82 FR 56336 - Medicare Program; Contract Year 2019 Policy and Technical Changes to the Medicare Advantage, Medicare Cost Plan, Medicare Fee-for-Service, the Medicare Prescription Drug Benefit Programs, and the PACE Program

DEPARTMENT OF HEALTH AND HUMAN SERVICES
Centers for Medicare & Medicaid Services

Federal Register Volume 82, Issue 227 (November 28, 2017)

Page Range		56336-56527
FR Document		2017-25068

This proposed rule would revise the Medicare Advantage program (Part C) regulations and Prescription Drug Benefit program (Part D) regulations to implement certain provisions of the Comprehensive Addiction and Recovery Act (CARA) and the 21st Century Cures Act; improve program quality, accessibility, and affordability; improve the CMS customer experience; address program integrity policies related to payments based on prescriber, provider and supplier status in Medicare Advantage, Medicare cost plan, Medicare Part D and the PACE programs; provide a proposed update to the official Medicare Part D electronic prescribing standards; and clarify program requirements and certain technical changes regarding treatment of Medicare Part A and Part B appeal rights related to premiums adjustments.

Federal Register, Volume 82 Issue 227 (Tuesday, November 28, 2017)

[Federal Register Volume 82, Number 227 (Tuesday, November 28, 2017)]
[Proposed Rules]
[Pages 56336-56527]
From the Federal Register Online [www.thefederalregister.org]
[FR Doc No: 2017-25068]

[[Page 56335]]

Vol. 82

Tuesday,

No. 227

November 28, 2017

Part II

Department of Health and Human Services

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Centers for Medicare & Medicaid Services

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42 CFR Parts 405, 417, 422, et al.

Medicare Program; Contract Year 2019 Policy and Technical Changes to
the Medicare Advantage, Medicare Cost Plan, Medicare Fee-for-Service,
the Medicare Prescription Drug Benefit Programs, and the PACE Program;
Proposed Rule

Federal Register / Vol. 82 , No. 227 / Tuesday, November 28, 2017 /
Proposed Rules

[[Page 56336]]

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 405, 417, 422, 423, and 498

[CMS-4182-P]
RIN 0938-AT08

Medicare Program; Contract Year 2019 Policy and Technical Changes
to the Medicare Advantage, Medicare Cost Plan, Medicare Fee-for-
Service, the Medicare Prescription Drug Benefit Programs, and the PACE
Program

AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.

ACTION: Proposed rule.

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SUMMARY: This proposed rule would revise the Medicare Advantage program
(Part C) regulations and Prescription Drug Benefit program (Part D)
regulations to implement certain provisions of the Comprehensive
Addiction and Recovery Act (CARA) and the 21st Century Cures Act;
improve program quality, accessibility, and affordability; improve the
CMS customer experience; address program integrity policies related to
payments based on prescriber, provider and supplier status in Medicare
Advantage, Medicare cost plan, Medicare Part D and the PACE programs;
provide a proposed update to the official Medicare Part D electronic
prescribing standards; and clarify program requirements and certain
technical changes regarding treatment of Medicare Part A and Part B
appeal rights related to premiums adjustments.

DATES: To be assured consideration, comments must be received at one of
the addresses provided below, no later than 5 p.m. on January 16, 2018.

ADDRESSES: In commenting, please refer to file code CMS-4182-P. 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 this
regulation to http://www.regulations.gov. Follow the ``Submit a
comment'' instructions.
2. By regular mail. You may mail written comments to the following
address ONLY: Centers for Medicare & Medicaid Services, Department of
Health and Human Services, Attention: CMS-4182-P, P.O. Box 8013,
Baltimore, MD 21244-8013.

Please allow sufficient time for mailed comments to be received before
the close of the comment period.
3. By express or overnight mail. You may send written comments to
the following address ONLY: Centers for Medicare & Medicaid Services,
Department of Health and Human Services, Attention: CMS-4182-P, Mail
Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.
4. By hand or courier. Alternatively, you may deliver (by hand or
courier) your written comments ONLY to the following addresses prior to
the close of the comment period:
a. For delivery in Washington, DC--Centers for Medicare & Medicaid
Services, Department of Health and Human Services, Room 445-G, Hubert
H. Humphrey Building, 200 Independence Avenue SW., Washington, DC
20201.
(Because access to the interior of the Hubert H. Humphrey 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. For delivery in Baltimore, MD--Centers for Medicare & Medicaid
Services, Department of Health and Human Services, 7500 Security
Boulevard, Baltimore, MD 21244-1850.
If you intend to deliver your comments to the Baltimore address,
call telephone number (410) 786-7195 in advance to schedule your
arrival with one of our staff members.
Comments erroneously 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:
Theresa Wachter, (410) 786-1157, Part C Issues.
Marie Manteuffel, (410) 786-3447, Part D Issues.
Kristy Nishimoto, (206) 615-2367, Beneficiary Enrollment and
Appeals Issues.
Raghav Aggarwal, (410) 786-0097, Part C and D Payment Issues.
Vernisha Robinson-Savoy, (267) 970-2395, Part C and D Compliance
Issues.
Frank Whelan, (410) 786-1302, Preclusion List Issues.
Shelly Winston, (410) 786-3694, Part D E-Prescribing Program.

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://www.regulations.gov. Follow the search instructions on that Web site to
view public comments.
Comments received timely will also be 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.

Table of Contents

I. Executive Summary
A. Purpose
B. Summary of the Major Provisions
1. Implementation of the Comprehensive Addiction and Recovery
Act of 2016 (CARA) Provisions
2. Updating the Part D E-Prescribing Standards (Sec. 423.160)
3. Revisions to Timing and Method of Disclosure Requirements
4. Preclusion List
a. Part D
b. Part C
C. Summary of Costs and Benefits
II. Provisions of the Proposed Regulations
A. Supporting Innovative Approaches to Improving Quality,
Accessibility, and Affordability
1. Implementation of the Comprehensive Addiction and Recovery
Act of 2016 (CARA) Provisions
a. Medicare Part D Drug Management Programs
b. Stakeholder Input Informing This Notice of Proposed
Rulemaking
c. Integration of CARA and the Current Part D Opioid DUR Policy
and OMS
(1) Current Part D Opioid DUR Policy and OMS
(2) Proposed Requirements for Part D Drug Management Programs
(Sec. Sec. 423.100, 423.153)
(i) Definitions (Sec. 423.100)
(A) Definition of ``Potential At-Risk Beneficiary'' and ``At-
Risk Beneficiary'' (Sec. 423.100)
(B) Definition of ``Frequently Abused Drug'', ``Clinical
Guidelines'', ``Program Size'', and ``Exempted Beneficiary'' (Sec.
423.100)
(ii) Requirements of Drug Management Programs (Sec. Sec.
423.153, 423.153(f)))
(iii) Written Policies and Procedures (Sec. 423.153(f)(1))
(iv) Case Management/Clinical Contact/Prescriber Verification
(Sec. 423.153(f)(2))

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(v) Limitations on Access to Coverage for Frequently Abused
Drugs (Sec. 423.153(f)(3))
(vi) Requirements for Limiting Access to Coverage for Frequently
Abused Drugs (Sec. 423.153(f)(4))
(vii) Beneficiary Notices and Limitation of the Special
Enrollment Period (Sec. Sec. 423.153(f)(5), 423.153(f)(6), 423.38)
(A) Initial Notice to Beneficiary and Sponsor Intent To
Implement Limitation on Access to Coverage for Frequently Abused
Drugs (Sec. 423.153(f)(5))
(B) Limitation on the Special Enrollment Period for LIS
Beneficiaries With an At-Risk Status (Sec. 423.38)
(C) Second Notice to Beneficiary and Sponsor Implementation of
Limitation on Access to Coverage for Frequently Abused Drugs by
Sponsor (Sec. 423.153(f)(6))
(D) Alternate Second Notice When Limit To Access to Coverage for
Frequently Abused Drugs by Sponsor Will Not Occur (Sec.
423.153(f)(7))
(E) Timing of Notices (Sec. 423.153(f)(8))
(F) Exceptions to Timing of the Notices (Sec. 423.153(f)(8))
(viii) Provisions Specific to Limitation on Access to Coverage
of Frequently Abused Drugs to Selected Pharmacies and Prescribers
(Sec. 423.153(f)(4) and (f)(9) Through (13))
(A) Special Requirement To Limit Access to Coverage of
Frequently Abused Drugs to Selected Prescriber(s) (Sec.
423.153(f)(4))
(B) Selection of Pharmacies and Prescribers (Sec. 423.153(f)(9)
Through (13))
(1) Beneficiary Preferences (Sec. 423.153(f)(9))
(2) Exception to Beneficiary Preferences (Sec. 423.153(f)(10))
(3) Reasonable Access (Sec. Sec. 423.100, 423.153(f)(11),
423.153(f)(12))
(4) Confirmation of Pharmacy and Prescriber Selection (Sec.
423.153(f)(13))
(ix) Drug Management Program Appeals (Sec. Sec. 423.558,
423.560, 423.562, 423.564, 423.580, 423.582, 423.584, 423.590,
423.602, 423.636, 423.638, 423.1970, 423.2018, 423.2020, 423.2022,
423.2032, 423.2036, 423.2038, 423.2046, 423.2056, 423.2062,
423.2122, and 423.2126)
(x) Termination of a Beneficiary's Potential At-Risk or At-Risk
Status (Sec. 423.153(f)(14))
(xi) Data Disclosure and Sharing of Information for Subsequent
Sponsor Enrollments (Sec. 423.153(f)(15))
(xii) Summary
2. Flexibility in the Medicare Advantage Uniformity Requirements
3. Segment Benefits Flexibility
4. Maximum Out-of-Pocket Limit for Medicare Parts A and B
Services (Sec. Sec. 422.100 and 422.101)
5. Cost Sharing Limits for Medicare Parts A and B Services
(Sec. Sec. 417.454 and 422.100)
6. Meaningful Differences in Medicare Advantage Bid Submissions
and Bid Review (Sec. Sec. 422.254 and 422.256)
7. Coordination of Enrollment and Disenrollment Through MA
Organizations and Effective Dates of Coverage and Change of Coverage
(Sec. Sec. 422.66 and 422.68)
8. Passive Enrollment Flexibilities To Protect Continuity of
Integrated Care for Dually Eligible Beneficiaries (Sec. 422.60(g))
9. Part D Tiering Exceptions (Sec. Sec. 423.560, 423.578(a) and
(c))
a. Background
b. General Rules
c. Limitations on Tiering Exceptions
d. Alternative Drugs for Treatment of the Enrollee's Condition
e. Approval of Tiering Exception Requests
f. Additional Technical Changes and Corrections
10. Establishing Limitations for the Part D Special Election
Period (SEP) for Dually Eligible Beneficiaries (Sec. 423.38)
11. Medicare Advantage and Part D Prescription Drug Plan Quality
Rating System
a. Introduction
b. Background
c. Basis, Purpose and Applicability of the Quality Star Ratings
System
d. Definitions
e. Contract Ratings
f. Contract Consolidations
g. Data Sources
h. Adding, Updating, and Removing Measures
i. Measure Set for Performance Periods Beginning on or After
January 1, 2019
j. Improvement Measures
k. Data Integrity
l. Measure-Level Star Ratings
m. Hierarchical Structure of the Ratings
n. Domain Star Ratings
o. Part C and D Summary Ratings
p. Overall Rating
q. Measure Weights
r. Application of the Improvement Measure Scores
s. Reward Factor (Formerly Referred to as Integration Factor)
t. Categorical Adjustment Index
u. High and Low Performing Icons
v. Plan Preview of Star Ratings
w. Technical Changes
12. Any Willing Pharmacy Standards Terms and Conditions and
Better Define Pharmacy Types (Sec. Sec. 423.100, 423.505)
a. Any Willing Pharmacy Required for All Pharmacy Business
Models
b. Revise the Definition of Retail Pharmacy and To Add a
Definition of Mail-Order Pharmacy
c. Treatment of Accreditation and Other Similar Any Willing
Pharmacy Requirements in Standard Terms and Conditions
d. Timing of Contracting Requirements
13. Changes to the Days' Supply Required by the Part D
Transition Process
14. Expedited Substitutions of Certain Generics and Other
Midyear Formulary Changes (Sec. Sec. 423.100, 423.120, and 423.128)
15. Treatment of Follow-On Biological Products as Generics for
Non-LIS Catastrophic and LIS Cost Sharing
16. Eliminating the Requirement To Provide PDP Enhanced
Alternative (EA) to EA Plan Offerings With Meaningful Differences
(Sec. 423.265)
17. Request for Information Regarding the Application of
Manufacturer Rebates and Pharmacy Price Concessions to Drug Prices
at the Point of Sale
B. Improving the CMS Customer Experience
1. Restoration of the Medicare Advantage Open Enrollment Period
(Sec. Sec. 422.60, 422.62, 422.68, 423.38, and 423.40)
2. Reducing the Burden of the Compliance Program Training
Requirements (Sec. Sec. 422.503 and 423.504)
3. Medicare Advantage Plan Minimum Enrollment Waiver (Sec.
422.514(b))
4. Revisions to Timing and Method of Disclosure Requirements
(Sec. Sec. 422.111 and 423.128)
5. Revisions to Parts 422 and 423, Subpart V, Communication/
Marketing Materials and Activities
a. Revising the Scope of Subpart V To Include Communications and
Communications Materials
b. Amending the Regulatory Definition of Marketing and Marketing
Materials
c. Prohibition of Marketing During the Open Enrollment Period
d. Technical Changes to Other Regulatory Provisions as a Result
of the Changes to Subpart V
6. Lengthening Adjudication Timeframes for Part D Payment
Redeterminations and IRE Reconsiderations (Sec. Sec. 423.590 and
423.636)
7. Elimination of Medicare Advantage Plan Notice for Cases Sent
to the IRE (Sec. 422.590)
8. E-Prescribing and the Part D Prescription Drug Program;
Updating Part D E-Prescribing Standards
a. Legislative Background
b. Regulatory History
c. Proposed Adoption of NCPDP SCRIPT Version 2017071 as the
Official Part D E-Prescribing Standard, Retirement of NCPDP SCRIPT
10.6, Implementing Related Conforming Changes Elsewhere in Sec.
423.160 and Correction of a Typographical Error Which Occurred When
NCPDP SCRIPT 10.6 Was Initially Adopted
9. Reduction of Past Performance Review Period for Applications
Submitted by Current Medicare Contracting Organizations (Sec. Sec.
422.502 and 423.503)
10. Part D Prescriber Preclusion List
a. Background
(1) 2014 Final Rule
(2) 2015 Interim Final Rule
(3) Preparations for Enforcement of Prescriber Enrollment
Requirement
b. Proposed Provisions
(1) Prescriber NPI Validation on Part D Claims
(a) Provisions of Sec. 423.120(c)(5)
(b) Medicare Access and CHIP Reauthorization Act of 2015 (MACRA)
(i) Preclusion List
(b) Replacement of Enrollment Requirement With Preclusion List
Requirement
(ii) Updates to Preclusion List
(3) Provisional Coverage
(4) Appeals
c. Specific Regulatory Changes
11. Part C/Medicare Advantage Cost Plan and PACE Preclusion List
(Sec. 422.224)
12. Removal of Quality Improvement Project for Medicare
Advantage Organizations (Sec. 422.152)

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13. Reducing Provider Burden--Comment Solicitation
C. Implementing Other Changes
1. Reducing the Burden of the Medicare Part C and Part D Medical
Loss Ratio Requirements (Sec. Sec. 422.2420 and 423.2430)
a. Background
b. Proposed Regulatory Changes to the Calculation of the Medical
Loss Ratio (Sec. Sec. 422.2420, 422.2430, 423.2420, and 423.2430)
(1) Fraud Reduction Activities (Sec. Sec. 422.2420, 422.2430,
423.2420, and 423.2430)
(2) Medication Therapy Management (MTM) (Sec. Sec. 422.2430 and
423.2430)
(3) Additional Technical Changes to Calculation of the Medical
Loss Ratio (Sec. Sec. 422.2420 and 423.2420)
c. Proposed Regulatory Changes to Medicare MLR Reporting
Requirements (Sec. Sec. 422.2460 and 423.2460)
d. Proposed Technical Changes to Medicare MLR Review and Non-
Compliance and the Release of MLR Data (Sec. Sec. 422.2410,
422.2480, 422.2490, 423.2410, 423.2480, and 423.2490)
2. Medicare Advantage Contract Provisions (Sec. 422.504)
3. Late Contract Non-Renewal Notifications (Sec. Sec. 422.506,
422.508, and 423.508)
4. Contract Request for a Hearing (Sec. Sec. 422.664(b) and
423.652(b))
5. Physician Incentive Plans--Update Stop-Loss Protection
Requirements (Sec. 422.208)
6. Changes to the Agent/Broker Compensation Requirements
(Sec. Sec. 422.2274 and 423.2274)
7. Changes to the Agent/Broker Requirements (Sec. Sec.
422.2272(e) and 423.2272(e))
8. Codification of Certain Medicare Premium Adjustments as
Initial Determinations (Sec. 405.924)
9. Eliminate Use of the Term ``Non-Renewal'' To Refer to a CMS-
Initiated Termination (Sec. Sec. 422.506, 422.510, 423.507, and
423.509)
III. Collection of Information Requirements
A. Wages
B. Proposed Information Collection Requirements (ICRs)
1. ICRs Regarding Passive Enrollment Flexibilities To Protect
Continuity of Integrated Care for Dually Eligible Beneficiaries
(Sec. 422.60(g))
2. ICRs Regarding Restoration of the Medicare Advantage Open
Enrollment Period (Sec. Sec. 422.60, 422.62, 422.68, 423.38, and
423.40)
3. ICRs Regarding Coordination of Enrollment and Disenrollment
Through MA Organizations and Effective Dates of Coverage and Change
of Coverage (Sec. Sec. 422.66 and 422.68)
4. ICRs Regarding Revisions to Timing and Method of Disclosure
Requirements (Sec. Sec. 422.111 and 423.128)
5. ICRs Regarding the Removal of Quality Improvement Project for
Medicare Advantage Organizations (Sec. 422.152)
6. ICRs Regarding Medicare Advantage Quality Rating System
(Sec. Sec. 422.162, 422.164, 422.166, 422.182, 422.184, and
422.186)
7. ICRs Regarding the Medicare Advantage Plan Minimum Enrollment
Waiver (Sec. 422.514(b))
8. ICRs Regarding Revisions to Parts 422 and 423, Subpart V,
Communication/Marketing Materials and Activities
9. ICRs Regarding Medical Loss Ratio Reporting Requirements
(Sec. Sec. 422.2460 and 423.2460)
10. ICRs Regarding Establishing Limitations for the Part D
Special Enrollment Period for Dual Eligible Beneficiaries (Sec.
423.38(c)(4))
11. ICRs Regarding Expedited Substitutions of Certain Generics
and Other Midyear Formulary Changes (Sec. Sec. 423.100, 423.120,
and 423.128)
12. ICRs Related to Preclusion List Requirements for Prescribers
in Part D and Individuals and Entities in Medicare Advantage, Cost
Plans and PACE
13. ICRs Regarding the Part D Tiering Exceptions (Sec. Sec.
423.560, 423.578(a), and (c))
14. ICRs Regarding the Implementation of the Comprehensive
Addiction and Recovery Act of 2016 (CARA) Provisions (Sec. Sec.
423.38 and 423.153(f))
IV. Regulatory Impact Analysis
A. Statement of Need
B. Overall Impact
C. Anticipated Effects
1. CARA Provisions
2. Reducing the Burden of the Compliance Program Training
Requirements (Sec. Sec. 422.503 and 423.504)
3. Meaningful Differences in Medicare Advantage Bid Submissions
and Bid Review (Sec. Sec. 422.254 and 422.256)
4. Physician Incentive Plans--Update Stop-Loss Protection
Requirements (Sec. 422.208)
5. Changes to the Agent/Broker Requirements (Sec. Sec.
422.2272(e) and 423.2272(e))
6. Coordination of Enrollment and Disenrollment Through MA
Organizations and Effective Dates of Coverage and Change of Coverage
7. Lengthening Adjudication Timeframes for Part D Payment
Redeterminations and IRE Reconsiderations
8. Elimination of Medicare Advantage Plan Notice for Cases Sent
to the IRE
9. Medicare Advantage and Prescription Drug Plan Quality Rating
System
10. Changes to the Days' Supply Required by the Part D
Transition Process
11. Treatment of Follow-On Biological Products as Generics for
Non-LIS Catastrophic and LIS Catastrophic Cost Sharing
12. Eliminating the Requirement To Provide PDP Enhanced
Alternative (EA) to EA Plan Offerings With Meaningful Differences
(Sec. 423.265)
13. Removal of Quality Improvement Project for Medicare
Advantage Organizations (Sec. 422.152)
14. Preclusion List Requirements for Prescribers in Part D and
Providers and Suppliers in Medicare Advantage, Cost Plans and PACE
15. Any Willing Pharmacy Standard Terms and Conditions and
Better Define Pharmacy Types
16. Expedited Substitutions of Certain Generics and Other
Midyear Formulary Changes (Sec. Sec. 423.100, 423.120, and 423.128)
D. Expected Benefits
E. Alternatives Considered
F. Accounting Statement and Table
G. Conclusion

Acronyms

ACA Affordable Care Act
ACS American Community Survey
AEP Annual Election Period
ANDA Abbreviated New Drug Application
ANOC Annual Notice of Change
AMA American Medical Association
AO Accrediting Organization
ASPE Office of the Assistant Secretary for Planning and Evaluation
AWP Any Willing Pharmacy
CAI Categorical Adjustment Index
CARA Comprehensive Addiction and Recovery Act
CCIP Chronic Care Improvement Program
CMS Centers for Medicare & Medicaid Services
CPT Current Procedural Terminology
DAB Departmental Appeals Board
DE Dual Eligible
DIR Direct or Indirect Remuneration
DME Durable Medical Equipment
DSMO Designated Standards Maintenance Organization
D-SNP Dual-Eligible Special Needs Plan
EDM Enhanced Disease Management
EHR Electronic Health Record
EOC Evidence of Coverage
EP Eligible Professionals
FFS Fee-for-Service
ePA Electronic Prior Authorization
eRx Electronic Prescription (e-prescribing)
FDA Food and Drug Administration
FIDE Fully Integrated Dual Eligible
FMV Fair Market Value
FPL Federal Poverty Level
HPMS Health Plan Management System
ICD-10 ICD-10-CM
IRE Independent Review Entity
LIS Low Income Subsidy
LPPO Local Preferred Provider Organization
LTC Long Term Care
MA Medicare Advantage
MADP Medicare Advantage Disenrollment Period
MA-PD Medicare Advantage Prescription Drug
MAO Medicare Advantage Organizations
MIPPA Medicare Improvements for Patients and Providers Act
MLR Medical Loss Ratio
MOOP Maximum Out-of-Pocket
NCPDP National Council of Prescription Drug Programs
NCQA National Committee for Quality Assurance
NDC National Drug Code
NSO National Standard Organization
OIG Office of Inspector General
OEP Open Enrollment Period
OMHA Office of Medicare Hearings and Appeals
OOPC Out-of-Pocket Cost
PA Prior Authorization
PBM Pharmacy Benefit Manager
PBP Plan Benefit Package
PDP Prescription Drug Plan
PHSA Public Health Service Act

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PIP Physician Incentive Plan
PQA Pharmacy Quality Alliance
PSO Provider Sponsored Organization
PSP Provider Specific Plan
QBP Quality Bonus Payment
QI Quality Improvement
QIA Quality Improvement Activities
QIP Quality Improvement Project
REMS Risk Evaluation and Mitigation Strategies
RFI Request for Information
RHC Rural Health Center
RI Rewards and Incentives
RPPO Regional Preferred Provider Organization
RRB Railroad Retirement Board
SE Standard Error
SEP Special Enrollment/Election Period
SES Socio-Economic Status
SNP Special Needs Plan
SSA Social Security Administration
TMP Timeliness Monitoring Project

I. Executive Summary

A. Purpose

The primary purpose of this proposed rule is to make revisions to
the Medicare Advantage (MA) program (Part C) and Prescription Drug
Benefit Program (Part D) regulations based on our continued experience
in the administration of the Part C and Part D programs and to
implement certain provisions of the Comprehensive Addiction and
Recovery Act and the 21st Century Cures Act. The proposed changes are
necessary to--(1) Support Innovative Approaches to Improving Quality,
Accessibility, and Affordability; (2) Improve the CMS Customer
Experience; and (3) Implement Other Changes. In addition, this rule
proposes technical changes related to treatment of Part A and Part B
premium adjustments and updates the Script standard used for Part D
electronic prescribing. While the Part D program has high satisfaction
among users, we continually evaluate program policies and regulations
to remain responsive to current trends and newer technologies.
Specifically, this regulation meets the Administration's priorities to
reduce burden and provide the regulatory framework to develop MA and
Part D products that better meet the individual beneficiary's
healthcare needs. Additionally, this regulation includes a number of
provisions that will help address the opioid epidemic and mitigate the
impact of increasing drug prices in the Part D program.

B. Summary of the Major Provisions

1. Implementation of the Comprehensive Addiction and Recovery Act of
2016 (CARA) Provisions
This proposed regulatory provision would implement statutory
provisions of the Comprehensive Addiction and Recovery Act of 2016
(CARA), enacted into law on July 22, 2016, which amended the Social
Security Act and includes new authority for Medicare Part D drug
management programs, effective on or after January 1, 2019. Through
this provision, CMS proposes a framework under which Part D plan
sponsors may establish a drug management program for beneficiaries at
risk for prescription drug abuse or misuse, or ``at-risk
beneficiaries.'' CMS proposes that, under such programs, sponsors may
limit at-risk beneficiaries' access to coverage of controlled
substances that CMS determines are ``frequently abused drugs'' to a
selected prescriber(s) and/or network pharmacy(ies). CMS also proposes
to limit the use of the special enrollment period (SEP) for dually- or
other low income subsidy (LIS)-eligible beneficiaries who are
identified as at-risk or potentially at-risk for prescription drug
abuse under such a drug management program. Finally, this provision
proposes to codify the current Part D Opioid Drug Utilization Review
(DUR) Policy and Overutilization Monitoring System (OMS) by integrating
this current policy with our proposals for implementing the drug
management program provisions. The current policy involves Part D
prescription drug benefit plans engaging in case management with
prescribers when an enrollee is found to be taking a very high dose of
opioids and obtaining them from multiple prescribers and multiple
pharmacies who may not know about each other. Through the adoption of
this policy, from 2011 through 2016, there was a 61 percent decrease
(over 17,800 beneficiaries) in the number of Part D beneficiaries
identified as potential very high risk opioid overutilizers.\1\ Thus,
this proposal expands upon an existing, innovative, successful approach
to reduce opioid overutilization in the Part D program by improving
quality of care through coordination while maintaining access to
necessary pain medications.
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\1\ CY 2018 Final Parts C&D Call Letter, April 3, 2017.
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2. Updating the Part D E-Prescribing Standards (Sec. 423.160)
This provision proposes an update to the electronic standards to be
used by Medicare Part D prescription drug plans. This includes the
proposed adoption of the NDPDP SCRIPT Standard Version 2017071, and
retirement of the current NCPDP SCRIPT Version 10.6, as the official
electronic prescribing standard for transmitting prescriptions and
prescription-related information using electronic media for covered
Part D drugs for Part D eligible individuals. These changes would
become effective January 1, 2019. The NCPDP SCRIPT standards are used
to exchange information between prescribers, dispensers, intermediaries
and Medicare prescription drug plans.
Although e-prescribing is optional for physicians and pharmacies,
the Medicare Part D statute and regulations require drug plans
participating in the prescription benefit to support electronic
prescribing, and physicians and pharmacies who elect to transmit e-
prescriptions and related communications electronically must utilize
the adopted standards. The proposed updated NCPDP SCRIPT standards have
been requested by the industry and could provide a number of
efficiencies which the industry and CMS supports.
In order to facilitate this change, we propose to update Sec.
423.160, and also make a number of conforming technical changes to
other sections of part 423. In addition, we are proposing to correct a
typographical error that occurred in the regulatory text listing the
applicability dates of the standards by changing the reference in Sec.
423.160(b)(1)(iv) to reference (b)(2)(iii) instead of (b)(2)(ii) to
correctly cite to the present use of the currently adopted NCPDP SCRIPT
Standard Version 10.
3. Revisions to Timing and Method of Disclosure Requirements
We are proposing to allow the electronic delivery of certain
information normally provided in hard copy documents such as the
Evidence of Coverage (EOC). Additionally, we are proposing to change
the timeframe for delivery of the EOC in particular to the first day of
the Annual Election Period (AEP) rather than fifteen days prior to that
date. Allowing plans to provide the EOC electronically would alleviate
plan burden related to printing and mailing, and simultaneously would
reduce the number of paper documents that beneficiaries receive from
plans. This would allow beneficiaries to focus on materials, like the
Annual Notice of Change (ANOC), that drive decision making. Changing
the date by which plans must provide the EOC to members would allow
plans more time to finalize the formatting and ensure the accuracy of
the information, as well as further distance it from the ANOC, which
must still be delivered 15 days prior to the AEP. We see this proposed
change as an overall reduction of impact that our regulations have on
plans and beneficiaries. In aggregate, we estimate a savings (to plans
for not producing

[[Page 56340]]

and mailing hard-copy EOCs) of approximately $51 million.
4. Preclusion List
a. Part D
This proposed rule would rescind the current provisions in Sec.
423.120(c)(6) that require physicians and eligible professionals (as
defined in section 1848(k)(3)(B) of the Act) to enroll in or validly
opt-out of Medicare in order for a Part D drug prescribed by the
physician or eligible professional to be covered. As a replacement, we
propose that a Part D plan sponsor must reject, or must require its
pharmacy benefit manager to reject, a pharmacy claim for a Part D drug
if the individual who prescribed the drug is included on the
``preclusion list,'' which would be defined in Sec. 423.100 and would
consist of certain prescribers who are currently revoked from the
Medicare program under Sec. 424.535 and are under an active
reenrollment bar, or have engaged in behavior for which CMS could have
revoked the prescriber to the extent applicable if he or she had been
enrolled in Medicare, and CMS determines that the underlying conduct
that led, or would have led, to the revocation is detrimental to the
best interests of the Medicare program. We recognize, however, the need
to minimize interruptions to Part D beneficiaries' access to needed
medications. Therefore, we also propose to prohibit plan sponsors from
rejecting claims or denying beneficiary requests for reimbursement for
a drug on the basis of the prescriber's inclusion on the preclusion
list, unless the sponsor has first covered a 90-day provisional supply
of the drug and provide individualized written notice to the
beneficiary that the drug is being covered on a provisional basis.
b. Part C
This proposed rule would rescind the current provisions in Sec.
422.222 stating that providers or suppliers that are types of
individuals or entities that can enroll in Medicare in accordance with
section 1861 of the Act must be enrolled in Medicare in order to
provide health care items or services to a Medicare enrollee who
receives his or her Medicare benefit through an MA organization. As a
replacement, we propose that an MA organization shall not make payment
for an item or service furnished by an individual or entity that is on
the ``preclusion list.'' The preclusion list, which would be defined in
Sec. 422.2, would consist of certain individuals and entities that are
currently revoked from the Medicare program under Sec. 424.535 and are
under an active reenrollment bar, or have engaged in behavior for which
CMS could have revoked the individual or entity to the extent
applicable if he or she had been enrolled in Medicare, and CMS
determines that the underlying conduct that led, or would have led, to
the revocation is detrimental to the best interests of the Medicare
program.

C. Summary of Costs and Benefits

------------------------------------------------------------------------
Provision Savings
------------------------------------------------------------------------
Implementation of the Besides the benefits of preventing opioid
Comprehensive Addiction and dependency in beneficiaries we estimate
Recovery Act of 2016. a net savings in 2019 of $13 million to
the Trust Fund because of reduced
scripts, modestly increasing to a
savings of $14 million in 2023. The cost
to industry is estimated at about $2.8
million per year.
Revisions to Timing and We estimate 67% of the current 47.8
Method of Disclosure million beneficiaries will prefer use of
Requirements. the internet vs. hard copies. This will
result in savings of $55 million in 2019
and growing due to inflation to $67
million in 2023.
------------------------------------------------------------------------

II. Provisions of the Proposed Regulations

A. Supporting Innovative Approaches to Improving Quality,
Accessibility, and Affordability

1. Implementation of the Comprehensive Addiction and Recovery Act of
2016 (CARA) Provisions
a. Medicare Part D Drug Management Programs
The Comprehensive Addiction and Recovery Act of 2016 (CARA),
enacted into law on July 22, 2016, amended the Social Security Act and
includes new authority for the establishment of drug management
programs in Medicare Part D, effective on or after January 1, 2019. In
accordance with section 704(g)(3) of CARA and revised section 1860D-
4(c) of the Act, CMS must establish through notice and comment
rulemaking a framework under which Part D plan sponsors may establish a
drug management program for beneficiaries at-risk for prescription drug
abuse, or ``at-risk beneficiaries.'' Under such a Part D drug
management program, sponsors may limit at-risk beneficiaries' access to
coverage of controlled substances that CMS determines are ``frequently
abused drugs'' to a selected prescriber(s) and/or network
pharmacy(ies). While such programs, commonly referred to as ``lock-in
programs,'' have been a feature of many state Medicaid programs for
some time, prior to the enactment of CARA, there was no statutory
authority to allow Part D plan sponsors to require beneficiaries to
obtain controlled substances from a certain pharmacy or prescriber in
the Medicare Part D program.
In summary, this proposed rule would implement the CARA Part D drug
management program provisions by integrating them with the current Part
D Opioid Drug Utilization Review (DUR) Policy and Overutilization
Monitoring System (OMS) (``current policy''). As explained in more
detail later in this section, this integration would mean that Part D
sponsors implementing a drug management program could limit an at-risk
beneficiary's access to coverage of opioids beginning 2019 through a
point-of-sale (POS) claim edit and/or by requiring the beneficiary to
obtain opioids from a selected pharmacy(ies) and/or prescriber(s) after
case management and notice to the beneficiary. To do so, the
beneficiary would have to meet clinical guidelines that factor in that
the beneficiary is taking a high-risk dose of opioids over a sustained
time period and that the beneficiary is obtaining them from multiple
prescribers and multiple pharmacies. This proposed rule would also
implement a limitation on the use of the special enrollment period
(SEP) for low income subsidy (LIS)-eligible beneficiaries who are
identified as potential at-risk beneficiaries.
b. Stakeholder Input Informing This Notice of Proposed Rulemaking
Section 704(g)(2) of CARA required us to convene stakeholders to
provide input on specific topics so that we could take such input into
account in promulgating regulations governing Part D drug management
programs. Stakeholders include Medicare beneficiaries with Part A or
Part B, advocacy groups representing Medicare beneficiaries,
physicians, pharmacists, and other clinicians (particularly other
lawful prescribers of controlled

[[Page 56341]]

substances), retail pharmacies, Part D plan sponsors and their
delegated entities (such as pharmacy benefit managers), and
biopharmaceutical manufacturers.
We hosted a Listening Session on the CARA drug management program
provisions via a public conference call on November 14, 2016 that was
announced in the October 26, 2016 Federal Register (81 FR 74388). We
sought stakeholder input on specific topics enumerated in sections
704(a)(1) and 704(g)(2)(B) of the CARA and other related topics of
concern to the stakeholders.
In developing this proposed rule, we considered the stakeholders'
comments provided during the Listening Session, as well as written
comments submitted afterward, including those submitted in response to
the Request for Information associated with the publication of the Plan
Year 2018 Medicare Parts C&D Final Call Letter. We refer to this input
in this preamble using the terms ``stakeholders,'' ``commenters'' and
``comments.''
c. Integration of CARA and the Current Part D Opioid DUR Policy and OMS
As noted in section II.A.1. of this proposed rule previously, we
are proposing to implement the CARA Part D drug management program
provisions by integrating them with our current policy that is not
currently codified, but would be under this proposal. In using the term
``current policy'', we refer to the aspect of our current Part D opioid
overutilization policy that is based on retrospective DUR.\2\
Specifically, we are proposing a regulatory framework for Part D plan
sponsors to voluntarily adopt drug management programs through which
they address potential overutilization of frequently abused drugs
identified retrospectively through the application of clinical
guidelines/criteria that identify potential at-risk beneficiaries and
conduct case management which incorporates clinical contact and
prescriber verification that a beneficiary is an at-risk beneficiary.
If deemed necessary, a sponsor could limit at-risk beneficiaries'
access to coverage for such drugs through pharmacy lock-in, prescriber
lock-in, and/or a beneficiary-specific point-of-sale (POS) claim edit.
Finally, sponsors would report to CMS the status and results of their
case management to OMS and any beneficiary coverage limitations they
have implemented to MARx, CMS' system for payment and enrollment
transactions. While plan sponsors would have the option to implement a
drug management program, our proposal codifies a framework that would
place requirements upon such programs. We foresee that all plan
sponsors will implement such drug management programs based on our
experience that all plan sponsors' are complying with the current
policy as laid out in guidance, the fact that our proposal largely
incorporates the CARA drug management provisions into existing CMS and
sponsor operations, and especially, in light of the national opioid
epidemic and the declaration that the opioid crisis is a nationwide
Public Health Emergency.
---------------------------------------------------------------------------

\2\ Please refer to the CMS Web site, ``Improving Drug
Utilization Review Controls in Part D'' at https://www.cms.gov/Medicare/Prescription-Drug-Coverage/PrescriptionDrugCovContra/RxUtilization.html which contains CMS communications regarding the
current policy.
---------------------------------------------------------------------------

Because we propose to integrate the CARA Part D drug management
program provisions with the current policy and codify them both, we
describe the current policy in section II.A.1.c.(1) of this proposed
rule, noting where our proposal incorporates changes to the current
policy in order to comply with CARA and achieve operational
consistency. Where we do not note a change, our intent is to codify the
current policy, and we seek specific comment as to whether we have
overlooked any feature of the current policy that should be codified.
CMS communications regarding the current policy can be found at the CMS
Web site, ``Improving Drug Utilization Review Controls in Part D'' at
https://www.cms.gov/Medicare/Prescription-Drug-Coverage/PrescriptionDrugCovContra/RxUtilization.html.
Then we set forth our proposal for codification of the regulatory
framework for drug management programs in section II.A.1.c.(2) of this
proposed rule, which includes provisions specific to lock-in, which is
not a feature of the current policy.
(1) Current Part D Opioid DUR Policy and OMS
CMS is actively engaged in addressing the opioid epidemic and
committed to implementing effective tools in Medicare Part D. We will
work across all stakeholder, beneficiary and advocacy groups, health
plans, and other federal partners to help address this devastating
epidemic. CMS has worked with plan sponsors and other stakeholders to
implement Medicare Part D opioid overutilization policies with multiple
initiatives to address opioid overutilization in Medicare Part D
through a medication safety approach. These initiatives include better
formulary and utilization management; real-time safety alerts at the
pharmacy aimed at coordinated care; retrospective identification of
high risk opioid overutilizers who may need case management; and
regular actionable patient safety reports based on quality metrics to
sponsors.
The goal of the current policy and OMS is to reduce opioid
overutilization in Part D. In conjunction with related Part D opioid
overutilization policies that address prospective opioid use, the
current policy has played a key role in reducing high risk opioid
overutilization in the Part D program by 61 percent (representing over
17,800 beneficiaries) from 2011 (pre-policy pilot) through 2016, even
as the number of beneficiaries enrolled in Part D increased overall
during this period from 31.5 million to 43.6 million enrollees, or a 38
percent increase.\3\
---------------------------------------------------------------------------

\3\ Final CY 2018 Parts C&D Call Letter, April 3, 2017.
---------------------------------------------------------------------------

The purpose of the current policy is to provide Part D plan
sponsors with specific guidance about compliance with Sec.
423.153(b)(2) as to opioid overutilization, which requires a Part D
plan sponsor to have a reasonable and appropriate drug utilization
management program that maintains policies and systems to assist in
preventing overutilization of prescribed medications. We adopted the
current policy on January 1, 2013, and it has evolved over time in
scope in several ways with stakeholder feedback and support, including
through the addition of the OMS in July 2013, primarily via the annual
Parts C&D Call Letter process.
The current policy has two aspects. First, in the CY 2013 final
Call Letter and subsequent supplemental guidance, we provided guidance
about our expectations for Part D plan sponsors to retrospectively
identify beneficiaries who are at high risk for potential opioid
overutilization and provide appropriate case management aimed at
coordinated care.\4\ More specifically, we currently expect Part D plan
sponsors' Pharmacy and Therapeutics (P&T) committees to establish
criteria consistent with CMS guidance to retrospectively identify
potential opioid overutilizers at high risk for an adverse event
enrolled in their plans who may warrant case management because they
are receiving opioid prescriptions from multiple prescribers and
pharmacies. Enrollees

[[Page 56342]]

with cancer or in hospice are excluded from the current policy, because
the benefit of their high opioid use may outweigh the risk associated
with such use. This exclusion was supported by stakeholder feedback on
the current policy.
---------------------------------------------------------------------------

\4\ An excerpt from the Final 2013 Call Letter, the supplemental
guidance, and additional information about the policy and OMS are
available on the CMS Web page, ``Improving Drug Utilization Controls
in Part D'' at https://www.cms.gov/Medicare/Prescription-Drug/PrescriptionDrugCovContra/RxUtilization.html.
---------------------------------------------------------------------------

Once such enrollees are identified through retrospective
prescription drug claims review, we expect the Part D plan sponsors to
diligently assess each case, and if warranted, have their clinical
staff conduct case management with the beneficiary's opioid prescribers
until the case is resolved. According to the supplemental guidance,\5\
case management entails:
---------------------------------------------------------------------------

\5\ September 6, 2012 HPMS memo, ``Supplemental Guidance Related
to Improving Drug Utilization Review Controls in Part D.''
---------------------------------------------------------------------------

The personnel communicating with prescribers have
appropriate credentials.
Written inquiries to the prescribers of the opioid
medications about the appropriateness, medical necessity and safety of
the apparent high dosage for their patient.
Attempts to schedule telephone conversations with the
prescribers (separately or together) within a reasonable period from
the issuance of the written inquiry notification, if necessary.
The clinician-to-clinician communication includes
information about the existence of multiple prescribers and the
beneficiary's total opioid utilization, and the plan's clinician
elicits the information necessary to identify any complicating factors
in the beneficiary's treatment that are relevant to the case management
effort.
After discussion or communication about the appropriate
level of opioid use, the consensus reached by the prescribers is
implemented by the sponsor, with a beneficiary-specific opioid POS
claim edit, as deemed appropriate by the prescribers, to prevent
further Part D coverage of an unsafe level of drug.
In cases of non-responsive prescribers, the sponsor may
also implement a beneficiary-specific opioid POS claim edit to prevent
further coverage of an unsafe level of drug and to encourage the
prescribers to participate in case management.
Thus, we expect case management to confirm that the beneficiary's
opioid use is medically necessary or resolve an overutilization issue.
As part of the current policy, and because the Food and Drug
Administration (FDA)-approved labeling for opioids generally does not
include maximum daily doses, CMS developed specific criteria to
identify beneficiaries at high risk through retrospective review of
their opioid use in order to assist Part D sponsors in identifying such
beneficiaries. These criteria incorporate a morphine milligram
equivalent (MME) \6\ approach, which is a method to uniformly calculate
the total daily dosage of opioids across all of a patient's opioid
prescription drug claims. Beginning with plan year 2018, we adjusted
these criteria to align with the Centers for Disease Control (CDC)
Guideline for Prescribing Opioids for Chronic Pain (CDC Guideline) \7\
issued in March 2016 in terms of using 90 MME as a threshold to
identify beneficiaries who appear to be at high risk due to their
opioid use. In its guideline, after considering information from
relevant studies and experts, the CDC identifies 50 MME daily dose as a
threshold for increased risk of opioid overdose, and to generally avoid
increasing the daily dosage to 90 MME. Our criteria, which we will
discuss more fully later in the preamble, also incorporate a multiple
prescriber and pharmacy count to focus on beneficiaries who appear to
be not only overutilizing opioids but who also are at increased risk
due to potential coordination of care issues, such that the providers
who are prescribing or dispensing opioids to these beneficiaries may
not know that other providers are also doing so.
---------------------------------------------------------------------------

\6\ Please note that CMS will use the term ``MME'' going forward
instead of morphine equivalent dose (MED), which CMS has used to
date. CMS used the term MED in a manner that was equivalent to MME.
We will update CMS documents that currently refer to MED as soon as
practicable.
\7\ Please see https://www.cdc.gov/drugoverdose/prescribing/guideline.html.
---------------------------------------------------------------------------

The second aspect of the current policy came into place in July
2013, when CMS launched the OMS as a tool to monitor Part D plan
sponsors' effectiveness in complying with Sec. 423.153(b)(2) to
address opioid overutilization. Through the OMS, CMS sends sponsors
quarterly reports about their Part D enrollees who meet the criteria
for being at high risk of opioid overutilization. Then, we expect
sponsors to address each case through the case management process
previously described and respond to CMS through the OMS using
standardized responses. In addition, we expect sponsors to provide
information to their regional CMS representatives and the MARx system
about beneficiary-specific opioid POS claim edits that they intend to
or have implemented.\8\
---------------------------------------------------------------------------

\8\ Please refer to the CMS Web site, ``Improving Drug
Utilization Review Controls in Part D'' at https://www.cms.gov/Medicare/Prescription-Drug-Coverage/PrescriptionDrugCovContra/RxUtilization.html which contains CMS communications regarding the
current policy.
---------------------------------------------------------------------------

Because case management is very resource intensive for sponsors and
PBMs, we have limited the scope of the current policy in terms of the
number of beneficiaries identified by OMS, and when expanding that
number, we have made changes incrementally through annual Parts C&D
Call Letter process.
(2) Proposed Requirements for Part D Drug Management Programs
(Sec. Sec. 423.100 and 423.153)
We first propose several definitions for terms we propose to use in
establishing requirements for Part D drug management programs.
(i) Definitions (Sec. 423.100)
(A) Definition of ``Potential At-Risk Beneficiary'' and ``At-Risk
Beneficiary'' (Sec. 423.100)
Section 1860D-4(c)(5)(C) of the Act contains a definition for ``at-
risk beneficiary'' that we propose to codify at Sec. 423.100. In
addition, although the section 1860D-4(c)(5) of the Act does not
explicitly define a ``potential at-risk beneficiary,'' it contemplates
a beneficiary who is potentially at-risk. Accordingly, we propose to
define these two terms at Sec. 423.100 as follows: Potential at-risk
beneficiary means a Part D eligible individual--(1) Who is identified
using clinical guidelines (as defined in Sec. 423.100); or (2) With
respect to whom a Part D plan sponsor receives a notice upon the
beneficiary's enrollment in such sponsor's plan that the beneficiary
was identified as a potential at-risk beneficiary (as defined in
paragraph (1) of this definition) under the prescription drug plan in
which the beneficiary was most recently enrolled, such identification
had not been terminated upon disenrollment, and the new plan has
adopted the identification. At-risk beneficiary means a Part D eligible
individual--(1) who is--(i) Identified using clinical guidelines (as
defined in Sec. 423.100); (ii) Not an exempted beneficiary; and (iii)
Determined to be at-risk for misuse or abuse of such frequently abused
drugs under a Part D plan sponsor's drug management program in
accordance with the requirements of Sec. 423.153(f); or (2) With
respect to whom a Part D plan sponsor receives a notice upon the
beneficiary's enrollment in such sponsor's plan that the beneficiary
was identified as an at-risk beneficiary (as defined in paragraph (1)
of this definition) under the prescription drug plan in which the
beneficiary was most

[[Page 56343]]

recently enrolled, such identification had not been terminated upon
disenrollment, and the new plan has adopted the identification. The
distinction between a ``potential at-risk beneficiary'' and an ``at-
risk beneficiary'' is important for a few reasons that we will explain
later in this preamble. Also, we added the phrase, ``and the new plan
has adopted the identification'' to both definitions for cases where a
beneficiary has been identified as a potential at-risk or at-risk
beneficiary by the immediately prior plan to indicate that the
beneficiary's status in the subsequent plan is not automatic.
(B) Definition of ``Frequently Abused Drug'', ``Clinical Guidelines'',
``Program Size'', and ``Exempted Beneficiary'' (Sec. 423.100)
Because we use these terms in the proposed definitions of
``potential at-risk beneficiary'' and ``at-risk beneficiary,'' we
propose to define ``frequently abused drug,'' ``clinical guidelines'',
``program size'', and ``exempted beneficiary'' at Sec. 423.100 as
follows:
Frequently Abused Drug
Section 1860D-4(c)(5)(G) of the Act defines ``frequently abused
drug'' as a drug that is a controlled substance that the Secretary
determines to be frequently abused or diverted. Consistent with the
statutory definition, we propose to define ``Frequently abused drug''
at Sec. 423.100 to mean a controlled substance under the federal
Controlled Substances Act that the Secretary determines is frequently
abused or diverted, taking into account the following factors: (1) The
drug's schedule designation by the Drug Enforcement Administration; (2)
Government or professional guidelines that address that a drug is
frequently abused or misused; and (3) An analysis of Medicare or other
drug utilization or scientific data. This definition is intended to
provide enough specificity for stakeholders to know how the Secretary
will determine a frequently abused drug, while preserving flexibility
to update which drugs CMS considers to be frequently abused drugs based
on relevant factors, such as actions by the Drug Enforcement
Administration and/or trends observed in Medicare or scientific data.
We plan to publish and update a list of frequently abused drugs for
purposes of Part D drug management programs. We propose that future
designations of frequently abused drugs by the Secretary primarily be
included in the annual Parts C&D Call Letter or in similar guidance,
which would be subject to public comment, if necessary to address
midyear entries to the drug market or evolving government or
professional guidelines. This approach would be consistent with our
approach under the current policy and necessary for Part D drug
management programs to be responsive to changing public health issues
over time.
While this is the approach we propose for future designations of
frequently abused drugs, we are including a discussion of the
designation for plan year 2019 in this preamble. For plan year 2019,
consistent with current policy, we propose that opioids are frequently
abused drugs. Our proposal to designate opioids as frequently abused
drugs illustrates how the proposed definition could work in practice:
First, the Secretary determines opioids are frequently abused or
diverted, because they are controlled substances, and drugs and other
substances that are considered controlled substances under the
Controlled Substances Act (CSA) are so considered precisely because
they have abuse potential. The Drug Enforcement Administration (DEA)
divides controlled substances into five schedules based on whether they
have a currently accepted medical use in treatment in the United
States, their relative abuse potential, and their likelihood of causing
dependence when abused. Most prescription opioids are Schedule II,
where the DEA places substances with a high potential for abuse with
use potentially leading to severe psychological or physical
dependence.\9\ A few opioids are Schedule III or IV, where the DEA
places substances that have a potential for abuse.
---------------------------------------------------------------------------

\9\ The abuse rate is a determinate factor in the DEA's
scheduling of the drug; for example, Schedule I drugs have a high
potential for abuse and the potential to create severe psychological
and/or physical dependence. As the drug schedule changes-- Schedule
II, Schedule III, etc., so does the abuse potential-- Schedule V
drugs represents the least potential for abuse. See DEA Web site
about Drug Scheduling: https://www.dea.gov/druginfo/ds.shtml.
---------------------------------------------------------------------------

Second, on October 26, 2017, the President directed that executive
agencies use all appropriate emergency authorities and other relevant
authorities to address drug addiction and opioid abuse, and the Acting
Secretary of Health and Human Services declared a nationwide Public
Health Emergency to address the opioid crisis.\10\ In addition, the CDC
has declared opioid overuse a national epidemic, both of which are
relevant factors.\11\ More than 33,000 people died from opioid overuse
in 2015, which is the highest number per year on record. From 2000 to
2015, more than half a million people died from drug overdoses, and 91
Americans die every day from an opioid overdose. Nearly half of all
opioid overdose deaths involve a prescription opioid. Given that
opioids, including prescription opioids, are the main driver of drug
overdose deaths in the U.S., it is reasonable for the Secretary to
conclude that opioids are frequently abused and misused.
---------------------------------------------------------------------------

\10\ See White House Web site https://www.whitehouse.gov/the-press-office/2017/10/26/presidential-memorandum-heads-executive-departments-and-agencies, and the HHS Web site https://www.hhs.gov/about/news/2017/10/26/hhs-acting-secretary-declares-public-health-emergency-address-national-opioid-crisis.html.
\11\ See CDC Web site https://www.cdc.gov/drugoverdose/index.html for all statistics in this paragraph.
---------------------------------------------------------------------------

Third, government or professional guidelines support determining
that opioids are frequently abused or misused. Consistent with current
policy, we propose to designate all opioids as frequently abused drugs
except buprenorphine for medication-assisted treatment (MAT) and
injectables. The CDC MME Conversion Factor file \12\ does not include
all formulations of buprenorphine for MAT so that access is not
limited, and injectables are not included due to low claim volume.
Therefore, CMS cannot determine the MME. CMS will consider revisions to
the CDC MME Conversion Factor file when updating the list of opioids
designated as frequently abused drugs in future guidance.
---------------------------------------------------------------------------

\12\ See https://www.cdc.gov/drugoverdose/resources/data.html.
---------------------------------------------------------------------------

Fourth, an analysis of Medicare data supports designating opioids
as ``frequently abused drugs,'' at least initially. Over 727,000 Part D
beneficiaries had an average MME of at least 90 mg during the 6-month
period from July 1, 2015 to December 31, 2015 (``90 mg MME + users''),
a number which excludes beneficiaries with cancer or in hospice, whom
we propose to exempt from drug management programs, as we discuss
later. As noted earlier, the CDC recommends prescribers generally avoid
increasing the daily opioid dosage to 90 MME. Given that so many
beneficiaries have an average MME above this threshold, it is
reasonable that the Secretary consider this data to be a relevant
factor in determining that opioids are frequently abused or diverted.
Most stakeholders recommended designating opioids as frequently
abused drugs. In this regard, we note

[[Page 56344]]

that our current policy applies only to opioids and that we are
integrating the drug management provisions of CARA with our current
policy. Therefore, designating opioids as frequently abused drugs, at
least in the initial implementation of drug management programs, would
have the added benefit of allowing CMS and stakeholders to gain
experience with the use of lock-in in the Part D program, before
potentially designating other controlled substances as frequently
abused drugs.
Some commenters expressed support for including other or all
controlled substances, such as benzodiazepines, sedatives, and certain
muscle relaxants as frequently abused drugs; however, we are not
persuaded. Opioids are unique in that there is generally no maximum
dose for them in the FDA labeling. Also, in the proposed Contract Year
2016 Parts C&D Call Letter, we solicited feedback on expanding the
current policy to other drugs, and the comments were mixed. A few
commenters suggested that we expand the current policy to
benzodiazepines and muscle relaxants when used with opioids. In respond
to the feedback, we did not expand the current policy beyond the opioid
class but indicated that we would investigate. Subsequently, the CDC
Guideline was published and it specifically recommends that clinicians
avoid prescribing opioid pain medication and benzodiazepines
concurrently whenever possible due to increased risk for overdose.
Therefore, we added a concurrent benzodiazepine-opioid flag to OMS in
October 2016 to alert Part D sponsors that concurrent use may be an
issue that should be addressed during case management, and we will
continue to do so.\13\
---------------------------------------------------------------------------

\13\ Please refer to the memo, ``Medicare Part D Overutilization
Monitoring System (OMS) Update: Addition of the Concurrent Opioid-
Benzodiazepine Use Flag'' dated October 21, 2016.
---------------------------------------------------------------------------

Other than conveying the concurrent benzodiazepine use information
to sponsors, we have not expanded the current policy to address non-
opioid medications. However, we have stated that if a sponsor chooses
to implement the current policy for non-opioid medications, we would
expect the sponsor to employ the same level of diligence and
documentation with respect to non-opioid medications that we expect for
opioid medications.\14\ We have taken this approach to the current
policy so that we could focus on the opioid epidemic and also due to
the difficulty in establishing overuse guidelines for non-opioid
controlled substances. For this reason our proposal would not identify
benzodiazepines as frequently abused drugs. However, we solicit
additional comment on our proposed approach to frequently abused drugs.
Also, we propose that, if finalized, this rule would supersede our
current policy, and sponsors would no longer be allowed to implement
the current policy for non-opioid medications. We seek feedback on
allowing sponsors to continue to implement the current policy for non-
opioid medications with respect to beneficiary-specific claim edits.
---------------------------------------------------------------------------

\14\ See ``Supplemental Guidance Related to Improving Drug
Utilization Review Controls in Part D,'' dated September 6, 2012.
---------------------------------------------------------------------------

Clinical Guidelines and Program Size
Section 1860D-4(c)(5)(C)(i)(I) of the Act requires at-risk
beneficiaries to be identified using clinical guidelines that indicate
misuse or abuse of frequently abused drugs and that are developed in
consultation with stakeholders. We propose to include a definition of
``clinical guidelines'' that cross references standards that we are
proposing at Sec. 423.153(f) for how the guidelines would be
established and updated. Specifically, we propose to define clinical
guidelines for purposes of a Part D drug management program as criteria
to identify potential at-risk beneficiaries who may be determined to be
at-risk beneficiaries under such programs, and that are developed in
accordance with the proposed standards in Sec. 423.153(f)(16) and
published in guidance annually.
We also propose to add Sec. 423.153(f)(16) to state that potential
at-risk beneficiaries and at-risk beneficiaries are identified by CMS
or the Part D sponsor using clinical guidelines that: (1) Are developed
with stakeholder consultation; (2) Are based on the acquisition of
frequently abused drugs from multiple prescribers, multiple pharmacies,
the level of frequently abused drugs, or any combination of these
factors; (3) Are derived from expert opinion and an analysis of
Medicare data; and (4) Include a program size estimate. This proposed
approach to developing and updating the clinical guidelines is intended
to provide enough specificity for stakeholders to know how CMS would
determine the guidelines by identifying the standards we would apply in
determining them.
This proposed approach indicates that the program size would be
determined as part of the process to develop the clinical guidelines--a
process into which stakeholders would provide input. Section 1860D-
4(c)(5)(C)(iii) of the Act states that the Secretary shall establish
policies, including the guidelines and exemptions, to ensure that the
population of enrollees in drug management programs could be
effectively managed by plans. We propose to define ``program size'' in
Sec. 423.100 to mean the estimated population of potential at-risk
beneficiaries in drug management programs (described in Sec.
423.153(f)) operated by Part D plan sponsors that the Secretary
determines can be effectively managed by such sponsors as part of the
process to develop clinical guidelines.
This proposed approach to developing and updating the clinical
guidelines would also be flexible enough to allow for updates to the
guidelines outside of the regulatory process to address trends in
Medicare with respect to the misuse and/or diversion of frequently
abused drugs. We have determined this approach is appropriate to enable
CMS to assist Part D drug management programs in being responsive to
public health issues over time. This approach would also be consistent
with how the OMS criteria have been established over time through the
annual Medicare Parts C&D Call Letter process, which we plan to
continue except for 2019.
For plan year 2019, we propose the clinical guidelines in this
preamble to be the OMS criteria established for plan year 2018, which
meet the proposed standards for the clinical guidelines for the
following reasons: First, as described earlier, the OMS criteria
incorporate a 90 MME threshold cited in a CDC Guideline, which was
developed by experts as the level that prescribers should avoid
reaching with their patients. This threshold does not function as a
prescribing limit for the Part D program; rather, it identifies
potentially risky and dangerous levels of opioid prescribing in terms
of misuse or abuse. Second, the OMS criteria also incorporate a
multiple prescriber and pharmacy count. A high MED level combined with
multiple prescribers and/or pharmacies may also indicate the abuse or
misuse of opioids due to the possible lack of care coordination among
the providers for the patient. Third, the OMS criteria have been
revised over time based on analysis of Medicare data and with
stakeholder input via the annual Parts C&D Call Letter process. Indeed,
many stakeholders recommended the use of the CDC Guideline as part of
the clinical guidelines the Secretary must develop, with some noting
that they would need to be used in a way that accounts for use of
multiple providers, which the OMS criteria do. Fourth, these criteria
are familiar to Part D sponsors--they will already have experience with
them by

[[Page 56345]]

2019, and they were established with an estimate of program size.
Several stakeholders in their comments referred to various criteria
used in state Medicaid lock-in programs to identify beneficiaries
appropriate for lock-in, without suggesting that any particular ones be
adopted. Other commenters suggested CMS consider other guidelines, such
as the American Society of Addiction Medicine (ASAM) National Practice
Guideline for the Use of Medications in the Treatment of Addiction
Involving Opioid Use and the Veterans Affairs/Department of Defense
(VA/DoD) Clinical Practice Guideline on Opioid Therapy for Chronic
Pain. However, these guidelines are similar to or moving toward an MME
methodology which we currently use or address a more narrow population
than persons who may be abusing or misusing frequently abused drugs,
and they do not directly address situations involving multiple opioid
providers. The VA/DoD Clinical Practice Guideline for Opioid Therapy
for Chronic Pain is similar to the scope of the CDC Guideline. The ASAM
Guideline for the Use of Medications in the Treatment of Addiction
Involving Opioid Use was developed specifically for the evaluation and
treatment of opioid use disorder and for the management of opioid
overdose, which would not be applicable here because it serves a
different purpose. Therefore, we do not see a reason to adopt these
guidelines instead of the 2018 OMS criteria.
The clinical guidelines for use in drug management programs we are
proposing for 2019 are: Use of opioids with an average daily MME
greater than or equal to 90 mg for any duration during the most recent
6 months and either: 4 or more opioid prescribers and 4 or more opioid
dispensing pharmacies OR 6 or more opioid prescribers, regardless of
the number of opioid dispensing pharmacies. We note that we have
described alternative clinical guidelines that we considered in the
Regulatory Impact Analysis section of this rule. Stakeholders are
invited to comment on those alternatives and any others which would
involve identifying more or fewer potential at-risk beneficiaries.
We propose that under the proposed clinical guidelines, prescribers
associated with the same single Tax Identification Number (TIN) be
counted as a single prescriber. This is consistent with the current
policy under which we have found that such prescribers are typically in
the same group practice that is coordinating the care of the patients
served by it. Thus, it is appropriate to count such prescribers as one,
so as not to identify beneficiaries who are not at-risk.
In this regard, in applying the OMS criteria, CMS counts
prescribers with the same TIN as one prescriber, unless any of the
prescribers are associated with multiple TINs. For example, under the
criteria we have proposed, a beneficiary who meets the 90 MME criterion
and received opioid prescriptions from 4 prescribers in the same group
practice and 3 independent opioid prescribers (1 group practice + 3
prescribers = 4 prescribers) and filled the prescriptions at 4 opioid
dispensing pharmacies, would still meet the criteria, which is
appropriate. However, a beneficiary who meets that 90 MME criterion and
received opioid prescriptions from 4 prescribers in the same group
practice and 1 independent opioid prescriber (1 group practice + 1
prescriber = 2 prescribers) and filled the prescriptions at 4 opioid
dispensing pharmacies would not meet the criteria, which is also
appropriate at this time given program size concerns.
Section 1860D-4(c)(5)(D) of the Act specifies that for purposes of
limiting access to coverage of frequently abused drugs to those
obtained from a selected pharmacy, if the pharmacy has multiple
locations that share real-time electronic data, all such locations of
the pharmacy collectively are treated as one pharmacy. Given this
provision, as well as our proposal to treat multiple prescribers from
the same group practice as one prescriber under the clinical
guidelines, we propose that where a pharmacy has multiple locations
that share real-time electronic data, all locations of the pharmacy
collectively be treated as one pharmacy under the clinical guidelines.
Because not all Part D plans' data systems may be able to account
for group practice prescribers as we described above, or chain
pharmacies through data analysis alone, or may not be able to fully
account for them, we request information on sponsors' systems
capabilities in this regard. Also, if a plan sponsor does not have the
systems capability to automatically determine when a prescriber is part
of a group or a pharmacy is part of a chain, the plan sponsor would
have to make these determinations during case management, as they do
with respect to group practices under the current policy. If through
such case management, the Part D plan finds that the multiple
prescribers who prescribed frequently abused drugs for the beneficiary
are members of the same group practice, the Part D plan would treat
those prescribers as one prescriber for purposes of identification of
the beneficiary as a potential at-risk beneficiary. Similarly, if
through such case management, the Part D plan finds that multiple
locations of a pharmacy used by the beneficiary share real-time
electronic data, the Part D plan would treat those locations as one
pharmacy for purposes of identification of the beneficiary as a
potential at-risk beneficiary. Both of these scenarios may result in a
Part D sponsor no longer conducting case management for a beneficiary
because the beneficiary does not meet the clinical guidelines. We also
note that group practices and chain pharmacies are important to
consider for purposes of the selection of a prescriber(s) and
pharmacy(ies) in cases when a Part D plan limits a beneficiary's access
to coverage of frequently abused drugs to selected pharmacy(ies) and/or
prescriber(s), which we discuss in more detail later in this preamble.
Under the current policy, sponsors must use 90 MME as a ``floor''
for their own criteria to identify beneficiaries who may be
overutilizing opioids, but they may vary the prescriber and pharmacy
count. This means sponsors may review beneficiaries who do not meet the
OMS criteria but meet the sponsors' internal criteria for review, or
they may not review beneficiaries who meet the OMS criteria but do not
meet the sponsors' internal criteria for review. However, under our
proposal to adopt the 2018 OMS criteria as the 2019 clinical guidelines
for Part D drug management programs, we also propose to mostly
eliminate this feature of the current policy. Under our proposal, Part
D plan sponsors would not be able to vary the criteria of the
guidelines to include more or fewer beneficiaries in their drug
management programs, except that we propose to continue to permit plan
sponsors to apply the criteria more frequently than CMS would apply
them through OMS in 2018, which can result in sponsors identifying
beneficiaries earlier. This is because CMS evaluates enrollees
quarterly using a 6-month look back period, whereas sponsors may
evaluate enrollees more frequently (for example, monthly).
While several commenters stated that Part D plan sponsors should
have flexibility in developing their own criteria for identifying at-
risk beneficiaries in their plans, a more conservative and uniform
approach is warranted for the initial implementation of Part D drug
management programs. While we already have experience with how
frequently Part D plan sponsors use beneficiary-specific opioid POS
claim edits to prevent opioid overutilization, we wish to learn how
sponsors will use

[[Page 56346]]

lock-in as a tool to address this issue before adopting clinical
guidelines that might include parameters for permissible variations of
the criteria. We plan to monitor compliance of drug management programs
as we monitor compliance with the current policy through various CMS
data sources, such as OMS, MARx, beneficiary complaints and appeals.
Also, we note that despite sponsors' additional identification of
some beneficiaries currently, in practice, we have found that CMS
identifies the vast majority of beneficiaries who are reviewed by Part
D sponsors through OMS. CMS identifies over 80 percent of the cases
reviewed through OMS, and about 20 percent are identified by sponsors
based on their internal criteria. We understand that most of the
beneficiaries representing the 20 percent were reported to OMS due to
the sponsors averaging the MME calculations across all opioid
prescriptions, which has subsequently been changed in the 2018 OMS
criteria. The 2018 OMS criteria also have a lower MME threshold and
account for additional beneficiaries who receive their opioids from
many prescribers regardless of the number of pharmacies, which will
result in the identification of more beneficiaries through OMS. Thus,
our proposal would not substantially change the current practice.
Furthermore, in approximately 39 percent of current OMS cases, sponsors
respond that the case does not meet the sponsor's internal criteria for
review.\15\ We found that the original OMS criteria generated false
positives that some sponsors' internal criteria did not because these
sponsors used a shorter look back period or were able to group
prescribers within the same practice or chain pharmacies. These best
practices have also been incorporated into the revised 2018 OMS
criteria, which are the basis of the proposed 2019 clinical guidelines.
Thus, while our proposal will prevent sponsors from voluntarily
reviewing more potential at-risk beneficiaries than CMS identifies
through OMS, it will likely require sponsors to review more
beneficiaries than they currently do.
---------------------------------------------------------------------------

\15\ We noted in the final CY Parts C&D Call Letter, for the
January 2014 OMS reports, 67 percent of the potential opioid
overutilization responses were that the beneficiary did not meet the
sponsor's internal criteria. We explained the reasons for this
figure and the actions we took to reduce it.
---------------------------------------------------------------------------

Table 1 shows that in 2015 approximately 33,000 beneficiaries would
have met the proposed 2019 clinical guidelines, which is approximately
0.08 percent of the 42 million beneficiaries enrolled in Part D in
2015. We think this population would constitute a manageable program
size because this is the estimated OMS population we finalized during
the Plan Year 2018 Parts C&D Call Letter process. Moreover, we have no
evidence to suggest that this program size will be problematic for
sponsors.
In addition, current Medicaid lock-in programs support the notion
that this program size would be manageable by Part D plan sponsors. In
2015, an average 0.37 percent of Medicaid recipients were locked-in and
the percentage of recipient's locked-in by state programs ranged from
0.01 percent to 1.8 percent.\16\
---------------------------------------------------------------------------

\16\ Medicaid Drug Utilization Review State Comparison/Summary
Report FFY 2015 Annual Report: Prescription Drug-Fee-For-Service
Programs (December 2016), pg. 26.
---------------------------------------------------------------------------

To derive this estimated population of potential at-risk
beneficiaries, we analyzed prescription drug event data (PDE) from
2015,\17\ using the CDC opioid drug list and MME conversion factors,
and applying the criteria we proposed earlier as the clinical
guidelines. This estimate is over-inclusive because we did not exclude
beneficiaries in long-term care (LTC) facilities who would be exempted
from drug management programs, as we discuss later in this section.
However, based on similar analyses we have conducted, this exclusion
would not result in a noteworthy reduction to our estimate. Also, we
were unable to count all locations of a pharmacy that has multiple
locations that share real-time electronic data as one, which is a topic
we discussed earlier and will return to later. Thus, there likely are
beneficiaries counted in our estimate who would not be identified as
potential at-risk beneficiaries because they are in an LTC facility or
only use multiple locations of a retail chain pharmacy that share real-
time electronic data.
---------------------------------------------------------------------------

\17\ Unique count of beneficiaries who met the criteria in any 6
month measurement period (January 2015-June 2015; April 2015-
September 2015; or July 2015-December 2015).

Table 1--Clinical Guidelines or Identifying Potential At-Risk
Beneficiaries
------------------------------------------------------------------------
Criteria applied Impact to Part D program
------------------------------------------------------------------------
[gteqt]90 mg MED and either: 33,053 beneficiaries in 2015
(76.3% were LIS).
4+ opioid prescribers AND 4+ opioid Represents 0.08% of 41,835,016
dispensing pharmacies. Part D beneficiaries in 2015.
OR LTC beneficiaries included in
estimate but are exempt.
6+ opioid prescribers (regardless Prescribers associated with the
of the number of opioid dispensing same single Tax Identification
pharmacies). Numbers (TIN) are counted as a
single prescriber.
------------------------------------------------------------------------

We note that the alternatives for clinical guidelines that we
considered, which are described in the Regulatory Impact Analysis (RIA)
section of this rule, also include estimated population of potential
at-risk beneficiaries for each alternative. Most of the options include
a 90 MME threshold with varying prescriber and pharmacy counts and
range from identifying 33,053 to 319,133 beneficiaries. Again,
stakeholders are invited to comment on these alternatives. We are
particularly interested in receiving comments on whether CMS should
adjust the clinical guidelines so that more or fewer potential at-risk
beneficiaries are identified, and if more are identified, whether the
additional number would result in a manageable program size for plan
sponsors (or too few beneficiaries to be meaningful).
Exempted Beneficiary
Section 1860D-4(c)(5)(C)(ii) of the Act defines an exempted
individual as one who receives hospice care, who is a resident of a
long-term care facility for which frequently abused drugs are dispensed
for residents through a contract with a single pharmacy, or who the
Secretary elects to treat as an exempted individual. Consistent with
this, we propose that an exempted beneficiary, with respect to a drug
management program, would mean an enrollee who: (1) Has elected to
receive hospice care; (2) Is a resident of a long-term care facility,
of a facility described in section 1905(d) of the Act, or of another
facility for which frequently abused drugs are dispensed for residents

[[Page 56347]]

through a contract with a single pharmacy; or (3) Has a cancer
diagnosis.
While the first two exceptions are required under CARA, we propose
to exercise the authority in section 1860D-4(c)(5)(C)(ii)(III) of the
Act to treat a beneficiary who has a cancer diagnosis as an exempted
individual for two reasons. First, many commenters recommended that the
Secretary exempt beneficiaries who have a cancer diagnosis, because a
Part D drug management program should not be able to interfere
administratively with their pain control regimen in the form of
additional notices from their prescription drug benefit plans and
limitations on their access to coverage for frequently abused drugs. We
agree with these commenters. Second, exempting beneficiaries with a
cancer diagnosis would be consistent with current policy. Under the
current policy, which has been developed through stakeholder feedback,
beneficiaries with cancer are excluded because the benefit of their
opioid use may outweigh the risk associated with their opioid use.
Also, as noted previously, some commenters requested that
implementation of the drug management program provisions of CARA be as
consistent as possible with the current policy for operational ease. We
also agree with these commenters.
Some commenters recommended against exempting beneficiaries with
cancer diagnoses, stating that there is no standard clinical reason why
a beneficiary with cancer should be receiving opioids from multiple
prescribers and/or multiple pharmacies, and that such situations
warrant further review. While we understand the concern of these
commenters, we maintain that beneficiaries who have a cancer diagnosis
should be exempted for the reasons stated just above. Moreover, our
experience with this exemption under the current policy suggests that
the exemption is workable and appropriate. We understand beneficiaries
with cancer diagnoses are identifiable by Part D plan sponsors either
through recorded diagnoses, their drug regimens or case management, and
no major concerns have been expressed about this exemption under our
current policy, including from standalone Part D plan sponsors who may
not have access to their enrollees' medical records.
A few commenters suggested exempting beneficiaries who are
receiving palliative and end-of-life care, since not all patients
receiving this type of care are necessarily enrolled in hospice or
reside in an LTC facility. Two commenters suggested exempting
beneficiaries in assisted living. Other commenters suggested exempting
beneficiaries in various other health care facilities, such as group
homes and adult day care centers, where medication is supervised. Other
commenters suggested exempting beneficiaries with debilitating
disorders or receiving medication-assisted treatment for substance
abuse disorders.
We have not proposed to exempt these additional categories of
beneficiaries but we seek specific comment on whether to do so and our
rationale. First, we have not exempted these other beneficiaries under
the current policy, and we thus do not think it is necessary to exempt
them from drug management programs. Second, unlike with cancer
diagnoses, we are not able to determine administratively through CMS
data who these beneficiaries are to exempt them from OMS reporting.
Consequently, it could be burdensome for Part D sponsors to attempt to
exempt these beneficiaries, by definition, from their drug management
programs. Third, it is important to remember that the proposed clinical
guidelines would only identify potential at-risk beneficiaries in the
Part D program who are receiving potentially unsafe doses of opioids
from multiple prescribers and/or multiple pharmacies who typically do
not know about each other in terms of providing services to the
beneficiary. Thus, it is likely that a plan would discover during case
management that a potential at-risk beneficiary is receiving palliative
and end-of-life care during case management. Absent a compelling
reason, we would expect the plan not to seek to implement a limit on
such beneficiary's access to coverage of opioids under the current
policy nor a drug management program, as it would seem to outweigh the
medication risk in such circumstances. Moreover, in cases where a
prescriber is cooperating with case management, we would not expect the
prescriber to agree to such a limitation, again, absent a compelling
reason. With respect to beneficiaries receiving medication-assisted
treatment for substance abuse for opioid use disorder, we decline to
propose to treat these individuals as exempted individuals. It is these
beneficiaries who are among the most likely to benefit from a drug
management program.
(ii) Requirements of Drug Management Programs (Sec. Sec. 423.153,
423.153(f))
As noted previously, we are proposing to codify a regulatory
framework under which Part D plan sponsors may adopt drug management
programs to address overutilization of frequently abused drugs.
Therefore, we propose to amend Sec. 423.153(a) by adding this sentence
at the end: ``A Part D plan sponsor may establish a drug management
program for at-risk beneficiaries enrolled in their prescription drug
benefit plans to address overutilization of frequently abused drugs, as
described in paragraph (f) of this section,'' in accordance with our
authority under revised section 1860D-4(c)(5)(A) of the Act.
We also propose to revise Sec. 423.153 by adding a new paragraph
(f) about drug management programs for which the introductory sentence
would read: ``(f) Drug Management Programs. A drug management program
must meet all the following requirements.'' Thus, the requirements that
a Part D plan sponsor must meet to operate a drug management program
would be codified in various provisions under subsection Sec.
423.153(f).
(iii) Written Policies and Procedures (Sec. 423.153(f)(1))
We propose to require Part D sponsors document their programs in
written policies and procedures that are approved by the applicable P&T
committee and reviewed and updated as appropriate, which is consistent
with the current policy. Also consistent with the current policy, we
would require these policies and procedures to address the appropriate
credentials of the personnel conducting case management and the
necessary and appropriate contents of files for case management. We
additionally propose to require sponsors to monitor information about
incoming enrollees who would meet the definition of a potential at-risk
and an at-risk beneficiary in proposed Sec. 423.100 and respond to
requests from other sponsors for information about potential at-risk
and at-risk beneficiaries who recently disenrolled from the sponsor's
prescription drug benefit plans. We discuss potential at-risk and at-
risk beneficiaries who are identified as such in their most recent Part
D plan later in this preamble.
To codify these requirements, we propose that section Sec.
423.153(f)(1) read as follows: (1) Written policies and procedures. A
sponsor must document its drug management program in written policies
and procedures that are approved by the applicable P&T committee and
reviewed and updated as appropriate. The policies and procedures must
address all aspects of the sponsor's drug management program, including
but not limited to the following: (i) The appropriate credentials of
the personnel conducting case management required under

[[Page 56348]]

paragraph (f)(2); (ii) The necessary and appropriate contents of files
for case management required under paragraph (f)(2); and (iii)
Monitoring reports and notifications about incoming enrollees who meet
the definition of an at-risk beneficiary and a potential at-risk
beneficiary in Sec. 423.100 and responding to requests from other
sponsors for information about at-risk beneficiaries and potential at-
risk beneficiaries who recently disenrolled from the sponsor's
prescription drug benefit plans. Thus, Part D sponsors would have
flexibility--as they do today under the current policy--to adopt
specific policies and procedures for their drug management programs, as
long as they are consistent with the requirements of Sec. 423.153, as
finalized.
(iv) Case Management/Clinical Contact/Prescriber Verification (Sec.
423.153(f)(2))
As discussed earlier, case management is a key feature of the
current policy, under which we currently expect Part D plan sponsors'
clinical staff to diligently engage in case management with the
relevant opioid prescribers to coordinate care with respect to each
beneficiary reported by OMS until the case is resolved (unless the
beneficiary does not meet the sponsor's internal criteria). We propose
that the second requirement for drug management programs in a new Sec.
423.153(f)(2) reflect the current policy with some adjustment to the
current policy to require all beneficiaries reported by OMS to be
reviewed by sponsors.
Our proposal for a new Sec. 423.153(f)(2) also meets the
requirements of section 1860D-4I(5)(C) of the Act. This section of the
Act requires that, with respect to each at-risk beneficiary, the
sponsor shall contact the beneficiary's providers who have prescribed
frequently abused drugs regarding whether prescribed medications are
appropriate for such beneficiary's medical conditions. Further, our
proposal meets the requirements of Section 1860D-4(c)(5)(B)(i)(II) of
the Act, which requires that a Part D sponsor first verify with the
beneficiary's providers that the beneficiary is an at-risk beneficiary,
if the sponsor intends to limit the beneficiary's access to coverage
for frequently abused drugs.
Specifically, we propose that a new Sec. 423.153(f)(2) read as
follows: Case Management/Clinical Contact/Prescriber Verification. (i)
General Rule. The sponsor's clinical staff must conduct case management
for each potential at-risk beneficiary for the purpose of engaging in
clinical contact with the prescribers of frequently abused drugs and
verifying whether a potential at-risk beneficiary is an at-risk
beneficiary. Proposed Sec. 423.153(f)(2)(i) would further state that,
except as provided in paragraph (f)(2)(ii) of this section, the sponsor
must do all of the following: (A) Send written information to the
beneficiary's prescribers that the beneficiary meets the clinical
guidelines and is a potential at-risk beneficiary; (B) Elicit
information from the prescribers about any factors in the beneficiary's
treatment that are relevant to a determination that the beneficiary is
an at-risk beneficiary, including whether prescribed medications are
appropriate for the beneficiary's medical conditions or the beneficiary
is an exempted beneficiary; and (C) In cases where the prescribers have
not responded to the inquiry described in (i)(B), make reasonable
attempts to communicate telephonically with the prescribers within a
reasonable period after sending the written information.
Given the ``Except as provided in paragraph (f)(2)(ii) of this
section'', we propose to add paragraph (ii) to Sec. 423.153(f)(2) that
would read: (ii) Exception for identification by prior plan. If a
beneficiary was identified as a potential at-risk or an at-risk
beneficiary by his or her most recent prior plan, and such
identification has not been terminated in accordance with paragraph
(f)(14) of this section, the sponsor meets the requirements in
paragraph (f)(2)(i) of this section, so long as the sponsor obtains
case management information from the previous sponsor and such
information is still clinically adequate and up to date. This proposal
is to avoid unnecessary burden on health care providers when additional
case management outreach is not necessary. This is consistent with the
current policy under which sponsors are expected to enter information
into MARx about pending, implemented and terminated beneficiary-
specific POS claim edits, which is transferred to the next sponsor, if
applicable. Pending and implemented POS claim edits are actions that
sponsors enter into MARx after case management. We discuss potential
at-risk and at-risk beneficiaries who change plans again later in this
preamble.
The information that the plan sends to the prescribers and elicits
from them is intended to assist a Part D sponsor to understand why the
beneficiary meets the clinical guidelines and if a plan intervention is
warranted for the safety of the beneficiary. Also, sponsors use this
information to choose standardized responses in OMS and provide
information to MARx about plan interventions that were referenced
earlier. We will address required reporting to OMS and MARx by sponsors
again later.
We note that, currently, OMS standardized responses generally fall
into four categories: First, in approximately 18 percent of cases, the
enrollee's opioid use is medically necessary. Second, approximately 38
percent of cases are resolved without a beneficiary-specific POS opioid
claim edit, for example, when the sponsor takes a ``wait and see''
approach to observe if the prescribers adjust their management of, and
the opioid prescriptions they are writing for, their patient due to the
written information they received from the sponsor about their patient.
Third, a small subset of cases--on average 1.3 percent--need a
beneficiary-specific opioid POS claim edit to resolve the beneficiary's
opioid overutilization issue. From 2013 through of July 4, 2017, CMS
received 4,617 contract-beneficiary-level opioid POS claim edit
notifications through MARx for 3,961 unique beneficiaries. Fourth, as
previously mentioned, approximately 39 percent of cases do not meet the
sponsor's internal criteria for review. We expect adjustment to these
percentages under our proposal, particularly since we anticipate that
plans will no longer be able to respond that a case does not meet its
internal criteria for review. In addition, the revised 2018 OMS
criteria which are the basis of the proposed 2019 clinical guidelines
should reduce ``false positives'' which may have been reported through
OMS but not identified through sponsors' internal criteria due to a
shorter look back period and ability to group prescribers within the
same practice.
We also note that under the current policy, sponsors are expected
to make ``at least three (3) attempts to schedule telephone
conversations with the prescribers (separately or together) within a
reasonable period (for example, a 10 business day period) from the
issuance of the written inquiry notification.'' If the prescribers are
unresponsive to case management, under our current policy, a sponsor
may also implement a beneficiary-specific POS claim edit for opioids as
a last resort to encourage prescriber engagement with case management.
By contrast, our proposed Sec. 423.153(f)(2) uses the terms
``reasonable attempts'' and ``reasonable period'' rather than a
specific number of attempts or a specific timeframe for plan to call
prescribers. The reason for this proposed adjustment to our policy is
because our current policy also states that ``[s]ponsors are not
required to

[[Page 56349]]

automatically contact prescribers telephonically,'' but those that
``employ a wait-and-see approach'' should understand that ``we expect
sponsors to address the most egregious cases of opioid overutilization
without unreasonable delay, and that we do not believe that all such
cases can be addressed through a prescriber letter campaign.'' Our
guidance further states that, ``to the extent that some cases can be
addressed through written communication to prescribers only, we would
acknowledge the benefit of not aggravating prescribers with unnecessary
telephonic communications.'' Finally, our guidance states that,
``[s]ponsors must determine for themselves the usefulness of attempting
to call or contact all opioid prescribers when there are many,
particularly when they are emergency room physicians.'' \18\
---------------------------------------------------------------------------

\18\ See ``Supplemental Guidance Relating to Improving Drug
Utilization Review Controls in Part D'', September 6, 2012 (pp. 5,
19-20) at https://www.cms.gov/Medicare/Prescription-Drug-Coverage/PrescriptionDrugCovContra/RxUtilization.html.
---------------------------------------------------------------------------

Given the competing priorities of sponsors' diligently addressing
opioid overutilization in the Part D program through case management,
which may necessitate telephone calls to the prescribers, while being
cognizant of the need to be judicious in contacting prescribers
telephonically in order to not unnecessarily disrupt their practices,
we wish to leave flexibility in the regulation text for sponsors to
balance these priorities on a case-by-case basis in their drug
management programs, particularly since this flexibility exists under
the current policy. We note however, that we propose a 3 attempts/10
business days requirement for sponsors to conclude that a prescriber is
unresponsive to case management in Sec. 423.153(f)(4) discussed later
in this section.
(v) Limitations on Access to Coverage for Frequently Abused Drugs
(Sec. 423.153(f)(3))
As described earlier, under the current policy, Part D sponsors may
implement a beneficiary-specific opioid POS claim edit to prevent
continued overutilization of opioids, with prescriber agreement or in
the case of an unresponsive prescriber during case management. If a
sponsor implements a POS claim edit, the sponsor thereafter does not
cover opioids for the beneficiary in excess of the edit, absent a
subsequent determination, including a successful appeal.
As noted earlier, revised section 1860D-4(c)(5)(A) of the Act
provides additional tools commonly known as ``lock-in'', for Part D
plans to limit an at-risk beneficiary's access to coverage for
frequently abused drugs. Prescriber lock-in would limit an at-risk
beneficiary's access to coverage for frequently abused drugs to those
that are prescribed for the beneficiary by one or more prescribers, and
pharmacy lock-in would restrict an at-risk beneficiary's access to
coverage for frequently abused drugs to those that are dispensed to the
beneficiary by one or more network pharmacies.
If the sponsor uses a lock-in tool(s), the sponsor must generally
cover frequently abused drugs for the beneficiary only when they are
obtained from the selected pharmacy(ies) and/or prescriber(s), as
applicable, absent a subsequent determination, including a successful
appeal. Pursuant to section 1860D-4(c)(5)(D)(i)(II) of the Act, a
sponsor would also have to cover frequently abused drugs from a non-
selected pharmacy or prescriber, if such coverage were necessary in
order to provide reasonable access. We discuss selection of pharmacies
and prescribers and reasonable access later.
We propose to describe all the tools that would be available to
sponsors to limit an at-risk beneficiary's access to coverage for
frequently abused drugs through a drug management program in Sec.
423.153(f)(3) as follows: Limitation on Access to Coverage for
Frequently Abused Drugs. Subject to the requirements of paragraph
(f)(4) of this section, a Part D plan sponsor may do all of the
following: (i) Implement a point-of-sale claim edit for frequently
abused drugs that is specific to an at-risk beneficiary; or (ii) In
accordance with paragraphs (f)(10) and (f)(11) of this section, limit
an at-risk beneficiary's access to coverage for frequently abused drugs
to those that are (A) Prescribed for the beneficiary by one or more
prescribers; (B) Dispensed to the beneficiary by one or more network
pharmacies; or (C) Specified in both paragraphs (3)(ii)(B)(1) and (2)
of this paragraph. Paragraph (iii)(A) would state that if the sponsor
implements an edit as specified in paragraph (f)(3)(i) of this section,
the sponsor must not cover frequently abused drugs for the beneficiary
in excess of the edit, unless the edit is terminated or revised based
on a subsequent determination, including a successful appeal. Paragraph
(iii)(B) would state that if the sponsor limits the at-risk
beneficiary's access to coverage as specified in paragraph (f)(3)(ii)
of this section, the sponsor must cover frequently abused drugs for the
beneficiary only when they are obtained from the selected pharmacy(ies)
and/or prescriber(s), or both, as applicable, (1) in accordance with
all other coverage requirements of the beneficiary's prescription drug
benefit plan, unless the limit is terminated or revised based on a
subsequent determination, including a successful appeal, and (2) except
as necessary to provide reasonable access in accordance with paragraph
(f)(12) of this section.
(vi) Requirements for Limiting Access to Coverage for Frequently Abused
Drugs (Sec. 423.153(f)(4))
We propose that before a Part D plan sponsor could limit the access
of at-risk beneficiary to coverage for frequently abused drugs, the
sponsor must first take certain actions, consistent with current
policy. We propose that a sponsor must first conduct the case
management discussed earlier, which includes clinical contact to
determine whether prescribed medications are appropriate for the
potential at-risk beneficiary's medical conditions and prescriber
verification that the beneficiary is an at-risk beneficiary. We also
propose that the sponsor must first obtain the agreement of the
prescribers of frequently abused drugs with the limitation, unless the
prescribers were not responsive to the required case management, in
light of the risk to the beneficiary's health. We further propose that
the sponsor must first provide notice to the beneficiary in accordance
with section 1860D-4(c)(5)(B)(i)(I) of the Act.
We propose to require the additional step of prescriber agreement,
which is consistent with the current policy as discussed earlier,
because a prescriber may verify that the beneficiary is an at-risk
beneficiary but may not view a limitation on the beneficiary's access
to coverage for frequently abused drugs as appropriate. Given the
additional information the prescribers would have from the Part D
sponsor through case management about the beneficiary's utilization of
frequently abused drugs, the prescribers' professional opinion may be
that an adjustment to their prescribing for, and care of, the
beneficiary is all that is needed to safely manage the beneficiary's
use of frequently abused drugs going forward. We invite stakeholders to
comment on not requiring prescriber agreement to implement pharmacy
lock-in. We could foresee a case in which the prescriber is responsive,
but does not agree with pharmacy lock-in.
We also propose language that would provide an exception to the
case management requirement in Sec. 423.153(f)(2) when an at-risk

[[Page 56350]]

beneficiary was identified as an at-risk beneficiary by the
beneficiary's most recent prior prescription drug benefit plan. We
discuss such cases more later in this section. Given the foregoing, we
propose to add a paragraph (f)(4) to Sec. 423.153 that reads:
Requirements for Limiting Access to Coverage for Frequently Abused
Drugs. (i) A sponsor may not limit the access of an at-risk beneficiary
to coverage for frequently abused drugs under paragraph (f)(3) of this
section, unless the sponsor has done all of the following: (A)
Conducted the case management required by paragraph (f)(2) of this
section and updated it, if necessary; (B) Obtained the agreement of the
prescribers of frequently abused drugs for the beneficiary that the
specific limitation is appropriate; and (C) Provided the notices to the
beneficiary in compliance with paragraphs (f)(5) and (6) of this
section. We would also state in subsection (ii) that if the sponsor
complied with the requirement of paragraph (f)(2)(i)(C) of this
section, and the prescribers were not responsive after 3 attempts by
the sponsor to contact them by telephone within 10 business days, then
the sponsor has met the requirement of paragraph (f)(4)(i)(B) of this
section. Finally, we would state in a subsection (iii) that if the
beneficiary meets paragraph (2) of the definition of a potential at-
risk beneficiary or an at-risk beneficiary, and the sponsor has
obtained the applicable case management information from the sponsor of
the beneficiary's most recent plan and updated it as appropriate, the
sponsor has met the case management requirement in paragraph (f)(2)(i).
(vii) Beneficiary Notices and Limitation of Special Enrollment Period
(Sec. Sec. 423.153(f)(5), 423.153(f)(6), 423.38)
(A) Initial Notice to Beneficiary and Sponsor Intent To Implement
Limitation on Access to Coverage for Frequently Abused Drugs (Sec.
423.153(f)(5))
The notices referred to in proposed Sec. 423.153(f)(4)(i)(C) are
the initial and second notice that section 1860D-4(c)(5)(B)(i)(I) of
the Act requires Part D sponsors to send to potential at-risk and at-
risk beneficiaries regarding their drug management programs. We remind
Part D sponsors that under Section 504 of the Rehabilitation Act of
1973, effective communications requirements would apply to both these
notices. We first discuss the initial notice.
We propose in Sec. 423.153(f)(5) that if a Part D plan sponsor
intends to limit the access of a potential at-risk beneficiary to
coverage for frequently abused drugs, the sponsor would be required to
provide an initial written notice to the potential at-risk beneficiary.
We also propose that the language be approved by the Secretary and be
in a readable and understandable form that contains the language
required by section 1860D-4(c)(5)(B)(ii) of the Act to which we propose
to add detail in the regulation text. Finally, we propose that the
sponsor be required to make reasonable efforts to provide the
prescriber(s) of frequently abused drugs with a copy of the notice.
We propose that Sec. 423.153(f)(5)(i) read as follows: Initial
Notice to Beneficiary. A Part D sponsor that intends to limit the
access of a potential at-risk beneficiary to coverage for frequently
abused drugs under paragraph (f)(3) of this section must provide an
initial written notice to the beneficiary. Paragraph (f)(5)(ii) would
require that the notice use language approved by the Secretary and be
in a readable and understandable form that provides the following
information: (1) An explanation that the beneficiary's current or
immediately prior Part D plan sponsor has identified the beneficiary as
a potential at-risk beneficiary; (2) A description of all State and
Federal public health resources that are designed to address
prescription drug abuse to which the beneficiary has access, including
mental health and other counseling services and information on how to
access such services, including any such services covered by the plan
under its Medicare benefits, supplemental benefits, or Medicaid
benefits (if the plan integrates coverage of Medicare and Medicaid
benefits); (3) An explanation of the beneficiary's right to a
redetermination if the sponsor issues a determination that the
beneficiary is an at-risk beneficiary and the standard and expedited
redetermination processes described at Sec. 423.580 et seq.; (4) A
request that the beneficiary submit to the sponsor within 30 days of
the date of this initial notice any information that the beneficiary
believes is relevant to the sponsor's determination, including which
prescribers and pharmacies the beneficiary would prefer the sponsor to
select if the sponsor implements a limitation under Sec.
423.153(f)(3)(ii); (5) An explanation of the meaning and consequences
of being identified as an at-risk beneficiary, including an explanation
of the sponsor's drug management program, the specific limitation the
sponsor intends to place on the beneficiary's access to coverage for
frequently abused drugs under the program, the timeframe for the
sponsor's decision, and if applicable, any limitation on the
availability of the special enrollment period described in Sec.
423.38; (6) Clear instructions that explain how the beneficiary can
contact the sponsor, including how the beneficiary may submit
information to the sponsor in response to the request described in
paragraph (f)(5)(ii)(C)(4); (7) Contact information for other
organizations that can provide the beneficiary with assistance
regarding the sponsor's drug management program; and (8) Other content
that CMS determines is necessary for the beneficiary to understand the
information required in this notice.
We propose to require at Sec. 423.153(f)(5)(iii) that the Part D
plan sponsor make reasonable efforts to provide the beneficiary's
prescriber(s) of frequently abused drugs with a copy of the notice
required under paragraph (f)(5)(i).
The content of the initial notice we propose in Sec. 423.153(f)(5)
closely follows the content required by section 1860D-4(c)(5)(B)(ii) of
the Act, but as noted previously, we have proposed to add some detail
to the regulation text. In proposed paragraph (f)(5)(ii)(C)(2)--which
would require a description of public health resources that are
designed to address prescription drug abuse--we propose to require that
the notice contain information on how to access such services. We also
included a reference in proposed paragraph (ii)(C)(4) to the fact that
a beneficiary would have 30 days to provide information to the sponsor,
which is a timeframe we discuss later in this preamble. We propose an
additional requirement in paragraph (ii)(C)(5) that the sponsor include
the limitation the sponsors intends to place on the beneficiary's
access to coverage for frequently abused drugs, the timeframe for the
sponsor's decision, and, if applicable, any limitation on the
availability of the SEP. Finally, we proposed a requirement in
paragraph (ii)(C)(8) that the notice contain other content that CMS
determines is necessary for the beneficiary to understand the
information required in the initial notice.
We note that our proposed implementation of the statutory
requirements for the initial notice would permit the notice also to be
used when the sponsor intends to implement a beneficiary-specific POS
claim edit for frequently abused drugs. This is consistent with our
current policy and would streamline beneficiary notices about opioids
since we propose frequently abused drugs to consist of opioids for
2019.

[[Page 56351]]

Although section 1860D-4(c)(5) is silent as to the sequence of the
steps of clinical contact, prescriber verification, and the initial
notice, we propose to implement these requirements such that they would
occur in the following order: First, the plan sponsor would conduct the
case management which encompasses clinical contact and prescriber
verification required by Sec. 423.153(f)(2) and prescriber agreement
required by Sec. 423.153(f)(4), and second would, as applicable,
indicate the sponsor's intent to limit the beneficiary's access to
frequently abused drugs by providing the initial notice. In our view, a
sponsor cannot reasonably intend to limit the beneficiary's access
unless it has first undertaken case management to make clinical contact
and obtain prescriber verification and agreement. Further, under our
proposal, although the proposed regulatory text of (f)(4)(i) states
that the sponsor must verify with the prescriber(s) that the
beneficiary is an at-risk beneficiary in accordance with the applicable
statutory language, the beneficiary would still be a potential at-risk
beneficiary from the sponsor's perspective when the sponsor provides
the beneficiary the initial notice. This is because the sponsor has yet
to solicit information from the beneficiary about his or her use of
frequently abused drugs, and such information may have a bearing on
whether a sponsor identifies a potential at-risk beneficiary as an at-
risk beneficiary.
Moreover, we believe that in general, a sponsor should not send a
potential at-risk beneficiary an initial notice until after the sponsor
has been in contact with the beneficiary's prescribers of frequently
abused drugs, so as to avoid unnecessarily alarming the beneficiary,
considering that a sponsor may learn from the prescribers that the
beneficiary's use of the drugs is medically necessary, or that the
beneficiary is an exempted beneficiary. This proposed approach is also
consistent with our current policy and stakeholder comments. Therefore,
under this approach, a sponsor would provide an initial notice to a
potential at-risk beneficiary if the sponsor intends to limit the
beneficiary's access to coverage for frequently abused drugs, and the
sponsor would provide a second notice to an at-risk beneficiary when it
actually limits the beneficiary's access to coverage for frequently
abused drugs. Alternatively, the sponsor would provide an alternate
second notice if it decides not to limit the beneficiary's access to
coverage for frequently abused drugs. We discuss the second notice and
alternate second notice later in this preamble.
We intend to develop language for the initial notice. Therefore,
the proposed regulatory text states that the notice must use language
approved by the Secretary.
(B) Limitation on the Special Enrollment Period for LIS Beneficiaries
With an At-Risk Status (Sec. 423.38)
In addition to providing relevant information to a potential at-
risk beneficiary, we propose that the initial notice will notify
dually- and other low income subsidy (LIS)-eligible beneficiaries, that
they will be unable to use the special enrollment period (SEP) for LIS
beneficiaries due to their at-risk status. (Hereafter, this SEP is
referred to as the ``duals' SEP''). Section 1860D-1(b)(3)(D) of the Act
requires the Secretary to establish a Part D SEP for full-benefit
dually eligible (FBDE) beneficiaries. This SEP, codified at Sec.
423.38(c)(4), was later extended to all other subsidy-eligible
beneficiaries (75 FR 19720) so that all LIS-eligible beneficiaries were
treated uniformly. The duals' SEP currently allows such individuals to
make Part D enrollment changes (that is, enroll in, disenroll from, or
change Part D plans) throughout the year, unlike other Part D enrollees
who generally may make enrollment changes only during the annual
election period (AEP). Individuals using this SEP can enroll in either
a stand-alone Part D prescription drug plan (PDP) or a Medicare
Advantage plan with prescription drug coverage.
Section 704(a)(3) of CARA gives the Secretary the discretion to
limit the SEP for FBDE beneficiaries outlined in section 1860D-
1(b)(3)(D) of the Act. This limitation is related to, but distinct
from, other changes to the duals' SEP proposed in section III.A.11 of
this proposed rule (as discussed later). A limitation under a sponsor's
drug management program can only be effective as long as the individual
is enrolled in that plan or another plan that also has a drug
management program. Therefore, this proposed SEP limitation would be an
important tool to reduce the opportunities for LIS-eligible
beneficiaries designated as at-risk to switch plans. If an individual
is determined to be an at-risk beneficiary, and is permitted to change
plans using the duals' SEP, he or she could avoid the drug management
program by leaving the plan before the program can be started or by
enrolling in a PDP that does not have a drug management program. This
would allow the beneficiary to circumvent the lock-in program and not
receive the care coordination such a program provides. Even if an-risk
beneficiary joined another plan that had a drug management program in
place, there would be challenges in terms of preventing a gap managing
their potential or actual overutilization of frequently abused drugs
due to timing of information sharing between the plans and possible
difference in provider networks.
Accordingly, we are proposing to revise Sec. 423.38(c)(4), so that
it is not available to potential at-risk beneficiaries or at-risk
beneficiaries. Once an individual is identified as a potential at-risk
beneficiary and the sponsor intends to limit the beneficiary's access
to coverage for frequently abused drugs, the sponsor would provide an
initial notice to the beneficiary and the duals' SEP would no longer be
available to the otherwise eligible individual. This means that he or
she would be unable to use the duals' SEP to enroll in a different plan
or disenroll from the current Part D plan. The limitation would be
effective as of the date the Part D plan sponsor identifies an
individual to be potentially at-risk. Limiting the duals' SEP
concurrent with the plan's identification of a potential at-risk
beneficiary would reduce the opportunities for such beneficiaries to
use the interval between receipt of the initial notice and application
of the limitation (for example, pharmacy or prescriber lock-in,
beneficiary-specific POS claim edit) as an opportunity to change plans
before the restriction takes effect.
Based on the 2015 data in CMS' OMS, more than 76 percent of all
beneficiaries estimated to be potential at-risk beneficiaries are LIS-
eligible individuals. Based on this data, without an SEP limitation at
the initial point of identification, the notification of a potential
drug management program may prompt these individuals to switch plans
immediately after receiving the initial notice. In effect, under the
current regulations, if unchanged, the dually- or other LIS-eligible
individual, could keep changing plans and avoid being subject to any
drug management program.
We propose that, consistent with the timeframes discussed in
proposed paragraph Sec. 423.153(f)(7), if the Part D plan sponsor
takes no additional action to identify the individual as an at-risk
beneficiary within 90 days from the initial notice, the ``potentially
at-risk'' designation and the duals' SEP limitation would expire. If
the sponsor determines that the potential at-risk beneficiary is an at-
risk beneficiary, the

[[Page 56352]]

duals' SEP would not be available to that beneficiary until the date
the beneficiary's at-risk status is terminated based on a subsequent
determination, including a successful appeal, or at the end of a 12-
month period calculated from the effective date the sponsor provided
the beneficiary in the second notice as proposed at Sec. 423.153(f)(6)
whichever is sooner.
As discussed in section III.A.11 of this proposed rule, we are also
proposing to revise Sec. 423.38(c)(4) to make the SEP for FBDE or
other subsidy-eligible individuals available only in certain
circumstances. As further explained in section III.A.11, we also are
proposing to establish a new SEP at Sec. 423.38(c)(9) to permit any
beneficiary to make an enrollment change when he or she has a gain,
loss, or change in Medicaid or LIS eligibility.
We propose not to limit the availability of this new SEP to
potential at-risk and at-risk beneficiaries. In situations where an
individual is designated as a potential at-risk beneficiary or an at-
risk beneficiary and later determined to be dually-eligible for
Medicaid or otherwise eligible for LIS, that beneficiary should be
afforded the ability to receive the subsidy benefit to the fullest
extent for which he or she qualifies and therefore should be able to
change to a plan that is more affordable, or that is within the premium
benchmark amount if desired. Likewise, if an individual with an ``at-
risk'' designation loses dual-eligibility or LIS status, or has a
change in the level of extra help, he or she would be afforded an
opportunity to elect a different Part D plan, as discussed in section
III.A.11 of this proposed rule. This is also a life changing event that
may have a financial impact on the individual, and could necessitate an
individual making a plan change in order to continue coverage.
We note that auto- and facilitated enrollment of LIS eligible
individuals and plan annual reassignment processes would still apply to
dual- and other LIS-eligible individuals who were identified as an at-
risk beneficiary in their previous plan. This is consistent with CMS's
obligation and general approach to ensure Part D coverage for LIS-
eligible beneficiaries and to protect the individual's access to
prescription drugs. Furthermore, we note that the proposed enrollment
limitations for Medicaid or other LIS-eligible individuals designated
as at-risk beneficiaries would not apply to other Part D enrollment
periods, including the AEP or other SEPs. As discussed previously, we
propose that the ability to use the duals' SEP, as outlined in section
III.A.11. of this proposed rule, would not be permissible once the
individual is enrolled in a plan that has identified him or her as a
potential at-risk beneficiary or at-risk beneficiary, for a dual or
other LIS-eligible who meets the definition of at-risk beneficiary or
potential at-risk beneficiary under proposed Sec. 423.100.
(C) Second Notice to Beneficiary and Sponsor Implementation of
Limitation on Access to Coverage for Frequently Abused Drugs by Sponsor
(Sec. 423.153(f)(6))
As previously noted, section 1860D-4(c)(5)(B)(i)(I) of the Act
requires Part D sponsors to provide a second written notice to at-risk
beneficiaries when they limit their access to coverage for frequently
abused drugs. Also, as with the initial notice, our proposed
implementation of this statutory requirement for the second notice
would permit the second notice to be used when the sponsor implements a
beneficiary-specific POS claim edit for frequently abused drugs.
We propose to codify this requirement in Sec. 423.153(f)(6)(i).
Specifically, we propose to require the sponsor to provide the second
notice when it determines that the beneficiary is an at-risk
beneficiary and to limit the beneficiary's access to coverage for
frequently abused drugs. We further propose to require the second
notice to include the effective and end date of the limitation. Thus,
this second notice would function as a written confirmation of the
limitation the sponsor is implementing with respect to the beneficiary,
and the timeframe of that limitation.
We also propose that the second notice, like the initial notice,
contain language required by section 1860D-4(c)(5)(B)(iii) of the Act
to which we propose to add detail in the regulation text. We also
propose that the second notice, like the initial notice, be approved by
the Secretary and be in a readable and understandable form, as well as
contain other content that CMS determines is necessary for the
beneficiary to understand the information required in this notice.
Finally, in Sec. 423.153(f)(6)(iii), we propose that the sponsor be
required to make reasonable efforts to provide the beneficiary's
prescriber(s) of frequently abused drugs with a copy of the notice, as
we proposed with the initial notice.
Proposed Sec. 423.153(f)(6)(i) would read as follows: Second
notice. Upon making a determination that a beneficiary is an at-risk
beneficiary and to limit the beneficiary's access to coverage for
frequently abused drugs under paragraph (f)(3) of this section, a Part
D sponsor must provide a second written notice to the beneficiary.
Paragraph (f)(6)(ii) would require that the second notice use language
approved by the Secretary and be in a readable and understandable form
that contains the following information: (1) An explanation that the
beneficiary's current or immediately prior Part D plan sponsor has
identified the beneficiary as an at-risk beneficiary; (2) An
explanation that the beneficiary is subject to the requirements of the
sponsor's drug management program, including the limitation the sponsor
is placing on the beneficiary's access to coverage for frequently
abused drugs and the effective and end date of the limitation; and, if
applicable, any limitation on the availability of the special
enrollment period described in Sec. 423.38 et seq.; (3) The
prescriber(s) and/or pharmacy(ies) or both, if and as applicable, from
which the beneficiary must obtain frequently abused drugs in order for
them to be covered by the sponsor; (4) An explanation of the
beneficiary's right to a redetermination under Sec. 423.580 et seq.,
including a description of both the standard and expedited
redetermination processes, with the beneficiary's right to, and
conditions for, obtaining an expedited redetermination; (5) An
explanation that the beneficiary may submit to the sponsor, if the
beneficiary has not already done so, the prescriber(s) and
pharmacy(ies), as applicable, from which the beneficiary would prefer
to obtain frequently abused drugs; (6) Clear instructions that explain
how the beneficiary may contact the sponsor, including how the
beneficiary may submit information to the sponsor in response to the
request described in paragraph (f)(6)(ii)(C)(5) of this section; and
(7) Other content that CMS determines is necessary for the beneficiary
to understand the information required in this notice.
The content of the second notice we propose in Sec. 423.153(f)(6)
closely follows the content required by section 1860D-4(c)(5)(B)(iii)
of the Act, but as noted previously, we have proposed to add some
detail to the regulation text. In proposed paragraph (2), we have
proposed language that would require a sponsor to include the
limitation the sponsors is placing on the beneficiary's access to
coverage for frequently abused drugs, the effective and end date of the
limitation, and if applicable, any limitation on the availability of
the SEP. We propose an additional requirement in paragraph (6) that the
sponsor include instructions how the beneficiary

[[Page 56353]]

may submit information to the sponsor in response to the request
described in paragraph (4). Finally, we proposed a requirement in
paragraph (7) that the notice contain other content that CMS determines
is necessary for the beneficiary to understand the information required
in the initial notice.
We note that under our current policy, plan sponsors send only one
notice to the beneficiary if they intend to implement a beneficiary-
specific POS opioid claim edit, which generally provides the
beneficiary with a 30-day advance written notice and opportunity to
provide additional information, as well as to request a coverage
determination if the beneficiary disagrees with the edit. If our
proposal is finalized, the implementation of a beneficiary-specific POS
claim edit or a limitation on the at-risk beneficiary's coverage for
frequently abused drugs to a selected pharmacy(ies) or prescriber(s)
would be an at-risk determination (a type of initial determination that
would confer appeal rights). Also, the sponsor would generally be
required to send two notices--the first signaling the sponsor's intent
to implement a POS claim edit or limitation (both referred to generally
as a ``limitation''), and the second upon implementation of such
limitation. Under our proposal, the requirement to send two notices
would not apply in certain cases involving at-risk beneficiaries who
are identified as such and provided a second notice by their
immediately prior plan's drug management program.
(D) Alternate Second Notice When Limit on Access Coverage for
Frequently Abused Drugs by Sponsor Will Not Occur (Sec. 423.153(f)(7))
We propose that if a sponsor does not implement the limitation on
the potential at-risk beneficiary's access to coverage of frequently
abused drugs it described in the initial notice, then the sponsor would
be required to provide the beneficiary with an alternate second notice.
Although not explicitly required by the statute, we believe this notice
is consistent with the intent of the statute and is necessary to avoid
beneficiary confusion and minimize unnecessary appeals. We propose
generally that in such an alternate notice, the sponsor must notify the
beneficiary that the sponsor no longer considers the beneficiary to be
a potential at-risk beneficiary upon making such determination; will
not place the beneficiary in its drug management program; will not
limit the beneficiary's access to coverage for frequently abused drugs;
and if applicable, that the SEP limitation no longer applies.
Specifically, we propose that Sec. 423.153(f)(7)(i) would read:
Alternate second notice. (i) If, after providing an initial notice to a
potential at-risk beneficiary under paragraph (f)(4) of this section, a
Part D sponsor determines that the potential at-risk beneficiary is not
an at-risk beneficiary, the sponsor must provide an alternate second
written notice to the beneficiary. Paragraph (f)(7)(ii) would require
that the notice use language approved by the Secretary in a readable
and understandable form containing the following information: (1) The
sponsor has determined that the beneficiary is not an at-risk
beneficiary; (2) The sponsor will not limit the beneficiary's access to
coverage for frequently abused drugs; (3) If applicable, the SEP
limitation no longer applies; (4) Clear instructions that explain how
the beneficiary may contact the sponsor; and (5) Other content that CMS
determines is necessary for the beneficiary to understand the
information required in this notice.
Again, as with the initial and second notices, we propose in a
paragraph (f)(7)(iii) that the Part D sponsor be required to make
reasonable efforts to provide the beneficiary's prescriber(s) of
frequently abused drugs with a copy of the notice required by paragraph
(f)(7)(i). Also, as with the initial and second notices, we propose in
paragraph (ii) that the notice use language approved by the Secretary
and be in a readable and understandable form; in paragraph (ii)(C)(4)
that the notice contain clear instructions that explain how the
beneficiary may contact the sponsor; and in paragraph (ii)(C)(5), that
the notice contain other content that CMS determines is necessary for
the beneficiary to understand the information required in the notice.
(E) Timing of Notices (Sec. 423.153(f)(8))
Section 1860D-4(c)(5)(B)(iv) of the Act requires a Part D sponsor
to provide the second notice to the beneficiary on a date that is not
less than 30 days after the sponsor provided the initial notice to the
beneficiary. We interpret the purpose of this requirement to be that
the beneficiary should have ample time to provide information to the
sponsor that may alter the sponsor's intended action that is contained
in the initial notice to the beneficiary, or to provide the sponsor
with the beneficiary's pharmacy and/or prescriber preferences, if the
sponsor's intent is to limit the beneficiary's access to coverage for
frequently abused drugs from selected a pharmacy(ies) and/or
prescriber(s).
In addition, we propose to impose a deadline by when a sponsor must
provide the second notice or alternate second notice to the
beneficiary, although not specifically required by CARA. Such a
requirement should provide the sponsor with sufficient time to complete
the administrative steps necessary to execute the action the sponsor
intends to take that was explained in the initial notice to the
beneficiary, while acknowledging that the sponsor would have already
met in the case management, clinical contact and prescriber
verification requirement.
In the case of an alternate second notice, the timeframe should
provide the beneficiary with definitive notice that the sponsor has not
identified the beneficiary as an at-risk beneficiary and that there
will be no limitation on his/her access to coverage for frequently
abused drugs. Accordingly, we propose that the sponsor would be
required to send either the second notice or the alternate second
notice, as applicable, when it makes its determination or no later than
90 calendar days after the date on the initial notice, whichever comes
sooner.
Specifically, we propose to include at Sec. 423.153(f)(8) the
following: Timing of Notices. (i) Subject to paragraph (ii) of this
section, a Part D sponsor must provide the second notice described in
paragraph (f)(6) of this section or the alternate second notice
described in paragraph (f)(7) of this section, as applicable, on a date
that is not less than 30 days and not more than the earlier of the date
the sponsor makes the relevant determination or 90 days after the date
of the initial notice described in paragraph (f)(5) of this section. We
intend this proposed timeframe for the sponsor to provide either the
second notice or the alternate second notice, as applicable, to be
reasonable for both Part D sponsors and the relevant beneficiaries and
important to ensuring clear, timely and reasonable communication
between the parties.
Section 1860D-4(c)(5)(B)(iv)(II) of the Act explicitly provides for
an exception to the required timeframe for issuing a second notice.
Specifically, the statute permits the Secretary to identify through
rulemaking concerns regarding the health or safety of a beneficiary or
significant drug diversion activities that would necessitate that a
Part D sponsor provide the second written notice to the beneficiary
before the 30 day time period normally required has elapsed. For this
reason, we included the language, ``subject to paragraph (ii),'' at the
beginning of proposed Sec. 423.153(f)(8)(i).

[[Page 56354]]

We note that the proposed definition of at-risk beneficiary would
include beneficiaries for whom a gaining Part D plan sponsor received a
notice upon the beneficiary's enrollment that the beneficiary was
identified as an at-risk beneficiary under the prescription drug plan
in which the beneficiary was most recently enrolled and such
identification had not been terminated upon enrollment. This proposed
definition is based on the language in section 1860-D-4(c)(5)(C)(i)(II)
of the Act.
Given that this provision allows an at-risk identification to carry
forward to the next plan, we believe it is appropriate to propose to
permit a gaining plan to provide the second notice to an at-risk
beneficiary so identified by the most recent prior plan sooner than
would otherwise be required. For the same reasons, we believe that it
would be appropriate to permit the gaining plan to even send the
beneficiary a combined initial and second notice, under certain
circumstances. However, because the content of the initial notice would
not be appropriate for an at-risk beneficiary, and because such
beneficiary would have already received an initial notice from his or
her immediately prior plan sponsor, the content of this combined notice
should only consist of the required content for the second notice so as
not to confuse the beneficiary. Thus, our interpretation of section
1860D-4(c)(5)(B)(iv)(II) of the Act in conjunction with section 1860D-
4(c)(5)(C)(i)(II) of the Act is that a gaining Part D sponsor may send
the second notice immediately to a beneficiary for whom the sponsor
received a notice upon the beneficiary's enrollment that the
beneficiary was identified as an at-risk beneficiary under the
prescription drug plan in which the beneficiary was most recently
enrolled and such identification had not been terminated upon
disenrollment. This is consistent with our current policy under which a
gaining sponsor may immediately implement a beneficiary-specific opioid
POS claim edit, if the gaining sponsor is notified that the beneficiary
was subject to such an edit in the immediately prior plan and such edit
had not been terminated.\19\
---------------------------------------------------------------------------

\19\ See ``Beneficiary-Level Point-of-Sale Claim Edits and Other
Overutilization Issues,'' August 25, 2014.
---------------------------------------------------------------------------

We propose that sending a second notice to an at-risk beneficiary
so identified in the most recent plan would be permissible only if the
new sponsor is implementing a beneficiary-specific POS claim edit for a
frequently abused drug, or if the sponsor is implementing a limitation
on access to coverage for frequently abused drugs to a selected
pharmacy(ies) or prescriber(s) and has the same location of
pharmacy(ies) and/or the same prescriber(s) in its provider network, as
applicable, that the beneficiary used to obtain frequently abused drugs
in the most recent plan. Otherwise, we propose that the new sponsor
would be required to provide the initial notice to the at-risk
beneficiary, even though the initial notice is generally intended for
potential at-risk beneficiaries, and could not provide the second
notice until at least 30 days had passed. This is because even though
there would also be a concern for the at-risk beneficiary's health and
safety in this latter case as well, this concern would be outweighed by
the fact that the beneficiary had not been afforded a chance to submit
his or her preference for a pharmacy(ies) and/or prescriber(s), as
applicable, from which he or she would have to obtain frequently abused
drugs to obtain coverage under the new plan's drug management program.
We propose to codify this policy by adding a paragraph (ii) to
Sec. 423.153(f)(8), as noted earlier, to read as follows: Immediately
upon the beneficiary's enrollment in the gaining plan, the gaining plan
sponsor may provide a second notice described in paragraph (f)(6) to a
beneficiary for whom the gaining sponsor received notice that the
beneficiary was identified as an at-risk beneficiary by his or her most
recent prior plan and such identification had not been terminated in
accordance with Sec. 423.153(f)(14), if the sponsor is implementing
either of the following: (A) A beneficiary-specific point-of-sale claim
edit as described in paragraph (f)(3)(i); or (B) A limitation on access
to coverage as described in paragraph(f)(3)(ii), if such limitation
would require the beneficiary to obtain frequently abused drugs from
the same location of pharmacy and/or the same prescriber, as
applicable, that was selected under the immediately prior plan under
(f)(9).
Some stakeholders commented that sponsors should be allowed to
expedite the second notice in cases of egregious and potentially
dangerous overutilization or in cases involving an active criminal
investigation when allowed by a court. However, given the importance of
a beneficiary having advance notice of a pending limit on his or her
access to coverage for frequently abused drugs and sufficient time to
respond and/or prepare, we believe exceptions to the timing of the
notices should be very narrow. Therefore, we have only included a
proposal for an exception to shorten the 30 day timeframe between the
initial and second notice that is based on a beneficiary's status as an
at-risk beneficiary in an immediately preceding plan. We note that is a
status the drug management provisions of CARA explicitly requires to be
shared with the next plan sponsor, if a beneficiary changes plans,
which means there would be a concrete data point for this proposed
exception to the timing of the notices. We discuss such sharing of
information later in the preamble.
(viii) Provisions Specific to Limitations on Access to Coverage of
Frequently Abused Drugs to Selected Pharmacies and Prescribers
(Sec. Sec. 423.153(f)(4), 423.153(f)(9), 423.153(f)(10),
423.153(f)(11), 423.153(f)(12), 423,153(f)(13))
Some of the drug management program provisions in CARA are only
relevant to ``lock-in''. We propose several regulatory provisions to
implement these provisions, as follows:
(A) Special Requirement To Limit Access to Coverage of Frequently
Abused Drugs to Selected Prescriber(s) (Sec. 423.153(f)(4))
We believe prescriber lock-in should be a tool of last resort to
manage at-risk beneficiaries' use of frequently abused drugs, meaning
when a different approach has not been successful, whether that was a
``wait and see'' approach or the implementation of a beneficiary
specific POS claim edit or a pharmacy lock-in. Limiting an at-risk
beneficiary's access to coverage for frequently abused drugs from only
selected prescribers impacts the beneficiary's relationship with his or
her health care providers and may impose burden upon prescribers in
terms of prescribing frequently abused drugs.
As a result, we propose that a sponsor may not limit an at-risk
beneficiary's access to coverage of frequently abused drugs to a
selected prescriber(s) until at least 6 months has passed from the date
the beneficiary is first identified as a potential at-risk beneficiary.
We propose that this date be the date of the first OMS report that
identified the beneficiary, so long as the beneficiary was also
reported in the most recent OMS report that the sponsor received. This
is because limiting the beneficiary's access to coverage of frequently
abused drugs from a selected prescriber would only be necessary if the
beneficiary continues to meet the clinical guidelines despite any
existing

[[Page 56355]]

intervention or limitation. We discuss OMS reports in more detail
later.
We expect that the 6-month waiting period will provide the sponsor
additional time to assess whether case management or another tool, such
as a beneficiary-specific POS claim edit or pharmacy lock-in has failed
to resolve the beneficiary's overutilization of frequently abused
drugs. Sponsors have indicated in comments on the current policy that
the case management process can take 3 to 6 months. Also, sponsors
would need time to determine whether the beneficiary still meets the
clinical guidelines and is thus continuing to be reported by OMS.
Therefore, the time period we propose was chosen to account for time
needed for the case management process and to align with the 6 month
measurement period of the proposed clinical guidelines.
We seek comment on whether this 6-month waiting period would reduce
provider burden sufficiently to outweigh the additional case
management, clinical contact and prescriber verification that providers
may experience if a sponsor believes a beneficiary's access to coverage
of frequently abused drugs should be limited to a selected
prescriber(s). Comments should include the additional operational
considerations for sponsors to implement this proposal.
Given our proposal, we propose adding a paragraph (iv) to Sec.
423.153(f)(4) that would state: (f)(4)(iv) A Part D sponsor must not
limit an at-risk beneficiary's access to coverage for frequently abused
drugs to those that are prescribed for the beneficiary by one or more
prescribers under Sec. 423.153(f)(3)(ii)(A) unless--(A) At least 6
months has passed from the date the beneficiary was first identified as
a potential at-risk beneficiary from the date of the applicable CMS
identification report; and (B) The beneficiary meets the clinical
guidelines and was reported by the most recent CMS identification
report.
We note that in conducting the case management required under Sec.
423.153(f)(4)(i)(A) in anticipation of implementing a prescriber lock-
in, the sponsor would be expected to update any case management it had
already conducted. Also, even if a sponsor had already obtained the
prescriber's agreement to implement a limitation on the beneficiary's
coverage of frequently abused drugs to a selected pharmacy to comply
with Sec. 423.153(f)(4)(i)(B), for example, the sponsor would have to
obtain the agreement of the prescriber who would be selected to
implement a limitation on a beneficiary's coverage of frequently abused
drugs to a selected prescriber. Finally, we note that even if a sponsor
had already provided the beneficiary with the required notices to
comply with Sec. 423.153(f)(4)(i)(C), the sponsor would have to
provide them again in order to remain compliant, because the
beneficiary would not have been notified about the specific limitation
on his or her access to coverage for frequently abused drugs to a
selected prescriber(s) and has an opportunity to select the
prescriber(s).
We foresee a scenario in which a sponsor may wish to implement a
limitation on a beneficiary's access to coverage of frequently abused
drugs to a selected prescriber(s) when the sponsor's first round of
case management, clinical contact and prescriber verification resulted
only in sending the prescribers of frequently abused drugs a written
report about the beneficiary's utilization of frequently abused drugs
and taking a ``wait and see'' approach, which did not result in the
prescribers' adjusting their prescriptions for frequently abused drugs
for their patient. In such a scenario, assuming the patient still meets
the clinical guidelines and continues to be reported by OMS, the
sponsor would need to try another intervention to address the opioid
overuse. Another scenario could be that the sponsor implemented a
pharmacy lock-in, but after 6-months, the beneficiary still meets the
clinical guidelines due to receiving frequently abused drugs from
additional prescribers.
(B) Selection of Pharmacies and Prescribers (Sec. Sec. 423.153(f)(9),
423.153(f)(10), 423.153(f)(11), 423.153(f)(12), 423.153(f)(13))
(1) Beneficiary Preferences (Sec. 423.153(f)(9))
Section 1860D-4(c)(5)(D) of the Act provides that, if a sponsor
intends to impose, or imposes, a limit on a beneficiary's access to
coverage of frequently abused drugs to selected pharmacy(ies) or
prescriber(s), and the potential at-risk beneficiary or at-risk
beneficiary submits preferences for a pharmacy(ies) or prescriber(s),
the sponsor must select the pharmacy(ies) and prescriber(s) for the
beneficiary based on such preferences, unless an exception applies,
which we will address later in the preamble. We further propose that
such pharmacy(ies) or prescriber(s) must be in-network, except if the
at-risk beneficiary's plan is a stand-alone prescription drug benefit
plan and the beneficiary's preference involves a prescriber. Because
stand-alone Part D plans (PDPs) do not have provider networks, and thus
no prescriber would be in-network, the plan sponsor must generally
select the prescriber that the beneficiary prefers, unless an exception
applies. We discuss exceptions in the next section of this preamble. In
our view, it is essential that an at-risk beneficiary must generally
select in-network pharmacies and prescribers so that the plan is in the
best possible position to coordinate the beneficiary's care going
forward in light of the demonstrated concerns with the beneficiary's
utilization of frequently abused drugs.
Accordingly, we propose Sec. 423.153(f)(9) to read: Beneficiary
preferences. Except as described in paragraph (f)(10) of this section,
if a beneficiary submits preferences for prescribers or pharmacies or
both from which the beneficiary prefers to obtain frequently abused
drugs, the sponsor must do the following--(i) Review such preferences
and (ii) If the beneficiary is--(A) Enrolled in a stand-alone
prescription drug benefit plan and specifies a prescriber(s) or network
pharmacy(ies) or both, select or change the selection of prescriber(s)
or network pharmacy(ies) or both for the beneficiary based on
beneficiary's preference(s) or (B) Enrolled in a Medicare Advantage
prescription drug benefit plan and specifies a network prescriber(s) or
network pharmacy(ies) or both, select or change the selection of
prescriber(s) or pharmacy(ies) or both for the beneficiary based on the
beneficiary's preference(s). If the beneficiary submits preferences for
a non-network pharmacy(ies), or in the case of a Medicare Advantage
prescription drug benefit plan a non-network prescriber(s), or both,
the sponsor does not have to select or change the selection for the
beneficiary to a non-network pharmacy or prescriber except if necessary
to provide reasonable access.
In a paragraph (iii), we propose that the sponsor must inform the
beneficiary of the selection in the second notice, or if not feasible
due to the timing of the beneficiary's submission, in a subsequent
written notice, issued no later than 14 days after receipt of the
submission. Thus, this section would require a Part D plan sponsor to
honor an at-risk beneficiary's preferences for in-network prescribers
and pharmacies from which to obtain frequently abused drugs, unless the
plan was a stand-alone PDP and the selection involves a prescriber. In
other words, a stand-alone PDP or MA-PD does not have to honor a
beneficiary's selection of a non-network pharmacy, except as necessary

[[Page 56356]]

to provide reasonable access, which we discuss later in this section.
Also, under our proposal, the beneficiary could submit preferences at
any time. Finally, the sponsor would be required to confirm the
selection in writing either in the second notice, if feasible, or
within 14 days of receipt of the beneficiary's submission.
(2) Exception to Beneficiary Preferences (Sec. 423.153(f)(10))
Section 1860D-4(c)(5)(D)(iv) of the Act, provides for an exception
to an at-risk beneficiary's preference of prescriber or pharmacy from
which the beneficiary must obtain frequently abused drugs, if the
beneficiary's allowable preference of prescriber or pharmacy would
contribute to prescription drug abuse or drug diversion by the at-risk
beneficiary. Section 1860-D-4(c)(5)(D)(iv) of the Act requires the
sponsor to provide the at-risk beneficiary with at least 30 days
written notice and a rationale for not honoring his or her allowable
preference for pharmacy or prescriber from which the beneficiary must
obtain frequently abused drugs under the plan.
A few commenters asserted there should be limits to how many times
beneficiaries can submit their preferences. Other commenters stated
there should be a strong evidence of inappropriate action before a
sponsor can change a beneficiary's selection.
We are not proposing to place a limit on how many times
beneficiaries can submit their preferences, but we are open to
additional comments on this topic. We agree with commenters who stated
that there should be a strong evidence of inappropriate action before a
sponsor can change a beneficiary's selection, but we note that because
such a situation would often involve a network pharmacy or prescriber,
we would expect that the sponsor would also take appropriate action
with respect to the pharmacy or prescriber, such as termination from
the network.
Given the foregoing, we propose to add the following: Sec.
423.153(f)(10) Exception to Beneficiary Preferences. (i) If the Part D
sponsor determines that the selection or change of a prescriber or
pharmacy under paragraph (f)(9) of this section would contribute to
prescription drug abuse or drug diversion by the at-risk beneficiary,
the sponsor may change the selection without regard to the
beneficiary's preferences if there is strong evidence of inappropriate
action by the prescriber, pharmacy or beneficiary. (ii) If the sponsor
changes the selection, the sponsor must provide the beneficiary with
(A) At least 30 days advance written notice of the change; and (B) A
rationale for the change.
(3) Reasonable Access (Sec. Sec. 423.100, 423.153(f)(11),
423.153(f)(12))
If a potential at-risk beneficiary or at-risk beneficiary does not
submit pharmacy or prescriber preferences, section 1860-D-4(c)(5)(D)(i)
of the Act provides that the Part D sponsor shall make the selection.
Section 1860-D-4(c)(5)(D)(ii) of the Act further provides that, in
making the selection, the sponsor shall ensure that the beneficiary
continues to have reasonable access to frequently abused drugs, taking
into account geographic location, beneficiary preference, impact on
cost-sharing, and reasonable travel time.
We propose to add the following at Sec. 423.153(f)(11): Reasonable
access. In making the selections under paragraph (f)(12) of this
section, a Part D plan sponsor must ensure both of the following: (i)
That the beneficiary continues to have reasonable access to frequently
abused drugs, taking into account geographic location, beneficiary
preference, the beneficiary's predominant usage of a prescriber or
pharmacy or both, impact on cost-sharing, and reasonable travel time;
and (ii) reasonable access to frequently abused drugs in the case of
individuals with multiple residences, in the case of natural disasters
and similar situations, and in the case of the provision of emergency
services.
Since the statute explicitly allows the beneficiary to submit
preferences, we interpret the additional reference to beneficiary
preference in the context of reasonable access to mean that a
beneficiary allowable preference should prevail over a sponsor's
evaluation of geographic location, the beneficiary's predominant usage
of a prescriber and/or pharmacy impact on cost-sharing and reasonable
travel time. In the absence of a beneficiary preference for pharmacy
and/or prescriber, however, a Part D plan sponsor must take into
account geographic location, the beneficiary's predominant usage of a
prescriber and/or pharmacy, impact on cost-sharing and reasonable time
travel in selecting a pharmacy and/or prescriber, as applicable, from
which the at-risk beneficiary will have to obtain frequently abused
drugs under the plan. Thus, absent a beneficiary's allowable
preference, or the beneficiary's selection would contribute to
prescription drug abuse or drug diversion, the sponsor must ensure
reasonable access by choosing the network pharmacy or prescriber that
the beneficiary uses most frequently to obtain frequently abused drugs,
unless the plan is a stand-alone PDP and the selection involves a
prescriber(s). In the latter case, the prescriber will not be a network
provider, because such plans do not have provider networks. In urgent
circumstances, we propose that reasonable access means the sponsor must
have reasonable policies and procedures in place to ensure beneficiary
access to coverage of frequently abused drugs without a delay that may
seriously jeopardize the life or health of the beneficiary or the
beneficiary's ability to regain maximum function.
Determining reasonable access may be complicated when an enrollee
has multiple addresses or his or her health care necessitates obtaining
frequently abused drugs from more than one prescriber and/or more than
one pharmacy. Section 1860D-4(c)(5) addresses this issue by requiring
the Part D plan sponsor to select more than one prescriber to prescribe
frequently abused drugs and more than one pharmacy to dispense them, as
applicable, when it reasonably determines it is necessary to do so to
provide the at-risk beneficiary with reasonable access.
Given the foregoing, we propose the following at Sec.
423.153(f)(12): Selection of Prescribers and Pharmacies. (i) A Part D
plan sponsor must select, as applicable--(A) One, or, if the sponsor
reasonably determines it necessary to provide the beneficiary with
reasonable access, more than one, network prescriber who is authorized
to prescribe frequently abused drugs for the beneficiary, unless the
plan is a stand-alone PDP and the selection involves a prescriber(s),
in which case, the prescriber need not be a network prescriber; and (B)
One, or, if the sponsor reasonably determines it necessary to provide
the beneficiary with reasonable access, more than one, network pharmacy
that may dispense such drugs to such beneficiary.
We also propose to address chain pharmacies and group practices by
adding a paragraph (ii) that states: (ii) (A) For purposes of this
subsection (f)(12) of this section, in the case of a pharmacy that has
multiple locations that share real-time electronic data, all such
locations of the pharmacy shall collectively be treated as one
pharmacy; and (B) For purposes of this subsection (f)(12), in the case
of a group practice, all prescribers of the group practice shall be
treated as one prescriber.
We would interpret these provisions to mean that a sponsor would be
required to select more than one prescriber of frequently abused drugs,
if more than one prescriber has asserted

[[Page 56357]]

during case management that multiple prescribers of frequently abused
drugs are medically necessary for the at-risk beneficiary. We further
propose that if no prescribers of frequently abused drugs were
responsive during case management, and the beneficiary does not submit
preferences, the sponsor would be required to select the pharmacy or
prescriber that the beneficiary predominantly uses to obtain frequently
abused drugs.
(4) Confirmation of Pharmacy and Prescriber Selection (Sec.
423.153(f)(13))
Section 1860D-4(c)(5)(D)(v) of the Act requires that, before
selecting a prescriber or pharmacy, a Part D plan sponsor must notify
the prescriber and/or pharmacy that the at-risk beneficiary has been
identified for inclusion in the drug management program which will
limit the beneficiary's access to coverage of frequently abused drugs
to selected pharmacy(ies) and/or prescriber(s) and that the prescriber
and/or pharmacy has been selected as a designated prescriber and/or
pharmacy for the at-risk beneficiary.
We propose that plan sponsors can obtain a network provider's
confirmation in advance by including a provision in the network
agreement specifying that the provider agrees to serve as at-risk
beneficiaries' selected prescriber or pharmacy, as applicable. In these
cases, the network provider would agree to forgo providing specific
confirmation if selected under a drug management program to serve an
at-risk beneficiary. However, the contract between the sponsor and the
network provider would need to specify how the sponsor will notify the
provider of its selection. Absent a provision in the network contract,
however, the sponsor would be required to receive confirmation from the
prescriber(s) and/or pharmacy(ies) that the selection is accepted
before conveying this information to the at-risk beneficiary.
Otherwise, the plan would need to make another selection and seek
confirmation.
We propose Sec. 423.153(f)(13) to read: Confirmation of
Selections(s). (i) Before selecting a prescriber or pharmacy under this
paragraph, a Part D plan sponsor must notify the prescriber or
pharmacy, as applicable, that the beneficiary has been identified for
inclusion in the drug management program for at-risk beneficiaries and
that the prescriber or pharmacy or both is (are) being selected as the
beneficiary's designated prescriber or pharmacy or both for frequently
abused drugs. (ii) The sponsor must receive confirmation from the
prescriber(s) or pharmacy(ies) or both that the selection is accepted
before conveying this information to the at-risk beneficiary, unless
the prescriber or pharmacy has agreed in advance in its network
agreement with the sponsor to accept all such selections and the
agreement specifies how the prescriber or pharmacy will be notified by
the sponsor of its selection.
(ix) Drug Management Program Appeals (Sec. Sec. 423.558, 423.560,
423.562, 423.564, 423.580, 423.582, 423.584, 423.590, 423.602, 423.636,
423.638, 423.1970, 423.2018, 423.2020, 423.2022, 423.2032, 423.2036,
423.2038, 423.2046, 423.2056, 423.2062, 423.2122, and 423.2126)
Section 1860D-4(c)(5)(E) of the Act specifies that the
identification of an individual as an at-risk beneficiary for
prescription drug abuse under a Part D drug management program, a
coverage determination made under such a program, the selection of a
prescriber or pharmacy, and information sharing for subsequent plan
enrollments shall be subject to reconsideration and appeal under
section 1860D-4(h) of the Act. This provision also permits the option
of an automatic escalation to external review to the extent provided by
the Secretary.
As discussed earlier in this preamble, we are proposing to
integrate the lock-in provisions with existing Part D Opioid DUR
Policy/OMS. Determinations made in accordance with any of those
processes, proposed at Sec. 423.153(f), and discussed previously, are
interrelated issues that we collectively refer to as an ``at-risk
determination'' made under a drug management program. The at-risk
determination includes prescriber and/or pharmacy selection for lock-
in, beneficiary-specific POS claim edits for frequently abused drugs,
and information sharing for subsequent plan enrollments. Given the
concomitant nature of the at-risk determination and associated aspects
of the drug management program applicable to an at-risk beneficiary, we
expect that any dispute under a plan's drug management program will be
adjudicated as a single case involving a review of all aspects of the
drug management program for the at-risk beneficiary. While a
beneficiary who is subject to a Part D plan sponsor's drug management
program always retains the right to request a coverage determination
under existing Sec. 423.566 for any Part D drug that the beneficiary
believes may be covered by their plan, we believe that appeals of an
at-risk determination made under proposed Sec. 423.153(f) should
involve consideration of all relevant elements of that at-risk
determination. For example, if a Part D plan determines that a
beneficiary is at-risk, implements a beneficiary-specific claim edit on
2 drugs that beneficiary is taking and locks that beneficiary into a
specific pharmacy, the affected beneficiary should not be expected to
raise a dispute about the pharmacy selection and about one of the claim
edits in distinct appeals.
We note that, while section 1860D-4(c)(5)(B)(ii)(III) of the Act
requires the initial written notice to the beneficiary, which
identifies him or her as potentially being at-risk, to include ``notice
of, and information about, the right of the beneficiary to appeal such
identification under subsection (h),'' we interpret ``such
identification'' to refer to any subsequent identification that the
beneficiary is actually at-risk. Because CARA, at section 1860D-
4(c)(5)(E) of the Act, specifically provides for appeal rights under
subsection (h) but does not refer to identification as a potential at-
risk beneficiary, we believe this interpretation is consistent with the
statutory intent. Furthermore, when a beneficiary is identified as
being potentially at-risk, but has not yet been identified as at-risk,
the plan is not taking any action to limit such beneficiary's access to
frequently abused drugs; therefore, the situation is not ripe for
appeal. While an LIS SEP under Sec. 423.38 would be restricted at the
time the beneficiary is identified as potentially at-risk under
proposed Sec. 423.100, the loss of such SEP is not appealable under
section 1860D-4(h) of the Act.
As noted previously, section 1860D-4(c)(5)(E) of the Act
specifically refers to the Part D benefit appeals provisions in section
1860D-4(h) of the Act, which require Part D plan sponsors to meet the
requirements of paragraphs (4) and (5) of section 1852(g) of the Act
for benefits in a manner similar to the manner such requirements apply
to MA organizations. Section 1852(g)(4) of the Act specifically
provides for independent review of ``reconsiderations that affirm
denial of coverage, in whole or in part (emphasis added).'' We believe
section 1860D-4(c)(5)(E) of the Act broader reference to
``reconsideration and appeal'' should be interpreted to mean that
individuals have a right to a plan level appeal, consistent with the
reconsideration provisions under section 1860D-4(g) of the Act,
followed by the right to independent review if the plan level affirms
the initial adverse decision. In other words, we believe the reference
to ``reconsideration'' means that a Part D plan sponsor should conduct
the initial

[[Page 56358]]

level of appeal following an at-risk determination under the plan
sponsor's drug management program, consistent with the existing Part D
drug benefit appeals process, despite the absence of a specific
reference to section 1860D-4(g) of the Act.
Part D enrollees, plan sponsors, and other stakeholders are already
familiar with the Part D benefit appeals process. Resolving disputes
that arise under a plan sponsor's drug management program within the
existing Part D benefit appeals process would allow at-risk
beneficiaries to be more familiar with, and more easily access, the
appeals process instead of creating a new process specific to appeals
related to a drug management program. Also, allowing a plan sponsor the
opportunity to review information it used to make an at-risk
determination under the drug management program (and any additional
relevant information submitted as part of the appeal) would be
efficient for both the individual and the Medicare program because it
would potentially resolve the issues at a lower level of administrative
review. Conversely, permitting review by the independent review entity
(IRE) before a plan sponsor has an opportunity to review and resolve
any errors or omissions that may have been made during the initial at-
risk determination would likely result in an unnecessary increase in
costs for plan sponsors as well as CMS' Part D IRE contract costs.
As noted previously, the Secretary has the discretion under CARA to
provide for automatic escalation of drug management program appeals to
external review. Under existing Part D benefit appeals procedures,
there is no automatic escalation to external review for adverse appeal
decisions; instead, the enrollee (or prescriber, on behalf of the
enrollee) must request review by the Part D IRE. Under the existing
Part D benefit appeals process, cases are auto-forwarded to the IRE
only when the plan fails to issue a coverage determination within the
applicable timeframe. During the stakeholder call and in subsequent
written comments, most commenters opposed automatic escalation to the
IRE, citing support for using the existing appeals process for reasons
of administrative efficiency and better outcomes for at-risk
beneficiaries. The majority of stakeholders supported following the
existing Part D appeals process, and some commenters specifically
supported permitting the plan to review its lock-in decision prior to
the case being subject to IRE review. Stakeholders cited a variety of
reasons for their opposition, including increased costs to plans, the
IRE, and the Part D program. Stakeholders cited administrative
efficiency in using the existing appeal process that is familiar to
enrollees, plans, and the IRE, while other commenters expressed support
for automatic escalation to the IRE as a beneficiary protection.
We are proposing that at-risk determinations made under the
processes at Sec. 423.153(f) be adjudicated under the existing Part D
benefit appeals process and timeframes set forth in Subpart M. However,
we are not proposing to revise the existing definition of a coverage
determination. The types of decisions made under a drug management
program align more closely with the regulatory provisions in Subpart D
than with the provisions in Subpart M related to coverage or payment
for a drug based on whether the drug is medically necessary for an
enrollee. Therefore, we believe it is clearer to set forth the rules
for at-risk determinations as part of Sec. 423.153 and cross reference
Sec. 423.153(f) in relevant provisions in Subpart M and Subpart U.
While a coverage determination made under a drug management program
would be subject to the existing rules related to coverage
determinations, the other types of initial determinations made under a
drug management program (for example, a restriction on the at-risk
beneficiary's access to coverage of frequently abused drugs to those
that are prescribed for the beneficiary by one or more prescribers)
would be subject to the processes set forth at proposed Sec.
423.153(f). Consistent with existing rules for redeterminations at
Sec. 423.582, an enrollee who wishes to dispute an at-risk
determination would have 60 days from the date of the second written
notice to make such request, unless the enrollee shows good cause for
untimely filing under Sec. 423.582(c). As previously discussed for
proposed Sec. 423.153(f)(6), the second written notice is sent to a
beneficiary the plan has identified as an at-risk beneficiary and with
respect to whom the sponsor limits his or her access to coverage of
frequently abused drugs regarding the requirements of the sponsor's
drug management programs.
Also consistent with the existing Part D benefit appeals process,
we are proposing that at-risk beneficiaries (or an at-risk
beneficiary's prescriber, on behalf of the at-risk beneficiary) must
affirmatively request IRE review of adverse plan level appeal decisions
made under a plan sponsor's drug management program. In other words,
under this proposal, an adverse redetermination would not be
automatically escalated to the Part D IRE, unless the plan sponsor
fails to meet the redetermination adjudication timeframe. We are also
proposing to amend the existing Subpart M rules at Sec. 423.584 and
Sec. 423.600 related to obtaining an expedited redetermination and IRE
reconsideration, respectively, to apply them to appeals of a
determination made under a drug management program. The right to an
expedited appeal of such a determination, which must be adjudicated as
expeditiously as the at-risk beneficiary's health condition requires,
would ensure that the rights of at-risk beneficiaries are protected
with respect to access to medically necessary drugs. While we are not
proposing to adopt auto-escalation, we believe our proposed approach
ensures that an at-risk beneficiary has the right to obtain IRE review
and higher levels of appeal (ALJ/attorney adjudicator, Council, and
judicial review). Accordingly, we also are proposing to add the
reference to an ``at-risk determination'' to the following regulatory
provisions that govern ALJ and Council processes: Sec. Sec. 423.2018,
423.2020, 423.2022, 423.2032, 423.2036, 423.2038, 423.2046, 423.2056,
423.2062, 423.2122, and 423.2126.
Finally, we are also proposing a change to Sec. 423.1970(b) to
address the calculation of the amount in controversy (AIC) for an ALJ
hearing in cases involving at-risk determinations made under a drug
management program in accordance with proposed Sec. 423.153(f).
Specifically, we propose that the projected value of the drugs subject
to the drug management program be used to calculate the amount
remaining in controversy. For example, if the beneficiary is disputing
the lock-in to a specific pharmacy for frequently abused drugs and the
beneficiary takes 3 medications that are subject to the plan's drug
management program, the projected value of those 3 drugs would be used
to calculate the AIC, including the value of any refills prescribed for
the drug(s) in dispute during the plan year.
In addition to the proposed changes related to the implementation
of drug management program appeals, we are also proposing to make
technical changes to Sec. 423.562(a)(1)(ii) to remove the comma after
``includes'' and replace the reference to ``Sec. Sec. 423.128(b)(7)
and (d)(1)(iii)'' with a reference to ``Sec. Sec. 423.128(b)(7) and
(d)(1)(iv).''
(x) Termination of a Beneficiary's Potential At-Risk or At-Risk Status
(Sec. 423.153(f)(14))
Section 1860-D-4(c)(5)(F) of the Act provides that the Secretary
shall develop standards for the termination of the identification of an
individual as an at-risk beneficiary, which shall be the

[[Page 56359]]

earlier of the date the individual demonstrates that he or she is no
longer likely to be an at-risk beneficiary in the absence of
limitations, or the end of such maximum period as the Secretary may
specify.
Most commenters recommended a maximum 12-month period for an at-
risk beneficiary to be locked-in. We also note that a 12-month lock-in
period is common in Medicaid lock-in programs.\20\ A few commenters
stated that a physician should be able to determine that a beneficiary
is no longer an at-risk beneficiary. One commenter was opposed to an
arbitrary termination based on a time period.
---------------------------------------------------------------------------

\20\ Medicaid Drug Utilization Review State Comparison/Summary
Report FFY 2015 Annual Report: Prescription Drug Fee-For Service
Program (December 2016).
---------------------------------------------------------------------------

Given that most commenters recommended a 12-month period and such a
period is common in Medicaid ``lock-in'' program, we propose a maximum
12-month period for both a lock-in period, and also for the duration of
a beneficiary-specific POS claim edit for frequently abused drugs
through the addition of the following language at Sec. 423.153(f)(14):
Termination of Identification as an At-Risk Beneficiary. The
identification of an at-risk beneficiary as such shall terminate as of
the earlier of the following--
(i) The date the beneficiary demonstrates through a subsequent
determination, including but not limited to, a successful appeal, that
the beneficiary is no longer likely, in the absence of the limitations
under this paragraph, to be an at-risk beneficiary; or
(ii) The end of a 12 calendar month period calculated from the
effective date of the limitation, as specified in the notice provided
under paragraph (f)(6) of this section.
Thus, we note that if a beneficiary continues to meet the clinical
guidelines and, if the sponsor implements an additional, overlapping
limitation on the at-risk beneficiary's access to coverage for
frequently abused drugs, the beneficiary may experience a coverage
limitation beyond 12-months. The same is true for at-risk beneficiaries
who were identified as such in the most recent prescription drug plan
in which they were enrolled and the sponsor of his or her subsequent
plan immediately implements a limitation on coverage of frequently
abused drugs.
Section 1860-D-4(c)(5)(F)(ii) of the Act states that nothing in
CARA shall be construed as preventing a plan from identifying an
individual as an at-risk beneficiary after such termination on the
basis of additional information on drug use occurring after the date of
notice of such termination. Accordingly, we note that our proposed
approach to termination of an at-risk determination would not prevent
an at-risk beneficiary from being subsequently identified as a
potential at-risk beneficiary or at-risk beneficiary on the basis of
new information on drug use occurring after the date of such
termination that causes the beneficiary to once again meet the clinical
guidelines.
(xi) Data Disclosure and Sharing of Information for Subsequent Sponsor
Enrollments (Sec. 423.153(f)(15))
In order for Part D sponsors to conduct the case management/
clinical contact/prescriber verification required by proposed Sec.
423.153(f)(2), CMS must identify potential at-risk beneficiaries to
sponsors who are in the sponsors' Part D prescription drug benefit
plans. In addition, new sponsors must have information about potential
at-risk beneficiaries and at-risk beneficiaries who were so identified
by their immediately prior plan and enroll in the new sponsor's plan
and such identification had not terminated before the beneficiary
disenrolled from the immediately prior plan. Finally, as discussed
earlier, sponsors may identify potential at-risk beneficiaries by their
own application of the clinical guidelines on a more frequent basis. It
is important that CMS be aware of which Part D beneficiaries sponsors
identify on their own, as well as which ones have been subjected to
limitations on their access to coverage for frequently abused drugs
under sponsors' drug management programs for Part D program
administration and other purposes. This data disclosure process would
be consistent with current policy, as described earlier in this
preamble.
As we also discussed earlier, under the current policy, CMS
provides quarterly reports to sponsors about beneficiaries enrolled in
their plans who meet the OMS criteria. In turn, Part D sponsors are
expected to provide responses to CMS through the OMS for each case
identified within 30 days of receiving a report that reflects the
status or outcome of their case management.\21\ At the same time, also
within 30 days, sponsors are expected to report additional
beneficiaries to OMS that they identify using their own opioid
overutilization identification criteria.\22\
---------------------------------------------------------------------------

\21\ See ``Medicare Part D Overutilization Monitoring System,''
July 5, 2013.
\22\ See ``Medicare Part D Overutilization Monitoring System,
January 17, 2014.
---------------------------------------------------------------------------

Regarding data disclosures, section 1860D-4(c)(5)(H) of the Act
provides that, in the case of potential at-risk beneficiaries and at-
risk beneficiaries, the Secretary shall establish rules and procedures
to require the Part D plan sponsor to disclose data, including any
necessary individually identifiable health information, in a form and
manner specified by the Secretary, about the decision to impose such
limitations and the limitations imposed by the sponsor under this part.
Sponsors also report information to CMS' MARx system about pending,
implemented and terminated beneficiary-specific POS claim edit for
opioids within 7 business days of the date on the applicable
beneficiary notice or of the termination.\23\ The MARx system transfers
information about pending and implemented claim edits to the gaining
sponsor with the beneficiary's enrollment record if the beneficiary
disenrolls and enrolls in the gaining sponsor's plan. If a gaining
sponsor requests case management information from the losing sponsor
about the beneficiary, we expect the losing sponsor to transfer the
information to the gaining sponsor as soon as possible, but no later
than 2 weeks from the date of the gaining sponsor's request.\24\
---------------------------------------------------------------------------

\23\ Final Parts C&D 2017 Call Letter, April 4, 2016.
\24\ See ``Beneficiary-Level Point-of-Sale Claim Edits and Other
Overutilization Issues,'' August 25, 2014.
---------------------------------------------------------------------------

Section 1860-D-4(c)(5)(I) of the Act requires that the Secretary
establish procedures under which Part D sponsors must share information
when at-risk beneficiaries or potential at-risk beneficiaries enrolled
in one prescription drug plan subsequently disenroll and enroll in
another prescription drug plan offered by the next sponsor (gaining
sponsor). We plan to expand the scope of the reporting to MARx under
the current policy to include the ability for sponsors to report
similar information to MARx about all pending, implemented and
terminated limitations on access to coverage of frequently abused drugs
associated with their plans' drug management programs.
We propose to codify the data disclosure and information sharing
process under the current policy, with the expansion just described, by
adding the following requirement to Sec. 423.153: (f)(15) Data
Disclosure. (i) CMS identifies each potential at-risk beneficiary to
the sponsor of the prescription drug plan in which the beneficiary is
enrolled. (ii) A Part D sponsor that operates a drug management program
must disclose any

[[Page 56360]]

data and information to CMS and other Part D sponsors that CMS deems
necessary to oversee Part D drug management programs at a time, and in
a form and manner, specified by CMS. The data and information
disclosures must do all of the following: (A) Respond to CMS within 30
days of receiving a report about a potential at-risk beneficiary from
CMS; (B) Provide information to CMS about any potential at-risk
beneficiary that a sponsor identifies within 30 days from the date of
the most recent CMS report identifying potential at-risk beneficiaries;
(C) Provide information to CMS within 7 business days of the date of
the initial notice or second notice that the sponsor provided to a
beneficiary, or within 7 days of a termination date, as applicable,
about a beneficiary-specific opioid claim edit or a limitation on
access to coverage for frequently abused drugs; and (D) Transfer case
management information upon request of a gaining sponsor as soon as
possible but no later than 2 weeks from the gaining sponsor's request
when: (1) An at-risk beneficiary or potential at-risk beneficiary
disenrolls from the sponsor's plan and enrolls in another prescription
drug plan offered by the gaining sponsor; and (2) The edit or
limitation that the sponsor had implemented for the beneficiary had not
terminated before disenrollment.
(xii) Summary
Our proposal is intended to be responsive to stakeholder input that
CMS focus on opioids; allow for flexibility to adjust the clinical
guidelines and frequently abused drugs in the future; is reflective of
the importance of the provider-patient relationship; protects
beneficiary's rights and access, and allows for operational
manageability and consistency with the current policy to the extent
possible. This proposal, if finalized, should result in effective Part
D drug management programs within a regulatory framework provided by
CMS, and further reduce opioid overutilization in the Part D program.
2. Flexibility in the Medicare Advantage Uniformity Requirements
We have determined that providing access to services (or specific
cost sharing for services or items) that is tied to health status or
disease state in a manner that ensures that similarly situated
individuals are treated uniformly is consistent with the uniformity
requirement in the Medicare Advantage (MA) regulations at Sec.
422.100(d). This regulatory requirement is a means to implement both
section 1852(d) of the Act, which requires that benefits under the MA
plan be available and accessible to each enrollee in the plan, and
section 1854(c) of the Act, which requires uniform premiums for each
enrollee in the plan. Previously, we required MA plans to offer all
enrollees access to the same benefits at the same level of cost
sharing. We have determined that these statutory provisions and the
regulation at Sec. 422.100(d) mean that we have the authority to
permit MA organizations the ability to reduce cost sharing for certain
covered benefits, offer specific tailored supplemental benefits, and
offer lower deductibles for enrollees that meet specific medical
criteria, provided that similarly situated enrollees (that is, all
enrollees who meet the identified criteria) are treated the same. For
example, reduced cost sharing flexibility would allow an MA plan to
offer diabetic enrollees zero cost sharing for endocrinologist visits.
Similarly, with this flexibility, a MA plan may offer diabetic
enrollees more frequent foot exams as a tailored, supplemental benefit.
In addition, with this flexibility, a MA plan may offer diabetic
enrollees a lower deductible. Under this example, non-diabetic
enrollees would not have access to these diabetic-specific tailored
cost-sharing or supplemental benefits; however, any enrollee that
develops diabetes would then have access to these benefits.
Such flexibility under our new interpretation of the uniformity
requirement is not without limits, however, as section 1852(b)(1)(A) of
the Act prohibits an MA plan from denying, limiting, or conditioning
the coverage or provision of a service or benefit based on health-
status related factors. MA regulations (for example, Sec. Sec.
422.100(f)(2) and 422.110(a)) reiterate and implement this non-
discrimination requirement. In interpreting these obligations to
protect against discrimination, we have historically indicated that the
purpose of the requirements is to protect high-acuity enrollees from
adverse treatment on the basis of their higher cost health conditions
(79 FR 29843; 76 FR 21432; and 74 FR 54634). As MA plans consider this
new flexibility in meeting the uniformity requirement, they must be
mindful of ensuring compliance with non-discrimination responsibilities
and obligations.\25\ MA plans that exercise this flexibility must
ensure that the cost sharing reductions and targeted supplemental
benefits are for health care services that are medically related to
each disease condition. CMS will be concerned about potential
discrimination if an MA plan is targeting cost sharing reductions and
additional supplemental benefits for a large number of disease
conditions, while excluding other higher-cost conditions. We will
review benefit designs to make sure that the overall impact is non-
discriminatory and that higher acuity, higher cost enrollees are not
being excluded in favor of healthier populations.
---------------------------------------------------------------------------

\25\ Among these responsibilities and obligations are compliance
with Title VI of the Civil Rights Act, section 504 of the
Rehabilitation Act, the Age Discrimination Act, and section 1557 of
the Affordable Care Act.
---------------------------------------------------------------------------

For example, an MA plan could identify enrollees diagnosed with
specific diseases, such as diabetes, chronic heart failure, and COPD,
as medically vulnerable and in need of certain services, which could be
offered to these enrollees in the form of tailored supplemental
benefits. In identifying eligible enrollees, the MA plan must use
medical criteria that are objective and measurable, and the enrollee
must be diagnosed by a plan provider or have their existing diagnosis
certified or affirmed by a plan provider to assure equal application of
the objective criteria necessary to provide equal treatment of
similarly situated individuals.
For contract year 2019, we are considering issuing guidance
clarifying the flexibility MA plans have to offer targeted supplemental
benefits for their most medically vulnerable enrollees. A benefit
package that offers differential access to enhanced services or
benefits or reduced cost sharing or different deductibles based on
objective criteria, and ensures equal treatment of similarly situated
enrollees, for whom such services and benefits are useful, can be
priced at a uniform premium consistent with the requirements for
availability and accessibility throughout the service area for all
enrollees in section 1852(d)(1)(A) of the Act and for uniform bids and
premiums in section 1854(c) of the Act. We believe this flexibility
will help MA plans better manage health care services for the most
vulnerable enrollees. The benefit and cost sharing flexibility we have
discussed here applies to Part C benefits but not Part D benefits. We
are requesting comments and/or questions from stakeholders about the
implementation of this flexibility. We note that CMS is currently
testing value based insurance design (VBID) through the use of our
demonstration authority under Section 1115A of the Act (42 U.S.C.
1315a, added by Section 3021 of the Affordable Care Act), which will
include some of the elements we have discussed

[[Page 56361]]

previously. However, there are also features of the VBID demonstration
that are unique to the demonstration test. We expect the VBID
demonstration to provide CMS with insights into future VBID innovations
for the MA program.
3. Segment Benefits Flexibility
In reviewing section 1854(h) of the Social Security Act and
Medicare Advantage (MA) regulations governing plan segments, we have
determined that the statute and existing regulations may be interpreted
to allow MA plans to vary supplemental benefits, in addition to premium
and cost sharing, by segment, as long as the benefits, premium, and
cost sharing are uniform within each segment of an MA plan's service
area. Plans segments are county-level portions of a plan's overall
service area which, under current CMS policy, are permitted to have
different premiums and cost sharing amounts as long as these premiums
and cost sharing amounts are uniform throughout the segment. We are
proposing to revise our interpretation of the existing statute and
regulations to allow MA plan segments to vary by benefits in addition
to premium and cost sharing, consistent with the MA regulatory
requirements defining segments at Sec. 422.262(c)(2).
4. Maximum Out-of-Pocket Limit for Medicare Parts A and B Services
(Sec. Sec. 422.100 and 422.101)
As provided at Sec. 422.100(f)(4) and (5) and Sec. 422.101(d)(2)
and (3), all Medicare Advantage (MA) plans (including employer group
waiver plans (EGWPs) and special needs plans (SNPs)), must establish
limits on enrollee out-of-pocket cost sharing for Parts A and B
services that do not exceed the annual limits established by CMS. CMS
added Sec. Sec. 422.100(f)(4) and (f)(5), effective for coverage in
2011, under the authority of sections 1852(b)(1)(A), 1856(b)(1), and
1857(e)(1) of the Act in order not to discourage enrollment by
individuals who utilize higher than average levels of health care
services (that is, in order for a plan not to be discriminatory) (75 FR
19709-11). Section 1858(b)(2) of the Act requires a limit on in-network
out-of-pocket expenses for enrollees in Regional MA Plans. In addition,
Local Preferred Provider Organization (LPPO) plans, under Sec.
422.100(f)(5), and Regional PPO (RPPO) plans, under section 1858(b)(2)
of the Act and Sec. 422.101(d)(3), are required to have a
``catastrophic'' limit inclusive of both in- and out-of-network cost
sharing for all Parts A and B services, the annual limit which is also
established by CMS. All cost sharing (that is, deductibles,
coinsurance, and copayments) for Parts A and B services, excluding plan
premium, must be included in each plan's Maximum Out-of-Pocket (MOOP)
amount subject to these limits.
As discussed in the 2010 rulemaking (75 FR 19709), CMS affords
greater flexibility in establishing Parts A and B cost sharing to MA
plans that adopt a lower, voluntary MOOP limit than is available to
plans that adopt the higher, mandatory MOOP limit. The percentage of
eligible Medicare beneficiaries with access to an MA plan (excluding
employer and dual eligible special needs plans) offering a voluntary
MOOP limit has decreased from 97.7 percent in CY 2011 to 68.1 percent
in CY 2017. This has resulted in the percentage of total enrollees in a
voluntary MOOP plan decreasing from 51 percent in CY 2011 to 21 percent
in CY 2017.
As stated in the CY 2018 final Call Letter \26\ and in the 2010
final rule (75 FR 19710), CMS currently sets MOOP limits based on a
beneficiary-level distribution of Parts A and B cost sharing for
individuals enrolled in Medicare Fee-for-Service (FFS) for local and
regional MA plans. The mandatory MOOP amount represents approximately
the 95th percentile of projected beneficiary out-of-pocket spending.
Stated differently, 5 percent of Medicare FFS beneficiaries are
expected to incur approximately $6,700 or more in Parts A and B
deductibles, copayments, and coinsurance. The voluntary MOOP amount of
$3,400 represents approximately the 85th percentile of projected
Medicare FFS out-of-pocket costs. The Office of the Actuary conducts an
annual analysis to help CMS determine the MOOP limits. Since the MOOP
requirements for local and regional MA plans were finalized in
regulation, a strict application of the 95th and 85th percentile would
have resulted in MOOP limits for local and regional MA plans
fluctuating from year-to-year. Therefore, CMS has exercised discretion
in order to maintain stable MOOP limits from year-to-year, when the
beneficiary-level distribution of Parts A and B cost sharing for
individuals enrolled in Medicare FFS is approximately equal to the
appropriate percentile. This approach avoids enrollee confusion, allows
plans to provide stable benefit packages year over year, and does not
discourage the adoption of the lower voluntary MOOP amount because of
fluctuations in the amount. CMS expects to change MOOP limits if a
consistent pattern of increasing or decreasing costs emerges over time.
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\26\ The CY 2018 final Call Letter may be accessed at https://www.cms.gov/Medicare/Health-Plans/MedicareAdvtgSpecRateStats/Announcements-and-Documents.html.
---------------------------------------------------------------------------

As part of the annual Call Letter process, stakeholders have
suggested changes to how CMS establishes MOOP limits. Some of the
comments suggested CMS use Medicare FFS and MA encounter data to inform
its decision-making. Other suggestions received have included
increasing the voluntary MOOP limit, increasing the number of service
categories that have higher cost sharing in return for a plan offering
a lower MOOP limit, and considering three levels of MOOP and service
category cost sharing to encourage plan offerings with lower MOOP
limits.
CMS's goal is to establish future MOOP limits based on the most
relevant and available data, or combination of data, that reflects
beneficiary health care costs in the MA program and maintains benefit
stability over time. Medicare FFS data currently represents the most
relevant and available data at this time. CMS may consider future
rulemaking regarding the use of MA encounter cost data to understand
program health care costs and compare to Medicare FFS data in
establishing cost sharing limits. Under this current proposal to revise
the regulations controlling MOOP limits, CMS might change its existing
methodology of using the 85th and 95th percentiles of projected
beneficiary out-of-pocket Medicare FFS spending in the future. CMS
expects to establish future limits by striking the appropriate balance
between limiting MOOP costs and potential changes in premium, benefits,
and cost sharing with the goal of making sure beneficiaries can access
affordable and sustainable benefit packages. While CMS intends to
continue using the 85th and 95th percentiles of projected beneficiary
out-of-pocket spending for the immediate future to set MA MOOP limits,
CMS proposes to amend the regulation text in Sec. Sec. 422.100(f)(4)
and (5) and 422.101(d)(2) and (d)(3) to incorporate authority to
balance factors discussed previously. The flexibility provided by these
proposed changes will permit CMS to annually adjust mandatory and
voluntary MOOP limits based on changes in market conditions and to
ensure the sustainability of the MA program and benefit options.
The proposed new authority permitting changes in data and
methodology related to establishing MOOP limits would be exercised by
CMS in advance of each plan year; CMS would use the annual Call Letter
and other guidance documents to explain its application of this
proposed regulatory standard and the data used to identify MOOP limits
in advance of bid

[[Page 56362]]

deadlines. This will provide MA organizations adequate time to comment
and prepare for changes. In addition, CMS plans to transition any
significant changes under this proposal over time to avoid disruption
to benefit designs and minimize potential beneficiary confusion.
CMS proposes to codify specific requirements because of the number
of comments received in the past about MOOP changes. CMS proposes to
amend Sec. Sec. 422.100(f)(4) and (f)(5) and 422.101(d)(2) and (d)(3)
to clarify that CMS may use Medicare FFS data to establish annual MOOP
limits. In addition, CMS would have authority to increase the voluntary
MOOP limit to another percentile level of Medicare FFS, increase the
number of service categories that have higher cost sharing in return
for offering a lower MOOP amount, and implement more than two levels of
MOOP and cost sharing limits to encourage plan offerings with lower
MOOP limits. This proposal includes authority to increase the number of
service categories that have higher cost sharing in return for offering
a lower (voluntary) MOOP amount and considering more than two levels of
MOOP (with associated cost sharing limits) to encourage plan offerings
with lower MOOP limits. Consistent with past practice, CMS will
continue to publish annual limits and a description of how the
regulation standard was applied (that is, the methodology used) in the
annual Call Letter prior to bid submission so that MA plans can submit
bids consistent with parameters that CMS has determined to meet the
cost sharing limits requirements. CMS seeks comments and suggestions on
the topics discussed in this section.
5. Cost Sharing Limits for Medicare Parts A and B Services (Sec. Sec.
417.454 and 422.100)
As provided at Sec. Sec. 417.454(e), 422.100(f)(6), and
422.100(j), MA plan cost sharing for Parts A and B services specified
by CMS must not exceed certain levels. Section 422.100(f)(6) provides
that cost sharing must not be discriminatory and CMS determines
annually the level at which certain cost sharing becomes
discriminatory. Sections 417.454(e) and 422.100(j), on the other hand,
are based on how section 1852(a)(1)(B)(iii) and (iv) of the Act directs
that cost sharing for certain services may not exceed cost sharing
levels in Medicare Fee-for-Service (FFS); under the statute and the
regulations, CMS may add to that list of services. CMS reviews cost
sharing set by MA organizations using parameters based on Parts A and B
services that are more likely to have a discriminatory impact on
beneficiaries. The review parameters are currently based on Medicare
FFS data and reflect a combination of patient utilization scenarios and
length of stays or services used by average to sicker patients. CMS
uses multiple utilization scenarios for some services (for example,
inpatient care) to guard against MA organizations distributing benefit
cost sharing amounts in a manner that is discriminatory. Review
parameters are also established for frequently used professional
services, such as primary and specialty care services.
CMS proposes here to amend Sec. 422.100(f)(6) to clarify that it
may use Medicare FFS data to establish appropriate cost sharing limits.
In addition, CMS intends to use MA utilization encounter data to inform
patient utilization scenarios used to help identify MA plan cost
sharing standards and thresholds that are not discriminatory; we
solicit comment on whether to codify that use of MA encounter data for
this purpose in Sec. 422.100(f)(6). This proposal is not related to a
statutory change.
This proposal aims to allow CMS to use the most relevant and
appropriate information in determining whether specific cost sharing is
discriminatory and to set standards and thresholds above which CMS
believes cost sharing is discriminatory. CMS intends to continue the
practice of furnishing information to MA organizations about the
methodology used to establish cost sharing limits and the thresholds
CMS identifies as non-discriminatory through the annual Call Letter
process or Health Plan Management System (HPMS) memoranda and solicit
comments, as appropriate. This process allows MA organizations to
prepare plan bids consistent with parameters that CMS have determined
to be non-discriminatory.
As specified in section 1852(a)(1)(B)(iv) of the Act, the cost
sharing charged by MA plans for chemotherapy administration services,
renal dialysis services, and skilled nursing care may not exceed the
cost sharing for those services under Parts A and B. Although CMS has
not established a specific service category cost sharing limit for all
possible services, CMS has issued guidance that MA plans must pay at
least 50 percent of the contracted (or Medicare allowable) rate and
that cost sharing for services cannot exceed 50 percent of the total MA
plan financial liability for the benefit in order for the cost sharing
for such services to be considered non-discriminatory; CMS believes
that cost sharing (service category deductibles, copayments or co-
insurance) that fails to cover at least half the cost of a particular
service or item acts to discriminate against those for whom those
services and items are medically necessary and discourages enrollment
by beneficiaries who need those services and items. If a plan uses a
copayment method of cost sharing, then the copayment for an in-network
Medicare FFS service category cannot exceed 50 percent of the average
contracted rate of that service under this guidance (Medicare Managed
Care Manual, Chapter 4, Section 50.1). Some service categories may
identify specific benefits for which a unique copayment would apply,
while others include a variety of services with different levels of
cost which may reasonably have a range of copayments based on groups of
similar services, such as durable medical equipment or outpatient
diagnostic and radiological services.
CMS affords MA plans that adopt a lower, voluntary MOOP limit
greater flexibility in establishing Parts A and B cost sharing than is
available to plans that adopt the higher, mandatory MOOP limit. As
discussed in section III.A.5, CMS intends to continue to establish more
than one set of Parts A and B service cost sharing thresholds for plans
choosing to offer benefit designs with either a lower, voluntary MOOP
limit or the higher, mandatory MOOP limit set under Sec. Sec.
422.100(f)(4) and (5) and 422.101(d)(2) and (3). Medicare FFS data
currently represents the most relevant and available data at this time
and is used to evaluate cost sharing for specific services as well in
applying the standard currently at Sec. 422.100(f)(6) and in
considering CMS's authority to add (by regulation) categories of
services for which cost sharing may not exceed levels in Medicare FFS.
As noted with regard to setting MOOP limits under Sec. Sec.
422.100 and 422.101, CMS expects that MA encounter data will be more
accurate and complete in the future and may consider future rulemaking
regarding the use of MA encounter to understand program health care
costs and compare to Medicare FFS data in establishing cost sharing
limits. For reasons discussed in section III.A.5, CMS proposes to amend
Sec. 422.100(f)(6) to permit use of Medicare FFS to evaluate whether
cost sharing for Part A and B services is discriminatory to set the
evaluation limits announced each year in the Call Letter: in addition,
we propose to use MA utilization encounter data as part of that
evaluation process. As with the proposal to authorize use of this data
for setting MOOP limits, CMS intends to use the Advance Notice/Call
Letter process to communicate its

[[Page 56363]]

application of the regulation and to transition any significant changes
over time to avoid disruption to benefit designs and minimize potential
beneficiary confusion.
This proposal will allow CMS to use the most relevant and
appropriate information in determining cost sharing standards and
thresholds. For example, analyses of MA utilization encounter data can
be used with Medicare FFS data to establish the appropriate utilization
scenarios to determine MA plan cost sharing standards and thresholds.
CMS seeks comments and suggestions on this proposal, particularly
whether additional regulation text is needed to achieve CMS's goal of
setting and announcing each year presumptively discriminatory levels of
cost sharing.
6. Meaningful Differences in Medicare Advantage Bid Submissions and Bid
Review (Sec. Sec. 422.254 and 422.256)
As provided at Sec. Sec. 422.254(a)(4) and 422.256(b)(4), CMS will
only approve a bid submitted by a Medicare Advantage (MA) organization
if its plan benefit package is substantially different from those of
other plans offered by the organization in the area with respect to key
plan characteristics such as premiums, cost sharing, or benefits
offered. MA organizations may submit bids for multiple plans in the
same area under the same contract only if those plans are substantially
different from one another based on CMS's annual meaningful difference
evaluation standards. CMS proposes to eliminate this meaningful
difference requirement beginning with MA bid submissions for contract
year (CY) 2019. Separate meaningful difference rules were concurrently
adopted for MA and stand-alone prescription drug plans (PDPs), but this
specific proposal is limited to the meaningful difference provision
related to the MA program. This proposal is not related to a statutory
change.
This proposal aims to improve competition, innovation, available
benefit offerings, and provide beneficiaries with affordable plans that
are tailored for their unique health care needs and financial
situation. CMS will maintain requirements that prohibit plans from
misleading beneficiaries in their communication materials, provide CMS
the authority to disapprove a bid if a plan's proposed benefit design
substantially discourages enrollment in that plan by certain Medicare-
eligible individuals, and allow CMS to non-renew a plan that fails to
attract a sufficient number of enrollees over a sustained period of
time (Sec. Sec. 422.100(f)(2), 422.510(a)(4)(xiv), 422.2264, and
422.2260(e)). CMS expects organizations to continue designing plan
benefit packages that, within a service area, are different from one
another with respect to key benefit design characteristics, so that any
potential beneficiary confusion is minimized when comparing multiple
plans offered by the organization. For example, beneficiaries may
consider the following factors when they make their health care
decisions: plan type, Part D coverage, differences in provider network,
Part B and plan premiums, and unique populations served (for example,
special needs plans, or SNPs). In addition, CMS intends to continue the
practice of furnishing information to MA organizations about their bid
evaluation methodology through the annual Call Letter process and/or
Health Plan Management System (HPMS) memoranda and solicit comments, as
appropriate. This process allows CMS to articulate bid requirements and
MA organizations to prepare bids that satisfy CMS requirements and
standards prior to bid submission in June each year.
Research studies indicate that consumers, especially elderly
consumers, may be challenged by a large number of plan choices that
may: (1) Result in not making a choice, (2) create a bias to not change
plans, and (3) impact MA enrollment growth.\27\ Beneficiaries indicate
they want to make informed and effective decisions, but do not feel
qualified. As a result, they seek help from Medicare Plan Finder (MPF),
brokers or plan representatives, providers, and family members.
Although challenged by choices, beneficiaries do not want their plan
choices to be limited and understand key decision factors such as
premiums, out-of-pocket cost sharing, Part D coverage, familiar
providers, and company offering the plan.\28\ CMS continues to explore
enhancements to MPF that will improve the customer experience; some
examples of recent updates are provided below.
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\27\ McWilliams JM, Afendulis CC, McGuire TG, Landon BE. Complex
Medicare advantage choices may overwhelm seniors--especially those
with impaired decision making. Health Aff (Millwood).
2011;30(9):1786-94.
\28\ Jacobson, G. Swoope, C., Perry, M. Slosar, M. How are
seniors choosing and changing health insurance plans? Kaiser Family
Foundation. 2014.
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As discussed later in this section, CMS believes that it is
challenging to apply the current standardized meaningful difference
evaluation (which is applied consistently to all plans) in a manner
that accommodates and evaluates important considerations objectively.
CMS is concerned that the current evaluation may create unintended
consequences related to innovative benefit designs. In addition, CMS's
efforts in implementing more sophisticated approaches to consumer
engagement and decision-making should help beneficiaries, caregivers,
and family members make informed plan choices. For example, in MPF,
plan details have been expanded to include MA and Part D benefits and a
new consumer friendly tool for the CY 2018 Medicare open enrollment
period which will assist beneficiaries in choosing a plan that meets
their unique and financial needs based on a set of 10 quick questions.
Prior to implementing the meaningful difference evaluation for CY
2011 bid submissions, the beneficiary weighted average number of plans
per county was about 30 in 2010 compared to 18 in 2017 (these numbers
do not include SNPs or employer group plans which have additional
criteria for enrollment). Private-fee-for-service (PFFS) plans
represented 13 of the 30 plans in 2010 and less than 1 of the 18 plans
in 2017. The Medicare Improvements for Patients and Providers Act of
2008 required PFFS plans to establish contracted provider networks by
2011 and many PFFS plans non-renewed. The weighted average number of
plans has remained relatively stable since the decline of PFFS options.
MA enrollment continued to grow from more than 11 million in July 2010
to 18.7 million in July 2017, fueled by the continued overall
acceptance of managed care, the baby boom generation aging into
Medicare beginning in 2011, and decreases in average plan premium
during the time period.
As stated in the October 22, 2009, proposed rule (74 FR 54670
through 73) and April 15, 2010, final rule (75 FR 19736 through 40),
CMS's goal for the meaningful difference evaluation was to ensure a
proper balance between affording beneficiaries a wide range of plan
choices and avoiding undue beneficiary confusion in making coverage
selections. The meaningful difference evaluation was initiated when
cost sharing and benefits were relatively consistent within each plan
and similar plans within the same contract could be readily compared by
measuring estimated out-of-pocket costs and other factors currently
integrated in the evaluation's methodology.
The current meaningful difference evaluation uses estimated
enrollee out-of-pocket costs based on the CMS Out-of-Pocket Cost (OOPC)
model. This model uses a nationally representative cohort of
beneficiaries from the Medicare Beneficiary Surveys (MCBS)

[[Page 56364]]

and is intended to be objective and applied in a standardized and
consistent manner across plans. MCBS data collected by CMS from
beneficiaries are used to create the cohort of beneficiaries whose
medical and prescription data are used to estimate out-of-pocket costs.
The OOPC model generates estimated out-of-pocket costs based on
utilization from the cohort of beneficiaries and each plan's benefit
design entered into the Plan Benefit Package submitted to CMS as part
of the bidding process. Detailed information about the meaningful
difference evaluation is available in the CY 2018 Final Call Letter
issued April 3, 2017 (pages 115-118) and information about the CMS OOPC
model is available at: https://www.cms.gov/Medicare/Prescription-Drug-Coverage/PrescriptionDrugCovGenIn/OOPCResources.html. Estimated
enrollee cost sharing is determined by the cost sharing amounts for
Part A, B, and D services and most mandatory supplemental benefits (for
example, dental services). Benefit service categories within a plan may
have a range of multiple and varying cost sharing amounts. For example,
the outpatient procedures, tests, labs, and radiology services benefit
category includes many services that may have a wide range of cost
sharing amounts. The OOPC model uses the minimum or lowest cost sharing
value placed in the Plan Benefit Package (PBP) for each service
category to estimate out-of-pocket costs in these situations. As
discussed in the CY 2018 Final Call Letter, the differences between
similar plans must have at least a $20 per member per month estimated
beneficiary out-of-pocket cost difference. Differences in plan type
(for example, HMO, LPPO), SNP sub-type, and inclusion of Part D
coverage are considered meaningful differences which aligns with
beneficiary decision-making. Premiums, risk scores, actual plan
utilization and enrollment are not included in the evaluation because
these factors would introduce risk selection, costs, and margin into
the evaluation, resulting in a negation of the evaluation's
objectivity.
Based on CMS's efforts to revisit MA standards and the
implementation of the governing law to find flexibility for MA
beneficiaries and plans, MA organizations are able to: (1) Tier the
cost sharing for contracted providers as an incentive to encourage
enrollees to seek care from providers the plan identifies based on
efficiency and quality data which was communicated in CY 2011 guidance;
(2) establish Provider Specific Plans (PSPs) designed to offer
enrollees benefits through a subset of the overall contracted network
in a given service area, which are sometimes referred to as narrower
networks, and which was collected in the PBP beginning in CY 2011; and
(3) beginning in CY 2019, provide different cost sharing and/or
additional supplemental benefits for enrollees based on defined health
conditions within the same plan (Flexibility in the Medicare Advantage
Uniformity Requirements). These flexibilities allow MA organizations to
provide beneficiaries with access to health care benefits that are
tailored to individual needs, but make it difficult for CMS to
objectively measure meaningful differences between plans. Items 1 and 3
provide greater cost sharing flexibility to address individual
beneficiary needs, but result in a much broader range of cost sharing
values being entered into PBP. As discussed in the previous paragraph,
the CMS OOPC model uses the lowest cost sharing value for each service
category to estimate out-of-pocket costs which may or may not be a
relevant comparison between different plans for purposes of evaluating
meaningful difference when variable cost sharing of this type is
involved.
CMS remains committed to ensuring transparency in plan offerings so
that beneficiaries can make informed decisions about their health care
plan choices. It is also important to encourage competition,
innovation, and provide access to affordable health care approaches
that address individual needs. The current meaningful difference
methodology evaluates the entire plan and does not capture differences
in benefits that are tied to specific health conditions. As a result,
the meaningful difference evaluation would not fully represent benefit
and cost sharing differences experienced by enrollees and could lead to
MA organizations to focus on CMS standards, rather than beneficiary
needs, when designing benefit packages.
In order to capture differences in provider network, more tailored
benefit and cost sharing designs, or other innovations, the evaluation
process would have to use more varied and complex assumptions to
identify plans that are not meaningfully different from one another.
CMS believes that such an evaluation could result in more complicated
and potentially confusing benefit designs to achieve differences
between plans. This process may require greater administrative
resources for MA organizations and CMS, while not producing results
that are useful to beneficiaries.
The current meaningful difference methodology may force MA
organizations to design benefit packages to meet CMS standards rather
than beneficiary needs. To satisfy current CMS meaningful difference
standards, MA organizations may have to change benefit coverage or cost
sharing in certain plans to establish the necessary benefit value
difference, even if substantial difference exists based on factors CMS
is currently unable to incorporate into the evaluation (such as tiered
cost sharing, and unique benefit packages based on enrollee health
conditions). Although these changes in benefits coverage may be
positive or negative, CMS is concerned the meaningful difference
requirement results in organizations potentially reducing the value of
benefit offerings. On the basis of bid review activities performed over
the past several years, CMS is concerned that benefits may be decreased
or cost sharing increased to satisfy the meaningful difference
evaluation. These are unintended consequences of the existing
meaningful difference evaluation and may restrict innovative benefit
designs that address individual beneficiary needs and affordability.
Beneficiaries may also consider plan and Part B premiums when
choosing among health plan options. Making changes to the existing
meaningful difference evaluation to consider premiums differences as
sufficient to distinguish among otherwise similar plans may limit the
value of CMS's evaluation by introducing factors that plans can easily
leverage, such as risk selection, costs, and margin, to satisfy the
evaluation test without resulting in additional benefit value or choice
for enrollees.
Stakeholders have expressed concern that without the meaningful
difference evaluation the number of bids and plan choices will likely
increase and make beneficiary decisions more difficult. The number of
plan bids may increase because of a variety of factors, such as
payments, bidding and service area strategies, serving unique
populations, and in response to other program constraints or
flexibilities. CMS expects that eliminating the meaningful difference
requirement will improve the plan options available for beneficiaries,
but CMS does not believe the number of similar plan options offered by
the same MA organization in each county will necessarily increase
significantly or create confusion in beneficiary decision-making. New
flexibilities in benefit design and more sophisticated approaches to
consumer engagement and decision-making should help

[[Page 56365]]

beneficiaries, caregivers, and family members make informed plan
choices among more individualized plan offerings. Based on the
previously stated information, CMS does not expect a significant
increase in time spent in bid review as a direct result of eliminating
meaningful difference nor increased health care provider burden.
In addition, new flexibilities in benefit design may allow MA
organizations to address different beneficiary needs within existing
plan options and reduce the need for new plan options to navigate
existing CMS requirements. In addition, MA organizations may be able to
offer a portfolio of plan options with clear differences between
benefits, providers, and premiums which would allow beneficiaries to
make more effective decisions if the MA organizations are not required
to change benefit and cost sharing designs in order to satisfy
Sec. Sec. 422.254 and 422.256. Currently, MA organizations must
satisfy CMS meaningful difference standards (and other requirements),
rather than solely focusing on beneficiary purchasing needs when
establishing a range of plan options.
CMS supports beneficiary decision-making by providing tools and
materials that focus on key beneficiary purchasing criteria, such as
eligibility to enroll in SNPs, need for Part D coverage, Part D
formulary and benefit coverage, plan type preference (for example, HMO
vs. PPO), network providers, medical benefit coverage, premiums, and
the brand or organization offering the plan options. CMS is also taking
steps to improve information available through MPF and 1-800-MEDICARE
to help beneficiaries, caregivers, and family members make informed
plan choices.
CMS continually evaluates consumer engagement tools and outreach
materials (including marketing, educational, and member materials) to
ensure information is formatted consistently so beneficiaries can
easily compare multiple plans. CMS also provides annual guidance and
model materials to MA organizations to assist them in providing
resources, such as the plan's Annual Notice of Change and Evidence of
Coverage, which contain valuable information for the enrollee to
evaluate and select the best plan for their needs. To reinforce
informed decision making, CMS invests substantial resources in
engagement strategies such as 1-800-MEDICARE, MPF, standard and
electronic mail, and social media to continuously communicate with
beneficiaries, caregivers, family members, providers, community
resources, and other stakeholders.
CMS will continue to furnish information to MA organizations and
solicit comments on bid evaluation methodology through the annual Call
Letter process or HPMS memoranda, as appropriate.
In addition, CMS is maintaining requirements around plans not
misleading beneficiaries in communication materials, disapproving a bid
if CMS finds that a plan's proposed benefit design substantially
discourages enrollment in that plan by certain Medicare-eligible
individuals, and non-renewing plans that fail to attract a sufficient
number of enrollees over a sustained period of time (Sec. Sec.
422.100(f)(2), 422.510(a)(4)(xiv), 422.2264, and 422.2260(e)). CMS
expects these measures will continue to protect beneficiaries from
discriminatory plan benefit packages and health plans that demonstrate
a lack of beneficiary interest if the meaningful difference requirement
is eliminated. For all these reasons, CMS proposes to remove Sec. Sec.
422.254(a)(4) and 422.256(b)(4) to eliminate the meaningful difference
requirement for MA bid submissions. CMS seeks comments and suggestions
on the topics discussed in this section about making sure beneficiaries
have access to innovative plans that meet their unique needs.
7. Coordination of Enrollment and Disenrollment Through MA
Organizations and Effective Dates of Coverage and Change of Coverage
(Sec. Sec. 422.66 and 422.68)
Section 1851(c)(3)(A)(ii) of the Act provides the Secretary with
the authority to implement default enrollment rules for the Medicare
Advantage (MA) program in addition to the statutory direction that
beneficiaries who do not elect an MA plan are defaulted to original
(fee-for-service) Medicare. This provision states that the Secretary
may establish procedures whereby an individual currently enrolled in a
non-MA health plan offered by an MA organization at the time of his or
her Initial Coverage Election Period is deemed to have elected an MA
plan offered by the organization if he or she does not elect to receive
Medicare coverage in another way.
We initially addressed default enrollment upon conversion to
Medicare in rulemaking (70 FR 4606 through 4607) in 2005, indicating
that we would retain the flexibility to implement this provision
through future instructions and guidance to MA organizations. Such
subregulatory guidance was established later that same year and was
applicable to the 2006 contract year. As outlined in Chapter 2 of the
Medicare Managed Care Manual, we established an optional enrollment
mechanism, whereby MA organizations may develop processes and, with CMS
approval, provide seamless continuation of coverage by way of
enrollment in an MA plan for newly MA eligible individuals who are
currently enrolled in other health plans offered by the MA organization
(such as commercial or Medicaid plans) at the time of the individuals'
initial eligibility for Medicare. The guidance emphasized that MA
organizations not limit seamless continuation of coverage to situations
in which an enrollee becomes eligible for Medicare by virtue of age,
but includes all newly eligible Medicare beneficiaries, including those
whose Medicare eligibility is based on disability. We did not mandate
that organizations implement a process for seamless continuation of
coverage but, instead, gave organizations the option of implementing
such a process for its enrollees who are approaching Medicare
eligibility. From its inception, the guidance has required that
individuals receive advance notice of the proposed MA enrollment and
have the ability to ``opt out'' of such an enrollment prior to the
effective date of coverage. This guidance has been in practice for the
past decade for MA organizations that requested to use this voluntary
enrollment mechanism, but we have encountered complaints and heard
concerns about the practice. We are proposing new regulation text to
establish limits and requirements for these types of default
enrollments to address these concerns and our administrative experience
with seamless continuation of coverage, commonly referred to as
seamless conversion.
Based on our experience with the seamless conversion process thus
far, we are proposing, to be codified at Sec. 422.66(c)(2),
requirements for seamless default enrollments upon conversion to
Medicare. As proposed in more detail later in this section, such
default enrollments would be into dual eligible special needs plans (D-
SNPs) and be subject to five substantive conditions: (1) The individual
is enrolled in an affiliated Medicaid managed care plan and is dually
eligible for Medicare and Medicaid; (2) the state has approved use of
this default enrollment process and provided Medicare eligibility
information to the MA organization; (3) the individual does not opt out
of the default enrollment; (4) the MA

[[Page 56366]]

organization provides a notice that meets CMS requirements to the
individual; and (5) CMS has approved the MA organization to use the
default enrollment process before any enrollments are processed. We are
also proposing that coverage under these types of default enrollments
begin on the first of the month that the individual's Part A and Part B
eligibility is effective. We are also proposing changes to Sec. Sec.
422.66(d)(1) and (d)(5) and 422.68 that coordinate with the proposal
for Sec. 422.66.
In the Advance Notice of Methodological Changes for Calendar Year
(CY) 2016 for Medicare Advantage (MA) Capitation Rates, Part C and Part
D Payment Policies and 2016 Call Letter, we explained how entities that
sponsor Medicaid managed care organizations (MCOs) and affiliated D-
SNPs can promote coverage of an integrated Medicare and Medicaid
benefit through existing authority for seamless continuation of
coverage of Medicaid MCO members as they become eligible for Medicare.
We received positive comments from state Medicaid agencies that
supported this enrollment mechanism and requested that we clarify the
process for approval of seamless continuation of coverage as a
mechanism to promote enrollment in integrated D-SNPs that deliver both
Medicare and Medicaid benefits. We also received comments from
beneficiary advocates asking that additional consumer protections,
including requiring written beneficiary confirmation and a special
enrollment period for those individuals who transition from non-
Medicare products to Medicare Advantage. We believe that our proposal,
described later in this section, adequately addresses the concerns on
which these requests are based, given that the default enrollment
process would be permissible only for individuals enrolled in a
Medicaid managed care plan in states that support this process. This
means that the Medicare plan into which individuals would be defaulted
would be one that is offered by the same parent organization as their
existing Medicaid plan, such that much of the information needed by the
MA plan would already be in the possession of the MA organization to
facilitate the default enrollment process. Also, default enrollment
would not be permitted if the state does not actively support this
process, ensuring an accurate source of data for use by MA
organizations to appropriately identify and notify individuals eligible
for default enrollment.
On October 21, 2016,\29\ in response to inquiries regarding this
enrollment mechanism, its use by MA organizations, and the beneficiary
protections currently in place, we announced a temporary suspension of
acceptance of new proposals for seamless continuation of coverage.
Based on our subsequent discussions with beneficiary advocates and MA
organizations approved for this enrollment mechanism, it is clear that
organizations attempting to conduct seamless continuation of coverage
from commercial coverage (that is, private coverage and Marketplace
coverage) find it difficult to comply with our current guidance and
approval parameters. This is especially true of the requirement to
identify commercial members who are approaching Medicare eligibility
based on disability. Also challenging for these organizations is the
requirement that they have the means to obtain the individual's
Medicare number and are able to confirm the individual's entitlement to
Part A and enrollment in Part B no fewer than 60 days before the MA
plan enrollment effective date.
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\29\ https://www.cms.gov/Medicare/Eligibility-and-Enrollment/MedicareMangCareEligEnrol/Downloads/HPMS_Memo_Seamless_Moratorium.pdf.
---------------------------------------------------------------------------

In addition, the ability for organizations to conduct seamless
enrollment of individuals converting to Medicare will be further
limited due to the statutory requirement that CMS remove Social
Security Numbers (SSNs) from all Medicare cards by April 2019. A new
Medicare number will replace the SSN-based Health Insurance Claim
Number (HICN) on the new Medicare cards for Medicare transactions.
Beginning in April 2018, we'll start mailing the new Medicare cards
with the new number to all people with Medicare. Given the random and
unique nature of the new Medicare number, we believe MA organizations
will be limited in their ability to automatically enroll newly eligible
Medicare beneficiaries without having to contact them to obtain their
Medicare numbers, as CMS does not share Medicare numbers with
organizations for their commercial members who are approaching Medicare
eligibility. We note that contacting the individual in order to obtain
the information necessary to process the enrollment does not align with
the intent of default enrollment, which is designed to process
enrollments and have coverage automatically shift into the MA plan
without an enrollment action required by the beneficiary.
Organizations operating Medicaid managed care plans are better able
to meet these requirements when states provide data, including the
individual's Medicare number, on those about to become Medicare
eligible. As part of coordination between the Medicare and Medicaid
programs, CMS shares with states, via the State MMA file, data of
individuals with Medicaid who are newly becoming entitled to Medicare;
such data includes the Medicare number of newly eligible Medicare
beneficiaries. MA organizations with state contracts to offer D-SNPs
would be able to obtain (under their agreements with state Medicare
agencies) the data necessary to process the MA enrollment submission to
CMS. Therefore, we are proposing to revise Sec. 422.66 to permit
default enrollment only for Medicaid managed care enrollees who are
newly eligible for Medicare and who are enrolled into a D-SNP
administered by an MA organization under the same parent organization
as the organization that operates the Medicaid managed care plan in
which the individual remains enrolled. These requirements would be
codified at Sec. 422.66(c)(2)(i) (as a limit on the type of plan into
which enrollment is defaulted) and (c)(2)(i)(A) (requiring existing
enrollment in the affiliated Medicaid managed care plan as a condition
of default MA enrollment). At paragraph (c)(2)(i)(B), we are also
proposing to limit these default enrollments to situations where the
state has actively facilitated and approved the MA organization's use
of this enrollment process and articulates this in the agreement with
the MA organization offering the D-SNP, as well as providing necessary
identifying information to the MA organization.
The option of default enrollment can be particularly beneficial for
Medicaid managed care enrollees who are newly eligible for Medicare,
because in the case that the parent organization of the Medicaid
managed care plan also offers a D-SNP, default enrollment promotes
enrollment in a plan that offers some level of integration of acute
care, behavioral health and, for eligible beneficiaries, long-term care
services and supports, including institutional care, and home and
community-based services (HCBS). This is in line with CMS' support of
state efforts to increase enrollment of dually eligible individuals in
fully integrated systems of care and the evidence \30\ that such
systems

[[Page 56367]]

improve health outcomes. Further this proposal will provide states with
additional flexibility and control. States can decide if they wish to
allow their contracted Medicaid managed care plans to use default
enrollment of Medicaid enrollees into D-SNPs and can control which D-
SNPs receive default enrollments through two means: The contracts that
states maintain with D-SNPs (Sec. 422.107(b)) and by providing the
data necessary for MA organizations to successfully implement the
process. Under our proposal, MA organizations can process default
enrollments only for dual-eligible individuals in states where the
contract with the state under Sec. 422.107 approves it and the state
identifies eligibility and shares necessary data with the organization.
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\30\ There is a growing evidence that integrated care and
financing models can improve beneficiary experience and quality of
care, including:
Health Management Associates, Value Assessment of the
Senior Care Options (SCO) Program, July 21, 2015, available at:
http://www.mahp.com/unify-files/HMAFinalSCOWhitePaper_2015_07_21.pdf;
MedPAC chapter ``Care coordination programs for dual-
eligible beneficiaries,'' June 2012, available at: http://www.medpac.gov/docs/default-source/reports/chapter-3-appendixes-care-coordination-programs-for-dual-eligible-beneficiaries-june-2012-report-.pdf?sfvrsn=0;
Anderson, Wayne L., Zhanlian Fen, and Sharon K. Long,
RTI International and Urban Institute, Minnesota Managed Care
Longitudinal Data Analysis, prepared for the U.S. Department of
Health and Human Services Assistant Secretary for Planning and
Evaluation (ASPE), March 2016, available at: https://aspe.hhs.gov/report/minnesota-managed-care-longitudinal-data-analysis.
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To ensure that Medicaid beneficiaries considered for default
enrollment upon their conversion to Medicare are aware of the default
MA enrollment and of the changes to their Medicare and Medicaid
coverage, we also propose, at Sec. 422.66(c)(2)(i)(C) and (c)(2)(iv),
that the MA organization must issue a notice no fewer than 60 days
before the default enrollment effective date to the enrollee. The
proposed revised notice \31\ must include clear information on the D-
SNP, as well as instructions to the individual on how to opt out (or
decline) the default enrollment and how to enroll in Original Medicare
or a different MA plan. This notice requirement aims to help ensure a
smooth transition of eligible individuals into the D-SNP for those who
choose not to opt out. All MA organizations currently approved to
conduct seamless conversion enrollment issue at least one notice 60
days prior to the MA enrollment effective date, so our proposal would
not result in any additional burden to these MA organizations using
this process. Recent discussions with MA organizations currently
conducting seamless conversion enrollment have revealed that several of
them already include in their process additional outreach, including
reminder notices and outbound telephone calls to aid in the transition.
We believe that these additional outreach efforts are helpful and we
would encourage their use under our proposal.
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\31\ Enrollment requirements and burden are currently approved
by OMB under control number 0938-0753 (CMS-R-267). Since this rule
would not impose any new or revised requirements/burden, we are not
making any changes to that control number.
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We also propose, in paragraph (c)(2)(i)(E) and (2)(ii), that MA
organizations must obtain approval from CMS before implementing default
enrollment. Under our proposal in paragraph (c)(2)(i)(B), CMS approval
would be granted only if the applicable state approves the default
enrollment through its agreement with the MA organization. MA
organizations would be required to implement default enrollment in a
non-discriminatory manner, consistent with their obligations under
Sec. 422.110; that is, MA organizations could not select for default
enrollment only certain of the members of the affiliated Medicaid plan
who were identified as eligible for default enrollment. Lastly, we
propose that CMS may suspend or rescind approval at any time if it is
determined that the MA organization is not in compliance with the
requirements. We request comment whether this authority to rescind
approval should be broader; we have considered whether a time limit on
the approval (such as 2 to 5 years) would be appropriate so that CMS
would have to revisit the processes and procedures used by an MA
organization under this proposed regulation in order to assure that the
regulation requirements are still being followed. We are particularly
interested in comment on this point in conjunction with our alternative
(discussed later in this section) proposal to codify the existing
parameters for this type of seamless conversion default enrollment such
that all MA organizations would be able to use this default enrollment
process for newly eligible and newly enrolled Medicare beneficiaries in
the MA organization's non-Medicare coverage.
Under our proposal, default enrollment of individuals at the time
of their conversion to Medicare would be more limited than the default
enrollments Congress authorized the Secretary to permit in section
1851(c)(3)(A)(ii) of the Act. However, we are also proposing some
flexibility for MA organizations that wish to offer seamless
continuation of coverage to their non-Medicare members, commercial,
Medicaid or otherwise, who are gaining Medicare eligibility. As
discussed in more detail below, affirmative elections would be
necessary for individuals not enrolled in a Medicaid managed care plan,
consistent with Sec. 422.50. However, because individuals enrolled in
an organization's commercial plan, for example would already be known
to the parent organization offering both the non-Medicare plan and the
MA plan and the statute acknowledges that this existing relationship is
somewhat relevant to Part C coverage, we propose to amend Sec.
422.66(d)(5) and to establish, through subregulatory guidance, a new
and simplified positive (that is, ``opt in'') election process that
would be available to all MA organizations for the MA enrollments of
their commercial, Medicaid or other non-Medicare plan members. To
reflect our change in policy with regard to a default enrollment
process and this proposal to permit a simplified election process for
individuals who are electing coverage in an MA plan offered by the same
entity as the individual's non-Medicare coverage, we are also proposing
to add text in Sec. 422.66(d)(5) authorizing a simplified election for
purposes of converting existing non-Medicare coverage, commercial,
Medicaid or otherwise, to MA coverage offered by the same organization.
This new mechanism would allow for a less burdensome process for MA
organizations to offer enrollment in their MA plans to their non-
Medicare health plan members who are newly eligible for Medicare. As
the MA organization has a significant amount of the information from
the member's non-Medicare enrollment, this new simplified election
process aims to make enrollment easier for the newly-eligible
beneficiary to complete and for the MA organization to process. It
would align with the individual's Part A and Part B initial enrollment
period (and initial coordinated election period for MA coverage),
provided he or she enrolled in both Medicare Parts A and B when first
eligible for Medicare. This new election process would provide a longer
period of time for MA organizations to accept enrollment requests than
the time period in which MA organizations would be required to
effectuate default enrollments, as organizations would be able to
accept enrollments throughout the individual's Initial Coverage
Election Period (ICEP), which for an aged beneficiary is the 7-month
period that begins 3 months before the month in which the individual
turns 65 and ends 3 months after the month in which the individual
turns 65. We would use existing authority to create this new enrollment

[[Page 56368]]

mechanism which, if implemented, would be available to MA organizations
in the 2019 contract year. We solicit comments on the proposed changes
to the regulation text as well as the form and manner in which such
enrollments may occur.
This optional simplified election process for the enrollment of
non-Medicare plan members into MA upon their initial eligibility (or
initial entitlement) for Medicare would provide individuals the option
to remain with the organization that offers their non-Medicare
coverage. A positive election in this circumstance provides an
additional beneficiary protection for non-dually eligible individuals,
so that they may actively choose a Medicare plan structure similar to
that of their commercial, Medicaid or other non-Medicare health plans,
as there may be significant differences between an organization's
commercial plans, for example, and its MA plans in terms of provider
networks, drug formularies, costs and benefit structures. While these
differences may result in a more restrictive network, a mandated change
in a primary care physician and increased out-of-pocket costs for
converting enrollees, default enrollment of a dually eligible
individual enrolled in a Medicaid plan into a D-SNP, triggers no
premium liability or cost sharing for medical care or prescription
drugs above levels that apply under Original Medicare. Further, the
individual remains in the Medicaid managed care plan and is gaining
additional Medicare coverage, which is not always the case in other
contexts. We solicit comment on these coordinated proposals to
implement section 1851(c)(3)(A)(ii) in general as discussed below and
in two particular ways: (1) To permit default MA enrollments for
dually-eligible beneficiaries who are newly eligible for Medicare under
certain conditions and (2) to permit simplified elections for seamless
continuations of coverage for other newly-eligible beneficiaries who
are in non-Medicare health coverage offered by the same parent
organization that offers the MA plan. We further invite comments
regarding whether the CMS approval of an organization's request to
conduct default enrollment should be limited to a specific time frame.
In addition, we are proposing amendments to Sec. Sec. 422.66(d)(1) and
422.68 that are also related to MA enrollment. Currently, as described
in the 2005 final rule (70 FR 4606 through 4607), Sec. 422.66(d)(1)
requires MA organizations to accept, during the month immediately
preceding the month in which he or she is entitled to both Part A and
Part B, enrollment requests from an individual who is enrolled in a
non-Medicare health plan offered by the MA organization and who meets
MA eligibility requirements. To better reflect section
1851(c)(3)(A)(ii), we are proposing to amend Sec. 422.66(d)(1) to add
text clarifying that seamless continuations of coverage are available
to an individual who requests enrollment during his or her Initial
Coverage Election Period. In light of our proposal to permit a
simplified election process for individuals who are electing coverage
in an MA plan offered by the same parent organization as the
individual's non-Medicare coverage, we are also proposing a revision to
Sec. 422.68(a) to ensure that ICEP elections made during or after the
month of entitlement to both Part A and Part B are effective the first
day of the calendar month following the month in which the election is
made. This proposed revision would codify the subregulatory guidance
that MA organizations have been following since 2006. This proposal is
also consistent with the proposal at Sec. 422.66(c)(2)(iii) regarding
the effective date of coverage for default enrollments into D-SNPs. We
also solicit comment on these related proposals.
In conclusion, we are proposing to add regulation text at Sec.
422.66(c)(2)(i) through (iv) to set limits and requirements for a
default enrollment of the type authorized under section
1851(c)(3)(A)(ii). We are proposing a clarifying amendment to Sec.
422.66(d)(1) regarding when seamless continuation coverage can be
elected and revisions to Sec. 422.66(d)(5) to reflect our proposal for
a new and simplified positive election process that would be available
to all MA organizations. Lastly, we are proposing revisions to Sec.
422.68(a) to ensure that ICEP elections made during or after the month
of entitlement to both Part A and Part B are effective the first day of
the calendar month following the month in which the election is made.
We invite comments in general on our proposal, as well as on the
alternatives presented. We recognize that our proposal narrows the
scope of default enrollments compared to what CMS approved under
section 1851(c)(3)(A) of the Act in the past. As we contemplated the
future of the seamless conversion mechanism, we considered retaining
processes similar to how the seamless conversion mechanism is outlined
currently in section 40.1.4 of Chapter 2 of the Medicare Managed Care
Manual and had been in practice through October 2016. We considered
proposing regulations to codify that guidance as follows--
Articulating the requirements for an MA organization's
proposal to use the seamless conversion mechanism, including
identifying eligible individuals in advance of Medicare eligibility;
Establishing timeframes for processing and the effective
date of the enrollment; and
Requiring notification to individuals at least 60 days
prior to the conversion of their right to opt-out or decline the
enrollment.
In considering this alternative, we contemplated adding additional
beneficiary protections, including the issuance of an additional notice
to ensure that individuals understood the implication of taking no
action. While this alternative would have led to increased use of the
seamless conversion enrollment mechanism than what had been used in the
past, the operational challenges, particularly in relation to the new
Medicare Beneficiary Identification number may be significant for MA
organizations to overcome at this time.
We also considered proposing regulations to limit the use of
default enrollment to only the aged population. While this alternative
would simplify a MA organization's ability to identify eligible
individuals, we have concerns about disparate treatment among newly
eligible individuals based on their reason for obtaining Medicare
entitlement.
We invite comments on our proposal and the alternate approaches,
including the following:
Codify the existing parameters for this type of seamless
conversion default enrollment such that all MA organizations would be
able to use this default enrollment process for newly eligible and
newly enrolled Medicare beneficiaries in the MA organization's non-
Medicare coverage.
Codify the existing parameters for this type of seamless
conversion default enrollment, as described previously, but allow that
use of default enrollment be limited to only the aged population.
If commenters recommend one or more alternate approaches, we ask
for suggested solutions that address the concerns noted in this
discussion, particularly related to the requirement that plans identify
commercial members who are approaching Medicare eligibility based on
disability, as well as how plans could confirm MA eligibility and
process enrollments without access to the individual's Medicare number.

[[Page 56369]]

8. Passive Enrollment Flexibilities To Protect Continuity of Integrated
Care for Dually Eligible Beneficiaries (Sec. 422.60(g))
Beneficiaries who are dually eligible for both Medicare and
Medicaid typically face significant challenges in navigating the two
programs, which include separate or overlapping benefits and
administrative processes. Fragmentation between the two programs can
result in a lack of coordination for care delivery, potentially
resulting in unnecessary, duplicative, or missed services. One method
for overcoming this challenge is through integrated care, which
provides dually eligible beneficiaries with the full array of Medicaid
and Medicare benefits for which they are eligible through a single
delivery system, thereby improving quality of care, beneficiary
satisfaction, care coordination, and reducing administrative burden.
Integrated care options are increasingly available for dually
eligible beneficiaries, which include a variety of integrated D-SNPs.
D-SNPs can provide greater integrated care than enrollees would
otherwise receive in other MA plans or Medicare Fee-For-Service (FFS),
particularly when an individual is enrolled in both a D-SNP and
Medicaid managed care organization offered by the same organization. D-
SNPs that meet higher standards of integration, quality, and
performance benchmarks--known as highly integrated D-SNPs--are able to
offer additional supplemental benefits to support integrated care
pursuant to Sec. 422.102(e). D-SNPs that are fully integrated--known
as Fully Integrated Dual-Eligible (FIDE) SNPs, as defined at Sec.
422.2 provide for a much greater level of integration and coordination
than non-integrated D-SNPs, providing all primary, acute, and long-term
care services and supports under a single entity.
While enrollment in integrated care options continues to grow,
there are instances in which beneficiaries may face disruptions in
coverage in integrated care plans. These disruptions can result from
numerous factors, including market forces that impact the availability
of integrated D-SNPs and state re-procurements of Medicaid managed care
organizations. Such disruptions can result in beneficiaries being
enrolled in two separate organizations for their Medicaid and Medicare
benefits, thereby losing the benefits of integration achieved when the
same entity offers both benefit packages. In an effort to protect the
continuity of integrated care for dually eligible beneficiaries, we are
proposing a limited expansion of our regulatory authority to initiate
passive enrollment for certain dually eligible beneficiaries in
instances where integrated care coverage would otherwise be disrupted.
Section 1851(c)(1) of the Act authorizes us to develop mechanisms
for beneficiaries to elect MA enrollment, and we have used this
authority to create passive enrollment. The current regulation at Sec.
422.60(g) limits the use of passive enrollment to two scenarios: (1) In
instances where there is an immediate termination of an MA contract; or
(2) in situations in which we determine that remaining enrolled in a
plan poses potential harm to beneficiaries. The passive enrollment
defined in Sec. 422.60(g) requires beneficiaries to be provided prior
notification and a period of time prior to the effective date to opt
out of enrollment from a plan. Current Sec. 422.60(g)(3) provides
every passively enrolled beneficiary with a special election period to
allow for election of different Medicare coverage: Selecting a
different managed care plan or opting out of MA completely and,
instead, receiving services through Original Medicare (a FFS delivery
system). A beneficiary who is offered a passive enrollment is deemed to
have elected enrollment in the designated plan if he or she does not
elect to receive Medicare coverage in another way.
Our proposal is a limited expansion of this regulatory authority to
promote continued enrollment of dually eligible beneficiaries in
integrated care plans to preserve and promote care integration under
certain circumstances. The proposal includes use of these existing opt-
out procedures and special election period. Therefore, we are proposing
to redesignate these requirements from (g)(1) through (3) to (g)(3)
through (g)(5) respectively, with minor revisions in proposed paragraph
(g)(5) to describe the application of special election period and in
proposed paragraph (g)(4) to make minor grammatical changes to the text
to improve its readability and clarity.
Our proposal is to add authority to passively enroll full-benefit
dually eligible beneficiaries who are currently enrolled in an
integrated D-SNP into another integrated D-SNP under certain
circumstances. We anticipate that these proposed regulations would
permit passive enrollments only when all the following conditions are
met:
When necessary to promote integrated care and continuity
of care;
Where such action is taken in consultation with the state
Medicaid agency;
Where the D-SNP receiving passive enrollment contracts
with the state Medicaid agency to provide Medicaid services; and
Where certain other conditions are met to promote
continuity and quality of care.
We expect that these factors would all occur in situations when
affected beneficiaries would otherwise be experiencing an involuntary
disruption in either their Medicare or Medicaid coverage. We anticipate
using this new proposed authority exclusively in such situations.
All individuals would be provided with a special election period
(which, as established in subregulatory guidance, lasts for 2 months),
as described in Sec. 422.62(b)(4), provided they are not otherwise
eligible for another SEP (for example, under proposed Sec.
423.38(c)(4)(ii)).
For illustrative purposes we have outlined two scenarios in which
this proposed regulatory authority could be used to promote continued
access to integrated care and maintain continuity of care for dually
eligible individuals:
State Re-Procurement of Medicaid Managed Care Contracts:
In several states, dually eligible beneficiaries receive Medicaid
services through managed care plans that the state selects through a
competitive procurement process. Some states also require that the
sponsors of Medicaid health plans also offer a D-SNP in the same
service area to promote opportunities for integrated care. Dually
eligible beneficiaries can face disruptions in coverage due to routine
state re-procurements of Medicaid managed care contracts. Individuals
enrolled in Medicaid managed care plans that are not renewed are
typically transitioned to a separate Medicaid managed care plan. In
such a scenario, dually eligible beneficiaries enrolled in the non-
renewing Medicaid managed care plan's corresponding D-SNP product would
now be enrolled in two separate organizations for their Medicaid and
Medicare services, resulting in non-integrated coverage. Under this
proposed regulation, CMS would have the ability, in consultation with
the state Medicaid agency that contracts with integrated D-SNPs, to
passively enroll dually eligible beneficiaries facing such a disruption
into an integrated D-SNP that corresponds with their new Medicaid
managed care plan, thereby promoting continuous enrollment in
integrated care.

[[Page 56370]]

Non-Renewal of D-SNP Contracts: Beneficiaries enrolled in
an integrated D-SNP that non-renews its MA contract at the end of the
contract year can face disruptions in integrated care coverage,
requiring them to actively select a new MA plan or default into
Original Medicare and a standalone prescription drug plan. While states
are permitted to passively enroll beneficiaries for Medicaid coverage
as defined in Sec. 438.54(c), CMS is not permitted to do so for
Medicare coverage when an MA plan non-renews at the end of the contract
year, as current authority for passive enrollment is limited to midyear
terminations. Rather, beneficiaries in the D-SNP that is non-renewing
its contract would need to actively select and enroll in an MA plan
that integrates their Medicare and Medicaid coverage in order to
continue the same level of integrated care. Permitting CMS the ability
to passively enroll D-SNP enrollees into other integrated D-SNP plans
in consultation with the state Medicaid agency would support
beneficiaries remaining in integrated care.
With a limited expansion of our passive enrollment regulatory
authority, we can better promote integrated care and continuity of care
for dually eligible beneficiaries. Therefore, we are proposing to
redesignate the introductory text in Sec. 422.60(g) as paragraph
(g)(1), with a new heading, technical revisions to the existing text
that specifies when passive enrollments may be implemented by CMS
designated as (g)(1)(i) and (ii), and a new paragraph (iii). This new
(g)(1)(iii) would authorize CMS to passively enroll certain dually
eligible individuals currently enrolled in an integrated D-SNP into
another integrated D-SNP, after consulting with the state Medicaid
agency that contracts with the D-SNP or other integrated managed care
plan, to promote continuity of care and integrated care.
We also propose to add a new paragraph (g)(2) to include a number
of requirements that an MA plan would have to meet in order to qualify
to receive passive enrollments under paragraph (g)(1)(iii). We also
propose to include in paragraph (g)(1)(iii) a reference to new
paragraph (g)(2) to make it clear that a contract with the state is
also necessary for a D-SNP to be eligible to receive these passive
enrollments. Specifically, we propose that in order to receive passive
enrollments under the new authority, MA plans must be highly
integrated, thereby restricting passive enrollment to those MA plans
that operate as a FIDE SNP or meet the integration standard for a
highly-integrated D-SNP, as defined in Sec. 422.2 and described in
Sec. 422.102(e) respectively. In an effort to ensure continuity of
care, acquiring MA plans would also be required to have substantially
similar provider and facility networks and Medicare- and Medicaid-
covered benefits as the integrated MA plan (or plans) from which
beneficiaries are passively enrolled. MA plans receiving passive
enrollment would also be required to not have any prohibition on new
enrollment imposed by CMS and have appropriate limits on premium and
cost-sharing for beneficiaries. If our proposed paragraphs (g)(1) and
(g)(2) are finalized, we would describe in subregulatory guidance the
procedure through which CMS would determine qualification for passive
enrollment. We also propose that to receive these passive enrollments,
that D-SNP must meet minimum quality standards based on MA Star
Ratings; we direct the reader to the proposal at section III.A.12. of
this rule regarding the MA Star Rating System. Our proposed regulation
text refers to a requirement to have a minimum overall MA Star Rating
of at least 3 stars, which represents average or above-average
performance. The rating for the year prior to receipt of passive
enrollment would be used in order to provide sufficient time for CMS,
states, and MAOs to prepare for the passive enrollment process. Low-
enrollment contracts or new plans without MA Star Ratings as defined in
Sec. 422.252 would also be eligible for passive enrollment under our
proposal, as long as the plan meets all other proposed requirements.
Our goal with this proposed requirement is to ensure that the D-SNP
plans receiving these passive enrollments provide high-quality care,
coverage and administration of benefits. As passive enrollments, in
some sense, are a benefit to a plan, by providing an enrollee and
associated payments without the plan having successfully marketed to
the enrollee, we believe that it is important that these enrollments
are limited to plans that have demonstrated commitment to quality.
Further, it is important to ensure that when we are making an
enrollment decision for a beneficiary who does not make an alternative
coverage choice that we are guided by the beneficiary's best interests,
which are likely served by a plan that is rated as having average or
above-average performance on the MA Stars Rating System. However, we
recognize that MA Star Ratings do not capture performance for those
services that would be covered under Medicaid, including community
behavioral health treatment and long-term services and supports. We
welcome comments on the process for determining qualification for
passive enrollment under this proposal and particularly on the minimum
quality standards. We request that commenters identify specific
measures and minimum ratings that would best serve our goals in this
proposal and are specific or especially relevant to coverage for dually
eligible beneficiaries.
In addition to the proposed minimum quality standards and other
requirements for a D-SNP to receive passive enrollments, we are
considering limiting our exercise of this proposed new passive
enrollment authority to those circumstances in which such exercise
would not raise total cost to the Medicare and Medicaid programs. We
seek comment on this potential further limitation on exercise of the
proposed passive enrollment regulatory authority to better promote
integrated care and continuity of care. In particular, we seek
stakeholder feedback how to calculate the projected impact on Medicare
and Medicaid costs from exercise of this authority.
The intent of the proposed passive enrollment regulatory authority
is to better promote integrated care and continuity of care--including
with respect to Medicaid coverage--for dually eligible beneficiaries.
As such, we would implement this authority in consultation with the
state Medicaid agencies that are contracting with these plan sponsors
for provision of Medicaid benefits.
We considered proposing new beneficiary notification requirements
for passive enrollments that occur under proposed paragraph
(g)(1)(iii). We considered requiring MA organizations receiving the
passive enrollment to provide two notifications to all potential
enrollees prior to their enrollment effective date. We acknowledge that
under the Financial Alignment Initiative demonstrations, states are
required to provide two passive enrollment notices. Under the passive
enrollment authority proposed here, we would continue to encourage, but
not require, a second notice or additional outreach to impacted
individuals. Given the existing beneficiary notifications that are
currently required under Medicare regulations and concerns regarding
the quantity of notifications sent to beneficiaries, we are not
proposing to modify the existing notification requirements, so these
existing standards would apply for existing passive enrollments and for
the newly proposed passive enrollment authority.

[[Page 56371]]

However, we solicit comment on alternatives regarding beneficiary
notices, including comments about the content and timing of such
notices. Our proposal redesignates the notice requirements to paragraph
(g)(4) with minor grammatical revisions.
Finally, we propose a technical correction to a citation in Sec.
422.60(g), which discusses situations involving an immediate
termination of an MA plan as provided in Sec. 422.510(a)(5). This
citation is outdated, as the regulatory language at Sec. 422.510(a)(5)
has been moved to Sec. 422.510(b)(2)(i)(B). We propose to replace the
current citation with a reference to Sec. 422.510(b)(2)(i)(B).
9. Part D Tiering Exceptions (Sec. Sec. 423.560, 423.578(a) and (c))
a. Background
Section 1860D-4(g)(2) of the Act specifies that a beneficiary
enrolled in a Part D plan offering prescription drug benefits for Part
D drugs through the use of a tiered formulary may request an exception
to the plan sponsor's tiered cost-sharing structure. The statute
requires such plan sponsors to have a process in place for making
determinations on such requests, consistent with guidelines established
by the Secretary. At the start of the Part D program, we finalized
regulations at Sec. 423.578(a) that require plan sponsors to establish
and maintain reasonable and complete exceptions procedures. These
procedures permit enrollees, under certain circumstances, to obtain a
drug in a higher cost-sharing tier at the more favorable cost-sharing
applicable to alternative drugs on a lower cost-sharing tier of the
plan sponsor's formulary. Such an exception is granted when the plan
sponsor determines that the non-preferred drug is medically necessary
based on the prescriber's supporting statement. The tiering exceptions
regulations establish the general scope of issues that must be
addressed under the plan sponsor's tiering exceptions process. Our goal
with the exceptions rules codified in the Part D final rule (70 FR
4352) was to allow plan sponsors sufficient flexibility in benefit
design to obtain pricing discounts necessary to offer optimal value to
beneficiaries, while ensuring that beneficiaries with a medical need
for a non-preferred drug are afforded the type of drug access and
favorable cost-sharing called for under the law.
At the start of the program, most Part D formularies included no
more than four cost-sharing tiers, generally with only one generic
tier. For the 2006 and 2007 plan years respectively, about 83 percent
and 89 percent of plan benefit packages (PBPs) that offered drug
benefits through use of a tiered formulary had 4 or fewer tiers. Since
that time, there have been substantial changes in the prescription drug
landscape, including increasing costs of some generic drugs, as well as
the considerable impact of high-cost drugs on the Part D program. Plan
sponsors have responded by modifying their formularies and PBPs,
resulting in the increased use of two generic-labeled drug tiers and
mixed drug tiers that include brand and generic products on the same
tiers. The flexibilities CMS permits in benefit design enable plan
sponsors to continue to offer comprehensive prescription drug coverage
with reasonable controls on out of pocket costs for enrollees, but
increasingly complex PBPs with more variation in type and level of
cost-sharing. For the 2017 plan year, about 91 percent of all Part D
PBPs offer drug benefits through use of a tiered formulary. Over 98
percent of those tiered PBPs use a formulary containing 5 or 6 tiers;
of those, about 98 percent contain two generic-labeled tiers.
These changes and increased complexities, and more than a decade of
program experience, lead us to believe that our current regulations are
no longer sufficient to ensure that tiering exceptions are understood
by beneficiaries and adjudicated by plan sponsors in the manner the
statute contemplates. For this reason, we propose to amend Sec. Sec.
423.560, 423.578(a) and 423.578(c) to revise and clarify requirements
for how tiering exceptions are to be adjudicated and effectuated.
While section 1860D-4(g)(2) of the Act uses the terms ``preferred''
and ``non-preferred'' drug, rather than ``brand'' and ``generic'', it
also gives the Secretary authority to establish guidelines for making a
determination with respect to a tiering exception request. The statute
further specifies that ``a non-preferred drug could be covered under
the terms applicable for preferred drugs'' (emphasis added) if the
prescribing physician determines that the preferred drug would not be
as effective or would have adverse effects for the individual. The
statute therefore contemplates that tiering exceptions must allow for
an enrollee with a medical need to obtain favorable cost-sharing for a
non-preferred product, but that such access be subject to reasonable
limitations. Establishing regulations that allow plans to impose
certain limitations on tiering exceptions helps ensure that all
enrollees have access to needed drugs at the most favorable cost-
sharing terms possible.
b. General Rules
We are proposing to revise Sec. 423.578(a)(2) to read as follows:
``Part D plan sponsors must establish criteria that provide for a
tiering exception consistent with paragraphs Sec. 423.578(a)(3)
through (a)(6) of this section.'' We believe that inserting a cross-
reference to paragraph (a)(6), which establishes allowable limitations
on tiering exceptions, and which we are also proposing to revise, would
streamline and clarify the requirements for such exceptions. The
proposed revisions would establish rules that more definitively base
eligibility for tiering exceptions on the lowest applicable cost
sharing for the tier containing the preferred alternative drug(s) for
treatment of the enrollee's health condition in relation to the cost
sharing of the requested, higher-cost drug, and not based on tier
labels.
c. Limitations on Tiering Exceptions
We are also proposing to revise the regulations at Sec.
423.578(a)(6) to specify when a Part D plan sponsor may limit tiering
exceptions. We believe the current text, which permits a plan sponsor
to exempt any dedicated generic tier from its tiering exceptions
procedures, is being applied in a manner that restricts tiering
exceptions more stringently than is appropriate. Specifically, Part D
sponsors have been considering any tier that is labeled ``generic'' to
be exempt from tiering exceptions even if the tier also contains brand
name drugs. This has become even more problematic with the increase in
the number of PBPs with more than one tier labeled ``generic''. Based
on an analysis of 2017 plan data entered into the Health Plan
Management System (HPMS), for all Part D plans using a tiered
formulary, 62 percent have indicated at least two tiers that contain
only generic drugs, and 7 percent have three such tiers. Combined with
the allowable exemption of a specialty tier (used by 99.8 percent of
tiered Part D plans in 2017), almost two-thirds of all tiered PBPs
could exempt 3 of their 5 or 6 tiers from tiering exceptions without
any consideration of medical need or placement of preferred alternative
drugs. To ensure appropriate enrollee access to tiering exceptions, we
are proposing to revise Sec. 423.578(a)(6) to specify that a Part D
plan sponsor would not be required to offer a tiering exception for a
brand name drug to a preferred cost-sharing level that applies only to
generic alternatives. Under this proposal, however, plans would be
required to approve tiering exceptions for non-preferred generic drugs
when

[[Page 56372]]

the plan determines that the enrollee cannot take the preferred generic
alternative(s), including when the preferred generic alternative(s) are
on tier(s) that include only generic drugs or when the lower tier(s)
contain a mix of brand and generic alternatives. In other words, plans
would not be permitted to exclude a tier containing alternative drug(s)
with more favorable cost-sharing from their tiering exceptions
procedures altogether just because that lower-cost tier is dedicated to
generic drugs. As described in the following paragraph, we are also
proposing at Sec. 423.578(a)(6) to establish specific tiering
exceptions policy for biological products.
Proposed Sec. 423.578(a)(6)(iii) would specify that, ``If a Part D
plan sponsor maintains a specialty tier, as defined in Sec. 423.560,
the sponsor may design its exception process so that Part D drugs and
biological products on the specialty tier are not eligible for a
tiering exception.'' We also propose to add the following definition to
Subpart M at Sec. 423.560:
Specialty tier means a formulary cost-sharing tier dedicated to
very high cost Part D drugs and biological products that exceed a cost
threshold established by the Secretary. We note that, while the
proposed definition of specialty tier does not refer to ``unique''
drugs as existing Sec. 423.578(a)(7) does, we do not intend to change
the criteria for the specialty tier, which has always been based on the
drug cost. This proposal would retain the current regulatory provision
that permits Part D plan sponsors to disallow tiering exceptions for
any drug that is on the plan's specialty tier. This policy is currently
codified at Sec. 423.578(a)(7), which would be revised and
redesignated as Sec. 423.578(a)(6)(iii). We believe that retaining the
existing policy limiting the availability of tiering exceptions for
drugs on the specialty tier is important because of the beneficiary
protection that limits cost-sharing for the specialty tier to 25
percent coinsurance (up to 33 percent for plans that have a reduced or
$0 Part D deductible), ensuring that these very high cost drugs remain
accessible to enrollees at cost sharing equivalent to the defined
standard benefit.
We also clarify that, if the specialty tier has cost sharing more
preferable than another tier, then a drug placed on such other non-
preferred tier is eligible for a tiering exception down to the cost
sharing applicable to the specialty tier if an applicable alternative
drug is on the specialty tier and the other requirements of Sec.
423.578(a) are met. In other words, while plans are not required to
allow tiering exceptions for drugs on the specialty tier to a more
preferable cost-sharing tier, the specialty tier is not exempt from
being considered a preferred tier for purposes of tiering exceptions.
We believe a shift in regulatory policy that establishes a
distinction between non-preferred branded drugs, biological products,
and non-preferred generic and authorized generic drugs, achieves needed
balance between limitations in plans' exceptions criteria and
beneficiary access, and aligns with how many plan sponsors already
design their tiering exceptions criteria. Accordingly, we are proposing
to revise Sec. 423.578(a)(6) to clarify and establish additional
limitations plans would be permitted to place on tiering exception
requests. First, we are proposing new paragraphs (i) and (ii), which
would permit plans to limit the availability of tiering exceptions for
the following drug types to a preferred tier that contains the same
type of alternative drug(s) for treating the enrollee's condition:
Brand name drugs for which an application is approved
under section 505(c) of the Federal Food, Drug, and Cosmetic Act (21
U.S.C. 355(c)), including an application referred to in section
505(b)(2) of the Federal Food, Drug, and Cosmetic Act (21 U.S.C.
355(b)(2)); and
Biological products, including follow-on biologics,
licensed under section 351 the Public Health Service Act.
With the proposed revisions, that approved tiering exceptions for
brand name drugs would generally be assigned to the lowest applicable
cost-sharing associated with brand name alternatives, and approved
tiering exceptions for biological products would generally be assigned
to the lowest applicable cost-sharing associated with biological
alternatives. Similarly, tiering exceptions for non-preferred generic
drugs would be assigned to the lowest applicable cost-sharing
associated with alternatives that are either brand or generic drugs
(see further discussion later in this section related to assignment of
cost-sharing for approved tiering exceptions to the lowest applicable
tier). Given the widespread use of multiple generic tiers on Part D
formularies, and the inclusion of generic drugs on mixed, higher-cost
tiers, we believe these changes are needed to ensure that tiering
exceptions for non-preferred generic drugs are available to enrollees
with a demonstrated medical need. Procedures that allow for tiering
exceptions for higher-cost generics when medically necessary promote
the use of generic drugs among Part D enrollees and assist them in
managing out of pocket costs.
We are also proposing at Sec. 423.578(a)(6)(i) to codify that
plans are not required to offer tiering exceptions for brand name drugs
or biological products at the cost-sharing level of alternative drug(s)
for treating the enrollee's condition, where the alternatives include
only the following drug types:
Generic drugs for which an application is approved under
section 505(j) of the Federal Food, Drug, and Cosmetic Act (21 U.S.C.
355(j)), or
Authorized generic drugs as defined in section 505(t)(3)
of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 355(t)(3)).
As discussed in the Call Letter, CMS collects Part D plan formulary
data based on the National Library of Medicare RxNorm concept unique
identifier (RxCUI), and not at the manufacturer-specific National Drug
Code (NDC) level. This process does not allow us to clearly identify
whether a plan sponsor includes coverage of authorized generic NDCs or
not. We believe this position is consistent with how plans currently
administer their formularies. Under this regulatory proposal, a plan
sponsor could not completely exclude a lower tier containing only
generic and authorized generic drugs from its tiering exception
procedures, but would be permitted to limit the cost sharing for a
particular brand drug or biological product to the lowest tier
containing the same drug type. Plans would be required to grant a
tiering exception for a higher cost generic or authorized generic drug
to the cost sharing associated with the lowest tier containing generic
and/or authorized generic alternatives when the medical necessity
criteria is met.
d. Alternative Drugs for Treatment of the Enrollee's Condition
In response to the 2018 Call Letter and RFI, we received comments
from plan sponsors and PBMs requesting that CMS provide additional
guidance on how to determine what constitutes an alternative drug for
purposes of tiering exceptions, including establishment of additional
limitations on when such exceptions are approvable. The statutory
language for tiering and formulary exceptions at sections 1860D-4(g)(2)
and 1860D-4(h)(2) of the Act, respectively, specifically refers to a
preferred or formulary drug ``for treatment of the same condition.'' We
interpret this language to be referring to the condition as it affects
the enrollee--that is, taking into consideration the individual's
overall clinical condition,

[[Page 56373]]

including the presence of comorbidities and known relevant
characteristics of the enrollee and/or the drug regimen, which can
factor into which drugs are appropriate alternative therapies for that
enrollee. The Part D statute at Sec. 1860D-4(g)(2) requires that
coverage decisions subject to the exceptions process be based on the
medical necessity of the requested drug for the individual for whom the
exception is sought. We believe that requirement reasonably includes
consideration of alternative therapies for treatment of the enrollee's
condition, based on the facts and circumstances of the case.
e. Approval of Tiering Exception Requests
We are proposing to revise Sec. 423.578(c)(3) by renumbering the
provision and adding a new paragraph (ii) to codify our current policy
that cost sharing for an approved tiering exception request is assigned
at the lowest applicable tier when preferred alternatives sit on
multiple lower tiers. Under this proposal, assignment of cost sharing
for an approved tiering exception must be at the most favorable cost-
sharing tier containing alternative drugs, unless such alternative
drugs are not applicable pursuant to limitations set forth under
proposed Sec. 423.578(a)(6). We are also proposing to delete similar
language from existing (c)(3) that proposed new paragraph (c)(3)(ii)
would replace.
f. Additional Technical Changes and Corrections
Finally, we are proposing various technical changes and corrections
to improve the clarity of the tiering exceptions regulations and
consistency with the regulations for formulary exceptions.
Specifically, we are proposing the following:
Revise the introductory text of Sec. 423.578(a) to
clarify that a ``requested'' non-preferred drug for treatment of an
enrollee's health condition may be eligible for an exception.
Revise Sec. 423.578(a)(1) to include ``tiering'' when
referring to the exceptions procedures described in this subparagraph.
Revise Sec. 423.578(a)(4) by making ``conditions''
singular and by adding ``(s)'' to ``drug'' to account for situations
when there are multiple alternative drugs.
Revise Sec. 423.578(a)(5) by removing the text specifying
that the prescriber's supporting statement ``demonstrate the medical
necessity of the drug'' to align with the existing language for
formulary exceptions at Sec. 423.578(b)(6). The requirement that the
supporting statement address the enrollee's medical need for the
requested drug is already explained in the introductory text of Sec.
423.578(a).
Redesignate paragraphs Sec. 423.578(c)(3)(i) through
(iii) as paragraphs Sec. 423.578(c)(3)(i)(A) through (C),
respectively. This proposed change would improve consistency between
the regulation text for tiering and formulary exceptions.
We anticipate that the proposed changes to the tiering exceptions
regulations will make this process more accessible and transparent for
enrollees and less cumbersome for plan sponsors to administer. We also
believe that, by helping plan sponsors ensure their tiering exceptions
processes comply with CMS requirements, IRE overturn rates for tiering
exception requests will remain low.
10. Establishing Limitations for the Part D Special Election Period
(SEP) for Dually Eligible Beneficiaries (Sec. 423.38)
As discussed in section III.A.2 of this proposed rule, the MMA
added section 1860D-1(b)(3)(D) to the Act to establish a special
election period (SEP) for full-benefit dual eligible (FBDE)
beneficiaries under Part D. This SEP, codified at Sec. 423.38(c)(4),
was later extended to all other subsidy-eligible beneficiaries by
regulation (75 FR 19720). The SEP allows eligible beneficiaries to make
Part D enrollment changes (that is, enroll in, disenroll from, or
change Part D plans, including Medicare Advantage Prescription Drug
(MA-PD) plans) throughout the year, unlike other Part D enrollees who
generally may switch plans only during the annual enrollment period
(AEP) each fall.
The MMA sought to strike a balance of promoting beneficiary plan
choice, but also ensuring that FBDE beneficiaries who did not make an
active election would still have Part D coverage. The statute directed
the Secretary to enroll FBDE beneficiaries into a PDP if they did not
enroll in a Part D plan on their own. (As noted previously, CMS
extended the SEP through rulemaking to make it available to all other
subsidy-eligible beneficiaries.) When the automatic enrollment of
subsidy-eligible beneficiaries was originally proposed in rulemaking,
we noted that beneficiaries would have the option to use the SEP if
they determined there was a better plan option for them, and codified a
continuous SEP (that is, that was available monthly).
At the time, we did not know on what factors FBDE beneficiaries
would rely to make their plan choice. Now, with over 10 years of
programmatic experience, we have observed certain enrollment trends in
terms of FBDE and other LIS beneficiaries:
Most LIS beneficiaries do not make an active choice to
join a PDP. For plan year 2015, over 71 percent of LIS individuals in
PDPs were placed into that plan by CMS.
Once in a plan, whether it was a CMS-initiated enrollment
or a choice they made on their own, most LIS beneficiaries do not make
changes during the year. Of all LIS beneficiaries who were eligible for
the SEP in 2016, less than 10 percent utilized it. Overall, we have
seen slight growth of SEP usage over the past 5 years (for example,
less than 8 percent in 2012, approximately 9 percent in 2014).
A small subset (0.8 percent) of LIS beneficiaries use the
SEP to actively enroll in a plan of their choice and then disenroll
within 2 months.
While we know that the majority of LIS-eligible beneficiaries do
not take advantage of the SEP, we have seen the Medicare and Medicaid
environment evolve in such a way that it may be disadvantageous to
beneficiaries if they changed plans during the year, let alone if they
made multiple changes. States and plans have noted that they are best
able to provide or coordinate care if there is continuity of
enrollment, particularly if the beneficiary is enrolled in an
integrated product (as discussed later in this section). We now know
that in addition to choice, there are other critical issues that must
be considered in determining when and how often beneficiaries should be
able to change their Medicare coverage during the year, such as
coordination of Medicare-Medicaid benefits, beneficiary care
management, and public health concerns such as the national opioid
epidemic (and the drug management programs discussed in section
II.A.1). In addition, there are different care models available now
such as dual eligible special needs plans (D-SNPs), Fully Integrated
Dual Eligible (FIDE) SNPs, and Medicare-Medicaid Plans (MMPs) that are
discussed later in this section and specifically designed to meet the
needs of high risk, high needs beneficiaries.
Current enrollment trends demonstrate that while a majority of
subsidy-eligible beneficiaries still receive their Part D coverage
through standalone PDPs, an increasing percentage of beneficiaries are
enrolled in MA-PDs and other capitated managed care products, including
over one in three dually eligible beneficiaries. A smaller but rapidly
growing subset are enrolled in capitated

[[Page 56374]]

Medicare managed care products that also integrate Medicaid services.
For example:
The MMA established D-SNPs to provide coordinated care to
dually eligible beneficiaries. Between 2007 and 2016, growth in D-SNPs
has increased by almost 150 percent.
FIDE SNPs are a type of SNP created by the Affordable Care
Act (ACA) in 2010 designed to promote full integration and coordination
of Medicare and Medicare benefits for dually eligible beneficiaries by
a single managed care organization. In 2017, there are 39 FIDE SNPs
providing coverage to approximately 155,000 beneficiaries.
MMPs, which operate as part of a model test under Section
1115(A) of the Act, are fully-capitated health plans that serve dually
eligible beneficiaries though demonstrations under the Financial
Alignment Initiative. The demonstrations are designed to promote full
access to seamless, high quality integrated health care across both
Medicare and Medicaid. In 2017, there are 58 MMPs providing coverage to
nearly 400,000 beneficiaries.
The current SEP, especially in the context of these products that
integrate Medicare and Medicaid, highlights differences in Medicare and
Medicaid managed care enrollment policies. Bringing Medicare and
Medicaid enrollment policies into greater alignment, even partially, is
a mechanism to reduce complexity in the health care system and better
partner with states. Both are important priorities for CMS.
In addition, the application of the continuous SEP carries
different service delivery implications for enrollees of MA-PD plans
and related products than for standalone enrollees of PDPs. At the
outset of the Part D program, when drug coverage for dually eligible
beneficiaries was transitioned from Medicaid to Medicare, there were
concerns about how CMS would effectively identify, educate, and enroll
dually eligible beneficiaries. While processes (for example, auto-
enrollment, reassignment) were established to facilitate coverage, the
continuous SEP served as a fail-safe to ensure that the beneficiary was
always in a position to make a choice that best served their healthcare
needs. Unintended consequences have resulted from this flexibility,
including, as noted by the Medicare Payment Advisory Commission (MedPAC
\32\), opportunities for marketing abuses.
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\32\ Medicare Payment Advisory Commission, ``Report to Congress:
Medicare Payment Policy,'' March 2008.
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Among the key obstacles the SEP (and resulting plan movement) can
present are--
Interfering with the coordination of care among the
providers, health plans, and states;
Hindering the ability for beneficiaries to benefit from
case management and disease management;
Wasting the effort and resources needed to conduct
enrollee needs assessments and developing plans of care for services
covered by Medicare and Medicaid;
Limiting a plan's opportunity for continuous treatment of
chronic conditions; and
Diminishing incentives for plans to innovate and invest in
serving potentially high-cost members.
While we still support in the underlying principle that LIS
beneficiaries should have the ability to make an active choice, we find
that plan sponsors are better able to administer benefits to
beneficiaries, including coordination of Medicare and Medicaid
benefits, and maximize care management and positive health outcomes, if
dual and other LIS-eligible beneficiaries are held to the similar
election period requirements as all other Part D-eligible
beneficiaries. Therefore, we are proposing to amend Sec. 423.38(c)(4)
to make the SEP for FBDE and other subsidy-eligible individuals
available only in certain circumstances. These circumstances would be
considered separate and unique from one another, so there could be
situations where a beneficiary could still use the SEP multiple times
if he or she meets more than one of the conditions proposed as follows.
Specifically, we are proposing to revise to Sec. 423.38(c) to specify
that the SEP is available only as follows:
In new paragraph (c)(4)(i), eligible beneficiaries (that
is, those who are dual or other LIS-eligible and meet the definition of
at-risk beneficiary or potential at-risk beneficiary under proposed
Sec. 423.100) would be able to use the SEP once per calendar year.
In new paragraph (c)(4)(iii), eligible beneficiaries who
have been assigned to a plan by CMS or a State would be able to use the
SEP before that election becomes effective (that is, opt out and enroll
in a different plan) or within 2 months of their enrollment in that
plan.
In new paragraph (c)(9), dual and other LIS-eligible
beneficiaries who have a change in their Medicaid or LIS-eligible
status would have an SEP to make an election within 2 months of the
change, or of being notified of such change, whichever is later. This
SEP would be available to beneficiaries who experience a change in
Medicaid or LIS status regardless of whether they have been identified
as potential at-risk beneficiaries or at-risk beneficiaries under
proposed Sec. 423.100. In addition, we are also proposing to remove
the phrase ``at any time'' in the introductory language of Sec.
423.38(c) for the sake of clarity.
The onetime annual SEP opportunity would be able to be used at any
time of the year to enroll in a new plan or disenroll from the current
plan, provided that their eligibility for the SEP has not been limited
consistent with section 1860D-1(b)(3)(D) of the Act, as amended by CARA
(as discussed in section III.A.2. of this proposed rule). We believe
that the onetime annual SEP would still provide dually eligible
beneficiaries adequate opportunity to change their coverage during the
year if desired, but is also responsive to consistent feedback we have
received from States and plans that have noted that the current SEP,
which allows month-to-month movement, can disrupt continuity of care,
especially in integrated care plans. They specifically noted that
effective care management can best be achieved through continuous
enrollment.
Beneficiaries who have been enrolled in a plan by CMS or a state
(that is, through processes such as auto enrollment, facilitated
enrollment, passive enrollment, default enrollment (seamless
conversion), or reassignment), would be allowed a separate, additional
use of the SEP, provided that their eligibility for the SEP has not
been limited consistent with section 1860D-1(b)(3)(D) of the Act, as
amended by CARA. These beneficiaries would still have a period of time
before the election takes effect to opt out and choose their own plan
or they would be able to use the SEP to make an election within 2
months of the assignment effective date. Once a beneficiary has made an
election (either prior to or after the effective date) it would be
considered ``used'' and no longer would be available. If a beneficiary
wants to change plans after 2 months, he or she would have to use the
onetime annual election opportunity discussed previously, provided that
it has not been used yet. If that election has been used, the
beneficiary would have to wait until they are eligible for another
election period to make a change.

[[Page 56375]]

Under a new proposed SEP, individuals who have a change in their
Medicaid or LIS-eligible status would have an election opportunity that
is separate from, and in addition to, the two scenarios discussed
previously. (As discussed in section III.A.2. of this rule, and unlike
the other two conditions discussed previously, individuals identified
as ``at risk'' would be able to use this SEP.) This would apply to
individuals who gain, lose, or change Medicaid or LIS eligibility. We
believe that in these instances, it would be appropriate to give these
beneficiaries an opportunity to re-evaluate their Part D coverage in
light of their changing circumstances. Beneficiaries eligible for this
SEP would need to use it within 2 months of the change or of being
notified of the change, whichever is later.
We considered multiple alternatives related to the SEP proposal. We
describe two such alternatives in the following discussion:
Limit of two or three uses of the SEP per year. In 2016, 1.2
million beneficiaries used the SEP for FBDE or other subsidy-eligible
individuals, including over 27,000 who used the SEP three or more
times, and over 1,700 who used the SEP five or more times during the
year. These SEP changes are in addition to changes made during the AEP
and any other election periods for which a beneficiary may qualify. We
believe that any overuse of the SEP creates significant inefficiencies
and impedes meaningful continuity of care and care coordination. As
such, we considered applying a simple numerical limit to the number of
times the LIS SEP could be used by any beneficiary within each calendar
year. We specifically considered limits of either two or three uses of
the SEP per year.
Compared to our proposal to limit the use of the SEP to one time
per calendar year, this alternative would permit more opportunities for
midyear changes. However, it could still allow for a high level of
membership churning. Relative to our proposal, it would also be less
effective in limiting the opportunities for aggressive marketing to LIS
beneficiaries outside of the AEP. We welcome comments on this
alternative.
Limits on midyear MA-PD plan switching. We also considered a more
complex option, drawing heavily on earlier MedPAC recommendations.\33\
Under this alternative we would:
---------------------------------------------------------------------------

\33\ Medicare Payment Advisory Commission, ``Report to Congress:
Medicare Payment Policy,'' March 2008.
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Modify the SEP to prohibit its use to elect a non-
integrated MA-PD plan. As such, the SEP would not be used for switching
between MA-PD plans, movement from integrated products to a non-
integrated MA-PD plan, or movement from Medicare FFS to an MA-PD plan.
Beneficiaries would still be able to select non-integrated MA-PD plans
during other enrollment periods, such as the AEP, the open enrollment
period (OEP) outlined in section III.C.2. of this proposed rule, and
any other SEP for which they may be eligible; and
Allow continuous use of the dual SEP to allow eligible
beneficiaries to enroll into FIDE SNPs or comparably integrated
products for dually eligible beneficiaries through model tests under
section 1115(A) of the Act.
This alternative would still permit continuous election of Medicare
FFS with a standalone PDP throughout the year and a continuous option
to change between standalone PDPs.
We believe this alternative would create greater stability among
plans and limit the opportunities for misleading and aggressive
marketing to dually-eligible individuals. It would also maintain the
opportunity for continuous enrollment into integrated products to
reflect our ongoing partnership with states to promote integrated care.
However, this alternative would be more complex to administer and
explain to beneficiaries, and it encourages enrollment into a limited
set of MA plans compared to all the plans available to the beneficiary
under the MA program. We welcome comments on this alternative.
We believe that our proposed approach to narrowing of the scope of
the SEP preserves a dual or other LIS-eligible beneficiary's ability to
make an active choice. As noted previously, less than 10 percent of the
LIS population used the dual SEP in 2016. We acknowledge that even
though this is a small percentage of the population, given the number
of beneficiaries who receive Extra Help, this equates to over a million
elections. We note, though, that of this group, the majority (74.5
percent) used the SEP one time. Under our proposal, this population
would still be able to make an election, thus, we believe that the
majority of beneficiaries would not be negatively impacted by these
changes. We opted for our proposed approach, as opposed to the
alternatives, because we believe it encourages continuity of enrollment
and care, without overcomplicating both beneficiary understanding of
how the SEP is available to them, as well as plan sponsor operational
responsibilities.
If the proposal is finalized, we would revise our messaging and
beneficiary education materials as necessary to ensure that dual and
other LIS-eligible beneficiaries understand that the SEP is no longer
an unlimited opportunity. We would also need to ensure that
beneficiaries who are assigned to a plan by CMS or the State understand
that they must use the SEP within 2 months after the new coverage
begins if they wish to change from the plan to which they were
assigned.
We note that other election periods, including the AEP, the new
OEP, or other SEPs (for example, when moving to a new service area),
would still be available to individuals. In addition, the proposed
limitations would also apply to the Part C SEP established in sub-
regulatory guidance for dual-eligible individuals or individuals who
lose their dual-eligibility.
We welcome public comment on this proposal and the considered
alternatives. Specifically, we seek input on the following areas:
Are there other limited circumstances where the dual SEP
should be available?
Are there special considerations CMS should keep in mind
if we finalize this policy?
Are there other alternative approaches we should consider
in lieu of narrowing the scope of the SEP?
In addition to CMS outreach materials, what are the best
ways to educate the affected population and other stakeholders of the
new proposed SEP parameters?
11. Medicare Advantage and Part D Prescription Drug Program Quality
Rating System
a. Introduction
We are committed to transforming the health care delivery system--
and the Medicare program--by putting a strong focus on person-centered
care, in accordance with the CMS Quality Strategy, so each provider can
direct their time and resources to each beneficiary and improve their
outcomes. As part of this commitment, one of our most important
strategic goals is to improve the quality of care for Medicare
beneficiaries. The Part C and D Star Ratings support the efforts of CMS
to improve the level of accountability for the care provided by health
and drug plans, physicians, hospitals, and other Medicare providers. We
currently publicly report the quality and performance of health and
drug plans on the Medicare Plan Finder tool on www.medicare.gov in the
form of summary and overall ratings for the contracts under which each
MA plan (including MA-PD plans) and Part D plan is offered, with drill
downs to

[[Page 56376]]

ratings for domains, ratings for individual measures, and underlying
performance data. We also post additional measures on the display page
\34\ at www.cms.gov for informational purposes. The goals of the Star
Ratings are to display quality information on Medicare Plan Finder for
public accountability and to help beneficiaries, families, and
caregivers make informed choices by being able to consider a plan's
quality, cost, and coverage; to incentivize quality improvement; to
provide information to oversee and monitor quality; and to accurately
measure and calculate scores and stars to reflect true performance. In
addition, CMS has started to incorporate efforts to recognize the
challenges of serving high risk, high needs populations while
continuing the focus on improving health care for these important
groups.
---------------------------------------------------------------------------

\34\ http://go.cms.gov/partcanddstarratings (under the
downloads).
---------------------------------------------------------------------------

In this rule as part of the Administration's efforts to improve
transparency, we propose to codify the existing Star Ratings System for
the MA and Part D programs with some changes. As noted later in this
section in more detail, the proposed changes include more clearly
delineating the rules for adding, updating, and removing measures and
modifying how we calculate Star Ratings for contracts that consolidate.
Although the rulemaking process will create a longer lead time for
changes, codifying the Star Ratings methodology will provide plans with
more stability to plan multi-year initiatives, because they will know
the measures several years in advance. We have received comments for
the past several years from MA organizations and other stakeholders
asking that CMS use Federal Register rulemaking for the Star Ratings
System; we discuss in section III.12.c. (regarding plans for the
transition period before the codified rules are used) how section
1832(b) authorizes CMS to establish and annually modify the Star
Ratings System using the Advance Notice and Rate Announcement process
because the system is an integral part of the policies governing Part C
payment. We think this is an appropriate time to codify the
methodology, because the rating system has been used for several years
now and is relatively mature so there is less need for extensive
changes every year; the smaller degree of flexibility in having
codified regulations rather than using the process for adopting payment
methodology changes may be appropriate. Further, by adopting and
codifying the rules that govern the Star Ratings System, we are
demonstrating a commitment to transparency and predictability for the
rules in the system so as to foster investment.
b. Background
We originally acted upon our authority to disseminate information
to beneficiaries as the basis for developing and publicly posting the
5-star ratings system (sections 1851(d) and 1852(e) of the Act). The MA
statute explicitly requires that information about plan quality and
performance indicators be provided to beneficiaries in an easy to
understand language to help them make informed plan choices. These data
are to include disenrollment rates, enrollee satisfaction, health
outcomes, and plan compliance with requirements.
The Part D statute (at section 1860D-1(c)) imposes a parallel
information dissemination requirement with respect to Part D plans, and
refers specifically to comparative information on consumer satisfaction
survey results as well as quality and plan performance indicators. Part
D plans are also required by regulation (Sec. 423.156) to make
Consumer Assessment of Healthcare Providers and Systems (CAHPS) survey
data available to CMS and are required to submit pricing and
prescription drug event data under statutes and regulations specific to
those data. Regulations require plans to report on quality improvement
and quality assurance and to provide data which CMS can use to help
beneficiaries compare plans (Sec. Sec. 422.152 and 423.153). In
addition we may require plans to report statistics and other
information in specific categories (Sec. Sec. 422.516 and 423.514).
Currently, for similar reasons of providing information to
beneficiaries to assist them in plan enrollment decisions, we also
review and rate section 1876 cost plans on many of the same measures
and publish the results. We also propose to continue to include 1876
cost contracts in the MA and Part D Star Rating system to provide
comparative information to Medicare beneficiaries making plan choices.
We propose specific text, to be codified at Sec. 417.472(k), noting
that 1876 cost contracts must agree to be rated under the quality
rating system specified at subpart D of part 422. Cost contracts are
also required by regulation (Sec. 17.472(j)) to make CAHPS survey data
available to CMS. As is the case today, no quality bonus payments (QBP)
would be associated with the ratings for 1876 cost contracts.
In line with Sec. Sec. 422.152 and 423.153, CMS uses the
Healthcare Effectiveness Data and Information Set (HEDIS), Health
Outcomes Survey (HOS), CAHPS data, Part C and D Reporting requirements
and administrative data, and data from CMS contractors and oversight
activities to measure quality and performance of contracts. We have
been displaying plan quality information based on that and other data
since 1998.
Since 2007, we have published annual performance ratings for stand-
alone Medicare PDPs. In 2008, we introduced and displayed the Star
Ratings for Medicare Advantage Organizations (MAOs) for both Part C
only contracts (MA-only contracts) and Part C and D contracts (MA-PDs).
Each year since 2008, we have released the MA Star Ratings. An overall
rating combining health and drug plan measures was added in 2011, and
differential weighting of measures (for example, outcomes being
weighted 3 times the value of process measures) began in 2012. The
measurement of year to year improvement began in 2013, and an
adjustment (Categorical Adjustment Index) was introduced in 2017 to
address the within-contract disparity in performance revealed in our
research among beneficiaries that are dual eligible, receive a low
income subsidy, and/or are disabled.
The MA and Part D Star Ratings measure the quality of care and
experiences of beneficiaries enrolled in MA and Part D contracts, with
5 stars as the highest rating and 1 star as the lowest rating. The Star
Ratings provide ratings at various levels of a hierarchical structure
based on contract type, and all ratings are determined using the
measure-level Star Ratings. Contingent on the contract type, ratings
may be provided and include overall, summary (Part C and D), and domain
Star Ratings. Information about the measures, the hierarchical
structure of the ratings, and the methodology to generate the Star
Ratings is detailed in the annually updated Medicare Part C and D Star
Ratings Technical Notes, referred to as Technical Notes, available at
http://go.cms.gov/partcanddstarratings.
The MA and Part D Star Ratings System is designed to provide
information to the beneficiary that is a true reflection of the plan's
quality and encompasses multiple dimensions of high quality care. The
information included in the ratings is selected based on its relevance
and importance such that it can meet the data needs of beneficiaries
using it to inform plan choice. While encouraging improved health
outcomes of beneficiaries in an efficient, person centered, equitable,
and high quality manner is one of the

[[Page 56377]]

primary goals of the ratings, they also provide feedback on specific
aspects of care that directly impact outcomes, such as process measures
and the beneficiary's perspective. The ratings focus on aspects of care
that are within the control of the health plan and can spur quality
improvement. The data used in the ratings must be complete, accurate,
reliable, and valid. A delicate balance exists between measuring
numerous aspects of quality and the need for a small data set that
minimizes reporting burden for the industry. Also, the beneficiary or
his or her representative must have enough information to make an
informed decision without feeling overwhelmed by the volume of data.
The Patient Protection and Affordable Care Act (Pub. L. 111-148),
as amended by the Healthcare and Education Reconciliation Act (Pub. L.
111-152), provides for quality ratings, based on a 5-star rating system
and the information collected under section 1852(e) of the Act, to be
used in calculating payment to MA organizations beginning in 2012.
Specifically, sections 1853(o) and 1854(b)(1)(C) of the Act provide,
respectively, for an increase in the benchmark against which MA
organizations bid and in the portion of the savings between the bid and
benchmark available to the MA organization to use as a rebate. Under
the Act, Part D plan sponsors are not eligible for quality based
payments or rebates. We finalized a rule on April 15, 2011 to implement
these provisions and to use the existing Star Ratings System that had
been in place since 2007 and 2008. (76 FR 21485-21490).\35\ In
addition, the Star Ratings measures are tied in many ways to
responsibilities and obligations of MA organizations and Part D
sponsors under their contracts with CMS. We believe that continued poor
performance on the measures and overall and summary ratings indicates
systemic and wide-spread problems in an MA plan or Part D plan. In
April 2012, we finalized a regulation to use consistently low summary
Star Ratings--meaning 3 years of summary Star Ratings below 3 stars--as
the basis for a contract termination for Part C and Part D plans.
(Sec. Sec. 422.510(a)(14) and 423.509(a)(13)). Those regulations
further reflect the role the Star Ratings have had in CMS' oversight,
evaluation, and monitoring of MA and Part D plans to ensure compliance
with the respective program requirements and the provision of quality
care and health coverage to Medicare beneficiaries.
---------------------------------------------------------------------------

\35\ The ratings were first used as part of the Quality Bonus
Payment Demonstration for 2012 through 2014 and then used for
payment purposes as specified in sections 1853(o) and 1854(b)(1)(C)
and the regulation at 42 CFR 422.258(d)(7).
---------------------------------------------------------------------------

The true potential of the use of the MA and Part D Star Ratings
System to reach our goals and to serve as a catalyst for change can
only be realized by working in tandem with our many stakeholders
including beneficiaries, industry, and advocates. The following guiding
principles have been used historically in making enhancements to the MA
and Part D Star Ratings:
Ratings align with the current CMS Quality Strategy.
Measures developed by consensus-based organizations are
used as much as possible.
Ratings are a true reflection of plan quality and enrollee
experience; the methodology minimizes risk of misclassification.
Ratings are stable over time.
Ratings treat contracts fairly and equally.
Measures are selected to reflect the prevalence of
conditions and the importance of health outcomes in the Medicare
population.
Data are complete, accurate, and reliable.
Improvement on measures is under the control of the health
or drug plan.
Utility of ratings is considered for a wide range of
purposes and goals.
++ Accountability to the public.
++ Enrollment choice for beneficiaries.
++ Driving quality improvement for plans and providers.
Ratings minimize unintended consequences.
Process of developing methodology is transparent and
allows for multi-stakeholder input.
We are using these goals to guide our proposal and how we interpret
and apply the proposed regulations once finalized. For each provision
we are proposing, we solicit comment on whether our specific proposed
regulation text best serves these guiding principles. We also solicit
comment on whether additional or other principles are better suited for
these roles in measuring and communicating quality in the MA and Part D
programs in a comparative manner.
As we continue to consider making changes to the MA and Part D
programs in order to increase plan participation and improve benefit
offerings to enrollees, we would also like to solicit feedback from
stakeholders on how well the existing stars measures create meaningful
quality improvement incentives and differentiate plans based on
quality. We welcome all comments on those topics, and will consider
them for changes through this or future rulemaking or in connection
with interpreting our regulations (once finalized) on the Star Rating
system measures. However, we are particularly interested in receiving
stakeholder feedback on the following topics:
Additional opportunities to improve measures so that they
further reflect the quality of health outcomes under the rated plans.
Whether CMS' current process for establishing the cut
points for Star Rating can be simplified, and if the relative
performance as reflected by the existing cut points accurately reflects
plan quality.
How CMS should measure overall improvement across the Star
Ratings measures. We are requesting input on additional improvement
adjustments that could be implemented, and the effect that these
adjustments could have on new entrants (that is, new MA organizations
and/or new plans offered by existing MA organizations).
Additional adjustments to the Star Ratings measures or
methodology that could further account for unique geographic and
provider market characteristics that affect performance (for example,
rural geographies or monopolistic provider geographies), and the
operational difficulties that plans could experience if such
adjustments were adopted.
In order to further encourage plan participation and new
market entrants, whether CMS should consider implementing a
demonstration to test alternative approaches for putting new entrants
(that is, new MA organizations) on a level playing field with renewing
plans from a Star Ratings perspective for a pre-determined period of
time.
Adding measures that evaluate quality from the perspective
of adopting new technology (for example, the percent of beneficiaries
enrolled through online brokers or the use of telemedicine) or
improving the ease, simplicity, and satisfaction of the beneficiary
experience in a plan.
Including survey measures of physicians' experiences.
(Currently, we measure beneficiaries' experiences with their health and
drug plans through the CAHPS survey.) Physicians also interact with
health and drug plans on a daily basis on behalf of their patients. We
are considering developing a survey tool for collecting standardized
information on physicians' experiences with health and drug plans and
their services, and we would welcome comments.

[[Page 56378]]

c. Basis, Purpose and Applicability of the Quality Star Ratings System
We propose to codify regulation text, at Sec. Sec. 422.160 and
423.180, that identifies the statutory authority, purpose, and
applicability of the Star Ratings System regulations we are proposing
to add to part 422 subpart D and part 423 subpart D. Under our
proposal, the existing purposes of the quality rating system--to
provide comparative information to Medicare beneficiaries pursuant to
sections 1851(d) and 1860D-1(c) of the Act, to identify and apply the
payment consequences for MA plans under sections 1853(o) and
1854(b)(1)(C) of the Act, and to evaluate and oversee overall and
specific performance by plans--would continue. To reflect how the Part
D ratings are used for MA-PD plan QBP status and rebate retention
allowances, we also propose specific text, to be codified at Sec.
423.180(b)(2), noting that the Part D Star Rating will be used for
those purposes.
We are proposing here, broadly stated, to codify the current
quality Star Ratings System uses, methodology, measures, and data
collection beginning with the measurement periods in calendar year
2019. We are proposing some changes, such as how we handle
consolidations from the current Star Ratings program, but overall the
proposal is to continue the Star Ratings System as it has been
developed and has stabilized. Data will be collected and performance
will be measured using these proposed rules and regulations for the
2019 measurement period; the associated quality Star Ratings will be
used to assign QBP ratings for the 2022 payment year and released prior
to the annual coordinated election period held in late 2020 for the
2021 contract year. Application of the final regulations resulting from
this proposal will determine whether the measures proposed in section
III.A.12.i. of the proposed rule (Table 2) are updated, transitioned to
or from the display page, and otherwise used in conjunction with the
2019 performance period.
Under our proposal, the current quality Star Ratings System and the
procedures for revising it will remain in place for the 2019 and 2020
quality Star Ratings. Section 1853(b) of the Act authorizes an advance
notice and rate announcement to announce and seek comment for proposed
changes to the MA payment methodology, which includes the Part C and D
Star Ratings program. The statute identifies specific notice and
comment timeframes, but that process does not require publication in
the Federal Register. We have used the draft and final Call Letter,
which are attachments to the Advance Notice and final Rate Announcement
respectively,\36\ to propose for comment and finalize changes to the
quality Star Ratings System since the ratings became a component of the
payment methodology for MA and MA-PD plans. (76 FR 214878 through 89).
Because the Star Ratings System has been integrated into the payment
methodology since the 2012 contract year (as a mechanism used to
determine how much a plan is paid, and not the mechanism by which (or a
rule about when) a plan is paid), the Star Ratings are part of the
process for setting benchmarks and capitation rates under section 1853,
and the process for announcing changes to the Star Ratings System falls
within the scope of section 1853(b). Although not expressly required by
section 1853(b), CMS has historically solicited comment on significant
changes to the ratings system using a Request for Comment process
before the Advance Notice and draft Call Letter are released; this
Request for Comment \37\ provides MAOs, Part D sponsors, and other
stakeholders an opportunity to request changes to and raise concerns
about the Star Ratings methodology and measures before CMS finalizes
its proposal for the Advance Notice. We intend to continue the current
process at least until the 2019 measurement period that we are
proposing as the first measurement period under these new regulations,
but we may discontinue that process at a later date as the rulemaking
process may provide sufficient opportunity for public input. In
addition, CMS issues annually the Technical Notes \38\ that describe in
detail how the methodology is applied from the changes in policy
adopted through the Advance Notice and Rate Announcement process. We
intend to continue the practice of publishing the Technical Notes
during the preview periods. Under our proposal, we would also continue
to use the draft and final Call Letters as a means to provide
subregulatory application), interpretation, and guidance of the final
version of these proposed regulations where necessary. Our proposed
regulation text does not detail these plans for continued use of the
current process and future for subregulatory guidance because we
believe such regulation text would be unnecessary. We propose to codify
the first performance period (2019) and first payment year (2022) to
which our proposed regulations would apply at Sec. 422.160(c) and
Sec. 423.180(c).
---------------------------------------------------------------------------

\36\ Advance Notices and Rate Announcements are posted each year
on the CMS Web site at: https://www.cms.gov/Medicare/Health-Plans/MedicareAdvtgSpecRateStats/Announcements-and-Documents.html.
\37\ Requests for Comment are posted at http://go.cms.gov/partcanddstarratings under the downloads.
\38\ http://go.cms.gov/partcanddstarratings (under the
downloads) for the Technical Notes.
---------------------------------------------------------------------------

d. Definitions
There are a number of technical and other terms relevant to our
proposed regulations. Therefore, we propose the following definitions
for the respective subparts in part 422 and part 423 in paragraph (a)
of Sec. Sec. 422.162 and 423.182 respectively. Some proposed
definitions are discussed in more detail later in this preamble in
connection with other proposed regulation text related to the
definition.
CAHPS refers to a comprehensive and evolving family of
surveys that ask consumers and patients to evaluate the interpersonal
aspects of health care. CAHPS surveys probe those aspects of care for
which consumers and patients are the best or only source of
information, as well as those that consumers and patients have
identified as being important. CAHPS initially stood for the Consumer
Assessment of Health Plans Study, but as the products have evolved
beyond health plans the acronym now stands for Consumer Assessment of
Healthcare Providers and Systems.
Case-mix adjustment means an adjustment to the measure
score made prior to the score being converted into a Star Rating to
take into account certain enrollee characteristics that are not under
the control of the plan. For example age, education, chronic medical
conditions, and functional health status that may be related to the
enrollee's survey responses.
Categorical Adjustment Index (CAI) means the factor that
is added to or subtracted from an overall or summary Star Rating (or
both) to adjust for the average within-contract (or within-plan as
applicable) disparity in performance associated with the percentages of
beneficiaries who are dually eligible for Medicare and enrolled in
Medicaid, beneficiaries who receive a Low Income Subsidy or have
disability status in that contract (or plan as applicable).
Clustering refers to a variety of techniques used to
partition data into distinct groups such that the observations within a
group are as similar as possible to each other, and as dissimilar as
possible to observations in any other group. Clustering of the measure-
specific scores means that gaps that exist within the distribution of
the scores are identified to create groups (clusters) that are then
used to identify

[[Page 56379]]

the four cut points resulting in the creation of five levels (one for
each Star Rating), such that the scores in the same Star Rating level
are as similar as possible and the scores in different Star Rating
levels are as different as possible. Technically, the variance in
measure scores is separated into within-cluster and between-cluster sum
of squares components. The clusters reflect the groupings of numeric
value scores that minimize the variance of scores within the clusters.
The Star Ratings levels are assigned to the clusters that minimize the
within-cluster sum of squares. The cut points for star assignments are
derived from the range of measure scores per cluster, and the star
levels associated with each cluster are determined by ordering the
means of the clusters.
Consolidation means when an MA organization/Part D sponsor
that has at least two contracts for health and/or drug services of the
same plan type under the same parent organization in a year combines
multiple contracts into a single contract for the start of the
subsequent contract year.
Consumed contract means a contract that will no longer
exist after a contract year's end as a result of a consolidation.
Display page means the CMS Web site on which certain
measures and scores are publicly available for informational purposes;
the measures that are presented on the display page are not used in
assigning Part C and D Star Ratings.
Domain rating means the rating that groups measures
together by dimensions of care.
Dual Eligible (DE) means a beneficiary who is enrolled in
both Medicare and Medicaid.
HEDIS is the Healthcare Effectiveness Data and Information
Set which is a widely used set of performance measures in the managed
care industry, developed and maintained by the National Committee for
Quality Assurance (NCQA). HEDIS data include clinical measures
assessing the effectiveness of care, access/availability measures, and
service use measures.
Highest rating means the overall rating for MA-PDs, the
Part C summary rating for MA-only contracts, and the Part D summary
rating for PDPs.
Highly-rated contract means a contract that has 4 or more
stars for their highest rating when calculated without the improvement
measures and with all applicable adjustments (CAI and the reward
factor).
HOS means the Medicare Health Outcomes Survey which is the
first patient reported outcomes measure that was used in Medicare
managed care. The goal of the Medicare HOS program is to gather valid,
reliable, and clinically meaningful health status data in the Medicare
Advantage (MA) program for use in quality improvement activities, pay
for performance, program oversight, public reporting, and improving
health. All managed care organizations with MA contracts must
participate.
Low Income Subsidy (LIS) means the subsidy that a
beneficiary receives to help pay for prescription drug coverage (see
Sec. 423.34 for definition of a low-income subsidy eligible
individual).
Measurement period means the period for which data are
collected for a measure or the performance period that a measures
covers.
Measure score means the numeric value of the measure or an
assigned `missing data' message.
Measure star means the measure's numeric value is
converted to a Star Rating. It is displayed to the nearest whole star,
using a 1-5 star scale.
Overall Rating means a global rating that summarizes the
quality and performance for the types of services offered across all
unique Part C and Part D measures.
Part C Summary Rating means a global rating that
summarizes the health plan quality and performance on Part C measures.
Part D Summary Rating means a global rating of the
prescription drug plan quality and performance on Part D measures.
Plan Benefit Package (PBP) means a set of benefits for a
defined MA or PDP service area. The PBP is submitted by PDP sponsors
and MA organizations to CMS for benefit analysis, bidding, marketing,
and beneficiary communication purposes.
Reliability means a measure of the fraction of the
variation among the observed measure values that is due to real
differences in quality (``signal'') rather than random variation
(``noise''); it is reflected on a scale from 0 (all differences in plan
performance measure scores are due to measurement error) to 1 (the
difference in plan performance scores is attributable to real
differences in performance).
Reward factor means a rating-specific factor added to the
contract's summary or overall (or both) rating if a contract has both
high and stable relative performance.
Statistical significance assesses how likely differences
observed in performance are due to random chance alone under the
assumption that plans are actually performing the same. Although not
part of the proposed regulatory definition, we clarify that CMS uses
statistical tests (for example, t-test) to determine if a contract's
measure value is statistically different (greater than or less than
depending on the test) from the national mean for that measure, or
whether conversely, the observed differences from the national mean
could have arisen by chance.
Surviving contract means the contact that will still exist
under a consolidation, and all of the beneficiaries enrolled in the
consumed contract(s) are moved to the surviving contracts.
Traditional rounding rules mean that the last digit in a
value will be rounded. If rounding to a whole number, look at the digit
in the first decimal place. If the digit in the first decimal place is
0, 1, 2, 3 or 4, then the value should be rounded down by deleting the
digit in the first decimal place. If the digit in the first decimal
place is 5 or greater, then the value should be rounded up by 1 and the
digit in the first decimal place deleted.
e. Contract Ratings
Star Ratings and data reporting are at the contract level for most
measures. Currently, data for measures are collected at the contract
level including data from all PBPs under the contract, except for the
following Special Needs Plan (SNP)-specific measures which are
collected at the PBP level: Care for Older Adults--Medication Review,
Care for Older Adults--Functional Status Assessment, and Care for Older
Adults--Pain Assessment. The SNP-specific measures are rolled up to the
contract level by using an enrollment-weighted mean of the SNP PBP
scores. Subject to the discussion later in this section about the
feasibility and burden of collecting data at the PBP (plan) level and
the reliability of ratings at the plan level, we propose to continue
the practice of calculating the Star Ratings at the contract level and
all PBPs under the contract would have the same overall and/or summary
ratings.
However, beneficiaries select a plan, rather than a contract, so we
have considered whether data should be collected and measures scored at
the plan level. We have explored the feasibility of separately
reporting quality data for individual D-SNP PBPs, instead of the
current reporting level. For example, in order for CAHPS measures to be
reliably scored, the number of respondents must be at least 11 people
and reliability must be at least 0.60. Our current analyses show that,
at the PBP level, CAHPS measures could be reliably reported for only
about one-third of D-SNP PBPs due to sample size

[[Page 56380]]

issues, and HEDIS measures could be reliably reported for only about
one-quarter of D-SNP PBPs. If reporting were done at the plan level, a
significant number of D-SNP plans would not be rated and in lieu of a
Star Rating, Medicare Plan Finder would display that the plan is ``too
small to be rated.'' However, when enough data are available, plan
level quality reporting would better reflect the quality of care
provided to enrollees in that plan. Plan-level quality reporting would
also give states that contract with D-SNPs plan-specific information on
their performance and provide the public with data specific to the
quality of care for dual eligible (DE) beneficiaries enrolled in these
plans. For all plans as well as D-SNPs, reporting at the plan level
would significantly increase plan burden for data reporting and would
have to be balanced against the availability of additional clinical
information available at the plan level. Plan-level ratings would also
potentially increase the ratings of higher-performing plans when they
are in contracts that have a mix of high and low performing plans.
Similarly, plan-level ratings would also potentially decrease the
ratings of lower-performing plans that are currently in contracts with
a mix of high and low performing plans. Measurement reliability issues
due to small sample sizes would also decrease our ability to measure
true performance at the plan level and add complexities to the rating
system. We are soliciting comments on balancing the improved precision
associated with plan level reporting (relative to contract level
reporting) with the negative consequences associated with an increase
in the number of plans without adequate sample sizes for at least some
measures; we ask for comments about this for D-SNPs and for all plans
as we continue to consider whether rating at the plan level is feasible
or appropriate. In particular, we are interested in feedback on the
best balance and whether changing the level at which ratings are
calculated and reported better serves beneficiaries and our goals for
the Star Ratings System.
We are also exploring whether some measure data could be reported
at a higher level (parent organization versus contract) to ease and
simplify reporting and still remain useful (for example, call center
measures as we anticipate that parent organizations use a consolidated
call center to serve all contracts and plans) to incorporate into the
Star Ratings. Further, we are exploring if contract market area
reporting is feasible when a contract covers a large geographic area.
For example, when HEDIS reporting began in 1997, there were contract-
specific market areas that evolved into reporting by market area for
five states with large Medicare populations.\39\ We are planning to
continue work in this area to determine the best reporting level for
each measure that most accurately reflects performance and minimizes to
the extent possible plan reporting burden. As we consider alternative
reporting units, we welcome comments and suggestions about requiring
reporting at different levels (for example, parent organization,
contract, plan, or geographic area) by measure.
---------------------------------------------------------------------------

\39\ The following states were divided into multiple market
areas: CA, FL, NY, OH, and TX.
---------------------------------------------------------------------------

We propose to continue at this time calculating the same overall
and/or summary Star Ratings for all PBPs offered under an MA-only, MA-
PD, or PDP contract. We propose to codify this policy in regulation
text at Sec. Sec. 422.162(b) and 423.182(b). We also propose a cost
plan regulation at Sec. 417.472(k) to require cost contracts to be
subject to the part 422 and part 423 Medicare Advantage and Part D
Prescription Drug Program Quality Rating System as they are measured
and rated like an MA plan. Specifically, we propose, at paragraph
(b)(1) that CMS will calculate overall and summary ratings at the
contract level and propose regulation text that cross-references other
proposed regulations regarding the calculation of measure scoring and
rating, and domain, summary and overall ratings. Further, we propose to
codify, at (b)(2) of each section, that data from all PBPs offered
under a contract will continue to be used to calculate the ratings for
the contract. For SNP specific measures collected at the PBP level, we
propose that the contract level score would be an enrollment-weighted
mean of the PBP scores using enrollment in each PBP as reported as part
of the measure specification, which is consistent with current
practice. The proposed text is explicit that domain and measure
ratings, other than the SNP-specific measures, are based on data from
all PBPs under the contract.
f. Contract Consolidations
We are proposing a change in how contract-level Star Ratings are
assigned in the case of contract consolidations. We have historically
permitted MAOs and Part D sponsors to consolidate contracts when a
contract novation occurs or to better align business practices. As
noted in MedPAC's March 2016 Report to Congress (https://aspe.hhs.gov/pdf-report/report-congress-social-risk-factors-and-performance-under-medicares-value-based-purchasing-programs), there has been a continued
increase in the number of enrollees being moved from lower Star Rating
contracts that do not receive a QBP to higher Star Rating contracts
that do receive a QBP as part of contract consolidations, which
increases the size of the QBPs that are made to MAOs due to the large
enrollment increase in the higher rated, surviving contract. We are
worried that this practice results in masking low quality plans under
higher rated surviving contracts. This does not provide beneficiaries
with accurate and reliable information for enrollment decisions, and it
does not truly reward higher quality contracts. We propose here to
modify from the current policy the calculation of Star Ratings for
surviving contracts that have consolidated. Instead of assigning the
surviving contract the Star Rating that the contract would have earned
without regard to whether a consolidation took place, we propose to
assign and display on Medicare Plan Finder Star Ratings based on the
enrollment-weighted mean of the measure scores of the surviving and
consumed contract(s) so that the ratings reflect the performance of all
contracts (surviving and consumed) involved in the consolidation. Under
this proposal, the calculation of the measure, domain, summary, and
overall ratings would be based on these enrollment-weighted mean
scores. The number of contracts this would impact is small relative to
all contracts that qualify for QBPs. During the period from 1/1/2015
through 1/1/2017 annual consolidations for MA contracts ranged from a
low of 7 in 2015 to a high of 19 in 2016 out of approximately 500 MA
contracts. As proposed in Sec. Sec. 422.162(b)(3)(i)-(iii) and
423.182(b)(3)(i)-(iii), CMS will use enrollment-weighted means of the
measure scores of the consumed and surviving contracts to calculate
ratings for the first and second plan years following the contract
consolidations. We believe that use of enrollment-weighted means will
provide a more accurate snapshot of the performance of the underlying
plans in the new consolidated contract, such that both information to
beneficiaries and QBPs are not somehow inaccurate or misleading. We
also propose, however, that the process of weighting the enrollment of
each contract and applying this general rule would vary depending on
the specific types of measures involved in order to take into account
the measurement period and

[[Page 56381]]

data collection processes of certain measures. Our proposal would also
treat ratings for determining quality bonus payment (QBP) status for MA
contracts differently than displayed Star Ratings for the first year
following the consolidation for consolidations that involve the same
parent organization and plans of the same plan type.
We propose to codify our new policy at Sec. Sec. 422.162(b)(3) and
423.182(b)(3). First, we propose generally, at paragraph (b)(3)(i) of
each regulation, that CMS will assign Star Ratings for consolidated
contracts using the provisions of paragraph (b)(3). We are proposing in
Sec. 422.162(b)(3) both a specific rule to address the QBP rating
following the first year after the consolidation and a rule for
subsequent years. As Part D plan sponsors are not eligible for QBPs,
the Part D regulation text is proposed without the QBP aspect. We
propose in Sec. 422.162(b)(3)(iv) and Sec. 423.182(b)(3)(ii) the
process for assigning Star Ratings for posting on the Medicare Plan
Finder for the first 2 years following the consolidation.
For the first contract year following a consolidation, as proposed
at paragraphs Sec. 422.162(b)(3)(iv) and Sec. 423.182(b)(3)(ii), we
propose to use the enrollment-weighted means as calculated below to set
Star Ratings for publication (and, in Sec. 422.162(b)(3)(iii), use of
certain enrollment-weighted means for establishing QBP status:
The Star Ratings measure scores for the consolidated
entity's first plan year would be based on enrollment-weighted measure
scores using the July enrollment of the measurement period of the
consumed and surviving contracts for all measures, except the survey-
based and call center measures.
The survey-based measures (that is, CAHPS, HOS, and HEDIS
measures collected through CAHPS or HOS) would use enrollment of the
surviving and consumed contracts at the time the sample is pulled for
the rating year. For example, for a contract consolidation that is
effective January 1, 2021 the CAHPS sample for the 2021 Star Ratings
would be pulled in January 2020 so enrollment in January 2020 would be
used. The call center measures would use mean enrollment during the
study period. We believe that these proposals for survey-based measures
are more nuanced and account for how the data underlying those measures
are gathered. By using the enrollment-weighted means we are reflecting
the true underlying performance of both the surviving and consumed
contracts.
For the second year following the consolidation, for all MA and
Part D Sponsors, the Star Ratings would be calculated as follows:
The enrollment-weighted measure scores using the July
enrollment of the measurement period of the consumed and surviving
contracts would be used for all measures except HEDIS, CAHPS, and HOS.
The current reporting requirements for HEDIS and HOS
already combine data from the surviving and consumed contract(s)
following the consolidation, so we are not proposing any modification
or averaging of these measure scores. For example, for HEDIS if an
organization consolidates one or more contracts during the change over
from measurement to reporting year, then only the surviving contract is
required to report audited summary contract-level data but it must
include data on all members from all contracts involved. For this
reason, we are proposing regulation text that HEDIS and HOS measure
data will be used as reported in the second year after consolidation.
The CAHPS survey sample that would be selected following
the consolidation would be modified to include enrollees in the sample
universe from which the sample is drawn from both the surviving and
consumed contracts. If there are two contracts (that is, Contract A is
the surviving contract and Contract B is the consumed contract) that
consolidate, and Contract A has 5,000 enrollees eligible for the survey
and Contract B has 1,000 eligible for the survey, the universe from
which the sample would be selected would be 6,000.
After applying these rules for calculating the measure scores in
the first and second year after consolidation, CMS would use the other
rules proposed in Sec. Sec. 422.166 and 423.186 to calculate the
measure, domain, summary, and overall Star Ratings for the consolidated
contract. In the third year after consolidation and subsequent years,
the performance period for all the measures would be after the
consolidation, so our proposal is limited to the Star Ratings issued
the first 2 years after consolidation.
When consolidations involve two or more contracts for health and/or
drug services of the same plan type under the same parent organization
combining into a single contract at the start of a contract year, we
propose to calculate the QBP rating for that first year following the
consolidation using the enrollment-weighted mean, using traditional
rounding rules, of what would have been the QBP ratings of the
surviving and consumed contracts using the contract enrollment in
November of the year the Star Ratings were released. In November of
each year following the release of the ratings on Medicare Plan Finder,
the preliminary QBP ratings are displayed in the Health Plan Management
System (HPMS) for the year following the Star Ratings year. For
example, the first year the consolidated entity is in operation is plan
year 2020; the 2020 QBP rating displayed in HPMS in November 2018 would
be based on the 2019 Star Ratings (which are released in October 2018)
and calculated using the weighted mean of the November 2018 enrollment
of the surviving and consumed contracts. Because the same parent
organization is involved in these situations, we believe that many
administrative processes and procedures are identical in the Medicare
health plans offered by the sponsoring organization, and using a
weighted mean of what would have been their QBP ratings accurately
reflects their performance for payment purposes. In subsequent years
after the first year following the consolidation, QBPs status would be
determined based on the consolidated entity's Star Rating posted on
Medicare Plan Finder. Under our proposal, the measure, domain, summary,
and in the case of MA-PD plans the overall Star Ratings posted on
Medicare Plan Finder for the second year following consolidation would
be based on the enrollment-weighted measure scores so would include
data from all contracts involved. Consequently, the ratings used for
QBP status determinations would reflect the care provided by both the
surviving and consumed contracts.
In conclusion, we are proposing a new set of rules regarding the
calculation of Star Ratings for consolidated contracts to be codified
at paragraphs (b)(3)(i) through (iv) of Sec. Sec. 422.162 and 423.182.
In most cases, we propose that the Star Ratings for the first and
second year following the consolidation to be an enrollment-weighted
mean of the scores at the measure level for the consumed and surviving
contracts. For the QBP rating for the first year following the
consolidation, we propose to use the enrollment-weighted mean of the
QBP rating of the surviving and consumed contracts (which would be the
overall or summary rating depending on the plan type) rather than
averaging measure scores. We solicit comment on this proposal and
whether our separate treatment of different measure types during the
first and second year adequately addresses the differences in how data
are collected (and submitted) for those measures during the different

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periods. We would also like to know whether sponsoring organizations
believe that the special rule for consolidations involving the same
parent organization and same plan types adequately addresses how those
situations are different from cases where an MA organization buys or
sells a plan or contract from or to a different entity and whether
these rules should be extended to situations where there are different
parent organizations involved. For commenters that support the latter,
we also request comment on how CMS should determine that the same
administrative processes are used and whether attestations from
sponsoring organizations or evidence from prior audits should be
required to support such determinations.
g. Data Sources
Under 1852(e) of the Act, MA organizations are required to collect,
analyze, and report data that permit measurement of health outcomes and
other indices of quality. The Star Ratings System is based on
information collected consistent with section 1852(e) of the Act.
Section 1852(e)(3)(B) of the Act prohibits the collection of data on
quality, outcomes, and beneficiary satisfaction other than the types of
data that were collected by the Secretary as of November 1, 2003; there
is a limited exception for SNPs to collect, analyze, and report data
that permit the measurement of health outcomes and other indicia of
quality. The statute does not require that only the same data be
collected, but that we do not change or expand the type of data
collected until after submission of a Report to Congress (prepared in
consultation with MA organizations and accrediting bodies) that
explains the reason for the change(s). We clarify here that the types
of data included under the Star Ratings System are consistent with the
types of data collected as of November 1, 2003. Since 1997, Medicare
managed care organizations have been required to annually report
quality of care performance measures through HEDIS. We have also been
conducting the CAHPS survey since 1997 to measure beneficiaries'
experiences with their health plans, and since 2007 we have been
measuring experiences with drug plans with CAHPS. HOS began in 1998 to
capture changes in the physical and mental health of MA enrollees. To
some extent, these surveys have been revised and updated over time, but
the same types of data--clinical measures, beneficiary experiences, and
changes in physical and mental health, respectively--have remained the
focus of these surveys. In addition, there are several measures in the
Stars Ratings System that are based on performance that address
telephone customer service, members' complaints, disenrollment rates,
and appeals; however these additional measures are not collected
directly from the sponsoring organizations for the primary purpose of
quality measurement. These additional measures are calculated from
information that CMS has gathered as part of the administration of the
Medicare program, such as information on appeals forwarded to the
Independent Review Entity under subparts M, enrollment, and compliance
and enforcement actions.
The Part D program was implemented in 2006, and while there is no
parallel provision regarding applicable Part D sources of data, we have
used similar datasets, for example CAHPS survey data, for
beneficiaries' experiences with prescription drug plans. Section 1860D-
4(d) of the Act specifically directs the administration and collection
of data from consumer surveys in a manner similar to those conducted in
the MA program. All of these measures reflect structure, process, and
outcome indices of quality that form the measurement set under Star
Ratings. Since 2007, we have publicly reported a number of measures
related to the drug benefit as part of the Star Ratings. For MA
organizations that offer prescription drug coverage, we have developed
a series of measures focusing on administration of the drug benefit.
Similar to MA measures of quality relative to health services, the Part
D measures focus on customer service and beneficiary experiences,
effectiveness, and access to care relative to the drug benefit. We
believe that the Part D Star Ratings are consistent with the limitation
expressed in section 1852(e) of the Act even though the limitation does
not apply to our collection of Part D quality data from Part D
sponsors.
We intend to continue to base the types of information collected in
the Part C Star Ratings on section 1852(e) of the Act, and we propose
at Sec. 422.162(c)(1) that the type of data used for Star Ratings will
be data consistent with the section 1852(e) limits and data gathered
from CMS administration of the MA program. In addition, we propose in
Sec. 422.162(c)(1) and in Sec. 423.182(c)(1) to include measures that
reflect structure, process, and outcome indices of quality, including
Part C measures that reflect the clinical care provided, beneficiary
experience, changes in physical and mental health, and benefit
administration, and Part D measures that reflect beneficiary
experiences and benefit administration. The measures encompass data
submitted directly by MA organizations (MAOs) and Part D sponsors to
CMS, surveys of MA and Part D enrollees, data collected by CMS
contractors, and CMS administrative data. We also propose, primarily so
that the regulation text is complete on this point, a regulatory
provision at Sec. Sec. 422.162(c)(2) and 423.182(c)(2) that requires
MA organizations and Part D plan sponsors to submit unbiased, accurate,
and complete quality data as described in paragraph(c)(1) of each
section. Our authority to collect quality data is clear under the
statute and existing regulations, such as section 1852(e)(3)(A) and
1860D-4(d) and Sec. Sec. 422.12(b)(2) and 423.156. We propose the
paragraph (c)(2) regulation text to ensure that the quality ratings
system regulations include a regulation on this point for readers and
to avoid confusion in the future about the authority to collect this
data. In addition, it is important that the data underlying the ratings
are unbiased, accurate, and complete so that the ratings themselves are
reliable. This proposed regulation text would clearly establish the
sponsoring organization's responsibility to submit data that can be
reliably used to calculate ratings and measure plan performance.
h. Adding, Updating, and Removing Measures
We are committed to continuing to improve the Part C and D Star
Ratings System by focusing on improving clinical and other outcomes. We
anticipate that new measures will be developed and that existing
measures will be updated over time. NCQA and the Pharmacy Quality
Alliance (PQA) continually work to update measures as clinical
guidelines change and develop new measures focused on health and drug
plans. To address these anticipated changes, we propose in Sec. Sec.
422.164 and 423.184 specific rules to govern the addition, update, and
removal of measures. We also propose to apply these rules to the
measure set proposed in this rulemaking, to the extent that there are
changes between the final rule and the Star Ratings based on the
performance periods beginning on or after January 2019.
As discussed in more detail in the following paragraphs, we propose
the following general rules to govern adding, updating, and removing
measures:
For data quality issues identified during the calculation
of the Star Ratings for a given year, we propose to continue our
current practice of

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removing the measure from the Star Ratings.
That new measures and substantive updates to existing
measures would be added to the Star Ratings System based on future
rulemaking but that prior to such a rulemaking, CMS would announce new
measures and substantive updates to existing measures and solicit
feedback using the process described for changes in and adoption of
payment and risk adjustment policies in section 1853(b) of the Act
(that is the Call Letter attachment to the Advance Notice and Rate
Announcement).
That existing measures (currently existing or existing
after a future rulemaking) used for Star Ratings would be updated with
regular updates from the measure stewards through the process described
for changes in and adoption of payment and risk adjustment policies in
section 1853(b) of the Act when the changes are not substantive.
That existing measures (currently existing or existing
after a future rulemaking) used for Star Ratings would be removed from
use in the Star Ratings when there has been a change in clinical
guidelines associated with the measure or reliability issues identified
in advance of the measurement period; CMS would announce the removal
using the process described for changes in and adoption of payment and
risk adjustment policies in section 1853(b) of the Act. Removal might
be permanent or temporary, depending on the basis for the removal.
We are proposing specific rules for updating and removal that would
be implemented through subregulatory action, so that rulemaking will
not be necessary for certain updates or removals. Under this proposal,
CMS would announce application of the regulation standards in the Call
Letter attachment to the Advance Notice and Rate Announcement process
under section 1853(b) of the Act.
First, we propose to codify, at Sec. Sec. 422.164(a) and
423.184(a), regulation text stating the general rule that CMS would
add, update, and remove measures used to calculate Star Ratings as
provided in Sec. Sec. 422.164 and 423.184. In each paragraph regarding
addition, updating, and removal of measures and the use of improvement
measures, we also propose rules to identify when these types of changes
would not involve rulemaking based on application of the standards and
authority in the regulation text. Under our proposal, CMS would solicit
feedback of its application of the rules using the draft and final Call
Letter each year.
Second, we propose, in paragraph (b) of these sections, that CMS
would review the quality of the data on which performance, scoring, and
rating of measures is done each year. We propose to continue our
current practice of reviewing data quality across all measures,
variation among organizations and sponsors, and measures' accuracy,
reliability, and validity before making a final determination about
inclusion of measures in the Star Ratings. The intent is to ensure that
Star Ratings measures accurately measure true plan performance. If a
systemic data quality issue is identified during the calculation of the
Star Ratings, we would remove the measure from that year's rating under
proposed paragraph (b).
Third, we propose to address the addition of new measures in
paragraph (c).
In identifying whether to add a measure, we will be guided by the
principles we listed in section III.A.12.b. of the proposed rule.
Measures should be aligned with best practices among payers and the
needs of the end users, including beneficiaries. Our strategy is to
continue to adopt measures when they are available, nationally
endorsed, and in alignment with the private sector, as we do today
through the use of measures developed by NCQA and the PQA, and the use
of measures that are endorsed by the National Quality Forum (NQF). We
propose to codify this standard for adopting new measures at Sec. Sec.
422.164(c)(1) and 423.184(c)(1). We do not intend this standard to
require that a measure be adopted by an independent measure steward or
endorsed by NQF in order for us to propose its use for the Star
Ratings, but that these are considerations that will guide us as we
develop such proposals. We also propose that CMS may develop its own
measures as well when appropriate to measure and reflect performance in
the Medicare program.
For the 2021 Star Ratings, we propose (at section III.A.12.) of the
proposed rule to have measures that encompass outcome, intermediate
outcome, patient/consumer experience, access, process, and improvement
measures. It is important to have a mix of different types of measures
in the Star Ratings program to understand how all of the different
facets of the provision of health and drug services interact. For
example, process measures are evidence-based best practices that lead
to clinical outcomes of interest. Process measures are generally easier
to collect, while outcome measures are sometimes more challenging
requiring in some cases medical record review and more sophisticated
risk-adjustment methodologies.
Over time new measures will be added and measures will be removed
from the Star Ratings program to meet our policy goals. As new measures
are added, our general guidelines for deciding whether to propose new
measures through future rulemaking will use the following criteria:
Importance: The extent to which the measure is important
to making significant gains in health care processes and experiences,
access to services and prescription medications, and improving health
outcomes for MA and Part D enrollees.
Performance Gap: The extent to which the measure
demonstrates opportunities for performance improvement based on
variation in current health and drug plan performance.
Reliability and Validity: The extent to which the measure
produces consistent (reliable) and credible (valid) results.
Feasibility: The extent to which the data related to the
measure are readily available or could be captured without undue burden
and could be implemented by the majority of MA and Part D contracts.
Alignment: The extent to which the measure or measure
concept is included in one or more existing federal, State, and/or
private sector quality reporting programs.
We would balance these criteria as part of our decision making
process so that each new measure proposed for addition to the Star
Ratings meets each criteria in some fashion or to some extent. We
intend to apply these criteria to identify and adopt new measures for
the Star Ratings, which will be done through future rulemaking that
includes explanations for how and why we propose to add new measures.
When we identify a measure that meets these criteria, we propose to
follow the process in our proposed paragraphs (c)(2) through (4) of
Sec. Sec. 422.164 and 423.184. We would initially solicit feedback on
any potential new measures through the Call Letter.
As new performance measures are developed and adopted, we propose,
at Sec. Sec. 422.164(c)(3) and (4) and 423.184(c)(3) and (4), that
they would initially be incorporated into the display page for at least
2 years but that we would keep a new measure on the display page for a
longer period if CMS finds there are reliability or validity issues
with the measure. As noted in the

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Introduction, the rulemaking process will create a longer lead time for
changes, in particular to add a new measure to the Star Ratings or to
make substantive changes to measures as discussed later in this
section. Here is an example timeline for adding a new measure to the
Star Ratings. In this scenario, the new measure has already been
developed by the NCQA and the PQA, and endorsed by the NQF. Otherwise,
that process may add an extra 3 to 5 years to the timeline.
January 2019: Solicit feedback on whether to add the new
measure in the draft 2020 Call Letter.
April 2019: Summarize feedback on adding the new measure
in the 2020 Call Letter.
2020/2021: Propose adding the new measure to the 2024 Star
Ratings (2022 measurement period) in a proposed rule; finalize through
rulemaking (for 1/1/2022 effective date).
2020: Performance period and collection of data for the
new measure and collection of data for posting on the 2022 display
page.
2021: Performance period and collection of data for the
new measure and collection of data for posting on the 2023 display
page.
Fall 2021: Publish new measure on the 2022 display page
(2020 measurement period).
January 1, 2022: Applicability date of new measure for
Star Ratings.
2022: Performance period and collection of data for the
new measure and collection of data for inclusion in the 2024 Star
Ratings.
Fall 2022: Publish new measure on the 2023 display page
(2021 measurement period).
Fall 2023: Publish new measure in the 2024 Star Ratings
(2022 measurement period).
2025: QBP status and rebate retention allowances are
determined for the 2025 payment year.
Fourth, at Sec. Sec. 422.164(d) and 423.184(d) we propose to
address updates to measures based on whether an update is substantive
or non-substantive. Since quality measures are routinely updated (for
example, when clinical codes are updated), we propose to adopt rules
for the incorporation of non-substantive updates to measures that are
part of the Star Ratings System without going through new rulemaking.
As proposed in paragraphs (d)(1) of Sec. Sec. 422.164 and 423.184, we
would only incorporate updates without rulemaking for measure
specification changes that do not substantively change the nature of
the measure.
Substantive changes (for example, major changes to methodology) to
existing measures would be proposed and finalized through rulemaking.
In paragraphs (d)(2) of Sec. Sec. 422.164 and 423.184, we propose to
initially solicit feedback on whether to make the substantive measure
update through the Call Letter prior to the measurement period for
which the update would be initially applicable. For example, if the
change announced significantly expands the denominator or population
covered by the measure (for example, the age group included in the
measures is expanded), the measure would be moved to the display page
for at least 2 years and proposed through rulemaking for inclusion in
Star Ratings. We intend this process for substantive updates to be
similar to the process we would use for adopting new measures under
proposed paragraph (c). As appropriate, the legacy measure may remain
in the Star Ratings while the updated measure is on the display page
if, for example, the updated measure expands the population covered in
the measure and the legacy measure would still be relevant and
measuring a critical topic to continue including in the Star Ratings
while the updated measure is on display. Adding the updated measure to
the Star Ratings would be proposed through rulemaking.
We propose to adopt rules to incorporate specification updates that
are non-substantive in paragraph (d)(1). Non-substantive updates that
occur (or are announced by the measure steward) during or in advance of
the measurement period will be incorporated into the measure and
announced using the Call Letter. We propose to use such updated
measures to calculate and assign Star Ratings without the updated
measure being placed on the display page. This is consistent with
current practice.
In paragraph (d)(1)(i-v) of Sec. Sec. 422.164 and paragraph
(d)(1)(i-v) of 423.184, we propose to codify a non-exhaustive list for
identifying non-substantive updates announced during or prior to the
measurement period and how we would treat them under our proposal. The
list includes updates in the following circumstances:
If the change narrows the denominator or population
covered by the measure with no other changes, the updated measure would
be used in the Star Ratings program without interruption. For example,
if an additional exclusion--such as excluding nursing home residents
from the denominator--is added, the change would be considered non-
substantive and would be incorporated automatically. In our view,
changes to narrow the denominator generally benefit Star Ratings of
sponsoring organizations and should be treated as non-substantive for
that reason.
If the change does not meaningfully impact the numerator
or denominator of the measure, the measure would continue to be
included in the Star Ratings. For example, if additional codes are
added that increase the number of numerator hits for a measure during
or before the measurement period, such a change would not be considered
substantive because the sponsoring organization would generally benefit
from that change. This type of administrative (billing) change has no
impact on the current clinical practices of the plan or its providers,
and thus would not necessitate exclusion from the Star Ratings System
of any measures updated in this way.
The clinical codes for quality measures (such as HEDIS
measures) are routinely revised as the code sets are updated. For
updates to address revisions to the clinical codes without change in
the intent of the measure and the target population, the measure would
remain in the Star Ratings program and would not move to the display
page. Examples of clinical codes that might be updated or revised
without substantively changing the measure include:
++ ICD-10-CM (``ICD-10'') code sets. Annually, there are new ICD 10
coding updates, which are effective from October 1 through September
30th of any given year.
++ Current Procedural Terminology (CPT) codes. These codes are
published and maintained by the American Medical Association (AMA) to
describe tests, surgeries, evaluations, and any other medical procedure
performed by a healthcare provider on a patient.
++ Healthcare Common Procedure Coding System (HCPCS) codes. These
codes cover items, supplies, and non-physician services not covered by
CPT codes.
++ National Drug Code (NDC). The PQA updates NDC lists biannually,
usually in January and July.
If the measure specification change is providing
additional clarifications such as the following, the measure would also
not move to the display page since this does not change the intent of
the measure but provides more information about how to meet the measure
specifications:
++ Adding additional tests that would meet the numerator
requirements.
++ Clarifying documentation requirements (for example, medical
record documentation).

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++ Adding additional instructions to identify services or
procedures that meet (or do not meet) the specifications of the
measure.
If the measure specification change is adding additional
data sources, the measure would also not move to the display page
because we believe such changes are merely to add alternative ways to
collect the data to meet the measure specifications without changing
the intent of the measure.
We solicit comment on our proposal to add non-substantive updates
to measures and using the updated measure (replacing the legacy
measure) to calculate Star Ratings. In particular, we are interested in
stakeholders' views whether only non-substantive updates that have been
adopted by a measure steward after a consensus-based or notice and
comment process should be added to the Star Ratings under this proposed
authority. Further, we solicit comment on whether there are other
examples or situations involving non-substantive updates that should be
explicitly addressed in the regulation text or if our proposal is
sufficiently extensive.
In addition to updates and additions of measures, we are proposing
rules to address the removal of measures from the Star Ratings to be
codified in Sec. Sec. 422.164(e) and 423.184(e). In paragraph (e)(1)
of each section, we propose the two circumstances under which a measure
would be removed entirely from the calculation of the Star Ratings. The
first circumstance would be changes in clinical guidelines that mean
that the measure specifications are no longer believed to align with or
promote positive health outcomes. As clinical guidelines change, we
would need the flexibility to remove measures from the Star Ratings
that are not consistent with current guidelines. We are proposing to
announce such subregulatory removals through the Call Letter so that
removals for this reason are accomplished quickly and as soon as the
disconnect with positive clinical outcomes is definitively identified.
We note that this proposal is consistent with our current practice. For
example, previously we retired the Glaucoma Screening measure for HEDIS
2015 after the U.S. Preventive Services Task Force concluded that the
clinical evidence is insufficient to assess the balance of benefits and
harms of screening for glaucoma in adults.
In addition to removal of measures because of changes in clinical
guidelines, we currently review measures continually to ensure that the
measure remains sufficiently reliable such that it is appropriate to
continue use of the measure in the Star Ratings. We propose, at
paragraph (e)(1)(ii), that we would also have authority to
subregulatorily remove measures that show low statistical reliability
so as to move swiftly to ensure the validity and reliability of the
Star Ratings, even at the measure level. We will continue to analyze
measures to determine if measure scores are ``topped out'' (that is,
showing high performance across all contracts decreasing the
variability across contracts and making the measure unreliable) so as
to inform our approach to the measure, or if measures have low
reliability. Although some measures may show uniform high performance
across contracts and little variation between them, we seek evidence of
the stability of such high performance, and we want to balance how
critical the measures are to improving care, the importance of not
creating incentives for a decline in performance after the measures
transition out of the Star Ratings, and the availability of alternative
related measures. If, for example, performance in a given measure has
just improved across all contracts, or if no other measures capture a
key focus in Star Ratings, a ``topped out'' measure which would have
lower reliability may be retained in Star Ratings. Under our proposal
to be codified at paragraph (e)(2), we would announce application of
this rule through the Call Letter in advance of the measurement period.
We request comment on these proposals regarding the processes to
add, update, and remove Star Ratings measures.
i. Measure Set for Performance Periods Beginning on or After January 1,
2019
We are proposing the measures included in Table 2 to be collected
for performance periods beginning on or after January 1, 2019 for the
2021 Part C and D Star Ratings. The CAHPS measure specification,
including case-mix adjustment, is described in the Technical Notes and
at ma-pdpcahps.org. The HOS measure specification, including case-mix
adjustment, is described at (http://hosonline.org/globalassets/hos-online/survey-results/hos_casemix_coefficient_tables_c17.pdf). These
specifications are part of our proposal.
We are not proposing to codify this list of measures and
specifications in regulation text in light of the regular updates and
revisions contemplated by our proposals at Sec. Sec. 422.164 and
423.184. We intend, as proposed in paragraph (a) of these sections,
that the Technical Notes for each year's Star Ratings would include the
applicable full list of measures.
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j. Improvement Measures
In the 2013 Part C and D Star Ratings, we implemented the Part C
and D improvement measures (CY2013 Rate Announcement, https://www.cms.gov/Medicare/Health-Plans/MedicareAdvtgSpecRateStats/Downloads/Announcement2013.pdf). The improvement measures address the overall
improvement or decline in individual measure scores from the prior to
the current year. We propose to continue the current methodology
detailed in the Technical Notes for calculating the improvement
measures and to codify it at Sec. Sec. 422.164(f) and 423.184(f). For
a measure to be included in the improvement calculation, the measure
must have numeric value scores in both the current and prior year and
not have had a substantive specification change during those years. In
addition, the improvement measure will not include any data on measures
that are already focused on improvement (for example, HOS measures
focused on improving or maintaining physical or mental health). The
Part C improvement measure includes only Part C measure scores, and the
Part D improvement measure includes only Part D measure scores. All
measures meeting these criteria would be included in the improvement
measures under our proposal at paragraph (f)(1)(i) through (iv) of
Sec. Sec. 422.164 and 423.184.
Annually, the subset of measures to be included in the improvement
measures following these criteria would be announced through the Call
Letter, similar to our proposal for regular updates and removal of
measures. Under our proposal, once the measures to be used for the
improvement measures are identified, CMS would determine which
contracts have sufficient data for purposes of applying and scoring the
improvement measure(s). Following current practices, the improvement
measure score would be calculated only for contracts that have numeric
measure scores for both years for at least half of the measures
identified for use in the improvement measure. We propose this standard
for determining contracts eligible for an improvement measure at
paragraph (f)(2).
We propose at part Sec. Sec. 422.164(f)(3) and (4) and
423.184(f)(3) and (4) the process for calculating the improvement
measure score(s) and a special rule for any identified improvement
measure for a contract that received a measure-level Star Rating of 5
in each of the 2 years examined, but whose associated measure score
indicates a statistically significant decline in the time period. The
improvement measure would be calculated in a series of distinct steps:
The improvement change score (the difference in the
measure scores in the 2-year period) would be determined for each
measure that has been identified as part of an improvement measure and
for which a contract has a numeric score for each of the 2 years
examined.
Each contract's improvement change score would be
categorized as a significant change or not by employing a two tailed t-
test with a level of significance of 0.05.
The net improvement per measure category (outcome, access,
patient experience, process) would be calculated by finding the
difference between the weighted number of significantly improved
measures and significantly declined measures, using the measure weights
associated with each measure category.
The improvement measure score would then be determined by
calculating the weighted sum of the net improvement per measure
category divided by the weighted sum of the number of eligible
measures.
The improvement measure score would be converted to a
measure-level Star Rating using the hierarchical clustering algorithm.
The improvement measure score cut points would be determined using
two separate clustering algorithms. Improvement measure scores of zero
and above would use the clustering algorithm to determine the cut
points for the Star Rating levels of 3 and above. Improvement measure
scores below zero would be clustered to determine the cut points for 1
and 2 stars. The Part D improvement measure thresholds for MA-PDs and
PDPs would be reported separately.
We propose a special rule in paragraph (f)(3) to hold harmless
sponsoring organizations that have 5-star ratings for both years on a
measure used for the improvement measure calculation. This hold
harmless provision was added in 2014 to avoid the unintended
consequence for contracts that score 5 stars on a subset of measures in
each of the 2 years. For any identified improvement measure for which a
contract received a rating of 5 stars in each of the years examined,
but for which the measure score demonstrates a statistically
significant decline based on the results of the significance testing
(at a level of significance of 0.05) on the change score, the measure
will be categorized as having no significant change. The measure will
be included in the count of measures used to determine eligibility for
the improvement measure and in the denominator of the improvement
measure score. The intent of the hold harmless provision for a contract
that receives a measure rating of 5 stars for each year is to prevent
the measure from lowering a contract's improvement measure when the
contract still demonstrates high performance. We propose in section
III.A.12. of this proposed rule another hold harmless provision to be
codified at Sec. Sec. 422.166(g)(1) and 423.186(g)(1).
We request comment on the methodology for the improvement measures,
including rules for determining which measures are included, the
conversion to a Star Rating, and the hold harmless provision for
individual measures that are used for the determination of the
improvement measure score.
k. Data Integrity
The data underlying a measure score and rating must be complete,
accurate, and unbiased for it to be useful for the purposes we have
proposed at Sec. Sec. 422.160(b) and 423.180(b). As part of the
current Star Ratings methodology, all measures and the associated data
have multiple levels of quality assurance checks. Our longstanding
policy has been to reduce a contract's measure rating if we determine
that a contract's measure data are incomplete, inaccurate, or biased.
Data validation is a shared responsibility among CMS, CMS data
providers, contractors, and Part C and D sponsors. When applicable (for
example, data from the IRE, PDE, call center), CMS expects sponsoring
organizations to routinely monitor their data and immediately alert CMS
if errors or anomalies are identified so CMS can address these errors.
We propose to codify at Sec. Sec. 422.164(g) and 423.184(g)
specific rules for the reduction of measure ratings when CMS identifies
incomplete, inaccurate, or biased data that have an impact on the
accuracy, impartiality, or completeness of data used for the impacted
measures. Data may be determined to be incomplete, inaccurate, or
biased based on a number of reasons, including mishandling of data,
inappropriate processing, or implementation of incorrect practices that
impacted specific measure(s). One example of such situations that give
rise to such determinations includes a contract's failure to adhere to
HEDIS, HOS, or CAHPS reporting requirements. Our modifications to
measure-specific ratings due to data integrity issues are separate from
any CMS compliance or enforcement actions related to a sponsor's
deficiencies. This policy and

[[Page 56395]]

these rating reductions are necessary to avoid falsely assigning a high
star to a contract, especially when deficiencies have been identified
that show we cannot objectively evaluate a sponsor's performance in an
area.
As a standard practice, we check for flags that indicate bias or
non-reporting, check for completeness, check for outliers, and compare
measures to the previous year to identify significant changes which
could be indicative of data issues. CMS has developed and implemented
Part C and Part D Reporting Requirements Data Validation standards to
assure that data reported by sponsoring organizations pursuant to
Sec. Sec. 422.516 and 423.514 satisfy the regulatory obligation.
Sponsor organizations should refer to specific guidance and technical
instructions related to requirements in each of these areas. For
example, information about HEDIS measures and technical specifications
is posted on: http://www.ncqa.org/HEDISQualityMeasurement/HEDISMeasures.aspx. Information about Data Validation of Reporting
Requirements data is posted on: https://www.cms.gov/Medicare/Prescription-Drug-Coverage/PrescriptionDrugCovContra/PartCDDataValidation.html and https://www.cms.gov/Medicare/Prescription-Drug-Coverage/PrescriptionDrugCovContra/RxContracting_ReportingOversight.html.
We propose, in paragraphs (g)(1)(i) through (iii), rules for
specific circumstances where we believe a specific response is
appropriate. First, we propose a continuation of a current policy: To
reduce HEDIS measures to 1 star when audited data are submitted to NCQA
with an audit designation of ``biased rate'' or BR based on an
auditor's review of the data if a plan chooses to report; this proposal
would also apply when a plan chooses not to submit and has an audit
designation of ``non-report'' or NR. Second, we propose to continue to
reduce Part C and D Reporting Requirements data, that is, data required
pursuant to Sec. Sec. 422.514 and 423.516, to 1 star when a contract
did not score at least 95 percent on data validation for the applicable
reporting section or was not compliant with data validation standards/
sub-standards for data directly used to calculate the associated
measure. In our view, data that do not reach at least 95 percent on the
data validation standards are not sufficiently accurate, impartial, and
complete for use in the Star Ratings. As the sponsoring organization is
responsible for these data and submits them to CMS, we believe that a
negative inference is appropriate to conclude that performance is
likely poor. Third, we propose a new specific rule to authorize scaled
reductions in Star Ratings for appeal measures in both Part C and Part
D.
The data downgrade policy was adopted to address instances when the
data that would be used for specific measures are not reliable for
measuring performance due to their incompleteness or biased/erroneous
nature. For instances where the integrity of the data is compromised
because of the action or inaction of the sponsoring organization (or
its subcontractors or agents), this policy reflects the underlying
fault of the sponsoring organization for the lack of data for the
applicable measure. Without some policy for reduction in the rating for
these measures, sponsoring organizations could ``game'' the Star
Ratings and merely fail to submit data that illustrate poor
performance. We believe that removal of the measure from the ratings
calculation would unintentionally reward poor data compilation and
submission activities such that our only recourse is to reduce the
rating to 1 star for affected measures.
For verification and validation of the Part C and D appeals
measures, we propose to use statistical criteria to determine if a
contract's appeals measure-level Star Ratings would be reduced for
missing IRE data. The criteria would allow us to use scaled reductions
for the appeals measures to account for the degree to which the data
are missing. The completeness of the IRE data is critical to allow fair
and accurate measurement of the appeals measures. All plans are
responsible and held accountable for ensuring high quality and complete
data to maintain the validity and reliability of the appeals measures.
In response to stakeholder concerns about CMS' prior practice of
reducing measure ratings to one star based on any finding of data
inaccuracy, incompleteness, or bias, CMS initiated the Timeliness
Monitoring Project (TMP) in CY 2017.\40\ The first submission for the
TMP was for the measurement year 2016 related to Part C organization
determinations and reconsiderations and Part D coverage determinations
and redeterminations. The timeframe for the submitted data was
dependent on the enrollment of the contract with smaller contracts
submitting data from a three-month period, medium-sized contracts
submitting data from a two-month period, and larger contracts
submitting data from a one-month period.\41\
---------------------------------------------------------------------------

\40\ This project was discussed in the November 28, 2016 HPMS
memo, ``Industry-wide Appeals Timeliness Monitoring.'' https://www.cms.gov/Medicare/Prescription-Drug-Coverage/PrescriptionDrugCovGenIn/Downloads/Industry-wide-Timeliness-Monitoring.pdf, https://www.cms.gov/Medicare/Prescription-Drug-Coverage/PrescriptionDrugCovGenIn/Downloads/Industry-wide-Appeals-Timeliness-Monitoring-Memo-November-28-2016.pdf.
\41\ Contracts with a mean annual enrollment of less than 50,000
are required to submit data for a three-month time period. Contracts
with a mean enrollment of at least 50,000 but at most 250,000 are
required to submit data for a two-month time period. Contracts with
a mean enrollment greater than 250,000 are required to submit data
for a one-month period.
---------------------------------------------------------------------------

We propose to use multiple data sources whenever possible, such as
the TMP data or information from audits to determine whether the data
at the Independent Review Entity (IRE) are complete. Given the
financial and marketing incentives associated with higher performance
in Star Ratings, safeguards are needed to protect the Star Ratings from
actions that inflate performance or mask deficiencies.
CMS is proposing to reduce a contract's Part C or Part D appeal
measures Star Ratings for IRE data that are not complete or otherwise
lack integrity based on the TMP or audit information. The reduction
would be applied to the measure-level Star Ratings for the applicable
appeals measures. There are varying degrees of data issues and as such,
we are proposing a methodology for reductions that reflects the degree
of the data accuracy issue for a contract instead of a one-size fits
all approach. The methodology would employ scaled reductions, ranging
from a 1-star reduction to a 4-star reduction; the most severe
reduction for the degree of missing IRE data would be a 4-star
reduction which would result in a measure-level Star Rating of 1 star
for the associated appeals measures (Part C or Part D). The data source
for the scaled reduction is the TMP or audit data, however the specific
data used for the determination of a Part C IRE data completeness
reduction are independent of the data used for the Part D IRE data
completeness reduction. If a contract receives a reduction due to
missing Part C IRE data, the reduction would be applied to both of the
contract's Part C appeals measures. Likewise, if a contract receives a
reduction due to missing Part D IRE data, the reduction would be
applied to both of the contract's Part D appeals measures. We solicit
comment on this proposal and its scope; we are looking in particular
for comments related to how to use the process we are proposing

[[Page 56396]]

in this proposal to account for data integrity issues discovered
through means other than the TMP and audits of sponsoring
organizations.
CMS' proposed scaled reduction methodology is a three-stage process
using the TMP or audit information to determine: First, whether a
contract may be subject to a potential reduction for the Part C or Part
D appeals measures; second, the basis for the estimate of the error
rate; and finally, whether the estimated error rate is significantly
greater than the cut points for the scaled reductions of 1, 2, 3, or 4
stars.
Once the scaled reduction for a contract is determined using this
methodology, the reduction would be applied to the contract's
associated appeals measure-level Star Ratings. The minimum measure-
level Star Rating is 1 star. If the difference between the associated
appeals measure-level Star Rating (before the application of the
reduction) and the identified scaled reduction is less than one, the
contract would receive a measure-level Star Rating of 1 star for the
appeals measure.
The error rate for the Part C and Part D appeals measures using the
TMP or audit data and the projected number of cases not forwarded to
the IRE for a 3-month period would be used to identify contracts that
may be subject to an appeals-related IRE data completeness reduction. A
minimum error rate is proposed to establish a threshold for the
identification of contracts that may be subject to a reduction. The
establishment of the threshold allows the focus of the possible
reductions on contracts with error rates that have the greatest
potential to distort the signal of the appeals measures. Since the
timeframe for the TMP data is dependent on the enrollment of the
contract, with smaller contracts submitting data from a three-month
period, medium-sized contracts submitting data from a 2-month period,
and larger contracts submitting data from a one-month period, the use
of a projected number of cases allows a consistent time period for the
application of the criteria proposed.
The calculated error rate formula (Equation 1) for the Part C
measures is proposed to be determined by the quotient of the number of
cases not forwarded to the IRE and the total number of cases that
should have been forwarded to the IRE. The number of cases that should
have been forwarded to the IRE is the sum of the number of cases in the
IRE during TMP or audit data collection period and the number of cases
not forwarded to the IRE during the same period.
[GRAPHIC] [TIFF OMITTED] TP28NO17.008

The calculated error rate formula (Equation 2) for the Part D
measures is proposed to be determined by the quotient of the number of
untimely cases not auto-forwarded to the IRE and the total number of
untimely cases.
[GRAPHIC] [TIFF OMITTED] TP28NO17.009

The projected number of cases not forwarded to the IRE in a 3-month
period would be calculated by multiplying the number of cases found not
to be forwarded to the IRE based on the TMP or audit data by a constant
determined by the TMP time period. Contracts with mean annual
enrollments greater than 250,000 that submitted data from 1-month
period would have their number of cases found not to be forwarded to
the IRE based on the TMP data multiplied by the constant 3.0. Contracts
with mean enrollments of 50,000 but at most 250,000 that submitted data
from a 2-month period would have their number of cases found not to be
forwarded to the IRE based on the TMP data multiplied by the constant
1.5. Small contracts with mean enrollments less than 50,000 that
submitted data for a 3-month period would have their number of cases
found not to be forwarded to the IRE based on the TMP data multiplied
by the constant 1.0.
Under this proposal, contract ratings would be subject to a
possible reduction due to lack of IRE data completeness if both
following conditions are met The calculated error rate is 20
percent or more.
The projected number of cases not forwarded to the IRE is
at least 10 in a 3-month period.
The requirement for a minimum number of cases is needed to address
statistical concerns with precision and small numbers. If a contract
meets only one of the conditions, the contract would not be subject to
reductions for IRE data completeness issues.
If a contract is subject to a possible reduction based on the
aforementioned conditions, a confidence interval estimate for the true
error rate for the contract would be calculated using a Score Interval
(Wilson Score Interval) at a confidence level of 95 percent.
The midpoint of the score interval would be determined using
Equation 3.
[GRAPHIC] [TIFF OMITTED] TP28NO17.010

The z score that corresponds to a level of statistical significance
of 0.05, commonly denoted as z[alpha]/2 but for ease of presentation
represented here as z. (The z value that will be used for the purpose
of the calculation of the interval is 1.959964.).
For the Part C appeals measures, the midpoint of the confidence
interval would be calculated using Equation 3 along with the calculated
error rate from the TMP, which is determined by Equation 1. The total
number of cases in Equation 3 is the number of cases that should have
been in the IRE for the Part C TMP data.
For the Part D appeals measures, the midpoint of the confidence
interval would be calculated using Equation 3 along with the calculated
error rate from the TMP, which is determined by Equation 2. The total
number of cases in

[[Page 56397]]

Equation 3 is the total number of untimely cases for the Part D appeals
measures.
Letting the calculated error rate be represented by and the total
number of cases represented as n, Equation 3 can be streamlined as
Equation 4:
[GRAPHIC] [TIFF OMITTED] TP28NO17.011

The lower bound of the confidence interval estimate for the error
rate is calculated using Equation 5 below:
[GRAPHIC] [TIFF OMITTED] TP28NO17.012

For each contract subject to a possible reduction, the lower bound
of the interval estimate of the error rate would be compared to each of
the thresholds in Table 3. If the contract's calculated lower bound is
higher than the threshold, the contract would receive the reduction
that corresponds to the highest threshold that is less than the lower
bound. In other words, the contract's lower bound is being employed to
determine whether the contract's error rate is significantly greater
than the thresholds of 20 percent, 40 percent, 60 percent, and 80
percent. The proposed scaled reductions are in Table 3, and would be
codified in narrative form at paragraph (g)(1)(iii)(D) of both
regulations.
The reductions due to IRE data completeness issues would be applied
after the calculation of the measure-level Star Rating for the appeals
measures. The reduction would be applied to the Part C appeals measures
and/or the Part D appeals measures.
It is important to note that a contract's lower bound could be
statistically significantly greater than more than one threshold. The
reduction would be determined by the highest threshold that the
contract's lower bound exceeds. For example, if the lower bound for a
contract is 64.560000 percent, the contract's estimated value is
significantly greater than the thresholds of 20 percent, 40 percent,
and 60 percent because the lower bound value 64.560000 percent is
greater than each of these thresholds. The lower bound for the
contract's confidence interval is not greater than 80 percent. The
contract would be subject to the reduction that corresponds to the 60
percent threshold, which is three stars.

Table 3--Appeals Measure Star Ratings Reductions by the Incomplete Data
Error Rate
------------------------------------------------------------------------
Reduction for
Proposed thresholds using the lower bound of confidence incomplete
interval estimate of the error rate (%) IRE data
(stars)
------------------------------------------------------------------------
20...................................................... 1
40...................................................... 2
60...................................................... 3
80...................................................... 4
------------------------------------------------------------------------

We propose regulation text at Sec. 422.164(g)(1)(iii)(A) through
(N) and Sec. 423.184(g)(1)(iii)(A) through (K) to codify these
parameters and formulas for the scaled reductions. We note that the
proposed text for the Part C regulation includes specific paragraphs
related to MA and MA-PD plans that are not included in the proposed
text for the Part D regulation but that the two are otherwise
identical.
In addition, we propose in Sec. Sec. 422.164(g)(2) and
423.184(g)(2) to authorize reductions in a Star Rating for a measure
when there are other data accuracy concerns (that is, those not
specified in paragraph (g)(1)). We propose an example in paragraph
(g)(2) of another circumstance where CMS would be authorized to reduce
ratings based on a determination that performance data are incomplete,
inaccurate, or biased. We also propose this other situation would
result in a reduction of the measure rating to 1 star.
We have taken several steps in past years to protect the integrity
of the data we use to calculate Star Ratings. However, we welcome
comments about alternative methods for identifying inaccurate or biased
data and comments on the proposed policies for reducing stars for data
accuracy and completeness issues. Further, we welcome comments on the
proposed methodology for scaled reductions for the Part C and Part D
appeals measures to address the degree of missing IRE data.
l. Measure-Level Star Ratings
We propose in Sec. Sec. 422.166(a) and 423.186(a) the methods for
calculating Star Ratings at the measure level. As part of the Part C
and D Star Ratings System, Star Ratings are currently calculated at the
measure level. To separate a distribution of scores into distinct
groups or star categories, a set of values must be identified to
separate one group from another group. The set of values that break the
distribution of the scores into non-overlapping groups is a set of cut
points. We propose to continue to determine cut points by applying
either clustering or a relative distribution and significance testing
methodology; we propose to codify this policy in paragraphs (a)(1) of
each section. We propose in paragraphs (a)(2) and (a)(3) of each
section that for non-CAHPS measures, we would use a clustering
methodology and that for CAHPS measures, we would use relative
distribution and significance testing. Measure scores would be
converted to a 5-star scale ranging from 1 to 5, with whole star
increments for the cut points. A rating of 5 stars would indicate the
highest Star Rating possible, while a rating of 1 star would be the
lowest rating on the scale. Consistent with current policy, we propose
to use the two methodologies described as follows to convert measure
scores to measure-level Star Ratings.
The clustering method would be applied to all Star Ratings
measures, except for the CAHPS measures. For each individual measure,
we would determine the measure cut points using all measure scores for
all contracts required to report that do not have missing, flagged as
biased, or erroneous data. For the Part D measures, we propose to
determine MA-PD and PDP cut points separately. The scores would

[[Page 56398]]

be grouped such that scores within the same rating (that is 1 star, 2
stars, etc.) are as similar as possible, and scores in different
ratings are as different as possible. The hierarchical clustering
algorithm and the associated tree and cluster assignments using SAS (a
statistical software package) are currently used to determine the cut
points for the assignment of the measure-level Star Ratings. We intend
to continue use of this software under this proposal, but improvements
in statistical analysis will not result in rulemaking or changes in
these proposed rules. Rather, we believe that the software used to
apply the clustering methodology is generally irrelevant.
Conceptually, the clustering algorithm identifies natural gaps
within the distribution of the scores and creates groups (clusters)
that are then used to identify the cut points that result in the
creation of a pre-specified number of categories. The Euclidean
distance between each pair of contracts' measure scores serves as the
input for the clustering algorithm. The hierarchical clustering
algorithm begins with each contract's measure score being assigned to
its own cluster. Ward's minimum variance method is used to separate the
variance of the measure scores into within-cluster and between-cluster
sum of squares components in order to determine which pairs of clusters
to merge. For the majority of measures, the final step in the algorithm
is done a single time with five categories specified for the assignment
of individual scores to cluster labels. The cluster labels are then
ordered to create the 1 to 5-star scale. The range of the values for
each cluster (identified by cluster labels) is examined and would be
used to determine the set of cut points for the Star Ratings. The
measure score that corresponds to the lower bound for the measure-level
ratings of 2 through 5 would be included in the star-specific rating
category for a measure for which a higher score corresponds to better
performance. For a measure for which a lower score is better, the
process would be the same except that the upper bound within each
cluster label would determine the set of cut points. The measure score
that corresponds to the cut point for the ratings of 2 through 5 would
be included in the star-specific rating category. In cases where
multiple clusters have the same measure score value range, those
clusters would be combined, leading to fewer than 5 clusters. Under our
proposal to use clustering to set cut points, we would not require the
same number of observations (contracts) within each rating and instead
would use a data-driven approach.
As proposed in paragraphs (a)(2)(ii) of each section the
improvement measures for Part C and Part D would require the clustering
algorithm to be done twice for the identification of the cut points
that would allow the conversion of the improvement measure scores to
the star scale. The Part D improvement measure score clustering for MA-
PDs and PDPs would be reported separately. Improvement scores of zero
or greater would be assigned at least 3 stars for the improvement Star
Rating, while improvement scores less than zero would be assigned
either 1 or 2 stars. The clustering would be conducted separately for
improvement measure scores greater than or equal to zero and those with
improvement measure scores less than zero. For contracts with
improvement scores greater than or equal to zero, the clustering
process would result in three clusters with measure-level Star Ratings
of 3, 4, or 5 with the lower bound of each cluster serving as the cut
point for the associated Star Rating. For those contracts with
improvement scores less than zero, the clustering algorithm would
result in two clusters with measure-level Star Ratings of 1 or 2.
We propose in paragraphs (a)(3) of each section to use percentile
standing relative to the distribution of scores for other contracts,
measurement reliability standards, and statistical significance testing
to determine star assignments for the CAHPS measures. This method would
combine evaluating the relative percentile distribution of scores with
significance testing and measurement reliability standards in order to
maximize the accuracy of star assignments based on scores produced from
the CAHPS survey. For CAHPS measures, contracts are first classified
into base groups by comparisons to percentile cut points defined by the
current-year distribution of case-mix adjusted contract means.
Percentile cut points would then be rounded to the nearest integer on
the 0-100 reporting scale, and each base group would include those
contracts whose rounded mean score is at or above the lower limit and
below the upper limit. Then, the number of stars assigned would be
determined by the base group assignment, the statistical significance
and direction of the difference of the contract mean from the national
mean, an indicator of the statistical reliability of the contract score
on a given measure (based on the ratio of sampling variation for each
contract mean to between-contract variation), and the standard error of
the mean score. Table 4, which we propose to codify at Sec. Sec.
422.166(a)(3) and 423.186(a)(3), details the CAHPS star assignment
rules for each rating. All statistical tests, including comparisons
involving standard error, would be computed using unrounded scores.
We propose that if the reliability of a CAHPS measure score is very
low for a given contract, less than 0.60, the contract would not
receive a Star Rating for that measure. For purposes of applying the
criterion for 1 star on Table 3, at item (c), low reliability scores
would be defined as those with at least 11 respondents and reliability
greater than or equal to 0.60 but less than 0.75 and also in the lowest
12 percent of contracts ordered by reliability. The standard error
would be considered when the measure score is below the 15th percentile
(in base group 1), significantly below average, and has low
reliability: In this case, 1 star would be assigned if and only if the
measure score is at least 1 standard error below the unrounded cut
point between base groups 1 and 2. Similarly, when the measure score is
at or above the 80th percentile (in base group 5), significantly above
average, and has low reliability, 5 stars would be assigned if and only
if the measure score is at least 1 standard error above the unrounded
cut point between base groups 4 and 5.

Table 4--CAHPS Star Assignment Rules
------------------------------------------------------------------------
Star Criteria for assigning star ratings
------------------------------------------------------------------------
1....................... A contract is assigned one star if both
criteria (a) and (b) are met plus at least
one of criteria (c) and (d):
(a) Its average CAHPS measure score is lower
than the 15th percentile; AND
(b) its average CAHPS measure score is
statistically significantly lower than the
national average CAHPS measure score;
(c) the reliability is not low; OR
(d) its average CAHPS measure score is more
than one standard error (SE) below the 15th
percentile.

[[Page 56399]]

2....................... A contract is assigned two stars if it does
not meet the one[dash]star criteria and meets
at least one of these three criteria:
(a) Its average CAHPS measure score is lower
than the 30th percentile and the measure does
not have low reliability; OR
(b) its average CAHPS measure score is lower
than the 15th percentile and the measure has
low reliability; OR
(c) its average CAHPS measure score is
statistically significantly lower than the
national average CAHPS measure score and
below the 60th percentile.
3....................... A contract is assigned three stars if it meets
at least one of these three criteria:
(a) Its average CAHPS measure score is at or
above the 30th percentile and lower than the
60th percentile, AND it is not statistically
significantly different from the national
average CAHPS measure score; OR
(b) its average CAHPS measure score is at or
above the 15th percentile and lower than the
30th percentile, AND the reliability is low,
AND the score is not statistically
significantly lower than the national average
CAHPS measure score; OR
(c) its average CAHPS measure score is at or
above the 60th percentile and lower than the
80th percentile, AND the reliability is low,
AND the score is not statistically
significantly higher than the national
average CAHPS measure score.
4....................... A contract is assigned four stars if it does
not meet the 5-star criteria and meets at
least one of these three criteria:
(a) Its average CAHPS measure score is at or
above the 60th percentile and the measure
does not have low reliability; OR
(b) its average CAHPS measure score is at or
above the 80th percentile and the measure has
low reliability; OR
(c) its average CAHPS measure score is
statistically significantly higher than the
national average CAHPS measure score and
above the 30th percentile.
5....................... A contract is assigned five stars if both
criteria (a) and (b) are met plus at least
one of criteria (c) and (d):
(a) Its average CAHPS measure score is at or
above the 80th percentile; AND
(b) its average CAHPS measure score is
statistically significantly higher than the
national average CAHPS measure score;
(c) the reliability is not low; OR
(d) its average CAHPS measure score is more
than one SE above the 80th percentile.
------------------------------------------------------------------------

We request comments on our proposed methods to determine cut
points. For certain measures, we previously published pre-determined 4-
star thresholds. If commenters recommend pre-determined 4-star
thresholds, we request suggestions on how to minimize generating Star
Ratings that do not reflect a contract's ``true'' performance,
otherwise referred to as the risk of ``misclassifying'' a contract's
performance (for example, scoring a ``true'' 4-star contract as a 3-
star contract, or vice versa, or creating ``cliffs'' in Star Ratings
and therefore, potential benefits between plans with nearly identical
Star Ratings on different sides of a fixed threshold), and how to
continue to create incentives for quality improvement. We also welcome
comments on alternative recommendations for revising the cut point
methodology. For example, we are considering methodologies that would
minimize year-to-year changes in the cut points by setting the cut
points so they are a moving average of the cut points from the two or
three most recent years or setting caps on the degree to which a
measure cut point could change from one year to the next. We welcome
comments on these particular methodologies and recommendations for
other ways to provide stability for cut points from year to year.
m. Hierarchical Structure of the Ratings
We propose to continue our existing policy to use a hierarchical
structure for the Star Ratings. The basic building block of the MA Star
Ratings System is, and under our proposal would continue to be, the
measure. Because the MA Star Ratings System consists of a large
collection of measures across numerous quality dimensions, the measures
would be organized in a hierarchical structure that provides ratings at
the measure, domain, Part C summary, Part D summary, and overall
levels. The regulation text at Sec. Sec. 422.166 and 423.186 is built
on this structure and provides for calculating ratings at each
``level'' of the system. The organization of the measures into larger
groups increases both the utility and efficiency of the rating system.
At each aggregated level, ratings are based on the measure-level stars.
Ratings at the higher level are based on the measure-level Star
Ratings, with whole star increments for domains and half-star
increments for summary and overall ratings; a rating of 5 stars would
indicate the highest Star Rating possible, while a rating of 1 star
would be the lowest rating on the scale. Half-star increments are used
in the summary and overall ratings to allow for more variation at the
higher hierarchical levels of the ratings system. We believe this
greater variation and the broader range of ratings provide more useful
information to beneficiaries in making enrollment decisions while
remaining consistent with the statutory direction in sections 1853(o)
and 1854(b) of the Act to use a 5-star system. These policies for the
assignment of stars would be codified with other rules for the ratings
at the domain, summary, and overall level. Domain ratings employ an
unweighted mean of the measure-level stars, while the Part C and D
summary and overall ratings employ a weighted mean of the measure-level
stars and up to two adjustments. We propose to codify these policies at
paragraphs (b)(2), (c)(1) and (d)(1) of Sec. Sec. 422.166 and 423.186.
n. Domain Star Ratings
Groups of measures that together represent a unique and important
aspect of quality and performance are organized to form a domain.
Domain ratings summarize a plan's performance on a specific dimension
of care. Currently the domains are used purely for purposes of
displaying data on Medicare Plan Finder to organize the measures and
help consumers interpret the data. We propose to continue this policy
at Sec. Sec. 422.166(b)(1)(i) and 423.186(b)(1)(i).
At present, there are nine domains--five for Part C measures for
MA-only and MA-PDs plans and four for Part D measures for MA-PDs. We
propose to continue to group measures for purposes of display on
Medicare Plan Finder and to continue use of the same domains as in
current practice in Sec. Sec. 422.166(b)(1)(i) and 423.196(b)(1)(i).
The current domains are listed in Tables 5 and 6.

Table 5--Part C Domains
------------------------------------------------------------------------
Domain
-------------------------------------------------------------------------
Staying Healthy: Screenings, Tests and Vaccines.
Managing Chronic (Long Term) Conditions.
Member Experience with Health Plan.

[[Page 56400]]

Member Complaints and Changes in the Health Plan's Performance.
Health Plan Customer Service.
------------------------------------------------------------------------

Table 6--Part D Domains
------------------------------------------------------------------------
Domain
-------------------------------------------------------------------------
Drug Plan Customer Service.
Member Complaints and Changes in the Drug Plan's Performance.
Member Experience with the Drug Plan.
Drug Safety and Accuracy of Drug Pricing.
------------------------------------------------------------------------

Currently, Star Ratings for domains are calculated using the
unweighted mean of the Star Ratings of the included measures. They are
displayed to the nearest whole star, using a 1-5 star scale. We propose
to continue this policy at paragraph (b)(2)(ii). We also propose that a
contract must have stars for at least 50 percent of the measures
required to be reported for that domain for that contract type to have
that domain rating calculated in order to have enough data to reflect
the contract's performance on the specific dimension. For example, if a
contract is rated only on one measure in Staying Healthy: Screenings,
Tests and Vaccines, that one measure would not necessarily be
representative of how the contract performs across the whole domain so
we do not believe it is appropriate to calculate and display a domain
rating. We propose to continue this policy by providing, at paragraph
(b)(2)(i), that a minimum number of measures must be reported for a
domain rating to be calculated.
o. Part C and D Summary Ratings
In the current rating system the Part C summary rating provides a
rating of the health plan quality and the Part D summary rating
provides a rating of the prescription drug plan quality. We are
proposing, at Sec. Sec. 422.166(c) and 423.186(c), to codify
regulation text governing the adoption of Part C summary ratings and
Part D summary ratings. An MA-only plan and a Part D standalone plan
would receive a summary rating only for, respectively, Part C measures
and Part D measures.
First, in paragraphs (c)(1) of each section, we propose the overall
formula for calculating the summary ratings for Part C and Part D.
Under current policy, the summary rating for an MA-only contract is
calculated using a weighted mean of the Part C measure-level Star
Ratings with up to two adjustments: The reward factor (if applicable)
and the categorical adjustment index (CAI); similarly, the current
summary rating for a PDP contract is calculated using a weighted mean
of the Part D measure-level Star Ratings with up to two adjustments:
The reward factor (if applicable) and the CAI. We propose in Sec. Sec.
422.166(c)(1) and 423.186(c)(1) that the Part C and Part D summary
ratings would be calculated as the weighted mean of the measure-level
Star Ratings with an adjustment to reward consistently high performance
(reward factor) and the application of the CAI, pursuant to paragraph
(f) (where we propose the specifics for these adjustments) for Parts C
and D, respectively.
Second, and also consistent with current policy, we propose an MA-
only contract and PDP would have a summary rating calculated only if
the contract meets the minimum number of rated measures required for
its respective summary rating: A contract must have scores for at least
50 percent of the measures required to be reported for the contract
type to have the summary rating calculated. The proposed regulation
text would be codified as paragraph (c)(2)(i) of Sec. Sec. 422.166 and
423.186. The same rules would be applied to both the Part C and Part D
summary ratings for the minimum number of rated measures and flags for
display. We would apply this regulation to require a MA-PD to have a
Part C and a Part D summary rating if the minimum requirement of rated
measures for each summary rating type is met. The improvement measures
are based on identified measures that are each counted towards meeting
the proposed requirement for the calculation of a summary rating. We
propose (at paragraph (c)(2)(ii)) that the improvement measures
themselves are not included in the count of minimum number of measures
for the Part C or Part D summary ratings.
Third, we propose a paragraph (c)(3) in both Sec. Sec. 422.166 and
423.186 to provide that the summary ratings are on a 1 to 5 star scale
in half-star increments. Traditional rounding rules would be employed
to round the summary rating to the nearest half-star. The summary
rating would be displayed in HPMS and Medicare Plan Finder to the
nearest half-star. As proposed in Sec. Sec. 422.166(h) and 423.186(h),
if a contract has not met the measure requirement for calculating a
summary rating, the display in HPMS (and on Medicare Plan Finder) for
the applicable summary rating would be the flag ``Not enough data
available'' or if the measurement period is less than 1 year past the
contract's effective date the flag would be ``Plan too new to be
measured''.
We welcome comments on the calculations for the Part C and D
summary ratings.
p. Overall Rating
The overall Star Rating is a global rating that summarizes the
plan's quality and performance for the types of services offered by the
plans under the rated contract. We propose at Sec. Sec. 422.166(d) and
423.186(d) to codify the standards for calculating and assigning
overall Star Ratings for MA-PD contracts. The overall rating for an MA-
PD contract is proposed to be calculated using a weighted mean of the
Part C and Part D measure level Star Ratings, respectively, with an
adjustment to reward consistently high performance described in
paragraph (f)(1) and the application of the CAI, pursuant to described
in paragraph (f)(2).
Consistent with current policy, we propose at paragraph (d)(2) that
an MA-PD would have an overall rating calculated only if the contract
receives both a Part C and Part D summary rating, and scores for at
least 50% of the measures are required to be reported for the contract
type to have the overall rating calculated. As with the Part C and D
summary ratings, the Part C and D improvement measures would not be
included in the count for the minimum number of measures for the
overall rating. Any measure that shares the same data and is included
in both the Part C and Part D summary ratings would be included only
once in the calculation for the overall rating; for example, Members
Choosing to Leave the Plan and Complaints about the Plan. As with
summary ratings, we propose that overall MA-PD ratings would use a 1 to
5 star scale in half-star increments; traditional rounding rules would
be employed to round the overall rating to the nearest half-star. These
policies are proposed as paragraphs (d)(2)(i) through (iv).
In accordance with our general proposed policy at Sec. Sec.
422.166(h) and 423.186(h), the overall rating would be posted on HPMS
and Medicare Plan Finder, with specific messages for lack of ratings
for certain reasons. Applying that rule, if an MA-PD contract has only
one of the two required summary ratings, the overall rating would not
be calculated and the display in HPMS would be the flag ``Not enough
data available.''
For QBP purposes, low enrollment contracts and new MA plans are
defined in Sec. 422.252. Low enrollment contract

[[Page 56401]]

means a contract that could not undertake Healthcare Effectiveness Data
and Information Set (HEDIS) and Health Outcomes Survey (HOS) data
collections because of a lack of a sufficient number of enrollees to
reliably measure the performance of the health plan; new MA plan means
a MA contract offered by a parent organization that has not had another
MA contract in the previous 3 years. Low enrollment contracts and new
plans do not receive an overall or summary rating because of the lack
of necessary data. However, they are treated as qualifying plans for
the purposes of QBPs. Section 1853(o)(3)(A)(ii)(II) of the Act, as
implemented at Sec. 422.258(d)(7), provides that for 2013 and
subsequent years, CMS shall develop a method for determining whether an
MA plan with low enrollment is a qualifying plan for purposes of
receiving an increase in payment under section 1853(o). This
determination is applied at the contract level and thus determines
whether a contract (meaning all plans under that contract) is a
qualifying contract. The statute, at section 1853(o)(3)(A)(iii) of the
Act, provides for treatment of new MA plans as qualifying plans
eligible for a specific QBP. We therefore propose, at Sec. Sec.
422.166(d)(3) and 423.186(d)(3), that low enrollment contracts (as
defined in Sec. 422.252 of this chapter) and new MA plans (as defined
in Sec. 422.252 of this chapter) do not receive an overall and/or
summary rating; they would be treated as qualifying plans for the
purposes of QBPs as described in Sec. 422.258(d)(7) of this chapter
and announced through the process described for changes in and adoption
of payment and risk adjustment policies in section 1853(b) of the Act.
This proposal would merely codify existing policy and practice.
q. Measure Weights
Prior to the 2012 Part C and D Plan Ratings (now known as Star
Ratings), all individual measures included in the program were weighted
equally, suggesting equal importance. Based on feedback from
stakeholders, including health and drug plans and beneficiary advocacy
groups, we moved to provide greater weight to clinical outcomes and
lesser weight to process measures. Patient experience and access
measures were also given greater weight than process measures, but not
as high as outcome measures. The differential weighting was implemented
to help create further incentives to drive improvement in clinical
outcomes, patient experience, and access. These differential weights
for measures were implemented for the 2012 Ratings following a May 2011
Request for Comments and adopted in the CY2013 Rate Announcement and
Final Call Letter.
In the Contract Year 2012 Final Rule for Changes to the Medicare
Advantage and the Medicare Prescription Drug Benefit Programs rule (79
FR 21486), we stated that scoring methodologies should also consider
improvement as an independent goal. To this end, we implemented in the
CY 2013 Rate Announcement the Part C and D improvement measures that
measure the overall improvement or decline in individual measure scores
from the prior to the current year. Given the importance of recognizing
quality improvement as an independent goal, for the 2015 Star Ratings,
we proposed and subsequently finalized through the 2015 Rate
Announcement and final Call Letter an increase in the weight of the
improvement measure from 3 times to 5 times that of a process measure.
This weight aligns the Part C and D Star Ratings program with value-
based purchasing programs in Medicare fee-for-service which heavily
weight improvement.
We are proposing in Sec. Sec. 422.166(e) and 423.186(e) to
continue the current weighting of measures in the Part C and D Star
Ratings program by assigning the highest weight (5) to improvement
measures, followed by outcome and intermediate outcome measures (weight
of 3), then by patient experience/complaints and access measures
(weight of 1.5), and finally process measures (weight of 1). We are
considering increasing the weight of the patient experience/complaints
and access measures and are interested in stakeholder feedback on this
potential change in order to reflect better the importance of these
issues in plan performance. If we were to increase the weight, we are
considering increasing it from a weight of 1.0 to between 1.5 and 3
similar to outcome measures. This increased weight would reflect CMS'
commitment to serve Medicare beneficiaries by putting the patients
first, including their assessments of the care received by plans. We
solicit comment on this point, particularly the potential change in the
weight of the patient experience/complaints and access measures.
Table 7 includes the proposed measure categories, the definitions
of the measure categories, and the weights. In calculating the summary
and overall ratings, a measure given a weight of 3 counts three times
as much as a measure given a weight of 1. In section III.A.12. of this
proposed rule, we propose (as Table 2) the measure set and include the
category and weight for each measure; those weight assignments are
consistent with this proposal. We propose that as new measures are
added to the Part C and D Star Ratings, we would assign the measure
category based on these categories and the regulation text proposed at
Sec. Sec. 422.166(e) and 423.186(e), subject to two exceptions. We
propose in paragraphs (e)(2) of each section as the first exception, to
assign new measures to the Star Ratings program a weight of 1 for their
first year in the Star Ratings. In subsequent years the weight
associated with the measure weighting category would be used. This is
consistent with current policy.

Table 7--Measure Categories, Definitions and Weights
----------------------------------------------------------------------------------------------------------------
Measure category Definition Weight
----------------------------------------------------------------------------------------------------------------
Improvement................................. Part C and Part D improvement measures are derived 5
through comparisons of a contract's current and
prior year measure scores.
Outcome and Intermediate Outcome............ Outcome measures reflect improvements in a 3
beneficiary's health and are central to assessing
quality of care. Intermediate outcome measures
reflect actions taken which can assist in
improving a beneficiary's health status.
Controlling Blood Pressure is an example of an
intermediate outcome measure where the related
outcome of interest would be better health status
for beneficiaries with hypertension.
Patient Experience/Complaints............... Patient experience measures reflect beneficiaries' 1.5
perspectives of the care and services they
received.
Access...................................... Access measures reflect processes and issues that 1.5
could create barriers to receiving needed care.
Plan Makes Timely Decisions about Appeals is an
example of an access measure.

[[Page 56402]]

Process..................................... Process measures capture the health care services 1
provided to beneficiaries which can assist in
maintaining, monitoring, or improving their
health status.
----------------------------------------------------------------------------------------------------------------

In addition, we propose (at Sec. Sec. 422.166(e)(3) and
423.186(e)(3)) a second exception to the general weighting rule for MA
and Part D contracts that have service areas that are wholly located in
Puerto Rico. We recognize the additional challenge unique to Puerto
Rico related to the medication adherence measures used in the Star
Ratings Program due to the lack of Low Income Subsidy (LIS). For the
2017 Star Ratings, we implemented a different weighting scheme for the
Part D medication adherence measures in the calculation of the overall
and summary Star Ratings for contracts that solely serve the population
of beneficiaries in Puerto Rico. We propose, at Sec. Sec.
422.166(e)(3) and 423.186(e)(3), to continue to reduce the weights for
the adherence measures to 0 for the summary and overall rating
calculations and maintain the weight of 3 for the adherence measures
for the improvement measure calculations for contracts that solely
serve the population of beneficiaries in Puerto Rico. We request
comment on our proposed weighting strategy for Measure Weights
generally and for Puerto Rico, including the weighting values
themselves.
r. Application of the Improvement Measure Scores
Consistent with current policy, we propose at Sec. Sec. 422.166(g)
and 423.186(g) a hold harmless provision for the inclusion or exclusion
of the improvement measure(s) for highly-rated contracts' highest
ratings. We are proposing, in paragraphs (g)(1)(i) through (iii), a
series of rules that specify when the improvement measure is included
in calculating overall and summary ratings.
MA-PDs would have the hold harmless provisions for highly-rated
contracts applied for the overall rating. For an MA-PD that receives an
overall rating of 4 stars or more without the use of the improvement
measures and with all applicable adjustments (CAI and the reward
factor), a comparison of the rounded overall rating with and without
the improvement measures is done. The overall rating with the
improvement measures used in the comparison would include up to two
adjustments, the reward factor (if applicable) and the CAI. The overall
rating without the improvement measures used in the comparison would
include up to two adjustments, the reward factor (if applicable) and
the CAI. The higher overall rating would be used for the overall
rating. For an MA-PD that has an overall rating of 2 stars or less
without the use of the improvement measure and with all applicable
adjustments (CAI and the reward factor), the overall rating would
exclude the improvement measure. For all others, the overall rating
would include the improvement measure.
MA-only and PDPs would have the hold harmless provisions for
highly-rated contracts applied for the Part C and D summary ratings,
respectively. For an MA-only or PDP that receives a summary rating of 4
stars or more without the use of the improvement measure and with all
applicable adjustments (CAI and the reward factor), a comparison of the
rounded summary rating with and without the improvement measure and up
to two adjustments, the reward factor (if applicable) and CAI, is done.
The higher summary rating would be used for the summary rating for the
contract's highest rating. For MA-only and PDPs with a summary rating
of 2 stars or less without the use of the improvement measure and with
all applicable adjustments (CAI and the reward factor), the summary
rating would exclude the improvement measure. For all others, the
summary rating would include the improvement measure. MA-PDs would have
their summary ratings calculated with the use of the improvement
measure regardless of the value of the summary rating.
In addition, at paragraph (g)(2), we also propose text to clarify
that summary ratings use only the improvement measure associated with
the applicable Part C or D performance.
We welcome comments on the hold harmless improvement provision we
propose to continue to use, particularly any clarifications in how and
when it should be applied.
s. Reward Factor (Formerly Referred to as Integration Factor)
In 2011, the integration factor was added to the Star Ratings
methodology to reward contracts that have consistently high
performance. The integration factor was later renamed the reward
factor. (The reference to either reward or integration factor refers to
the same aspect of the Star Ratings.) This factor is calculated
separately for the Part C summary rating, Part D summary rating for MA-
PDs, Part D summary rating for PDPs, and the overall rating for MA-PDs.
It is currently added to the summary (Part C or D) and overall rating
of contracts that have both high and stable relative performance for
the associated summary or overall rating. The contract's performance
will be assessed using its weighted mean relative to all rated
contracts without adjustments.
The contract's stability of performance will be assessed using its
weighted variance relative to all rated contracts at the same rating
level (overall, summary Part C, and summary Part D). The Part D summary
thresholds for MA-PDs are determined independently of the thresholds
for PDPs. We propose to codify the calculation and use of the reward
factor in Sec. Sec. 422.166(f)(1) and 423.186(f)(1).
Annually, we propose to update the performance and variance
thresholds for the reward factor based upon the data for the Star
Ratings year, consistent with current policy. A multistep process would
be used to determine the values that correspond to the thresholds for
the reward factors for the summary and/or overall Star Ratings for a
contract. The determination of the reward factors would rely on the
contract's ranking of its weighted variance and weighted mean of the
measure-level stars to the summary or overall rating relative to the
distribution of all contracts' weighted variance and weighted mean to
the summary and/or overall rating. A contract's weighted variance would
be calculated using the quotient of the following two values: (1) The
product of the number of applicable measures based on rating-type and
the sum of the products of the weight of each applicable measure and
its squared deviation \42\ and (2) the product of one less than the
number of applicable measures and the sum of the weights of the
applicable measures. A contract's weighted mean performance would be

[[Page 56403]]

found by calculating the quotient of the following two values: (1) The
sum of the products of the weight of a measure and its associated
measure-level Star Ratings of the applicable measures for the rating-
type and (2) the sum of the weights of the applicable measures for the
rating type. The thresholds for the categorization of the weighted
variance and weighted mean for contracts would be based upon the
distribution of the calculated values of all rated contracts of the
same type. Because highly-rated contracts may have the improvement
measure(s) excluded in the determination of their final highest rating,
each contract's weighted variance and weighted mean is calculated both
with and without the improvement measures.
---------------------------------------------------------------------------

\42\ A deviation is the difference between the performance
measure's Star Rating and the weighted mean of all applicable
measures for the contract.
---------------------------------------------------------------------------

A contract's weighted variance is categorized into one of three
mutually exclusive categories, identified in Table 8A, based upon the
weighted variance of its measure-level Star Ratings and its ranking
relative to all other contracts' weighted variance for the rating type
(Part C summary for MA-PDs and MA-only, overall for MA-PDs, Part D
summary for MA-PDs, and Part D summary for PDPs), and the manner in
which the highest rating for the contract was determined--with or
without the improvement measure(s). For an MA-PD's Part C and D summary
ratings, its ranking is relative to all other contracts' weighted
variance for the rating type (Part C summary, Part D summary) with the
improvement measure. Similarly, a contract's weighted mean is
categorized into one of three mutually exclusive categories, identified
in Table 8B, based on its weighted mean of all measure-level Star
Ratings and its ranking relative to all other contracts' weighted means
for the rating type (Part C summary for MA-PDs and MA-only, overall,
Part D summary for MA-PDs, and Part D summary for PDPs) and the manner
in which the highest rating for the contract was determined--with or
without the improvement measure(s). For an MA-PD's Part C and D summary
ratings, its ranking is relative to all other contracts' weighted means
for the rating type (Part C summary, Part D summary) with the
improvement measure. Further, the same threshold criterion is employed
per category regardless of whether the improvement measure was included
or excluded in the calculation of the rating. The values that
correspond to the thresholds are based on the distribution of all rated
contracts and are determined with and without the improvement
measure(s) and exclusive of any adjustments. Table 8A details the
criteria for the categorization of a contract's weighted variance for
the summary and overall ratings. Table 8B details the criteria for the
categorization of a contract's weighted mean (performance) for the
overall and summary ratings. The values that correspond to the cutoffs
are provided each year during the plan preview and are published in the
Technical Notes.

Table 8A--Categorization of a Contract Based on Its Weighted Variance Ranking
--------------------------------------------------------------------------------------------------------------------------------------------------------
Variance category Ranking
--------------------------------------------------------------------------------------------------------------------------------------------------------
Low............................................. Below the 30th percentile.
Medium.......................................... At or above the 30th percentile to less than the 70th percentile.
High............................................ At or above the 70th percentile.
--------------------------------------------------------------------------------------------------------------------------------------------------------

Table 8B--Categorization of a Contract Based on Weighted Mean (Performance) Ranking
--------------------------------------------------------------------------------------------------------------------------------------------------------
Weighted mean (performance) category Ranking
--------------------------------------------------------------------------------------------------------------------------------------------------------
High............................................ At or above the 85th percentile.
Relatively High................................. At or above the 65th percentile to less than the 85th percentile.
Other........................................... Below the 65th percentile.
--------------------------------------------------------------------------------------------------------------------------------------------------------

These definitions of high, medium, and low weighted variance
ranking and high, relatively high, and other weighted mean ranking
would be codified in narrative form in paragraph (f)(1)(ii).
A contract's categorization for both weighted mean and weighted
variance determines the value of the reward factor. Table 9 shows the
values of the reward factor based on the weighted variance and weighted
mean categorization; these values would be codified, as a chart, in
paragraph (f)(i)(iii). The weighted variance and weighted mean
thresholds for the reward factor are available in the Technical Notes
and updated annually.

Table 9--Categorization of a Contract for the Reward Factor
------------------------------------------------------------------------
Weighted mean
Weighted variance (performance) Reward factor
------------------------------------------------------------------------
Low............................... High................ 0.4
Medium............................ High................ 0.3
Low............................... Relatively High..... 0.2
Medium............................ Relatively high..... 0.1
High.............................. Other............... 0.0
------------------------------------------------------------------------

We propose to continue the use of a reward factor to reward
contracts with consistently high and stable performance over time.
Further, we propose to continue to employ the methodology described in
this subsection to categorize and determine the reward factor for
contracts. As proposed in paragraphs (c)(1) and (d)(1), these reward
factor adjustments would be applied at the summary and overall rating
level.

[[Page 56404]]

t. Categorical Adjustment Index
A growing body of evidence links the prevalence of beneficiary-
level social risk factors with performance on measures included in
Medicare value-based purchasing programs, including MA and Part D Star
Ratings. With support from our contractors, we undertook research to
provide scientific evidence as to whether MA organizations or Part D
sponsors that enroll a disproportionate number of vulnerable
beneficiaries are systematically disadvantaged by the current Star
Ratings. In 2014, we issued a Request for Information to gather
information directly from organizations to supplement the data that CMS
collects, as we believe that plans and sponsors are uniquely positioned
to provide both qualitative and quantitative information that is not
available from other sources. In February and September 2015, we
released details on the findings of our research.\43\ We have also
reviewed reports about the impact of socio-economic status (SES) on
quality ratings, such as the report published by the NQF posted at
www.qualityforum.org/risk_adjustment_ses.aspx and the Medicare Payment
Advisory Commission's (MedPAC) Report to the Congress: Medicare Payment
Policy posted at http://www.medpac.gov/docs/default-source/reports/march-2016-report-to-the-congress-medicare-payment-policy.pdf?sfvrsn=0.
We have more recently been reviewing reports prepared by the Office of
the Assistant Secretary for Planning and Evaluation (ASPE \44\) and the
National Academies of Sciences, Engineering, and Medicine on the issue
of measuring and accounting for social risk factors in CMS' value-based
purchasing and quality reporting programs, and we have been considering
options on how to address the issue in these programs. On December 21,
2016, ASPE submitted a Report to Congress on a study it was required to
conduct under section 2(d) of the Improving Medicare Post-Acute Care
Transformation (IMPACT) Act of 2014. The study analyzed the effects of
certain social risk factors of Medicare beneficiaries on quality
measures and measures of resource use in nine Medicare value-based
purchasing programs. The report also included considerations for
strategies to account for social risk factors in these programs. A
January 10, 2017 report released by the National Academies of Sciences,
Engineering, and Medicine provided various potential methods for
measuring and accounting for social risk factors, including stratified
public reporting.\45\
---------------------------------------------------------------------------

\43\ The February release can be found at https://www.cms.gov/medicareprescription-drug-coverage/prescriptiondrugcovgenin/performancedata.html.
The September release can be found at https://www.cms.gov/Medicare/Prescription-Drug-Coverage/PrescriptionDrugCovGenIn/Downloads/Research-on-the-Impact-of-Socioeconomic-Status-on-Star-Ratingsv1-09082015.pdf.
\44\ https://aspe.hhs.gov/pdf-report/report-congress-social-risk-factors-and-performance-under-medicares-value-based-purchasing-programs.
\45\ National Academies of Sciences, Engineering, and Medicine.
2017. Accounting for social risk factors in Medicare payment.
Washington, DC: The National Academies Press--https://www.nap.edu/catalog/21858/accounting-for-social-risk-factors-in-medicare-payment-identifying-social.
---------------------------------------------------------------------------

We have also engaged NCQA and the PQA to examine their measure
specifications used in the Star Ratings program to determine if re-
specification is warranted. The majority of measures used for the Star
Ratings program are consensus-based. Measure specifications can be
changed only by the measure steward (the owner and developer of the
measure). Thus, measure scores cannot be adjusted for differences in
enrollee case mix unless required by the measure steward. Measure re-
specification is a multiyear process. For example, NCQA has a standard
process for reviewing any measure and determining whether a measure
requires re-specification. NCQA's re-evaluation process is designed to
ensure any resulting measure updates have desirable attributes of
relevance, scientific soundness, and feasibility:
Relevance describes the extent to which the measure
captures information important to different groups, for example,
consumers, purchasers, policymakers. To determine relevance, NCQA
assesses issues such as health importance, financial importance, and
potential for improvement among entities being measured.
Scientific soundness captures the extent to which the
measure adheres to clinical evidence and whether the measure is valid,
reliable, and precise.
Feasibility captures the extent to which a measure can be
collected at reasonable cost and without undue burden. To determine
feasibility, NCQA also assesses whether a measure is precisely
specified and can be audited. The overall process for assessing the
value of re-specification emphasizes multi-stakeholder input, use of
evidence-based guidelines and data, and wide public input.
Beginning with 2017 Star Ratings, we implemented the CAI that
adjusts for the average within-contract disparity in performance
associated with the percentages of beneficiaries who receive a low
income subsidy and/or are dual eligible (LIS/DE) and/or have disability
status. We developed the CAI as an interim analytical adjustment while
we developed a long-term solution. The adjustment factor varies by a
contract's categorization into a final adjustment category that is
determined by a contract's proportion of LIS/DE and beneficiaries with
disabilities. By design, the CAI values are monotonic in at least one
dimension (LIS/DE or disability status) and thus, contracts with larger
LIS/DE and/or disability percentages realize larger positive
adjustments. MA-PD contracts can have up to three rating-specific CAI
adjustments--one for the overall Star Rating and one for each of the
summary ratings (Part C and Part D). MA-only contracts can have one
adjustment for the Part C summary rating. PDPs can have one adjustment
for the Part D summary rating. We propose to codify the calculation and
use of the reward factor and the CAI in Sec. Sec. 422.166(f)(2) and
423.186(f)(2), while we consider other alternatives for the future.
As is currently done today, the adjusted measure scores of a subset
of the Star Ratings measures would serve as the foundation for the
determination of the index values. Measures would be excluded as
candidates for adjustment if the measures are already case-mix adjusted
for SES (for example, CAHPS and HOS outcome measures), if the focus of
the measurement is not a beneficiary-level issue but rather a plan or
provider-level issue (for example, appeals, call center, Part D price
accuracy measures), if the measure is scheduled to be retired or
revised during the Star Rating year in which the CAI is being applied,
or if the measure is applicable to only Special Needs Plans (SNPs) (for
example, SNP Care Management, Care for Older Adults measures). We
propose to codify these paragraphs for determining the measures for CAI
values at paragraph (f)(2)(ii).The categorization of a beneficiary as
LIS/DE for the CAI would rely on the monthly indicators in the
enrollment file. For the determination of the CAI values, the
measurement period would correspond to the previous Star Ratings year's
measurement period. For the identification of a contract's final
adjustment category for its application of the CAI in the current
year's Star Ratings Program, the measurement period would align with
the Star Ratings year. If a beneficiary was designated as full or
partially dually eligible or receiving a LIS at any time during the
applicable measurement period, the

[[Page 56405]]

beneficiary would be categorized as LIS/DE. For the categorization of a
beneficiary as disabled, we would employ the information from the
Social Security Administration (SSA) and Railroad Retirement Board
(RRB) record systems. Disability status would be determined using the
variable original reason for entitlement (OREC) for Medicare. The
percentages of LIS/DE and disability per contract would rely on the
Medicare enrollment data from the applicable measurement year. The
counts of beneficiaries for enrollment and categorization of LIS/DE and
disability would be restricted to beneficiaries that are alive for part
or all of the month of December of the applicable measurement year.
Further, a beneficiary would be assigned to the contract based on the
December file of the applicable measurement period. We propose to
codify these paragraphs for determining the enrollment counts at
paragraph (f)(2)(i)(B).
Using the subset of the measures that meet the basic inclusion
requirements, we propose to select the measure set for adjustment based
on the analysis of the dispersion of the LIS/DE within-contract
differences using all reportable numeric scores for contracts receiving
a rating in the previous rating year. For the selection of the Part D
measures, MA-PDs and PDPs would be independently analyzed. For each
contract, the proportion of beneficiaries receiving the measured
clinical process or outcome for LIS/DE and non-LIS/DE beneficiaries
would be estimated separately, and the difference between the LIS/DE
and non-LIS/DE performance rates per contract would be calculated. CMS
would use a logistic mixed effects model for estimation purposes that
includes LIS/DE as a predictor, random effects for contract and an
interaction term of contract and LIS/DE.
Using the analysis of the dispersion of the within-contract
disparity of all contracts included in the modelling, the measures for
adjustment would be identified employing the following decision
criteria: (1) A median absolute difference between LIS/DE and non-LIS/
DE beneficiaries for all contracts analyzed is 5 percentage points or
more or \46\ (2) the LIS/DE subgroup performed better or worse than the
non-LIS/DE subgroup in all contracts. We propose to codify these
paragraphs for the selection criteria for the adjusted measures for the
CAI at paragraph (f)(2)(iii).
---------------------------------------------------------------------------

\46\ The use of the word `or' in the decision criteria implies
that if one condition or both conditions are met, the measure would
be selected for adjustment.
---------------------------------------------------------------------------

The Part D measures for PDPs would be analyzed separately. In order
to apply consistent adjustments across MA-PDs and PDPs, the Part D
measures would be selected by applying the selection criteria to MA-PDs
and PDPs independently and, then, selecting measures that met the
criteria for either delivery system. The measure set for adjustment of
Part D measures for MA-PDs and PDPs would be the same after applying
the selection criteria and pooling the Part D measures for MA-PDs and
PDPs. We propose to codify these paragraphs for the selection of the
adjusted measure set for the CAI for MA-PDs and PDPs at (f)(2)(iii)(C).
We also seek comment on the proposed methodology and criteria for the
selection of the measures for adjustment. Further, we seek comment on
alternative methods or rules to select the measures for adjustment for
future rulemaking.
Annually, while the CAI is being developed using the rules we are
proposing here, we would release on CMS.gov an updated analysis of the
subset of the Star Ratings measures identified for adjustment using
this rule as ultimately finalized. Basic descriptive statistics would
include the minimum, median, and maximum values for the within-contract
variation for the LIS/DE differences. The set of measures for
adjustment for the determination of the CAI would be announced in the
draft Call Letter.
We propose, at paragraph (f)(2)(iv) of each regulation, to
determine the adjusted measure scores for LIS/DE and disability status
from regression models of beneficiary-level measure scores that adjust
for the average within-contract difference in measure scores for MA or
PDP contracts. The approach employed to determine the adjusted measure
scores approximates case-mix adjustment using a beneficiary-level,
logistic regression model with contract fixed effects and beneficiary-
level indicators of LIS/DE and disability status, similar to the
approach currently used to adjust CAHPS patient experience measures.
However, unlike CAHPS case-mix adjustment, the only adjusters would be
LIS/DE and disability status.
The sole purpose of the adjusted measure scores is for the
determination of the CAI values. The adjusted measure scores would be
converted to a measure-level Star Rating using the measure thresholds
for the Star Ratings year that corresponds to the measurement period of
the data employed for the CAI determination.
All contracts would have their adjusted summary rating(s) and for
MA-PDs, an adjusted overall rating, calculated employing the standard
methodology proposed at Sec. Sec. 422.166 and 423.186 (which would
also be outlined in the Technical Notes each year), using the subset of
adjusted measure-level Star Ratings and all other unadjusted measure-
level Star Ratings. In addition, all contracts would have their summary
rating(s) and for MA-PDs, an overall rating, calculated using the
traditional methodology and all unadjusted measure-level Star Ratings.
For the annual development of the CAI, the distribution of the
percentages for LIS/DE and disabled using the enrollment data that
parallels the previous Star Ratings year's data would be examined to
determine the number of equal-sized initial groups for each attribute
(LIS/DE and disabled). The initial categories would be created using
all groups formed by the initial LIS/DE and disabled groups. The total
number of initial categories would be the product of the number of
initial groups for LIS/DE and the number of initial groups for the
disabled dimension.
The mean difference between the adjusted and unadjusted summary or
overall ratings per initial category would be calculated and examined.
The initial categories would then be collapsed to form the final
adjustment categories. The collapsing of the initial categories to form
the final adjustment categories would be done to enforce monotonicity
in at least one dimension (LIS/DE or disabled). The mean difference
within each final adjustment category by rating-type (Part C, Part D
for MA-PD, Part D for PDPs, or overall) would be the CAI values for the
next Star Ratings year.
The percentage of LIS/DE is a critical element in the
categorization of contracts into the final adjustment category to
identify a contract's CAI. Starting with the 2017 Star Ratings, we
applied an additional adjustment for contracts that solely serve the
population of beneficiaries in Puerto Rico to address the lack of LIS
in Puerto Rico. The adjustment results in a modified percentage of LIS/
DE beneficiaries that is subsequently used to categorize contracts into
the final adjustment category for the CAI.
We propose to continue this adjustment and to calculate the
contract-level modified LIS/DE percentage for Puerto Rico using the
following sources of information: The most recent data available at the
time of the development of the model of both the 1-year American
Community Survey (ACS) estimates for the percentage of people living
below the Federal Poverty Level (FPL) and the ACS 5-year estimates for
the percentage of people living below 150 percent of the FPL, and

[[Page 56406]]

the Medicare enrollment data from the same measurement period used for
the Star Ratings year.
The data to develop the model would be limited to the 10 states,
drawn from the 50 states plus the District of Columbia, with the
highest proportion of people living below the FPL as identified by the
1-year ACS estimates. Further, the Medicare enrollment data would be
aggregated from MA contracts that had at least 90 percent of their
enrolled beneficiaries with mailing addresses in the 10 highest poverty
states. A linear regression model would be developed using the known
LIS/DE percentage and the corresponding DE percentage from the subset
of MA contracts.
The estimated slope from the linear regression approximates the
expected relationship between LIS/DE for each contract in Puerto Rico
and its DE percentage. The intercept term is adjusted for use with
Puerto Rico contracts by assuming that the Puerto Rico model will pass
through the point (x, y) where x is the observed average DE percentage
in the Puerto Rico contracts based on the enrollment data, and y is the
expected average percentage of LIS/DE in Puerto Rico. The expected
average percentage of LIS/DE in Puerto Rico (the y value) is not
observable, but is estimated by multiplying the observed average
percentage of LIS/DE in the 10 highest poverty states by the ratio
based on the most recent 5-year ACS estimates of the percentage living
below 150 percent of the FPL in Puerto Rico compared to the
corresponding percentage in the set of 10 states with the highest
poverty level. (Further details of the methodology can be found in the
CAI Methodology Supplement available at http://go.cms.gov/partcanddstarratings.)
Using the model developed from this process, the estimated modified
LIS/DE percentage for contracts operating solely in Puerto Rico would
be calculated. The maximum value for the modified LIS/DE indicator
value per contract would be capped at 100 percent. All estimated
modified LIS/DE values for Puerto Rico would be rounded to 6 decimal
places when expressed as a percentage.
We propose to continue to employ the LIS/DE indicator for contracts
operating solely in Puerto Rico while the CAI is being used as an
interim analytical adjustment. Further, we propose that the modeling
results would continue to be detailed in the appendix of the Technical
Notes and the modified LIS/DE percentages would be available for
contracts to review during the plan previews.
We propose to continue the use of the CAI while the measure
stewards continue their examination of the measure specifications and
ASPE completes their studies mandated by the IMPACT Act and formalizes
final recommendations. Contracts would be categorized based on their
percentages of LIS/DE and disability using the data as outlined
previously. The CAI value would be the same for all contracts within
each final adjustment category. The CAI values would be determined
using data from all contracts that meet reporting requirements from the
prior year's Star Rating data. The CAI calculation for the PDPs would
be performed separately and use the PDP specific cut points. Under our
proposal, CMS would include the CAI values in the draft and final Call
Letter attachment of the Advance Notice and Rate Announcement each year
while the interim solution is applied. The values for the CAI value
would be displayed to 6 decimal places. Rounding would take place after
the application of the CAI value and if applicable, the reward factor;
standard rounding rules would be employed. (All summary and overall
Star Ratings are displayed to the nearest half-star.)
While we consider the recommendations from the ASPE report,
findings from measure developers, and work by NQF on risk adjustment
for quality measures, we are continuing to collaborate with
stakeholders. We are seeking to balance accurate measurement of genuine
plan performance, effective identification of disparities, and
maintenance of incentives to improve the outcomes for disadvantaged
populations. Keeping this in mind, we continue to seek public comment
on whether and how we should account for low SES and other social risk
factors in the Part C and D Star Ratings.
We look forward to continuing to work with stakeholders as we
consider the issue of accounting for LIS/DE, disability and other
social risk factors and reducing health disparities in CMS programs. As
we have stated previously, we are continuing to consider options to how
to measure and account for social risk factors in our Star Ratings
program. What we discovered though our research to date is, although a
sponsoring organization's administrative costs may increase as a result
of enrolling significant numbers of beneficiaries with LIS/DE status or
disabilities, the impacts of SES on the quality ratings are quite
modest, affect only a small subset of measures, and do not always
negatively impact the measures. However, CMS would like to better
understand whether, how, and to what extent a sponsoring organization's
administrative costs differ for caring for low-income beneficiaries and
we welcome comment on that topic. Administrative costs may include non-
medical costs such as transportation costs, coordination costs,
marketing, customer service, quality assurance and costs associated
with administering the benefit. We continue our commitment toward
ensuring that all beneficiaries have access to and receive excellent
care, and that the quality of care furnished by plans is assessed
fairly in CMS programs.
u. High and Low Performing Icons
Consistent with our current practice, we are proposing regulation
text to govern assignment of high and low performing icons at
Sec. Sec. 422.166(i) and 423.186(i). We propose to continue current
policy that a contract would receive a high performing icon as a result
of its performance on the Part C and D measures. The high performing
icon would be assigned to an MA-only contract for achieving a 5-star
Part C summary rating, a PDP contract for a 5-star Part D summary
rating, and an MA-PD contract for a 5-star overall rating.
We propose that a contract would receive a low performing icon as a
result of its performance on the Part C or Part D summary ratings. The
low performing icon would be calculated by evaluating the Part C and
Part D summary ratings for the current year and the past 2 years (for
example, the 2016, 2017, and 2018 Star Ratings). If the contract had
any combination of Part C and Part D summary ratings of 2.5 or lower in
all 3 years of data, it would be marked with a low performing icon. A
contract must have a summary rating in either Part C or Part D for all
3 years to be considered for this icon. These rules would be codified
at Sec. Sec. 422.166(i)(2)(i) and 423.186(i)(2)(i).
We also propose, at paragraph (i)(2)(ii), to continue our policy of
disabling the Medicare Plan Finder online enrollment function for
Medicare health and prescription drug plans with the low-performing
icon to ensure that beneficiaries are fully aware that they are
enrolling in a plan with low quality and performance ratings; we
believe this is an important beneficiary protection to ensure that the
decision to enroll in a low rated and low performing plan has been
thoughtfully considered. Beneficiaries who still want to enroll in a
low-performing plan or who may need to in order to get the benefits and
services they require (for example, in geographical areas with limited
plans) will be warned, via explanatory

[[Page 56407]]

messaging of the plan's poorly rated performance and directed to
contact the plan directly to enroll.
v. Plan Preview of Star Ratings
We propose in Sec. Sec. 422.166(i)(3) and 423.186(i)(3) that CMS
have plan preview periods before each Star Ratings release, consistent
with current practice. Part C and D sponsors can preview their Star
Ratings data in HPMS prior to display on the Medicare Plan Finder.
During the first plan preview, we expect Part C and D sponsors to
closely review the methodology and their posted numeric data for each
measure. The second plan preview would include any revisions made as a
result of the first plan preview. In addition, our preliminary Star
Ratings for each measure, domain, summary score, and overall score
would be displayed. During the second plan preview, we expect Part C
and D sponsors to again closely review the methodology and their posted
data for each measure, as well as their preliminary Star Rating
assignments. As part of this regulation, we are proposing that CMS
continue to offer plan preview periods, but are not codifying the
details of each period because over time the process has evolved to
provide more data to sponsors to help validate their data. We envision
it to continue to evolve in the future and do not believe that
codifying specific display content is necessary.
It is important that Part C and D sponsors regularly review their
underlying measure data that are the basis for the Part C and D Star
Ratings. For measures that are based on data reported directly from
sponsors, any issues or problems should be raised well in advance of
CMS' plan preview periods. A draft version of the Technical Notes would
be available during the first plan preview. The draft is then updated
for the second plan preview and finalized when the ratings data have
been posted to Medicare Plan Finder.
We welcome comments on the proposed plan preview process.
w. Technical Changes
We also propose a number of technical changes to other existing
regulations that refer to the quality ratings of MA and Part D plans;
we propose to make technical changes to refer to the proposed new
regulation text that provides for the calculation and assignment of
Star Ratings. Specifically, we propose:
In Sec. 422.258(d)(7), to revise paragraph (d)(7) to
read: Increases to the applicable percentage for quality. Beginning
with 2012, the blended benchmark under paragraphs (a) and (b) of this
section will reflect the level of quality rating at the plan or
contract level, as determined by the Secretary. The quality rating for
a plan is determined by the Secretary according to the 5-star rating
system (based on the data collected under section 1852(e) of the Act)
specified in subpart D of this part 422. Specifically, the applicable
percentage under paragraph (d)(5) of this section must be increased
according to criteria in paragraphs (d)(7)(i) through (v) of this
section if the plan or contract is determined to be a qualifying plan
or a qualifying plan in a qualifying county for the year.
In Sec. 422.260(a), to revise the paragraph to read:
Scope. The provisions of this section pertain to the administrative
review process to appeal quality bonus payment status determinations
based on section 1853(o) of the Act. Such determinations are made based
on the overall rating for MA-PDs and Part C summary rating for MA-only
contracts for the contract assigned pursuant to subpart 166 of this
part 422.
In Sec. 422.260(b), to revise the definition of ``quality
bonus payment (QBP) determination methodology'' to read: Quality bonus
payment (QBP) determination methodology means the quality ratings
system specified in subpart 166 of this part 422 for assigning quality
ratings to provide comparative information about MA plans and
evaluating whether MA organizations qualify for a QBP.
In Sec. 422.504(a)(18), to revise paragraph (a)(18) to
read: To maintain a Part C summary plan rating score of at least 3
stars pursuant to the 5-star rating system specified in subpart 166 of
this part 422. A Part C summary plan rating is calculated as provided
in Sec. 422.166.
In Sec. 423.505(b)(26), to revise paragraph (b)(26) to
read: Maintain a Part D summary plan rating score of at least 3 stars
pursuant to the 5-star rating system specified in subpart 186 of this
part 423. A Part D summary plan rating is calculated as provided in
Sec. 423.186.
We welcome comment on these technical changes and whether there are
additional changes that should be made to account for our proposal to
codify the Star Ratings methodology and measures in regulation text.
12. Any Willing Pharmacy Standards Terms and Conditions and Better
Define Pharmacy Types (Sec. Sec. 423.100, 423.505)
Section 1860D-4(b)(1)(A) of the Act and Sec. 423.120(a)(8)(i)
require a Part D plan sponsor to contract with any pharmacy that meets
the Part D plan sponsor's standard terms and conditions for network
participation. Section 423.505(b)(18) requires Part D plan sponsors to
have a standard contract with reasonable and relevant terms and
conditions of participation whereby any willing pharmacy may access the
standard contract and participate as a network pharmacy.
In the preamble to final rule published on January 28, 2005
(January 2005 final rule) (70 FR 4194) which implemented Sec.
423.120(a)(8)(i) and Sec. 423.505(b)(18), we indicated that standard
terms and conditions, particularly for payment terms, could vary to
accommodate geographic areas or types of pharmacies, so long as all
similarly situated pharmacies were offered the same terms and
conditions. We also stated that we viewed these standard terms and
conditions as a ``floor'' of minimum requirements that all similarly
situated pharmacies must abide by, but that Part D plans could modify
some standard terms and conditions to encourage participation by
particular pharmacies. We believe this approach strikes an appropriate
balance between the any willing pharmacy requirement at section 1860D-
4(b)(1)(A) of the Act and the provisions of section 1860D-4(b)(1)(B) of
the Act, which permits Part D plan sponsors to offer reduced cost
sharing at preferred pharmacies.
The balancing of these goals has led to the development of
preferred pharmacy networks in which certain pharmacies agree to
additional or different terms from the standard terms and conditions.
This has resulted in the development of ``standard'' terms and
conditions that in some cases has had the effect, in our view, of
circumventing the any willing pharmacy requirements and inappropriately
excluding pharmacies from network participation. This section is
intended to clarify or modify our interpretation of the existing
regulations to ensure that plan sponsors can continue to develop and
maintain preferred networks while fully complying with the any willing
pharmacy requirement.
First, we intend to clarify that the any willing pharmacy
requirement applies to all pharmacies, regardless of how they have
organized one or more lines of pharmacy business. Second, we propose to
revise the definition of retail pharmacy and define mail-order
pharmacy. Third, we propose to clarify our regulatory requirements for
what constitutes ``reasonable and relevant'' standard contract terms
and conditions. Finally, we propose to codify our existing guidance
with respect to when a pharmacy must be provided with a

[[Page 56408]]

Part D plan sponsor's standard terms and conditions.
a. Any Willing Pharmacy Required for All Pharmacy Business Models
With the pharmaceutical distribution and pharmacy practice
landscape evolving rapidly, and because pharmacies now frequently have
multiple lines of business, many pharmacies no longer fit squarely into
traditional pharmacy type classifications. For example, compounding
pharmacies and specialty pharmacies, including but not limited to
manufacturer-limited-access pharmacies, and those that may specialize
in certain drugs, disease states, or both, are increasingly common, and
Part D enrollees increasingly need access to their services. As noted
previously, in implementing the any willing pharmacy provision, we
indicated that standard terms and conditions could vary to accommodate
different types of pharmacies so long as all similarly situated
pharmacies were offered the same terms and conditions. In the original
rule to implement Part D (70 FR 4194, January 28, 2005), we defined
certain types of pharmacies (that is, retail, mail order, Long Term
Care (LTC)/institutional, and I/T/U [Indian Health Service, Indian
tribe or tribal organization, or urban Indian organization]) at Sec.
423.100 to operationalize various statutory provisions that
specifically mention these types of pharmacies (for example, section
1860D-4(b)(1)(C)(iv) of the Act). However, these definitions were never
intended to limit the scope of the any willing pharmacy requirement.
Nevertheless, we have anecdotal evidence that some Part D plan sponsors
have declined to permit willing pharmacies to participate in their
networks on the grounds that they do not meet the Part D plan sponsor's
definition of a pharmacy type for which it has developed standard terms
and conditions.
Section 1860D-4(b)(1)(A) of the Act requires Part D plan sponsors
to permit the participation of ``any pharmacy'' that meets the standard
terms and conditions. Accordingly, it is not appropriate for Part D
plan sponsors to offer standard terms and conditions for network
participation that are specific to only one particular type of
pharmacy, and then decline to permit a willing pharmacy to participate
on the grounds that it does not squarely fit into that pharmacy type.
Therefore, we are clarifying in this preamble that although Part D
sponsors may continue to tailor their standard terms and conditions to
various types of pharmacies, Part D plan sponsors may not exclude
pharmacies with unique or innovative business or care delivery models
from participating in their contracted pharmacy network on the basis of
not fitting in the correct pharmacy type classification. In particular,
we consider ``similarly situated'' pharmacies to include any pharmacy
that has the capability of complying with standard terms and conditions
for a pharmacy type, even if the pharmacy does not operate exclusively
as that type of pharmacy.
Thus, Part D plan sponsors must not exclude pharmacies from their
retail pharmacy networks solely on the basis that they, for example,
maintain a traditional retail business while also specializing in
certain drugs or diseases or providing home delivery service by mail to
surrounding areas. Or as another example, a Part D plan sponsor must
not preclude a pharmacy from network participation as a retail pharmacy
because that pharmacy also operates a home infusion book of business,
or vice versa. Later in this section we are proposing to codify our
requirements for when a Part D sponsor must provide a pharmacy with a
copy of its standard terms and conditions. These requirements, if
finalized, would apply to all pharmacies, regardless of whether they
fit into traditional pharmacy classifications or have unique or
innovative business or care delivery models.
b. Revise the Definition of Retail Pharmacy and Add a Definition of
Mail-Order Pharmacy
Since the inception of the Part D program, Part D statute,
regulations, and sub-regulatory guidance have referred to ``mail-
order'' pharmacy and services without defining the term ``mail order''.
Unclear references to the term ``mail order'' have generated confusion
in the marketplace over what constitutes ``mail-order'' pharmacy or
services. This confusion has contributed to complaints from pharmacies
and beneficiaries regarding how Part D plan sponsors classify
pharmacies for network participation, the Plan Finder, and Part D
enrollee cost-sharing expectations. Additionally, pharmacies that are
not mail-order pharmacies, but that may offer home delivery services by
mail (relative to that pharmacy's overall operation), have complained
because Part D plan sponsors classified them as mail-order pharmacies
for network participation and required them to be licensed in all
United States, territories, and the District of Columbia, as would be
required for traditional mail-order pharmacies providing a mail-order
benefit.
In creating the Part D program, the Medicare Prescription Drug,
Improvement, and Modernization Act of 2003 (MMA) (Pub. L. 108-173)
added the convenient access provision of section 1860D-4(b)(1)(C) of
the Act and the level playing field provision of section 1860D-
4(b)(1)(D) of the Act. The convenient access provisions, as codified at
Sec. 423.120(a)(1)-(7), require Part D plan sponsors to secure the
participation in their networks a sufficient number of pharmacies that
dispense (other than by mail order) drugs directly to patients to
ensure convenient access (consistent with rules established by the
Secretary) and includes special provisions for standards with respect
to Long Term Care (LTC) and I/T/U pharmacies (as defined at Sec.
423.100). The level playing field provision, as codified at Sec.
423.120(a)(10), requires Part D plan sponsors to permit enrollees to
receive the same benefits, including extended days' supplies, through a
pharmacy (other than a mail-order pharmacy) (that is, a retail
pharmacy), although the Part D plan sponsor may require the enrollee to
pay a higher level of cost-sharing to do so.
We currently define ``retail pharmacy'' at Sec. 423.100 to mean
``any licensed pharmacy that is not a mail-order pharmacy from which
Part D enrollees could purchase a covered Part D drug without being
required to receive medical services from a provider or institution
affiliated with that pharmacy.'' Although we did not define ``non-
retail pharmacy,'' Sec. 423.120(a)(3) provides that ``a Part D plan's
contracted pharmacy network may be supplemented by non-retail
pharmacies, ``including pharmacies offering home delivery via mail-
order and institutional pharmacies,'' provided the convenient access
requirements are met (emphasis added). In the preamble to our January
2005 final rule, we also stated, ``examples of non-retail pharmacies
include I/T/U, FQHC, Rural Health Center (RHC) and hospital and other
provider-based pharmacies, as well as Part D [plan]-owned and operated
pharmacies that serve only plan members'' (see 70 FR 4249). We also
stated ``home infusion pharmacies will not count toward Part D plans'
pharmacy access requirements (at Sec. 423.120(a)(1)) because they are
not retail pharmacies'' (see 70 FR 4250).
Since 2005, our regulation at Sec. 423.120(a) has included access
requirements for retail, home infusion, LTC, and I/T/U pharmacies.
While mail-order pharmacies could be considered

[[Page 56409]]

one of several subsets of non-retail pharmacies, we never defined the
term mail-order pharmacy in regulation, nor have we specified access or
service-level requirements at Sec. 423.120(a) for mail-order
pharmacies.
As discussed previously, our classifications of certain types of
pharmacies were never intended to limit or exclude participation of
pharmacies, such as pharmacies with multiple lines of business, that do
not fit into one of these classifications. Additionally, we have
recognized since our January 2005 final rule that pharmacies may have
multiple lines of business, including retail pharmacies that may offer
home delivery services (see 70 FR 4235 and 4255).
Nonetheless, despite this guidance and specific access requirements
for LTC and HI pharmacies at Sec. 423.120(a), some Part D plan
sponsors interpreted ``including pharmacies offering home delivery via
mail-order and institutional pharmacies'' at Sec. 423.120(a)(3) to
mean that any pharmacies, even retail pharmacies, that may offer home
delivery services by mail are mail-order pharmacies. Although Sec.
423.120(a)(3) specifically allows for access to non-retail pharmacies,
and we intended ``including pharmacies offering home delivery via mail-
order and institutional pharmacies'' to mean home infusion pharmacies,
mail-order pharmacies, long-term care pharmacies, or other non-retail
pharmacies that offer home delivery services by mail, some Part D plan
sponsors began to require any interested pharmacies, even retail
pharmacies, that may offer home delivery services by mail to contract
as mail-order pharmacies in order to participate in the plan's
contracted pharmacy network. Because Part D plan sponsors frequently
require contracted mail-order pharmacies to be licensed in all United
States, territories, and the District of Columbia, the classification
of any pharmacies that may offer home delivery services by mail as
mail-order pharmacies for purposes of contracting with Part D plan
sponsors as a network pharmacy, including licensure requirements, led
to complaints from beneficiaries and pharmacies, including retail,
specialty, and other pharmacies.
Although the language at Sec. 423.120(a)(3) is specific to non-
retail pharmacies, there is a great deal of confusion regarding mail-
order pharmacy in the Part D marketplace. We believe it is
inappropriate to classify pharmacies as ``mail-order pharmacies''
solely on the basis that they offer home delivery by mail. Because the
statute at section 1860D-4(b)(1)(D) of the Act discusses cost sharing
in terms of mail order versus other non-retail pharmacies, mail-order
cost sharing is unique to mail-order pharmacies, as we have proposed to
define the term. For example, while a non-retail home infusion pharmacy
may provide services by mail, cost-sharing is commensurate with retail
cost-sharing. Therefore, to clarify what a mail-order pharmacy is, we
propose to define mail-order pharmacy at Sec. 423.100 as a licensed
pharmacy that dispenses and delivers extended days' supplies of covered
Part D drugs via common carrier at mail-order cost sharing.
Although we propose to add the definition of mail-order pharmacy,
we also believe that our existing definition of retail pharmacy has
contributed, in part, to the confusion in the Part D marketplace. As
discussed previously, the existing definition of ``retail pharmacy'' at
Sec. 423.100 means ``any licensed pharmacy that is not a mail-order
pharmacy from which Part D enrollees could purchase a covered Part D
drug without being required to receive medical services from a provider
or institution affiliated with that pharmacy.'' This definition, given
the rapidly evolving pharmacy practice landscape, may be a source of
some confusion given that it expressly excludes mail-order pharmacies,
but not other non-retail pharmacies such as home infusion or specialty
pharmacies.
We note that Medicaid recently adopted a definition of ``retail
community pharmacy.'' Pursuant to section 1927(k)(10) of the Act, as
amended by section 2503 of the Affordable Care Act (ACA), for purposes
of Medicaid prescription drug coverage, CMS defines ``retail community
pharmacy'' at Sec. 447.504(a) as ``an independent pharmacy, a chain
pharmacy, a supermarket pharmacy, or a mass merchandiser pharmacy that
is licensed as a pharmacy by the state and that dispenses medications
to the walk-in general public at retail prices. Such term does not
include a pharmacy that dispenses prescription medications to patients
primarily through the mail, nursing home pharmacies, long-term care
facility pharmacies, hospital pharmacies, clinics, charitable or not-
for-profit pharmacies, government pharmacies, or pharmacy benefit
managers.'' Although this definition adds greater clarity about the
locations or practice settings where retail pharmacies may be found, we
were concerned that, for the purposes of the Part D program, the
mention of additional types of pharmacies in our regulation could
contribute to more confusion instead of less.
However, two aspects of this definition are similar to Part D
statutory language in section 1860D-4(b)(1)(C) and (D) of the Act. The
first is the concept that a retail pharmacy is open to dispense
prescription medications to the walk-in general public, which echoes
the requirement at section 1860D-4(b)(1)(C) of the Act that Part D plan
sponsors secure the participation in their networks a sufficient number
of pharmacies that dispense (other than mail order) drugs directly to
patients. The second is the concept that prescriptions are dispensed at
retail prices, or for the Part D program, retail cost-sharing, which
echoes the requirement at section 1860D-4(b)(1)(D) of the Act that Part
D plan sponsors permit enrollees to receive benefits (which may include
a 90-day supply of drugs or biologicals) through a pharmacy (other than
a mail-order pharmacy), with any differential in charge paid by such
enrollees. Because these concepts are consistent with the Part D
statute, we believe their inclusion in our definition of retail
pharmacy at Sec. 423.100 would be appropriate.
Therefore, to clarify what a retail pharmacy is, we propose to
revise the definition of retail pharmacy at Sec. 423.100. First, we
note that the existing definition of ``retail pharmacy'' is not in
alphabetical order, and we propose a technical change to move it such
that it would appear in alphabetical order. Second, we propose to
incorporate the concepts of being open to the walk-in general public
and retail cost-sharing such that the definition of retail pharmacy
would mean ``any licensed pharmacy that is open to dispense
prescription drugs to the walk-in general public from which Part D
enrollees could purchase a covered Part D drug at retail cost sharing
without being required to receive medical services from a provider or
institution affiliated with that pharmacy.''
Although we were originally unsure whether Part D enrollees would
need routine access to specialty drugs and specialty pharmacies beyond
our out-of-network requirements (see 70 FR 4250), as the Part D program
has evolved, the use of specialty drugs in the Part D program has grown
exponentially and will likely continue to do so. The June 2016 MedPAC
report (available at http://www.medpac.gov/docs/default-source/reports/chapter-6-improving-medicare-part-d-june-2016-report-.pdf) notes growth
in the use of specialty drugs in the Part D program is currently
outpacing other drugs and health spending, generally. Such drugs are
often high-cost and complex, for

[[Page 56410]]

diseases including, but not limited to, cancer, Hepatitis C, HIV/AIDS,
multiple sclerosis, and rheumatoid arthritis. The report also
highlights that each year since 2009, more than half of the United
States Food and Drug Administration (FDA) approvals have been for
specialty drugs. Because many specialty drugs can be self-administered
on an outpatient basis, even in the patient's home, and for chronic or
long-term use, increasing numbers of Part D enrollees need routine
access to specialty drugs and specialty pharmacies. Nonetheless,
because the pharmacy landscape is changing so rapidly, we believe any
attempt by us to define specialty pharmacy could prematurely and
inappropriately interfere with the marketplace, and we decline to
propose a definition of specialty pharmacy at this time.
Similar to specialty pharmacy, we also decline to further define
non-retail pharmacy. The pharmacy types that we define and propose to
modify and define in regulation describe functional lines of business
that an individual pharmacy may have, solely, or in combination.
However, unlike mail order, home infusion, I/T/U, FQHC, LTC, hospital,
other institutional, other provider-based, and ``members-only'' Part D
plan-owned and operated pharmacy types or lines of business that
comprise ``non-retail'', the term ``non-retail'' does not, itself,
define a unique pharmacy functional line of business, and does not lend
itself to a clear definition. Consistent with statutory any willing
pharmacy and preferred pharmacy provisions, mail-order pharmacies may
be preferred or non-preferred. Part D plan sponsors may establish
unique non-preferred mail-order cost-sharing, or may establish such
non-preferred mail-order cost sharing commensurate with those for
retail pharmacies.
We solicit comment on our proposed definition of mail-order
pharmacy and our proposed modification to the definition of retail
pharmacy. Specifically, we solicit comment regarding whether
stakeholders believe these definitions strike the right balance to
resolve confusion in the marketplace, afford Part D plan sponsor
flexibility, and incorporate recent innovations in pharmacy business
and care delivery models.
c. Treatment of Accreditation and Other Similar Any Willing Pharmacy
Requirements in Standard Terms and Conditions
As noted previously, since the beginning of the Part D program, we
have considered standard terms and conditions for network participation
to set a ``floor'' of minimum requirements by which all similarly
situated pharmacies must abide. We further believe it is reasonable for
a Part D plan sponsor to require additional terms and conditions beyond
those required in the standard contract for network participation for
pharmacies to have preferred status. Therefore, we implemented the
requirements of section 1860D-4(b)(1)(A) of the Act by requiring that
standard terms and conditions be ``reasonable and relevant,'' but
declined to further define ``reasonable and relevant'' in order to
provide Part D plans with maximum flexibility to structure their
standard terms and conditions.
We note that a pharmacy's ability to participate in a preferred or
specially labeled subset of the Part D plan sponsor's larger contracted
pharmacy network or to offer preferred cost sharing assumes that, at a
minimum, the pharmacy is able to participate in the network. Where
there are barriers to a pharmacy's ability to participate in the
network at all, it raises the question of whether the standard (that
is, entry-level) terms and conditions are reasonable and relevant.
It has been our longstanding policy that Part D plans cannot
restrict access to certain Part D drugs to specialty pharmacies within
their Part D network in such a manner that contravenes the convenient
access protections of section 1860D-4(b)(1)(C) of the Act and Sec.
423.120(a) of our regulations. (See Q&A at https://www.cms.gov/Medicare/Prescription-Drug-Coverage/PrescriptionDrugCovContra/Downloads/QASpecialtyAccess_051706.pdf). In 2006, we informed sponsors
they cannot restrict access to drugs on the ``specialty/high cost''
tier to a subset of network pharmacies, except when necessary to meet
FDA-mandated limited dispensing requirements (for example, Risk
Evaluation and Mitigation Strategies (REMS) processes) or to ensure the
appropriate dispensing of Part D drugs that require extraordinary
special handling, provider coordination, or patient education when such
extraordinary requirements cannot be met by a network pharmacy (that
is, a contracted network pharmacy that does not belong to the
restricted subset). Since 2006, it has been our general policy that
these types of special requirements for Part D plan sponsors to limit
dispensing of specialty drugs be directly linked to patient safety or
regulatory reasons.
As the specialty drug distribution market has grown, so has the
number of organizations competing to distribute or dispense specialty
drugs, such as pharmacy benefit managers (PBMs), health plans,
wholesalers, health systems, physician practices, retail pharmacy
chains, and small, independent pharmacies (see the URAC White Paper,
``Competing in the Specialty Pharmacy Market: Achieving Success in
Value-Based Healthcare,'' available at http://info.urac.org/specialtypharmacyreport). CMS is concerned that Part D plan sponsors
might use their standard pharmacy network contracts in a way that
inappropriately limits dispensing of specialty drugs to certain
pharmacies. In fact, we have received complaints from pharmacies that
Part D plan sponsors have begun to require accreditation of pharmacies,
including accreditation by multiple accrediting organizations, or
additional Part D plan-/PBM-specific credentialing criteria, for
network participation. We agree that there is a role in the Part D
program for pharmacy accreditation, to the extent pharmacy
accreditation requirements in network agreements promote quality
assurance. In particular, we support Part D plan sponsors that want to
negotiate an accreditation requirement in exchange for, for example,
designating a pharmacy as a specialty or preferred pharmacy in the Part
D plan sponsor's contracted pharmacy network. However, we do not
support the use of Part D plan sponsor- or PBM-specific credentialing
criteria, in lieu of, or in addition to, accreditation by recognized
accrediting organizations, apart from drug-specific limited dispensing
criteria such as FDA-mandated REMS or to ensure the appropriate
dispensing of Part D drugs that require extraordinary special handling,
provider coordination, or patient education when such extraordinary
requirements cannot be met by a network pharmacy (as discussed
previously). Moreover, we are especially concerned about anecdotal
reports that allege such standard terms and conditions for network
participation are waived, for example, when a Part D plan sponsor needs
a particular pharmacy in its network in order to meet convenient access
requirements, or even for certain pharmacies that received preferred
pharmacy status.
If the premise of accreditation or Part D plan sponsor- or PBM-
specific credentialing requirements is to ensure more stringent quality
standards, then there is no reasonable explanation for why a quality-
related standard term or condition could be waived for situations when
the Part D plan sponsor needs a particular pharmacy in its contracted

[[Page 56411]]

pharmacy network in order to meet the convenient access standards or to
designate a particular pharmacy with preferred pharmacy status. A term
or condition which can be dropped in such situations is by definition
not ``standard'' according to the plain meaning of the word. Waivers or
inconsistent application of such standard terms and conditions is an
explicit acknowledgement that such terms and conditions are not
necessary for the ability of a pharmacy to perform its core functions,
and are thus neither reasonable nor relevant for any willing pharmacy
standard terms and conditions.
It has been our longstanding policy to leave the establishment of
pharmacy practice standards to the states, and we do not intend to
change that now. We continue to believe pharmacy practice standards
established by the states provide applicable minimum standards for all
pharmacy practice standards, and Sec. 423.153(c)(1) requires
representation that network providers are required to comply with
minimum standards for pharmacy practice as established by the states.
Additionally, because a pharmacy's ability to dispense certain
medications is not dependent on it having the ability to dispense other
medications, it is not relevant for sponsors to require pharmacies to
dispense a particular roster of certain drugs or drugs for certain
disease states in order to receive standard terms and conditions for
network participation as a contracted network pharmacy for that Part D
plan sponsor. Consequently, consistent with our longstanding policy,
discussed previously, we would not expect Part D plan sponsors to limit
dispensing of certain drugs or drugs for certain disease states to a
subset of network pharmacies, except when necessary to meet FDA-
mandated limited dispensing requirements (for example, Risk Evaluation
and Mitigation Strategies (REMS) processes) or except as required by
applicable state law(s) if the contracted network pharmacy is capable
of and appropriately licensed under applicable state law(s) for doing
so. We solicit comment on this topic.
d. Timing of Contracting Requirements
CMS has received complaints over the years from pharmacies that
have sought to participate in a Part D plan sponsor's contracted
network but have been told by the Part D plan sponsor that its standard
terms are not available until the sponsor has completed all other
network contracting. In other instances, pharmacies have told us that
Part D plan sponsors delay sending them the requested terms and
conditions for weeks or months or require pharmacies to complete
extensive paperwork demonstrating their eligibility to participate in
the sponsor's network before the sponsor will provide a document
containing the standard terms and conditions. CMS believes such actions
have the effect of frustrating the intent of the any willing pharmacy
requirement, and as a result, we believe it is necessary to codify
specific procedural requirements for the delivery of pharmacy network
standard terms and conditions.
To this end, we propose to establish deadlines by which Part D plan
sponsors must furnish their standard terms and conditions to requesting
pharmacies. The first deadline we propose to establish is the date by
which Part D plan sponsors must have standard terms and conditions
available for pharmacies that request them. By mid-September of each
year, Part D plan sponsors have signed a contract with CMS committing
them to delivering the Part D benefit through an accessible pharmacy
network during the upcoming year and have provided information about
that network to CMS for posting on the Medicare Plan Finder Web site.
At that point, Part D plan sponsors should have had ample opportunity
to develop standard contract terms and conditions for the upcoming plan
year. Therefore, we propose to require at Sec. 423.505(b)(18)(i) that
Part D plan sponsors have standard terms and conditions readily
available for requesting pharmacies no later than September 15 of each
year for the succeeding benefit year.
The second deadline we propose concerns the promptness of Part D
plan sponsors' responses to pharmacy requests for standard terms and
conditions. As discussed previously, we propose to require all Part D
plan sponsors to have standard terms and conditions developed and ready
for distribution by September 15. Therefore, we propose to require at
Sec. 423.505(b)(18)(ii) that, after that date and throughout the
following plan year, Part D plan sponsors must provide the applicable
standard terms and conditions document to a requesting pharmacy within
two business days of receipt of the request. Part D plan sponsors would
be required to clearly identify for interested pharmacies the avenue
(for example, phone number, email address, Web site) through which they
can make this request. In instances where the Part D plan sponsor
requires a pharmacy to execute a confidentiality agreement with respect
to the terms and conditions, the Part D plan sponsor would be required
to provide the confidentiality agreement within two business days after
receipt of the pharmacy's request and then provide the standard terms
and conditions within 2 business days after receipt of the signed
confidentiality agreement. While Part D plan sponsors may ask
pharmacies to demonstrate that they are qualified to meet the Part D
plan sponsors' standard terms and conditions before executing the
contract, Part D plan sponsors would be required to provide the
pharmacy with a copy of the contract terms for its review within the
two-day timeframe. If finalized, this proposed requirement would permit
pharmacies to do their due diligence with respect to whether a Part D
plan sponsor's standard terms and conditions are acceptable at the same
time Part D plan sponsors are conducting their own review of the
qualifications of the requesting pharmacy. We specifically seek comment
on whether these timeframes are the right length to address our goal
but are operationally realistic. We also request examples of situations
where a longer timeframe might be needed.
13. Changes to the Days' Supply Required by the Part D Transition
Process
We promulgated regulations under the authority of section 1860D-
11(d)(2)(B) of the Act to require Part D sponsors to provide for an
appropriate transition process for enrollees prescribed Part D drugs
that are not on the prescription drug plan's formulary (including Part
D drugs that are on a sponsor's formulary but require prior
authorization or step therapy under a plan's utilization management
rules). These regulations are codified at Sec. 423.120(b)(3).
Specifically, these regulations require that a Part D sponsor ensure
certain enrollees access to a temporary supply of drugs within the
first 90 days under a new plan (including drugs that are on a plan's
formulary but require prior authorization or step therapy under a
plan's utilization management rules) by ensuring a temporary fill when
an enrollee requests a fill of a non-formulary drug during this time
period. In the outpatient setting, the supply must be for at least 30
days of medication, unless the prescription is written for less. In the
LTC setting, this supply must be for up to at least 91 days and may be
up to 98 days, consistent with the dispensing increment, unless a less
amount is prescribed.
We propose to make two changes to these regulations. First, we
propose to shorten the required transition days'

[[Page 56412]]

supply in the long-term care (LTC) setting to the same supply currently
required in the outpatient setting. Second, we propose a technical
change to the current required days' transition supply in the
outpatient setting to be a month's supply.
We provided our rationale for the transition fill days' supply
requirement in the LTC setting in CMS final rule CMS-4085-F published
on April 15, 2010 (75 FR 19678). In that final rule, we stated that for
a new enrollee in a LTC facility, the temporary supply may be for up to
31 days (unless the prescription is written for less than 31 days),
consistent with the dispensing practices in the LTC industry. We
further stated that, due to the often complex needs of LTC residents
that often involve multiple drugs and necessitate longer periods in
order to successfully transition to new drug regimens, we will require
sponsors to honor multiple fills of non-formulary Part D drugs, as
necessary during the entire length of the 90-day transition period.
Thus, we required a Part D sponsor to provide a LTC resident enrolled
in its Part D plan with at least a 31 day supply of a prescription with
refills provided, if needed, up to a 93 days' supply (unless the
prescription is written for less) (75 FR 19721). In a subsequent final
rule published on April 15, 2011, we changed the 93 days' supply to 91
to 98 days' supply, as noted previously, to acknowledge variations in
days' supplies that could result from the short-cycle dispensing of
brand drugs in the LTC setting (76 FR 21460 and 21526).
We received and responded to a comment in the April 2010 final rule
about transition and a longer timeframe in the LTC setting. We stated
that a number of commenters supported our proposal of requiring an
extended transition supply for enrollees residing in LTC facilities but
that commenters requested that we provide the same protections to
individuals requiring LTC in community-based settings. In our response
to the comment, we indicated that residents of LTC institutions were
more limited in access to prescribing physicians hired by LTC
facilities due to a limited visitation schedule and more likely to
require extended transition timeframes in order for the physician to
work with the facility and LTC pharmacies on transitioning residents to
formulary drugs. We further stated that we believed that community-
based enrollees, in contrast, were less limited in their access to
prescribing physicians and did not require an extended transition
period to work with their physicians to successfully transition to a
formulary drug. (75 FR 19721). Thus, the requirement to provide longer
transition fill days' supply in the LTC setting was a result of our
concerns that a longer timeframe would be needed in the LTC setting.
After more than 10 years of experience with Part D in LTC
facilities, we have not seen the concerns that we expressed in the 2010
final rule materialize. We are not aware of any evidence that
transition for a Part D beneficiary in the LTC setting necessarily
takes any longer than it does for a beneficiary in the outpatient
setting. We understand that it is common for Part D beneficiaries in
the LTC setting to be cared for by on-staff or consultant physicians
and other health professionals with prescriptive authority who are
under contract with the LTC facility. Additionally, we also understand
that Part D beneficiaries in the LTC setting are typically served by an
on-site pharmacy or one under contract to service the LTC facility.
Given this structure of the LTC setting, we understand that the LTC
prescribers and pharmacies are readily available to address transition
for Part D beneficiaries in the LTC setting. In addition, LTC
facilities now have many years' experience with the Medicare Part D
program generally and transition specifically.
While our concerns about the needed timeframe for transition in the
LTC setting do not seem to have materialized, we have continuing
concerns about drug waste and the costs associated with such waste in
the LTC setting. Some of these concerns have been addressed by our rule
requiring the short-cycle dispensing of brand drugs to Part D
beneficiaries in LTC facilities in the April 2011 final rule. That
rule, codified at 42 CFR 423.154, requires that all Part D sponsors
require all network pharmacies servicing LTC facilities to dispense
certain solid oral doses of covered Part D brand-name drugs to
enrollees in such facilities in no greater than 14-day increments at a
time to reduce drug waste. However, we now believe that CMS could
eliminate additional drug waste and cost by no longer requiring a
longer transition days' supply in the LTC setting. Therefore, we are
proposing that the transition days' supply in the LTC setting be the
same as it is in the outpatient setting.
Our second proposed change involves the current required 30 days'
transition supply in the outpatient setting, which is codified at Sec.
423.120(b)(3)(iii)(A). We have received a number of inquiries from Part
D sponsors regarding scenarios involving medications that do not easily
add up to a 30 days' supply when dispensed (for example, drugs that
typically are dispensed in 28-day packages). Historically, our response
to those inquiries has been that the regulation requires plans to
provide at least 30 days of medication, which requires plans to
dispense more than one package to comply with the text of the
regulation. However, the intent of the regulation was for the
transition fill in the outpatient setting to be for at least a month's
supply. For this reason, we are proposing a change to the regulation
from ``30 days'' to ``a month's supply.'' If finalized, this change
would mean that the regulation would require that a transition fill in
the outpatient setting be for a supply of at least a month of
medication, unless the prescription is written by the prescriber for
less. Therefore, the supply would have to be for at least the days'
supply that the applicable Part D prescription drug plans has approved
as its retail month's supply in its Plan Benefit Package submitted to
CMS for the relevant plan year, again, unless the prescription is
written by the prescriber for less.
Together, our two proposals--if finalized--would mean that Sec.
423.120 (b)(3)(iii)(A) would be consolidated into Sec. 423.120
(b)(3)(iii) to read that the transition process must ``[e]nsure the
provision of a temporary fill when an enrollee requests a fill of a
non-formulary drug during the time period specified in paragraph
(b)(3)(ii) of this section (including Part D drugs that are on a plan's
formulary but require prior authorization or step therapy under a
plan's utilization management rules) by providing a one-time, temporary
supply of at least a month's supply of medication, unless the
prescription is written by a prescriber for less than a month's supply
and requires the Part D sponsor to allow multiple fills to provide up
to a total of a month's supply of medication.'' Section
423.120(b)(3)(iii)(B) would be eliminated.
Please note that we also are proposing in II.A.15. Expedited
Substitutions of Certain Generics and Other Midyear Formulary Changes
to revise Sec. 423.120(b)(3)(i)(B) to state that the transition
process is not applicable in cases in which a Part D sponsor
substitutes a generic drug for a brand name drug as specified under
paragraph Sec. 423.120(b)(3)(iv) or Sec. 423.120(b)(6) of this
section.

[[Page 56413]]

14. Expedited Substitutions of Certain Generics and Other Midyear
Formulary Changes (Sec. Sec. 423.100, 423.120, and 423.128)
Section 1860D-4(b)(3)(E) of the Act requires Part D sponsors to
provide ``appropriate notice'' to the Secretary, affected enrollees,
authorized prescribers, pharmacists, and pharmacies regarding any
decision to either: (1) Remove a drug from its formulary, or (2) make
any change in the preferred or tiered cost-sharing status of a drug.
Section 423.120(b)(5) implements that requirement by defining
appropriate notice as that given at least 60 days prior to such change
taking effect during a given contract year. We have recognized that
both current and prospective enrollees of a prescription drug plan need
to have the most current formulary information by the time of the
annual election period described in Sec. 423.38(b) in order to enroll
in the Part D plan that best suits their particular needs. To this end,
Sec. 423.120(b)(6) prohibits Part D sponsors and MA organizations from
removing a covered Part D drug from a formulary or changing the
preferred or tiered cost-sharing status of a covered Part D drug
between the beginning of the annual election period described in Sec.
423.38(b)(2) and 60 days subsequent to the beginning of the contract
year associated with that annual election period. Our concern has been
to prevent situations in which Part D sponsors change their formularies
early in the contract year without providing appropriate notice as
described in Sec. 423.120(b)(5) to new enrollees. Thus, Sec.
423.120(b)(6) has required that all materials distributed during the
annual election period reflect the formulary the Part D sponsor will
offer at the beginning of the contract year for which it is enrolling
Part D eligible individuals. Lastly, under Sec. 423.128(d)(2)(iii),
Part D sponsors must also provide current and prospective Part D
enrollees with at least 60 days' notice regarding the removal or change
in the preferred or tiered cost-sharing status of a Part D drug on its
Part D plan's formulary. The general notice requirements and burden are
currently approved by OMB under control number 0938-0964 (CMS-10141).
MedPAC observed that the continuity of a plan's formulary is very
important to all beneficiaries in order to maintain access to the
medications that were offered by the plan at the time the beneficiaries
enrolled. While we agree with MedPAC's assertion, we acknowledge the
need to balance formulary continuity with requests from Part D sponsors
to provide greater flexibility to make midyear changes to formularies.
Indeed, MedPAC made its observation in a report that suggested that
CMS's rules regarding formulary changes warranted examination. There
MedPAC pointed out, among other things, that CMS could provide Part D
sponsors with greater flexibility to make changes such as adding a
generic drug and removing its brand name version without first
receiving agency approval. (MedPAC, Report to the Congress: Medicare
and the Health Care Delivery System, June 2016, page 192.)
This proposed rule would implement MedPAC's recommendation by
permitting generic substitutions without advance approval as specified
later in this section. We have also taken this opportunity to examine
our regulations to determine how to otherwise facilitate the use of
certain generics. Currently, Part D sponsors can add drugs to their
formularies at any time; however, there is no guarantee that enrollees
will switch from their brand name drugs to newly added generics.
Therefore, Part D sponsors seeking to better manage the Part D benefit
may choose to remove a brand name drug, or change its preferred or
tiered cost-sharing, and substitute or add its therapeutic equivalent.
But even this takes some time: Under current regulations, Part D
sponsors must submit formulary change requests to CMS and provide
specified notice before removing drugs or changing their cost-sharing
(except for unsafe drugs or those withdrawn from the market). As noted
earlier, the general notice requirements and burden are currently
approved by OMB under control number 0938-0964 (CMS-10141). Also, as
detailed previously, Sec. 423.120(b)(5)(i) requires 60 days' notice to
specified entities prior to the effective date of changes and 60 days'
direct notice to affected enrollees or a 60 day refill. The ability of
Part D sponsors to make generic substitutions as approved by CMS is
further limited by the fact that as detailed previously, under Sec.
423.120(b)(6), Part D sponsors generally cannot remove drugs or make
cost-sharing changes from the start of the annual election period (AEP)
until 2 months after the plan year begins.
We propose to provide Part D sponsors with more flexibility to
implement generic substitutions as follows: The proposed provisions
would permit Part D sponsors meeting all requirements to immediately
remove brand name drugs (or to make changes in their preferred or
tiered cost-sharing status), when those Part D sponsors replace the
brand name drugs with (or add to their formularies) therapeutically
equivalent newly approved generics--rather than having to wait until
the direct notice and formulary change request requirements have been
met. The proposed provisions would also allow sponsors to make those
specified generic substitutions at any time of the year rather than
waiting for them to take effect 2 months after the start of the plan
year. Related proposals would require advance general and retrospective
direct notice to enrollees and notice to entities; clarify online
notice requirements; except specified generic substitutions from our
transition policy; and conform our definition of ``affected
enrollees.'' Lastly, to address stakeholder requests for greater
flexibility to make midyear formulary changes in general, we are also
proposing to decrease the days of enrollee notice and refill required
when (aside from generic substitution and drugs deemed unsafe or
withdrawn from the market) drug removal or changes in cost-sharing will
affect enrollees.
Specifically, we propose to add a new paragraph (b)(5)(iv) to Sec.
423.120 to permit Part D sponsors to immediately remove, or change the
preferred or tiered cost-sharing of, brand name drugs and substitute or
add therapeutically equivalent generic drugs provided specified
requirements are met. The generic drug would need to be offered at the
same or a lower cost-sharing and with the same or less restrictive
utilization management criteria originally applied to the brand name
drug. The Part D sponsor could not have as a matter of timing been able
to previously request CMS approval of the change because the generic
drug had not yet been released to the market. Also, the Part D sponsor
must have previously provided prospective and current enrollees general
notice that certain generic substitutions could occur without
additional advance notice. As proposed, we would permit Part D sponsors
to substitute a generic drug for a brand name drug immediately rather
than make that change effective, for instance, at the start of the next
month. However, we solicit comment as to whether there would be a
reason to require such a delay, especially given the fact that we are
proposing not to require advance direct notice (rather, only advance
general notice) or CMS approval. The proposed regulation would also
require that, when generic drug substitutions occur, Part D sponsors
must provide direct notice to affected enrollees and other specified
notice to CMS and other entities. We also propose to specify in a
revision to

[[Page 56414]]

Sec. 423.120(b)(3)(i)(B) that the transition process is not applicable
in cases in which a Part D sponsor substitutes a generic drug for a
brand name drug under paragraph (b)(6) of this section.
A proposed exception to Sec. 423.120(b)(6) would permit Part D
sponsors to make the above specified changes (removing covered Part D
drugs from their formularies, or changing their cost-sharing, when
substituting or adding their generic equivalents) during any time of
the year. That section generally provides--with a current exception
only for unsafe drugs and drugs removed from the market--that Part D
sponsors generally cannot remove drugs or make cost-sharing changes
between the beginning of the AEP and 60 days after the plan year
begins. We believe that revising this provision would assist Part D
sponsors by permitting substitutions to take place effect during a
longer time period than is currently permitted. Given that the previous
exception would permit generic substitutions prior to the start of the
calendar year, we also propose to conform the definition of ``affected
enrollees'' to clarify that applicable changes must affect their access
to drugs during the current plan year.
We are aware that some may be concerned about not requiring advance
CMS approval or advance direct notice to enrollees prior to making the
permitted generic substitutions, or requiring a transition fill. But we
would only permit immediate substitution when the generics are deemed
therapeutically equivalent to the brand name drug being removed by the
Federal Drug and Food Administration (FDA) and meet other requirements
specified later in this section. This would not apply to follow-on
biological products under current FDA guidance. The FDA has, in fact
noted that, ``A generic drug is a medication created to be the same as
an existing approved brand-name drug in dosage form, safety, strength,
route of administration, quality, and performance characteristics.''
(``Generic Drug Facts,'' see FDA Web site, https://www.fda.gov/Drugs/ResourcesForYou/Consumers/BuyingUsingMedicineSafely/UnderstandingGenericDrugs/ucm167991.htm, accessed September 19, 2017,
hereafter FDA, ``Abbreviated New Drug Application (ANDA): Generics''.)
Additionally, immediate generic substitution has long been an
established bedrock of commercial insurance, and we are not aware of
any harm to the insured resulting from such policies.
Also, we do not believe a transition policy would be appropriate
for these situations: The purpose of the transition process is to make
sure that the medical needs of enrollees are safely accommodated in
that they do not go without their medications or face an abrupt change
in treatment. If the proposal to permit Part D sponsors to immediately
substitute generics for brand name drugs upon market release were
finalized, most enrollees in this situation would not have had an
opportunity to try the drug prior to the drug substitution to see how
it worked for them. In other words, an enrollee could not be certain
that a generic substitution would not work, would constitute an abrupt
change in treatment, or that the enrollee would be better served by
taking no medication rather than the generic unless he or she had
previously tried the generic drug.
Moreover, we have built beneficiary protections into the proposed
provisions. First, proposed Sec. 423.120(b)(5)(iv)(A) addresses safety
concerns by permitting Part D sponsors to add only therapeutically
equivalent generic drugs. This means the FDA must have approved the
generic drug in an abbreviated new drug application pursuant to section
505(j) of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 355(j)),
and it must be listed with the innovator drug in the publication
``Approved Drug Products with Therapeutic Equivalence Evaluations''
(commonly known as the Orange Book) in which the FDA identifies drug
products approved on the basis of safety and effectiveness by the FDA,
and be considered by the FDA to be therapeutically equivalent to the
brand name drug.
Second, we share the concern that prospective enrollees could be
misled by Part D sponsors that deliberately offer brand name drugs
during open enrollment periods only to remove them or change their
cost-sharing as quickly as possible during the plan year. We believe
that our proposed provision would address such problems: Under proposed
Sec. 423.120(b)(5)(iv)(B), a Part D sponsor cannot substitute a
generic for a brand name drug unless it could not have previously
requested formulary approval for use of that drug. As a matter of
operations, CMS permits Part D sponsors to submit formularies, and
their respective change requests, only during certain windows. Under
proposed Sec. 423.120(b)(5)(iv)(B), a Part D sponsor could not remove
a brand name drug or change its preferred or tiered cost-sharing if
that Part D sponsor could have included its generic equivalent with its
initial formulary submission or during a later update window.
However, to be certain, that we have not missed practical or other
complications that would hinder the ability of Part D sponsors to
timely seek approval within the CMS timeframes, we solicit comment as
to whether we should consider immediate substitution, potentially in
limited circumstances, of specified generics for which Part D sponsors
could have previously requested formulary approval. At the same time,
we remain mindful of beneficiary protections and are hesitant to simply
permit substitution of any generics regardless of how long they have
been on the market. Accordingly, we welcome suggestions of any other
practical cut-offs, as well as information on possible effects on
beneficiaries that could result if we were to permit Part D sponsors to
substitute specified generics that have been on the market for longer
time periods.
Third, we believe the two-pronged approach of the proposed
provision would provide appropriate notice for this type of formulary
change. The general notice requirement of proposed Sec.
423.120(b)(iv)(C) would require that, before making any generic
substitutions, a Part D sponsor provide all prospective and current
enrollees with notice in the formulary and other applicable beneficiary
communication materials stating that the Part D sponsor can remove, or
change the preferred or tiered cost-sharing of, any brand name drug
immediately without additional advance notice (beyond the general
advance notice) when a new equivalent generic is added. This would, for
instance, include the Evidence of Coverage (EOC). Proposed Sec.
423.120(b)(iv)(C) would also require that this general notice advise
prospective and current enrollees that they will get direct notice
about any specific drug substitutions made that would affect them and
that the direct notice would advise them of the steps they could take
to request coverage determinations and exceptions. Therefore, the
general notice would advise enrollees about what might take place
before any changes occur.
When the Part D sponsor substitutes a generic for a brand name
drug, the proposed direct notice provision, Sec. 423.120(b)(5)(iv)(E),
would require the Part D sponsor to provide affected enrollees with
direct notice consistent with Sec. 423.120(b)(5)(ii). We currently
require Part D sponsors to provide this information 60 days before such
changes are made. Under the proposed changes, enrollees would receive
the same information they receive under the current regulation--the
only difference being that the notice could be provided

[[Page 56415]]

after the effective date of the generic substitution. As discussed
earlier, under the proposed provision Part D sponsors seeking to make
immediate substitutions would be newly required to have previously
provided general notice in beneficiary communication materials such as
formularies and EOCs that certain generic substitutions could take
place without additional advance notice.
We understand there may be concerns that the direct notice
identifying the specific drug substitution would arrive after the
formulary change has already taken place. As explained previously, we
believe generic substitutions pose no threat to enrollee safety. Also,
as noted earlier, we are proposing to revise Sec. 423.120(b)(6) to
permit generic substitutions to take place throughout the entire year.
This means that, under the proposed provision, a Part D sponsor meeting
all the requirements would be able to substitute a generic drug for a
brand name drug well before the actual start of the plan year (for
instance, if a generic drug became available on the market days after
the summer update). There is nothing in our regulation that would
prohibit advance notice and, in fact, we would encourage Part D
sponsors to provide direct notice as early as possible to any
beneficiaries who have reenrolled in the same plan and are currently
taking a brand name drug that will be replaced with a generic drug with
the start of the next plan year. We would also anticipate that Part D
sponsors will be promptly updating the formularies posted online and
provided to potential beneficiaries to reflect any permitted generic
substitutions--and at a minimum meeting any current timing requirements
provided in applicable guidance. At this time we are not proposing to
set a regulatory deadline by which Part D sponsors must update their
formularies before the start of the new plan year. However, if we were
to finalize this provision and thereafter find that Part D sponsors
were not timely updating their formularies, we would reexamine this
policy. And we would note, as regards timing, that Sec.
423.128(d)(2)(iii) requires that the current formulary posted online be
updated at least monthly.
In cases in which the Part D sponsor would necessarily have to send
notice after the fact, for example instances in which a drug is not
released to the market until after the beginning of the plan year and
the Part D sponsor then immediately makes a generic substitution, the
proposed general notice would have already advised enrollees that they
would receive information about any specific drug generic substitutions
that affected them and that they would still be able to request
coverage determinations and exceptions. While the timing would most
likely mean most enrollees would only be able to make such requests
after receiving a generic drug fill, in the vast majority of cases, an
enrollee could not be certain that a generic substitution would not
work unless he or she actually tried the generic drug. Additionally, we
are strongly encouraging Part D sponsors to provide the retrospective
direct notices of these generic substitutions (including direct notice
to affected enrollees and notice to entities including CMS) no later
than by the end of the month after which the change becomes effective.
While sponsors are required to report this information to both
enrollees and entities including CMS, we currently are not proposing to
codify the end of month timing requirement; however, if we were to
finalize this provision and thereafter find that Part D sponsors were
not timely providing retrospective notice, we would reexamine this
policy.
Fourth, enrollees would be protected from higher cost-sharing under
proposed paragraph (b)(5)(iv)(A), which would require Part D sponsors
to offer the generic with the same or lower cost-sharing and the same
or less restrictive utilization management criteria as the brand name
drug.
We also believe requirements and guidance regarding beneficiary
communications will continue to provide beneficiary protections.
Section 423.128(e)(5) currently requires Part D sponsors to furnish
directly to enrollees an explanation of benefits (EOB) that includes
any applicable formulary changes for which Part D plans are required to
provide notice as described in Sec. 423.120(b)(5). As noted
previously, Sec. 423.128(d)(2)(iii) currently requires Part D sponsors
to post at least 60 days' notice of removals and cost-sharing changes
online for current and prospective Part D enrollees. In light of our
proposal for generic substitutions described previously, we propose to
modify Sec. 423.128(d)(2)(iii) to require Part D sponsors to provide
``timely'' notice under 423.120(b)(5). This would mean that, under the
proposed provision, a Part D sponsor would need to provide at least 30
days' online notice to affected enrollees before removing drugs or
making cost-sharing changes except when adding a therapeutically
equivalent generic as specified, and as has currently been the
requirement, removing unsafe or withdrawn drugs. Part D sponsors could
provide online notice after the effective date of changes only in those
limited instances.
As regards content, Sec. 423.128(d)(2)(iii) requires--and would
continue to do so under the proposed revisions--that Part D sponsors
post online notice regarding any removal or change in the preferred or
tiered cost-sharing status of a Part D drug on its Part D plan's
formulary. Posting information online related to removing a specific
drug or changing its cost-sharing solely to meet the content
requirements of Sec. 423.128(d)(2)(iii) cannot replace general notice
under proposed Sec. 423.120(b)(5)(iv)(C); direct notice to affected
enrollees under Sec. 423.120(b)(5)(ii); or notice to CMS when required
under Sec. 423.120(b)(5). For instance, as noted in the January, 28,
2005 final rule (70 FR 4265), we view online notification under Sec.
423.128(d)(2)(iii) on its own as an inadequate means of providing
specific information to the enrollees who most need it, and we consider
it an additional way that Part D sponsors provide notice of formulary
changes to affected enrollees.
However, we do not mean to restrict or otherwise affect other rules
governing the provisions of materials online. For instance, if Part D
sponsors were able to fulfill CMS marketing and beneficiary
communications requirements by posting a specific document online
rather than providing it in paper, the fact the document was posted
online would not preclude it from providing general notice required
under our proposed provisions. In other words, if otherwise valid,
provision of general notice in a document posted online could suffice
as notice as regards that specified document under proposed Sec.
423.120(b)(5)(iv)(C). In contrast, we do not wish to suggest that
posting one type of notice online would necessarily suffice to meet
distinct notice requirements. For instance, providing the general
advance notice that would be required under Sec. 423.120(b)(5)(iv)(C)
in a document posted online could not meet the online content
requirements of Sec. 423.128(d)(2)(iii) related to providing
information about removing drugs or changing their cost-sharing. Nor,
as noted previously, could the opposite apply: Posting the content
required under Sec. 423.128(d)(2)(iii) online could not fulfill the
advance general notice requirements that would be required under
proposed Sec. 423.120(b)(5)(iv)(C) (or suffice to provide direct
notice to affected enrollees under Sec. 423.120(b)(5)(ii) or notice to
CMS under Sec. 423.120(b)(5)).
In addition to requiring the direct notice to affected enrollees
discussed previously, proposed Sec. 423.120(b)(iv)(D) would also
require Part D sponsors to provide the following entities with

[[Page 56416]]

notice of the generic substitutions consistent with Sec.
423.120(b)(5)(ii): CMS, State Pharmaceutical Assistance Programs (as
defined in Sec. 423.454), entities providing other prescription drug
coverage (as described in Sec. 423.464(f)(1)), authorized prescribers,
network pharmacies, and pharmacists. (To avoid repetition, we propose
to revise the provision to refer to all of these entities as ``CMS and
other specified entities'' for the purposes of Sec. 423.120(b).) Even
though, as proposed, a Part D sponsor that met all of the requirements
would be able to make the generic substitution immediately without
submitting any formulary change requests to CMS, the Part D sponsor
must include the generic substitution in the next available formulary
submission to CMS. We note that Part D plans can determine the most
effective means to communicate formulary change information to State
Pharmaceutical Assistance Programs, entities providing other
prescription drug coverage, authorized prescribers, network pharmacies,
and pharmacists and that, under our proposed provision, we would
consider online posting sufficient for those purposes.
Lastly as part of our reexamination of the need to generally
provide Part D sponsors greater flexibility in formulary changes, we
plan to decrease the amount of direct notice required in cases where
the removal of a drug or change in cost-sharing status will affect
enrollees currently taking the drug. (This would contrast proposed
notice requirements that would apply to immediate substitution of
specified generics. There we would also require advance general notice
that such changes can occur, and direct notice of the specific changes
could be provided after their effective date.) Section 423.120(b)(5)(i)
currently requires at least 60 days' notice to all entities prior to
the effective date of changes and at least 60 days' direct notice to
affected enrollees or a 60 day refill upon the request of an affected
enrollee. We propose to reduce the notice requirement in both instances
to at least 30 days and the refill requirement to a month.
Beneficiaries would be affected, and therefore receive the 30 days'
notice or a month refill, in cases in which, for instance, Part D
sponsors planned to add prior authorization requirements as a result of
new safety-related information or clinical guidelines. This proposal
would permit Part D sponsors to institute formulary changes in half the
time.
We are, again, aware that some may be concerned that we are
reducing the number of days advance notice afforded to enrollees in
these instances. But again, we believe current CMS requirements provide
the necessary beneficiary protections, and that 30 (rather than 60)
days' notice still will afford enrollees sufficient time to either
change to a covered alternative drug or to obtain needed prior
authorization or an exception for the drug affected by the formulary
change. Existing CMS regulations establish robust beneficiary
protections in the coverage and appeals process, including expedited
adjudication timeframes for exigent circumstances (maximum timeframe of
24 hours for coverage determinations and 72 hours for level 1 and 2
appeals), and a requirement that Part D plan sponsors automatically
forward all untimely coverage determinations and redeterminations to
the IRE for independent review. Further, while 60 days' notice is
currently required, we have no evidence to suggest that beneficiaries
are currently utilizing the full 60 days. The reduction to 30 days
would align these requirements with the timeframes for transition
fills. And, with over 11 years of program experience, we have no
evidence to suggest that 30 days has been an insufficient temporary
days supply for transition fills.
(Note we are also proposing to amend the refill amount to months
(namely a month) rather than days (it was 60 days previously) to
conform to a proposed revision to the transition policy regulations at
Sec. 423.120(b)(3).) For further discussion, see section III.A.15 of
this proposed rule, Changes to the Transition.)
Summary: The following provides a high level summary of notice
changes proposed in Sec. 423.120(b). Details on these requirements
appear in the preamble and proposed provisions. This summary does not
address other proposed changes (for instance, changes to transition
requirements); notice provisions we do not propose to change (for
instance, notice for safety edits); or other rules that may also apply
(for instance, marketing and beneficiary communications rules regarding
formulary updates).
Notice required for expedited substitutions of certain
generics: Part D sponsors that would otherwise be permitted to make
certain generic substitutions as specified under proposed Sec.
423.120(b)(5)(iv) would be required to provide the following types of
notice:
++ Advance general notice in the formulary and EOC and other
applicable beneficiary communications stating that such changes may
occur without notice.
++ Notice that identifies the specific drug substitution made--
which may be provided after the effective date of the change--as
follows:

--Direct notice to affected enrollees.
--Notice posted online for current and prospective enrollees.
--Notice to CMS.
--Notice to other entities.

Notice and refill required for certain other midyear
formulary changes: Part D sponsors that would be otherwise permitted to
remove or change the preferred or tiered cost-sharing status of drugs
would be required to provide the below types of notice and refills
under proposed Sec. 423.120(b)(5)(i) and (ii). However, these notice
requirements do not apply when removing drugs deemed unsafe by the FDA
or removed from the market by manufacturers (for applicable
requirements see Sec. 423.120(b)(5)(iii).)
For affected enrollees--
++ Advance direct written notice at least 30 days prior to the
effective date; or
++ Written notice of the change and a month supply of the brand
name drug under the same terms as provided before the change; and
For entities and other enrollees:
++ Advance notice identifying the specific drug changes to be made
at least 30 days prior to the effective date of the change as follows:

--Notice posted online for current and prospective enrollees;
--Notice to CMS; and
--Notice to other entities.
15. Treatment of Follow-On Biological Products as Generics for Non-LIS
Catastrophic and LIS Cost Sharing
Similar to the introduction of an abbreviated approval pathway for
generic drugs provided by the Hatch-Waxman Act in 1984 to spur more
competition through quicker approvals and introduction of lower cost
therapeutic alternatives in the marketplace, Congress enacted the
``Biologics Price Competition and Innovation Act of 2009'' to balance
innovation and consumer interests. Specifically, section 7002 of the
ACA amended section 351 of the Public Health Service Act (PHS Act) (42
U.S.C. 262), adding a subsection (k) to create an abbreviated licensure
pathway for follow-on biological products that are demonstrated to be
either ``biosimilar'' to or ``interchangeable'' with a United States
Food and Drug Administration (FDA) licensed reference biological
product. According to the FDA, ``a biosimilar product is a biological
product that is approved based on a showing that it is highly similar
to an FDA-approved biological product, known as a reference product,
and has

[[Page 56417]]

no clinically meaningful differences in terms of safety and
effectiveness from the reference product. Only minor differences in
clinically inactive components are allowable in biosimilar products.''
However, ``an interchangeable biological product is biosimilar to an
FDA-approved reference product and meets additional standards for
interchangeability. An interchangeable biological product may be
substituted for the reference product by a pharmacist without the
intervention of the health care provider who prescribed the reference
product.'' (See http://www.fda.gov/Drugs/DevelopmentApprovalProcess/HowDrugsareDevelopedandApproved/ApprovalApplications/TherapeuticBiologicApplications/Biosimilars/) Biosimilar biological
products are, by definition, not interchangeable, and are not
substitutable without a new prescription. Follow-on biological products
are listed in the FDA's Purple Book: Lists of Licensed Biological
Products with Reference Product Exclusivity and Biosimilarity or
Interchangeability Evaluations, available at http://www.fda.gov/Drugs/DevelopmentApprovalProcess/HowDrugsareDevelopedandApproved/ApprovalApplications/TherapeuticBiologicApplications/Biosimilars/ucm411418.htm. Part D plan sponsors are also encouraged to monitor the
FDA's Web site for new biologic (BLA) approvals at http://www.accessdata.fda.gov/scripts/cder/drugsatfda/index.cfm?fuseaction=Reports.ReportsMenu.
Sections 1860D-2(b)(4) and 1860D-14(a)(1)(D)(ii-iii) of the Act
specify lower Part D maximum copayments for low-income subsidy (LIS)
eligible individuals for generic drugs and preferred drugs that are
multiple source drugs (as defined in section 1927(k)(7)(A)(i) of the
Act) than are available for all other Part D drugs. Currently the
statutory cost sharing levels are set at the maximums. CMS does not
interpret the statutory language to mean that each plan can establish
lower LIS cost sharing on drugs, but rather, that CMS, through
rulemaking, could establish lower cost sharing than the maximum amount,
and it would therefore be the same for all Part D plans.
For the Part D program, CMS defines a ``generic drug'' at Sec.
423.4 as a drug for which an application under section 505(j) of the
Federal Food, Drug, and Cosmetic Act (21 U.S.C. 355(j)) is approved.
Biosimilar and interchangeable biological products do not meet the
section 1927(k)(7) definition of a multiple source drug or the CMS
definition of a generic drug at Sec. 423.4. Consequently, follow-on
biological products are subject to the higher Part D maximum copayments
for LIS eligible individuals and non-LIS Part D enrollees in the
catastrophic portion of the benefit applicable to all other Part D
drugs. While the statutory maximum LIS copayment amounts apply to all
phases of the Part D benefit, the statute only specifies non-LIS
maximum copayments for the catastrophic phase. CMS clarified the
applicable LIS and non-LIS catastrophic cost sharing in a March 30,
2015 Health Plan Management System (HPMS) memorandum. We advised that
additional guidance may be issued for interchangeable biological
products at a later date.
Nonetheless, treatment of follow-on biological products, which are
generally high-cost, specialty drugs, as brands for the purposes of
non-LIS catastrophic and LIS cost sharing generated a great deal
confusion and concern for plans and advocates alike, and CMS received
numerous requests to redefine generic drug at Sec. 423.4. Advocates
expressed concerns that LIS enrollees were required to pay the higher
brand copayment for biosimilar biological products. Stakeholders who
contacted us asserted treatment of biosimilar biological products as
brands for purposes of LIS cost-sharing creates a disincentive for LIS
enrollees to choose lower cost alternatives. Some of these stakeholders
also expressed similar concerns for non-LIS enrollees in the
catastrophic portion of the benefit.
We agree and propose to revise the definition of generic drug at
Sec. 423.4 to include follow-on biological products approved under
section 351(k) of the PHS Act (42 U.S.C. 262(k)) solely for purposes of
cost-sharing under sections 1860D-2(b)(4) and 1860D-14(a)(1)(D)(ii-iii)
of the Act. Lower cost sharing for lower cost alternatives will improve
enrollee incentives to choose follow-on biological products over more
expensive reference biological products, and will reduce costs to both
Part D enrollees and the Part D program.
While CMS generally seeks to encourage the utilization of lower
cost follow-on biological products, we propose to limit inclusion of
follow-on biological products in the definition of generic drug to
purposes of non-LIS catastrophic cost sharing and LIS cost sharing only
because we want to avoid causing any confusion or misunderstanding that
CMS treats follow-on biological products as generic drugs in all
situations. We do not believe that would be appropriate because the
same FDA requirements for generic drug approval (for example,
therapeutic equivalence) do not apply to biosimilar biological
products, currently the only available follow-on biological products.
Accordingly, CMS currently considers biosimilar biological products
more like brand name drugs for purposes of transition or midyear
formulary changes because they are not interchangeable. In these
contexts, treating biosimilar biological products the same as generic
drugs would incorrectly signal that CMS has deemed biosimilar
biological products (as differentiated from interchangeable biological
products) to be therapeutically equivalent. This could jeopardize Part
D enrollee safety and may generate confusion in the marketplace through
conflation with other provisions due to the many places in the Part D
statute and regulation where generic drugs are mentioned. Therefore, we
believe the proposed change to treat follow-on biological products as
generics should be limited to purposes of non-LIS catastrophic and LIS
cost sharing only.
We propose to modify the definition of generic drug at Sec. 423.4
as follows:
We propose to redesignate the existing definition as
paragraph (i).
We propose to add a new paragraph (ii) to state ``for
purposes of cost sharing under sections 1860D-2(b)(4) and 1860D-
14(a)(1)(D) of the Act only, a biological product for which an
application under section 351(k) of the Public Health Service Act (42
U.S.C. 262(k)) is approved.''
We solicit comment on this proposed change to the definition of
generic drug at Sec. 423.4.
16. Eliminating the Requirement To Provide PDP Enhanced Alternative
(EA) to EA Plan Offerings With Meaningful Differences (Sec. 423.265)
CMS has the authority under section 1857(e)(1) of the Act,
incorporated for Part D by section 1860D-12(b)(3)(D) of the Act, to
establish additional contract terms that CMS finds ``necessary and
appropriate,'' as well as authority under section 1860D-11(d)(2)(B) of
the Act to propose regulations imposing ``reasonable minimum
standards'' for Part D sponsors. Using this authority we previously
issued regulations to ensure that multiple plan offerings by Part D
sponsors represent meaningful differences to beneficiaries with respect
to benefit packages and plan cost structures. At that time, separate
meaningful difference rules were concurrently adopted for MA and stand-
alone PDPs. This section addresses proposed changes to our regulations
pertaining strictly to meaningful

[[Page 56418]]

differences in PDP plan offerings. One of the underlying principles in
the establishment of the Medicare Part D prescription drug benefit is
that both market competition and the flexibility provided to Part D
sponsors in the statute would result in the offering of a broad array
of cost effective prescription drug coverage options for Medicare
beneficiaries. We continue to support the concept of offering a variety
of prescription drug coverage choices for Medicare beneficiaries
consistent with our commitment to afford beneficiaries access to the
prescription drugs they need.
PDP sponsors must offer throughout a PDP region a basic plan that
consists of: Standard deductible and cost sharing amounts (or actuarial
equivalents); an initial coverage limit based on a set dollar amount of
claims paid on the beneficiary's behalf during the plan year; a
coverage gap phase; and finally, catastrophic coverage that applies
once a beneficiary's out-of-pocket expenditures for the year have
reached a certain threshold. Prior to our adopting regulations
requiring meaningful differences between each PDP sponsor's plan
offerings in a PDP Region, our guidance allowed sponsors that offered a
basic plan to offer additional basic plans in the same region, as long
as they were actuarially equivalent to the basic plan structure
described in the statute. These sponsors could also offer enhanced
alternative plans that provide additional value to beneficiaries in the
form of reduced deductibles, reduced copays, coverage of some or all
drugs while the beneficiary is in the gap portion of the benefit,
coverage of drugs that are specifically excluded as Part D drugs under
paragraph (2)(ii) of the definition of Part D drug under Sec. 423.100,
or some combination of those features. As we have gained experience
with the Part D program, we have made consistent efforts to ensure that
the number and type of plan benefit packages PDP sponsors may market to
beneficiaries are no more numerous than necessary to afford
beneficiaries choices from among meaningfully different plan options.
To that end, CMS sets differential out-of-pocket cost (OOPC) targets
each year, using an analysis performed on the previous year's bid
submissions, to ensure contracting organizations submit bids that
clearly offer differences in value to beneficiaries. Published annually
in the Call Letter, the threshold differentials are defined for a basic
and enhanced plan, as well as for two enhanced plans, when offered by a
parent organization in the same region. For example, in CY 2018, a
basic and enhanced plan are required at minimum to provide for a $20
out-of-pocket difference, while two enhanced plans are required to have
at least a $30 differential. Over the years, the thresholds have ranged
from $18 to $23 between basic and enhanced plans, and from $12 to $34
between two enhanced plans. We issued regulations in 2010, at Sec.
423.265(b)(2), that established our authority to deny bids that are not
meaningfully different from other bids submitted by the same
organization in the same service area. Our application of this
authority has eliminated PDP sponsors' ability to offer more than one
basic plan in a PDP region since all basic plan benefit packages must
be actuarially equivalent to the standard benefit structure discussed
in the statute, and in guidance we have also limited to two the number
of enhanced alternative plans that we approve for a single PDP sponsor
in a PDP region. As part of the same 2010 rulemaking, we also
established at Sec. 423.507(b)(1)(iii) our authority to terminate
existing plan benefit packages that do not attract a number of
enrollees sufficient to demonstrate their value in the Medicare
marketplace. Both of these authorities have been effective tools in
encouraging the development of a variety of plan offerings that provide
meaningful choices to beneficiaries.
We continue to be committed to maintaining benefit flexibility and
efficiency throughout both the MA and Part D programs. We wish to
continue the trend of using transparency, flexibility, program
simplification, and innovation to transform the MA and Part D programs
for Medicare enrollees to have options that fit their individual health
needs. In our April 2017 Request for Information (RFI), we offered
stakeholders the opportunity to submit their ideas on how to better
accomplish these goals. In response to the RFI, we received two
comments specific to the meaningful difference requirement for PDPs.
One commenter urged us to eliminate meaningful difference requirements
to allow market competition to determine the appropriate number and
type of plan offerings. Alternatively, it was suggested that if the
meaningful difference standard is retained, we should revise it to
allow plans to be treated as meaningfully different based on
differences in plan characteristics not previously considered by CMS.
The commenter contends that the meaningful difference requirement, as
currently applied, unfairly limits the number of plan offerings and
beneficiary choices. Specifically, it was argued that the meaningful
difference test does not recognize premiums as elements constituting
meaningful differences, despite this being an extremely important
factor for beneficiaries in making enrollment decisions. Another
commenter recommended that we lower the OOPC differentials between
basic and enhanced PDP offerings but at a minimum, we should lower the
OOPC differential between enhanced PDP offerings.
While we received relatively few comments related to meaningful
difference in response to the RFI, we did receive a number of comments
both in support of and opposing the proposed increase in the meaningful
difference threshold between enhanced PDP offerings we announced in the
Draft CY 2018 Call Letter. Those in favor of our proposal believe that
the increase would help to ensure that sponsors are offering
meaningfully different plans and would minimize beneficiary confusion.
Commenters opposed to the proposal argued that the increase would lead
to more expensive plans and would effectively limit plan choice. They
argued that expanding OOPC differentials would ultimately create more
beneficiary disruption as sponsors would have to consolidate plans that
do not meet the new threshold. This result would directly contradict
our request that plan sponsors consider options to minimize beneficiary
disruption. Commenters suggested that we should utilize OOPC estimates
as they were originally intended, to ensure that beneficiaries receive
a minimum additional value from enhanced plans. They added that steady
and reasonable OOPC thresholds will give beneficiaries more consistent
benefits and lower premiums.
We appreciate the importance of ensuring adequate plan choice for
beneficiaries and the value of multiple plan offerings with a diversity
of benefits, now and in the future. We agree with the argument that two
enhanced plans offered by a plan sponsor could vary with respect to
their plan characteristics and benefit design, such that they might
appeal to different subsets of Medicare enrollees, but in the end have
similar out-of-pocket beneficiary costs. We continue to believe however
that a meaningful difference, that takes into account out-of-pocket
costs, be maintained between basic and enhanced plans to ensure that
there is a meaningful value for beneficiaries given the supplemental
Part D premium associated with the enhanced plans. Therefore, effective
for

[[Page 56419]]

Contract Year (CY) 2019, we propose to revise the Part D regulations at
Sec. 423.265 (b)(2) to eliminate the PDP EA to EA meaningful
difference requirement, while maintaining the requirement that enhanced
plans be meaningfully different from the basic plan offered by a plan
sponsor in a service area. We believe these proposed revisions will
help us accomplish the balance we wish to strike with respect to
encouraging competition and plan flexibilities while still providing
PDP choices to beneficiaries that represent meaningful choices in
benefit packages. Anticipated impacts to this change include: (1) A
modest increase in the number of plans that would be offered by PDP
sponsors (if the EA to EA meaningful difference requirement was the
sole barrier to a PDP sponsors offering a second EA plan in a region)
and (2) a potential decrease in the average supplemental Part D
premium.
We also announce our future intent to reexamine, with the benefit
of additional information, how we define the meaningful difference
requirement between basic and enhanced plans offered by a PDP sponsor
within a service area. We recognize that the current OOPC methodology
is only one method for evaluating whether the differences between plan
offerings are meaningful, and will investigate whether the current OOPC
model or an alternative methodology should be used to evaluate
meaningful differences between PDP offerings. While we intend to
conduct our own analyses, we also seek stakeholder input on how to
define meaningful difference as it applies to basic and enhanced Part D
plans. CMS will continue to provide guidance for basic and enhanced
plan offering requirements in the annual Call Letter.
Beneficiaries can continue to rely on the many resources CMS makes
available, such as the Medicare Plan Finder (MPF), 1-800-MEDICARE and
the Medicare and You Handbook, to assist them and their caregivers in
making the best plan choices that meet their individual health needs.
To the extent that CMS finds its elimination results in potential
beneficiary confusion or harm, CMS will consider reinstating the
meaningful difference requirement through future rule making or
consider taking other action.
17. Request for Information Regarding the Application of Manufacturer
Rebates and Pharmacy Price Concessions to Drug Prices at the Point of
Sale
a. Introduction
Part D sponsors and their contracted PBMs have been increasingly
successful in recent years at negotiating price concessions from
pharmaceutical manufacturers, network pharmacies, and other such
entities. Between 2010 and 2015, the amount of all forms of price
concessions received by Part D sponsors and their PBMs increased nearly
24 percent per year, about twice as fast as total Part D gross drug
costs, according to the cost and price concession data Part D sponsors
submitted to CMS for payment purposes.
The data Part D sponsors submit to CMS as part of the annual
required reporting of direct or indirect remuneration (DIR) show that
manufacturer rebates, which comprise the largest share of all price
concessions received, have accounted for much of this growth.\47\ The
data also show that manufacturer rebates have grown dramatically
relative to total Part D gross drug costs each year since 2010. Rebate
amounts are negotiated between manufacturers and sponsors or their
PBMs, independent of CMS, and are often tied to the sponsor driving
utilization toward a manufacturer's product through, for instance,
favorable formulary tier placement and cost-sharing requirements.
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\47\ Sponsors report all DIR to CMS annually by category at the
plan level. DIR categories include: Manufacturer rebates,
administrative fees above fair market value, price concessions for
administrative services, legal settlements affecting Part D drug
costs, pharmacy price concessions, drug cost-related risk-sharing
settlements, etc.
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The DIR data show similar trends for pharmacy price concessions.
Pharmacy price concessions, net of all pharmacy incentive payments,
have grown faster than any other category of DIR received by sponsors
and PBMs and now buy down a larger share of total Part D gross drug
costs than ever before. Such price concessions are negotiated between
pharmacies and sponsors or their PBMs, again independent of CMS, and
are often tied to the pharmacy's performance on various measures
defined by the sponsor or its PBM.
When manufacturer rebates and pharmacy price concessions are not
reflected in the price of a drug at the point of sale, beneficiaries
might see lower premiums, but they do not benefit through a reduction
in the amount they must pay in cost-sharing, and thus, end up paying a
larger share of the actual cost of a drug. Moreover, given the increase
in manufacturer rebates and pharmacy price concessions in recent years,
the point-of-sale price of a drug that a Part D sponsor reports on a
PDE record as the negotiated price is rendered less transparent at the
individual prescription level and less representative of the actual
cost of the drug for the sponsor when it does not include such
discounts. Finally, variation in the treatment of rebates and price
concessions by Part D sponsors may have a negative effect on the
competitive balance under the Medicare Part D program, as explained
later in this section.
At the time the Part D program was established, we believed, as
discussed in the Part D final rule that appeared in the January 28,
2005 Federal Register (70 FR 4244), that market competition would
encourage Part D sponsors to pass through to beneficiaries at the point
of sale a high percentage of the manufacturer rebates and other price
concessions they received, and that establishing a minimum threshold
for the rebates to be applied at the point of sale would only serve to
undercut these market forces. However, actual Part D program experience
has not matched expectations in this regard. In recent years, only a
handful of plans have passed through a small share of price concessions
to beneficiaries at the point of sale. Instead, because of the
advantages that accrue to sponsors in terms of premiums (also an
advantage for beneficiaries), the shifting of costs, and plan revenues,
from the way rebates and other price concessions applied as DIR at the
end of the coverage year are treated under the Part D payment
methodology, sponsors may have distorted incentives as compared to what
we intended in 2005.
Therefore, in this request for information we discuss
considerations related to and solicit comment on requiring sponsors to
include at least a minimum percentage of manufacturer rebates and all
pharmacy price concessions received for a covered Part D drug in the
drug's negotiated price at the point of sale. Feedback received will be
used for consideration in future rulemaking on this topic.
b. Background
Section 1860D-2(d)(1) of the Act requires that a Part D sponsor
provide beneficiaries with access to negotiated prices for covered Part
D drugs. Under our current regulations at Sec. 423.100, the negotiated
price is the price paid to the network pharmacy or other network
dispensing provider for a covered Part D drug dispensed to a plan
enrollee that is reported to CMS at the point of sale by the Part D
sponsor. This point of sale price is used to calculate beneficiary
cost-sharing. More broadly, the negotiated price is the primary basis
by which the Part D benefit is adjudicated, and is used to determine
plan, beneficiary, manufacturer (in the

[[Page 56420]]

coverage gap), and government liability during the course of the
payment year, subject to final reconciliation following the end of the
coverage year.
Under current law, when not explicitly required to do so for
certain types of pharmacy price concessions, Part D sponsors can choose
whether to reflect various price concessions, including manufacturer
rebates, they or their intermediaries receive in the negotiated price.
Specifically, section 1860D-2(d)(1)(B) of the Act merely requires that
negotiated prices ``shall take into account negotiated price
concessions, such as discounts, direct or indirect subsidies, rebates,
and direct or indirect remunerations, for covered part D drugs . . .
.'' In other words, Part D sponsors are allowed, but generally not
currently required, to apply rebates and other price concessions at the
point of sale to lower the price upon which beneficiary cost-sharing is
calculated. To date, sponsors have elected to include rebates and other
price concessions in the negotiated price at the point-of-sale only
very rarely. All rebates and other price concessions that are not
included in the negotiated price must be reported to CMS as DIR at the
end of the coverage year and are used in our calculation of final plan
payments, which, under the statute, are required to be based on costs
actually incurred by Part D sponsors, net of all applicable DIR.
(1) Premiums and Plan Revenues
The main benefit to a Part D beneficiary of price concessions
applied as DIR at the end of the coverage year (and not to the
negotiated price at the point of sale) comes in the form of a lower
plan premium. A sponsor must factor into its plan bid an estimate of
the DIR expected to be generated--that is, it must lower its estimate
of plan liability by a share of the projected DIR--which has the effect
of reducing the price of coverage under the plan. Under the current
Part D benefit design, price concessions that are applied post-point-
of-sale, as DIR, reduce plan liability, and thus premiums, more than
price concessions applied at the point of sale. When price concessions
are applied to reduce the negotiated price at the point of sale, some
of the concession amount is apportioned to reduce beneficiary cost-
sharing, as explained in this section, instead of plan and government
liability; this is not the case when price concessions are applied
post-point-of-sale, where the majority of the concession amount accrues
to the plan, and the remainder accrues to the government. Therefore, to
the extent that plan bids reflect accurate DIR estimates, the rebates
and other price concessions that Part D sponsors and their PBMs
negotiate, but do not include in the negotiated price at the point of
sale, put downward pressure on plan premiums, as well as the
government's subsidies of those premiums. The average Part D basic
beneficiary premium has grown at an average rate of only about 1
percent per year between 2010 and 2015, and is projected to decline in
2018, due in part to sponsors' projecting DIR growth to outpace the
growth in projected gross drug costs each year. The average Medicare
direct subsidy paid by the government to cover a share of the cost of
coverage under a Part D plan has also declined, by an average of 8.1
percent per year between 2010 and 2015, partly for the same reason.
However, any DIR received that is above the projected amount
factored into a plan's bid contributes primarily to plan profits, not
lower premiums. The risk-sharing construct established under Part D by
statute allows sponsors to retain as plan profit the majority of all
DIR that is above the bid-projected amount.\48\ Our analysis of Part D
plan payment and cost data indicates that in recent years, DIR amounts
Part D sponsors and their PBMs actually received have consistently
exceeded bid-projected amounts.
---------------------------------------------------------------------------

\48\ Medicare shares risk with Part D sponsors on the drug costs
for which they are liable using symmetrical risk corridors and
through the payment of 80 percent reinsurance in the catastrophic
phase of the benefit.
---------------------------------------------------------------------------

To capture the relative premium and other advantages that price
concessions applied as DIR offer sponsors over lower point-of-sale
prices, sponsors sometimes opt for higher negotiated prices in exchange
for higher DIR and, in some cases, even prefer a higher net cost drug
over a cheaper alternative. This may put upward pressure on Part D
program costs and, as explained below, shift costs from the Part D
sponsor to beneficiaries who utilize drugs in the form of higher cost-
sharing and to the government through higher reinsurance and low-income
cost-sharing subsidies.
(2) Cost-Shifting
When manufacturer rebates and other price concessions are not
reflected in the negotiated price at the point of sale (that is,
applied instead as DIR at the end of the coverage year), beneficiary
cost-sharing, which is generally calculated as a percentage of the
negotiated price, becomes larger, covering a larger share of the actual
cost of a drug. Although this is especially true when a Part D drug is
subject to coinsurance, it is also true when a drug is subject to a
copay because Part D rules require that the copay amount be at least
actuarially equivalent to the coinsurance required under the defined
standard benefit design. For many Part D beneficiaries who utilize
drugs and thus incur cost-sharing expenses, this means, on average,
higher overall out-of-pocket costs, even after accounting for the
premium savings tied to higher DIR. For the millions of low-income
beneficiaries whose out-of-pocket costs are subsidized by Medicare
through the low income cost-sharing subsidy, those higher costs are
borne by the government. This potential for cost-shifting grows
increasingly pronounced as manufacturer rebates and pharmacy price
concessions increase as a percentage of gross drug costs and continue
to be applied outside of the negotiated price. Numerous research
studies further suggest that the higher cost-sharing that results can
impede beneficiary access to necessary medications, which leads to
poorer health outcomes and higher medical care costs for beneficiaries
and Medicare.^{49 50 51} These effects of higher beneficiary
cost-sharing under the current policies regarding the determination of
negotiated prices must be weighed against the impact on beneficiary
access to affordable drugs of the lower premiums that are currently
charged for Part D coverage.
---------------------------------------------------------------------------

\49\ Michele Heisler et al., ``The Health Effects of Restricting
Prescription Medication Use Because of Cost,'' Medical Care, 626-634
(2004).
\50\ Peter Bach, ``Limits on Medicare's Ability to Control
Rising Spending on Cancer Drugs,'' The New England Journal of
Medicine, 360, 626-633 (2009).
\51\ Sonya Blesser Streeter et al., ``Patient and Plan
Characteristics Affecting Abandonment of Oral Oncolytic
Prescriptions,'' Journal of Oncology Practice, 7, no. 3S, 46S-51S
(2011).
---------------------------------------------------------------------------

Moreover, beneficiaries progress through the four phases of the
Part D benefit as their total gross drug costs and cost-sharing
obligations increase. Because both of these values are calculated based
on the negotiated prices reported at the point of sale, when
manufacturer rebates and pharmacy price concessions are not applied at
the point of sale, the higher negotiated prices that result move Part D
beneficiaries more quickly through the Part D benefit. This, in turn,
shifts more of the total drug spend into the catastrophic phase, where
Medicare liability is highest (80 percent, paid as reinsurance) and
plan liability, after the closing of the coverage gap, is lowest (15
percent). Part D program experience further suggests that sponsors are
able to offset their already limited liability in the catastrophic
phase by capturing additional rebates from manufacturers,

[[Page 56421]]

the largest share of which, under current Part D rules, as explained
previously, are allocated to reduce plan liability. Consistent with
this benefit, we note that sponsors have negotiated more high price-
high rebate arrangements, especially in recent years, which has caused
the proportion of costs for which the plan sponsor is at risk to shrink
when those higher rebates are not passed on at the point of sale. Under
current rules, therefore, Part D sponsors may have weak incentives,
and, in some cases even, no incentive, to lower prices at the point of
sale or to choose lower net cost alternatives to high cost-highly
rebated drugs when available.
(3) Transparency and Differential Treatment
Given the significant growth in manufacturer rebates and pharmacy
price concessions in recent years, when such amounts are not reflected
in the negotiated price, at least to some degree, the true price of a
drug to the plan is not available to consumers at the point of sale,
nor is it reflected on the Medicare Prescription Drug Plan Finder (Plan
Finder) tool. Consequently, consumers cannot efficiently minimize both
their costs and costs to the taxpayers by seeking and finding the
lowest-cost drug or the lowest-cost drug and pharmacy combination.
The quality of information available to consumers is even less
conducive to producing efficient choices when rebates and other price
concessions are treated differently by different Part D sponsors; that
is, when they are applied to the point-of-sale price to differing
degrees and/or estimated and factored into plan bids with varying
degrees of accuracy. First, when some sponsors include price
concessions in negotiated prices while others treat them as DIR,
negotiated prices no longer have a consistent meaning across the Part D
program, undermining meaningful price comparisons and efficient choices
by consumers. Second, if a sponsor's bid is based on an estimate of net
plan liability that is understated because the sponsor has been
applying price concessions as DIR at the end of the coverage year
rather than using them to reduce the negotiated price at the point of
sale, it follows that the sponsor may be able to submit a lower bid
than a competitor that applies price concessions at the point of sale
or opts for lower net cost alternatives to high cost-highly rebated
drugs when available. This lower bid results in a lower plan premium
that must be paid by enrollees in the plan, which could allow the
sponsor to capture additional market share. The resulting competitive
advantage accruing to one sponsor over another in this scenario stems
only from a technical difference in how plan costs are reported to CMS.
Therefore, the opportunity for differential treatment of rebates and
price concessions could result in bids that are not comparable and in
premiums that are not valid indicators of relative plan efficiency.
c. Manufacturer Rebates to the Point of Sale
We are soliciting comment from stakeholders on how we might most
effectively design a policy requiring Part D sponsors to pass through
at the point of sale a share of the manufacturer rebates they receive,
in order to mitigate the effects of the DIR construct \52\ on costs to
both beneficiaries and Medicare, competition, and efficiency under Part
D. In this section, we put forth for consideration potential parameters
for such a policy and seek detailed comments on their merits, as well
as the merits of any alternatives that might better serve our goals of
reducing beneficiary costs and better aligning incentives for Part D
sponsors with the interests of beneficiaries and taxpayers. We
specifically seek comment on how this issue could be addressed without
increasing government costs and without reducing manufacturer payments
under the coverage gap discount program. We encourage all commenters to
provide quantitative analytical support for their ideas wherever
possible.
---------------------------------------------------------------------------

\52\ We use the term ``DIR construct'' to refer to how DIR is
treated under current Part D payment rules and the advantages that
accrue to Part D sponsors when they apply rebates and other price
concessions as DIR at the end of the coverage year.
---------------------------------------------------------------------------

Specifically, we are considering requiring, through future
rulemaking, Part D sponsors to include in the negotiated price reported
to CMS for a covered Part D drug a specified minimum percentage of the
cost-weighted average of rebates provided by drug manufacturers for
covered Part D drugs in the same therapeutic category or class. We will
refer to the rebate amount that we would require be included in the
negotiated price for a covered Part D drug as the ``point-of-sale
rebate.'' Under such a policy, sponsors could apply as DIR at the end
of the coverage year only those manufacturer rebates received in excess
of the total point-of-sale rebates. In the unlikely event that total
manufacturer rebate dollars received for a drug are less than the total
point-of-sale rebates, the difference would be reported at the end of
the coverage year as negative DIR.
(1) Specified Minimum Percentage
We are considering setting the minimum percentage of manufacturer
rebates that must be passed through at the point of sale at a point
less than 100 percent of the applicable average rebate amount for drugs
in the same drug category or class. For operational ease, we are
considering setting the same minimum percentage, which we would specify
in regulation, for all rebated drugs in all years--that is, the minimum
percentage would not change by drug category or class or by year.
It is important to note that we are not considering requiring that
100 percent of rebates be applied at the point of sale. As explained
earlier, the statutory definition of negotiated price in section 1860D-
2(d)(1)(B) of the Act requires that ``negotiated prices shall take into
account negotiated price concessions, such as discounts, direct or
indirect subsidies, rebates, and direct or indirect remunerations, for
covered part D drugs . . .'' (emphasis added). We believe this
language, particularly when read in the context of the requirement in
section 1860D-2(d)(2) of the Act that Part D sponsors report the
aggregate price concessions made available ``by a manufacturer which
are passed through in the form of lower subsidies, lower monthly
beneficiary prescription drug premiums, and lower prices through
pharmacies and other dispensers,'' contemplates that Part D sponsors
have some flexibility in determining how to apply manufacturer rebates
in order to reduce costs under the plan.
Furthermore, we are cognizant of the fact that while requiring that
a higher share of rebates be included in the negotiated price would
more meaningfully address the concerns highlighted earlier and lead to
larger cost-sharing savings for many beneficiaries, doing so would also
result in larger premium increases for all beneficiaries, as discussed
in greater detail later in this section, and lower flexibility for Part
D sponsors in regards to the treatment of manufacturer rebates, and
thus, for some sponsors, weaker incentives to participate in the Part D
program. We aim to set the minimum percentage of rebates that must be
applied at the point of sale at a point that allows an appropriate
balance between these outcomes and thus achieves the greatest possible
increase in beneficiary access to affordable drugs.
We are soliciting comment on the minimum percentage of manufacturer
rebates that should be reflected in the negotiated price in order to
achieve this balance. We are also seeking comment on how and how often,
if at all, that

[[Page 56422]]

minimum percentage should be updated by CMS, and what factors should be
considered in making any such change. We request that commenters
provide analytical justification for their ideas wherever possible. We
also are seeking comment on the effect that specifying a minimum
percentage of rebates that must be reflected in the negotiated price
would have on the competition for rebates under Part D and the total
rebate dollars received by Part D sponsors and PBMs.
(2) Applicable Average Rebate Amount
We are also particularly interested in stakeholder feedback
regarding the following methodology to calculate the applicable average
rebate amount, a specified minimum percentage of which would be
required to be applied at the point of sale:
Rebate Year: We are considering requiring that
point-of-sale rebate amounts be based on average manufacturer rebates
expected to be received for each drug category or class under the
manufacturer rebate agreements for the current payment year, not
historical rebate experience. To the extent that rebate agreements are
structured with contingencies that would be unclear at the point of
sale, sponsors would be required to base the point-of-sale rebate
amount on a good faith estimate of the rebates expected to be received.
We solicit comments on whether this approach would ensure that the
price available to beneficiaries at the point of sale reflects the
actual price of a drug at that time, or if an alternative approach
would do so more effectively.
Rebated Drugs: We are considering requiring that
the average rebate amount be calculated using only drugs for which
manufacturers provide rebates. We believe including non-rebated drugs
in this calculation would serve only to drive down the average
manufacturer rebates, which would dampen the intended effects of any
change.
Additionally, we would likely consider each drug product with a
unique 11-digit national drug code (NDC) separately for purposes of
calculating the average rebate amount. PDE and rebate data submitted to
CMS show that gross drug costs and rebate rates under a plan can vary
even for the same drugs produced by the same manufacturer that are
packaged differently and thus have different NDC-11 identifiers.
Therefore, we believe that the average rebate amounts are more likely
to be accurate when calculated based on the gross drug cost and rebate
data at the 11-digit NDC level. We solicit comment on whether
specifying such a requirement would also serve to ensure consistency in
how average rebates are calculated across sponsors, which would make
prices more comparable across Part D plans and enforcement easier.
Plan-Level Average: We are considering requiring
that average rebate amounts be calculated separately for each plan
(that is, calculated at the plan-benefit-package level). In other
words, the same average rebate amount would not apply to the point-of-
sale price for a covered drug across all plans under one contract, nor
across all contracts under one sponsor. We believe this approach would
result in the calculation of more accurate average rebates because the
PDE and rebate data that are submitted by sponsors demonstrate that
gross drug costs and rebate levels are not the same across all plans
under one contract, nor across all contracts under one sponsor. This
approach would also largely be consistent with how sponsors develop
cost estimates for their Part D bids because benefit designs, including
formulary structure, and assumptions about enrollee characteristics and
utilization vary by plan, even for multiple plans under one contract.
Similarly, final payments are calculated by CMS at the plan level,
based on the data submitted by the sponsor. We solicit comment on
whether the most appropriate approach for calculating the average
rebate amount for point-of-sale application would be to do so at the
plan level, using plan-specific information, given that moving a
portion of manufacturer rebates to the point of sale would impact plan
liability and payments, or if another approach would be more
appropriate.
Drug Category or Class: We are considering
requiring that the manufacturer rebate amount applied to the point-of-
sale price for a covered drug be based on the plan's average rebate
amount calculated for the rebated drugs in the same category or class.
We are considering requiring sponsors to determine the average rebate
amount at the therapeutic category or class level, rather than a drug-
specific rebate amount, in order to maintain the confidentiality of any
manufacturer-sponsor/PBM pricing relationship with respect to an
individual drug. Given that rebate rates are typically negotiated at
the individual drug level, we believe that the drug category/class-
average approach we are considering would help maintain fair
competition among drug manufacturers, as well as Part D sponsors, by
preventing competitors from reverse engineering the particulars of any
proprietary pricing arrangement. This approach would also increase
price transparency over the status quo, especially at the drug category
or class level, and improve market competition and efficiency under
Part D as a result. In addition to feedback on this general approach
and our rationale for it, we are seeking comment, in particular, on the
drug classification system that Part D sponsors should be required to
use to calculate their drug category/class-level average rebate amounts
and why that system would be most appropriate for use in such a point-
of-sale rebate policy. We also are seeking comment on the effect of
calculating average rebates at the drug category/class level on
competition and, in turn, on the total rebate dollars received.
We are also particularly interested in comments on how an average
rebate amount should be calculated for a drug that is the only rebated
drug in its drug category or class. An alternative approach would be
necessary in this case because the average rebate amount calculated
under the general approach we have described above would equal the
drug-specific rebate amount, which, if included in the negotiated
price, could result in the release of proprietary pricing information.
We ask that commenters explain how any alternative they suggest for the
only rebated drug scenario would address this concern and comment on
the level of price transparency that would be achieved under the
suggested alternative.
Weighting: We are considering requiring that
when calculating the applicable average rebate amount for a particular
drug category, the manufacturer rebate amount for each individual drug
in that category be weighted by the total gross drug costs incurred for
that drug, under the plan, over the most recent month, quarter, year,
or another time period to be specified in future rulemaking for which
cost data is available. We believe a weighted average is more accurate
than a simple average because sponsors do not receive the same level of
rebates for all drugs in a particular drug category or class, and thus,
contrary to the assumption underlying a simple average, not all drugs
contribute equally to the final average rebate percentage for a drug
category or class received by the sponsor under a plan at the end of a
payment year. A gross drug cost-weighted average ensures that drugs
with higher utilization, higher costs, or both will be more important
to the final average rebate rate realized for the drug category or
class than lower utilization, lower cost, or lower cost-lower
utilization drugs in the category or class.

[[Page 56423]]

In the case of a drug with less time on the market than the time
period for which cost data would be required under this weighting
approach or of a plan that has not been active in the Part D program
for the time period required under the weighting approach, we are
considering requiring that the drug's rebate amount be weighted by a
sponsor's projection of total gross drug costs for the plan that takes
into account any plan-specific cost experience already available. If no
plan-specific cost experience is available when calculating average
rebate amounts, such as at the beginning of a payment year for a new
plan, are considering requiring sponsors to use the same drug cost
projections on which they base their Part D bids. Further, for
operational ease, it appears the manufacturer rebates used in the
calculation of the average rebate amount would need to include all
manufacturer rebates received for the drug, including all point-of-sale
rebates. Then, in order not to double count the point-of-sale rebates,
the total gross drug costs used to weight the average under this
methodology would have to be based on the drug's price at the point of
sale before it is lowered by any manufacturer rebates or other price
concessions applied at the point of sale. We are interested in
stakeholder feedback on these considerations.
For an illustration of how the weighted-average rebate amount for a
particular drug category or class would be calculated, see the point-
of-sale rebate example later in this section.
Timing: We are considering requiring Part D
sponsors to recalculate the applicable average rebate amount every
month, quarter, year, or another time period to be specified in future
rulemaking, in order to ensure that the average reflects current cost
experience and manufacturer rebate information. We believe that a
requirement to recalculate the average rebate amount should balance the
need to sustain a level of price transparency throughout the entire
year with the additional burden on sponsors associated with more
frequent updates. We are seeking comment on how often the applicable
cost-weighted drug category/class-average rebate amount, and thus the
point-of-sale rebate for any drug, should be recalculated.
(3) Point-of-Sale Rebate Drugs
We are considering limiting the application of any point-of-sale
rebate requirement to only rebated drugs. Under this approach, the
calculated average rebate amount would only be required to be applied
to the point-of-sale prices for drugs that are rebated, with each drug
identified by its unique NDC-11 identifier. The alternative would
result in a manufacturer that provides no rebates for a particular drug
benefiting from a direct competitor's rebate, as the competitor's
rebate would be used to lower the negotiated price and thereby
potentially increasing sales of the non-rebated drug. However, to be
clear, under this potential approach, sponsors would maintain their
flexibility to include in the negotiated price for any drug, including
a non-rebated drug, manufacturer rebates and other price concessions
above those required to be included in the negotiated price for rebated
drugs under a point-of-sale rebate policy such as the one we describe
here.
Moreover, in order to limit the impact on premiums for all
beneficiaries of adopting a requirement that sponsors include a portion
of manufacturer rebates in the negotiated price at the point of sale,
we are also seeking comment on the merits or limitations of, a more
targeted version of the policy approach that would require sponsors to
pass through a minimum percentage of rebates at the point of sale only
for specific drugs or drug categories or classes. Under this
alternative approach, the point-of-sale rebate policy would apply only
for drugs or drug categories or classes that most directly contribute
to increasing Part D drug costs in the catastrophic phase of coverage
or drugs with high price-high rebate arrangements; such drugs or drug
categories or classes are likely to have the most significant impact on
beneficiary costs and serve to increase program costs overall, as
discussed previously. We are interested in stakeholder feedback on
whether targeting the rebate requirement in such a way would
effectively address the misaligned sponsor incentives and market
inefficiencies that exist under Part D today as a result of the DIR
construct. In addition to general comments on the alternative, more
targeted policy approach, we are particularly interested in
recommendations for the criteria that we might use to determine which
drugs or drug categories or classes to target under such an alternative
approach.
(4) Point-of-Sale Rebate Example
To illustrate how the weighted-average rebate amount for a
particular drug class would be calculated under a point-of-sale rebate
requirement that includes the features described earlier, we provide
the following example: suppose drugs A, B, and C are the only three
rebated drugs on the plan's formulary in a particular drug class. The
negotiated prices, before application of the point-of-sale rebates, for
the three drugs in the current time period are $200, $100, and $75,
respectively. The manufacturer rebates expected by the plan in this
payment year, given the information available in the current period,
for drugs A, B, and C equal 20, 10, and 5 percent, respectively, of the
drugs' pre-rebate negotiated prices. Over the previous time period,
total gross drug costs incurred under the plan for drug A equaled $2
million, for drug B equaled $750,000, and for drug C equaled $150,000.
Therefore, the gross drug cost-weighted average rebate rate for this
drug class in the current time period is calculated as the following:
[($2 million x 20 percent) + ($750,000 x 10 percent) + ($150,000 x 5
percent)]/($2 million + $750,000 + $150,000), or 16.64 percent. If we
were to require that a minimum 50 percent of the average rebate be
applied at the point of sale for all rebated drugs in this drug class
(and the plan only applies the minimum required percentage), the final
negotiated prices for drugs A, B, and C, now equal to $183.36, $91.68,
and $68.76, respectively, would be 8.32 percent (50 percent of 16.64
percent) lower than the pre-rebated prices.
For each of the three drugs in this example, beneficiary out-of-
pocket costs would be lower under the approach we are considering than
under the status quo. Assuming, for instance, these drugs are subject
to a 25 percent coinsurance, the enrollee's costs for the three drugs
under this approach would be $45.84 (25 percent of $183.36) for drug A,
$22.92 (25 percent of $91.68) for drug B, and $17.19 (25 percent of
$68.76) for drug C. Under the status quo, the enrollee's costs would be
$50 for drug A ($4.16 higher), $25 for drug B ($2.08 higher), and
$18.75 for drug C ($1.56 higher).
Any difference between the rebates applied at the point of sale and
those actually received would be captured as DIR through reporting at
the end of the coverage year. Assume, for instance, that total gross
drug costs for drugs A, B, and C equal $1.5 million, $1 million, and
$200,000, respectively, in this period. The actual manufacturer rebates
received, therefore, will equal $300,000, $100,000, and $10,000,
respectively, for drugs A, B, and C in this period, based on the plan's
expected rebate rates of 20, 10, and 5 percent, respectively, for the
three drugs in this payment year. Based on the point-of-sale rebate
rate calculated above for the applicable drug class and the total gross
drug cost assumptions provided for the three drugs, we calculate the
total point-of-

[[Page 56424]]

sale rebates in this period to be $124,786.48 (8.32 percent of $1.5
million) for drug A, $83,189.66 (8.32 percent of $1 million) for drug
B, and $16,637.93 (8.32 percent of $200,000) for drug C. Therefore, the
manufacturer rebates applied by the plan as DIR at the end of the
coverage year for the three drugs, respectively, would be $175,215.52,
$16,810.34, and -$6,637.93 and total $185,387.93 across the drug class.
(5) Additional Considerations
Under the policy approach that we are considering here for moving
manufacturer rebates to the point of sale, the responsibility for
calculating the appropriate point-of-sale rebate amount over the course
of the year would fall on Part D sponsors given their role in
administering the Medicare drug benefit. We would leverage existing
reporting mechanisms to review the sponsors' calculations, as we do
with other cost data required to be reported. Specifically, we would
likely use the estimated rebates at point-of-sale field on the PDE
record to collect point-of-sale rebate information, and the
manufacturer rebates fields on the Summary and Detailed DIR Reports to
collect final manufacturer rebate information at the plan and NDC
levels. Differences between the manufacturer rebate amounts applied at
the point of sale and rebates actually received would become apparent
when comparing the data collected through those means at the end of the
coverage year.
Additionally, we note that in accordance with Sec. 423.505(k) of
the Part D regulations, a Part D sponsor is required to certify the
accuracy, completeness, and truthfulness of all data related to
payment, including the PDE data and information on allowable costs that
it submits for purposes of risk corridor and reinsurance payment. A
Part D sponsor certifies its Part D cost data by signing and submitting
attestations to CMS. By signing the attestations, the Part D sponsor
certifies (based on best knowledge, information, and belief) that the
PDE data, DIR data, and any other information provided for the purposes
of determining payment to the plan for the applicable contract year are
accurate, complete, and truthful. If we were to move forward with a
point-of-sale rebate policy, we would also consider amending Sec.
423.505(k) to add a new requirement that the CEO, CFO, or COO attest
(based on best knowledge, information, and belief) to the accuracy,
completeness, and truthfulness of the average rebate amount included in
the negotiated price and reported on the PDE. The submission of
accurate, complete, and truthful data regarding the average rebate
amount included in the negotiated price would be necessary to ensure
accurate reinsurance and risk corridor payments.
Under the approach we are considering, if a Part D sponsor
discovers errors after the certification has been made (that is, after
the attestation has been signed), the Part D sponsor would submit
corrected PDE data, and, under most circumstances, CMS would reconcile
the error through the reopening process described at Sec. 423.346. All
reopenings are at the discretion of CMS. CMS performs a global
reopening approximately 4 years after the initial reconciliation for
that contract year. A Part D sponsor's reopening request resulting from
errors in PDE data discovered after the global reopening for the
contract year in which the error occurred would be evaluated by CMS on
a case by case basis. Any errors in the calculation of the average
rebate amount that result in overpayments would be required to be
reported and returned consistent with Sec. 423.360 and the applicable
subregulatory guidance on overpayments.
We note that prior to the submission of the attestation, and more
specifically, prior to the PDE submission deadline for the initial
reconciliation for a contract year, if a Part D sponsor discovers an
issue with the average rebate amount included in the negotiated price
and reported on the PDE, all affected PDEs would need to be adjusted or
deleted in accordance with applicable CMS guidance. As of the
publication of this request for information, the applicable guidance is
October 6, 2011 CMS memorandum, Revision to Previous Guidance Titled
``Timely Submission of Prescription Drug Event (PDE) Records and
Resolution of Rejected PDEs.''
We encourage stakeholders to comment on what other enforcement and
oversight mechanisms should be instituted to ensure compliance with any
potential point-of-sale rebate requirement. We are particularly
interested in stakeholder feedback on how we might ensure accurate
rebate amounts are applied at the point of sale when rebate agreements
are structured with contingencies that would be unclear at the point of
sale.
We also seek stakeholder comment on what, if any, special
considerations should be taken into account in the design of a point-
of-sale rebate policy, for Part D employer group waiver plans (EGWPs).
We are also interested in feedback on what particular effects requiring
Part D sponsors to apply some manufacturer rebates at the point of sale
would have on the EGWP market, as well as on how such a requirement
might impact the retiree drug subsidy program.
Finally, we note that the negotiated price is also the basis by
which manufacturer liability for discounts in the coverage gap is
determined. Under section 1860D-14A(g)(6) of the Act, the negotiated
price used for coverage gap discounts is based on the definition of
negotiated price in the version of Sec. 423.100 that was in effect as
of the passage of the Patient Protection and Affordable Care Act
(PPACA). Under this definition, the negotiated price is ``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'' (emphasis added). Because this definition of negotiated price
only references the price concessions that the Part D sponsor has
elected to pass through at the point of sale, we are uncertain as to
whether we would have the authority to require sponsors include in the
negotiated price the weighted-average rebate amounts that would be
required to be passed through under any potential point-of-sale rebate
policy, for purposes of determining manufacturer coverage gap
discounts. We intend to consider this issue further and will address it
in any future rulemaking regarding the requirements for determining the
negotiated price that is available at the point of sale.
(6) Impacts of Applying Manufacturer Rebates at the Point of Sale
Under a point-of-sale rebate policy designed as we have described
in this comment solicitation, beneficiaries would see lower prices at
the pharmacy point-of-sale, and on Plan Finder, beginning immediately
in the year the policy takes effect. Lower point-of-sale prices would
result directly in lower cost-sharing costs for non-low income
beneficiaries, especially for those who use drugs in highly
competitive, highly-rebated categories or classes. For low income
beneficiaries whose out-of-pocket costs are subsidized through
Medicare's low-income cost-sharing subsidy, cost-sharing savings
resulting from lower point-of-sale prices would accrue to the
government. Plan premiums would likely increase as a result of such a
point-of-sale rebate policy--if some rebates are required to be passed
through to beneficiaries at the point of sale, fewer such concessions
could be apportioned to reduce plan liability, which would have the
effect of

[[Page 56425]]

increasing the cost of coverage under the plan. At the same time, the
reduction in cost-sharing obligations for the average beneficiary would
likely be large enough to lower their overall out-of-pocket costs. The
increasing cost of coverage under Part D plans as a result of rebates
being applied at the point of sale likely would have a more significant
impact on government costs, which would increase overall due to the
significant growth in Medicare's direct subsidies of plan premiums and
low income premium subsidies.
Partially offsetting the increase in direct subsidy and low income
premium subsidy costs for the government would be decreases in
Medicare's reinsurance and low income cost-sharing subsidies. Decreases
in Medicare's reinsurance subsidy result when lower negotiated prices
slow down the progression of beneficiaries through the Part D benefit
and into the catastrophic phase, and when the government's 80 percent
reinsurance payments for allowable drug costs incurred in the
catastrophic phase are based on lower negotiated prices. Similarly, low
income cost-sharing subsidies would decrease if beneficiary cost-
sharing obligations decline due to the reduction in prices at the point
of sale. Finally, the slower progression of beneficiaries through the
Part D benefit would also have the effect of reducing manufacturer gap
discount payments as fewer beneficiaries would enter the coverage gap
phase or progress entirely through it.
The following tables summarize the 10-year impacts we have modeled
for when 33, 66, 90, and 100 percent of all manufacturer rebates are
applied at the point of sale: \53\
---------------------------------------------------------------------------

\53\ Assumptions: (1) For purposes of calculating impacts only,
we assume that total rebates will equal about 20 percent of
allowable Part D drug costs projected for each year modeled, and
that rebates are perfectly substituted with the point-of-sale
discount in all phases of the Part D benefit, including the coverage
gap phase.
(2) Used 2016 distribution of costs by benefit phase to form
assumptions.
(3) Assumed no other behavioral changes by sponsors,
beneficiaries, or others.

Table 10A--Total Impacts for 2019 Through 2028
[In $billions]
----------------------------------------------------------------------------------------------------------------
33% 66% 90% 100%
----------------------------------------------------------------------------------------------------------------
Beneficiary Costs............................... -$19.6 -$39.1 -$53.2 -$56.9
Cost-Sharing................................ -28.8 -57.8 -78.9 -85.2
Premium..................................... 9.2 18.7 25.7 28.3
Government Costs................................ 27.3 55.1 75.5 82.1
Direct Subsidy.............................. 62.8 128.1 177.4 200.0
Reinsurance................................. -21.7 -44.7 -62.2 -73.1
LI Cost-Sharing Subsidy..................... -16.6 -34.2 -47.7 -53.7
LI Premium Subsidy.......................... 2.9 5.9 8.1 8.9
Manufacturer Gap Discount....................... -9.7 -19.4 -26.4 -29.4
----------------------------------------------------------------------------------------------------------------

Table 10B--2019-2028 Per Member-Per Month Impacts
----------------------------------------------------------------------------------------------------------------
33% 66% 90% 100%
----------------------------------------------------------------------------------------------------------------
Beneficiary Costs............................... -$30.33 -$60.58 -$82.42 -$88.13
Cost-Sharing................................ -44.61 -89.50 -122.26 -131.97
Premium..................................... 14.29 28.92 39.83 43.84
Government Costs................................ 42.38 85.40 117.01 127.22
Direct Subsidy.............................. 97.45 198.93 275.43 310.58
Reinsurance................................. -33.76 -69.57 -96.84 -113.75
LI Cost-Sharing Subsidy..................... -25.80 -53.06 -74.11 -83.42
LI Premium Subsidy.......................... 4.49 9.10 12.53 13.81
Manufacturer Gap Discount....................... -15.01 -30.02 -40.93 -45.48
----------------------------------------------------------------------------------------------------------------

Table 10C--2019-2028 Impacts--Percent Change
----------------------------------------------------------------------------------------------------------------
33% 66% 90% 100%
----------------------------------------------------------------------------------------------------------------
Beneficiary Costs............................... -3 -5 -7 -8
Cost-Sharing................................ -6 -12 -16 -17
Premium..................................... 4 7 10 11
Government Costs................................ 2 4 5 6
Direct Subsidy.............................. 24 49 67 76
Reinsurance................................. -3 -7 -9 -11
LI Cost-Sharing Subsidy..................... -4 -9 -12 -14
LI Premium Subsidy.......................... 4 8 11 12
Manufacturer Gap Discount....................... -7 -13 -18 -20
----------------------------------------------------------------------------------------------------------------

While we did not account for behavioral changes when modeling these
impacts, requiring rebates to be applied at the point of sale might
induce changes in sponsor behavior related to drug pricing that would
further reduce the cost of the Part D program for beneficiaries and
taxpayers. Specifically, requiring that at least a minimum percentage
of manufacturer rebates be used to lower the price at the point of sale
could limit the potential for sponsors to leverage the benefits that
accrue to them when price concessions are applied as DIR at the end of
the

[[Page 56426]]

coverage year rather than as discounts at the point of sale, and thus
potentially better align sponsors' incentives with those of
beneficiaries and taxpayers. For example, we believe such an approach
could reduce the incentive for sponsors to favor high cost-highly
rebated drugs to lower net cost alternatives, when such alternatives
are available, and also potentially increase the incentive for sponsors
and PBMs to negotiate lower prices at the point of sale instead of
higher DIR. We seek comment on the extent to which a point-of-sale
rebate policy might be expected to further align the incentives for
beneficiaries, sponsors, and taxpayers.
Finally, we believe requiring that some manufacturer rebates be
applied at the point of sale as we are considering doing would improve
price transparency and limit the opportunity for differential reporting
of costs and price concessions, which may have a positive effect on
market competition and efficiency. We solicit comment on whether basing
the rebate applied at the point of sale on average rebates at the drug
category/class level, as described previously, would meaningfully
increase price transparency over the status quo by ensuring a
consistent percentage of the rebates received are reflected in the
price at the point of sale, while also protecting the details of any
manufacturer-sponsor pricing relationship.
d. Pharmacy Price Concessions to Point of Sale
In recent years, a growing proportion of Part D sponsors and their
contracted PBMs have entered into payment arrangements with Part D
network pharmacies in which a pharmacy's reimbursement for a covered
Part D drug is adjusted after the point of sale based on the pharmacy's
performance on various measures defined by the sponsor or its PBM.
Furthermore, we understand that the share of pharmacies' reimbursements
that is contingent upon their performance under such arrangements has
also grown steadily each year. As a result, sponsors and PBMs have been
recouping increasing sums from network pharmacies after the point of
sale (pharmacy price concessions) for ``poor performance'' relative to
standards defined by the sponsor or PBM. These sums are far greater
than those paid to network pharmacies after the point of sale (pharmacy
incentive payments) for ``high performance.'' We refer to pharmacy
price concessions and incentive payments collectively as pharmacy
payment adjustments. These findings are largely based on the aggregate
pharmacy payment adjustment data submitted to CMS by Part D sponsors as
part of the annual required reporting of DIR, which show that
performance-based pharmacy price concessions, net of all pharmacy
incentive payments, increased most dramatically after 2012.
In order to address the effects of the DIR construct, as it relates
to pharmacy payment adjustments, on cost, competition, and efficiency
under Part D, in the Part C and Part D final rule that appeared in the
May 23, 2014 Federal Register (79 FR 29844), we amended the definition
of ``negotiated prices'' at Sec. 423.100 to require Part D sponsors to
include in the negotiated price at the point of sale all pharmacy price
concessions and incentive payments to pharmacies, with an exception,
which was intended to be narrow, allowed for contingent pharmacy
payment adjustments that cannot reasonably be determined at the point
of sale (the reasonably determined exception). However, when we
formulated these requirements in 2014, the most recent year for which
DIR data was available was 2012 and we did not anticipate the growth of
performance-based pharmacy payment arrangements that we have observed
in subsequent years. We now understand that the reasonably determined
exception we currently allow applies more broadly than we had initially
envisioned because of the shift by Part D sponsors and their PBMs
towards these types of contingent pharmacy payment arrangements, and,
as a result, this exception prevents the current policy from having the
intended effect on price transparency, consistency, and beneficiary
costs.
Specifically, we have heard from several stakeholders that have
suggested that the reasonably determined exception applies to all
performance-based pharmacy payment adjustments. The amount of these
adjustments, by definition, is contingent upon performance measured
over a period that extends beyond the point of sale and, thus, cannot
be known in full at the point of sale. Therefore, performance-based
pharmacy payment adjustments cannot ``reasonably be determined'' at the
point of sale as they cannot be known in full at the point of sale. We
initially proposed, in a September 29, 2014 memorandum entitled Direct
and Indirect Remuneration (DIR) and Pharmacy Price Concessions, that if
the amount of the post-point of sale pharmacy payment adjustment could
be reasonably approximated at the point of sale, the adjustment should
be reflected in the negotiated price, even if the actual amount of the
payment adjustment was subject to later reconciliation and thus not
known in full at the point of sale. However, we did not finalize that
interpretation because we determined that it was inconsistent with the
existing regulation given that it would have effectively eliminated the
reasonably determined exception from inclusion in the negotiated price
for all pharmacy price concessions, as we stated in our follow-up
memorandum of the same name released on November 5, 2014.
Given the predominance of performance-contingent pharmacy payment
arrangements, we do not believe that the existing requirement that
pharmacy price concessions be included in the negotiated price can be
implemented in a manner that achieves meaningful price transparency,
ensures that all pharmacy payment adjustments are taken into account
consistently by all Part D sponsors, and prevents the shifting of costs
onto beneficiaries and taxpayers. Therefore, we are soliciting comment
from stakeholders on how we might update the requirements governing the
determination of negotiated prices, to better reflect current pharmacy
payment arrangements, so as to ensure that the reported price at the
point of sale includes all pharmacy price concessions. In this section,
we put forth for consideration one potential approach for doing so and
seek comments on its merits, as well as the merits of any alternatives
that might better serve our goals of reducing beneficiary costs and
better aligning incentives for Part D sponsors with the interests of
beneficiaries and taxpayers. We encourage all commenters to provide
quantitative analytical support for their ideas wherever possible.
(1) All Pharmacy Price Concessions
We are considering revising the definition of negotiated price at
Sec. 423.100 to remove the reasonably determined exception and to
require that all price concessions from pharmacies be reflected in the
negotiated price that is made available at the point of sale and
reported to CMS on a PDE record, even when such concessions are
contingent upon performance by the pharmacy. We believe we have the
discretion to require that all pharmacy price concessions be applied at
the point of sale, and not just a share of the amounts as we discussed
earlier for manufacturer rebates. Such a requirement would preserve the
flexibilities provided under section 1860D-2(d)(1)(B) of the Act with
respect to the treatment of manufacturer rebates, while also allowing
for greater

[[Page 56427]]

transparency and consistency in the reporting of pharmacy price
concessions. First, section 1860D-2(d)(2) of the Act, which provides
the context critical to our interpretation that sponsors are granted
flexibility in how to apply manufacturer rebates, does not contemplate
price concessions from sources other than manufacturers, such as
pharmacies, being passed through in various ways. Second, even when all
price concessions from pharmacies are required to be applied at the
point of sale, sponsors would retain the flexibility to determine how
to apply manufacturer rebates and other price concessions received from
sources other than pharmacies in order to reduce costs under the plan.
Finally, we believe that requiring that all pharmacy price concessions
be applied at the point of sale would ensure that negotiated prices
``take into account'' at least some price concessions and, therefore,
would be consistent with the plain language of section 1860D-2(d)(1)(B)
of the Act. We are considering requiring all, and not only a share of,
pharmacy price concessions be included in the negotiated price in order
to maximize the level of price transparency and consistency in the
determination of negotiated prices and bids and meaningfully reduce the
shifting of costs from sponsors to beneficiaries and taxpayers.
(2) Lowest Possible Reimbursement
In order to effectively capture all pharmacy price concessions at
the point of sale consistently across sponsors, we are considering
requiring the negotiated price to reflect the lowest possible
reimbursement that a network pharmacy could receive from a particular
Part D sponsor for a covered Part D drug. Under this approach, the
price reported at the point of sale would need to include all price
concessions that could potentially flow from network pharmacies, as
well as any dispensing fees, but exclude any additional contingent
amounts that could flow to network pharmacies and increase prices over
the lowest reimbursement level, such as incentive fees. That is, if a
performance-based payment arrangement exists between a sponsor and a
network pharmacy, the point-of-sale price of a drug reported to CMS
would need to equal the final reimbursement that the network pharmacy
would receive for that prescription under the arrangement if the
pharmacy's performance score were the lowest possible. If a pharmacy is
ultimately paid an amount above the lowest possible contingent
incentive reimbursement (such as in situations where a pharmacy's
performance under a performance-based arrangement triggers a bonus
payment or a smaller penalty than that assessed for the lowest level of
performance), the difference between the negotiated price reported to
CMS on the PDE record and the final payment to the pharmacy would need
to be reported as negative DIR. For an illustration of how negotiated
prices would be reported under such an approach, see the example
provided later in this section.
We are interested in public comment on whether requiring the
negotiated price at the point of sale to reflect the lowest possible
pharmacy reimbursement would effectively address recent developments in
industry practices, that is, the growing prevalence of performance-
based pharmacy payment arrangements, and ensure that all pharmacy price
concessions are included in the negotiated price, and thus shared with
beneficiaries, in a consistent manner by all Part D sponsors. By
requiring that sponsors assume the lowest possible pharmacy performance
when reporting the negotiated price, we would be prescribing a
standardized way for Part D sponsors to treat the unknown (final
pharmacy performance) at the point of sale under a performance-based
payment arrangement, which many Part D sponsors and PBMs have
identified as the most substantial operational barrier to including
such concessions at the point of sale. We are also interested in public
comment on whether requiring the negotiated price to be the lowest
possible pharmacy reimbursement would serve to maximize the cost-
sharing savings accruing to beneficiaries by passing through all
potential pharmacy price concessions at the point of sale.
Further, we are interested in public comment on whether this
approach would be clearer for Part D sponsors to follow than the
requirements in place today, which require Part D sponsors to assess
which types of pharmacy payment adjustments fall under the reasonably
determined exception. We are interested in public comment on whether
providing such additional clarity and thus limiting the need for
interpretation of the requirements by Part D sponsors would improve
consistency in the application of the requirements regarding pharmacy
price concessions across sponsors, as well as reducing sponsor burden
in terms of the resources necessary to ensure compliance in the absence
of clear guidance. In addition, we welcome feedback on whether the
change we describe here would improve the quality of pricing
information available across Part D plans and thus improve market
competition and cost-efficiency under Part D.
Requiring the negotiated price to reflect the lowest possible
pharmacy reimbursement, would move the negotiated price closer to the
final reimbursement for most network pharmacies under current pharmacy
payment arrangements and thus closer to the actual cost of the drug for
the Part D sponsor. We are interested in public comment on whether such
an outcome would help us to achieve meaningful price transparency. We
have learned from the DIR data reported to CMS and feedback from
numerous stakeholders that pharmacies rarely receive an incentive
payment above the original reimbursement rate for a covered claim. We
gather that performance under most arrangements dictates only the
magnitude of the amount by which the original reimbursement is reduced,
and most pharmacies do not achieve performance scores high enough to
qualify for a substantial, if any, reduction in penalties. Therefore,
we seek comment on whether a requirement that the negotiated price
reflect the lowest possible reimbursement to a network pharmacy,
including all potential pharmacy price concessions, is likely to
capture the actual price of the drug at a network pharmacy, or at least
move closer to it.
Finally, we are considering requiring that all contingent incentive
payments be excluded from the negotiated price because including the
actual amount of any contingent incentive payments to pharmacies in the
negotiated price would make drug prices appear higher at a ``high
performing'' pharmacy, which receives an incentive payment, than at a
``poor performing'' pharmacy, which is assessed a penalty. This pricing
differential could potentially create a perverse incentive for
beneficiaries to choose a lower performing pharmacy for the advantage
of a lower price. We seek comment on whether such an approach would
prevent this unintended consequence and thus avoid reducing the
competitiveness of high performing pharmacies by increasing the
negotiated price charged to the beneficiary at those pharmacies.
(3) Lowest Possible Reimbursement Example
To illustrate how Part D sponsors and their intermediaries would
report costs under the approach we are considering, we provide the
following example: Suppose that under a performance-based payment
arrangement between a

[[Page 56428]]

Part D sponsor and its network pharmacy, the sponsor will: (1) Recoup 5
percent of its total Part D-related payments to the pharmacy at the end
of the contract year for the pharmacy's failure to meet performance
standards; (2) recoup no payments for average performance; or (3)
provide a bonus equal to 1 percent of total payments to the pharmacy
for high performance. For a drug that the sponsor has agreed to pay the
pharmacy $100 at the point of sale, the pharmacy's final reimbursement
under this arrangement would be: (1) $95 for poor performance; (2) $100
for average performance; or (3) $101 for high performance. However,
under all performance scenarios, the negotiated price reported to CMS
on the PDE at the point of sale for this drug would be $95, or the
lowest reimbursement possible under the arrangement. Thus, if a plan
enrollee were required to pay 25 percent coinsurance for this drug,
then the enrollee's costs under all scenarios would be 25 percent of
$95, or $23.75, which is less than the $25 the enrollee would pay today
(when the negotiated price is likely to be reported as $100). Any
difference between the reported negotiated price and the pharmacy's
final reimbursement for this drug would be reported as DIR at the end
of the coverage year. The sponsor would report $0 as DIR under the poor
performance scenario ($95 minus $95), - $5 as DIR under the average
performance scenario ($95 minus $100), and - $6 as DIR under the high
performance scenario ($95 minus $101), for every covered claim for this
drug purchased at this pharmacy.
(4) Additional Considerations
As with the policy approach that we described previously for moving
manufacturer rebates to the point of sale, we would leverage existing
reporting mechanisms to confirm that sponsors are appropriately
applying pharmacy price concessions at the point of sale, as we do with
other cost data required to be reported. Specifically, we would likely
use the estimated rebates at point-of-sale field on the PDE record to
also collect point-of-sale pharmacy price concessions information, and
fields on the Summary and Detailed DIR Reports to collect final
pharmacy price concession information at the plan and NDC levels.
Differences between the amounts applied at the point of sale and
amounts actually received, therefore, would become apparent when
comparing the data collected through those means at the end of the
coverage year.
Finally, as noted previously, the negotiated price is also the
basis by which manufacturer liability for discounts in the coverage gap
determined. Under section 1860D-14A(g)(6) of the Act, the definition of
negotiated price used for coverage gap discounts is based on the
regulatory definition of the negotiated price in the version of Sec.
423.100 that was in effect as of the passage of the PPACA. As discussed
previously, this definition of negotiated price only references the
price concessions that the Part D sponsor has elected to pass through
at the point of sale. As such, we are uncertain as to whether we would
have the authority to require sponsors include pharmacy price
concessions in the negotiated price for purposes of determining
manufacturer coverage gap discounts. We intend to consider this issue
further and will address it in any future rulemaking regarding the
requirements for determining the negotiated price that is available at
the point of sale.
(5) Impacts for Applying Pharmacy Price Concessions at the Point of
Sale
Requiring that all pharmacy price concessions that sponsors and
PBMs receive be used to lower the price at the point of sale, as we
described earlier, would affect beneficiary, government, and
manufacturer costs largely in the same manner as discussed previously
in regards to moving manufacturer rebates to the point of sale. The
difference is in the magnitude of the impacts given that sponsors and
PBMs receive significantly higher sums of manufacturer rebates than of
pharmacy price concessions. The following table summarizes the 10-year
impacts we have modeled for moving all pharmacy price concessions to
the point of sale: \54\
---------------------------------------------------------------------------

\54\ Assumptions: (1) For purposes of calculating impacts only,
we assume that pharmacy price concession will equal about 3 percent
of allowable Part D costs projected for each year modeled, and that
the concession amounts are perfectly substituted with the point-of-
sale discount in all phases of the Part D benefit, including the
coverage gap phase.
(2) Used 2016 distribution of costs by benefit phase to form
assumptions.
(3) Assumed no other behavioral changes by sponsors,
beneficiaries, or others.

Table 11--2019-2028 Point-of-Sale Pharmacy Price Concessions Impacts
----------------------------------------------------------------------------------------------------------------
Total Per member-per
(billions) month Percent change
----------------------------------------------------------------------------------------------------------------
Beneficiary Costs............................................... -$10.4 -$16.09 -1
Cost-Sharing................................................ -16.1 -24.89 -3
Premium..................................................... 5.7 8.79 2
Government Costs................................................ 16.6 25.65 1
Direct Subsidy.............................................. 33.5 51.89 13
Reinsurance................................................. -8.8 -13.74 -1
LI Cost-Sharing Subsidy..................................... -9.9 -15.23 -3
LI Premium Subsidy.......................................... 1.8 2.73 2
Manufacturer Gap Discount....................................... -5.0 -7.69 -3
----------------------------------------------------------------------------------------------------------------

Moreover, while not accounted for when modeling these impacts, we
seek comment on whether requiring that all pharmacy price concessions
be included in the negotiated price, as we have described, would also
lead to prices and Part D bids and premiums being more accurately
comparable and reflective of relative plan efficiencies, with no unfair
competitive advantage accruing to one sponsor over another based on a
technical difference in how costs are reported. We are further
interested in comments on whether this outcome could make the Part D
market more competitive and efficient.

B. Improving the CMS Customer Experience

1. Restoration of the Medicare Advantage Open Enrollment Period
(Sec. Sec. 422.60, 422.62, 422.68, 423.38 and 423.40)
Section 4001 of the Balanced Budget Act of 1997 (BBA), added
section

[[Page 56429]]

1851(e) of the Act establishing specific parameters in which elections
can be made and/or changed during open enrollment and disenrollment
periods under the Medicare Advantage (MA) program. In addition, section
1851(e)(6) of the Act permits MA organizations, at their discretion, to
choose not to accept enrollment requests during the open enrollment
period (that is, choose to be closed to accept enrollments for all or a
portion of the enrollment period). The Medicare Prescription Drug,
Improvement, and Modernization Act of 2003 (MMA) amended section
1851(e)(2) of the Act to further establish open enrollment periods
during which MA-eligible individuals were limited to a single election
to (that is, enroll, disenroll, or change MA plans) during such period.
From 2007 to 2010, the Act outlined an Open Enrollment Period
(OEP)--referred to hereafter as the ``old OEP''--which provided MA-
eligible individuals one opportunity to make an enrollment change
between January 1 and March 31. It permitted new enrollment into an MA
plan from Original Medicare, switches between MA plans, and
disenrollment from a MA plan to Original Medicare. During this old OEP,
individuals were not allowed to make changes to their Part D coverage.
Hence, an individual who had Part D coverage through a Medicare
Advantage Prescription Drug plan (MA-PD plan) could only use the old
OEP to switch to (1) another MA-PD plan; or (2) Original Medicare with
a Prescription Drug Plan (PDP). This old OEP did not permit someone
enrolled in either an MA-only plan or Original Medicare without a PDP
to enroll in Part D coverage through this enrollment opportunity. The
old OEP was codified at Sec. 422.62(a)(5) in 2005 (see 70 FR 4587).
In 2010, section 3204 of the Patient Protection and Affordable Care
Act modified section 1851(e)(2)(C) of the Act to no longer offer the
old OEP and instead provide a different enrollment period for MA
enrollees to leave the MA program and return to Original Medicare in
the first 45 days of the calendar year. The statute further permitted
individuals who utilized this disenrollment opportunity to enroll in a
Part D plan upon their return to Original Medicare. On April 15, 2011,
we amended Sec. 422.62(a)(5) and codified Sec. Sec. 422.62(a)(7) and
423.38(d) to conform with this statutory change and to establish the
current Medicare Advantage Disenrollment Period (MADP) with its
coordinating Part D enrollment period. These changes were effective for
the 2011 plan year (76 FR 21442 and43).
Section 17005 of the 21st Century Cures Act (the Cures Act)
modified section 1851(e)(2) of the Act to eliminate the MADP and to
establish, beginning in 2019, a new OEP--hereafter referred to as the
``new OEP''--to be held from January 1 to March 31 each year. Subject
to the MA plan being open to enrollees as provided under Sec.
422.60(a)(2), this new OEP allows individuals enrolled in an MA plan to
make a one-time election during the first 3 months of the calendar year
to switch MA plans or to disenroll from an MA plan and obtain coverage
through Original Medicare. In addition, this provision affords newly
MA-eligible individuals (those with Part A and Part B) who enroll in a
MA plan, the opportunity to also make a one-time election to change MA
plans or drop MA coverage and obtain Original Medicare. Newly eligible
MA individuals can only use this new OEP during the first 3 months in
which they have both Part A and Part B. Similar to the old OEP,
enrollments made using the new OEP are effective the first of the month
following the month in which the enrollment is made, as outlined in
Sec. 422.68(c). In addition, an MA organization has the option under
section 1851(e)(6) of the Act to voluntarily close one or more of its
MA plans to OEP enrollment requests. If an MA plan is closed for OEP
enrollments, then it is closed to all individuals in the entire plan
service area who are making OEP enrollment requests. All MA plans must
accept OEP disenrollment requests, regardless of whether or not it is
open for enrollment.
There are a few key differences between the old OEP and the new OEP
as authorized by the Cures Act. Unlike the old OEP, this new OEP
permits changes to Part D coverage for individuals who, prior to the
change in election during the new OEP, were enrolled in an MA plan. As
eligibility to use the new OEP is available only for MA enrollees, the
ability to make changes to Part D coverage is limited to any individual
who uses the OEP; however, the new OEP does not provide enrollment
rights to any individual who is not enrolled in an MA plan during the
applicable 3-month period. Individuals who use the new OEP to make
changes to their MA coverage may also enroll in or disenroll from Part
D coverage. For example, an individual enrolled in an MA-PD plan may
use the new OEP to switch to: (1) Another MA-PD plan; (2) an MA-only
plan; or (3) Original Medicare with or without a PDP. The new OEP would
also allow an individual enrolled in an MA-only plan to switch to--(1)
another MA-only plan; (2) an MA-PD plan; or (3) Original Medicare with
or without a PDP. However, this enrollment period does not allow for
Part D changes for individuals enrolled in Original Medicare, including
those with enrollment in stand-alone PDPs.
In addition, individuals with enrollment in Original Medicare or
other Medicare health plan types, such as cost plans, are not able use
the new OEP to enroll in an MA plan, regardless of whether or not they
have Part D. We note that the inability for an individual enrolled in
Original Medicare to use the new OEP is a significant difference from
the old OEP. Furthermore, and significantly different from the old OEP,
unsolicited marketing is prohibited by statute during this period.
To implement the changes required by the Cures Act, we propose the
following revisions:
Amend current Sec. 422.62(a)(5) and add Sec. Sec.
423.38(e) and 423.40(e) to establish the new OEP starting 2019 and the
corresponding limited Part D enrollment period.
Amend Sec. Sec. 422.62(a)(7), 422.68(f), 423.38(d) and
423.40(d) to end the MADP at the end of 2018.
Remove current regulations in Sec. 422.62(a)(3) and
(a)(4) that outline historical OEPs which have not been in existence
for more than a decade. As these past enrollment periods are no longer
relevant to the current enrollment periods available to MA-eligible
individuals, we are proposing to delete these paragraphs and renumber
the enrollment periods which follow them. As such, we propose that
Sec. 422.62 (a)(5) become Sec. 422.62 (a)(3), and both Sec. Sec.
422.62 (a)(6) and (a)(7) be renumbered as Sec. Sec. 422.62(a)(4) and
(a)(5), respectively.
Amend new redesignated paragraph (a)(4) (proposed to be
redesignated from (a)(6)) to make two technical changes to replace the
phrase ``as defined by CMS'' with ``as defined in Sec. 422.2'' and to
capitalize ``original Medicare.''
As noted previously, and discussed in section III.C.7,
Sec. Sec. 422.2268 and 423.2268 would be revised to prohibit marketing
to MA enrollees during the OEP.
Conforming technical edits to update cross references in
Sec. Sec. 422.60(a)(2), 422.62(a)(5)(iii), and 422.68(c).
2. Reducing the Burden of the Compliance Program Training Requirements
(Sec. Sec. 422.503 and 423.504)
Sections 1857(e) and 1860D-12(b)(3)(D) of the Act specify that
contracts with MA organizations and

[[Page 56430]]

Part D sponsors shall contain other terms and conditions that the
Secretary may find necessary and appropriate. We have previously
established that all Part C and Part D contracting organizations must
have the necessary administrative and management arrangements to have
an effective compliance program, as reflected in Sec.
422.503(b)(4)(vi) and Sec. 423.504(b)(4)(vi). Effective compliance
programs are those designed and implemented to prevent, detect and
correct Medicare non-compliance, fraud waste and abuse and address
improper conduct in a timely and well-documented manner. Medicare non-
compliance may include inaccurate and untimely payment or delivery of
items or medical services, complaints from providers and enrollees,
illegal activities and unethical behavior. While there is no ``one-size
fits all'' program for every contracting organization, there are seven
core elements that must exist to have an effective compliance program
that is tailored to the organization's unique operations, compliance
risks, resources and circumstances. These 7 core elements are codified
in current regulations at Sec. Sec. 422.503(b)(4)(vi)(A) through (G)
and 423.504(b)(4)(vi)(A) through (G). One of the 7 core elements is
training and education. Compliance programs for Part C and Part D
organizations must include training and education between the
compliance officer and the sponsoring organization's employees, senior
administrators, governing body members as well as their first-tier,
downstream and related entities (FDRs).
FDRs have long complained of the burden of having to complete
multiple sponsoring organizations' compliance trainings and the amount
of time it can take away from providing care to beneficiaries. We
attempted to resolve this burden by developing our own web-based
standardized compliance program training modules and establishing, in a
May 23, 2014 final rule (79 FR 29853 and 29855), which was effective
January 1, 2016, that FDRs were required to complete the CMS training
to satisfy the compliance training requirement. The mandatory use of
the CMS training by FDRs was a means to ensure that FDRs would only
have to complete the compliance training once on an annual basis. The
FDRs could then provide the certificate of completion to all Part C and
Part D contracting organizations they served, hence, eliminating the
prior duplication of effort that so many FDRs stated was creating a
huge burden on their operation.
However, CMS continues to receive hundreds of inquiries and
concerns from sponsors and FDRs regarding their difficulties with
adopting CMS' compliance training to satisfy the compliance program
training requirement. While CMS' previous market research indicated
that this provision would mitigate the problems raised by FDRs who held
contracts with multiple sponsors and who completed repetitive trainings
for each sponsor with which they contract, in practice, we learned that
the problems persisted. Many sponsors are unwilling to accept
completion of the CMS training as fulfillment of the training
requirement and identify which critical positions within the FDR are
subject to the training requirement. As a result, FDRs are still being
subjected to multiple sponsors' specific training programs. FDRs have
the additional burden of taking CMS training and reporting completion
back to the sponsor or sponsors with which they contract. Furthermore,
the industry has indicated that the requirement has increased the
burden for various Part C and Part D program stakeholders, including
hospitals, suppliers, health care providers, pharmacists and
physicians, all of which may be considered FDRs. Since the
implementation of the mandatory CMS-developed training has not achieved
the intended efficiencies in the administration of the Part C and Part
D programs, we propose to delete the provisions from the Part C and
Part D regulations that require use of the CMS-developed training.
Additionally we propose to restructure Sec. 422.503(b)(4)(vi)(C)(1)
(with the proposed revisions) into two paragraphs (that is, paragraph
(C)(1) and (C)(2)) to separate the scope of the compliance training
from the frequency with which the training must occur, as these are two
distinct requirements. With this proposed revision, the organization of
Sec. 422.503(b)(4)(vi)(C) will mirror that of Sec.
423.504(b)(4)(vi)(C). Further, we propose to revise the text in Sec.
423.504(b)(4)(vi)(C)(2) to track the phrasing in Sec.
422.503(b)(4)(vi)(C)(2), as reorganized. The technical changes in the
text eliminate any potential ambiguity created by different phrasing in
what we intend to be identical requirements as to the timing
requirements for the training. We believe these technical changes make
the requirements easier to understand.
Furthermore, we believe that the broader requirement that plan
sponsors provide compliance training to their FDRs no longer promotes
the effective and efficient administration of the Medicare Advantage
and Prescription Drug programs. Part C and Part D sponsoring
organizations have evolved greatly and their compliance program
operations and systems are well established. Many of these
organizations have developed effective training and learning models to
communicate compliance expectations and ensure that employees and FDRs
are aware of the Medicare program requirements. Also, the attention
focused on compliance program effectiveness by CMS' Part C and Part D
program audits has further encouraged sponsors to continually improve
their compliance operations.
CMS does not generally interfere in private contractual matters
between sponsoring organizations and their FDRs. Our contract is with
the sponsoring organization, and sponsoring organizations are
ultimately responsible for compliance with all applicable statutes,
regulations and sub-regulatory guidance, regardless who is performing
the work. Additionally, delegated entities range in size, structure,
risks, staffing, functions, and contractual arrangements which
necessitates the sponsoring organization have discretion in its method
of oversight to ensure compliance with program requirements. This may
be accomplished through routine monitoring and implementing corrective
action, which may include training or retraining as appropriate, when
non-compliance or misconduct is identified.
We will continue to hold MA organizations and Part D sponsors
accountable for the failures of their FDRs to comply with Medicare
program requirements, even with these proposed changes. Existing
regulations at Sec. 422.503(b)(4)(vi) and Sec. 423.504(b)(4)(vi)
require that every sponsor's contract must specify that FDRs must
comply with all applicable federal laws, regulations and CMS
instructions. Additionally, we audit sponsors' compliance programs when
we conduct routine program audits, and our audit process includes
evaluations of sponsoring organizations' monitoring and auditing of
their FDRs as well as FDR oversight. Our audits also evaluate formulary
administration and processing of coverage and appeal requests in the
Part C and Part D programs. FDRs often perform some or all of these
functions for sponsors, so if they are non-compliant, it will come to
light during the program audit and the sponsoring organization is
ultimately held responsible for the FDRs' failure to comply with
program requirements.
Given that compliance programs are very well established and have
grown more sophisticated since their inception, coupled with the
industry's desire to perform well on audit, the

[[Page 56431]]

CMS training requirement is not the driver of performance improvement
or FDR compliance with key CMS requirements. Given this accumulated
program experience and the growing sophistication of the industry's
compliance operations, as well as our continuing requirements on
sponsors for oversight and monitoring of FDRs, we are proposing to
delete not just the regulatory provision requiring acceptance of CMS'
training as meeting the compliance training requirements, but also the
reference to FDRs in the compliance training requirements codified at
Sec. Sec. 422.503(b)(4)(vi)(C) and 423.504(b)(4)(vi)(C). Specifically,
we propose to remove the phrases in paragraphs (C)(1) and (C)(2) that
refer to first tier, downstream and related entities and remove the
paragraphs specific to FDR training at Sec. Sec.
422.503(b)(4)(vi)(C)(2) and (3) and 423.504(b)(4)(vi)(C)(3) and (4); we
are also proposing technical revisions to restructure Sec.
422.503(b)(4)(vi)(C)(1) into two paragraphs and ensure that the
remaining text is grammatically correct and consistent with Office of
the Federal Register style. Compliance training would still be required
of MA and Part D sponsors, their employees, chief executives or senior
administrators, managers, and governing body members. This change will
allow sponsoring organizations, and the FDRs with which they contract,
the maximum flexibility in developing and meeting training requirements
associated with effective compliance programs. We invite comments
concerning this proposal and suggestions on other options we can
implement to accomplish the desired outcome.
3. Medicare Advantage Plan Minimum Enrollment Waiver (Sec. 422.514(b))
Under section 1857(b) of the Act, CMS may not enter into a contract
with a MA organization unless the organization complies with the
minimum enrollment requirement. Under the basic rule at Sec.
422.514(a), to provide health care benefits under the MA program, MA
organizations must demonstrate that they have the capability to enroll
at least 5,000 individuals, and provider sponsored organizations (PSOs)
must demonstrate that they have the capability to enroll at least 1,500
individuals. If an MA organization intends to offer health care
benefits outside urbanized areas as defined in Sec. 422.62(f), then
the minimum enrollment level is reduced to 1,500 for MA organizations
and to 500 for PSOs. The statute permits CMS to waive this requirement
in the first 3 years of the contract for an MA contract applicant. We
have codified this authority at Sec. 422.514(b) and limited it to
circumstances where the MA contract applicant is capable of
administering and managing an MA contract and is able to manage the
level of risk required under the contract. We are proposing to revise
Sec. 422.514 regarding the minimum enrollment requirements to improve
program efficiencies.
Currently, MA organizations, including PSOs, with an approved
minimum enrollment waiver for their first contract year have the option
to resubmit the waiver request for CMS in the second and third year of
the contract. In conjunction with the waiver request, the MA
organization must continue to demonstrate the organization's ability to
operate and demonstrate that it has and uses an effective marketing and
enrollment system, despite continued failure to meet the minimum
enrollment requirement. In addition, the current regulation limits our
authority to grant the waiver in the third year to situations where the
MA organization has at least attained a projected number of enrollees
in the second year. Since 2012, we have not received any waiver to the
minimum enrollment requirement during the second and third year of the
contract. Rather, we only received minimum enrollment waiver requests
through the initial application process.
We believe the current requirement to resubmit the waiver in the
second and third year of the contract is unnecessary. The statute does
not require a reevaluation of the minimum enrollment standard each year
and plainly authorizes a waiver ``during the first 3 contract years
with respect to an organization.'' The current minimum enrollment
waiver review in the initial MA contract application provides CMS the
confidence to determine whether an MA organization may operate for the
first 3 years of the contract without meeting the minimum enrollment
requirement. CMS currently monitors low enrollment at the plan benefit
package (PBP) level. We note that a similar provision in current Sec.
422.506(b)(1)(iv) permits CMS to terminate an MA contract (or terminate
a specific plan benefit package) if the MA plan fails to maintain a
sufficient number of enrollees to establish that it is a viable
independent plan option for existing or new enrollees. In addition,
compliance with Sec. 422.514 is required under Sec. 422.503(a)(13).
If an organization's PBP does not achieve and maintain enrollment
levels in accordance with the applicable low and minimum enrollment
policies in existing regulations, CMS may move to terminate the PBP
absent an approved waiver from CMS during the first 3 years of the
contract pursuant to Sec. 422.510(a).
Under our proposal, we would only review and approve waivers
through the MA application process as opposed to the current practice
of reviewing annual requests and, potentially, requests from existing
MA organizations that fail to maintain enrollment in the second or
third year of operation.
We are proposing to revise the text in Sec. 422.514(b) to provide
that the waiver of the minimum enrollment requirement may be in effect
for the first 3 years of the contract. Further, we are proposing to
delete all references to ``MA organizations'' in paragraph (b) to
reflect our proposal that we would only review and approve waiver
requests during the contract application process. We also propose to
delete current paragraphs (b)(2) and (b)(3) in their entirety to remove
the requirement for MA organizations to submit an additional minimum
enrollment waiver annually for the second and third years of the
contract. Finally, the proposed text also includes technical changes to
redesignate paragraphs (b)(1)(i) through (iii) as (b)(1) through (3),
consistent with regulation style requirements of the Office of the
Federal Register.
4. Revisions to Timing and Method of Disclosure Requirements
(Sec. Sec. 422.111 and 423.128)
As provided in sections 1852(c)(1) and 1860D-4(a)(1)(A) of the Act,
Medicare Advantage (MA) organizations and Part D sponsors must disclose
detailed information about the plans they offer to their enrollees ``at
the time of enrollment and at least annually thereafter.'' This
detailed information is specified in section 1852(c)(1) of the Act,
with additional information specific to the Part D benefit also
required under section 1860D-4(a)(1)(B) of the Act. Under Sec.
422.111(a)(3), CMS requires MA plans to disclose this information to
each enrollee ``at the time of enrollment and at least annually
thereafter, 15 days before the annual coordinated election period.'' A
similar rule for Part D sponsors is found at Sec. 423.128(a)(3).
Additionally, Sec. 417.427 directs 1876 cost plans to follow the
disclosure requirements in Sec. 422.111 and Sec. 423.128. In making
the changes proposed here, we will also affect 1876 cost plans, though
it is not necessary to change the regulatory text at Sec. 417.427.
Sections 422.111(b) and 423.128(b) of the Part C and Part D program
regulations, respectively, describe the information plans must
disclose. The content listed in Sec. 422.111(b) is found in

[[Page 56432]]

an MA plan's Evidence of Coverage (EOC) and provider directory. The
content listed in Sec. 423.128(b) is found in a Part D Sponsor's EOC,
formulary, and pharmacy directory. Section 422.111(h)(2)(i) requires
that plans must maintain an internet Web site that contains the
information listed in Sec. 422.111(b) and also states that posting the
EOC, Summary of Benefits, and provider network information on the
plan's Web site ``does not relieve the MA organization of its
responsibility under Sec. 422.111(a) to provide hard copies to
enrollees.''
We propose two changes to the disclosure requirements. First, we
propose to revise Sec. Sec. 422.111(a)(3) and 423.128(a)(3) to require
MA plans and Part D Sponsors to provide the information in paragraph
(b) of the respective regulations by the first day of the annual
enrollment period, rather than 15 days before. In addition, we propose
to modify the sentence in Sec. 422.111(h)(2)(ii) which states that
posting the EOC, Summary of Benefits, and provider network information
on the plan's Web site does not relieve the plan of responsibility to
provide hard copies to enrollees. We propose to revise the sentence
slightly and add ``upon request'' to the existing regulatory language
to make it clear when any document that is required to be delivered
under paragraph (a) in a manner that includes provision of a hard copy
upon request, posting the document on the Web site (whether that
document is the EOC, SB, directory information or other materials) does
not relieve the MA organizations of a responsibility to deliver hard
copies upon request. We intend these proposals to provide CMS with the
flexibility to permit delivery other than through mailing hard copies
(which is the requirement today for all materials and information
covered by Sec. 422.111(a)), including through electronic delivery or
posting on the Web site in conjunction with delivery of a hard copy
notice describing how the information and materials are available. We
believe this proposal will ultimately provide additional flexibility to
plans to take advantage of technological developments and reduce the
amount of mail enrollees receive from plans.
Prior to the 2009 contract year, Sec. Sec. 422.111(a) and
423.128(a) required the provision of the materials in their respective
paragraphs (b) at the time of enrollment and at least annually
thereafter, but did not specify a deadline. In the September 18, 2008,
final rule, CMS required MA organizations to send this material to
current enrollees 15 days before the annual coordinated election period
(AEP) (73 FR 54216). The rationale for this requirement was to provide
beneficiaries with comprehensive information prior to the AEP so that
they could make informed enrollment decisions.
However, we have found through consumer testing that the large size
of these mailings overwhelmed enrollees. In particular, the EOC is a
long document that enrollees found difficult to navigate. Enrollees
were more likely to review the Annual Notice of Change (ANOC), a
shorter document summarizing any changes to plan benefits beginning on
January 1 of the upcoming year, if it was separate from the EOC.
Sections 422.111(d) and 423.128(g)(2) require MA organizations and Part
D sponsors to provide the ANOC to all enrollees at least 15 days before
the AEP.
The ANOC is intended to convey all of the information essential to
an enrollee's decision to remain enrolled in the same plan for the
following year or choose another plan during the AEP. CMS's research
and experience have indicated that the ANOC is particularly useful to
and used by enrollees. Therefore, we are not proposing to change the
Sec. Sec. 422.111(d) and 423.128(g) requirements that the ANOC be
received 15 days prior to AEP.
Unlike the ANOC, the EOC is a document akin to a contract that
provides enrollees with exhaustive information about their medical
coverage and rights and responsibilities as members of a plan. The
provider directory, pharmacy directory, and formulary also contain
information necessary to access care and benefits. As such, CMS
requires MA organizations and Part D sponsors to make these documents
available at the start of the AEP, so CMS proposes to amend Sec. Sec.
422.111(a)(3) and 423.128(a)(3) to remove the current deadline and
insert ``by the first day of the annual coordinated election period.''
To the extent that enrollees find the EOC, provider directory, pharmacy
directory, and formulary useful in making informed enrollment
decisions, CMS believes that receipt of these documents by the first
day of the AEP is sufficient. Any changes in the plan rules reflected
in these documents for the next year should be adequately described in
the ANOC, which will be provided earlier.
This change would also provide an additional 2 weeks for MA
organizations and Part D plan sponsors to prepare, review, and ensure
the accuracy of the EOC, provider directory, pharmacy directory, and
formulary documents. CMS considers the additional time for the EOC
important due to the high number errors plans self-identify in the
document through errata sheets they submit to CMS and mail to
beneficiaries. In 2017, plans submitted 166 ANOC/EOC errata, which
identified 221 ANOC errors and 553 EOC errors. Additional time to
produce the EOC will give plans more time to conduct quality assurance
and improve accuracy and result in fewer errata sheets in the future.
In addition to the proposed changes in Sec. Sec. 422.111(a)(3) and
423.128(a)(3), we also propose to give plans more flexibility to
provide the materials specified in Sec. 422.111(b) electronically. The
language in Sec. 422.111(h)(2)(ii) requiring hard copies of the
specified documents first appeared in the January 28, 2005, final rule
(70 FR 4587) in Sec. 422.111(f)(12). At that time, MA plans were not
required to maintain a Web site, but if they chose to they were
required to include the EOC, Summary of Benefits, and provider network
information on the Web site. However, plans were prohibited from
posting these documents online as a substitute for providing hard
copies to enrollees. A subsequent final rule, published April 15, 2011,
established that MA plans are required to maintain an internet Web site
at Sec. 422.111(h)(2) and moved the requirement that posting documents
on the plan Web site did not substitute for hard copies from Sec.
422.111(f)(12) to Sec. 422.111(h)(2)(ii) (76 FR 21502).
There is no parallel to Sec. 422.111(h)(2)(ii) in Sec. 423.128.
Instead, Sec. 423.128(a) states that Part D sponsors must disclose the
information in paragraph (b) in the manner specified by CMS. Section
423.128(d)(2)(i) requires Part D sponsors to maintain an internet Web
site that includes information listed in Sec. 423.128(b). CMS sub-
regulatory guidance has instructed plans to provide the EOC in hard
copy, but we believe that the regulatory text would permit delivery by
notifying enrollees of the internet posting of the documents, subject
to the right to request hard copies.\55\ As explained previously
regarding the changes to Sec. 422.111, we intend for plans to have the
flexibility to provide documents such as the Summary of Benefits, the
EOC, and the provider network information in electronic format. We
intend to change the relevant sub-regulatory guidance to coincide with
this as well.
---------------------------------------------------------------------------

\55\ Medicare Marketing Guidelines, section 60.6, issued July
20, 2017, https://www.cms.gov/Medicare/Health-Plans/ManagedCareMarketing/Downloads/CY-2018-Medicare-Marketing-Guidelines_Final072017.pdf.
---------------------------------------------------------------------------

In the preamble to the 2005 final rule, we noted that the
prohibition on

[[Page 56433]]

substituting electronic posting on the MA plan's internet site for
delivery of hardcopy documents was in response to comments recommending
this change (70 FR 4623). At the time, we did not think enough Medicare
beneficiaries used the internet to permit posting the documents online
in place of mailing them.
In the 12 years since the rule was finalized, research indicates
that internet use has increased significantly among Medicare
beneficiaries. Drawing on nationally representative surveys, the Pew
Research Center found that 67 percent of American adults age 65 and
older use the internet. Half of seniors have broadband available at
home. Internet use increases even more among seniors age 65-69, of
which 82 percent use the internet and 66 percent have broadband at
home.\56\ Electronic documents include advantages such as word search
tools, the ability to magnify text, screen reader capabilities, and
bookmarks or embedded links, all of which make documents easier to
navigate. Given that the younger range of Medicare beneficiaries have a
higher rate of internet access, we believe the number of beneficiaries
who ``use the internet'' will only continue to grow with time. Posted
electronic documents can also be accessed from anywhere the internet is
available.
---------------------------------------------------------------------------

\56\ Pew Research Center, May 2017, ``Tech Adoption Climbs Among
Older Adults'', http://www.pewinternet.org/2017/05/17/tech-adoption-climbs-among-older-adults/.
---------------------------------------------------------------------------

As mentioned previously, the EOC sometimes contains errors. To
correct these, MA and Part D plans currently have to mail errata sheets
and post an updated version online. The hardcopy version of the EOC is
then out-of-date. Beneficiaries either have to refer to errata sheets
in addition to the hardcopy EOC or go online to access a corrected EOC.
Increasing beneficiary use of the electronic EOC ensures that
beneficiaries are using the most accurate information. Under this
proposal to permit flexibility for us to approve non-hard-copy delivery
in some cases, we intend to continue requiring hardcopy mailings of any
ANOC or EOC errata.
Plans have also continued to request CMS give plans the flexibility
to provide the EOC electronically. They have frequently cited the
expense of printing and mailing large documents. Medicaid managed care
plans already have the flexibility to provide directories, formularies,
and member handbooks (similar to the EOC) electronically, per
Sec. Sec. 438.10(h)(1), 438.10(h)4)(i), and 438.10(g)(3) respectively.
To begin addressing this, in the Medicare Marketing Guidelines
released July 2, 2015, CMS notified plans that they could mail either a
hardcopy provider and/or pharmacy directory or a hardcopy notice to
enrollees instructing them where to find the directories online and how
to request a hard copy. That guidance has been moved to Chapter 4,
section 110.2.3, of the Medicare Managed Care Manual. If plans choose
to mail a notice with the location of the online directory rather than
a hard copy, the notice must include: A direct link to the online
directory, the customer service number to call and request a hard copy,
and if available the email address to request a hard copy. The notice
must be distinct, separate, and mailed with the ANOC/EOC.\57\ Section
60.4 of the Medicare Marketing Guidelines released July 20, 2017,
extends the same flexibility to formularies, with the same required
content in the notice identifying the location of the online formulary.
As CMS has received few complaints from any source about this new
process, allowing plans the option to use a similar strategy for
additional materials is appropriate.
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\57\ Medicare Managed Care Manual Chapter 4--Benefits and
Beneficiary Protections, Rev. 121, issued April 22, 2016, https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/downloads/mc86c04.pdf.
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Upon finalizing this rule, we would issue sub-regulatory guidance
to identify permissible manners of disclosure; we expect that guidance
would be similar to the current guidance for the provider directory,
pharmacy directory, and formulary regarding dissemination of the EOC.
Importantly, this provision does not eliminate the requirement for
plans to provide accessible formats of required documents. As
recipients of federal funding, plans are obligated to provide materials
in accessible formats upon request, at no cost to the individual, to
individuals with disabilities, under Section 504 of the Rehabilitation
Act of 1973 and to take reasonable steps to provide meaningful access,
including translation services, to individuals who have limited English
proficiency under Title VI of the Civil Rights Act of 1964.
To create this flexibility, CMS proposes modifying the sentence,
``Such posting does not relieve the MA organization of its
responsibility under Sec. 422.111(a) to provide hard copies to
enrollees,'' to include ``upon request'' in Sec. 422.111(h)(2)(ii) and
to revise Sec. 422.111(a) by inserting ``in the manner specified by
CMS.'' These changes will align Sec. Sec. 422.111(a) and 423.128(a) to
authorize CMS to provide flexibility to MA plans and Part D sponsors to
use technology to provide beneficiaries with information. CMS intends
to use this flexibility to provide sponsoring organizations with the
ability to electronically deliver plan documents (for example, the
Summary of Benefits) to enrollees while maintaining the protection of a
hard copy for any enrollee who requests such hard copy. As the current
version of Sec. 422.111(a) and (h)(2) require hard copies, we believe
this proposal will ultimately result in reducing burden and providing
more flexibility for sponsoring organizations.
5. Revisions to Sec. Sec. 422 and 423 Subpart V, Communication/
Marketing Materials and Activities
Section 1851(h) of the Act prohibits Medicare Advantage (MA)
organizations from distributing marketing materials and application
forms to (or for the use of) MA eligible individuals unless the
document has been submitted to the Secretary at least 45 days (10 days
for certain materials) prior to use and the document has not been
disapproved. Further, in section 1851(j), the Secretary is authorized
to adopt standards regarding marketing activities, and the statute
identifies certain prohibited activities. While the Act requires the
submission and review of the marketing materials and applications, it
does not provide a definition of what materials fall under the umbrella
term ``marketing.'' Sections 1806D-1(d)(3)(B)(iv) and 1860D-4(l) of the
Act provide similar restrictions on use of marketing and enrollment
materials and activities to promote enrollment in Part D plans.
Section 1876(c)(3)(C) of the Act states that no brochures,
application forms, or other promotional or informational material may
be distributed by cost plan to (or for the use of individuals eligible
to enroll with the organization under this section unless (i) at least
45 days before its distribution, the organization has submitted the
material to the Secretary for review, and (ii) the Secretary has not
disapproved the distribution of the material. As delegated this
authority by the Secretary, CMS reviews all such material submitted and
disapproves such material upon determination that the material is
materially inaccurate or misleading or otherwise makes a material
misrepresentation. Similar to 1851(h) of the Act, section 1876(c)(3)(C)
of the Act focuses more on the review and approval of materials as
opposed to providing an exhaustive list of materials that would qualify
as marketing or promotional information and materials.

[[Page 56434]]

As part of the implementation of section 1876(c)(3)(C) of the Act, the
regulation governing cost plans at Sec. 417.428(a) refers to Subpart V
of part 422 for marketing guidance. Throughout this proposal, the
changes discussed for MA organizations/MA plans and prescription drug
plan (PDP) sponsors/Part D plans applies as well to cost plans subject
to the same requirements as a result of this cross-reference.
Section 422.2260(1)-(4) of the Part C program regulations currently
identifies marketing materials as any materials that: (1) Promote the
MA organization, or any MA plan offered by the MA organization; (2)
inform Medicare beneficiaries that they may enroll, or remain enrolled
in, an MA plan offered by the MA organization; (3) explain the benefits
of enrollment in an MA plan, or rules that apply to enrollees; and (4)
explain how Medicare services are covered under an MA plan, including
conditions that apply to such coverage. Section 423.2260(1)-(4) applies
identical regulatory provisions to the Part D program.
Sections 422.2260(5) and 423.2260(5) provide specific examples of
materials under the ``marketing materials'' definition, which include:
General audience materials such as general circulation brochures,
newspapers, magazines, television, radio, billboards, yellow pages, or
the internet; marketing representative materials such as scripts or
outlines for telemarketing or other presentations; presentation
materials such as slides and charts; promotional materials such as
brochures or leaflets, including materials for circulation by third
parties (for example, physicians or other providers); membership
communication materials such as membership rules, subscriber
agreements, member handbooks and wallet card instructions to enrollees;
letters to members about contractual changes; changes in providers,
premiums, benefits, plan procedures etc.; and membership activities
(for example, materials on rules involving non-payment of premiums,
confirmation of enrollment or disenrollment, or no claim specific
notification information). Finally, Sec. Sec. 422.2260(6) and
423.2260(6) provide a list of materials that are not considered
marketing materials, including materials that are targeted to current
enrollees; are customized or limited to a subset of enrollees or apply
to a specific situation; do not include information about the plan's
benefit structure; and apply to a specific situation or cover claims
processing or other operational issues.
We are proposing several changes to Subpart V of the part 422 and
423 regulations. To better outline these proposed changes, they are
addressed in four areas of focus: (1) Including ``communication
requirements'' in the scope of Subpart V or parts 422 and 423, which
will include new definitions for ``communications'' and ``communication
materials;'' (2) amending Sec. Sec. 422.2260 and 423.2260 to add (at a
new paragraph (b)) a definition of ``marketing'' in place of the
current definition of ``marketing materials'' and to provide lists
identifying marketing materials and non-marketing materials; (3) adding
new regulation text to prohibit marketing during the Open Enrollment
Period proposed in section III.B.1 of this proposed rule; (4) technical
changes to other regulatory provisions as a result of the changes to
Subpart V. To the extent necessary, CMS relies on its authority to add
regulatory and contract requirements to the cost plan, MA, and Part D
programs to propose and (ultimately) adopt these changes. We note as
well that sections 1851(h) and (j) of the Act (cross-referenced in
sections 1860D-1 and 1860D-4(l)) of the Act address activities and
direct that the Secretary adopt standards limiting marketing
activities, which CMS interprets as permitting regulation of
communications about the plan that do not rise to the level of
activities and materials that specifically promote enrollment.
a. Revising the Scope of Subpart V To Include Communications and
Communications Materials
The current version of Subpart V of parts 422 and 423 regulation
focuses on marketing materials, as opposed to other materials currently
referred to as ``non-marketing'' in the sub-regulatory Medicare
Marketing Guidelines. This leaves a regulatory void for the
requirements that pertain to those materials that are not considered
marketing. Historically, the impact of not having regulatory guidance
for materials other than marketing has been muted because the current
regulatory definition of marketing is so broad, resulting in most
materials falling under the definition. The overall effect of this
combination--no definition of materials other than marketing and a
broad marketing definition--is that marketing and communications with
enrollees became synonymous.
With this CMS proposal to narrow the marketing definition, we
believe there is a need to continue to apply the current standards to
and develop guidance for those materials that fall outside of the
proposed definition. We propose changing the title of each Subpart V by
replacing the term ``Marketing'' with ``Communication.'' We propose to
define in Sec. Sec. 422.2260(a) and 423.2260(a) definitions of
``communications'' (activities and use of materials to provide
information to current and prospective enrollees) and ``communications
materials'' (materials that include all information provided to current
members and prospective beneficiaries). We propose that marketing
materials (discussed later in this section) would be a subset of
communications materials. In many ways, the proposed definition of
communications materials is similar to the current definition of
marketing materials; the proposed definition has a broad scope and
would include both mandatory disclosures that are primarily informative
and materials that are primarily geared to encourage enrollment.
CMS also proposes, through revisions to Sec. Sec. 422.2268 and
423.2268, to apply some of the current standards and prohibitions
related to marketing to all communications and to apply others only to
marketing. Marketing and marketing materials would be subject to the
more stringent requirements, including the need for submission to and
review by CMS. Under this proposal, those materials that are not
considered marketing, per the proposed definition of marketing, would
fall under the less stringent communication requirements.
In addition to these proposals related to defined terms and
revising the scope of Subparts V in parts 422 and 423, we are proposing
changes to the current regulations at Sec. Sec. 422.2264 and 423.2264
and Sec. Sec. 422.2268 and 423.2268 that are related to our proposal
to distinguish between marketing and communications.
With regard to Sec. Sec. 422.2264 and 423.2264, we are proposing
the following changes:
Deletion of paragraph (a)(3), which currently provides for
an adequate written explanation of the grievance and appeals process to
be provided as part of marketing materials. In our view grievance and
appeals communications would not be within the scope of marketing as
proposed in this rule.
Deletion of paragraph (a)(4), which provides for CMS to
determine that marketing materials include any other information
necessary to enable beneficiaries to make an informed decision about
enrollment. The intent of this section was to ensure that materials
which include measuring or ranking mechanisms such as Star Ratings were
a part of CMS's marketing review. We

[[Page 56435]]

propose deleting this section as the exclusion list to be codified at
Sec. 422.2260(c)(2)(ii) ensures materials that include measuring or
ranking standards will be considered marketing, thus making Sec. Sec.
422.2264(a)(4) and Sec. 423.2264(a)(4) duplicative.
Deletion of paragraph (e), which requires sponsoring
organizations to provide translated materials in certain areas where
there is a significant non-English speaking population. We propose to
recodify these requirement as a general communication standard in
Sec. Sec. 422.2268 and 423.2268, at new paragraph (a)(7). As part of
the redesignation of this requirement as a standard applicable to all
communications and communication materials, we are also proposing
revisions. First, we are proposing to revise the text so that it is
stated as a prohibition on sponsoring organizations: For markets with a
significant non-English speaking population, provide materials, as
defined by CMS, unless in the language of these individuals. We propose
adding the statement of ``as defined by CMS'' to the first sentence to
allow the agency the ability to define the significant materials that
would require translation. We propose deleting the word ``marketing''
so the second sentence now reads as ``materials'', to make it clear
that the updated section applies to the broader term of communications
rather than the more narrow term of marketing.
In addition, we are proposing to revise Sec. Sec. 422.2262(d) and
423.2262(d) to delete the term ``ad hoc'' from the heading and
regulation text in favor of referring to ``communication materials'' to
conform to the addition of communication materials under Subpart V.
Current regulations at Sec. Sec. 422.2268 and 423.2268 list
prohibited marketing activities. These activities include items such as
providing meals to potential enrollees, soliciting door to door, and
marketing in provider settings. With the proposal to distinguish
between overall communications and marketing activities, we are
proposing to break out the prohibitions into categories: those
applicable to all communications (activities and materials) and those
that are specific to marketing and marketing materials. In reviewing
the various standards under the current regulations to determine if
they would apply to communications or marketing, we looked at the each
standard as it applied to the new definitions under Subpart V.
Prohibitions that offer broader beneficiary protections and are
currently applicable to a wide variety of materials are proposed here
to apply to communications activities and communication materials; this
list of prohibitions is proposed as paragraph (a) Conversely,
prohibitions that are currently targeted to activities and materials
that are within the narrower scope of marketing and marketing materials
are proposed at paragraph (b) as prohibitions on marketing. We are not
proposing to expand the list of prohibitions but are proposing to
notate which prohibitions are applicable to which category. The only
substantive change is in connection with paragraph (a)(7), which we
discuss earlier in this section. We welcome comment on our proposed
distinctions between these types of prohibitions and whether certain
standards or prohibitions from current Sec. Sec. 422.2268 and 423.2268
should apply more narrowly or broadly than we have proposed.
b. Amending the Regulatory Definition of Marketing and Marketing
Materials
In conjunction with adding new proposed communication requirements,
we also propose a definition of ``marketing'' be codified in Sec. Sec.
422.2260(b) and 423.2260(b). Under this proposal, we would delete the
current text in that section defining only ``marketing materials'' to
add a new definition of ``marketing'' and lists of materials that are
``marketing materials'' and that are not. Specifically, the term
``marketing'' would be defined as the use of materials or activities by
the sponsoring organization (that is, the MA organization, Part D
Sponsor, or cost plan, depending on the specific part) or downstream
entities that are intended to draw a beneficiary's attention to the
plan or plans and influence a beneficiary's decision making process
when making a plan selection; this last criterion would also be met
when the intent is to influence an enrollee's decision to remain in a
plan (that is, retention-based marketing).
The current regulations address both prohibited marketing
activities and marketing materials. The prohibited activities are
directly related to marketing activities, but the current definition of
``marketing materials'' is overly broad and has resulted in a
significant number of documents being classified as marketing
materials, such as materials promoting the sponsoring organization as a
whole (that is, brand awareness) rather than materials that promote
enrollment in a specific Medicare plan. We believe that Congress'
intent was to target those materials that could mislead or confuse
beneficiaries into making an adverse enrollment decision. Since the
original adoption of Sec. Sec. 422.2260 and 423.2260, CMS has reviewed
thousands of marketing materials, tracked and resolved thousands of
beneficiary complaints through the complaints tracking module (CTM),
conducted secret shopping programs of MA plan sales events, and
investigated numerous marketing complaints. These efforts have provided
CMS insight into the types of plan materials that present the greatest
risk of misleading or confusing beneficiaries. Based on this
experience, we believe that the current regulatory definition of
marketing materials is overly broad. As a result, materials that pose
little to no threat of a detrimental enrollment decision fall under the
current broad marketing definition. As such, the materials are also
required to follow the associated marketing requirements, including
submission to CMS for potential review under limited statutory
timeframes. CMS believes that the level of scrutiny required on
numerous documents that are not intended to influence an enrollment
decision, combined with associated burden to sponsoring organizations
and CMS, is not justified. By narrowing the materials that fall under
the scope of marketing, this proposal will allow us to better focus its
review on those materials that present the greatest likelihood for a
negative beneficiary experience.
We propose to more appropriately implement the statute by narrowing
the definition of marketing to focus on materials and activities that
aim to influence enrollment decisions. We believe this is consistent
with Congress's intent. Moreover, the new definition differentiates
between factually providing information about the plan or benefits
(that is, the Evidence of Coverage (EOC)) versus persuasively conveying
information in a manner designed to prompt the beneficiary to make a
new plan decision or to stay with their current plan (for example, a
flyer that touts a low monthly premium). As discussed later, the
majority of member materials would no longer fall within the definition
of marketing under this proposal. The EOC, subscriber agreements, and
wallet card instructions are not developed nor intended to influence
enrollment decisions. Rather, they are utilized for current enrollees
to understand the full scope of and the rules associated with their
plan. We believe the proposed new marketing definition appropriately
safeguards potential and current enrollees while not placing an undue
burden on sponsoring organizations. Moreover, those materials that
would be

[[Page 56436]]

excluded from the marketing definition would fall under the proposed
definition of communication materials, with what we believe are more
appropriate requirements. CMS notes that enrollment and mandatory
disclosure materials continue to be subject to requirements in
Sec. Sec. 422.60(c), 422.111, 423.32(b), and 423.128.
Second, we propose to revise the list of marketing materials,
currently codified at Sec. Sec. 422.2260(5) and 423.2260(5), and to
include it in the proposed new Sec. Sec. 422.2260(c)(1) and
423.2260(c)(1). The current list of examples includes: brochures;
advertisements in newspapers and magazines, and on television,
billboards, radio, or the internet, and billboards; social media
content; marketing representative materials, such as scripts or
outlines for telemarketing or other presentations; and presentation
materials such as slides and charts. In conjunction with the proposed
new definition of marketing, we are proposing to remove from the list
of examples items such as membership communication materials,
subscriber agreements, member handbooks, and wallet card instructions
to enrollees, as they would no longer fall under the proposed
regulatory definition of marketing. The proposed text complements the
new definition by providing a concise non-exhaustive list of example
material types that would be considered marketing.
Third, we propose to revise the list of exclusions from marketing
materials, currently codified at Sec. Sec. 422.2260(6) and
423.2260(6), and to include it in the proposed new Sec. Sec.
422.2260(c)(2) and 423.2260(c)(2) to identify the types of materials
that would not be considered marketing. Materials that do not include
information about the plan's benefit structure or cost sharing or do
not include information about measuring or ranking standards (for
example, star ratings) will be excluded from marketing. In addition,
materials that do mention benefits or cost sharing, but do not meet the
definition of marketing as proposed here, would also be excluded from
marketing. We also propose that required materials in Sec. 422.111 and
Sec. 423.128 not be considered marketing, unless otherwise specified.
Lastly, we are proposing to exclude materials specifically designated
by us as not meeting the definition of the proposed marketing
definition based on their use or purpose. The purpose of this proposed
revision of the list of exclusions from marketing materials, as with
the proposed marketing definition and proposed non-exhaustive list of
marketing materials, is to maintain the current beneficiary protections
that apply to marketing materials but to narrow the scope to exclude
materials that are unlikely to lead to or influence an enrollment
decision.
In the proposed changes to the exclusions from marketing materials,
we intend to exclude materials that do not include information about
the plan's benefit structure or cost-sharing. We believe that materials
that do not mention benefit structure or cost sharing would not be used
to make an enrollment decision in a specific Medicare plan, rather they
would be used to drive beneficiaries to request additional information
that would fall under the new definition of marketing. Similarly, we
want to be sure it is clear that the use of measuring or ranking
standards, such as the CMS Star Ratings, even when not accompanied by
other plan benefit structure or cost sharing information, could lead a
beneficiary to make an enrollment decision. It should be noted that our
authority for similar requirements can be found under the current
Sec. Sec. 422.2264(a)(4) and 423.2264(a)(4). We believe this is
clearer and more appropriately housed under the regulatory definition
of marketing. As such, together with the proposed update to excluded
materials, we will make the technical change to remove (a)(4) from
Sec. Sec. 422.2264 and 423.2264. In addition, we propose to exclude
materials that mention benefits or cost sharing but do not meet the
proposed definition of marketing. The goal of this proposal is to
exclude member communications that convey important factual information
that is not intended to influence the enrollee's decision to make a
plan selection or to stay enrolled in their current plan. An example is
a monthly newsletter to current enrollees reminding them of preventive
services at $0 cost sharing.
In addition, we note the proposal excludes those materials required
under Sec. 422.111 (for MA plans) and Sec. 423.128 (for Part D
sponsors), unless otherwise specified by CMS because of their use or
purpose. This proposal is intended to exclude post-enrollment materials
that we require be disclosed and distributed to enrollees, such as the
EOC. Such materials convey important plan information in a factual
manner rather than to entice a prospective enrollee to choose a
specific plan or an existing enrollee to stay in a specific plan. In
addition, either these materials use model formats and text developed
by us or are developed by plans based on detailed instructions on the
required content from us; this high level of standardization by us on
the front-end provides the necessary beneficiary protections and
negates the need for our review of these materials before distribution
to enrollees.
The proposed changes do not release cost plans, MA organizations,
or Part D sponsors from the requirements in sections 1876(c)(3)(C),
1851(h), and 1860D-1(b)(1)(B)(vi) of the Act to have application forms
reviewed by CMS as well. To clarify this requirement, we are proposing
to revise Sec. 417.430(a)(1) and Sec. 423.32(b), which pertain to
application and enrollment processes, to add a cross reference to
Sec. Sec. 422.2262 and 423.2262, respectively. The cross references
directly link enrollment applications back to requirements related to
review and distribution of marketing materials. These proposed changes
update an old cross-reference, codify existing practices, and are
consistent with language already in Sec. 422.60(c).
c. Prohibition of Marketing During the Open Enrollment Period
The 21st Century Cures Act (the Cures Act) amended section
1851(e)(2) of the Act by adding a new continuous open enrollment and
disenrollment period (OEP) for MA and certain PDP members. See section
III.A.X for CMS's other proposal related to that provision. As part of
establishing this OEP, the Cures Act prohibits unsolicited marketing
and mailing marketing materials to individuals who are eligible for the
new OEP. We are proposing to add a new paragraph (b)(9) to both
proposed Sec. Sec. 422.2268 and 423.2268 to apply this prohibition on
marketing. However, we request comment on how the agency could
implement this statutory requirement. The new OEP is not available for
enrollees in Medicare cost plans; therefore, these limitations would
apply to MA enrollees and to any PDP enrollee who was enrolled in an MA
plan the prior year. CMS is concerned that it may be difficult for a
sponsoring organization to limit marketing to only those individuals
who have not yet enrolled in a plan during the OEP. One mechanism could
be to limit marketing entirely during that period, but we are concerned
that such a prohibition would be too broad We believe that using a
``knowing'' standard will both effectuate the statutory provision and
avoid against overly broad implementation. We welcome comment on how a
sponsoring organization could appropriately control who would or should
be marketed to during the new OEP, such as through as mailing campaigns
aimed at a more general audience.

[[Page 56437]]

d. Technical Changes to Other Regulatory Provisions as a Result of the
Changes to Subpart V
As previously stated, because of the broad regulatory definition of
marketing, the term marketing and communication became synonymous. With
the proposed updates to Subpart V in both part 422 and part 423, a
definition of the broader term communication would be added and the
definition of marketing, as well as the materials that fall within the
scope of that definition, would be narrowed. As a result, a number of
technical changes will be needed to update certain sections of the
regulation that use the term marketing. Accordingly, we propose the
following technical changes in Part C:
In Sec. 422.54, we propose to update paragraphs (c)(1)(i)
and (d)(4)(ii) to replace ``marketing materials'' with ``communication
materials.''
In Sec. 422.62, we propose to update paragraph
(b)(3)(B)(ii) by replacing ``in marketing the plans to the individual''
with ``in communication materials.''
In Sec. 422.102(d), we propose to use ``supplemental
benefits packaging'' instead of ``marketing of supplemental benefits.''
In Sec. 422.206(b)(2)(i), we propose to replace ``Sec.
422.80 (concerning approval of marketing materials and election
forms)'' with ``all applicable requirements under subpart V''.
In Sec. 422.503(b)(4)(ii), we propose to replace the term
``marketing'' with the term ``communication.''
In Sec. 422.510(a)(4)(iii), we propose to remove the word
``marketing'' so that the reference is to the broader Subpart V.
CMS has had longstanding authority to initiate ``marketing
sanctions'' in conjunction with enrollment sanctions as a means of
protecting beneficiaries from the confusion that stems from receiving
information provided by a plan that is--as a result of enrollment
sanctions--unable to accept enrollments. In this rulemaking, CMS is
proposing to replace the term ``marketing'' with ``communications'' in
Sec. 422.750 and 422.752 to reflect its proposal for Subpart V. The
intent of this proposal to change the terminology is not to expand the
scope of CMS's authority with respect to sanction regulations. Rather,
CMS intends to preserve the existing reach of its sanction authority it
currently has--to prohibit any communications under the current broad
definition of ``marketing materials'' from being issued by a sponsoring
organization while that entity is under sanction. For this reason, CMS
is proposing the following changes to Sec. Sec. 422.750 and 422.752:
In Sec. 422.750, we propose to revise paragraph (a)(3) to
refer to suspension of ``communication activities.''
In Sec. 422.752, we propose to replace the term
``marketing'' in paragraph (a)(11) and the heading for paragraph (b)
with the term ``communications.''
We are not proposing any changes to the use of the term
``marketing'' in Sec. Sec. 422.384, 422.504(a)(17), 422.504(d)(2)(vi),
or 422.514, as those regulations use the term in a way that is
consistent with the proposed definition of the term ``marketing,'' and
the underlying requirements and standards do not need to be extended to
all communications from an MA organization.
We also propose the following technical changes in Part D:
In Sec. 423.38(c)(8)(i)(C), we propose to revise the
paragraph to read: ``The organization (or its agent, representative, or
plan provider) materially misrepresented the plan's provisions in
communication materials.''
In Sec. 423.504(b)(4)(ii), we propose to replace
``marketing'' with ``communications'' to reflect the change to Subpart
V.
For the reasons explained in connection with our proposal to revise
the Part C sanction regulations, we also propose the following changes:
In Sec. 423.505(b)(25), we propose to replace
``marketing'' with ``communications'' to reflect the change to Subpart
V.
In Sec. 423.509(a)(4)(V)(A), we propose to delete the
word ``marketing'' and instead simply refer to Subpart V.
We are not proposing any changes to the use of the term
``marketing'' in Sec. Sec. 423.505(d)(2)(vi), 423.871(c), or
423.756(c)(3)(ii), as those regulations use the term in a way that is
consistent with the proposed definition of the term ``marketing,'' and
the underlying requirements and standards do not need to be extended to
all communications from a PDP sponsor.
We solicit comment on the proposed technical changes, particularly
whether a proposed revision here would be more expansive than
anticipated or have unintended consequences for sponsoring
organizations or for CMS's oversight and monitoring of the MA and Part
D programs.
In conclusion, we believe that our proposal here--the proposed
definitions of ``communications,'' ``communications materials,''
``marketing,'' and ``marketing materials;'' and the various proposed
changes to Subpart V; to distinguish between prohibitions applicable to
communications and those applicable to marketing; and to conform Sec.
417.430(a)(1) and Sec. 423.32(b) to Sec. 422.60(c) and reflect the
statutory direction regarding enrollment materials; all maintain the
appropriate level of beneficiary protection. These proposals will
facilitate and focus our oversight of marketing materials, while
appropriately narrowing the scope of what is considered marketing. We
believe beneficiary protections are further enhanced by adding
communication materials and associated standards under Subpart V. These
changes allow us to focus its oversight efforts on plan marketing
materials that have the highest potential for influencing a beneficiary
to make an enrollment decision that is not in the beneficiary's best
interest. We solicit comment on these proposals and whether the
appropriate balance is achieved with the proposed regulation text.
6. Lengthening Adjudication Timeframes for Part D Payment
Redeterminations and IRE Reconsiderations (Sec. Sec. 423.590 and
423.636)
Sections 1860D-4(g) and (h) of the Act require the Secretary to
establish processes for initial coverage determinations and appeals
similar to those used in the Medicare Advantage program. In accordance
with section 1860D-4(g) of the Act, Sec. 423.590 establishes Part D
plan sponsors' responsibilities for processing redeterminations,
including adjudication timeframes. Pursuant to section 1860D-4(h) of
the Act, Sec. 423.600 sets forth the requirements for an independent
review entity (IRE) for processing reconsiderations.
We are proposing changes to the adjudication timeframe for Part D
standard redetermination requests for payment at Sec. 423.590(b) and
the related effectuation provision Sec. 423.636(a)(2). Specifically,
we are proposing to change the timeframe for issuing decisions on
payment redeterminations from 7 calendar days from the date the plan
sponsor receives the request to 14 calendar days from the date the plan
sponsor receives the request. This proposed 14-day timeframe for
issuing a decision related to a payment request would also apply to the
IRE reconsideration pursuant to Sec. 423.600(d). We are not proposing
to make changes to the existing requirements for making payment. When
applicable, the Part D plan sponsor must make payment no later than 30
days from receipt of the request

[[Page 56438]]

for redetermination, or the IRE reconsideration notice, respectively.
Some of the feedback received from the RFI published in the 2018
Call Letter related to simplifying and establishing greater consistency
in Part D coverage and appeals processes. The proposed change to a 14
calendar day adjudication timeframe for payment redeterminations, which
would also apply to payment requests at the IRE reconsideration level
of appeal, will establish consistency in the adjudication timeframes
for payment requests throughout the plan level and IRE processes, as
Sec. 423.568(c) requires a plan sponsor to notify the enrollee of its
determination no later than 14 calendar days after receipt of the
request for payment. We believe affording more time to adjudicate
payment redetermination requests (including obtaining necessary
documentation to support the request) will ease burden on plan sponsors
because it could reduce the need to deny payment redeterminations due
to missing information. We also expect the proposed change to the
payment redetermination timeframe would reduce the volume of untimely
payment redeterminations that must be auto-forwarded to the IRE.
In addition, having more time to gather information and process
these requests could be beneficial to enrollees because decisions will
be more fully informed, potentially resulting in fewer decisions having
to undergo further appeal. While we acknowledge that some enrollees
would have to wait longer for a decision, we note that the proposed
changes are limited to payment requests where the enrollee has already
received the drug, ensuring any delay would not adversely affect the
enrollee's health. As noted previously, when coverage is approved, the
plan would remain obligated to remit payment to affected enrollees
within 30 days. Allowing plan sponsors and the IRE additional time to
process payment appeal requests may assist these adjudicators in
allocating resources in a manner that is most efficient and enrollee
friendly, for example, ensuring adequate resources are directed to
processing more time-sensitive pre-service requests where the enrollee
has not yet obtained the drug, particularly during periods of increased
case volume.
7. Elimination of Medicare Advantage Plan Notice for Cases Sent to the
IRE (Sec. 422.590)
Section 1852(g) of Act requires MA organizations to have a
procedure for making timely determinations regarding whether an
enrollee is entitled to receive a health service and any amount the
enrollee is required to pay for such service. Under this statutory
provision, the MA plan also is required to provide for reconsideration
of that determination upon enrollee request.
In accordance with section 1852(g) of the Act, our current
regulations at Sec. Sec. 422.578, 422.582, and 422.584 provide MA
enrollees with the right to request reconsideration of a health plan's
initial decision to deny Medicare coverage. Pursuant to Sec. 422.590,
when the MA plan upholds initial payment or service denials, in whole
or in part, it must forward member case files to an independent review
entity (IRE) that contracts with CMS to review plan-level appeals
decisions; that is, plans are required to automatically forward to the
IRE any reconsidered decisions that are adverse or partially adverse
for an enrollee without the enrollee taking any action.
Currently, MA plans are required to notify enrollees upon
forwarding cases to the IRE, as set forth at Sec. 422.590(f). CMS sub-
regulatory guidance, set forth in Chapter 13 of the Medicare Managed
Care Manual, specifically directs plans to mail a notice to the
enrollee informing the individual that the plan has upheld its decision
to deny coverage, in whole or in part, and thus is forwarding the
enrollee's case file to the IRE for review. We have made a model notice
available for plans to use for this purpose. (See Medicare Managed Care
Manual, Chapter 13, Sec. 10.3.3, 80.3, and Appendix 10.) In addition,
the Part C IRE is required, under its contract with CMS, to notify the
enrollee when the IRE receives the reconsidered decision for review. We
are proposing to revise Sec. 422.590 to remove paragraph (f) and
redesignate the existing paragraphs (g) and (h) as (f) and (g),
respectively. The Part C IRE is contractually responsible for notifying
an enrollee that the IRE has received and will be reviewing the
enrollee's case; thus, we believe the plan notice is duplicative and
nonessential. Under this proposal, the IRE would be responsible for
notifying enrollees upon forwarding all cases--including both standard
and expedited cases. We will continue to closely monitor the
performance of the IRE and beneficiary complaints related to timely and
appropriate notification that the IRE has received and will be
reviewing the enrollee's case.
We received feedback in response to the Request for Information
included in the 2018 Call Letter related to simplifying and
streamlining appeals processes. To that end, we believe this proposed
change will help further these goals by easing burden on MA plans
without compromising informing the beneficiary of the progress of his
or her appeal. If this proposal is finalized, and plans are no longer
required to notify an enrollee that his or her case has been sent to
the IRE, we would expect plans to redirect resources previously
allocated to issuing this notice to more time-sensitive activities such
as review of pre-service and post-service coverage requests, improved
efficiency in appeals processing, and provision of health benefits in
an optimal, effective, and efficient manner.
8. E-Prescribing and the Part D Prescription Drug Program; Updating
Part D E-Prescribing Standards
a. Legislative Background
Section 101 of the Medicare Prescription Drug, Improvement, and
Modernization Act of 2003 (MMA) (Pub. L. 108-173) amended title XVIII
of the Act to establish a voluntary prescription drug benefit program
at section 1860D-4(e) of the Act. Among other things, these provisions
required the adoption of Part D e-prescribing standards. Prescription
Drug Plan (PDP) sponsors and Medicare Advantage (MA) organizations
offering Medicare Advantage-Prescription Drug Plans (MA-PD) are
required to establish electronic prescription drug programs that comply
with the e-prescribing standards that are adopted under this authority.
There is no requirement that prescribers or dispensers implement e-
prescribing. However, prescribers and dispensers who electronically
transmit prescription and certain other information for covered drugs
prescribed for Medicare Part D eligible beneficiaries, directly or
through an intermediary, are required to comply with any applicable
standards that are in effect.
For a further discussion of the statutory basis for this proposed
rule and the statutory requirements at section 1860D-4(e) of the Act,
please refer to section I. (Background) of the E-Prescribing and the
Prescription Drug Program proposed rule, published February 4, 2005 (70
FR 6256).
b. Regulatory History
Transaction standards are periodically updated to take new
knowledge, technology and other considerations into account. As CMS
adopted specific versions of the standards when it adopted the
foundation and final e-prescribing standards, there was a need to
establish a process by which the standards could be updated or replaced

[[Page 56439]]

over time to ensure that the standards did not hold back progress in
the industry. We discussed these processes in the November 7, 2005
final rule (70 FR 67579).
The discussion noted that the rulemaking process will generally be
used to retire, replace or adopt a new e-prescribing standard, but it
also provided for a simplified ``updating process'' when a non-HIPAA
standard could be updated with a newer ``backward-compatible'' version
of the adopted standard. In instances in which the user of the later
version can accommodate users of the earlier version of the adopted
non-HIPAA standard without modification, however, it noted that notice
and comment rulemaking could be waived, in which case the use of either
the new or old version of the adopted standard would be considered
compliant upon the effective date of the newer version's incorporation
by reference in the Federal Register. We utilized this streamlined
process when we published an interim final rule with comment on June
23, 2006 (71 FR 36020). That rule recognized NCPDP SCRIPT 8.1 as a
backward compatible update to the NCPDP SCRIPT 5.0 for the specified
transactions, thereby allowing for use of either of the two versions in
the Part D program. Then, on April 7, 2008, we used notice and comment
rulemaking (73 FR 18918) to finalize the identification of the NCPDP
SCRIPT 8.1 as a backward compatible update of the NCPDP SCRIPT 5.0,
and, effective April 1, 2009, retire NCPDP SCRIPT 5.0 and adopt NCPDP
SCRIPT 8.1 as the official Part D e-prescribing standard for the
specified transactions. On July 1, 2010, CMS utilized the streamlined
process to recognize NCPDP SCRIPT 10.6 as a backward compatible update
of NCPDP SCRIPT 8.1 in an interim final rule (75 FR 38026).
We finalized the NCPDP SCRIPT 10.6 as a Backward Compatible Version
of NCPDP SCRIPT 8.1, and retired NCPDP SCRIPT 8.1 and adopted the NCPDP
SCRIPT 10.6 as the official Part D e-Prescribing Standard for the
specified transactions in the CY 2013 Physician Fee Schedule, effective
November 1, 2013. For a more detailed discussion, see the CY 2013 PFS
final rule (77 FR 69329 through 69333).
c. Proposed adoption of NCPDP SCRIPT version 2017071 as the
official Part D E-Prescribing Standard for certain specified
transactions, retirement of NCPDP SCRIPT 10.6, proposed conforming
changes elsewhere in 423.160, and correction of a historic
typographical error in the regulatory text which occurred when NCPDP
SCRIPT 10.6 was initially adopted.
The National Council for Prescription Drug Programs (NCPDP) is a
not-for-profit ANSI-Accredited Standards Development Organization (SDO)
consisting of more than 1,600 members who are interested in electronic
standardization within the pharmacy services sector of the healthcare
industry. NCPDP provides a forum wherein our diverse membership can
develop solutions, including ANSI-accredited standards, and guidance
for promoting information exchanges related to medications, supplies,
and services within the healthcare system.
NCPDP has developed the NCPDP SCRIPT standard for use by
prescribers, dispensers, pharmacy benefit managers (PBMs), payers and
other entities who wish to electronically transmit information about
prescriptions and prescription-related information. NCPDP has
periodically updated its SCRIPT standard over time, and three separate
versions of the NCPDP SCRIPT standard, versions 5.0, 8.1 and most
recently 10.6 have been adopted by CMS for the part D e-prescribing
program through the notice and comment rulemaking process. We believe
that our current proposal to adopt the NCPDP SCRIPT 2017071 as the
official part D e-prescribing standard for certain specified
transactions, and to retire the current standard for those transactions
would, among other things, improve communications between the
prescriber and dispensers, and we welcome public comment on these
proposals.
Our actions were, in part, precipitated by a May 24, 2017, letter
from the NCPDP that requested our adoption of NCPDP SCRIPT Standard
Version 2017071. This version was balloted and approved July 28, 2017.
The letter noted the considerable amount of time that had passed since
the last update to the current adopted standard (NCPDP SCRIPT 10.6),
and that there were many changes to the NCPDP SCRIPT Standard version
2017071 that would benefit its users.
CMS reviewed the specifications for NCPDP SCRIPT Standard Version
2017071 and found that this version would allow users substantial
improvements in efficiency. Version 2017071 supports communications
regarding multi-ingredient compounds, thereby allowing compounded
medication to be prescribed electronically. Previously prescriptions
for compounds were handwritten and sent via fax to the dispenser, which
often required follow up communications between the prescriber and
pharmacy. The ability to process prescriptions for compounds
electronically in lieu of relying on more time intensive interpersonal
interactions would be expected to improve efficiency.
While we do not propose mandating its use at this time, one
transaction supported by the proposed version of NCPDP SCRIPT would
also provide interested users with a Census transaction functionality
which is designed to service beneficiaries residing in long term care.
The Census feature would trigger timely notification of a beneficiary's
absence from a long term care facility, which would enable
discontinuation of daily medication dispensing when a leave of absence
occurs, thereby preventing the dispensing of unneeded medications.
Version 2017071 also contains an enhanced Prescription Fill Status
Notification that allows the prescriber to specify if/when they want to
receive the notifications from the dispenser. It now supports data
elements for diabetic supply prescriptions and includes elements which
could be required for the pharmacy during the dispensing process which
may be of value to prescribers who need to closely monitor medication
adherence.
We therefore believe that the functionalities offered by NCPDP
SCRPT 2017071 could offer efficiencies to the industry, and believe
that it would be an appropriate e-prescribing standard for the
transactions currently covered by the Medicare Part D program.
Furthermore, NCPDP SCRIPT 2017071 supports transactions new to the part
D e-prescribing program that we believe would prove beneficial to the
industry. Therefore, in addition to the transactions for which prior
versions of NCPDP SCRIPT were adopted (as reflected in the current
regulations at 423.160(b)), we propose to require use of NCPDP SCRPT
2017071 for the following transactions:
Prescription drug administration message,
New prescription requests,
New prescription response denials,
Prescription transfer message,
Prescription fill indicator change,
Prescription recertification,
Risk Evaluation and Mitigation Strategy (REMS) initiation
request,
REMS initiation response, REMS request, and
REMS response.
We believe that transitioning to the new 2017071 versions of the
transactions already covered by the current part D e-prescribing
standard (version 10.6 of the NCPDP SCRIPT) will impose deminimus cost
on the

[[Page 56440]]

industry as the burden in using the updated standards is anticipated to
be the same as using the old standards for the transactions currently
covered by the program. We are also proposing adoption of version
2017071 of the NCPDP SCRIPT standards for the nine new transactions to
replace manual processes that currently occur. Reducing the manual
processes currently used to support these transactions will improve
efficiency, accuracy, and user satisfaction with the system. While
system implementation may result in minimal expenses, we believe that
these minimal expenses will be more than offset by rendering these
manual transactions obsolete. That is, we believe that prescribers and
dispensers that are now e-prescribing largely invested in the hardware,
software, and connectivity necessary to e-prescribe. We do not
anticipate that the retirement of NCPDP SCRIPT 10.6 in favor of NCPDP
SCRIPT 2017071 will result in significant costs.
As such, we are proposing to revise Sec. 423.160(b)(1)(iv) so as
to limit its application to transactions before January 1, 2019 and add
a new Sec. 423.160(b)(1)(v). The requirement at Sec. 423.160(b)(1)(v)
would identify the standards that will be in effect on or after January
1, 2019, for those that conduct e-prescribing for part D covered drugs
for part D eligible beneficiaries. If finalized, those individuals and
entities would be required to use NCPDP SCRIPT 2017071 to convey
prescriptions and prescription-related information for the following
transactions:
Get message transaction.
Status response transaction.
Error response transaction.
New prescription request transaction.
Prescription change request transaction.
Prescription change response transaction.
Refill/Resupply prescription request transaction.
Refill/Resupply prescription response transaction.
Verification transaction.
Password change transaction.
Cancel prescription request transaction.
Cancel prescription response transaction.
Fill status notification.
Prescription drug administration message.
New prescription requests.
New prescription response denials.
Prescription transfer message.
Prescription fill indicator change.
Prescription recertification.
Risk Evaluation and Mitigation Strategy (REMS) initiation
request.
REMS initiation response, REMS request
REMS initiation response.
REMS request.
REMS response.
We are also proposing to adopt NCPDP SCRIPT 2017071 as the official
part D e-prescribing standard for the medication history transaction at
Sec. 423.160(b)(4). As a result, we are also proposing to retire NCPDP
SCRIPT versions 8.1 and 10.6 for medication history transactions
transmitted on or after January 1, 2019.
Furthermore, we propose to amend Sec. 423.160(b)(1) by modifying
Sec. 423.160(b)(1)(iv) to limit usage of NCPDP SCRIPT version 10.6 to
transactions before January 1, 2019.
In addition, we propose to add Sec. 423.160(b)(1)(v) to provide
that NCPDP Version 2017071 must be used to conduct the covered
transactions on or after January 1, 2019. Furthermore, we are proposing
to amend Sec. 423.160(b)(2) by adding Sec. 423.160(b)(2)(iv) to name
NCPDP SCRIPT Version 2017071 for the applicable transactions. Finally,
we propose to incorporate NCPDP SCRIPT version 2017071 by reference in
our regulations. We seek comment regarding our proposed retirement of
NCPDP SCRIPT version 10.6 on December 31, 2018 and adoption of NCPDP
SCRIPT Version 2017071 on January 1, 2019 as the official Part D e-
prescribing standard for the e-prescribing functions outlined in our
proposed Sec. 423.160(b)(1)(v) and (b)(2)(v), and for medication
history as outlined in our proposed Sec. 423.160(b)(4), effective
January 1, 2019. We are also soliciting comments regarding the impact
of these proposed effective dates on industry and other interested
stakeholders.
We are also proposing a technical correction of a prior regulation.
On July 30, 2012, we published regulation (CMS-1590-P), which
established version 10.6 as the Part D e-prescribing standard effective
March 1, 2015 for certain electronic transactions that convey
prescription or prescription related information, as listed in Sec.
423.160(b)(2)(iii). However, despite the regulation clearly noting
adoption of NCPDP SCRIPT 10.6 as the part D e-prescribing standard for
the listed transactions, due to a typographical error, Sec.
423.160(b)(1)(iv) references (b)(2)(ii) (NCPDP SCRIPT 8.1), rather than
(b)(2)(iii) (NCPDP SCRIPT 10.6). We propose a correction of this
typographical error by changing the reference at Sec. 423.160
(b)(1)(iv) to reference (b)(2)(iii) instead of (b)(2)(ii).
In proposing updates to the Part D E-Prescribing Standards CMS has
reviewed specification documents developed by the National Council for
Prescription Drug Programs (NCPDP). The Office of the Federal Register
(OFR) has regulations concerning incorporation by reference. 1 CFR part
51. For a proposed rule, agencies must discuss in the preamble to the
NPR ways that the materials the agency proposes to incorporate by
reference are reasonably available to interested persons or how the
agency worked to make the materials reasonably available. In addition,
the preamble to the proposed rule must summarize the materials.
Consistent with those requirements CMS has established procedures
to ensure that interested parties can review and inspect relevant
materials. The proposed update to the Part D prescribing standards has
relied on the NCPDP SCRIPT Implementation Guide Version 2017071
approved July 28, 2017. Members of the NCPDP may access these materials
through the member portal at www.ncpdp.org; non- NCPDP members may
obtain these materials for information purposes by contacting the
Centers for Medicare & Medicaid Services (CMS), 7500 Security
Boulevard, Baltimore, Maryland 21244, Mailstop C1-26-05, or by calling
(410) 786- 3694.
9. Reduction of Past Performance Review Period for Applications
Submitted by Current Medicare Contracting Organizations (Sec. Sec.
422.502 and 423.503)
In April 2010, we clarified our authority to deny contract
qualification applications from organizations that have failed to
comply with the requirements of a Medicare Advantage or Part D plan
sponsor contract they currently hold, even if the submitted application
otherwise demonstrates that the organization meets the relevant program
requirements. As part of that rulemaking, we established, at Sec.
422.502(b)(1) and Sec. 423.503(b)(1), that we would review an
applicant's prior contract performance for the 14-month period
preceding the application submission deadline (see 75 FR 19684 through
19686). We conduct that review in accordance with a methodology we
publish each year \58\ and use to score each applicant's performance by
assigning weights based on the severity of its non-compliance in
several

[[Page 56441]]

performance categories. Under the annual contract qualification
application submission and review process we conduct, organizations
must submit their application by a date, usually in mid-February,
announced by us. We now propose to reduce the past performance review
period from 14 months to 12 months.
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\58\ https://www.cms.gov/Medicare/Compliance-and-Audits/Part-C-and-Part-D-Compliance-and-Audits/Downloads/Final_2018_Application_Cycle_Past_Performance_Methodology.pdf.
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We originally established the 14-month review period because it
covered the time period from the start of the preceding contract year
through the date on which CMS receives contract applications for the
upcoming contract year. We believed at the time that the combination of
the most recent complete contract year and the 2 months preceding the
application submission provided us with the most complete picture of
the most relevant information about an applicant's past contract
performance. Our application of this authority since its publication
has prompted comments from contracting organizations that the 14-month
period is too long and is unfair as it is applied. In particular,
organizations have noted that non-compliance that occurs during January
and February of a given year is counted against an organization in 2
consecutive past performance review cycles while non-compliance
occurring in all other months is counted in only one review cycle. The
result is that some non-compliance is ``double counted'' based solely
on the timing of the non-compliance and can, depending on the severity
of the non-compliance, prevent an organization from receiving CMS
approval of their application for 2 consecutive years.
Rather than creating a gap in the look-back period, as we were
concerned in 2010, 75 FR 19685, we now believe a 12-month look-back
period provides a more accurate period to consider. We believe it is
still important to capture in each review cycle an applicant's most
recent contract performance. Therefore, we propose to revise Sec.
422.502(b)(1) and Sec. 423.503(b)(1) to reduce the review period from
14 to 12 months. This would effectively establish a new review period
for every application review cycle of March 1 of the year preceding the
application submission deadline through February 28 (February 29 in
leap years) of the year in which the application is submitted and would
eliminate the counting of instances of non-compliance in January and
February of each year in 2 separate application cycles. We also propose
to have this review period change reflected consistently in the Part C
and D regulation by revising the provisions of Sec. 422.502(b)(2) and
Sec. 423.503(b)(2) to state that CMS may deny an application from an
existing Medicare Advantage or Part D plan sponsor in the absence of a
record of at least 12, rather than 14, months of Medicare contract
performance by the applicant. We do not intend to change any other
aspect of our consideration of past performance in the application
process.
10. Preclusion List--Part D Provisions
a. Background
(1) 2014 Final Rule
On May 23, 2014, we published a final rule in the Federal Register
titled ``Medicare Program; Contract Year 2015 Policy and Technical
Changes to the Medicare Advantage and the Medicare Prescription Drug
Benefit Programs'' (79 FR 29844). Among other things, this final rule
implemented section 6405(c) of the Affordable Care Act, which provides
the Secretary with the authority to require that prescriptions for
covered Part D drugs be prescribed by a physician enrolled in Medicare
under section 1866(j) of the Act (42 U.S.C. 1395cc(j)) or an eligible
professional as defined at section 1848(k)(3)(B) of the Act (42 U.S.C.
1395w-4(k)(3)(B)). More specifically, the final rule revised Sec.
423.120(c)(5) and added new Sec. 423.120(c)(6), the latter of which
stated that for a prescription to be eligible for coverage under the
Part D program, the prescriber must have (1) an approved enrollment
record in the Medicare fee for service program (that is, original
Medicare); or (2) a valid opt out affidavit on file with a Part A/Part
B Medicare Administrative Contractor (A/B MAC).
The purpose of this change was to help ensure that Part D drugs are
prescribed only by qualified prescribers. In a June 2013 report titled
``Medicare Inappropriately Paid for Drugs Ordered by Individuals
Without Prescribing Authority'' (OEI-02-09-00608), the Office of
Inspector General (OIG) found that the Part D program improperly paid
for drugs prescribed by persons who did not appear to have the
authority to prescribe. We also noted in the final rule the reports we
received of prescriptions written by physicians with suspended licenses
having been covered by the Part D program. These reports raised
concerns within CMS about the propriety of Part D payments and the
potential for Part D beneficiaries to be prescribed dangerous or
unnecessary drugs by individuals who lack the authority or
qualifications to prescribe medications. Given that the Medicare FFS
provider enrollment process, as outlined in 42 CFR part 424, subpart P,
collects identifying information about providers and suppliers who wish
to enroll in Medicare, we believed that forging a closer link between
Medicare's coverage of Part D drugs and the provider enrollment process
would enable CMS to confirm the qualifications of the prescribers of
such drugs. That is, requiring Part D prescribers to enroll in Medicare
would provide CMS with sufficient information to determine whether a
physician or eligible professional is qualified to prescribe Part D
drugs.
We stated in the May 23, 2014 final rule that the compliance date
for our revisions to new Sec. 423.120(c)(6) would be June 1, 2015. We
believed that this delayed date would give physicians and eligible
professionals who would be affected by these provisions adequate time
to enroll in or opt-out of Medicare. It would also allow CMS, A/B MACs,
Medicare beneficiaries, and other impacted stakeholders sufficient
opportunity to prepare for these requirements.
(2) 2015 Interim Final Rule
On May 6, 2015, we published in the Federal Register an interim
final rule with comment period (IFC) titled ``Medicare Program; Changes
to the Requirements for Part D Prescribers'' (80 FR 25958). This IFC
made changes to certain requirements outlined in the May 23, 2014 final
rule related to beneficiary access to covered Part D drugs.
First, we changed the compliance date of Sec. 423.120(c)(6) from
June 1, 2015 to January 1, 2016. This was designed to give all affected
parties more time to prepare for the additional provisions included in
the IFC before Part D drugs prescribed by individuals who are neither
enrolled in nor opted-out of Medicare are no longer covered.
Second, we revised paragraph Sec. 423.120(c)(6)(ii) to address a
gap in Sec. 423.120(c)(6) regarding certain types of prescribers; such
prescribers included pharmacists who may be authorized under state law
to prescribe medications but are ineligible to enroll in Medicare and
thus, under Sec. 423.120(c)(6), would not have their prescriptions
covered. Revised paragraph (c)(6)(ii) stated that pharmacy claims and
beneficiary requests for reimbursement for Part D prescriptions written
by prescribers other than physicians and eligible professionals who are
nonetheless permitted by state or other applicable law to prescribe
medications (defined in Sec. 423.100 as ``other authorized
prescribers'') will not be rejected or denied, as applicable, by the
pharmacy benefit manager (PBM) if all other requirements are met. This
meant that

[[Page 56442]]

the enrollment requirement specified in Sec. 423.120(c)(6) would not
apply to other authorized prescribers--that is, to individuals who are
ineligible to enroll in or opt out of Medicare because they do not meet
the statutory definition of ``physician'' or ``eligible professional''
yet who are otherwise legally authorized to prescribe drugs.
Third, and to help ensure that beneficiaries would not experience a
sudden lapse in Part D prescription coverage upon the January 1, 2016
effective date, we added a new paragraph Sec. 423.120(c)(6)(v). This
provision stated that a Part D sponsor or its PBM must, beginning on
January 1, 2016 and upon receipt of a pharmacy claim or beneficiary
request for reimbursement for a Part D drug that a Part D sponsor or
PBM would otherwise be required to reject or deny, as applicable, under
Sec. 423.120(c)(6):
Provide the beneficiary with:
++ A 3-month provisional supply of the drug (as prescribed by the
prescriber and if allowed by applicable law); and
++ Written notice within 3 business days after adjudication of the
claim or request in a form and manner specified by CMS; and
Ensure that reasonable efforts are made to notify the
prescriber of a beneficiary who was sent the notice referred to in the
previous paragraph.
The 3-month provisional supply and written notice were intended to
(1) notify beneficiaries that a future prescription written by the same
prescriber would not be covered unless the prescriber enrolled in or
opted-out of Medicare, and (2) give beneficiaries time to make
arrangements to continue receiving the prescription if the prescriber
of the medication did not intend to enroll in or opt-out of Medicare.
(3) Preparations for Enforcement of Part D Prescriber Enrollment
Requirement
Immediately after the publication of the previously mentioned May
23, 2014 final rule, we undertook major efforts to educate affected
stakeholders about the forthcoming enrollment requirement. Particular
focus was placed on reaching out to Part D prescribers with information
regarding (1) the overall purpose of the enrollment process; (2) the
important program integrity objectives behind Sec. 423.120(c)(6); (3)
the mechanisms by which prescribers may enroll in Medicare (for
example, via the Internet based Provider Enrollment, Chain and
Ownership System (PECOS); and (4) how to complete an enrollment
application. Numerous prescribers have, in preparation for the
enforcement of Sec. 423.120(c)(6), enrolled in or opted out of
Medicare, and we are appreciative of their cooperation in this effort.
However, based on internal CMS data, as of July 2016 approximately
420,000 prescribers--or 35 percent of the total 1.2 million prescribers
of Part D drugs--whose prescriptions for Part D drugs would be affected
by the requirements of Sec. 423.120(c)(6) have yet to enroll or opt
out. Of these prescribers, 32 percent are dentists, 11 percent are
student trainees, 7 percent are nurse practitioners, 6 percent are
pediatric physicians, and 5 percent are internal medicine physicians.
Several provider organizations, moreover, have expressed concerns
about the enrollment requirements. They have contended that (1) most
prescribers pose no risk to the Medicare program; and (2) certain types
of physicians and eligible professionals prescribe Part D drugs only
very infrequently. Their general position, in short, is that the burden
to the prescriber community would outweigh the payment safeguard
benefits of Sec. 423.120(c)(6). After the publication of the IFC, and
based on our desire to give prescribers and other stakeholders more
time to prepare for the enrollment requirements, we announced a phased-
in enforcement of the enrollment requirements and stated that full
enforcement would be delayed until January 1, 2019. (Information was
posted at the following link: https://www.cms.gov/Medicare/Provider-Enrollment-and-Certification/MedicareProviderSupEnroll/Prescriber-Enrollment-Information.html.) However, the concerns of these provider
organizations remain.
We do recognize these concerns. We wish to reduce as much burden as
possible for providers without compromising our program integrity
objectives. In addition, over 400,000 prescribers remain unenrolled
and, as a consequence, approximately 4.2 million Part D beneficiaries
(based on analysis performed on 2015 and 2016 PDE data) could lose
access to needed prescriptions when full enforcement of the enrollment
requirement begins on January 1, 2019 unless their prescriber enrolls
or opt outs or they change prescribers. We believe that an appropriate
balance is possible between burden reduction and the need to protect
Medicare beneficiaries and the Trust Funds. To this end, we propose
several changes to Sec. 423.120(c)(6).
b. Proposed Provisions
In accordance with section 1871 of the Act, within 3 years of the
publication of the May 6, 2015 IFC, we must either publish a final rule
or publish a notice of a different timeline. If we finalize the
proposals described in this notice of proposed rulemaking, we would not
finalize the provisions of the IFC. Instead, the proposals described in
this publication would supersede our earlier rulemaking.
The effective date of our proposed provisions in Sec.
423.120(c)(5) would be 60 days after the publication of a final rule.
The effective date of our proposed revisions to Sec. 423.120(c)(6)
would be January 1, 2019.
(1) Prescriber NPI Validation on Part D Claims
(a) Provisions of Sec. 423.120(c)(5)
Section 423.120(c)(5) states that before January 1, 2016, the
following are applicable:
In paragraph (c)(5)(i), we state that a Part D sponsor
must submit to CMS only a prescription drug event (PDE) record that
contains an active and valid individual prescriber NPI.
In paragraph (c)(5)(ii), we state that a Part D sponsor
must ensure that the lack of an active and valid individual prescriber
NPI on a network pharmacy claim does not unreasonably delay a
beneficiary's access to a covered Part D drug, by taking the steps
described in paragraph (c)(5)(iii) of this section.
In paragraph (c)(5)(iii), we state that the sponsor must
communicate at point-of-sale whether or not a submitted NPI is active
and valid in accordance with this paragraph (c)(5)(iii).
++ In paragraph (c)(5)(iii)(A), we state that if the sponsor
communicates that the NPI is not active and valid, the sponsor must
permit the pharmacy to (1) confirm that the NPI is active and valid; or
(2) correct the NPI.
++ In paragraph (c)(5)(iii)(B), we state that if the pharmacy:
++ Confirms that the NPI is active and valid or corrects the NPI,
the sponsor must pay the claim if it is otherwise payable; or
++ Cannot or does not correct or confirm that the NPI is active and
valid, the sponsor must require the pharmacy to resubmit the claim
(when necessary), which the sponsor must pay, if it is otherwise
payable, unless there is an indication of fraud or the claim involves a
prescription written by a foreign prescriber (where permitted by State
law).
In paragraph (c)(5)(iv), we state that a Part D sponsor
must not later recoup payment from a network pharmacy for a claim that
does not contain an active and valid individual prescriber NPI on the
basis that it does not contain one, unless the sponsor--
++ Has complied with paragraphs (c)(5)(ii) and (iii) of this
section;

[[Page 56443]]

++ Has verified that a submitted NPI was not in fact active and
valid; and
++ The agreement between the parties explicitly permits such
recoupment.
In paragraph (c)(5)(v), we state that with respect to
requests for reimbursement submitted by Medicare beneficiaries, a Part
D sponsor may not make payment to a beneficiary dependent upon the
sponsor's acquisition of an active and valid individual prescriber NPI,
unless there is an indication of fraud. If the sponsor is unable to
retrospectively acquire an active and valid individual prescriber NPI,
the sponsor may not seek recovery of any payment to the beneficiary
solely on that basis.
These provisions, which focus on NPI submission and validation, are
no longer effective because the January 1, 2016 end-date for their
applicability has passed. Since that time, however, and as explained in
detail in section (b)(1)(b) below, congressional legislation requires
us to revisit some of the provisions in former paragraph (c)(5) and, as
warranted, to re-propose them in what would constitute a new paragraph
(c)(5). We believe that these new provisions would not only effectively
implement the legislation in question but also enhance Part D program
integrity by streamlining and strengthening procedures for ensuring the
identity of prescribers of Part D drugs. This would be particularly
important in light of our preclusion list proposals.
(b) Medicare Access and CHIP Reauthorization Act of 2015 (MACRA)
MACRA was signed into law on April 16, 2015, just before the IFC
was finalized. Section 507 of MACRA amends section 1860D-4(c) of the
Act (42 U.S.C. 1395w-104(6)) by requiring that pharmacy claims for
covered Part D drugs include prescriber NPIs that are determined to be
valid under procedures established by the Secretary in consultation
with appropriate stakeholders, beginning with plan year 2016.
In light of the enactment of MACRA, on June 1, 2015, we issued a
guidance memo, ``Medicare Prescriber Enrollment Requirement Update''
(memo). The memo noted that Sec. 423.120(c)(5) would no longer be
applicable beginning January 1, 2016 due to the IFC we had just
published, but that its provisions reflected certain existing Part D
claims procedures established by the Secretary in consultation with
stakeholders through the National Council for Prescription Drug
Programs (NCPDP) that would comply with section 507 of MACRA, except
one.
The provisions in Sec. 423.120(c)(5) that reflected the procedures
that would comply with section 507 of MACRA are the following:
Paragraph (c)(5)(iii).
Paragraph (c)(5)(iii)(A).
Paragraph (c)(5)(iii)(B)(1). (Note that paragraph
(c)(5)(iii)(B)(2) would not comply with section 507 because the sponsor
has no evidence that the NPI is active or valid.)
Paragraph (c)(5)(iv).
Paragraph (c)(5)(v).
Given this, we are proposing to include these provisions in new
paragraph (c)(5). They would be enumerated as, respectively, new
paragraphs (c)(5)(ii), (c)(5)(ii)(A), (c)(5)(ii)(B), (c)(5)(iii), and
(c)(5)(iv). Current paragraphs (c)(5)(i), (c)(5)(ii), and
(c)(5)(iii)(B)(2) would not be included in new paragraph (c)(5).
We also note that in the May 6, 2015 IFC, we revised Sec.
423.120(c)(6)(i) to require a Part D plan sponsor to reject, or require
its pharmaceutical benefit manager (PBM) to reject, a pharmacy claim
for a Part D drug, unless the claim contains the NPI of the prescriber
who prescribed the drug. This provision, too, reflects existing Part D
claims procedures and policies that comply with section 507 of MACRA.
We thus propose to retain this provision and seek comment on associated
burdens or unintended consequences and alternative approaches. However,
we wish to move it from paragraph (c)(6) to paragraph (c)(5) so that
most of the NPI provisions in Sec. 423.120 are included in one
subsection. We believe this would improve clarity.
(2) Targeted Approach to Part D Prescribers
We believe that the most effective means of reducing the burden of
the Part D enrollment requirement on prescribers, Part D plan sponsors,
and beneficiaries without compromising our payment safeguard aims would
be to concentrate our efforts on preventing Part D coverage of
prescriptions written by prescribers who pose an elevated risk to
Medicare beneficiaries and the Trust Funds. In other words, rather than
require the enrollment of Part D prescribers regardless of the possible
level of risk posed, we propose to focus on preventing payment for Part
D drugs prescribed by demonstrably problematic prescribers.
There is precedent for such a risk based approach. For instance,
consistent with Sec. 424.518, A/B MACs are required to screen
applications for enrollment in accordance with a CMS assessment of risk
and assignment to a level of ``limited,'' ``moderate,'' or ``high.''
Applications submitted by provider and supplier types that have
historically posed higher risks to the Medicare program are subjected
to a more rigorous screening and review process than those that present
limited risks. Moreover, Sec. 424.518 states that providers and
suppliers that have had certain adverse actions imposed against them,
such as felony convictions or revocations of enrollment, are placed
into the highest and most rigorous screening level. We recognize that
the risk based approach in Sec. 424.518 applies to enrollment
application screening rather than payment denials. However, we believe
that using a risk-based approach would enable CMS to focus on
prescribers who pose threats to the Medicare program and its
beneficiaries, while minimizing the burden on those who do not. The
process we envision and propose, which would replace the prescriber
enrollment requirement outlined in Sec. 423.120(c)(6) with a claims
payment-oriented approach, would consist of the following components:
Step 1: We would research our internal systems and other
relevant data for prescribers who have engaged in behavior for which
CMS:
++ Has revoked the prescriber's enrollment and the prescriber is
under a reenrollment bar; or
++ Could have revoked the prescriber (to the extent applicable) if
he or she had been enrolled in Medicare.
Concerning revocations, we have the authority to revoke a
provider's or supplier's Medicare enrollment for any of the applicable
reasons listed in Sec. 424.535(a). There are currently 14 such
reasons. When revoked, the provider or supplier is barred under Sec.
424.535(c) from reenrolling in Medicare for a period of 1 to 3 years,
depending upon the severity of the underlying behavior. We have an
obligation to protect the Trust Funds from providers and suppliers that
engage in activities that could threaten the Medicare program, its
beneficiaries, and the taxpayers. In light of the significance of
behavior that could serve as grounds for revocation, we believe that
prescribers who have engaged in inappropriate activities should be the
focus of our Part D program integrity efforts under Sec.
423.120(c)(6).
Step 2--We would review, on a case-by-case basis, each
prescriber who--
++ Is currently revoked from Medicare and is under a reenrollment
bar. We would examine the reason for the prescriber's revocation.
++ Has engaged in behavior for which CMS could have revoked the

[[Page 56444]]

prescriber to the extent applicable if he or she had been enrolled in
Medicare.
The prescribers to be reviewed would be those who, according to PDE
data and CMS' internal systems, are eligible to prescribe drugs covered
under the Part D program. That is, our review would not be limited to
those persons who are actually prescribing Part D drug, but would
include those that potentially could prescribe drugs. We believe that
the inclusion of these individuals in our review would help further
protect the integrity of the Part D program.
We are also seeking comment on an alternative by which we would
first identify, through PDE data, those providers who are prescribing
drugs to Medicare beneficiaries. This would significantly reduce the
universe of prescribers who are on the preclusion list and reduce the
government's surveillance of prescribers. We anticipate that this could
create delays in our ability to screen providers due to data lags and
may introduce some program integrity risks. We are particularly
interested in hearing from the public on the potential risks this could
pose to beneficiaries, especially in light of our efforts to address
the opioids epidemic.
Step 3--Based on the results of Steps 1 and 2, we would
compile a ``preclusion list'' of prescribers who fall within either of
the following categories:
++ Are currently revoked from Medicare, are under a reenrollment
bar, and CMS determines that the underlying conduct that led to the
revocation is detrimental to the best interests of the Medicare
program.
++ Have engaged in behavior for which CMS could have revoked the
prescriber to the extent applicable if he or she had been enrolled in
Medicare, and CMS determines that the underlying conduct that would
have led to the revocation is detrimental to the best interests of the
Medicare program.
We propose to adopt this preclusion list approach as an alternative
to enrollment in part to reflect the more indirect connection of
prescribers in the Medicare Part D program. We seek comment on whether
some of the bases for revocation should not apply to the preclusion
list in whole or in part and whether the final regulation (or future
guidance) should specify which bases are or are not applicable and
under what circumstances.
(i) Preclusion List
Considering the program integrity risk that the two previously
mentioned sets of prescribers present, we must be able to accordingly
protect Medicare beneficiaries and the Trust Funds. We thus propose to
revise Sec. 423.120(c)(6), as further specified in this proposed rule,
to require that a Part D plan sponsor must reject, or must require its
PBM to reject, a pharmacy claim (or deny a beneficiary request for
reimbursement) for a Part D drug prescribed by an individual on the
preclusion list. We believe we have the legal authority for such a
provision because sections 1102 and 1871 of the Act provide general
authority for the Secretary to prescribe regulations for the efficient
administration of the Medicare program; also, section 1860D-12(b)(3)(D)
of the Act authorizes the Secretary to add additional Part D contract
terms as necessary and appropriate, so long as they are not
inconsistent with the Part D statute. We note also that our proposal is
of particular importance when considering the current nationwide opioid
crisis. We believe that the inclusion of problematic prescribers on the
preclusion list could reduce the amount of opioids that are improperly
or unnecessarily prescribed by persons who pose a heightened risk to
the Part D program and Medicare beneficiaries.
All grounds for revocation under Sec. 424.535(a) reflect behavior
or circumstances that are of concern to us. However, considering the
variety of factual scenarios that CMS may come across, we believe it is
necessary for CMS to have the flexibility to take into account the
specific circumstances involved when determining whether the underlying
conduct is detrimental to the best interests of the Medicare program.
Accordingly, CMS would consider the following factors in making this
determination:
The seriousness of the conduct involved;
The degree to which the prescriber's conduct could affect
the integrity of the Part D program; and
Any other evidence that CMS deems relevant to its
determination.
We emphasize that in situations where the prescriber was enrolled
and then revoked, CMS' determination would not negate the revocation
itself. The prescriber would remain revoked from Medicare.
We also recognize that unique circumstances behind the potential or
actual inclusion of a particular prescriber on the preclusion list
could exist. Of foremost importance would be situations pertaining to
beneficiary access to Part D drugs. We believe that we should have the
discretion not to include (or, if warranted, to remove) a particular
individual on the preclusion list (who otherwise meets the standards
for said inclusion) should exceptional circumstances exist pertaining
to beneficiary access to prescriptions. This could include
circumstances similar to those described in section 1128(c)(3)(B) of
the Act, whereby the Secretary may waive an OIG exclusion under section
1128(a)(1), (a)(3), or (a)(4) of the in the case of an individual or
entity that is the sole community physician or sole source of essential
specialized services in a community. In making a determination as to
whether such circumstances exist, we would take into account-- (1) the
degree to which beneficiary access to Part D drugs would be impaired;
and (2) any other evidence that CMS deems relevant to its
determination.
With respect to the foregoing, we solicit comment on the following
issues:
++ Whether the actions referenced in Sec. 424.535(a) are
appropriate grounds for inclusion on the preclusion list.
++ Whether actions other than those referenced in Sec. 424.535(a)
should constitute grounds for inclusion on the preclusion and, if so,
what those specific grounds are.
++ Suggestions for means of monitoring abusive prescribing
practices and appropriate processes for including such prescribers on
the preclusion list.
(b) Replacement of Enrollment Requirement With Preclusion List
Requirement
We are proposing to delete the current regulations that require
prescribers to enroll in or opt out of Medicare for a pharmacy claim
(or beneficiary request for reimbursement) for a Part D drug prescribed
by a physician or eligible professional to be covered. We also propose
to generally streamline the existing regulations because, given that we
would no longer be requiring certain prescribers to enroll or opt out,
we would no longer need an exception for ``other authorized
providers,'' as defined in Sec. 423.100, for there would be no
enrollment requirement from which to exempt them. Instead, we would
require plan sponsors to reject claims for Part D drugs prescribed by
prescribers on the preclusion list. We believe this latter approach
would better facilitate our dual goals of reducing prescriber burden
and protecting the Medicare program and its beneficiaries from
prescribers who could present risks.
(ii) Updates to Preclusion List
The preclusion list would be updated on a monthly basis.
Prescribers would be added or removed from the list based on CMS'
internal data that indicate, for instance: (1) Prescribers who have
recently been convicted of a felony that,

[[Page 56445]]

consistent with Sec. 424.535(a)(33), CMS determines to be detrimental
to the best interests of the Medicare program, and (2) prescribers
whose reenrollment bars have expired. As a particular prescriber's
status with respect to the preclusion list changes, the applicable
provisions of Sec. 423.120(c)(6) would control. To illustrate, suppose
a prescriber in March 2020 is convicted of a felony that CMS deems
detrimental to Medicare's best interests. Pharmacy claims for
prescriptions written by the individual would thus be rejected by Part
D sponsors or their PBMs upon the prescriber being added to the
preclusion list. Conversely, a prescriber who was revoked under Sec.
424.535(a)(4) but whose reenrollment bar has expired would be removed
from the preclusion list; claims for prescriptions written by the
individual would therefore no longer be rejected based solely on his or
her inclusion on the preclusion list. CMS would regularly review the
preclusion list to determine whether certain individuals should be
added to or removed therefrom based on changes to their status.
Consistent with our application of a reenrollment bar to providers
and suppliers that are enrolled in and then revoked from Medicare, we
propose to keep an unenrolled prescriber on the preclusion list for the
same length of time as the reenrollment bar that we could have imposed
on the prescriber had he or she been enrolled and then revoked. For
example, suppose an unenrolled prescriber engaged in behavior that, had
he or she been enrolled, would have warranted a 2-year reenrollment
bar. The prescriber would remain on the preclusion list for that same
period of time. We note that in establishing such a time period, we
would use the same criteria that we do in establishing reenrollment
bars.
Prescribers who were revoked from Medicare or, for unenrolled
prescribers, engaged in behavior that could serve as a basis for an
applicable revocation prior to the effective date of this rule (if
finalized) could, if the requirements of Sec. 423.120(c)(6) are met,
be added to the preclusion list upon said effective date even though
the underlying action (for instance, felony conviction) occurred prior
to that date. However, the Part D claim rejections by Part D sponsors
and their PBMs under Sec. 423.120(c)(6) would only apply to claims for
Part D prescriptions filled or refilled on or after the date he or she
was added to the preclusion list; that is, sponsors and PBMs would not
be required to retroactively reject claims based on the effective date
of the revocation or, for unenrolled prescribers, the date of the
behavior that could serve as a basis for an applicable revocation
regardless of whether that date occurred before or after the effective
date of this rule.
We do seek comment on a reasonable time period for Part D sponsors/
PBMs to incorporate the preclusion list into their claims adjudication
systems, and whether and how our proposed regulatory text needs to be
modified to accommodate such a time period. We wish to avoid a
situation where a Part D sponsor/PBM pays for prescriptions written by
individuals on the preclusion list before the sponsors/PBMs have
incorporated the list but later are unable to submit their PDEs, which
CMS typically edits based on date of service.
(3) Provisional Coverage
The current text of Sec. 423.120(c)(6)(v) states that a Part D
sponsor or its PBM must, upon receipt of a pharmacy claim or
beneficiary request for reimbursement for a Part D drug that a Part D
sponsor would otherwise be required to deny in accordance with Sec.
423.120(c)(6), furnish the beneficiary with (a) a provisional supply of
the drug (as prescribed by the prescriber and if allowed by applicable
law); and (b) written notice within 3 business days after adjudication
of the claim or request in a form and manner specified by CMS. The
purpose of this provisional supply requirement is to give beneficiaries
notice that there is an issue with respect to future Part D coverage of
a prescription written by a particular prescriber.
Although CMS' proposed changes to Sec. 423.120(c)(6) would
significantly reduce the number of affected prescribers and, by
extension, the number of impacted beneficiaries, we remain concerned
that beneficiaries who receive prescriptions written by individuals on
the preclusion list might suddenly no longer have access to these
medications without provisional coverage and without notice, which
gives beneficiaries time to find a new prescriber. Therefore, we
propose to maintain the provisional coverage requirement consistent
with what was finalized in the IFC, but with a modification.
Additionally, many commercial plans are pursuing policies to address
the opioid epidemic, such as limiting the amount of initial opioid
prescriptions. Given the opioid epidemic, we are considering other
solutions for when a beneficiary tries to fill an opioid prescription
from a provider on the preclusion list. We seek comment as to what
limits or other guardrails CMS should set with respect to number of
doses, initial dosing, and type of product for opioid prescriptions for
particular clinical presentations (including acute pain, chronic pain,
hospice setting and so forth).
An alternative method of ensuring beneficiaries have access to
opioids as necessary would be to require the sponsor immediately
provide a transfer to a new provider when the first provider is on the
preclusion list. The new provider should be able to make an assessment
and either provide appropriate SUD treatment or continue the opioid or
pain management regimen, as medically appropriate. We are interested to
hear from commenters how to operationalize this and whether there is a
better method to ensure appropriate medication is provided without
transferring the beneficiary to a new provider. We are proposing a 90-
day provisional coverage period in lieu of a 3-month drug supply/90-day
time period established in existing Sec. 423.120(c)(6), which was
described on page 6 in the Technical Guidance on Implementation of the
Part D Prescriber Enrollment Requirement (Technical Guidance) issued on
December 29, 2015.\59\ Under the existing regulation (which, as noted
above, we have not enforced), a sponsor or MA-PD must track a separate
90-day consecutive time period for each drug covered as a provisional
supply from the initial date-of-service; the sponsor or MA-PD must not
reject a claim or deny a beneficiary's request for reimbursement until
the 90-day time period has passed or a 3-month supply has been
dispensed, whichever comes first. Under our proposal, however, a
beneficiary would have one 90-day provisional coverage period with
respect to an individual on the preclusion list. Accordingly, a
sponsor/PBM would track one 90-day time period from the date the first
drug is dispensed to the beneficiary pursuant to a prescription written
by the individual on the preclusion list. This dispensing event would
trigger a written notice and a 90-day time period for the beneficiary
to fill any prescriptions from that particular precluded prescriber and
to find another prescriber during that 90-day time period.
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\59\ See https://www.cms.gov/Medicare/Prescription-Drug-Coverage/PrescriptionDrugCovGenIn/Downloads/Technical-Guidance-on-Implementation-of-the-Part-D-Prescriber-Enrollment-Requirement.pdf.
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Our rationale for this change is that individuals on the preclusion
list are demonstrably problematic. This has negative implications not
only for the Trust Funds but also for beneficiary safety. Thus, it is
imperative that a beneficiary switch to a new prescriber who is not on
the preclusion list as soon as practicable. Under the current

[[Page 56446]]

prescriber enrollment requirement, the vast majority of prescribers who
are not enrolled in or opted-out of Medicare likely do not pose a risk
to the beneficiary or the Trust Funds, and therefore we can allow a 3-
month provisional supply/90-day time period for each prescription
written by such a prescriber. In addition, our proposed policy would
eliminate the difficulty sponsors and PBMs have under the current ``per
drug'' provisional supply policy in determining whether the beneficiary
already received a provisional supply of a drug. We seek specific
comment on the modifications we are proposing as to the provisional
coverage and time period.
With respect to beneficiaries who would also be entitled to a
transition, we are not proposing any change to the current policy. If a
Part D sponsor determines when adjudicating a pharmacy claim that a
beneficiary is entitled to provisional coverage because the prescriber
is on the preclusion list, but the drug is off-formulary and the
transition requirements set forth in Sec. 423.120(b)(3) are also
triggered, the beneficiary would not receive more than the applicable
transition supply of the drug, unless a formulary exception is
approved. We note that we considered proposing that the transition
requirements would not apply during the provisional supply period in
order to simplify the policy for situations when both apply to reduce
beneficiary confusion. We seek comment on this or other alternatives
for these situations.
We intend to allow the normal Part D rules (for example, edits,
prior authorization, quantity limits) to apply during the 90-day
provisional coverage period, but solicit comment on whether different
limits should apply when opioids are involved, particularly when the
reason for precluding the provider/prescriber relates to opioid
prescribing.
(4) Appeals
In our revisions to Sec. 423.120(c)(6), we propose to permit
prescribers who are on the preclusion list to appeal their inclusion on
this list in accordance with 42 CFR part 498. We believe that given the
aforementioned pharmacy claim rejections that would be associated with
a prescriber's appearance on the preclusion list, due process warrants
that the prescriber have the ability to challenge this via appeal. Any
appeal under this proposed provision, however, would be limited
strictly to the individual's inclusion on the preclusion list. The
proposed appeals process would neither include nor affect appeals of
payment denials or enrollment revocations, for there are separate
appeals processes for these actions. In addition, wewould send written
notice to the prescriber of his or her inclusion on the preclusion
list. The notice would contain the reason for the inclusion and would
inform the prescriber of his or her appeal rights. This is to ensure
that the prescriber is duly notified of the action, why it was taken,
and his or her ability to challenge our determination.
Consistent with our proposed provision in Sec. 423.120(c)(6)
regarding appeal rights, we propose to update several other regulatory
provisions regarding appeals:
We propose to revise Sec. 498.3(b) to add a new paragraph
(20) stating that a CMS determination to include a prescriber on the
preclusion list constitutes an initial determination. This revision
would help enable prescribers to utilize the appeals processes
described in Sec. 498.5.
In Sec. 498.5, we propose to add a new paragraph (n) that
would state as follows:
++ In paragraph (n)(1), we propose that any prescriber dissatisfied
with an initial determination or revised initial determination that he
or she is to be included on the preclusion list may request a
reconsideration in accordance with Sec. [thinsp]498.22(a).
++ In paragraph (n)(2), we propose that if CMS or the prescriber
under paragraph (n)(1) is dissatisfied with a reconsidered
determination under Sec. 498.5(n)(1), or a revised reconsidered
determination under Sec. 498.30, CMS or the prescriber is entitled to
a hearing before an administrative law judge (ALJ).
++ In paragraph (n)(3), we propose that if CMS or the prescriber
under paragraph (n)(2) is dissatisfied with a hearing decision as
described in paragraph (n)(2), CMS or the prescriber may request review
by the Departmental Appeals Board (DAB) and the prescriber may seek
judicial review of the DAB's decision.
These revisions are designed to include preclusion list
determinations within the scope of appeal rights described in Sec.
498.5. However, we solicit comment on whether a different appeals
process is warranted and, if so, what its components should be.
In addition, given that a beneficiary's access to a drug may be
denied because of the application of the preclusion list to his or her
prescription, we believe the beneficiary should be permitted to appeal
alleged errors in applying the preclusion list.
c. Specific Regulatory Changes
Given the foregoing discussion, we propose the following regulatory
changes:
In Sec. 423.100, we propose to delete the definition of
``other authorized prescriber'' and add the following:
++ Preclusion List means a CMS compiled list of prescribers who:
(1) Meet all of the following requirements: (A) The prescriber is
currently revoked from the Medicare program under Sec. 424.535.
(B) The prescriber is currently under a reenrollment bar under
Sec. 424.535(c).
(C) CMS determines that underlying conduct that led to the
revocation is detrimental to the best interests of the Medicare
program. In making this determination under this paragraph, CMS
considers the following factors:
(i) The seriousness of the conduct underlying the prescriber's
revocation;
(ii) The degree to which the prescriber's conduct could affect the
integrity of the Part D program; and
(iii) Any other evidence that CMS deems relevant to its
determination; or
(2) Meet both of the following requirements:
(i) The prescriber has engaged in behavior for which CMS could have
revoked the prescriber to the extent applicable if he or she had been
enrolled in Medicare.
(ii) CMS determines that the underlying conduct that would have led
to the revocation is detrimental to the best interests of the Medicare
program. In making this determination under this paragraph, CMS
considers the following factors:
(i) The seriousness of the conduct involved.
(ii) The degree to which the prescriber's conduct could affect the
integrity of the Part D program; and
(iii) Any other evidence that CMS deems relevant to its
determination
In paragraph (c)(5)(i), we propose that a Part D plan
sponsor must reject, or must require its pharmacy benefit manager (PBM)
to reject, a pharmacy claim for a Part D drug unless the claim contains
the active and valid National Provider Identifier (NPI) of the
prescriber who prescribed the drug. This requirement is consistent with
existing policy.
In paragraph (c)(5)(ii), we propose that the sponsor must
communicate at point-of sale whether or not a submitted NPI is active
and valid in accordance with this paragraph (c)(5)(ii).
In paragraph (c)(5)(ii)(A), we propose that if the sponsor
communicates that the NPI is not active and valid, the sponsor must
permit the pharmacy to--

[[Page 56447]]

++ Confirm that the NPI is active and valid; or
++ Correct the NPI.
In paragraph (c)(5)(ii)(B), we propose that if the
pharmacy confirms that the NPI is active and valid or corrects the NPI,
the sponsor must pay the claim if it is otherwise payable.
In paragraph (iii), we propose that a Part D sponsor must
not later recoup payment from a network pharmacy for a claim that does
not contain an active and valid individual prescriber NPI on the basis
that it does not contain one, unless the sponsor--
++ Has complied with paragraph (ii) of this section;
++ Has verified that a submitted NPI was not in fact active and
valid; and
++ The agreement between the parties explicitly permits such
recoupment.
In paragraph (iv), we propose that with respect to
requests for reimbursement submitted by Medicare beneficiaries, a Part
D sponsor may not make payment to a beneficiary dependent upon the
sponsor's acquisition of an active and valid individual prescriber NPI,
unless there is an indication of fraud. If the sponsor is unable to
retrospectively acquire an active and valid individual prescriber NPI,
the sponsor may not seek recovery of any payment to the beneficiary
solely on that basis.
In paragraph (c)(6)(i), we propose to state: ``Except as
provided in paragraph (c)(6)(iv) of this section, a Part D sponsor must
reject, or must require its PBM to reject, a pharmacy claim for a Part
D drug if the individual who prescribed the drug is included on the
preclusion list, defined in Sec. 423.100.'' This would help ensure
that Part D sponsors comply with our proposed requirement that claims
involving prescribers who are on the preclusion list should not be
paid.
In paragraph (c)(6)(ii), we propose to state as follows:
``Except as provided in paragraph (c)(6)(iv) of this section, a Part D
sponsor must deny, or must require its PBM to deny, a request for
reimbursement from a Medicare beneficiary if the request pertains to a
Part D drug that was prescribed by an individual who is identified by
name in the request and who is included on the preclusion list, defined
in Sec. 423.100.'' As with paragraph (c)(6)(i), this would help ensure
that Part D sponsors comply with our proposed requirement that payments
not be made for prescriptions written by prescribers who are on the
preclusion list.
In paragraph (c)(6)(iii), we propose to state: ``A Part D
plan sponsor may not submit a prescription drug event (PDE) record to
CMS unless it includes on the PDE record the active and valid
individual NPI of the prescriber of the drug, and the prescriber is not
included on the preclusion list, defined in Sec. 423.100, for the date
of service.'' This is to help ensure that-- (1) the prescriber can be
properly identified, and (2) prescribers who are on the preclusion list
are not included in PDEs.
In paragraph (c)(6)(iv), we propose to address the
provisional coverage period and notice provisions as follows:
``(iv)(A) A Part D sponsor or its PBM must not reject a pharmacy
claim for a Part D drug under paragraph (c)(6)(i) of this section or
deny a request for reimbursement under paragraph (c)(6)(ii) of this
section unless the sponsor has provided the provisional coverage of the
drug and written notice to the beneficiary required by paragraph
(c)(6)(iv)(B) of this section.
(B) Upon receipt of a pharmacy claim or beneficiary request for
reimbursement for a Part D drug that a Part D sponsor would otherwise
be required to reject or deny in accordance with paragraphs (c)(6)(i)
or (ii) of this section, a Part D sponsor or its PBM must do the
following: (1) Provide the beneficiary with the following, subject to
all other Part D rules and plan coverage requirements:
(i) A 90-day provisional supply coverage period during which the
sponsor must cover all drugs dispensed to the beneficiary pursuant to
prescriptions written by the individual on the preclusion list. The
provisional supply period begins on the date-of-service the first drug
is dispensed pursuant to a prescription written by the individual on
the preclusion list.
(ii) Written notice within 3 business days after adjudication of
the first claim or request for the drug in a form and manner specified
by CMS.
(2) Ensure that reasonable efforts are made to notify the
prescriber of a beneficiary who was sent a notice under paragraph
(c)(6)(iv)(B)(1)(ii) of this section.''
In new Sec. 423.120(c)(6)(v), we propose that CMS would
send written notice to the prescriber via letter of his or her
inclusion on the preclusion list. The notice would contain the reason
for the inclusion on the preclusion list and would inform the
prescriber of his or her appeal rights. A prescriber may appeal his or
her inclusion on the preclusion list in accordance with 42 CFR part
498.
In new Sec. 423.120(c)(6)(vi), we propose that CMS has
the discretion not to include a particular individual on (or, if
warranted, remove the individual from) the preclusion list should it
determine that exceptional circumstances exist regarding beneficiary
access to prescriptions. In making a determination as to whether such
circumstances exist, CMS would take into account--(1) the degree to
which beneficiary access to Part D drugs would be impaired; and (2) any
other evidence that CMS deems relevant to its determination.
In Sec. 498.3(b), we propose to add a new paragraph (20)
stating that a CMS determination that a prescriber is to be included on
the preclusion list constitutes an initial determination.
In Sec. 498.5, we propose to add a new paragraph (n) that
would state as follows:
++ In paragraph (n)(1), we propose that any prescriber dissatisfied
with an initial determination or revised initial determination that he
or she is to be included on the preclusion list may request a
reconsideration in accordance with Sec. [thinsp]498.22(a).
++ In paragraph (n)(2), we propose that if CMS or the prescriber
under paragraph (n)(1) is dissatisfied with a reconsidered
determination under Sec. 498.5(n)(1), or a revised reconsidered
determination under Sec. 498.30, CMS or the prescriber is entitled to
a hearing before an ALJ.
++ In paragraph (n)(3), we propose that if CMS or the prescriber
under paragraph (n)(2) is dissatisfied with a hearing decision as
described in paragraph (n)(2), CMS or the prescriber may request review
by the DAB and the prescriber may seek judicial review of the DAB's
decision.
11. Preclusion List--Part C/Medicare Advantage Cost Plan and PACE
Provisions
a. Background
(1) 2016 Final Rule
On November 15, 2016, CMS published a final rule in the Federal
Register titled ``Medicare Program; Revisions to Payment Policies Under
the Physician Fee Schedule and Other Revisions to Part B for CY 2017;
Medicare Advantage Bid Pricing Data Release; Medicare Advantage and
Part D Medical Loss Ratio Data Release; Medicare Advantage Provider
Network Requirements; Expansion of Medicare Diabetes Prevention Program
Model; Medicare Shared Savings Program Requirements'' (81 FR 80169).
This rule contained a number of requirements related to provider
enrollment, including, but not limited to, the following:
We added a new Sec. 422.222 to require providers and
suppliers that furnish health care items or services to

[[Page 56448]]

a Medicare enrollee who receives his or her Medicare benefit through an
MA organization to be enrolled in Medicare and be in an approved status
no later than January 1, 2019. (The term ``MA organization'' refers to
both MA plans and MA plans that provide drug coverage, otherwise known
as MA-PD plans.) We also updated Sec. Sec. 417.478, 460.70, and 460.71
to reflect this requirement.
We added a requirement in new Sec. 422.204(b)(5) that
required MA organizations to comply with the provider and supplier
enrollment requirements referenced in Sec. 422.222. A similar
requirement was added to Sec. 422.504.
We revised Sec. Sec. 422.510, 422.752, 460.40, and 460.50
to state that organizations and programs that do not ensure that
providers and suppliers comply with the provider and supplier
enrollment requirements may be subject to sanctions and termination.
We revised Sec. 422.501 to require that MA organization
applications include documentation demonstrating that all applicable
providers and suppliers are enrolled in Medicare in an approved status.
We believed that these new requirements, as they pertained to MA, were
necessary to help ensure that Medicare enrollees receive items or
services from providers and suppliers that are fully compliant with the
requirements for Medicare enrollment. We also believed it would assist
our efforts to prevent fraud, waste, and abuse, and to protect Medicare
enrollees, by allowing us to carefully screen all providers and
suppliers (especially those that potentially pose an elevated risk to
Medicare) to confirm that they are qualified to furnish Medicare items
and services. Indeed, although Sec. 422.204(a) requires MA
organizations to have written policies and procedures for the selection
and evaluation of providers and suppliers that conform with the
credentialing and recredentialing requirements in Sec. 422.204(b), CMS
has not historically had direct oversight over all network providers
and suppliers under contract with MA organizations. While there are CMS
regulations governing how and when MA organizations can pay for covered
services, those are tied to statutory provisions. We concluded that
requiring Medicare enrollment in addition to the existing MA
credentialing requirements would permit a closer review of MA providers
and suppliers, which could, as warranted, involve rigorous screening
practices such as risk-based site visits and, in some cases,
fingerprint-based background checks, an approach we already take in the
Medicare Part A and Part B provider and supplier enrollment arenas. The
fact that CMS also has access to information and data not available to
MA organizations was also relevant to our decision.
(2) Preparations for Part C Enrollment
As with our Part D enrollment requirement, we promptly commenced
outreach efforts after the publication of the November 15, 2016 final
rule. We communicated with Part C provider associations and MA
organizations regarding, among other things, the general purpose of the
enrollment process, the rationale for Sec. 422.222, and the mechanics
of completing and submitting an enrollment application. According to
recent CMS internal data, approximately 933,000 MA providers and
suppliers are already enrolled in Medicare and meeting the MA provider
enrollment requirements. However, roughly 120,000 MA-only providers and
suppliers remain unenrolled in Medicare, and concerns have been raised
by the MA community over the enrollment requirement, principally over
the burden involved in enrolling in Medicare while having to also
undergo credentialing by their respective health plans.
We understand and share these concerns. We believe that the
Medicare enrollment requirement could result in a duplication of effort
and, consequently, impose a burden on MA providers and suppliers as
well as MA organizations and beneficiaries in the form of limiting
access to providers. While we maintain that Medicare enrollment, in
conjunction with MA credentialing, is the most thorough means of
confirming a provider's compliance with Medicare requirements and of
verifying the provider's qualifications to furnish services and items,
we believe that an appropriate balance can be achieved between this
program integrity objective and the desire to reduce the burden on the
provider and supplier communities. Given this, we propose to utilize
the same ``preclusion list'' concept in MA that we are proposing for
Part D (described in section III.B.9.) and to eliminate the current
enrollment requirement in Sec. 422.222. We believe this approach would
allow us to concentrate our efforts on preventing MA payment for items
and services furnished by providers and suppliers that could pose an
elevated risk to Medicare beneficiaries and the Trust Funds, an
approach, as previously mentioned, similar to the risk-based process in
Sec. 424.518. This would, we believe, minimize the burden on MA
providers and suppliers.
b. Proposed Provisions
(1) Process
The process we envision and propose would, similar to the proposed
Part D process, consist of the following components:
Step 1: We would research our internal systems and other
relevant data for individuals and entities that have engaged in
behavior for which CMS:
++ Has revoked the individual's or entity's enrollment and the
individual or entity is under a reenrollment bar; or
++ Could have revoked the individual or entity to the extent
applicable if they had been enrolled in Medicare.
In light of the significance of any activity that would result in a
revocation under Sec. 424.535(a), we believe that individual and
entities that have engaged in inappropriate behavior should be the
focus of our Part C program integrity efforts.
Step 2--CMS would review, on a case-by-case basis, each
individual and entity that:
++ Is currently revoked from Medicare and is under a reenrollment
bar. We would examine the reason for the revocation.
++ Has engaged in behavior for which CMS could have revoked the
individual or entity to the extent applicable if he or she had been
enrolled in Medicare.
Similar to our approach with Part D and for the same reason, the
individuals and entities to be reviewed would be those that-- according
to CMS' internal systems MA organization data, state board information,
and other relevant data for individuals and entities who are or who
could become eligible to furnish health care services or items. To
avoid confusion, we refer to such parties in our proposed Part C
preclusion list provisions as ``individuals'' and ``entities'' rather
than ``providers'' and ``suppliers.'' This is because the latter two
terms could convey the impression that the party in question must be
actively furnishing health care services or items to be included on the
preclusion list.
Similar to the Part D approach, we are also seeking comment on an
alternative by which CMS would first identify through encounter data
those providers or suppliers furnishing services or items to Medicare
beneficiaries. This would significantly reduce the universe of
prescribers who are on the preclusion list and reduce the government's
surveillance of prescribers. We

[[Page 56449]]

anticipate that this could create delays in CMS' ability to screen
providers or suppliers due to data lags and may introduce some program
integrity risks. We are particularly interested in hearing from the
public on the potential risks this could pose to beneficiaries.
Based on the results of Steps 1 and 2, we would compile a
preclusion list of individuals and entities that fall within either of
the following categories:
++ Are currently revoked from Medicare, are under a reenrollment
bar, and CMS determines that the underlying conduct that led to the
revocation is detrimental to the best interests of the Medicare
program.
++ Have engaged in behavior for which CMS could have revoked the
individual or entity to the extent applicable if they had been enrolled
in Medicare, and CMS determines that the underlying conduct that would
have led to the revocation is detrimental to the best interests of the
Medicare program.
We propose to update Sec. 422.2 to add a definition of
``preclusion list'' consistent with both the foregoing discussion as
well as our proposed definition of the same term for the Part D
program.
We propose to adopt this preclusion list approach as an alternative
to enrollment in part to reflect the more indirect connection of
providers and suppliers in Medicare Advantage. We seek comment on
whether some of the bases for revocation should not apply to the
preclusion list in whole or in part and whether the final regulation
(or future guidance) should specify which bases are or are not
applicable and under what circumstances.
In addition, we note that while there would be separate regulatory
provisions for Part C and Part D, there would not be two separate
preclusion lists: one for Part C and one for Part D. Rather, there
would be a single preclusion list that includes all affected
individuals and entities. Having one joint list, we believe, would make
the preclusion list process easier to administer.
(2) Denial of Payment
Section 422.222(a) currently states that providers or suppliers
that are types of individuals or entities that can enroll in Medicare
in accordance with section 1861 of the Act, must be enrolled in
Medicare and be in an approved status in Medicare in order to provide
health care items or services to a Medicare enrollee who receives his
or her Medicare benefit through an MA organization. This requirement
applies to all of the following providers and suppliers:
Network providers and suppliers.
First-tier, downstream, and related entities (FDR).
Providers and suppliers in Cost HMOs or CMPs, as defined
in 42 CFR part 417.
Providers and suppliers participating in demonstration
programs.
Providers and suppliers in pilot program.
Locum tenens suppliers.
Incident-to suppliers.
We propose to revise this requirement to state than an MA
organization shall not make payment for an item or service furnished by
an individual or entity that is on the preclusion list (as defined in
Sec. 422.2). We also propose to remove the language beginning with
``This requirement applies to all of the following providers and
suppliers'' along with the list of applicable providers, suppliers, and
FDRs. This is consistent with our previously mentioned intention to use
the terms ``individuals'' and ``entities'' in lieu of ``providers'' and
``suppliers.''
We also propose that both basic and supplemental benefits should be
subject to the payment prohibition that is tied to the preclusion list.
We believe that restricting the payment prohibition to only one of
these two categories would undercut the effectiveness of our preclusion
list proposal.
We solicit comment on the following issues:
++ Whether the actions referenced in Sec. 424.535(a) are
appropriate grounds for inclusion on the preclusion list.
++ Whether actions other than those referenced in Sec. 424.535(a)
should constitute grounds for inclusion on the preclusion and, if so,
what those specific grounds are.
++ Suggestions for means of monitoring potentially abusive MA
practices involving providers and suppliers, and appropriate processes
for including such providers and suppliers on the preclusion list.
As stated earlier in reference to prescribers, the preclusion list
would be updated on a monthly basis. Individuals and entities would be
added or removed from the list based on CMS' internal data or other
informational sources that indicate, for instance-- (1) persons
eligible to provide medical services who have recently been convicted
of a felony that CMS determines to be detrimental to the best interests
of the Medicare program; and (2) entities whose reenrollment bars have
expired. As a particular individual's or entity's status with respect
to the preclusion list changes, the applicable provisions of Sec.
422.222 would control.
Individuals and entities that were revoked from Medicare or, for
unenrolled individuals and entities, had engaged in conduct that could
serve as a basis for an applicable revocation prior to the effective
date of this rule (if finalized) could, if the requirements of Sec.
422.222(a) are met, be added to the preclusion list upon said effective
date even though the underlying action (for instance, felony
conviction) occurred prior to that date. The proposed payment denials
under Sec. 422.222(a), however, would only apply to health care items
or services furnished on or after the date the individual or entity was
added to the preclusion list; that is, payment denials would not be
made retroactive to the date of the revocation or, for unenrolled
individuals and entities, the conduct that could serve as a basis for
an applicable revocation occurring before the effective date of the
final rule. Likewise, health care items and services furnished by
individuals and entities revoked from Medicare or engaging in conduct
that could serve as a basis for an applicable revocation after the
rule's effective date and that are subsequently added to the preclusion
list would not be subject to retroactive payment denials under Sec.
422.222(a); only the date on which the affected individual or entity is
added to the preclusion list would be used to determine payment and the
start date of payment denials under this proposal. We believe that this
approach is the most consistent with principles of due process.
(3) MA Organization Compliance
Section 422.222 currently states that MA organizations that do not
ensure that providers and suppliers comply with paragraph (a) may be
subject to sanctions under Sec. 422.750 and termination under Sec.
422.510. We propose to revise this to state that MA organizations that
do not comply with paragraph (a) may be subject to sanctions under
Sec. 422.750 and termination under Sec. 422.510. This is to help
ensure that MA organizations do not make improper payments for items
and services furnished by individuals and entities on the preclusion
list.
(4) Related Revisions
As discussed previously, in the November 15, 2016 final rule, we
added or updated a number of other MA regulatory provisions (for
example, Sec. 422.501 and 422.510) in order to fully incorporate our
new enrollment requirements. Because we are proposing to replace these
enrollment requirements with an approach centered upon a preclusion
list--and to help

[[Page 56450]]

ensure that providers, suppliers, MA organizations, PACE organizations,
and other applicable stakeholders comply with our proposed
requirements--we believe that these other MA regulatory provisions must
also be revised to reflect this change. To this end, we propose the
following revisions:
Section 422.204(a) states that an MA organization must
have written policies and procedures for the selection and evaluation
of providers and suppliers. These policies must conform with the
credentialing and recredentialing requirements in Sec. 422.204(b).
Under paragraph (b)(5), an MA organization must follow a documented
process with respect to providers and suppliers that have signed
contracts or participation agreements that ensures compliance with the
provider and supplier enrollment requirements in Sec. 422.222. To
achieve consistency with our preclusion list proposals and to help
facilitate MA organizations' compliance therewith, we propose to:
++ Establish a new Sec. 422.204(c) that would require MA
organizations to follow a documented process that ensures compliance
with the preclusion list provisions in Sec. 422.222.
++ Delete Sec. 422.204(b)(5) because it applies to the Part C
enrollment process, which we are proposing to eliminate. Further,
revising paragraph (b)(5) to address the preclusion list requirements
could cause confusion, for paragraph (b) references providers and
suppliers. We thus believe that creating a new paragraph (c) would
better clarify our expectations.
In 42 CFR part 417, subpart L, we address certain
contractual requirements concerning health maintenance organizations
(HMOs) and competitive medical plans (CMPs) that contract with CMS to
furnish covered services to Medicare beneficiaries. Under Sec.
417.478(e), the contract between CMS and the HMO or CMP must, among
other things, provide that the HMO or CMP agrees to comply with
``Sections 422.222 and 422.224, which require all providers and
suppliers that are types of individuals or entities that can enroll in
Medicare in accordance with section 1861 of the Act, to be enrolled in
Medicare in an approved status and prohibits payment to providers and
suppliers that are excluded or revoked.'' Paragraph (e) adds that this
requirement includes ``locum tenens suppliers and, if applicable,
incident-to suppliers.''
Furthermore, Sec. 417.484(b)(3) requires that the contract must
provide that the HMO or CMP agrees to require all related entities to
agree that ``All providers or suppliers that are types of individuals
or entities that can enroll in Medicare in accordance with section 1861
of the Act, are enrolled in Medicare in an approved status.'' We
accordingly propose the following revisions:
++ We propose to revise Sec. 417.478(e) to state as follows:
++ In new paragraph (e)(1), we propose to state that the
prohibitions, procedures and requirements relating to payment to
individual and entities on the preclusion list (defined in Sec. 422.2
of this part) apply to HMOs and CMPs that contract with CMS under
section 1876 of the Act.
++ In new paragraph (e)(2), we propose to state that in applying
the provisions of Sec. Sec. 422.2, 422.222, and 422.224 under
paragraph (e)(1) of this section, references to part 422 of this
chapter must be read as references to this part, and references to MA
organizations as references to HMOs and CMPs.
++ We propose to revise Sec. 417.484(b)(3) to state: ``That
payments must not be made to individuals and entities that are included
on the preclusion list (as defined in Sec. 422.2).''
In 42 CFR part 460, we address requirements relating to
Programs of All-Inclusive Care for the Elderly (PACE). The PACE program
is a state option under Medicaid to provide for Medicaid payments to,
and coverage of benefits under, PACE. We propose to make the following
changes to Part 460:
++ Section 460.40 states that, in addition to other remedies
authorized by law, CMS may impose any of the sanctions specified in
Sec. Sec. 460.42 and 460.46 if CMS determines that a PACE organization
commits certain violations, one of which is outlined in paragraph (j)
and reads: ``Employs or contracts with any provider or supplier that is
a type of individual or entity that can enroll in Medicare in
accordance with section 1861 of the Act, that is not enrolled in
Medicare in an approved status.'' We propose to revise paragraph (j) to
state: ``Makes payment to any individual or entity that is included on
the preclusion list, defined in Sec. 422.2 of this chapter.''
++ Section 460.50(b) addresses grounds for which CMS or the state
administering agency may terminate a PACE program agreement if CMS or
the state administering agency determines that the conditions of
paragraphs (b)(1) and (2) are met. In (b)(1), one of two conditions,
outlined in paragraphs (b)(1)(i) and (ii), must be met. Paragraph
(b)(1)(ii) states: ``The PACE organization failed to comply
substantially with conditions for a PACE program or PACE organization
under this part, or with terms of its PACE program agreement, including
employing or contracting with any provider or supplier that are types
of individuals or entities that can enroll in Medicare in accordance
with section 1861 of the Act, that is not enrolled in Medicare in an
approved status.'' We propose to revise paragraph (b)(1)(ii) by
changing the current language beginning with ``including'' to read
``including making payment to an individual or entity that is included
on the preclusion list, defined in Sec. 422.2 of this chapter.'' We
note that this change would not prohibit a PACE organization from
employing or contracting with an individual or entity on the preclusion
list. As previously discussed, the focus of our preclusion list
proposals is on the denial of payment.
++ Section 460.68(a) lists certain categories of individuals who a
PACE organization may not employ, as well as individuals and
organizations with whom a PACE organization may not contract. Among
these parties are those listed in paragraph (a)(4); specifically, those
``that are not enrolled in Medicare in an approved status, if the
providers or suppliers are of the types of individuals or entities that
can enroll in Medicare in accordance with section 1861 of the Act.'' We
propose to delete paragraph (a)(4), given our proposed removal of the
Part C enrollment requirement.
++ Section 460.70(a) states that a PACE organization must have a
written contract with each outside organization, agency, or individual
that furnishes administrative or care-related services not furnished
directly by the PACE organization, except for emergency services as
described in Sec. 460.100; various requirements that a contract
between a PACE organization and a contractor must meet are listed in
Sec. 460.70(b). Paragraph (b)(1) states that the PACE organization
must contract only with an entity that meets all applicable Federal and
State requirements, including, but not limited to, those listed in
paragraphs (b)(1)(i) through (iv). Paragraph (b)(1)(iv) reads:
``Providers or suppliers that are types of individuals or entities that
can enroll in Medicare in accordance with section 1861 of the Act, must
be enrolled in Medicare and be in an approved status in Medicare in
order to provide health care items or services to a PACE participant
who receives his or her Medicare benefit through a PACE organization.''
Consistent with our proposed deletion of Sec. 460.68(a)(4), we propose
to delete Sec. 460.70(b)(1)(iv). We note that we are not proposing to
prohibit individuals and entities on the preclusion list from
furnishing services

[[Page 56451]]

and items to PACE participants; we are merely proposing to prohibit
payment for such services and items if provided by an individual or
entity on the preclusion list.
++ Section 460.71(b) states that a PACE organization must develop a
program to ensure that all staff furnishing direct participant care
services meets the requirements outlined in paragraph (b). One of these
requirements, listed in paragraph (b)(7), reads: ``Providers or
suppliers that are types of individuals or entities that can enroll in
Medicare in accordance with section 1861 of the Act, must be enrolled
in Medicare and be in an approved status in Medicare in order to
provide health care items or services to a PACE participant who
receives his or her Medicare benefit through a PACE organization.''
Similar to our proposed deletion of Sec. 460.68(a)(4), we propose to
delete paragraph (b)(7).
++ Section 460.86 addresses payments to excluded or revoked
providers and suppliers as follows:
++ Paragraph (a) states that a PACE organization may not pay,
directly or indirectly, on any basis, for items or services (other than
emergency or urgently needed services as defined in Sec. 460.100)
furnished to a Medicare enrollee by any individual or entity that is
excluded by the Office of the Inspector General (OIG) or is revoked
from the Medicare program.
++ Paragraph (b) states: ``If a PACE organization receives a
request for payment by, or on behalf of, an individual or entity that
is excluded by the OIG or is revoked from the Medicare program, the
PACE organization must notify the enrollee and the excluded or revoked
individual or entity in writing, as directed by contract or other
direction provided by CMS, that payments will not be made. Payment may
not be made to, or on behalf of, an individual or entity that is
excluded by the OIG or is revoked from the Medicare program.''
We propose to revise these paragraphs as follows:
++ Paragraph (a) would state: ``A PACE organization may not pay,
directly or indirectly, on any basis, for items or services (other than
emergency or urgently needed services as defined in Sec. 460.100)
furnished to a Medicare enrollee by any individual or entity that is
excluded by the Office of the Inspector General (OIG) or is included on
the preclusion list, defined in Sec. 422.2 of this chapter.'' We are
not proposing to include the current regulatory language ``or revoked''
in our revised paragraph. This is because, as outlined previously,
there could be situations under revised Sec. 422.222 where a revoked
individual or entity would not be included on the preclusion list.
++ Paragraph (b) would state: ``If a PACE organization receives a
request for payment by, or on behalf of, an individual or entity that
is excluded by the OIG or is included on the preclusion list, defined
in Sec. 422.2 of this chapter, the PACE organization must notify the
enrollee and the excluded individual or entity or the individual or
entity included on the preclusion list in writing, as directed by
contract or other direction provided by CMS, that payments will not be
made. Payment may not be made to, or on behalf of, an individual or
entity that is excluded by the OIG or is included on the preclusion
list.''
Section 422.501(c) states that in order to obtain a
determination on whether it meets the requirements to become an MA
organization and is qualified to provide a particular type of MA plan,
an entity (or an individual authorized to act for the entity (the
applicant)), must fully complete all parts of a certified application.
As part of the application, paragraph (c)(1)(iv) requires
``(d)ocumentation that all providers or suppliers in the MA or MA-PD
plan that are types of individuals or entities that can enroll in
Medicare in accordance with section 1861 of the Act, are enrolled in an
approved status.'' Also, paragraph (c)(2) requires the following: ``The
authorized individual must thoroughly describe how the entity and MA
plan meet, or will meet, all the requirements described in this part,
including providing documentation that all providers and suppliers
referenced in Sec. 422.222 are enrolled in Medicare in an approved
status.''
We propose to:
++ Revise paragraph (c)(1)(iv) to read: ``Documentation that
payment for health care services or items is not being and will not be
made to individuals and entities included on the preclusion list,
defined in Sec. 422.2.''
++ Revise paragraph (c)(2) to replace the language beginning with
``including providing documentation . . . '' with ``including providing
documentation that payment for health care services or items is not
being and will not be made to individuals and entities included on the
preclusion list, defined in Sec. 422.2.''
Section 422.752(a) lists certain violations for which CMS
may impose sanctions (as specified in Sec. 422.750(a)) on any MA
organization with a contract. One violation, listed in paragraph
(a)(13), is that the MA organization ``(f)ails to comply with Sec.
422.222 and 422.224, that requires the MA organization to ensure that
providers and suppliers are enrolled in Medicare and not make payment
to excluded or revoked individuals or entities.'' We propose to revise
paragraph (a)(13) to read: ``Fails to comply with Sec. Sec. 422.222
and 422.224, that requires the MA organization not to make payment to
excluded individuals or entities, nor to individuals or entities on the
preclusion list, defined in Sec. 422.2.''
Section 422.510(a)(4) lists various grounds by which CMS
may terminate a contract with an MA organization. Paragraph
(a)(4)(xiii) refers to the MA organization's failure ``to meet the
preclusion list requirements in accordance with Sec. Sec. 422.222 and
422.224.'' We propose to revise this paragraph to read: ``Fails to meet
the preclusion list requirements in accordance with Sec. Sec. 422.222
and 422.224.''
Section 422.504 outlines provisions that the contract
between the MA organization and CMS must contain. Under paragraph
(a)(6), the MA organization must agree to adhere to, among other
things, ``Medicare provider and supplier enrollment requirements.''
Pursuant to paragraph (i)(2)(v), moreover, the MA organization agrees
to require all first tier, downstream, and related entities to agree
that ``they will require all of their providers and suppliers to be
enrolled in Medicare in an approved status consistent with Sec.
422.222.'' We propose to revise these two paragraphs as follows:
++ Paragraph (a)(6) would be revised to replace the language
``Medicare provider and supplier enrollment requirements'' with ``the
preclusion list requirements in 422.222.''
++ Paragraph (i)(2)(v) would be revised to replace the language
following ``they will'' with ``ensure that payments are not made to
individuals and entities included on the preclusion list, defined in
Sec. 422.2.''
Section 422.224, which applies to MA organizations and
pertains to payments to excluded or revoked providers or suppliers,
contains provisions very similar to those in Sec. 460.86:
++ Paragraph (a) states that an MA organization ``may not pay,
directly or indirectly, on any basis, for items or services (other than
emergency or urgently needed services as defined in Sec. 422.113)
furnished to a Medicare enrollee by any individual or entity that is
excluded by the Office of the Inspector General (OIG) or is revoked
from the Medicare program except as provided.''
++ Paragraph (b) states: ``If an MA organization receives a request
for

[[Page 56452]]

payment by, or on behalf of, an individual or entity that is excluded
by the OIG or is revoked from the Medicare program, the MA organization
must notify the enrollee and the excluded or revoked individual or
entity in writing, as directed by contract or other direction provided
by CMS, that payments will not be made. Payment may not be made to, or
on behalf of, an individual or entity that is excluded by the OIG or is
revoked in the Medicare program.
We propose to revise these paragraphs as follows:
++ Paragraph (a) would state: ``An MA organization may not pay,
directly or indirectly, on any basis, for items or services (other than
emergency or urgently needed services as defined in Sec. 422.113 of
this chapter) furnished to a Medicare enrollee by any individual or
entity that is excluded by the Office of the Inspector General (OIG) or
is included on the preclusion list, defined in Sec. 422.2.
++ Paragraph (b) would state: ``If an MA organization receives a
request for payment by, or on behalf of, an individual or entity that
is excluded by the OIG or an individual or entity that is included on
the preclusion list, defined in Sec. 422.2, the MA organization must
notify the enrollee and the excluded individual or entity or the
individual or entity included on the preclusion list in writing, as
directed by contract or other direction provided by CMS, that payments
will not be made. Payment may not be made to, or on behalf of, an
individual or entity that is excluded by the OIG or is included on the
preclusion list.''
In addition to the aforementioned proposals, CMS proposes to amend
existing data submission requirements for risk adjustment to require MA
organizations to include provider NPIs as part of encounter data
submissions; CMS intends to use the NPI data to identify individuals
and entities that, depending on the results of CMS investigation, may
be included on the preclusion list proposed in this section. Pursuant
to section 1853(a)(1)(C) and (a)(3)(B) of the Act, CMS adjusts the
capitation rates paid to MA organizations to account for such risk
factors as age, disability status, gender, institutional status, and
health status and requires MA organizations to submit data regarding
the services provided to MA enrollees. Implementing regulations at 42
CFR 422.310 set forth the requirements for the submission of risk
adjustment data that CMS uses to risk-adjust payments. MA organizations
must submit data, in accordance with CMS instructions, to characterize
the context and purposes of items and services provided to their
enrollees by a provider, supplier, physician, or other practitioner
(OMB Control No. 0938-1152). Currently, risk adjustment data is
submitted in two formats: comprehensive data equivalent to Medicare
fee-for-service claims data (often referred to as encounter data); and
data in abbreviated formats (often referred to as RAPS data).
CMS requires that MA organizations and other entities submit
encounter data using the X12 837 5010 format to fulfill the reporting
requirements at 42 CFR 422.310, where ``X12'' refers to healthcare
transactions, ``837'' refers to an electronic format for institutional
(``837-I'') and professional (``837-P'') encounters, and ``5010''
refers to the most recent version of this national standard. The X12
837 5010 is one of the national standard HIPAA transaction and code set
formats for electronic transmission of healthcare transactions. Records
that MA organziations and other submitters send to CMS in the X12 837
5010 format are known as ``encounter data records.''
One of the required data elements on the X12 837 5010 encounter
data record is the ``Billing Provider.'' The Billing Provider is
identified through several data fields (for example, name field and
address field), but a key data field for identifying the Billing
Provider is the National Provider Identifier (NPI). The NPI was
established as a national standard for a unique health identifier for
health care providers, as part of HIPAA Administrative Simplification
efforts for electronic transactions among trading partners. CMS
announced its decision to implement the NPI for Medicare, in the final
rule 69 FR 3434, published January 23, 2004. Billing Provider NPIs are
required for X12N 837 5010 transactions (both institutional and
professional), as established in the national implementation guides
(known by the shorthand ``TR3 guides''): Standards for Electronic Data
Interchange Technical Report Type 3, Health Care Claim: Institutional
(837) and Standards for Electronic Data Interchange Technical Report
Type 3, Health Care Claim: Professional (837). However, CMS has not
incorporated this Billing Provider NPI requirement into its Part C MA
regulations for submission of risk adjustment data. CMS has
incorporated the Part D program requirement that plan sponsors submit
NPIs on the Prescription Drug Event Record (77 FR 22072, published
April 12, 2012).
We are proposing to amend Sec. 422.310 by adding a new paragraph
(d)(5) to require that, for data described in paragraph (d)(1) as data
equivalent to Medicare fee-for-service data (which is also known as MA
encounter data), MA organizations must submit a National Provider
Identifier in a Billing Provider field on each MA encounter data
record, per CMS guidance. While the NPI is a required data element for
the X12 837 5010 format (as set forth in the TR3 guides cited in the
Background), CMS has not codified a regulatory requirement that MA
organizations include the Billing Provider NPI in encounter data
records. The proposed amendment would implement that requirement.
We propose to include the phrase ``per CMS guidance'' to allow CMS
to take into account situations where there is no bill (no claim for
payment) in an MA organization's system. For example, CMS allows
submission of chart review records (also submitted to CMS in the X12
837 5010 format) only for the purpose of submitting, correcting, and
deleting diagnoses from encounter data records for the purposes of risk
adjustment payment, based on medical record reviews (chart reviews).
Thus, chart review records and encounters that are capitated (when
there is no bill) would have different guidance for populating the
Billing Provider NPI field than encounters for which a bill was
received and adjudicated by the MA organization.
(5) Appeals
We propose to add a provision to Sec. 422.222(a) that would permit
individuals or entities that are on the preclusion list to appeal their
inclusion on this list in accordance with 42 CFR part 498. Given the
aforementioned payment denial that would ensue with the individual's or
entity's inclusion on the preclusion list, due process warrants that
the individual or entity have the ability to appeal this initial
determination. Any appeal under this proposed provision, however, would
be limited strictly to the individual's or entity's inclusion on the
preclusion list. It would neither include nor affect appeals of payment
denials or enrollment revocations, for there are separate appeals
processes for these actions. Individuals and entities that file an
appeal pursuant to Sec. 422.222(a) would be able to avail themselves
of any other appeals processes permitted by law.
CMS would send written notice to the individual or entity of their
inclusion on the preclusion list. The notice would contain the reason
for the inclusion and would inform the individual or entity of their
appeal rights.

[[Page 56453]]

We also propose to update the following regulatory provisions
regarding appeals. Note that these provisions would include references
to preclusion list inclusions under Sec. 422.222 (MA) and, as
previously mentioned, Sec. 423.120(c)(6).
We propose to revise Sec. 498.3(b) to add a new paragraph
(20) stating that a CMS determination that an individual or entity is
to be included on the preclusion list constitutes an initial
determination. This change would help enable individuals and entities
to utilize the appeals processes described in Sec. 498.5:
In Sec. 498.5, we propose to add a new paragraph (n) that
would state as follows:
++ In paragraph (n)(1), we propose that any individual or entity
dissatisfied with an initial determination or revised initial
determination that they are to be included on the preclusion list may
request a reconsideration in accordance with Sec. [thinsp]498.22(a).
++ In paragraph (n)(2), we propose that if CMS or the individual or
entity under paragraph (n)(1) is dissatisfied with a reconsidered
determination under Sec. 498.5(n)(1), or a revised reconsidered
determination under Sec. 498.30, CMS or the individual or entity is
entitled to a hearing before an ALJ.
++ In paragraph (n)(3), we propose that if CMS or the individual or
entity under paragraph (n)(2) is dissatisfied with a hearing decision
as described in paragraph (n)(2), CMS or the individual or entity may
request review by the Departmental Appeals Board (DAB) and the
individual or entity may seek judicial review of the DAB's decision.
These revisions are designed to include preclusion list
determinations within the scope of appeal rights described in Sec.
498.5. However, we solicit comment on whether a different appeals
process is warranted and, if so, what its components should be.
In addition, given that a beneficiary's access to health care items
or services may be impaired because of the application of the
preclusion list to his or her item or service, we believe the
beneficiary should be permitted to appeal alleged errors in applying
the preclusion list. We solicit comment whether additional beneficiary
protections, such as notices to enrollees when an individual or entity
that has recently furnished services or items to the enrollee is placed
on the preclusion list or a limited and temporary coverage approval
when an individual or entity is first placed on the preclusion list but
is in the middle of a course of previously covered treatment, should
also be included these rules upon finalization.
(6) Technical Changes
The title of Sec. 422.222 reads: ``Enrollment of MA organization
network providers and suppliers; first-tier, downstream, and related
entities (FDRs); cost HMO or CMP, and demonstration and pilot
programs.'' We propose to change this to simply state ``Preclusion
list'' so as to accord with our previously mentioned proposed changes.
For this same reason, we propose to:
++ Change the title of Sec. 422.224 from ``Payment to providers or
suppliers excluded or revoked'' to ``Payment to individuals and
entities excluded by the OIG or included on the preclusion list.''
++ Change the title of Sec. 460.86 from ``Payment to providers or
suppliers excluded or revoked'' to ``Payment to individuals or entities
excluded by the OIG or included on the preclusion list.''
c. Specific Regulatory Changes
Given the foregoing discussion, we propose the following regulatory
changes:
In Sec. 417.478, we propose to revise paragraph (e) as
follows:
++ In new paragraph (e)(1), we propose to state that the
prohibitions, procedures and requirements relating to payment to
individuals and entities on the preclusion list (defined in Sec. 422.2
of this chapter) apply to HMOs and CMPs that contract with CMS under
section 1876 of the Act.
++ In new paragraph (e)(2), we propose to state that in applying
the provisions of Sec. Sec. 422.2, 422.222, and 422.224 under
paragraph (e)(1) of this section, references to part 422 of this
chapter must be read as references to this part, and references to MA
organizations as references to HMOs and CMPs.
In Sec. 417.484, we propose to revise paragraph (b)(3) to
state: ``That payments must not be made to individuals and entities
included on the preclusion list, defined in Sec. 422.2.''
In Sec. 422.2, we propose to add a definition of
``preclusion list'' that reads as follows:
++ Preclusion list means a CMS compiled list of individuals and
entities that:
(1) Meet all of the following requirements:
(i) The individual or entity is currently revoked from Medicare
under Sec. 424.535.
(ii) The individual or entity is currently under a reenrollment bar
under Sec. 424.535(c).
(iii) CMS determines that the underlying conduct that led to the
revocation is detrimental to the best interests of the Medicare
program. In making this determination under this paragraph, CMS would
consider the following factors:
(A) The seriousness of the conduct underlying the individual's or
entity's revocation.
(B) The degree to which the individual's or entity's conduct could
affect the integrity of the Medicare program.
(C) Any other evidence that CMS deems relevant to its
determination; or
(2) Meet both of the following requirements:
(i) The individual or entity has engaged in behavior for which CMS
could have revoked the individual or entity to the extent applicable
had they been enrolled in Medicare.
(ii) CMS determines that the underlying conduct that would have led
to the revocation is detrimental to the best interests of the Medicare
program. In making this determination under this paragraph, CMS
considers the following factors:
(i) The seriousness of the conduct involved.
(ii) The degree to which the individual's or entity's conduct could
affect the integrity of the Medicare program; and
(iii) Any other evidence that CMS deems relevant to its
determination
We propose to delete Sec. 422.204(b)(5).
We propose to establish a new Sec. 422.204(c) that would
require MA organizations to follow a documented process that ensures
compliance with the preclusion list provisions in Sec. 422.222.
We propose to delete the existing version of Sec.
422.222(a) and replace it with the following:
++ In Sec. 422.222, we propose to change the title thereof to
``Preclusion list''.
++ In paragraph (a)(1), we propose to state that an MA organization
shall not make payment for a health care item or service furnished by
an individual or entity that is included on the preclusion list,
defined in Sec. 422.2.
++ In paragraph (a)(2), we propose to replace the existing language
therein with a provision stating that CMS would send written notice to
the individual or entity via letter of their inclusion on the
preclusion list. The notice would contain the reason for the inclusion
and would inform the individual or entity of their appeal rights. An
individual or entity may appeal their inclusion on the preclusion list,
defined in Sec. 422.2, in accordance with Part 498.
++ In paragraph (b), we propose to state that an MA organization
that does

[[Page 56454]]

not comply with paragraph (a) of Sec. 422.222 may be subject to
sanctions under Sec. 422.750 and termination under Sec. 422.510.
In Sec. 422.224, we propose to:
++ Change the title thereof to ``Payment to individuals and
entities excluded by the OIG or included on the preclusion list.''
++ Revise paragraph (a) to state: ``An MA organization may not pay,
directly or indirectly, on any basis, for items or services (other than
emergency or urgently needed services as defined in Sec. 422.113 of
this chapter) furnished to a Medicare enrollee by any individual or
entity that is excluded by the Office of the Inspector General (OIG) or
is included on the preclusion list, defined in Sec. 422.2''.
++ Revise paragraph (b) to state: ``If an MA organization receives
a request for payment by, or on behalf of, an individual or entity that
is excluded by the OIG or an individual or entity that is included on
the preclusion list, defined in Sec. 422.2, the MA organization must
notify the enrollee and the excluded individual or entity or the
individual or entity included on the preclusion list in writing, as
directed by contract or other direction provided by CMS, that payments
will not be made. Payment may not be made to, or on behalf of, an
individual or entity that is excluded by the OIG or is included on the
preclusion list.''
We propose to revise Sec. 422.310 to add a new paragraph
(d)(5) to require that, for data described in paragraph (d)(1) as data
equivalent to Medicare fee-for-service data (which is also known as MA
encounter data), MA organizations must submit a National Provider
Identifier in a Billing Provider field on each MA encounter data
record, per CMS guidance.
In Sec. 422.501(c), we propose to:
++ Revise paragraph (c)(1)(iv) to read: ``Documentation that
payment for health care services or items is not being and will not be
made to individuals and entities included on the preclusion list,
defined in Sec. 422.2.''
++ Revise paragraph (c)(2) to replace the language beginning with
``including providing documentation . . .'' with ``including providing
documentation that payment for health care services or items is not
being and will not be made to individuals and entities included on the
preclusion list, defined in Sec. 422.2.''
In section 422.504, we propose to:
++ Replace the language in paragraph (a)(6) that reads ``Medicare
provider and supplier enrollment requirements'' with ``the preclusion
list requirements in Sec. 422.222 and Sec. 422.224.''
++ Revise paragraph (i)(2)(v) to read, ``they will ensure that
payments are not made to individuals and entities included on the
preclusion list, defined in Sec. 422.2.''
In Sec. 422.510(a)(4), we propose to revise paragraph
(xiii) to read: ``Fails to meet the preclusion list requirements in
accordance with Sec. Sec. 422.222 and 422.224.''
In Sec. 422.752, we propose to revise paragraph (a)(13)
to read: ``Fails to comply with Sec. Sec. 422.222 and 422.224, that
requires the MA organization not to make payment to excluded
individuals and entities, nor to individuals and entities included on
the preclusion list, defined in Sec. 422.2.''
In Sec. 460.40, we propose to revise paragraph (j) to
state: ``Makes payment to any individual or entity that is included on
the preclusion list, defined in Sec. 422.2 of this chapter.''
In Sec. 460.50, we propose to revise paragraph (b)(1)(ii)
by changing the current language following ``including'' to read
``making payment to an individual or entity that is included on the
preclusion list, defined in Sec. 422.2 of this chapter.'' ''
We propose to delete Sec. 460.68(a)(4).
We propose to delete Sec. 460.70(b)(1)(iv).
We propose to delete Sec. 460.71(b)(7).
In Sec. 460.86, we propose to revise paragraphs (a) and
(b) to state as follows:
++ Paragraph (a) would state: ``A PACE organization may not pay,
directly or indirectly, on any basis, for items or services (other than
emergency or urgently needed services as defined in Sec. 460.100)
furnished to a Medicare enrollee by any individual or entity that is
excluded by the OIG or is included on the preclusion list, defined in
Sec. 422.2 of this chapter.''
++ Paragraph (b) would state: ``If a PACE organization receives a
request for payment by, or on behalf of, an individual or entity that
is excluded by the OIG or is included on the preclusion list, defined
in Sec. 422.2 of this chapter, the PACE organization must notify the
enrollee and the excluded individual or entity or the individual or
entity that is included on the preclusion list in writing, as directed
by contract or other direction provided by CMS, that payments will not
be made. Payment may not be made to, or on behalf of, an individual or
entity that is excluded by the OIG or is included on the preclusion
list.''
++ We also propose to change the title of Sec. 460.86 to ``Payment
to individuals and entities that are excluded by the OIG or are
included on the preclusion list.''
In Sec. 498.3(b), we propose to add a new paragraph (20)
stating that a CMS determination that an individual or entity is to be
included on the preclusion list constitutes an initial determination.
In Sec. 498.5, we propose to add a new paragraph (n) that
would state as follows:
++ In paragraph (n)(1), we propose that any individual or entity
dissatisfied with an initial determination or revised initial
determination that they are to be included on the preclusion list may
request a reconsideration in accordance with Sec. [thinsp]498.22(a).
+ In paragraph (n)(2), we propose that if CMS or the individual or
entity under paragraph (n)(1) is dissatisfied with a reconsidered
determination under (n)(1), or a revised reconsidered determination
under Sec. 498.30, CMS or the individual or entity is entitled to a
hearing before an ALJ.
++ In paragraph (n)(3), we propose that if CMS or the individual or
entity under paragraph (n)(2) is dissatisfied with a hearing decision
as described in paragraph (n)(2), CMS or the individual or entity may
request review by the DAB and the individual or entity may seek
judicial review of the DAB's decision.
12. Removal of Quality Improvement Project for Medicare Advantage
Organizations (Sec. 422.152)
Section 1852(e) of the Act requires that Medicare Advantage (MA)
organizations have an ongoing Quality Improvement (QI) Program for the
purpose of improving the quality of care provided to enrollees in the
organization's MA plans. The statute requires that the MA organization
include a Chronic Care Improvement Program (CCIP) as part of the
overall QI Program
Our regulations at Sec. 422.152 outline the QI Program
requirements for MA organizations, which include the development and
implementation of both Quality Improvement Projects (QIPs), at
paragraphs (a)(3) and (d), and a CCIP, at paragraphs (a)(2) and (c).
Both provisions require that the MA organization's QIP and CCIP address
areas or populations identified by CMS.
The January 2005 final rule (70 FR 4587) addressed the QI
provisions added to section 1852(e) of the Act by the Medicare
Modernization Act of 2003 (MMA). In the final rule, we specified in
Sec. 422.152 that MA organizations must have ongoing QI Programs,
which include chronic care programs. In addition, CMS provided MA
organizations the flexibility to shape their QI efforts to the needs of
their enrollees.

[[Page 56455]]

In the April 2010 final rule (75 FR 19677), CMS indicated concern
that MA organizations were choosing QIPs and CCIPs that did not address
QI areas that best reflected enrollee needs. Additionally, there were
concerns that some projects focused more on improving processes rather
than improving clinical outcomes. Therefore, we modified the regulation
to provide for CMS to identify focus areas for QIPs and population
areas for CCIPs. MA organizations retained the flexibility to identify
topics for development of QIPs and CCIPs based on the needs of their
population, but also had to implement QIPs and CCIPs as directed by
CMS, which could identify general areas of focus that supported CMS
quality strategies and initiatives.
During this time, CMS was also concerned that MA organizations were
employing inconsistent methods in developing criteria for QIPs and
CCIPs. As a result, CMS further modified the regulation to require MA
organizations to report progress in a manner identified by CMS. This
allowed CMS to review results and extrapolate lessons learned and best
practices consistently across the MA program.
After making these regulation modifications, CMS issued a number
sub-regulatory QIP and CCIP guidance documents to ensure that MA
organizations measured progress in a consistent and meaningful way. For
example, the new Plan-Do-Study-Act QI model required MA organizations
to place some structure and parameters around their QIPs and CCIPs,
ultimately leading to more consistency.
Over time, CMS found its implementation of the QIP and CCIP
requirements had become burdensome and complex, rather than
streamlining and conforming MA organizations' implementation of QIPs
and CCIPs. For example, the complex sub-regulatory guidance led to a
wide range of MA organization interpretations, resulting in extraneous,
irrelevant, voluminous, and redundant information being reported to
CMS. We gained little value from this information. As a result, we
scaled down our sub-regulatory guidance in order to gain more concise
and useful information with which to evaluate the outcomes and show any
sort of attribution. However, we also found that the complex guidance
did not necessarily produce better outcomes in the review of annual
updates.
Continued evaluation through annual review of plan reported updates
of the QIPs and CCIPs has led CMS to believe that the QIPs in
particular do not add significant value. Through annual review of plan-
reported updates, CMS has found that a number of QIPs implemented are
duplicative of activities MA organizations are already doing to meet
other plan needs and requirements, such as the CCIP and internal
organizational focus on STAR Rating metrics. For example, we designated
``Reducing All-Cause Hospital Readmissions'' as the 2012 QIP topic. The
QIPs for this topic often duplicated other CMS and MA organization care
coordination initiatives aimed to improve transition of care across
health care settings and reduce hospital readmissions. We found that
many plans were already engaged in activities to reduce hospital
readmissions because they are annually scored on their performance in
this area (and many other areas) through Healthcare Effectiveness Data
and Information Set (HEDIS). HEDIS are a set of plan performance and
quality measures. Each year, MA organizations are required to report
HEDIS data and are evaluated annually based on these measures. High
performance on these measures also plays a large role in achieving high
Star Ratings, which has beneficial payment consequences for MA
organizations. This suggests that CMS direction and detailed regulation
of QIPs is unnecessary as the Star Ratings program use of HEDIS
measures (and other measures) incentivizes MA organizations
sufficiently to focus on desired improvements and outcomes.
Therefore, we believe the removal of the QIP and the continued CMS
direction of populations for required CCIPs would allow MA
organizations to focus on one project that supports improving the
management of chronic conditions, a CMS priority, while reducing the
duplication of other QI initiatives. We propose to delete Sec. Sec.
422.152(a)(3) and 422.152(d), which outline the QIP requirements. In
addition, in order to ensure that remaining cross references for other
provisions in this section remain accurate, we will reserve paragraphs
(a)(3) and (d). The removal of these requirements would reduce burden
on both MA organizations and CMS.
Even with this proposed removal of the QIP requirements, the MA
requirements for QI Programs would remain in place and be robust and
sufficient to ensure that the requirements of section 1852(e) of the
Act are met. As a part of the QI Program, each MA organization would
still be required to develop and maintain a health information system;
encourage providers to participate in CMS and HHS QI initiatives;
implement a program review process for formal evaluation of the impact
and effectiveness of the QI Program at least annually; correct all
problems that come to its attention through internal, surveillance,
complaints, or other mechanisms; contract with an approved Medicare
Consumer Assessment of Health Providers and Systems (CAHPS[supreg])
survey vendor to conduct the Medicare CAHPS[supreg] satisfaction survey
of Medicare plan enrollees; measure performance under the plan using
standard measures required by CMS and report its performance to CMS;
develop, compile, evaluate, and report certain measures and other
information to CMS, its enrollees, and the general public; and develop
and implement a CCIP. Further, CMS emphasizes here that MA
organizations must have QI Programs that go beyond only performance of
CCIPs that focus on populations identified by CMS. The CCIP is only one
component of the QI Program, which has the purpose of improving care
and provides for the collection, analysis, and reporting of data that
permits the measurement of health outcomes and other indices of quality
under section 1852(e) of the Act.
We believe this proposed change will allow MA organizations to
maintain existing health improvement initiatives and take steps to
reduce the risk of redundancies or duplication. The remaining elements
of the QI Program, including the CCIP, will still maintain the intended
purpose of the QI Program: That plans have the necessary infrastructure
to coordinate care and promote quality, performance, and efficiency on
an ongoing basis.
This proposal does not eliminate the CCIP requirements that MA
organizations address populations identified by CMS and report project
status to CMS as requested. Per the April 2010 rule (75 FR 19677), we
still believe that these requirements are necessary to ensure that MA
organizations are developing projects that positively impact
populations identified by CMS and that progress is documented and
reported in a way that is consistent with our requirements.
In conclusion, we are proposing to amend Sec. 422.152 by:
Deleting and reserving paragraphs (a)(3) and (d).
We solicit comments on this proposal, including whether additional
revision to Sec. 422.152 is necessary to eliminate redundancies CMS
has identified in this preamble.
13. Reducing Provider Burden--Comment Solicitation
Health care providers are key partners in the delivery of Medicare
benefits, and we are exploring ways to reduce burden

[[Page 56456]]

on providers (meaning institutions, physicians, and other
practitioners) arising from requests for medical record documentation
by MA organizations, particularly in connection with MA program
requirements. We are interested in stakeholder feedback on the nature
and extent of this burden of producing medical record documentation and
on ideas to address the burden. We are particularly interested in
burden experienced by solo providers. Please note that this is a
solicitation for comment only and does not commit CMS to adopt any
ideas submitted nor to making any changes to CMS audits or activities,
including risk adjustment data validation (RADV) processes.
By law, CMS is required to adjust payments to MA organizations for
their enrollees' risk factors, such as age, disability status, gender,
institutional status, and health status. To this end, MA organizations
are required in regulation (Sec. 422.310) to submit risk adjustment
data to CMS--including diagnosis codes--to characterize the context and
purposes of items and services provided to MA organization plan
enrollees. Risk adjustment data refers to data submitted in two
formats: Comprehensive data equivalent to Medicare fee-for-service
claims data (often referred to as encounter data) and data in
abbreviated formats (often referred to as RAPS data). Under Sec.
422.310, risk adjustment data that is submitted must be documented in
the medical record and MA organizations will be required to submit
medical records to validate the risk adjustment data. Finally, at Sec.
422.310(d)(4), MA organizations may include in their contracts with
providers, suppliers, physicians, and other practitioners, provisions
that require submission of complete and accurate risk adjustment data
as required by CMS. These provisions may include financial penalties
for failure to submit complete data.
To address concerns from providers about burdensome requests from
MA organizations for their patients' medical record documentation, we
are soliciting comment from stakeholders to more fully understand the
issue and for ideas to accomplish reductions in provider burden.
Specifically, we seek comment on the following:
The nature and extent of medical record requests,
including the following:
++ Reasoning behind the request sent by the MA organization to the
provider.
++ Amount of time afforded to providers to respond to such
requests.
++ Frequency of requests for providers to submit medical records.
++ Volume of medical records in a given request.
++ Method of collection and submission of medical records.
++ How narrowly or broadly the requests are framed (for example,
whether the request is for a single visit, a specific condition, and
for what timeframe).
++ Extent to which requests are made pursuant to a CMS-conducted
RADV audit, other CMS activities, or for other purposes (please specify
what the other purposes are).
++ Considerations that may be unique to solo providers.
++ Impact on burden due to increased adoption of electronic health
record systems.
++ Specific examples of medical record requests (for example,
anecdotes and/or the requests themselves, appropriately redacted of
confidential information and PII/PHI).
The nature and extent of requests related to medical
record attestations, including the following:
++ Reasoning behind the attestation request.
++ Amount of time afforded to providers to respond to such
requests.
++ Frequency of requests for providers to sign attestations.
++ Volume of requests.
++ Level and duration for which attestations are requested (for
example, for each medical record, for all medical records for a
beneficiary for a particular date of service or for a particular year).
++ Whether there is reduced burden associated with electronic
signatures.
++ Specific examples of medical record attestations and attestation
requests.
Ideas for improving the process around MA organizations
requesting medical records and/or attestations that are not directly
pursuant to CMS-conducted RADV audits. Specify the type of change the
idea would necessitate: a statutory, regulatory, subregulatory,
operational, or CMS-issued guidance such as best practices for MA
organizations when requesting medical records and/or attestations, and
how such a change may interact with other provisions, such as state law
or Joint Commission requirements. If the ideas involve novel legal
questions, analysis regarding our authority is welcome for our
consideration. For each idea, describe the extent of provider burden
reduction, quantitatively where possible, and any other consequences
that implementing the idea may have on beneficiaries, providers, MA
organizations, or CMS. Further, we encourage all relevant parties to
respond to this request: MA organizations, providers, associations for
these entities, and companies assisting MA organizations, providers,
and hospitals with handling medical record requests.

C. Implementing Other Changes

1. Reducing the Burden of the Medicare Part C and Part D Medical Loss
Ratio Requirements
a. Background
Section 1103 of Title I, Subpart B of the Health Care and Education
Reconciliation Act (Pub. L. 111-152) amends section 1857(e) of the Act
to add medical loss ratio (MLR) requirements to Medicare Part C (MA
program). An MLR is expressed as a percentage, generally representing
the percentage of revenue used for patient care rather than for such
other items as administrative expenses or profit. Because section
1860D-12(b)(3)(D) of the Act incorporates by reference the requirements
of section 1857(e) of the Act, these MLR requirements also apply to the
Medicare Part D program. In the May 23, 2013 Federal Register (78 FR
31284), we published a final rule that codified the MLR requirements
for Part C MA organizations, and Part D sponsors (including
organizations offering cost plans that provide the Part D benefit) in
the regulations at 42 CFR part 422, subpart X and part 423, subpart X.
For contract year 2014 and subsequent contract years, MA
organizations and Part D sponsors are required to report their MLRs and
are subject to financial and other penalties for a failure to meet the
statutory requirement that they have an MLR of at least 85 percent (see
Sec. Sec. 422.2410 and 423.2410). The statute imposes several levels
of sanctions for failure to meet the 85 percent minimum MLR
requirement, including remittance of funds to CMS, a prohibition on
enrolling new members, and ultimately contract termination. The minimum
MLR requirement in section 1857(e)(4) of the Act creates incentives for
MA organizations and Part D sponsors to reduce administrative costs,
such as marketing costs, profits, and other uses of the funds earned by
plan sponsors, and helps to ensure that taxpayers and enrolled
beneficiaries receive value from Medicare health and drug plans.
Section 1001(5) of the Patient Protection and Affordable Care Act
(Pub. L. 111-148), as amended by section 10101(f) of the Health Care
Reconciliation Act, also established a new MLR requirement under
section 2718 of the Public Health Service Act (PHSA) that applies to
issuers of employer group and individual market

[[Page 56457]]

private insurance. We will refer to the MLR requirements that apply to
issuers of private insurance as the ``commercial MLR rules.''
Regulations implementing the commercial MLR rules are published at 45
CFR part 158.
This proposed rule sets forth our proposed modifications to certain
MLR requirements in the Medicare Part C and Part D programs.
b. Proposed Regulatory Changes to the Calculation of the Medical Loss
Ratio (Sec. Sec. 422.2420, 422.2430, 423.2420, and 423.2430)
(1) Fraud Reduction Activities
As explained in the February 22, 2013 proposed rule (78 FR 12428),
we used the commercial MLR rules as a reference point for developing
the Medicare MLR rules. We sought to align the commercial and Medicare
MLR rules in order to limit the burden on organizations that
participate in both markets, and to make commercial and Medicare MLRs
as comparable as possible for comparison and evaluation purposes,
including by Medicare beneficiaries. Although we believe it is
important to maintain consistency between the commercial and Medicare
MLR requirements, we also recognized that some areas of the commercial
MLR rules would need to be revised to fit the unique characteristics of
the MA and Part D programs.
One area of alignment between the commercial and Medicare MLR rules
is the treatment of expenditures related to fraud reduction efforts,
which we defined to include both fraud prevention and fraud recovery in
both rules (see 78 FR 12433). The Medicare MLR regulations adopted the
same definitions of activities that improve healthcare quality (also
referred to as quality improvement activities, or QIA), as had been
adopted in the commercial MLR regulations at 45 CFR 158.150 and
158.151, in order to facilitate uniform accounting for the costs of
these activities across lines of business (see 78 FR 12435). Consistent
with this policy of alignment, the Medicare MLR regulations at
Sec. Sec. 422.2430(b)(8) and 423.2430(b)(8) adopted the commercial MLR
rules' exclusion of fraud prevention activities from QIA. The Medicare
MLR regulations (Sec. Sec. 422.2420(b)(2)(ix) and
423.2420(b)(2)(viii)) further aligned with the commercial MLR rules'
treatment of fraud-related expenditures by allowing the amount of claim
payments recovered through fraud reduction efforts, not to exceed the
amount of fraud reduction expenses, to be included in the MLR numerator
as an adjustment to incurred claims. The Medicare MLR proposed rule (78
FR 12433) explained that we considered this approach to be appropriate
because without such an adjustment, the recovery of paid fraudulent
claims would reduce an MLR and could create a disincentive to engage in
fraud reduction efforts. Allowing an adjustment to incurred claims to
reflect claims payments recoveries up to the limit of fraud reduction
expenses would help mitigate whatever disincentive might occur if fraud
reduction expenses were treated solely as nonclaims and nonquality
improving expenses. The Medicare MLR proposed rule echoed the December
7, 2011 commercial MLR final rule with comment period (76 FR 76577),
where we had earlier expressed the view that allowing an unlimited
adjustment for fraud reduction expenses would undermine the purpose of
requiring issuers to meet the MLR standard.
We have reconsidered this position based on the specific
characteristics of the MA and Part D programs, and are now proposing
certain changes to the treatment of expenses for fraud reduction
activities in the Medicare MLR calculation. First, we are proposing to
revise the MA and Part D regulations by removing the current exclusion
of fraud prevention activities from QIA at Sec. Sec. 422.2430(b)(8)
and 423.2430(b)(8). Second, we are proposing to expand the definition
of QIA in Sec. Sec. 422.2430 and 423.2430 to include all fraud
reduction activities, including fraud prevention, fraud detection, and
fraud recovery. Third, we are proposing to no longer include in
incurred claims the amount of claims payments recovered through fraud
reduction efforts, up to the amount of fraud reduction expenses, in
Sec. Sec. 422.2420(b)(2)(ix) and 423.2420(b)(2)(viii). We note that
the commercial MLR rules and the Medicaid MLR rules are outside the
scope of this proposed rule.
We are proposing these changes to the Medicare MLR rules because we
believe that limiting or excluding amounts invested in fraud reduction
undermines the federal government's efforts to combat fraud in the
Medicare program, and reduces the potential savings to the government,
taxpayers, and beneficiaries that robust fraud prevention efforts in
the MA and Part D programs can provide. Fraud prevention activities can
improve patient safety, deter the use of medically unnecessary
services, and can lead to higher levels of health care quality, which
is part of the reason why we require such activities as a condition of
participation in the MA and Part D programs.
MA organizations and Part D sponsors are required at Sec. Sec.
422.503(b)(4)(vi) and 423.504(b)(4)(vi), respectively, to adopt an
effective compliance program which includes measures that prevent,
detect, and correct fraud. We believe that the proposed change to
include all expenditures in connection with fraud reduction activities
as QIA-related expenditures in the MLR numerator best aligns with this
Medicare contracting requirement. We are concerned that the current
rules could create a disincentive to invest in fraud reduction
activities, which is only partly mitigated by the current adjustment to
incurred claims for amounts recovered as a result of fraud reduction
activities, up to the amount of fraud reduction expenses. We believe
that it is particularly important that MA organizations and Part D
sponsors invest in fraud reduction activities as the Medicare trust
funds are used to finance the MA and Part D programs. We believe that
including the full amount of expenses for fraud reduction activities as
QIA will provide additional incentive to encourage MA organizations and
Part D sponsors to develop innovative and more effective ways to detect
and deter fraud.
We continue to believe that the minimum MLR requirement in section
1857(e)(4) of the Act is intended to create an incentive to reduce
administrative costs, marketing, profits, and other such uses of the
funds that plan sponsors receive, and to ensure that taxpayers and
enrolled beneficiaries receive value from Medicare health plans.
However, we also believe that MA organizations' and Part D sponsors'
fraud reduction activities can potentially provide significant value to
the government and taxpayers by reducing trust fund expenditures. When
MA organizations and Part D sponsors prevent fraud and recover amounts
paid for fraudulent claims, this lowers the overall cost of providing
coverage to MA and Part D enrollees. Because MA organizations' and Part
D sponsors' monthly payments are based in part on their claims
experience in prior years, if MA organizations and Part D sponsors pay
fewer fraudulent claims, this should be reflected in their subsequent
cost projections, which would ultimately result in lower payments to MA
organizations and Part D sponsors out of the Medicare trust funds, and
could also result in lower premiums or additional supplemental benefits
for beneficiaries.
Given the proposed change to include expenditures for fraud
reduction activities in the QIA portion of the MLR numerator, we no
longer believe that it

[[Page 56458]]

would be necessary or appropriate to include in incurred claims the
amount of claim payments recovered through fraud reduction efforts, up
to the amount of fraud reduction expenses. As noted previously, we
originally included an adjustment to incurred claims for claims
payments recovered through fraud reduction efforts based on the
rationale that, because the recovery of paid fraudulent claims reduces
the amount of incurred claims in the MLR numerator, if expenditures for
fraud reduction efforts were treated solely as nonclaims and nonquality
improvement activities, this could create a disincentive to engage in
fraud reduction activities. The adjustments to incurred claims under
current Sec. Sec. 422.2420(b)(2)(ix) and 423.2420(b)(2)(viii) mitigate
the potential disincentive to invest in fraud reduction activities
insofar as MA organizations' and Part D sponsors' recoveries of paid
fraudulent claims do not result in a reduction to incurred claims.
Because this adjustment to incurred claims is only available to the
extent that an MA organization or Part D sponsor recovers paid
fraudulent claims, it encourages MA organizations and Part D sponsors
to invest in tracking down and recouping amounts that have already been
paid, rather than in preventing payment of fraudulent claims. Under our
proposal, claim payments recovered through fraud reduction efforts, up
to the amount of fraud reduction expenses, would no longer be included
in the MLR numerator as an adjustment to incurred claims. Instead, all
expenditures for fraud reduction activities would be included in the
MLR numerator as QIA, even if such expenditures exceed the amount
recovered through fraud reduction efforts. As a result, MA
organizations and Part D sponsors will no longer have an incentive to
use contract revenue to pursue recovery of paid fraudulent claims
instead of investing in fraud prevention. We believe that effective
fraud reduction strategies will include efforts to prevent payment of
fraudulent claims, and we believe that the proposed inclusion of all
fraud reduction activities as QIA in the MLR numerator will strengthen
the incentive to engage in these vital activities.
In summary, we are proposing the following regulatory revisions:
Remove and reserve Sec. Sec. 422.2420(b)(2)(ix) and
423.2420(b)(2)(viii).
In Sec. Sec. 422.2430 and 423.2430, redesignate existing
paragraphs (a)(1) and (a)(2) as (a)(2) and (a)(3), respectively.
In Sec. Sec. 422.2430 and 423.2430, add new paragraph
(a)(4) that lists activities that are automatically included in QIA.
Designate the introductory text of Sec. Sec. 422.2430(a)
and 423.2430(a) as paragraph (a)(1), and revise newly designated
paragraph (a)(1) to specify that, for an activity to be included in
QIA, it must either fall into one of the categories listed in newly
redesignated (a)(2) and meet all of the requirements in newly
redesignated (a)(3), or be listed in paragraph (a)(4).
Remove and reserve Sec. Sec. 422.2430(b)(8) and
423.2430(b)(8).
We solicit comment on these proposed changes, particularly whether
our proposal is based on the best understanding of the motives and
incentives applicable to MA organizations and Part D sponsors to engage
in fraud reduction activities. We also solicit comment on the types of
activities that should be included in, or excluded from, fraud
reduction activities. In addition, we solicit comment on alternative
approaches to accounting for fraud reduction activities in the MLR
calculation. In particular, we are interested in receiving input on:
Whether fraud reduction activities should be included in
quality improvement activities as proposed, or whether we should create
a separate MLR numerator category for fraud reduction activities;
Whether fraud reduction activities should be subject to
any or all of the exclusions at Sec. Sec. 422.2430(b) and 422.2430(b).
Although our proposal removes the exclusion of fraud prevention
activities from QIA at Sec. Sec. 422.2430(b)(8) and 423.2430(b)(8), it
is possible that fraud reduction activities would be subject to one of
the other exclusions under Sec. Sec. 422.2430(b) and 423.2430(b), such
as the exclusion that applies to activities that are designed primarily
to control or contain costs (Sec. Sec. 422.2430(b)(1) and
423.2430(b)(1)) or the exclusion of activities that were paid for with
grant money or other funding separate from premium revenue (Sec. Sec.
422.2430(b)(1) and 423.2430(b)(3).)
(2) Medication Therapy Management (MTM) (Sec. Sec. 422.2430 and
423.2430)
In the May 23, 2013 final rule (78 FR 31294), we stated that
Medication Therapy Management (MTM) activities (defined at Sec.
423.153(d)) qualify as QIA, provided they meet the requirements set
forth in Sec. Sec. 422.2430 and 423.2430. To meet these requirements,
the activity must fall into one of the categories listed in current
paragraph (a)(1) of those regulations, which means the activity must:
(1) Improve health quality; (2) increase the likelihood of desired
health outcomes in ways that are capable of being objectively measured
and of producing verifiable results; (3) be directed toward individual
enrollees, specific groups of enrollees, or other populations as long
as enrollees do not incur additional costs for population-based
activities; and (4) be grounded in evidence-based medicine, widely
accepted best clinical practice, or criteria issued by recognized
professional medical associations, accreditation bodies, government
agencies or other nationally recognized health care quality
organizations. In our prior MLR rulemaking, we did not attempt to
determine whether all MTM programs that comply with Sec. 423.153(d)
would necessarily meet the QIA requirements at Sec. 422.2430 (for MA-
PD contracts) and Sec. 423.2430 (for stand-alone Part D contracts).
Subsequent to publication of the May 23, 2013 final rule, we have
received numerous inquiries seeking clarification regarding whether MTM
programs are QIA. To address those questions and resolve any
ambiguities or uncertainties, we are now proposing to specifically
address MTM programs in the MLR regulations.
We propose to modify our regulations at Sec. Sec. 422.2430 and
423.2430 by adding new paragraph (a)(4)(i), which specifies that all
MTM programs that comply with Sec. 423.153(d) and are offered by Part
D sponsors (including MA organizations that offer MA-PD plans
(described in Sec. 422.2420(a)(2)) are QIA. Each Part D sponsor is
required to incorporate an MTM program into its plans' benefit
structure, and the MTM Program Completion Rate for Comprehensive
Medication Reviews (CMR) measure has been included in the Star Ratings
as a metric of plan quality since 2016. We believe that the MTM
programs that we require improve quality and care coordination for
Medicare beneficiaries. We also believe that allowing Part D sponsors
to include compliant MTM programs as QIA in the calculation of the
Medicare MLR would encourage sponsors to ensure that MTM is better
utilized, particularly among standalone PDPs that may currently lack
strong incentives to promote MTM.
Furthermore, we have expressed concern that Part D sponsors may be
restricting MTM eligibility criteria to limit the number of qualified
enrollees, and we believe that explicitly including MTM program
expenditures in the MLR numerator as QIA-related expenditures could
provide an incentive to reduce any such restrictions. This is
particularly important in providing individualized disease management
in conjunction with the ongoing opioid

[[Page 56459]]

crisis evolving within the Medicare population. We hope that, by
removing any restrictions or uncertainty about whether compliant MTM
programs will qualify for inclusion in the MLR numerator as QIA, the
proposed changes will encourage Part D sponsors to strengthen their MTM
programs by implementing innovative strategies for this potentially
vulnerable population. We believe that beneficiaries with higher rates
of medication adherence have better health outcomes, and that
medication adherence can also produce medical spending offsets, which
could lead to government and taxpayer savings in the trust fund, as
well as beneficiary savings in the form of reduced premiums. We solicit
comment on these proposed changes.
(3) Additional Technical Changes to Calculation of the Medical Loss
Ratio (Sec. Sec. 422.2420 and 423.2420)
We are also proposing technical changes to the MLR provisions at
Sec. Sec. 422.2420 and 423.2420. In Sec. 422.2420(d)(2)(i), we are
replacing the phrase ``in Sec. 422.2420(b) or (c)'' with the phrase
``in paragraph (b) or (c) of this section''. In Sec. 423.2430, the
regulatory text includes two paragraphs designated as (d)(2)(ii). We
propose to resolve this error by amending Sec. 423.2420 as follows:
Revise paragraph (d)(2)(i) by adding at the end the text
of the first paragraph designated as (d)(2)(ii).
Remove the first paragraph designated as (d)(2)(ii).
c. Proposed Regulatory Changes to Medicare MLR Reporting Requirements
(Sec. Sec. 422.2460 and 423.2460)
Our general approach when developing the current Medicare MLR
regulations was to align the Medicare MLR requirements with the
commercial MLR requirements. Consistent with this policy, we attempted
to model the Medicare MLR reporting format on the tools used to report
commercial MLR data in order to limit the burden on organizations that
participate in both markets. However, as noted previously, we also
recognized that there are some areas where the unique characteristics
of the MA and Part D programs make it appropriate for the Medicare MLR
reporting requirements to deviate from the rules that apply to
commercial MLR reporting. Most beneficiaries are enrolled in plans
offered by MA organizations and Part D sponsors that also participate
in the commercial market, and these entities are familiar with the
commercial MLR forms that they have had to submit since 2012 for the
2011 benefit year. In practice, however, these forms and reports have
not been identical. We have become concerned, after having received two
annual Medicare MLR reports at the time that this proposed rule is
being published, that requiring health insurance issuers to complete a
substantially different set of forms for Medicare MLR purposes has
created an unnecessary additional burden. Our proposal to reduce the
burden of the current Medicare requirement for MLR reporting aligns
with the directive in the January 30, 2017 Presidential Executive Order
on Reducing Regulation and Controlling Regulatory Costs to manage the
costs associated with the governmental imposition of private
expenditures required to comply with Federal regulations.
It is with these concerns in mind that we are proposing to reduce
the current reporting burden to require the minimum amount of
information needed for MLR reporting by organizations with contracts to
offer Medicare benefits. Specifically, we are proposing that the
Medicare MLR reporting requirements would be limited to the following
data fields, as shown in Table 12: Organization name, contract number,
adjusted MLR (which would be populated as ``Not Applicable'' or ``N/A''
for non-credible contracts as determined in accordance with Sec. Sec.
422.2440(d) and 423.2440(d)), and remittance amount. We solicit comment
on these proposed changes.

Table 12--MLR Reporting for Fully Credible, Partially Credible, and Non-Credible Contracts
----------------------------------------------------------------------------------------------------------------
Adjusted MLR Remittance
Organization Contract No. (%) amount
----------------------------------------------------------------------------------------------------------------
ABC, Inc........................................................ H1234 90.1 $0
XYZ, LLC........................................................ S4321 84.8 17,420
MAO1, LLC....................................................... H4321 N/A N/A
----------------------------------------------------------------------------------------------------------------

We believe that it is important to note that although we are
proposing a significant reduction in the amount of data that MA
organizations and Part D sponsors must report to us, we are not
proposing to change our authority under Sec. 422.2480 or Sec.
423.2480 to conduct selected audit reviews of the data reported under
Sec. Sec. 422.2460 and 423.2460 to determine that remittance amounts
under Sec. Sec. 422.2410(b) and 423.2410(b) and sanctions under
Sec. Sec. 422.2410(c), 422.2410(d), 423.2410(c), and 423.2410(d) were
accurately calculated, reported, and applied. Moreover, MA
organizations and Part D sponsors would continue to be required to
retain documentation supporting the MLR figure reported and to make
available to CMS, HHS, the Comptroller General, or their designees any
information needed to determine whether the data and amounts submitted
with respect to the Medicare MLR are accurate and valid, in accordance
with Sec. Sec. 422.504 and 423.505.
In addition, we have realized that the MLR Reporting Requirements
at Sec. 422.2460 do not include provisions that correspond to the
provisions currently codified at Sec. 423.2460(b) and (c). In the
February 22, 2013 proposed rule (78 FR 12435), we proposed that the
total revenue reported by MA organizations and Part D sponsors for MLR
purposes would be net of all projected reconciliations, and that each
MA and Part D contract's MLR would only be reported once and would not
be reopened as a result of any payment reconciliation processes. In the
May 23, 2013 final rule (78 FR 31293), we finalized these proposals
without change. Although we explicitly proposed that both MA
organizations and Part D sponsors would be required to report their
revenues net of all projected reconciliations (78 FR 12435), and we did
not indicate that only Part D sponsors would be affected by our
proposal for each contract's MLR to be reported once and not reopened
as a result of any payment reconciliation process (our discussion of
this proposal in the final rule addressed how this policy would apply
to both MA organizations and Part D sponsors (78 FR 31293)), regulatory
provisions implementing the finalized proposals were only included in
the Part D regulations, where they currently appear at Sec.
423.2460(b) and (c); corresponding regulatory text was not added to the
MA regulations. We are proposing to make a technical change to Sec.
422.2460 by

[[Page 56460]]

incorporating provisions which parallel the language of current
paragraphs (b) and (c) of Sec. 423.2460 for purposes of the reporting
requirements for contract year 2014 and subsequent contract years. This
proposed technical change does not establish any new rules or
requirements for MA organizations; it merely updates regulatory
references that were overlooked in previous rulemaking.
In summary, we are proposing to revise the regulations at
Sec. Sec. 422.2460 and 423.2460 as follows:
In Sec. 422.2460, redesignate the existing regulation
text as paragraph (a).
Revise newly designated Sec. Sec. 422.2460(a) and
423.2460(a) by adding ``from 2014 through 2017'' after the phrase ``For
each contract year'' in the first sentence to limit the more detailed
MLR reporting requirement to that period, making minor grammatical
changes to clarify the text, and by adding ``under this part'' to
modify the phrase ``for each contract''.
In Sec. 423.2460, redesignate existing paragraphs (b) and
(c) as paragraphs (c) and (d), respectively.
In Sec. Sec. 422.2460 and 423.2460, add a new paragraph
(b) to require MA organizations and Part D plan sponsors with--
++ Fully credible and partially credible experience to report the
MLR for each contract for the contract year along with the amount of
any owed remittance; and
++ Non-credible experience, to report that such experience was non-
credible.
For each, the proposed text cross-references the applicable
regulations for the determination of credibility, and for the general
remittance requirement.
In newly redesignated Sec. 423.2460(c), revise the text
to refer to total revenue included in the MLR calculation rather than
reports of that information.
Add new paragraphs (c) and (d) to Sec. 422.2460 that
mirror the text in Sec. 423.2460(c) and (d), as redesignated and
revised.
d. Proposed Technical Changes to Medicare MLR Review and Non-Compliance
and the Release of MLR Data (Sec. Sec. 422.2410, 422.2480, 422.2490,
423.2410, 423.2480, and 423.2490)
We are proposing technical changes to the General Requirements, MLR
review and non-compliance, and Release of MLR data provisions at
Sec. Sec. 422.2410, 422.2480, 422.2490, 423.2410, 423.2480, and
423.2490. These changes are being proposed in conformity with the more
substantive regulatory text changes being proposed herein. These
proposed technical changes do not establish any new rules or
requirements for MA organizations or Part D sponsors. The proposed
technical changes revise references to MLR reports in conformity with
our proposal to scale back Medicare MLR reporting so that we only
require the submission of a limited number of data points, as opposed
to a full report.
2. Medicare Advantage Contract Provisions (Sec. 422.504)
Under the authority of section 1857(b) of the Act, CMS may enter
into a contract with a Medicare Advantage (MA) organization, through
which the organization agrees to comply with applicable requirements
and standards. CMS has established and codified provisions of contracts
between the MA organization and CMS at Sec. 422.504. This proposed
rule seeks to correct an inconsistency in the text that identifies the
contract provisions deemed material to the performance of an MA
contract.
Section 422.504(a) sets forth regulations and instructions at
paragraphs (1) through (15) that are material to the performance of the
MA contract in accordance to Sec. 422.504(a)(16). This is inconsistent
with the introductory regulatory text at Sec. 422.504(a), which
provides, ``An MA organization's compliance with paragraphs (a)(1)
through (a)(13) of this section is material to performance of the
contract.'' Further, both paragraphs (a) and (a)(15) fail to mention
paragraphs (a)(17) and (a)(18).
We propose to correct the inconsistent language by revising the
language in the introductory text in Sec. 422.504(a) and deleting
paragraph Sec. 422.504(a)(16). With this revision, We will renumber
current paragraphs Sec. Sec. 422.504(a)(17) and (a)(18). The proposed
revision to the paragraph (a) introductory text would provide that
compliance with all contract terms listed in paragraph (a) is material.
3. Late Contract Non-Renewal Notifications (Sec. Sec. 422.506,
422.508, and 423.508)
Pursuant to section 1857(c)(1) of the Act, CMS enters into
contracts with MA organizations for a period of 1 year. As implemented
by CMS pursuant to that provision, these contracts automatically renew
absent notification by either CMS or the MA organization to terminate
the contract at the end of the year. Section 1860D-12(b)(3)(B) of the
Act makes this same process applicable to CMS contracts with Part D
plan sponsors. CMS has implemented these provisions in regulations that
permit MA organizations and Part D plan sponsors to non-renew their
contracts, with CMS approval and consent necessary depending on the
timeframe of the sponsoring organization's notice to CMS that a non-
renewal is desired. We are proposing to clarify its operational policy
that any request to terminate a contract after the first Monday in June
is considered a request for termination by mutual consent.
Under Sec. 422.506(a)(2)(i) and Sec. 423.507(a)(2)(i), contract
non-renewals effective at the end of the 1-year contract term must be
submitted to CMS in writing by the first Monday in June. There may be
instances where CMS accepts a late non-renewal notice after the first
Monday in June for an MA contract if the non-renewal is consistent with
the effective and efficient administration of the contract under Sec.
422.506(a)(3). There is no corresponding regulatory provision affording
CMS such discretion for Part D contracts.
We have seen that many MA organizations do not understand that CMS
treats non-renewals requested after the first Monday in June as an
organization's request for a mutual termination pursuant to Sec.
422.508 when determining whether it is in the best interest of the
Medicare program to permit non-renewals in applying Sec.
422.506(a)(3). Organizations that request a non-renewal of their
contract after the first Monday in June, must receive written
confirmation from CMS of the termination by mutual consent pursuant to
Sec. 422.508(a) (and Sec. 423.508(a) if an MA-PD plan) to be
effectively relieved of their obligation to participate in the MA or
Part D programs during the upcoming contract year. CMS has received a
number of late non-renewal requests and has received questions from MA
organizations inquiring why their request was not treated as a contract
non-renewal, but rather as a termination by mutual consent.
We propose to modify Sec. 422.506(a)(3) to remove language that
indicates late non-renewals may be permitted by CMS so that there would
only be one process--mutual termination under Sec. Sec. 422.508--that
is applicable if CMS is not taking action under Sec. 422.506(b) or
Sec. 422.510. Also, we propose to amend Sec. Sec. 422.508 and 423.508
to clarify that organizations that request to non-renew a contract
after the first Monday in June are in effect requesting that CMS agree
to mutually terminate their contract.
4. Contract Request for a Hearing (Sec. Sec. 422.664(b) and
423.652(b))
Under the authority of section 1857(a) of the Act, CMS enters into
contracts with MA organizations which authorize

[[Page 56461]]

them to offer MA plans to Medicare beneficiaries. Similarly, CMS
contracts with Part D plan sponsors according to section 1860D-12(a) of
the Act. CMS determines that an organization is qualified to hold an MA
contract through the application process established at 42 CFR 422,
Subpart K. CMS evaluates the qualifications of potential Part D plan
sponsors according to Subpart K of 42 CFR, part 423. If CMS denies an
application, organizations have the right to appeal CMS's decision
(under Sec. 422.502(c)(3)(iii) and Sec. 423.503(c)(3)(iii) using the
procedures in subparts N of part 422 and part 423). This proposed rule
seeks to correct an inconsistency in the text that identifies CMS's
deadline for rendering its determination on appeals of application
denials.
According to Sec. 422.660(c) and Sec. 423.650(c), CMS must issue
a determination on appealed application denials by September 1 in order
to enter into an MA contract for coverage starting January 1 of the
following year. We codified this September 1 deadline in the April 15,
2010, final rule (45 FR 19699). As stated in the in the 2009 proposed
rule (74 FR 54650 and 54651), we proposed to modify Sec. 422.660(c)
and Sec. 423.660(c), which then specified that the notice of any
decision favorable to a Part C or D applicant must be issued by July 15
for the contract in question to be effective on January 1 of the
following year. However, in that rulemaking, we inadvertently
overlooked other regulatory provisions that address the date by which a
favorable decision must be made on an appeal of a CMS determination
that an entity is not qualified for a Part C or Part D contract.
There is an inconsistency in regulations regarding the date by
which an MA organization must receive a decision from CMS on an appeal.
Section 422.660(c) specifies that a notice of any decision favorable to
the MA organization appealing a determination that it is not qualified
to enter into a contract with CMS must be issued by September 1 for the
contract to be effective on January 1. However, Sec. 422.664(b)(1)
specifies that if a final decision is not reached by July 15, CMS will
not enter into a contract with the applicant for the following year.
Similarly, there is an inconsistency in regulations regarding the date
by which a Part D sponsor must receive a CMS decision on an appeal.
Section 423.650(c) specifies that a notice of any decision favorable to
the MA organization appealing a determination that it is not qualified
to enter into a contract with CMS must be issued by September 1 to be
effective on January 1. However, Sec. 423.652(b)(1) specifies that if
a final decision is not reached on CMS's determination for an initial
contract by July 15, CMS will not enter into a contract with the
applicant for the following year.
We propose to modify Sec. 422.664(b)(1) and Sec. 423.652(b)(1) to
align with the September 1 date codified in Sec. 422.660(c) and Sec.
423.650(c), which was codified on April 15, 2010.
5. Physician Incentive Plans--Update Stop-Loss Protection Requirements
(Sec. 422.208)
Pursuant to section 1852(j)(4), MA organizations that operate
physician incentive plans must meet certain requirements, which CMS has
implemented in Sec. 422.208. MA organizations must provide adequate
and appropriate stop-loss insurance to all physicians or physician
groups that are at substantial financial risk under the MA
organization's physician incentive plan (PIP). The current stop-loss
insurance deductible limits are identified in a table codified at Sec.
422.208(f)(2)(iii).
Under the current regulation, an MA organization that operates a
PIP must provide stop-loss protection for 90 percenter of actual costs
of referral services that exceed the per patient deductible limit to
all physicians and physician groups at financial risk under the PIP.
The stop-loss protection may be per patient or aggregate. The current
regulation contains a chart that identifies per-patient stop-loss
deductible limits for single combined; separate institutional; and
separate professional insurance. The current regulation establishes
requirements for stop-loss attachment points (deductibles) based on the
patient panel size and does not distinguish between at-risk or non-at-
risk patients in that panel. There is no requirement for an MA
organization to provide stop-loss protection when the physician or
physician group has a panel of risk patients of more than 25,000; we
are not proposing to change to this requirement. In recent years, CMS
has received a number of requests to update the stop-loss insurance
limits associated with PIP arrangements to better account for medical
costs and utilization changes that have occurred since the final rule
was published in the June 29, 2000 Federal Register (65 FR 40325) on.
We are not proposing to change the requirements that the MAO (in
connection with the PIP) must provide aggregate stop-loss protection
for 90 percentage of actual costs of referral services that are greater
than 25 percent of potential income to all physicians and physician
groups at financial risk under the PIP and that no stop-loss protection
is required when the panel size of the physician or physician group is
above 25,000. We are proposing three changes to update the existing
regulation:
Update the stop-loss deductible limits at Sec.
422.208(f)(2)(iii) and codify the methodology that CMS would use to
update the stop-loss deductible limits in the future to account for
changes in medical cost and utilization;
Authorize, at paragraph Sec. 422.208(f)(3), MA
organizations to use actuarially equivalent arrangements to protect
against substantial financial loss under the PIP due to the risks
associated with serving particular groups of patients.
Modify paragraph 422.208(f)(2) to allow non-risk patient
equivalents (NPEs), such as Medicare Fee-For-Service patients (FFS),
who obtain some services from the physician or physician group to be
included when determining the deductible.
We do not believe that other substantive requirements set forth in
the PIP regulation, such as the determination of substantial financial
risk based on a risk threshold of 25 percent of potential payments (see
Sec. 422.208(d)(2)), need to be updated regularly or have been
rendered obsolete in the years since the regulation was initially
adopted. Although we are not proposing a change to the determination of
``substantial financial risk,'' we appreciate that the regulatory
standard (25% of potential payments) in Sec. 422.208(d)(2) was adopted
many years ago. Therefore, we seek comment on whether the definitions
of ``substantial financial risk'' and ``risk threshold'' contained in
the current regulation should be revisited, including whether the
current identification of 25 percent of potential payments codified in
paragraph (d)(2) remains appropriate as the standard in light of
changes in medical cost.
b. Update Deductible Limits and Codify Methodology
Because of increases in medical costs and changes in utilization
since the current regulatory standards for PIP stop-loss insurance were
adopted, we are concerned that the current regulation requires stop-
loss insurance on more generous and more expensive terms than is
necessary. Our goal in developing this proposal was to identify the
point at which most, if not all, physicians and physician groups would
be subject to the substantial loss so that the requirement for the
provision of

[[Page 56462]]

stop-loss protection and the parameters of that protection would be
tailored to address that risk. We intend to avoid regulatory
requirements that require protection that is broader than the minimum
required under the statute. In developing the new minimum attachment
points for the stop-loss protection that is required under the statute,
one goal is to provide flexibility to MA organizations and the
physicians and physician groups that participate in PIPs in selecting
between combined stop-loss insurance and separate professional services
and institutional services stop loss insurance.
In order to develop the specific attachment points, we engaged in a
data-driven analysis using Part A and Part B claims data from 340,000
randomly selected beneficiaries from 2016. We assumed a multi-specialty
practice and we estimated medical group income based on FFS claims,
including payments for all Part A and Part B services. We used the
central limit theorem to calculate the distribution of claim means for
a multi-specialty group of any given panel size. This distribution was
used to obtain, with 98% confidence, the point at which a multi-
specialty group of a given panel size would, through referral services,
lose more than 25% of its income derived from services that the
physician or physician group personally rendered. We used projections
of total income based on services provided personally by individual
physicians and directly by physician groups because that is how we
interpret ``potential payments'' as defined in the existing regulation.
The point at which loss would exceed 25% of potential payments was set
as the single combined per patient deductible in Table 13, which we
describe in our proposed text at Sec. 422.208(f)(2)(iii); we are not
proposing to codify the table, but to codify the methodology for
creating it so that the table itself may be updated by CMS as
necessary. Nonetheless, Table 13 would be the table applicable for
contract years beginning on or after January 1, 2019 until CMS
reapplied the methodology and published an updated table under our
proposal. We performed the analysis for multiple panel sizes, which are
listed on Table 13. Table 13 also includes a `net benefit premium'
(NBP) column, which is used under our proposal to identify the
attachment points for separate stop-loss insurance for institutional
services and professional services. This NBP column is not needed for
identification of the minimum attachment point (maximum deductible) for
combined aggregate insurance. The NBP is computed by dividing the total
amount of stop-loss claims (90 percent of claims above the deductible)
for that panel size by the panel size.

Table 13--Combined Stop-Loss Insurance Deductibles
------------------------------------------------------------------------
Net benefit
Panel size Single combined premium (NBP)
deductible PMPY
------------------------------------------------------------------------
400........................... $5,000................ $5,922
800........................... 10,000................ 4,891
1400.......................... 15,000................ 4,122
2,000......................... 20,000................ 3,514
3,300......................... 30,000................ 2,612
4,600......................... 40,000................ 1,984
5,800......................... 50,000................ 1,539
6,900......................... 60,000................ 1,216
7,900......................... 70,000................ 977
10,100........................ 100,000............... 553
12,300........................ 150,000............... 267
13,500........................ 200,000............... 159
14,800........................ 300,000............... 79
16,100........................ 500,000............... 428
16,800........................ 1,000,000............. 12
17,400-25,000................. 2,000,000............. 4
>25,000....................... No Stop Loss.......... 0
------------------------------------------------------------------------

We propose, at paragraph Sec. 422.208 (f)(2)(iii), other
significant provisions. Proposed paragraph Sec. 422.208 (f)(2)(iii)(A)
provides that the table (published by CMS using the methodology
proposed in paragraph Sec. 422.208(f)(2)(iv)) identifies the maximum
attachment point/maximum deductible for per-patient-combined insurance
coverage that must be provided for 90% of the costs above the
deductible or an actuarial equivalent amount. For panel sizes and
deductible amounts not shown in the tables, we propose that linear
interpolation may be used to identify the required deductible for panel
sizes between the table values. In addition, proposed paragraph Sec.
422.208(f)(2)(iii)(B) provides that the table applies only for
capitated risk.
In order to provide the attachment points for separate per patient
insurance for institutional services and professional services, we
propose to use the NBP from Table 13. This second table provides
separate deductibles for physician and institutional services. Table 14
was calculated using a methodology similar to the calculation of Table
13. The source for our estimate of medical group income and
institutional income is derived from CMS claims files which includes
payments for all Part A and Part B services. The central limit theorem
was used to obtain the distribution of claim means, and deductibles
were obtained at the 98 percent confidence level. We propose to codify
the methodology and assumptions for Table 14 in Sec. 422.208
(f)(2)(vi) and (f)(2)(vii).
BILLING CODE 4120-01-P

[[Page 56463]]

[GRAPHIC] [TIFF OMITTED] TP28NO17.013

BILLING CODE 4120-01-C
The physician or physician group would look up the combined
deductible in the second column of Table 13 and select the
corresponding NBP in the

[[Page 56464]]

third column. If necessary, linear interpolation would be used.
Finally, the physician or physician group would select any cell in the
table in Table 14 whose numerical entry is greater than or equal to
that NBP. The row and column labels for this cell are the corresponding
professional and institutional deductibles for that selection. Any such
selection would meet the requirement of the basic rule stated in
paragraph (f)(2)(i). We are proposing to codify the use of this table
of deductibles for separate stop-loss insurance professional services
and institutional services based on the NBP in paragraph (f)(2)(v).
We solicit comment on our proposal, specifically the following:
Whether our proposed regulation text at paragraphs
(f)(2)(iv), (vi) and (vii) details the methodology for developing
Tables 13 and 14 in sufficient detail.
Whether our proposed regulation text clearly identifies
how the tables would be used.
Whether we should finalize a specific schedule, such as
annually or every 3 years for updating the tables using the proposed
methodologies in order to ensure that the maximum deductibles are
consistent with medical cost and utilization trends.
d. Actuarially Equivalent Arrangements
Over the past several years, MA organizations, have requested an
update to the tables as well as additional flexibilities around
protection arrangements other than combined and separate per-patient
stop-loss insurance. CMS believes that providing the flexibility to MA
organizations to use actuarially equivalent arrangements is appropriate
as the nature of the PIP negotiated between the MA organization and
physicians or physician groups might necessitate other arrangements to
properly and adequately protect physicians from substantial financial
risk. Examples where actuarially equivalent modifications might be
necessary, include: Global capitation arrangements that include some,
but not all Parts A and B services; stop-loss policies with different
coinsurances; stop-loss policies that use medical loss ratios (MLR),
which generally pay specific stop-loss amounts only to the extent that
the overall aggregate MLR for the physician group exceeds a certain
amount; stop-loss policies for exclusively primary care physicians; and
risk arrangements on a quota share basis, which occurs when less than
full capitation risk is transferred from a plan to a physician or
physician group. Therefore, we propose to add Sec. 422.208(f)(3) to
permit MA organizations to use other stop-loss protection arrangements;
the proposal would allow actuaries to develop actuarially equivalent
special insurances that are: Appropriately developed for the population
and services furnished; in accordance with generally accepted actuarial
principles and practices; and certified as meeting these requirements
by actuaries who meet the qualification standards established by the
American Academy of Actuaries and follow the practice standards
established by the Actuarial Standards Board. Under this proposal, CMS
would review the attestation of the actuary certifying the special
insurance arrangement. We solicit comment whether these proposed
standards provide sufficient flexibility to MA organizations and
physicians.
c. Non-Risk Patient Equivalents Included in Panel Size
We believe that the number of a physician group's non-risk patients
should be taken into account when setting stop loss deductibles for
risk patients. For example a group with 50,000 non-risk patients and
5,000 risk patients needs less protection than a group with only 3,000
non-risk patients and 5,000 risk patients. We propose, at Sec.
422.208(f)(2)(iii) and (v), to allow non-risk patient equivalents
(NPEs), such as Medicare Fee-For-Service patients, who obtain some
services from the physician or physician group to be included in the
panel size when determining the deductible. Under our proposal, NPEs
are equal to the projected annual aggregate payments to a physician or
physician group for non-global risk patients, divided by an estimate of
the average capitation per member per year (PMPY) for all non-global
risk patients, whether or not they are capitated. Both the numerator
and denominator are for physician services that are rendered by the
physician or physician group. We propose that the deductible for the
stop-loss insurance that is required under this regulation would be the
lesser of: (1) The deductible for globally capitated patients plus up
to $100,000 or (2) the deductible calculated for globally capitated
patients plus NPEs. The deductible for these groups would be separately
calculated using the tables and requirements in our proposed regulation
at paragraph (f)(2)(iii) and (v) and treating the two groups (globally
capitated patients and globally capitated patients plus NPEs)
separately as the panel size. We propose the same flexibility for
combined per-patient stop-loss insurance and the separate stop-loss
insurances. We solicit comment on this proposal.
6. Changes to the Agent/Broker Compensation Requirements (Sec. Sec.
422.2274 and 423.2274)
Sections 103(b)(1)(B) and 103(b)(2) of the Medicare Improvements
for Patients and Providers Act (MIPPA) revised section 1851(j)(2)(D) of
the Act to charge the Secretary with establishing guidelines to
``ensure that the use of compensation creates incentives for agents/
brokers to enroll individuals in the MA plan that is intended to best
meet their health care needs.'' Section 103(b)(2) of MIPPA revised
section 1860D-4(l)(2) of the Act to apply these same guidelines to Part
D sponsors. We believe agents/brokers play a significant role in
providing guidance and are, as such, in a unique position to influence
beneficiary choice. CMS implemented these MIPPA-related changes in a
May 23, 2014 final rule (79 FR 29960). The 2014 final rule revised the
provisions previously established in the interim final rule (IFR)
adopted on September 18, 2008 (73 FR 554226).
The IFR had established the previous compensation structure for
agents/brokers as it applied to the MA and Part D programs. In
particular, the IFR limited compensation for renewal enrollments to no
greater than 50 percent of the rate paid for the initial enrollment on
a 6-year cycle. This structure had proven to be complicated to
implement and monitor, as it required the MA organization or Part D
sponsor to track the compensation paid for every enrollee's initial
enrollment and calculate the renewal rate based on that initial
payment. To the extent that there was confusion about the required
levels of compensation or the timing of compensation, it seemed that
there was an uneven playing field for MA organizations and Part D
sponsors operating in the same geographic area.
In addition to the many inquiries from MA organizations and Part D
sponsors regarding the correct calculation of agent/broker
compensation, CMS found it necessary to take compliance actions against
MA organizations and Part D sponsors for failure to comply with the
compensation requirements. CMS's audit findings and monitoring efforts
performed after implementation of the IFR showed that MA organizations
and Part D sponsors were having difficulty correctly administering the
compensation requirements.
Also, we were concerned that the structure as it existed before the
2014 revisions created an incentive for agents/brokers to move
enrollees from a plan of one parent organization to a plan of another
parent organization, even for like plan-type changes. That

[[Page 56465]]

compensation structure resulted in different payments when a
beneficiary moved from one plan to another like plan in a different
organization. In such situations, the new parent organization would pay
the agent 50 percent of the current initial rate of the new parent
organization; not 50 percent of the initial rate paid by the prior
parent organization. Thus, in cases where the fair market value (FMV)
for compensation had increased, or the other parent organization paid a
higher commission, an incentive existed for the agent to move
beneficiaries from one parent organization to another, rather than
supporting the beneficiary's continued enrollment in the prior parent
organization.
In a 2014 proposed rule (79 FR 1918), we proposed to simplify
agent/broker compensation rules to help ensure that plan payments were
correct and establish a level playing field that further limited the
incentive for agents/brokers to move enrollees for financial gain
rather than for the beneficiary's best interest. In the final rule
published on May 23, 2014, we codified technical changes to the
language established by the IFR relating to agent/broker compensation,
choosing instead to link payment rates for renewal enrollments to
current FMV rates rather than the rate paid for the original (that is,
initial) enrollment. These changes also effectively removed the 6-year
cycle from the payment structure. We codified these changes in
Sec. Sec. 422.2274(a), (b), and (h) for MA organizations and
Sec. Sec. 423.2274(a), (b), and (h) for Part D sponsors.
At that time, we should have also proposed to remove the language
at Sec. 422.2274(b)(2)(i), Sec. 422.2274(b)(2)(ii), Sec.
423.2274(b)(2)(i), and Sec. 423.2274(b)(2)(ii), but we failed to do
so. Since then, this language is no longer relevant, as the current
compensation structure is not based on the initial payment. However, it
has created confusion among plan staff and brokers.
We propose to make a technical correction to the existing
regulatory language at Sec. 422.2274(b) and Sec. 423.2274(b). We
propose to remove the language at Sec. Sec. 422.2274(b)(2)(i),
422.2274(b)(2)(ii), 423.2274(b)(2)(i), and 423.2274(b)(2)(ii).
Additionally, we would renumber the existing provisions under Sec.
422.2274(b) and Sec. 423.2274(b) for clarity.
7. Changes to the Agent/Broker Requirements (Sec. Sec. 422.2272(e) and
423.2272(e))
Section 1851(h)(7) of the Act directs CMS to act in collaboration
with the states to address fraudulent or inappropriate marketing
practices. In particular, section 1851(h)(7)(A)(i) of the Act requires
that MA organizations only use agents/brokers who have been licensed
under state law to sell MA plans offered by those organizations.
Section 1860D-4(l)(4) of the Act references the requirements in section
1851(h)(7) of the Act and applies them to Part D sponsors. We have
codified the requirement in Sec. Sec. 422.2272(c) and 423.2272(c).
In the April 15, 2011, final rule (76 FR 21503 and 21504), we
codified a provision in Sec. Sec. 422.2272(e) and 423.2272(e) that
required MA organizations and Part D sponsors to terminate any employed
agent/broker who became unlicensed. The provision also required MA
organizations and Part D sponsors to notify any beneficiaries enrolled
by the unqualified agent/broker of that agent/broker's status. Finally,
the provision specified that the MA organization or Part D sponsor must
comply with any request from the beneficiary regarding the
beneficiary's options to confirm enrollment or make a plan change if
the beneficiary requests such upon notification of the agent/broker's
status.
Since implementation of the provision in Sec. Sec. 422.2272(e) and
423.2272(e), we have become aware that the regulation does not allow
latitude for punitive action in situations when a license lapses. The
MA organization or Part D sponsor may terminate the agent/broker and
immediately rehire the individual thereafter if licensure has been
already reinstated or prohibit the agent/broker from ever selling the
MA organization's or Part D sponsor's products again. Discussions with
the industry indicate that these two options are impractical due to
their narrow limits. We believe agents/brokers play a significant role
in providing guidance to beneficiaries and are in a unique position to
positively influence beneficiary choice. However, the statute directs
CMS to require MA organizations and Part D sponsors to only use agents/
brokers who are licensed under state law. We do not intend to change
the regulation, at Sec. Sec. 422.2272(c) and 423.2272(c), requiring
agent/broker licensure as a condition of being hired by a plan, and
will continue to review the licensure status of agents/brokers during
those monitoring activities that focus on MA organizations' and Part D
sponsors' marketing activities. CMS believes MA organizations and Part
D sponsors should determine the level of disciplinary action to take
against agents/brokers who fail to maintain their license and have sold
MA/Part D products while unlicensed, so long as the MA organization or
Part D plan complies with the remaining statutory and regulatory
requirements.
We propose to delete Sec. Sec. 422.2272(e) and 423.2272(e), the
provisions that limit what MA organizations and Part D sponsors can do
when they have discovered that a previously licensed agent/broker has
become unlicensed. Nonetheless, CMS may pursue compliance actions upon
discovery of MA organizations and Part D sponsors who allow unlicensed
agents/brokers to continue selling their products in violation of
Sec. Sec. 422.2272(c) and 423.2272(c).
Note that deleting paragraph (e) from Sec. Sec. 422.2272 and
423.2272 removes language describing the opportunity beneficiaries have
to select a different MA or Part D plan when the broker who enrolled
them was unlicensed at the time the beneficiaries enrolled. Removing
paragraph (e) from Sec. Sec. 422.2272 and 423.2272 does not eliminate
the special enrollment period (SEP) that enrollees receive when it is
later discovered that their agent/broker was not licensed at the time
of the enrollment as that SEP exists under the authority of Sec.
422.62(b)(4).
8. Codification of Certain Medicare Premium Adjustments as Initial
Determinations (Sec. 405.924)
Current regulations at Sec. 405.924(a) set forth Social Security
Administration (SSA) actions that constitute initial determinations
under section 1869(a)(1) of the Act. These actions at Sec. 405.924(a)
include determinations with respect to entitlement to Medicare hospital
(Part A) or supplementary medical insurance (Part B), disallowance of
an application for entitlement; a denial of a request for withdrawal of
an application for Medicare Part A or Part B, or denial of a request
for cancellation of a request for withdrawal; or a determination as to
whether an individual, previously determined as entitled to Part A or
Part B, is no longer entitled to these benefits, including a
determination based on nonpayment of premiums.
In addition to the actions set forth at Sec. 405.924(a), SSA, the
Office of Medicare Hearings and Appeals (OMHA), and the Departmental
Appeals Board (DAB) also treat certain Medicare premium adjustments as
initial determinations under section 1869(a)(1) of the Act. These
Medicare premium adjustments include Medicare Part A and Part B late
enrollment and reenrollment premium increases made in accordance with
sections 1818, 1839(b) of the Act, Sec. Sec. 406.32(d),

[[Page 56466]]

408.20(e), and 408.22 of this chapter, and 20 CFR 418.1301. Due to the
effect that these premium adjustments have on individuals' entitlement
to Medicare benefits, they constitute initial determinations under
section 1869(a)(1) of the Act.
Accordingly, we are proposing to add a new paragraph (5) to Sec.
405.924(a) to clarify that these premium adjustments, made in
accordance with sections 1818 and 1839(b) of the Act, Sec. Sec.
406.32(d) and 408.22 of this chapter, and 20 CFR 418.1301, constitute
initial determinations under section 1869(a)(1) of the Act. Because
this proposed change seeks only to codify existing processes related to
premium adjustments, and not to alter existing processes or procedures,
it applies only to Part A and Part B late enrollment and reenrollment
penalties. Based on 1860D-13(b)(6)(C) of the Act, CMS does not consider
Part D late enrollment and reenrollment penalties to be initial
determinations. As a result, their appeal rights stop at the
reconsideration level.
9. Eliminate Use of the Term ``Non-Renewal'' To Refer to a CMS-
Initiated Termination (Sec. Sec. 422.506, 422.510, 423.507 and
423.509)
Section 1857(c)(2) of the Act provides the bases upon which CMS may
make a decision to terminate a contract with an MA organization. Under
section 1860D 12(b)(3) of the Act, these same bases are available for a
CMS termination of a Part D sponsor contract, as section 1860D-12(b)(3)
of the Act incorporates into the Part D program the Part C bases by
reference to section 1857(c)(2). Also, sections 1857(h) and 1860D
12(b)(3)(F) of the Act provide the procedures CMS must follow in
carrying out MA organization or Part D sponsor contract terminations.
Although the Act only expressly refers to terminations, through
rulemaking and subregulatory guidance, we have created two different
processes relating to severing the contractual agreement between CMS
and an MA organization or Part D sponsor. In accordance with sections
1857(h) and 1860D-12(b)(3)(F) of the Act, we have adopted regulations
providing for distinct contract termination and bases and procedures
for nonrenewal if contracts. Our regulations at Sec. Sec. 422.506 and
422.510 provide for the nonrenewal and termination, respectively, of
CMS contracts with MA organizations. The Part D regulations provide for
similar procedures with respect to Part D sponsor contracts at
Sec. Sec. 423.507 and 423.509.
Each nonrenewal provision is divided into two parts, one governing
nonrenewals initiated by a sponsoring organization and another
governing nonrenewals initiated by CMS. Two features of the nonrenewal
provisions have created multiple meanings for the term ``nonrenewal''
in the operation of the Part C and D programs, contributing, in some
instances, to confusion within CMS and among contracting organizations
surrounding the use of the term. The first feature is the difference
between non renewals initiated by sponsoring organizations and those
initiated by CMS with respect to the need to establish cause for such
an action. The second is the partial overlap between CMS' termination
authority and our nonrenewal authority. We propose to revise our use of
terminology such that that the term ``nonrenewal'' only refers to
elections by contracting organizations to discontinue their contracts
at the end of a given year. We propose to remove the CMS initiated
nonrenewal authority stated at paragraph (b) from both Sec. Sec.
422.506 and 423.507 and modify the existing CMS initiated termination
authority at Sec. Sec. 422.510 and 423.509 to reflect this change.
MA organizations and Part D plan sponsors may elect to end the
automatic renewal provision in Part C or Part D contracts and
discontinue those contracts with CMS without cause, simply by providing
notice in the manner and within the timeframes stated at Sec.
422.506(a) and Sec. 423.507(a). Thus, organizations are free to make a
business decision to end their Medicare contract at the end of a given
year and need not provide CMS with a rationale for their decision. By
contrast, CMS may not end an MA organization or Part D plan sponsor's
contract through nonrenewal without establishing that the contracting
organization's performance has met the criteria for at least one of the
stated bases for a CMS initiated contract nonrenewal in paragraphs (b)
of those sections.
Contracting organizations often respond to changes in the Medicare
markets or changes in their own business objectives by making decisions
to end or modify their participation in the Part C and D programs.
Thus, these organizations exercise their nonrenewal rights under Sec.
422.506(a) and Sec. 423.507(a) much more frequently than CMS conducts
contract non renewals under Sec. 422.506(b) and Sec. 423.507(b). As a
result, within CMS and among industry stakeholders, the term
``nonrenewal'' has effectively come to refer almost exclusively to MA
organization and Part D plan sponsor initiated contract non renewals.
The termination authority allows us to provide notice of such an
action at any time and make it effective at least 30 days after
providing such notice to the contracting organization. By contrast, CMS
may issue a nonrenewal notice of a contract no later than August 1, and
the nonrenewal takes effect at the end of the current contract year.
Yet, the result of both actions taken by CMS is the discontinuation,
for cause (although the basis of that cause might be different), of an
organization's MA or Part D contract.
The similarities between nonrenewal and termination are
demonstrated by the extensive but not complete overlap in bases for CMS
action under both processes. For example, both nonrenewal authorities
incorporate by reference the bases for CMS initiated terminations
stated in Sec. 422.510 and Sec. 423.509. The remaining CMS initiated
nonrenewal bases (any of the bases that support the imposition of
intermediate sanctions or civil money penalties (Sec. Sec.
422.506(b)(iii) and Sec. 423.507(b)(1)(ii)), low enrollment in an
individual MA plan or PDP (Sec. Sec. 422.506(b)(iv) and
423.507(b)(1)(iii)), or failure to fully implement or make significant
progress on quality improvement projects (Sec. 422.506(b)(i))) were
all promulgated in accordance with our statutory termination authority
at sections 1857(c)(2) and 1860D-12(b)(3) of the Act and are all more
specific examples of an organization's substantial failure to carry out
the terms of its MA or Part D contract or its carrying out the contract
in an inefficient or ineffective manner. Therefore, we propose striking
these provisions from the nonrenewal portion of the regulation and
adding them to the list of bases for CMS initiated contract
terminations.
Finally, there are aspects of the notice requirements related to
the CMS initiated nonrenewal authority that are useful in the
administration of the Part C and D programs and which we propose
preserving in the revised termination provision. Specifically, Sec.
422.506(b)(2)(ii) requires notice to be provided by mail to a
contracting organization's enrollees at least 90 days prior to the
effective date of the nonrenewal, while Sec. 422.510(b)(1)(ii)
requires affected plan enrollees to be notified within 30 days of the
effective date of the termination. We see a continuing benefit to the
administration of the Part C and D programs in retaining the authority
to ensure that, when possible, enrollees can be made aware of their
plan's discontinuation at least by October 1 of a given year so that
they can make the necessary plan choice

[[Page 56467]]

during the annual election period. Therefore, we propose adding
provisions at Sec. Sec. 422.510(b)(2)(v) and 423.509(b)(2)(v) to
require that enrollees receive notice no later than 90 days prior to
the December 31 effective date of a contract termination when we make
such determination on or before August 1 of the same year.

III. Collection of Information Requirements

Under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq.),
we are required to provide 60-day notice in the Federal Register and
solicit public comment before a collection of information requirement
is submitted to the Office of Management and Budget (OMB) for review
and approval. 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.
In this proposed rule, we are soliciting public comment on each of
these issues for the following sections of this document that contain
information collection requirements (ICRs).

A. Wage Data

To derive average costs, we used data from the U.S. Bureau of Labor
Statistics' (BLS') May 2016 National Occupational Employment and Wage
Estimates for all salary estimates (http://www.bls.gov/oes/current/oes_nat.htm). In this regard, the following table presents the mean
hourly wage, the cost of fringe benefits and overhead (calculated at
100 percent of salary), and the adjusted hourly wage.

Table 15--National Occupational Employment and Wage Estimates
----------------------------------------------------------------------------------------------------------------
Fringe Adjusted
BLS occupation title Occupation Mean hourly benefits and hourly wage ($/
code wage ($/hr) overhead ($hr) hr)
----------------------------------------------------------------------------------------------------------------
Business Operations Specialist.................. 13-1000 34.54 34.54 69.08
Compliance Officers............................. 13-1041 33.77 33.77 67.54
Computer and Information Systems Managers....... 11-3021 70.07 70.07 140.14
Computer Programmer............................. 15-1131 40.95 40.95 81.90
Health Diagnostic and Treating Practitioners.... 29-1199 40.77 40.77 81.54
Insurance Claim and Policy Processing Clerk..... 43-9041 19.61 19.61 39.22
Lawyers......................................... 23-1011 67.25 67.25 134.50
Medical and Health Service Manager.............. 11-9111 52.58 52.58 105.16
Medical Secretary............................... 43-6013 16.85 16.85 33.70
Office and Administrative Support Workers, All 43-9199 17.33 17.33 34.66
Other..........................................
Physicians and Surgeons......................... 29-1060 101.04 101.04 202.08
Physicians and Surgeons, all other.............. 29-1069 98.83 98.83 197.66
Software Developers and Programmers............. 15-1130 48.11 48.11 96.22
Word Processors and Typists..................... 43-9022 19.22 19.22 38.44
----------------------------------------------------------------------------------------------------------------

As indicated, we are adjusting our employee hourly wage estimates
by a factor of 100 percent. This is necessarily a rough adjustment,
both because fringe benefits and overhead costs vary significantly from
employer to employer, and because methods of estimating these costs
vary widely from study to study. Nonetheless, there is no practical
alternative and we believe that doubling the hourly wage to estimate
total cost is a reasonably accurate estimation method.

B. Proposed Information Collection Requirements (ICRs)

1. ICRs Regarding Passive Enrollment Flexibilities To Protect
Continuity of Integrated Care for Dually Eligible Beneficiaries (Sec.
422.60(g))
In section II.A.9 of this proposed rule, we are proposing a limited
expansion of passive enrollment authority. More specifically, the new
provisions at Sec. 422.60(g) would allow CMS, in consultation with a
state Medicaid agency, to implement passive enrollment procedures in
situations where criteria identified in the regulation text are met. We
propose the criteria based on our policy determination that passive
enrollment is appropriate in those cases to promote integrated care and
continuity of care for full-benefit dual eligible beneficiaries who are
currently enrolled in an integrated D-SNP.
Under passive enrollment procedures, a beneficiary who is offered a
passive enrollment is deemed to have elected enrollment in a plan if he
or she does not affirmatively elect to receive Medicare coverage in
another way. Plans to which individuals are passively enrolled under
the proposed provision would be required to comply with the existing
requirement under Sec. 422.60(g) to provide a notification. The notice
must explain the beneficiaries' right to choose another plan, describe
the costs and benefits of the new plan, how to access care under the
plan, and the beneficiary's ability to decline the enrollment or choose
another plan. Providing notification would include mailing notices and
responding to any beneficiary questions regarding enrollment.
We anticipate that there will be relatively few instances each year
in which passive enrollment occurs under the new provisions at Sec.
422.60(g). This is informed by our experience in implementing passive
enrollments under the existing regulations at Sec. 422.60(g), where in
recent years there have been only one to two contract terminations
annually where CMS allows passive enrollment. We estimate that
approximately one percent of the 373 active D-SNPs would meet the
criteria identified in the regulation text, and operate in a market
where all of the conditions of passive enrollment are met and where
CMS, in consultation with a state Medicaid agency, implements passive
enrollment. Therefore, under the new provisions at Sec. 422.60(g), we
anticipate only four additional instances in which CMS allows passive
enrollment each year.
We estimate it would take 10 hours at $69.08/hr for a business
operations

[[Page 56468]]

specialist to develop the initial notice. We also estimate it would
take 1 minute for a business operations specialist to electronically
generate and submit a notice for each beneficiary that is offered
passive enrollment. We estimate that approximately 5,520 full-benefit
dual eligible beneficiaries would be sent a notice in each instance in
which passive enrollment occurs, which reflects the average enrollment
of currently active D-SNP plans. Four instances of passive enrollment
annually would result in 22,080 beneficiaries being sent the notice
(5,520 x 4 organizations) each year.
To develop the initial notice, we estimate a one-time burden of 40
hours (4 organizations x 10 hr) at a cost of $2,763.20 (40 hr x $69.08/
hr) or $690.80 per organization ($2,763.20/4 organizations). To
electronically generate and submit a notice to each beneficiary, we
estimate a total burden of 368 hours (22,080 beneficiaries x 1 min/60)
at a cost of $25,421.44 (368 hr x $69.08/hr) or $6,355.36 per
organization ($25,421.44/4 organizations) annually.
Since we estimate fewer than 10 respondents, the information
collection requirements are exempt (5 CFR 1320.3(c)) from the
requirements of the Paperwork Reduction Act of 1995. However, we seek
comment on our estimates for the overall number of respondents and the
associated burden.
2. ICRs Regarding the Restoration of the MA Open Enrollment Period
(Sec. Sec. 422.60, 422.62, 422.68, 423.38, and 423.40)
In section II.B.1. of this rule, we are proposing to codify the
requirements for open enrollment and disenrollment opportunities at
Sec. Sec. 422.60, 422.62, 422.68, 423.38, and 423.40 that would
eliminate the existing MADP and establish a MA Open Enrollment Period
(OEP). This new OEP revises a previous OEP which would allow MA-
enrolled individuals the opportunity to make a one-time election during
the first 3 months of the calendar year to switch MA plans, or
disenroll from an MA plan and obtain coverage through Original
Medicare. Although no new data would be collected, the burden
associated with this requirement would be the time and effort that it
takes an MA organization to process an increased number of enrollment
and disenrollment requests by individuals using this OEP, which is
first available in 2019.
To estimate the potential increase in the number of enrollments and
disenrollments from the new OEP, we considered the percentage of MA-
enrollees who used the old OEP that was available from 2007 through
2010. For 2010, the final year the OEP existed before the MADP took
effect, we found that approximately 3 percent of individuals used the
OEP. While the parameters of the old OEP and new OEP differ slightly,
we believe that this percentage is the best approximation to determine
the burden associated with this change. In January 2017, there were
approximately 18,600,000 individuals enrolled in MA plans. Using the 3
percent adjustment, we expect that 558,000 individuals (18.6 million MA
beneficiaries x 0.03), would use the OEP to make an enrollment change.
a. Beneficiary Estimate (Current OMB Control Number 0938-0753 (CMS-R-
267))
We estimate it would take a beneficiary approximately 30 minutes
(0.5 hours) at $7.25/hour to complete an enrollment request. While
there may be some cost to the respondents, there are individuals
completing this form who are working currently, may not be working
currently or never worked. Therefore, we used the current federal
minimum wage outlined by the U.S. Department of Labor (https://www.dol.gov/whd/minimumwage.htm) to calculate costs. The burden for all
beneficiaries is estimated at 279,000 hours (558,000 beneficiaries x
0.5 hour) at a cost of $2,022,750 (279,000 hour x $7.25/hour) or $3.63
per beneficiary ($2,022,750/558,000 beneficiaries).
b. MA Organization Estimate (Current OMB Ctrl# 0938-0753 (CMS-R-267))
There are currently 468 MA organizations in 2017. Not all MA
organizations are required to be open for enrollment during the OEP.
However, for those that are, we estimate that this enrollment period
would result in approximately 1,192 enrollments per organization
(558,000 individuals/468 organizations) during the OEP each year.
We estimate it would take approximately 5 minutes at $69.08/hour
for a business operations specialist to determine eligibility and
effectuate the changes for open enrollment. The burden for all
organizations is estimated at 46,500 hours (558,000 beneficiaries x 5
min/60) at a cost of $3,212,220 (46,500 hour x $69.08/hour) or $6,864
per organization ($3,212,220/468 MA organizations).
Once the enrollment change is completed, we estimate that it will
take 1 minute at $69.08/hour for a business operations specialist to
electronically generate and submit a notice to convey the enrollment or
disenrollment decision for each of the 558,000 beneficiaries. The total
burden to complete the notices is 9,300 hours (558,000 notices x 1 min/
60) at a cost of $642,444 (9,300 hour x $69.08/hour) or $1.15 per
notice ($642,444/558,000 notices) or $1,372.74 per organization
($642,444/468 MA organizations).
The burden associated with electronic submission of enrollment
information to CMS is estimated at 1 minute at $69.08/hour for a
business operations specialist to submit the enrollment information to
CMS during the open enrollment period. The total burden is estimated at
9,300 hours (558,000 notices x 1 min/60) at a cost of $642,444 (9,300
hour x $69.08/hour) or $1.15 per notice ($642,444/558,000 notices) or
$1,372.74 per organization ($642,444/468 MA organizations).
Additionally, MA organizations will have to retain a copy of the
notice in the beneficiary's records. The burden associated with this
task is estimated at 5 minutes at $34.66/hour for an office and
administrative support worker to perform record retention for the open
enrollment period. In aggregate we estimate an annual burden of 46,500
hours (558,000 beneficiaries x 5 min/60) at a cost of $1,606,110
(46,500 hour x $34.66/hour) or $3,431.86 per organization ($1,606,110/
468 MA organizations).
We estimate a total annual burden for all MA organizations
resulting from this proposed provision to be 111,600 hours (46,500 hour
+ 9,300 hour + 9,300 hour + 46,500 hour) at a cost of $6,103,218
($3,212,220 + $642,444 + $642,444 + $1,606,110). Per organization, we
estimate an annual burden of 238 hours (111,600 hour/468 MA
organizations) at a cost of $13,041 ($6,103,218/468 organizations). For
beneficiaries we estimate a total annual burden of 279,000 hours at a
cost of $2,022,750 and a per beneficiary burden of 30 minutes at $3.63.
The proposed requirements and burden will be submitted to OMB for
approval under control number 0938-0753 (CMS-R-267).
3. ICRs Regarding Coordination of Enrollment and Disenrollment Through
MA Organizations and Effective Dates of Coverage and Change of Coverage
(Sec. Sec. 422.66 and 422.68) OMB Control Number 0938-0753 (CMS-R-267)
In section II.A.8. of this rule we propose to revise Sec. 422.66
and 422.68 by: Codifying the requirements for default enrollment that
are currently set out in subregulatory guidance,\60\

[[Page 56469]]

revising current practice to limit the use of this type of enrollment
mechanism, and clarifying the effective date for ICEP elections. This
would provide an MA organization the option to enroll its Medicaid
managed care enrollees who are newly eligible for Medicare into an
integrated D-SNP administered by the same MA organization that operates
the Medicaid managed care plan. While our proposal restricts its use to
individuals in the organization's Medicaid managed care plan that can
be enrolled into an integrated D-SNP, the estimated burden for an
organization that desires to use default enrollment and obtain CMS
approval would not change. For those MA organizations that want to use
this enrollment mechanism and request and obtain CMS approval, the
administrative requirements would remain unchanged from the current
practice. Enrollment requirements and burden are currently approved by
OMB under control number 0938-0753 (CMS-R-267). Since this proposed
rule would not impose any new or revised requirements/burden, we are
not making any changes to that control number.
---------------------------------------------------------------------------

\60\ Chapter 2 of the Medicare Managed Care Manual found at
https://www.cms.gov/Medicare/Eligibility-and-Enrollment/MedicareMangCareEligEnrol/index.html?redirect=/MedicareMangCareEligEnrol/.
---------------------------------------------------------------------------

4. ICRs Regarding Timing and Method of Disclosure Requirements
(Sec. Sec. 422.111(a)(3) and (h)(2)(ii) and 423.128(a)(3) and
423.128(d)(2)) (OMB Control Number 0938-1051)
a. Timing of Disclosure (Sec. Sec. 422.111(a)(3) and 423.128(a)(3))
In section II.B.4. of this rule, we propose to revise the timing
and method of disclosing the information as required under Sec.
422.111(a) and (b) and the timing of such disclosures under Sec.
423.128(a) and (b). These regulations provide for disclosure of plan
content information to beneficiaries. We would revise Sec. Sec.
422.111(a)(3) and 423.128(a)(3) by requiring MA plans and Part D
sponsors to provide the information in Sec. Sec. 422.111(b) and
423.128(b) by the first day of the annual enrollment period, rather
than 15 days before that period. Plans must still distribute the ANOC
15 days prior to the AEP. In other words, the proposed provision would
provide the option of either submitting the EOC with the ANOC or
waiting until the first day of the AEP, or sooner, for distribution.
The provision simply gives plans that may need some flexibility the
ability to rearrange schedules and defer a deadline. Consequently,
there is no change in burden.
b. Method of Disclosure (Sec. Sec. 422.111(h)(2) and 423.128(d)(2))
(OMB Control Number 0938-1051)
Sections 422.111(h)(2)(i) and 423.128(d)(2)(i) require that plans
maintain a Web site which contains the information listed in Sec. Sec.
422.111(b) and 423.128(b). Section 422.111(h)(2)(ii) states that the
posting of the EOC, Summary of Benefits, and provider network
information on the plan's Web site ``does not relieve the MA
organization of its responsibility under Sec. 422.111(a) to provide
hard copies to enrollees.'' There is no parallel to Sec.
422.111(h)(2)(ii) in Sec. 423.128 for Part D sponsors. Further, Sec.
423.128(a) includes language providing that disclosures required under
that section be ``in the manner specified by CMS.''
In Sec. 422.111(h)(2)(ii), we propose to modify the sentence which
states that posting the EOC, Summary of Benefits, and provider network
information on the plan's Web site does not relieve the plan of its
responsibility to provide hard copies of these documents to
beneficiaries ``upon request.'' In addition, we propose to add the
phrase ``in the manner specified by CMS'' in paragraph (a). These
proposed revisions would give CMS the authority to permit MA plans the
flexibility to provide the information in Sec. 422.111(b)
electronically when specified by CMS as a permissible delivery option,
and better aligns with the provisions under Sec. 423.128. We intend to
continue to specify hardcopy mailing, as opposed to electronic
delivery, for most documents that convey the type of information
described in paragraph (b). CMS intends that provider and pharmacy
directories, the plan's Summary of Benefits, and EOC documents would be
those for which electronic posting and delivery of a hard copy upon
request are permissible. Electronic delivery would reduce plan burden
by reducing printing and mailing costs. Additionally, the IT systems of
the plans are already set up to format and print these documents. Also,
plans must provide hard copies upon request. To estimate the cost of
printing these documents, we note that the CMS Trustee's report,
accessible at https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/ReportsTrustFunds/, lists 47.8 million
beneficiaries in MA, Section 1876 cost,\61\ and Prescription Drug
contracts for contract year 2019.
---------------------------------------------------------------------------

\61\ Per 42 CFR 417.427, cost plans must comply with Sec.
422.111 and Sec. 423.128.
---------------------------------------------------------------------------

Based on reports from the InternetSociety.org and Pew Research
Center,\62\ we estimate that 33 percent of these beneficiaries who are
in MA and Prescription Drug contracts would prefer to opt in to
receiving hard copies to receiving electronic copies. Thus, the savings
comes from the 67 percent of beneficiaries who are in MA and
Prescription Drug contracts that will not opt in to having printed
copies mailed to them, namely 67 percent x 47.8 = 32,026,000
individuals.
---------------------------------------------------------------------------

\62\ Global Internet Report, 2017, Internet Society, http://www.internetsociety.org/globalinternetreport/2016/?gclid=EAIaIQobChMI-tz1nN_W1QIVgoKzCh1EVggBEAAYASAAEgLpj_D_BwE and
``Tech Adoption Climbs Among Older Adults,'' Pew Research Center,
http://www.pewinternet.org/2017/05/17/tech-adoption-climbs-among-older-adults/.
---------------------------------------------------------------------------

The major expenses in printing an EOC include paper, toner, and
mailing costs. The typical EOC has 150 pages. Typical wholesale costs
of paper are between $2.50 and $5.00 for a ream of 500 sheets. We
assume $2.50 per ream of 500 sheets. Since each EOC has 150 pages, we
are estimating a cost of $0.75 per EOC [$2.50/(150 pages per EOC/500
sheets per ream)]. Thus, we estimate that the total savings from paper
is $24,019,500 (32,026,000 EOCs x $0.75 per EOC).
Toner costs can range from $50 to $200 and each toner can last
4,000 to 10,000 pages. We conservatively assumes a cost of $50 for
10,000 pages. Each toner would print 66.67 EOCs (10,000 pages per
toner/150 pages per EOC) at a cost of $0.005 per page ($50/10,000
pages) or $0.75 per EOC ($0.005 per page x 150 pages). Thus, we
estimate that the total savings on toner is $24,019,500 ($0.75 per EOC
x 32,026,000 EOCs).
Regarding mailing costs, since a ream of paper with 2,000 8.5
inches by 11 inches pages weighs 20 pounds or 320 ounces it then
follows that 1 sheet of paper weighs 0.16 ounces (320 ounces/2,000
pages). Therefore, a typical EOC of 150 pages weighs 24 ounces (0.016
ounces/page x 150 pages) or 1.5 pounds. Since commercial mailing rates
are 13.8 cents per pound, the total savings in mailings is $6,629,382
($0.138/pounds x 1.5 pound x 32,026,000 EOCs).
In aggregate, we estimate a savings (to plans for not producing and
mailing hardcopy EOCs) of $54,668,382 ($24,019,500 + $24,019,500 +
$6,629,382). We will submit the proposed requirements and burden to OMB
for approval under OMB control number 0938-1051 (CMS-10260).
5. ICRs Regarding the Removal of Quality Improvement Project for
Medicare Advantage Organizations (Sec. 422.152) (OMB Control Number
0938-1023)
In section II.B.12. of this rule, we are proposing the removal of
the Quality Improvement Project (QIP) requirements (and CMS-direction
of QIPs) from the Quality Improvement (QI) Program

[[Page 56470]]

requirements, which would result in an annual savings of $12,663.75 to
MA organizations. The driver of the anticipated savings is the removal
of requirements to attest having a QIP annually.
To derive our savings, we estimate that it takes 1 MA organization
staff member (BLS: Compliance Officer) 15 minutes (0.25 hour) at
$67.54/hour to submit a QIP attestation. Currently, there are 750 MA
contracts, and each contract is required to submit a QIP attestation.
Therefore, we anticipate that there will be 750 QIP attestations
annually.
Using these assumptions, we estimate that the removal of the QIP
provision will result in a total savings of 187.5 hours (750 contracts
x 0.25 hour) at $12,663.75 (187.5 hour x $67.54/hour) or $16.89 per
contact ($12,663.75/750 contracts).
The proposed requirements and burden will be submitted to OMB for
approval under control number 0938-1023 (CMS-10209).
6. ICRs Regarding Medicare Advantage Quality Rating System (Sec. Sec.
422.162, 422.164, 422.166, 422.182, 422.184, and 422.186)
In section II.A.11. of this rule, we are proposing to codify the
existing measures and methodology for the Part C and D Star Ratings
program. The proposed provisions would not change any respondent
requirements or burden pertaining to any of CMS' Star Ratings-related
PRA packages including: OMB control number 0938-0701 for CAHPS (CMS-
10203), OMB control number 0938-0732 for HOS (CMS-R-246), OMB control
number 0938-1028 for HEDIS (CMS-10219), OMB control number 0938-1054
for Part C Reporting Requirements (CMS-10261), and OMB control number
0938-0992 for Part D Reporting Requirements (CMS-10185).
Since this rule would not impose any new or revised requirements/
burden, we are not making changes to any of the aforementioned control
numbers.
7. ICRs Regarding Medicare Advantage Plan Minimum Enrollment Waiver
(Sec. 422.514(b))
CMS regulations provide Medicare Advantage (MA) organizations,
including provider sponsored organizations, with the opportunity to
request a waiver of CMS's minimum enrollment requirements at Sec.
422.514(a) during the first 3 years of the contract. Regulations also
require that MA organizations reapply for the minimum enrollment waiver
in the second and third years of their contract. However, since CMS has
not received or approved any waivers outside of the application
process, CMS proposes to remove the requirement for MA organizations to
reapply for the minimum enrollment waiver during years 2 and 3 of the
contract under Sec. 422.514(b)(2) and (3). CMS also proposes to modify
Sec. 422.514(b)(2) to clarify that CMS will only accept a waiver
through the application process and allow the minimum enrollment
waiver, if approved by CMS, to remain effective for the first 3 years
of the contract. The requirement and burden associated with the
submission of the minimum enrollment waiver in the application is
currently approved by OMB under control number 0938-0935 (CMS-10237)
which does not need to be revised.
8. ICRs Regarding Revisions to Sec. Sec. 422 and 423 Subpart V,
Communication/Marketing Materials and Activities
In section II.B.5. of this rule, we are proposing to narrow the
definition of ``marketing materials'' under Sec. Sec. 422.2260 and
423.2260 to only include materials and activities that aim to influence
enrollment decisions. We believe the proposed definitions appropriately
safeguard potential and current MA/PDP enrollees from inappropriate
steering of beneficiary choice, while not including materials that pose
little risk to current or potential enrollees and are not traditionally
considered ``marketing.'' Revisions to Sec. Sec. 422.2260 and 423.2260
would provide a narrower definition than is currently provided for
``marketing materials.'' Consequently, this change decreases the number
of marketing materials that must be reviewed by CMS before use.
Additionally, the proposal would more specifically outline the
materials that are and are not considered marketing materials.
We believe the net effects of the proposed changes would reduce the
burden to MA organizations and Part D sponsors by reducing the number
of materials required to be submitted to us for review.
To estimate the savings, we reviewed the most recent 12-month
period of marketing material submissions from the Health Plan
Management System, July 2016 through and including June 2017. As
documented in the currently approved PRA package, we also estimates
that it takes a plan 30 minutes at $69.08/hour for a business
operations specialist to submit the marketing materials. To complete
the savings analysis, we also must estimate the number of marketing
materials that would have been submitted to and reviewed by CMS under
the current regulatory marketing definition (note that while all
materials that meet the regulatory definition of marketing must be
submitted to CMS, not all marketing materials are prospectively
reviewed by CMS). Certain marketing materials qualify for ``File and
Use'' status, which means the material can be submitted to CMS and used
5 days after submission, without being prospectively reviewed by CMS.
We estimates 90 percent of marketing materials are exempt from our
prospective review because of the file and use process. Thus, we only
prospectively review about 10 percent of the marketing materials
submitted.
Marketing materials are coded using 4- or 5-digit numbers, based on
marketing material type. The relevant codes and counts are summarized
in Table 16.
BILLING CODE 4120-01-P

[[Page 56471]]

[GRAPHIC] [TIFF OMITTED] TP28NO17.014

BILLING CODE 4120-01-C
By reducing the number of marketing materials submitted to CMS by
39,824 documents (80,110 current-40,286 excluded) we estimate a savings
of

[[Page 56472]]

19,912 hours (39,824 materials * 0.5 hours per material) at a cost
savings of $1,348,372.52 (19,912 hours * 69.08 per hour). Some key
points in the calculations are as follows:
There were a total of 80,110 marketing materials submitted
to CMS during the 12-month period sampled. These materials already
exclude PACE program marketing materials (30000 Code) which are
governed by a different authority and not affected by the proposed
provision. The 80,110 figure also excludes codes 16000 and 1700
Medicare-Medicaid Plan (MMP) materials. The MMP materials are not being
counted as the decision for review rests with the states and CMS.
The statute is clear that ``applications,'' which CMS also
refers to as enrollment or election forms, must be reviewed. Thus the
981 materials submitted under marketing code 1070, enrollment forms,
must be subtracted from the 80,110.
Marketing code 1100 includes the combined ANOC/EOC as well
as the D-SNP standalone ANOC. CMS intends to split the ANOC and EOC and
will still require the ANOC be submitted as a marketing material,
whereas the EOC will no longer be considered marketing and not require
submission. To account for the ANOC submission, CMS estimates that
5,162 ANOCs will still require submission.
We do not expect any disenrollment or grievance forms (the
2000 and 3000 codes) to be required submissions under this proposal.
Marketing code 4000 covers all advertisements which
constitute 55 percent (43,965) of the 80,110 materials. The majority of
these advertisements deal with benefits and enrollment. We estimate 25
percent of the 43,965 code 4000 documents (that is, 10,991 documents)
would fall outside of the new regulatory definition of marketing and no
longer require submission. Thus, we must subtract these 32,974 (43,965
- 10,991) from the 80,110.
Marketing code 5000 covers formulary drugs. Although, as
is currently the case, formularies will continue to be submitted to us
for review in capacities outside of marketing, they will no longer fall
under the new regulatory definition of marketing and hence would not be
submitted separately for review as marketing materials.
Marketing code 6000 includes sales scripts which are
predominantly used to encourage enrollment, and would likely still fall
under the scope of the new marketing definition. As such, we must
subtract 1,169 documents (code 6013) from the 80,110 total marketing
materials.
Marketing code 8000 includes creditable coverage and late
enrollment penalty (LEP) notices that will fall outside of the new
regulatory definition of marketing and no longer require submission.
Over the 12-month period sampled, this represents 559 material
submissions.
The proposed requirements and burden will be submitted to OMB under
control number 0938-1051 (CMS-10260).
9. ICRs Regarding Medical Loss Ratio Reporting Requirements (Sec. Sec.
422.2460 and 423.2460)
In section II.C.1. of this rule, we note that under current
Sec. Sec. 422.2460 and 423.2460, for each contract year, MA
organizations and Part D sponsors must report to CMS the information
needed to verify the MLR and remittance amount, if any, for each
contract, such as: Incurred claims, total revenue, expenditures on
quality improving activities, non-claims costs, taxes, licensing and
regulatory fees, and any remittance owed to CMS under Sec. 422.2410 or
Sec. 423.2410. Our proposed amendments to Sec. Sec. 422.2460 and
423.2460 would reduce the MLR reporting burden by requiring that MA
organizations and Part D sponsors report, for each contract year, only
the MLR and the amount of any remittance owed to us for each contract
with credible or partially credible experience. For each non-credible
contract, MA organizations and Part D sponsors would be required to
report only that the contract is non-credible.
Our analysis of the estimated administrative costs related to the
MLR reporting requirements is based on the average number of MA and
Part D contracts subject to the reporting requirements for each
contract year. The average number of MA and Part D contracts subject to
the annual MLR reporting requirements for contract years 2014 to 2018
is 587. The total number of MA and Part D contracts is relatively
stable year over year. To calculate the estimated administrative costs
of MLR reporting under the proposed amendments to Sec. Sec. 422.2460
and 423.2460, we assume that 587 MA and Part D contracts would be
subject to the MLR reporting requirements in each contract year.
Our estimate for the amount of time that MAOs and Part D sponsors
would spend on administrative tasks related to the MLR reporting
requirements under this proposed rule is based on our current burden
estimates that are approved by OMB under control number 0938-1232 (CMS-
10476), where we estimated that, on average, MA organizations and Part
D sponsors would spend approximately 47 hours per contract on
administrative work related to Medicare MLR reporting, including:
Collecting data, populating the MLR reporting forms, conducting a final
internal review, submitting the reports to the Secretary, and
conducting internal audits. Inadvertently, our currently approved
estimate did not specify (or break out) the portion of the overall
reporting burden that could be attributed solely to the tasks of
preparing and submitting the MLR report. We are correcting that
oversight by estimating that the burden for preparing and submitting
the MLR report is approximately 11.5 hours (or 24.4 percent of the
estimated 47 total hours spent on all administrative work related to
the MLR reporting requirements) per contact.
We arrived at the 11.5-hour estimate by considering the amount of
time it would take an MA organization or Part D sponsor to perform each
of the following tasks: (1) Review the MLR report filing instructions
and external materials referenced therein and to input all figures and
plan-level data in accordance with the instructions; (2) draft
narrative descriptions of methodologies used to allocate expenses; (3)
perform an internal review of the MLR report form prior to submission;
(4) upload and submit the MLR report and attestation; and (5) correct
or provide explanations for any suspected errors or omissions
discovered by CMS or our contractor during initial review of the
submitted MLR report.
We estimate that our proposal to scale back the MLR reporting
requirements would reduce the amount of time spent on administrative
work by 11 hours, from 47 hours to 36 hours.
Table 17 compares the estimated administrative costs related to the
MLR reporting requirements under the current regulation and under this
proposed rule. As indicated, this proposed rule estimates that MA
organizations and Part D sponsors will spend on average 36 hours per MA
or Part D contract on administrative work, compared to 47 hours per
contract under the current rule. We estimate the average cost per hour
of MLR reporting using wage data for computer and information systems
managers, as we believe that the tasks associated with MLR reporting
generally fall within the fields of data processing, computer
programming, information systems, and systems analysis. Based on
computer and information systems managers wage

[[Page 56473]]

data from BLS, we estimate that MA organizations and Part D sponsors
would incur annual MLR reporting costs of approximately $5,045 per
contract on average under our proposal, as opposed to $6,587 per
contract under the current regulations. Consequently, the proposed
changes would, on average, reduce the annual administrative costs by
$1,542 per contract. Across all MA and Part D contracts, we estimate
that the proposed changes would reduce the annual administrative burden
related to MLR reporting by 6,457 hours, resulting in a savings of
$904,884.

Table 17--Estimated Administrative Burden Related to Medical Loss Ratio (MLR) Reporting Requirements
--------------------------------------------------------------------------------------------------------------------------------------------------------
Estimated
Total number of contracts/ Estimated Estimated Estimated average cost Estimated average cost
Type of burden reports average hours total hours per hour total cost per contract/
per report report
--------------------------------------------------------------------------------------------------------------------------------------------------------
Ongoing Costs (current regulations) 587...................... 47 27,589 $140.14................. $3,866,322 $6,587
Ongoing Costs (proposed regulation 587...................... 36 21,132 140.14.................. 2,961,438 5,045
changes).
Change............................. No change................ 11 6,457 No change............... 904,884 1,542
--------------------------------------------------------------------------------------------------------------------------------------------------------
Notes: The source data has been modified to reflect estimated costs for MA organizations and Part D sponsors. Values may not be exact due to rounding.

The proposed requirements and burden will be submitted to OMB for
approval under control number 0938-1232 (CMS-10476).
10. ICRs Regarding Establishing Limitations for the Part D Special
Enrollment Period for Dual Eligible Beneficiaries (Sec. 423.38(c)(4))
OMB Under Control Number 0938-0964
In section II.A.11. of this rule, we propose to revise Sec.
423.38(c)(4) to limit the SEP for dual- and LIS-eligible individuals.
The provision would make the SEP for FBDE or other subsidy-eligible
individuals available only in the following circumstances:
For beneficiaries who are making an allowable onetime-per-
calendar-year election.
For beneficiaries who have been assigned to a plan by CMS
or a state (that is, through auto enrollment, facilitated enrollment,
passive enrollment, or reassignment) and decide to change plans
following notification of the change or within 2 months of the election
effective date.
For beneficiaries who have a change in their dual or LIS-
eligible status.
In instances where an individual is not able to utilize the dual
SEP because of the proposed limitations, we anticipate that there will
be no change in burden. Under current requirements, if a beneficiary
uses the dual SEP to disenroll from their plan, the plan would send a
notice to the beneficiary to acknowledge the voluntary disenrollment
request. If the beneficiary is subject to the dual SEP limitation, the
plan would send a notice to deny their voluntary disenrollment request.
The requirement to acknowledge the beneficiary request and address the
resolution would be the same in both scenarios, but the content of the
notice would be different. Enrollment processing and notification
requirements are codified at Sec. 423.32(c) and (d) and are not being
revised as part of this rulemaking. Therefore, no new or additional
information collection requirements are being imposed. Moreover, the
requirements and burden are currently approved by OMB under control
number 0938-0964 (CMS-10141). Since this rule would not impose any new
or revised requirements/burden, we are not making any changes to that
control number.
11. ICRs Related to Expedited Substitutions of Certain Generics and
Other Midyear Formulary Changes (Sec. Sec. 423.100, 423.120, and
423.128) OMB Under Control Number 0938-0964
In section II.A.15 of this rule, we propose to expedite certain
generic substitutions and other midyear formulary changes and except
applicable generic substitutions from the transition process. Excepting
generic substitutions that would otherwise require transition fills
from the transition process would lessen the burden for Part D sponsors
because they would no longer need to provide such fills. Permitting
Part D sponsors to immediately substitute newly approved generic drugs
or to make other formulary changes sooner than has been required would
allow Part D sponsors to take action sooner, but would not increase nor
decrease paperwork.
While the proposed provisions would additionally require general
notice that certain generic substitutions could take place immediately,
Part D sponsors are already creating the documents in which that notice
would appear such as formularies and EOCs. Similarly, Sec.
423.128(d)(2)(ii) already requires Web sites to include information
about drug removals and changes to cost-sharing. In other words, the
proposed general notice requirement would not require efforts in
addition to routine updates to beneficiary communications materials and
Web sites. In theory, if Part D sponsors that would have been denied
requests to make generic changes could do so under the proposed
provision, they would have somewhat more of a burden since the proposed
provision does require notice including direct notice to affected
enrollees. However, our practice has been to approve all or virtually
all generic substitutions that would meet the requirements of this
proposed provision--which again means that the proposed provisions
would just permit those substitutions to take place sooner.
The general notice requirements and burden are currently approved
by OMB under control number 0938-0964 (CMS-10141). Since this rule
would not impose any new or revised requirements/burden, we are not
making any changes to that control number.
12. ICRs Related to Preclusion List Requirements for Prescribers in
Part D and Individuals and Entities in Medicare Advantage, Cost Plans,
and PACE
a. Preclusion List Requirements for Part D Sponsors
(1) Burden and Costs
In sections II.D.10 and 11. of this proposed rule, we are proposing
in Sec. 423.120(c)(6) to require that Part D sponsors cover a
provisional supply of a drug before they reject a claim based on a
prescriber's inclusion on the preclusion list. The proposed provision
would also require that Part D sponsors provide written notice to the
beneficiary of the prescriber's presence on the preclusion list and
take reasonable efforts to furnish written notice to the prescriber.
The burden associated with these provisions would be the time and

[[Page 56474]]

effort necessary for Part D adjudication systems to be programmed and
for model notices to be created, generated, and disseminated.
(a) Part D System Programming
We estimate that it would take all 30 sponsors and PBMs with Part D
adjudication systems a total of approximately 93,600 hours in 2019 for
software developers and programmers to program their systems to comply
with the requirements of Sec. 423.120(c)(6). In 2020 and 2021, we do
not anticipate any system costs. The sponsors and PBMs would need
approximately 6 to 12 months to perform system changes and testing. The
total hour figures are based on a 6-month preparation and testing
period. There are roughly 1,040 full-time working hours in a 6-month
period. Using an estimate of 3 full-time software developers and
programmers at $96.22/hour resulted in the aforementioned 93,600 hour
figure (3 workers x 1,040 hour x 30 sponsors/PBMs) at a cost of
$9,006,192 (93,600 x $96.22/hour) for 2019. There would be no burden
associated with 2020 and 2021.
(b) Creation of Template Notices to Beneficiaries and Prescribers
As stated in the May 6, 2015 IFC, we estimate that 212 parent
organizations would need to create two template notices to notify
beneficiaries and prescribers under proposed Sec. 423.120(c)(6). We
project that it would take each organization 3 hours at $69.08/hour for
a business operations specialist to create the two model notices. For
2019, we estimate a one-time total burden of 636 hours (212
organizations x 3 hours) at a cost of $43,935 (636 hour x $69.08/hour)
or $207.24 per organization ($43,935/212 organizations). There would be
no burden associated with 2020 and 2021.
The proposed system programing and notice development requirements
and burden will be submitted to OMB for approval under control number
0938-0964 (CMS-10141).
(c) Preparation and Issuance of the Notices
We estimate that it would take an average of 5 minutes (0.083 hour)
at $39.22/hour for an insurance claim and policy processing clerk to
prepare and distribute the notices. We estimate that an average of
approximately 800 prescribers would be on the preclusion list in early
2019 with roughly 80,000 Part D beneficiaries affected; that is, 80,000
beneficiaries would have been receiving prescriptions written by these
prescribers and would therefore receive the notice referenced in Sec.
423.120(c)(6). In 2019 we estimate a total burden of 6,640 hours (0.083
hour x 80,000 responses) at a cost of $260,421 (6,640 hour x $39.22/
hour) or $1,228.40 per organization ($260,421/212 organizations).
In 2020 and 2021, we estimate that roughly 150 prescribers each
year would be added to the preclusion list, though this would be
largely offset by the same number of prescribers being removed from the
list (for example, based on reenrollment after the expiration of a
reenrollment bar or decision to remove them from the preclusion list)
with 15,000 affected beneficiaries. In aggregate, we estimate an annual
burden of 1,245 hours (15,000 beneficiaries x 0.083 hours) at a cost of
$48,829 (1,245 hour x $39.22/hour) or $325.53 per prescriber ($48,829/
150 prescribers).
The proposed notice preparation and distribution requirements and
burden will be submitted to OMB for approval under control number 0938-
0964 (CMS-10141).

Table 18--Estimated Burden of Part D--Notice Preparation and Distribution
[In hours]
----------------------------------------------------------------------------------------------------------------
2019 2020 2021 3-year average
----------------------------------------------------------------------------------------------------------------
Provisional Supply--Programming................. 93,600 0 0 31,200
Provisional Supply--Template Creation........... 636 0 0 212
Provisional Supply--Letter Preparation.......... 6,640 1,245 1,245 3,043
---------------------------------------------------------------
Total....................................... 100,876 1,245 1,245 34,455
----------------------------------------------------------------------------------------------------------------

Table 19--Estimated Burden of Part D--Notice Preparation and Distribution
[In $]
----------------------------------------------------------------------------------------------------------------
2019 2020 2021 3-year average
----------------------------------------------------------------------------------------------------------------
Provisional Supply--Programming................. $9,006,192 $0 $0 $3,002,064
Provisional Supply--Template Creation........... 43,935 0 0 14,645
Provisional Supply--Notice Preparation.......... 260,421 48,829 48,829 119,360
---------------------------------------------------------------
Total....................................... 9,310,548 48,829 48,829 3,136,069
----------------------------------------------------------------------------------------------------------------

(2) Savings
We believe that savings would accrue for the prescriber community
from our proposed elimination of the requirement that prescribers
enroll in Medicare in order to prescribe Part D drugs.
As previously explained in this proposed rule, approximately
420,000 prescribers have yet to enroll in Medicare via the CMS-855O
application (OMB 0938-1135). We estimate that it would take 0.5 hours
for a prescriber to complete a CMS-855O application. This is based on
the following assumptions:
A medical secretary would take 0.42 hours to prepare the
application.
A physician would take 0.08 hours to review and sign the
application.
This would result in a per application cost of $30.32 ((0.42 hours
x $33.70) + (0.08 hours x $202.08). Multiplying this figure by 420,000
applications results in a total savings of $12,734,400. We believe that
these savings would accrue in 2019.
(3) Net Costs and Savings
We believe that a result of our proposed elimination of the Part D

[[Page 56475]]

enrollment requirement, the following net savings for prescribers would
ensue:

Table 20--Net Costs/Savings
[In $]
----------------------------------------------------------------------------------------------------------------
2019 2020 2021 3-year average
----------------------------------------------------------------------------------------------------------------
Costs........................................... $9,310,548 $48,829 $48,829 $3,136,069
Savings......................................... 12,734,400 0 0 4,244,800
Net *........................................... 3,423,852 (48,829) (48,829) 1,108,731
----------------------------------------------------------------------------------------------------------------
* Net costs denoted in parentheses.

b. Preclusion List Requirements for Part C
As previously explained in this proposed rule, approximately
120,000 MA providers and suppliers have yet to enroll in Medicare via
the CMS-855 application. Of these providers and suppliers, and based on
internal CMS statistics, we estimate that 90,000 would complete the
CMS-855I (OMB No. 0938-0685), which is completed by physicians and non-
physician practitioners; 24,000 would complete the CMS-855B (OMB
control number 0938-0685), which is completed by certain Part B
organizational suppliers; and 6,000 would complete the CMS-855A (OMB
No. 0938-0685), which is completed by Part A providers and certain Part
B certified suppliers. Therefore, we believe that savings would accrue
for providers and suppliers from our proposed elimination of our MA/
Part C enrollment. Table 21 estimates the burden hours associated with
the completion of each form.

Table 21--CMS-855 Application Burden
----------------------------------------------------------------------------------------------------------------
Number of Hours for an
respondents no Hours for Hours for a authorized
Submission type longer completion by physician to official to Total hours
required to office review and review and for completion
enroll personnel sign sign
----------------------------------------------------------------------------------------------------------------
CMS-855I........................ 90,000 2.5 0.5 n/a 3
CMS-855B........................ 24,000 4 n/a 1 5
CMS-855A........................ 6,000 5 n/a 1 6
----------------------------------------------------------------------------------------------------------------

In projecting the savings involved, we assume a medical and health
services manager would serve as the provider's or supplier's
``authorized official'' and would sign the CMS-855A or CMS-855B
application on the provider's or supplier's behalf.
Therefore, we project the following total hour and cost burdens:
CMS-855I: We estimate a total reduction in hour burden of
270,000 hours (90,000 applicants x 3 hours). With the cost of each
application processed by a medical secretary and physician as being
$185.29 (($33.70 x 2.5 hours) + ($202.08 x 0.5 hours)), we estimate a
savings of $16,676,100 (90,000 applications x $185.29).
CMS-855B: We estimate a total reduction in hour burden of
120,000 hours (24,000 applicants x 5 hours). With the cost of each
application processed by a medical secretary and signed off by a
medical and health services manager as being $239.96 (($33.70 x 4
hours) + ($105.16 x 1 hour)), we estimate a total savings of $5,759,040
(24,000 applications x $105.16).
CMS-855A: We estimate a total reduction in hour burden of
36,000 hours (6,000 applicants x 6 hours). With the cost of each
application processed by a medical secretary and signed off by a
medical and health services manager as being $273.66 (($33.70 x 5
hours) + ($105.16 x 1 hour)), we estimate a total savings of $6,567,840
(24,000 applications x $273.66).
Given the foregoing, we estimate that providers and suppliers would
experience a total reduction in hour burden of 426,000 hours (270,000 +
120,000 + 36,000) and a total cost savings of $32,102,980 ($9,667,660 +
$5,759,040 + $16,676,100). We expect these reductions and savings to
accrue in 2019 and not in 2020 or 2021. Nonetheless, over the OMB 3-
year approval period of 2019-2021, we expect an annual reduction in
hour burden of 142,000 hours and an annual savings of $10,700,933
($32,102,800/3) under OMB Control No. 0938-0685.
We also propose to revise Sec. 422.310 to add a new paragraph
(d)(5) to require that, for data described in paragraph (d)(1) as data
equivalent to Medicare fee-for-service data (which is also known as MA
encounter data), MA organizations must submit a National Provider
Identifier in a Billing Provider field on each MA encounter data
record, per CMS guidance. We do not expect any additional burden from
this particular proposal, for this activity is consistent with existing
policy.
13. ICRs Regarding the Part D Tiering Exceptions ((Sec. Sec. 423.560
and Sec. 423.578(a) and (c))
In section II.A.9. of this rule, we are proposing various changes
to Sec. 423.578(a) and (c) related to the requirements for tiering
exceptions criteria that Part D plan sponsors are required to
establish. These changes include establishing a revised framework for
treatment of tiering exception requests based on whether the requested
drug is a brand name or generic drug or biological product, and where
the same type of drug alternatives are located on the plan's formulary.
The proposed changes also include clarification of appropriate cost-
sharing assigned to approved tiering exception requests when preferred
alternative drugs are on multiple lower-cost tiers. At the coverage
determination level, if a plan issues a decision that is partially or
fully adverse to the enrollee, it is already required to send written
notice of that decision. The existing requirement to send written
notice of an adverse coverage determination would

[[Page 56476]]

not change under the proposed changes related to tiering exceptions. We
do not expect the proposed changes to significantly impact the overall
volume or the approval rate of tiering exceptions requests, which
represent a consistently low percentage of total request volume.
While the requirement to send a written denial notice is subject to
the PRA, the requirement and burden are currently approved by OMB under
control number 0938-0976 (CMS-10146). Since this rule would not impose
any new or revised requirements/burden, we are not making any changes
to that control number.
14. ICRs Regarding the Implementation of the Comprehensive Addiction
and Recovery Act of 2016 (CARA) Provisions (Sec. 423.153(f))
As discussed in section of this rule, proposed Sec. 423.153(f)
would implement provisions of section 704 of CARA, which allows Part D
plan sponsors to establish a drug management program that includes
``lock-in'' as a tool to manage an at-risk beneficiary's access to
coverage of frequently abused drugs. Part D plan sponsors would be
required to notify at-risk beneficiaries about their plan's drug
management program. Part D plan sponsors are already expected to send a
notice to some beneficiaries when the sponsor decides to implement a
beneficiary-specific POS claim edit for opioids (OMB under control
number 0938-0964 (CMS-10141)). However, the OMB control number 0938-
0964 only accounts for the notices that are currently sent to
beneficiaries who have a POS edit put in place to monitor opioid access
(which would count as the initial notice described in the preamble and
defined in Sec. 423.153(f)(4)) and would not capture the second notice
that at-risk beneficiaries would receive confirming their determination
as such or the alternate second notice that potentially at-risk
beneficiaries would receive to inform them that they were not
determined to be at risk.
Since 2013, there have been 4,617 POS edits submitted into MARx by
plan sponsors for 3,961 unique beneficiaries as a result of the drug
utilization review policy. Given that there has not been a steady
increase or decrease in edits, we have used the average, 923 edits
annually, to assess burden under this rule. If we assume that the
number of edits or access to coverage limitations will double due to
the addition of pharmacy and prescriber ``lock-in'' to OMS, to
approximately 1,846 such limitations, we estimate 3,693 initial, and
second notices (number of limitations (1,846) multiplied by the number
of notices (2)) total corresponding to such edits/limitations. We
estimate it would take an average of 5 minutes (0.083 hours) at $39.22/
hour for an insurance claim and policy processing clerk to prepare each
notice. We estimate an annual burden of 307 hours (3,693 notices x
0.083 hour) at a cost of $12,040.54 (307 hour x $39.22/hour).
Part D plan sponsors are required to upload these new notice
templates into their internal claims systems. We estimate that 219 Part
D plan sponsors (31 PDP parent organizations and 188 MA-PD parent
organizations, based on plan year 2017 plan participation) would be
subject to this requirement. We estimate that it will take on average 5
hours at $81.90/hour for a computer programmer to upload all of the
notices into their claims systems (note, this is an estimate to upload
all of the documents in total; not per document). This would result in
a total burden of 1,095 hours (5 hours x 219 sponsors) at a cost of
$89,680.50 (1,095 hour x $81.90/hour).
In aggregate, the burden to upload and prepare these additional
notices is 1,402 hours (307 hours + 1,095 hours) at a cost of $101,721
($12,040 + $89,681).
Proposed revisions to Sec. 423.38(c)(4) would limit the SEP for
dual- or other LIS-eligible individuals who are identified as a
potential at-risk beneficiary subject to the requirements of a drug
management program, as outlined in Sec. 423.153(f). As already
codified in Sec. 423.38(c)(4), this proposed SEP limitation would be
extended to ``other subsidy-eligible individuals'' so that both full
and partial subsidy individuals are treated uniformly. Once an
individual is identified as a potential at-risk beneficiary, that
individual will not be permitted to use this election period to make a
change in enrollment.
Contingent with a Part D sponsor opting to implement a drug
management program, Part D sponsors will identify, and submit to CMS,
an individual's ``potential'' at-risk status and, if applicable,
confirmed at-risk status. The Part D sponsor will include notification
of the limitation of the duals' SEP in the required notice to the
beneficiary that he or she has been identified as a potential at-risk
beneficiary.
Therefore, the burden associated with the notification of the
inability to use the duals' SEP is covered under the previous statement
of burden.
Furthermore, we are proposing to codify that an at-risk beneficiary
will have an election opportunity if their dual- or LIS-eligible status
changes, that is, if they gain, lose or have a change in the level of
the subsidy assistance. Also, if a beneficiary is eligible for another
election period (for example, AEP, OEP, or other SEP), this SEP
limitation would not prohibit the individual from making an election.
This proposed provision, by creating a limitation for dually- and other
LIS-eligible at-risk beneficiaries after the initial notification,
would decrease sponsor burden in processing disenrollment and
enrollment requests for dual- and LIS-eligible beneficiaries who wish
to change plans.
We estimate that 1,846 beneficiaries would meet the criteria
proposed to be identified as an at-risk beneficiary and have a
limitation implemented. About 76 percent of the 1,846 beneficiaries are
estimated to be LIS. Approximately 10 percent of LIS-eligible enrollees
use the duals' SEP to make changes annually. Thus we estimate, at most,
140 changes per year (1,846 beneficiaries x 0.76 x 0.1) will no longer
take place because of the proposed duals' SEP limitation. There are
currently 219 Part D sponsors. This amounts to an average of 0.6
changes per sponsor per year (140 changes/219 sponsors). In 2016, there
were more than 3.5888 Part D plan switches, and as such, a difference
of 0.6 enrollments or disenrollments per sponsor will not impact the
administrative processing infrastructure or human resources needed to
process enrollments and disenrollments. Therefore, there is no change
in burden for sponsors to implement this component of the provision.
We are proposing that reviews of at-risk determinations made under
the processes at Sec. 423.153(f) be adjudicated under the existing
Part D benefit appeals process and timeframes set forth in part 423
Subparts M and U. Consistent with existing rules for redeterminations,
an enrollee who wishes to dispute an at-risk determination would have
60 days from the date of the notice of the determination to make such
request, must affirmatively request IRE review of an adverse plan level
appeal decision made under a plan sponsor's drug management program,
and would have rights to an expedited redetermination. Revisions to
regulations in part 423 Subparts M (Sec. Sec. 423.558, 423.560,
423.562, 423.564, 423.580, 423.582, 423.584, 423.590, 423.602, 423.636,
and 423.638) and U (Sec. Sec. 423.1970, 423.2018, 423.2020, 423.2022,
423.2032, 423.2036, 423.2038, 423.2046, 423.2056, 423.2062, 423.2122
and 423.2126) are being proposed to account for reviews of at-risk
determinations. The filing of an appeal is an information collection
requirement that is associated with an administrative action pertaining
to specific individuals or entities (5 CFR 1320.4(a)(2) and (c)).
Consequently, the

[[Page 56477]]

burden for preparing and filing the appeal is exempt from the
requirements and collection burden estimates of the PRA; however, the
burden estimate for appeals is included in the regulatory impact
analysis.
In aggregate, these components of this provision would result in an
annual net cost of $101,012.
The aforementioned requirements and burden, excluding beneficiary
appeals, will be submitted to OMB for approval under control number
0938-0964 (CMS-10141).

Table 22--Estimated Burden for the CARA Provisions
[In hours]
----------------------------------------------------------------------------------------------------------------
2019 2020 2021 3-year average
----------------------------------------------------------------------------------------------------------------
Preparation and Upload Notices.................. 1,402 0 0 467.3
SEP Limitation.................................. 0 0 0 0
Appeals......................................... N/A N/A N/A N/A
---------------------------------------------------------------
Total....................................... 1,402 0 0 467.3
----------------------------------------------------------------------------------------------------------------

Table 23--Estimated Burden for the Cara Provisions
(In $)
----------------------------------------------------------------------------------------------------------------
3-Year
2019 2020 2021 average
----------------------------------------------------------------------------------------------------------------
Preparation and Upload Notices.................. $101,012 $0 $0 $33,670.7
SEP Limitation.................................. 0 0 0 0
Appeals......................................... N/A N/A N/A N/A
---------------------------------------------------------------
Total....................................... 101,012 0 0 33,670.7
----------------------------------------------------------------------------------------------------------------

C. Summary of Proposed Information Collection Requirements and Burden

Table 24--Proposed Annual Recordkeeping and Reporting Requirements
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total
Regulatory section(s) in title 42 of OMB control annual Labor cost of Total cost
the CFR No. * Respondents Responses Burden per response burden reporting ($)
(hours) (hours)
--------------------------------------------------------------------------------------------------------------------------------------------------------
422.60, 422.62, 422.68, 423.38, and 0938-0753 468 558,000 5 min................. 46,500 $69.08 $3,212,220
423.40 eligibility determination.
422.60, 422.62, 422.68, 423.38, and 0938-0753 468 558,000 1 min................. 9,300 69.08 642,444
423.40 notification.
422.60, 422.62, 422.68, 423.38, and 0938-0753 468 558,000 1 min................. 9,300 69.08 642,444
423.40 report to CMS.
422.60, 422.62, 422.68, 423.38, and 0938-0753 468 558,000 5 min................. 46,500 34.66 1,606,110
423.40 record keeping.
422.152 QIP........................... 0938-1023 468 (750) (15 min).............. (188) 67.54 (12,664)
422.2260 and 423.2260 marketing 0938-1051 805 (67,061) (30 min).............. (26,959) 69.08 (1,862,397)
materials.
422.2460 and 423.2460 MLR reporting... 0938-1232 587 (587) (11 hr)............... (6,457) 140.14 (904,884)
423.120(c)(6) create model notices.... 0938-0964 212 212 3 hr.................. 636 69.08 43,935
423.120(c)(6) 2019 prepare and 0938-0964 212 80,000 0.083 hr.............. 6,640 39.22 260,421
distribute the notices.
423.120(c)(6) 2020 and 2021 prepare 0938-0964 212 15,000 0.083 hr.............. 1,245 39.22 48,829
and distribute the notices.
423.153(f) notice preparation......... 0938-0964 219 3,693 0.083 hr.............. 307 39.22 12,041
423.153(f) notice upload.............. 0938-0964 219 3,693 5 hr.................. 1,095 81.90 89,681
423.153(f) contract: Part D plan 0938-0964 31 31 10 hr................. 310 134.50 41,695
sponsors.
423.153(f) contract: MA-PDs........... 0938-0964 188 188 20 hr................. 3,760 134.50 505,720
-----------------------------------------------------------------------------------------------------------------
Subtotal: Private Sector Burden... ........... 805 2,266,419 varies................ 91,989 varies 4,325,595
-----------------------------------------------------------------------------------------------------------------
422.62, 423.38, and 423.40 complete 0938-0753 18,600,000 558,000 30 min................ 279,000 7.25 2,022,750
enrollment.
-----------------------------------------------------------------------------------------------------------------

[[Page 56478]]

Subtotal: Burden on Beneficaries.. ........... 18,600,000 558,000 30 min................ 279,000 7.25 2,022,750
-----------------------------------------------------------------------------------------------------------------
422.111(a)(3) and (h)(2)(ii) and 0938-1051 n/a (32,026,000) n/a................... n/a n/a (24,019,500)
423.128(a)(3) EOC paper.
422.111(a)(3) and (h)(2)(ii) and 0938-1051 n/a (32,026,000) n/a................... n/a n/a (24,019,500)
423.128(a)(3) EOC toner.
422.111(a)(3) and (h)(2)(ii) and 0938-1051 n/a (32,026,000) n/a................... n/a n/a (6,629,382)
423.128(a)(3) EOC mailing.
-----------------------------------------------------------------------------------------------------------------
Subtotal: Non-Labor Burden........ ........... n/a (32,026,000) n/a................... n/a n/a (54,668,382)
-----------------------------------------------------------------------------------------------------------------
Total......................... ........... 18,600,805 (29,201,581) varies................ 370,989 varies (48,320,037)
--------------------------------------------------------------------------------------------------------------------------------------------------------
* OMB control numbers and corresponding CMS ID numbers: 0938-0753 (CMS-R-267), 0938-1023 (CMS-10209), 0938-1051 (CMS-10260), 0938-1232 (CMS-10476), and
0938-0964 (CMS-10141).

D. Submission of PRA-Related Comments

We have submitted a copy of this proposed rule to OMB for its
review of the rule's information collection and recordkeeping
requirements. These requirements are not effective until they have been
approved by the OMB.
To obtain copies of the supporting statement and any related forms
for the proposed collections previously discussed, please visit CMS'
Web site at Web site address at https://www.cms.gov/Regulations-andGuidance/Legislation/PaperworkReductionActof1995/PRAListing.html, or
call the Reports Clearance Office at 410-786-1326.
We invite public comments on these potential information collection
requirements. If you wish to comment, please submit your comments
electronically as specified in the ADDRESSES section of this proposed
rule and identify the rule (CMS-4182-P) and where applicable the ICR's
CFR citation, CMS ID number, and OMB control number.
See the DATES and ADDRESSES sections of this proposed rule for
further information.

V. Regulatory Impact Analysis

A. Statement of Need

This proposed rule approaches to improve the quality, accessibility
and affordability of the Medicare Part C and Part D programs and to
improve the CMS customer experience. While satisfaction with these
programs remain high, these proposals are responsive to input we
received from stakeholders while administering the program, as well as
through a Request for Information process earlier this year.
Additionally, this regulation includes a number of provisions that will
help address the opioid epidemic and mitigate the impact of increasing
drug prices in the Part D program.

B. Overall Impact

We examined the impact of this final rule as required by Executive
Order 12866 on Regulatory Planning and Review (September 30, 1993),
Executive Order 13563 on Improving Regulation and Regulatory Review
(January 18, 2011), the Regulatory Flexibility Act (RFA) (September 19,
1980, Pub. L. 96-354), Section 1102(b) of the Social Security Act,
Section 202 of the Unfunded Mandates Reform Act of 1995 (March 22,
1995; Pub. L. 104-4), Executive Order 13132 on Federalism (August 4,
1999), the Congressional Review Act (5 U.S.C. 804(2)), and Executive
Order 13771 on Reducing Regulation and Controlling Regulatory Costs
(January 30, 2017).
The Regulatory Flexibility Analysis (RFA), as amended, requires
agencies to analyze options for regulatory relief of small businesses,
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.
The health insurance industry was examined in depth in the RIA
prepared for the proposed rule on establishment of the MA program (69
FR 46866, August 3, 2004). It was determined, in that analysis, that
there were few, if any, ``insurance firms,'' including HMOs that fell
below the size thresholds for ``small'' business established by the
Small Business Administration (SBA). We assume that the ``insurance
firms'' are synonymous with health plans that conduct standard
transactions with other covered entities and are, therefore, the
entities that will have costs associated with the new requirements
finalized in this rule. At the time the analysis for the MA program was
conducted, the market for health insurance was and remains, dominated
by a handful of firms with substantial market share.
However, we estimate that the costs of this rule on ``small''
health plans do not approach the amounts necessary to be a
``significant economic impact'' on firms with revenues of tens of
millions of dollars. Therefore, this rule would 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 analysis for any rule or regulation proposed under Title
XVIII, Title XIX, or Part B of the Act that may have significant impact
on the operations of a substantial number of small rural hospitals. We
are not preparing an analysis for section 1102(b) of the Act because
the Secretary certifies 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 (UMRA) also
requires that agencies assess anticipated costs and benefits before
issuing any rule whose mandates require spending in any 1 year of $100
million in 1995 dollars, updated annually for inflation. In 2017, that
threshold is approximately $148 million. This proposed rule is not
anticipated to have an effect on State, local, or tribal governments,
in the aggregate, or on the private sector of $148 million or more.
Executive Order 13132 establishes certain requirements that an
agency must meet when it promulgates a proposed rule (and subsequent
final

[[Page 56479]]

rule) that imposes substantial direct requirement costs on state and
local governments, preempts state law, or otherwise has federalism
implications. Since this rule does not impose any substantial costs on
state or local governments, the requirements of Executive Order 13132
are not applicable.
If regulations impose administrative costs on MA Plans and Part D
Sponsors, such as the time needed to read and interpret this proposed
rule, we should estimate the cost associated with regulatory review.
There are currently 468 MA plans and Part D Sponsors.
We assume each plan will have one designated staff member who will
read the entire rule.
Using the wage information from the BLS for medical and health
service managers (Code 11-9111), we estimate that the cost of reviewing
this rule is $105.16 per hour, including overhead and fringe benefits
(https://www.bls.gov/oes/2016/may/naics4_621100.htm). Assuming an
average reading speed, we estimate that it would take approximately
15.6 hours for each person to review this proposed rule. For each MA
plan that reviews the rule, the estimated cost is therefore, $1,640
(15.6 hours x $105.16). Therefore, we estimate that the total cost of
reviewing this regulation is $767,520 ($1,640 x 468 reviewers).
In accordance with the provisions of Executive Order 12866, this
rule was reviewed by the Office of Management and Budget.

C. Anticipated Effects

1. CARA Provisions
Proposed Sec. 423.153(f) would implement provisions of section 704
of CARA, which allows Part D plan sponsors to establish a drug
management program that includes ``lock-in'' as a tool to manage an at-
risk beneficiary's access to coverage of frequently abused drugs.
Under CARA, potentially at-risk beneficiaries are to be identified
under guidelines developed by CMS with stakeholder input. Also, the
Secretary must ensure that the population of at-risk beneficiaries can
be effectively managed by Part D plans. CMS considered a variety of
options as to how to define the clinical guidelines. We provide the
estimated population of potential at-risk beneficiaries under different
guidelines that take into account that the beneficiaries may be
overutilizing opioids, coupled with use of multiple prescribers and/or
pharmacies to obtain them, based on retrospective review, which makes
the population appropriate to consider for ``lock-in'' and a
description of the various options. We note that the measurement year
for the estimates was 2015.
For background, the current Part D Opioid Overutilization policy
and Overutilization Monitoring System (OMS) has been successful at
reducing high risk opioid overutilization. Under this policy, plans
retrospectively identify beneficiaries at high risk of an adverse event
due to opioids and use of multiple prescribers and pharmacies. CMS
created the OMS to monitor plans' effectiveness in complying with the
policy. The OMS criteria incorporate the CDC Guideline for Prescribing
Opioids for Chronic Pain (March 2016) (CDC Guideline) to identify
beneficiaries who are possibly overutilizing opioids and are at high
risk but the CDC Guideline is not a prescribing limit. CDC identifies
50 Morphine Milligram (MME) as a threshold for increased risk of opioid
overdose, and to generally avoid increasing the daily dosage to 90 MME.
Plans are expected to perform case management for each beneficiary
identified in OMS and respond using standardized responses. If viewed
as helpful by a prescriber, plans may implement a beneficiary-specific
claim edit at the point-of-sale to prevent coverage of opioids outside
of the amount deemed medically necessary by the prescriber. Plans may
also implement an edit in the absence of prescriber response to case
management.

Table 25--Guidelines To Identify At-Risk Beneficiaries
----------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------
Option Average MME Number of opioid prescribers and Estimated number
opioid dispensing pharmacies of potentially
at-risk Part D
beneficiaries
----------------------------------------------------------------------------------------------------------------
1................................ >=90................ 4+ 4+ 33,053
>=90................ 6+ 1+
2................................ >=90................ 4+ 4+ 52,998
>=90................ 5+ 1+
3................................ >=90................ 3+ 3+ 103,832
>=90................ 5+ 1+
4................................ >=90................ 3+ 3+ 152,652
>=90................ 4+ 1+
5................................ >=90................ 3+ 3+ 319,133
>=90................ 3+ 1+
----------------------------------------------------------------------------------------------------------------
Average MME Number of opioid prescribers or Estimated number
opioid dispensing pharmacies of potentially
at-risk Part D
beneficiaries
----------------------------------------------------------------------------------------------------------------
6................................ >=50................ 5+ 5+ 153,880
Any MME level....... 7+ 7+
----------------------------------------------------------------------------------------------------------------

Under Option 1, CMS would propose to integrate the CARA lock-in
provisions with our current Part D Opioid Overutilization Policy/
Overutilization Monitoring System (OMS). We will propose to initially
define frequently abused drugs as all and only opioids for the
treatment of pain. The guidelines to identify at-risk beneficiaries
would be the current Part D OMS criteria finalized for 2018 after
stakeholder input. Plans that adopt a drug management program would
have to engage in case management of the opioid use of all enrollees
who meet these criteria, which would be reported through OMS and plans
must provide a response for each case. The estimated number of
potential

[[Page 56480]]

at-risk beneficiaries in 2019 using Option 1 is 33,053. Option 1 would
allow plans to use pharmacy/prescriber lock in as an additional tool to
address the opioid overutilization of identified at-risk beneficiaries.
Option 2, 3, 4, and 5 are operationally the same as Option 1,
including 90 MME, but would identify approximately 52,998 to 319,133
beneficiaries in 2019 due to different clinical guidelines related to
the number of opioid prescribers and opioid dispensing pharmacies.
These options would result in up to 10 times the program size compared
to Option 1.
Finally, under Option 6, the guidelines to identify potentially at-
risk beneficiaries would not be fully integrated into our current OMS
criteria. This option would identify beneficiaries whose opioid use is
at the 50 MME level instead of 90, and the estimated number of
potentially at-risk beneficiaries in 2019 is 153,880. Of these,
approximately 29,000 would meet these criteria and the current OMS
criteria. We seek comment on proposed Option 1 or if any of the
alternative options may be currently viewed as manageable for Part D
sponsors to implement.
In addition, while these criteria would identify far more
potentially at-risk beneficiaries, we may have to implement these
options in a way that plans that adopt a drug management program would
not have to review the opioid use of all enrollees who meet these
criteria. This would mean a change in the structure of the successful
OMS or a separate administrative structure for prescription drug
management programs.
As noted in section II. of this rule, we have chosen to propose
Option 1. This approach is a cautious approach for the initial
implementation year of the CARA ``lock-in'' provisions. We believe
these provisions will result in the following savings to the program.
We estimate that the CARA provisions would result in a net savings
of $10 million (the estimated savings of $13 million less the total
estimated costs of $2,836,651 = $10,163,349, rounded to the nearest
million) in 2019. The following are details on each of these savings.
We assume, based on past experience with OMS, that about 61 percent
of at-risk beneficiaries may reduce prescriptions for frequently abused
drugs and will no longer meet the clinical criteria. This means that
prescriber and pharmacy lock-in would impact the remaining 39 percent
of at-risk beneficiaries or 39 percent x 33,000 at-risk beneficiaries =
12,870 at-risk beneficiaries. We estimate that the average number of
scripts per year on frequently abused drugs for those at-risk
beneficiaries is about 48 and the average cost per script is about $106
in 2016. Our data show that those beneficiaries who would meet the
proposed criteria for identification as an at-risk beneficiary and have
a limitation placed on their access to opioids, have 4 opioids scripts
per month on average. OACT anticipates between 10 and 30 percent
reduction in prescriptions for frequently abused drugs would be
possible through drug management programs and picked the average, 20
percent. Therefore, we believe there could be a 20 percent reduction in
the prescriptions for frequently abused drugs for those 12,870
beneficiaries, resulting in a projected savings of about $13 million to
Medicare in 2019.
Part D plan sponsors would also be required to send at-risk
beneficiaries multiple notices to notify them of about their plan's
drug management program. Part D plan sponsors are already expected to
send a notice to some beneficiaries when the Part D plan sponsors
decide to implement a beneficiary-specific POS claim edit for opioids.
Therefore, we anticipate limited additional burden for Part D plan
sponsors to send certain at-risk beneficiaries an additional notice to
indicate their lock-in status.
Since 2013, there have been 4,617 POS edits submitted into MARx by
plan sponsors for 3,961 unique beneficiaries as a result of the drug
utilization review policy. That results in approximately 923 edits
annually. If we assume that the number of edits or access to coverage
limitations will double due to the addition of pharmacy and prescriber
``lock-in'' to OMS, to approximately 1,846 such limitations, we
estimate 3,692 initial and second notices (number of limitations
(1,846) multiplied by the number of notices (2)) total corresponding to
such edits/limitations. For purposes of this estimate, we assume that
all beneficiaries who receive initial notices will be placed on an
access limitation. We estimate it would take an average of 5 minutes
(0.083 hours) at $39.22/hour for an insurance claim and policy
processing clerk to prepare each notice. The burden of 307 hours (3,692
notices x 0.083 hour) at a cost of $12,040.54 (307 hour x $39.22/hr) in
2019 was estimated in section III of this rule.
Part D plan sponsors are required to upload these new notice
templates into their internal claims systems. We estimate that 219 Part
D plan sponsors (31 PDP parent organizations and 188 MA-PD parent
organizations) will be subject to this requirement. We estimate that it
will take on average 5 hours at $81.90/hour for a computer programmer
to upload the notices into their claims systems. This would result in a
total burden of 1,095 hours (5 hours x 219 sponsors) at a cost of
$89,680.50 (1,095 hour x $81.90/hr). In aggregate, the burden to
prepare and upload these additional notices was estimated as 1,402
hours (307 hours + 1,095 hours) at a cost of $101,721 ($12,040 +
$89,681) in 2019 in section III. of this proposed rule.
Part D plan sponsors may also renegotiate the contracts with
network pharmacies and network prescribers in the case of MA-PDs. For
Part D plan sponsors that contract with pharmacies only, we estimate it
would take 10 hours at $134.50/hour for lawyers to conduct the PDP
contract negotiations with network pharmacies. Considering 31 sponsors
we estimate a total burden of 310 hours at a cost of $41,695 (310 hour
x $134.50/hour). For MA-PDs who also contract with prescribers, we
estimate that the annual burden for negotiating a contract with network
providers who can prescribe controlled substances to be 3,760 hours
(188 MA-PDs x 20 hours per sponsor) at a cost of $505,720 (3,760 hour x
$134.50/hour). The total estimated burden associated with the contract
negotiations from both PDP and MA-PD sources in 2019 was estimated as
4,070 hours (310 hours + 3,760 hours) at a cost of $547,415 ($41,695 +
$505,720).
We estimate that, in order to implement pharmacy or prescriber
lock-in, Part D plan sponsors would have to program edits into their
pharmacy claims systems so that once they restrict an at-risk
beneficiaries' access to coverage for frequently abused drugs through
applying pharmacy or prescriber lock-in, claims at a non-selected
pharmacies or associated with prescriptions for frequently abused drugs
from non-selected prescribers would be rejected. We believe that most
Part D plan sponsors with Medicaid or private lines of business will
have existing lock-in programs in those lines of business to pull
efficiencies from. We estimate it would take a total number of 26,280
labor hours across all 219 Part D plan sponsors (31 PDP parent
organizations and 188 MA-PD parent organizations) at a wage of $81.90
an hour for computer programmers to program these edits into their
existing systems. Thus, the total cost to program these edits is 26,280
hours x $81.90 = $2,152,332.
The right of an enrollee to appeal an at-risk determination will
also have an associated cost. As explained, we estimate a total hourly
burden of 178

[[Page 56481]]

hours at an annual estimated cost of $35,183 in 2019. As previously
discussed, we estimate that 1,846 beneficiaries would meet the criteria
for being identified as an at-risk beneficiary. Based on validated
program data for 2015, 24 percent of all adverse coverage
determinations were appealed to level 1. Given the nature of drug
management programs, the extensive level of case management conducted
by plans prior to making the at-risk determination, and the opportunity
for an at-risk beneficiary to submit preferences to the plan prior to
lock-in implementation, we believe it is reasonable to assume that this
rate of appeal will be reduced by at least 50 percent for at-risk
determinations made under a drug management program. Therefore, this
estimate is based on an assumption that about 12 percent of the
beneficiaries estimated to be subject to an at-risk determination
(1,846) will appeal the determination. Hence, we estimate that there
will be 222 level 1 appeals (1,846 x 12 percent). We estimate it takes
48 minutes (0.8 hours) to process a level 1 appeal. There is a
statutory requirement that a physician with appropriate expertise make
the determination for an appeal of an adverse initial determination
based on medical necessity. Thus, we estimate an hourly burden of 178
hours (222 appeals x 0.8) at a cost of $197.66 per hour for physicians
to perform these appeals. Thus the total cost in 2019 is estimated as
$35,183 = 178 hours x $197.66.
In aggregate, this provision would result in a net savings of $13
million - ($101,721 + $547,415 + $2,152,332 + $35,183) = $13 million -
$2,836,651 = $10,163,349 (or $10,000,000 if rounded to nearest million)
in 2019.
2. Reducing the Burden of the Compliance Program Training Requirements
(Sec. Sec. 422.503 and 423.504)
The proposed provision would amend the regulation so that first-
tier, downstream and related entities (FDR) no longer are required to
take the CMS compliance training, which lasts 1 hour, and so that MA
organizations and Part D sponsors no longer have a requirement to
ensure that FDRs have compliance training. However, it is still the
sponsoring organization's responsibility to manage relationships with
its FDRs and ensure compliance with all applicable laws, rules and
regulations. Furthermore, we would continue to hold sponsoring
organizations accountable for the failures of its FDRs to comply with
Medicare program requirements.
We believe that by deleting this provision we will reduce burden
for sponsoring organizations and their FDRs. We estimate that the
burden reduction will be roughly 1 hour for each FDR employee who would
be required to complete the CMS training on an annual basis, under the
current regulation at Sec. Sec. 422.503(b)(4)(vi)(C) and
423.504(b)(4)(vi)(C). We do not know how many employees were required
to take the CMS training, nor do we know the exact numbers of FDRs that
were subject to the requirement. Sponsoring organizations have
discretion in not only which of their contracted organizations meet the
definition of an FDR, but also discretion in which employees of that
FDR are subject to the training. But we know from public comments that
PBMs, hospitals, pharmacies, labs, physician practice groups and even
some billing offices were routinely subjected to the training.
Unfortunately, the Medicare Learning Network (MLN) Matters[supreg] Web
site is not able to track the number of people that took CMS' training,
so we cannot use that as a data source. CMS has reviewed the
Organization for Economic Co-operation and Development's (OECD) 2015
statistics which show a total of 20,076,000 people employed in the
health and social services fields in the United States, although
certainly not all of them were subject to CMS' training requirement
(See http://stats.oecd.org/index.aspx?DataSetCode=HEALTH_STAT).
Hospitals are one sector of the health industry that has been
particularly vocal about the burden the current training requirement
has placed on them and their staff. If we use hospitals as an example
to estimate potential burden reduction, the OECD Web site states that
there are 5,627 hospitals in the United States, employing 6,210,602
people. That is an average of 1,103 people per hospital. There are
approximately 4,800 hospitals registered with Original Medicare. If we
assume that each one of those hospitals holds at least one contract
with a M A health plan and all of their employees were subjected to the
training (4,800 x 1,103 x 1 hour) that is 5,294,400 hours of burden
that would be eliminated by this proposal. If we add pharmacists,
pharmacy technicians, billing offices, physician practice groups, we
would expect further burden reduction. OECD has data for a few more
sectors of the industry, including 295,620 pharmacists, 3,626,060
nurses and 820,251 physicians in the United States. Many of the
physicians and nurses are likely represented in the 6 million employed
by hospitals. Unfortunately we don't have data sources for all sectors
of the industry. However, using hospital staff as a starting point and
OECD's total figure of 20 million working in the health and social
service fields, we estimate the burden reduction is likely 6 to 8
million hours each year. Again, we have no way to determine exactly how
many FDRs there are or exactly how many staff would be expected to take
the training under the current regulation, but we hope this example
demonstrates the reduction in burden this proposal would mean for the
industry. We request comment that would allow for more complete
monetization of cost savings in the analysis of the final rule.
Although sponsors must still monitor FDRs and implement corrective
actions when mistakes are found, we believe that they are currently
already doing this. Therefore no additional burden complementing the
reduction in burden is anticipated from this proposal to eliminate the
CMS training.
3. Meaningful Differences in Medicare Advantage Bid Submissions and Bid
Review (Sec. Sec. 422.254 and 422.256)
For CY 2018 bids, 2,743 non-D-SNP non-employer plans (that is, HMO,
HMO-POS, Local PPO, PFFS, and RPPO) used in house and/or consulting
actuaries to address the meaningful difference requirement based on CY
2018 bid information. The most recent Bureau of Labor Statistics report
states that actuaries made an average of $54.87 an hour in 2016, and we
estimate that 2 hours per plan are required to fully address the
meaningful difference requirement. The estimated hours are based on
assumptions developed in consultation with our Office of the Actuary.
We additionally allow 100 percent for benefits and overhead costs of
actuaries, resulting in an hourly wage of $54.87 x 2 = $109.74.
Therefore, we estimate a savings of 2 hours per plan x 2,743 plans =
5,486 hours reduction in hourly burden with a savings in cost of 5,486
hours x $109.74 = $602,033.64, rounded down to $0.6 million to be saved
annually under this proposal.
The number of plan bids received by CMS may increase because of a
variety of factors, such as payments, bidding and service area
strategies, serving unique populations, and in response to other
program constraints or flexibilities. However, CMS expects that
eliminating the meaningful difference requirement will improve the plan
options available for beneficiaries, but do not believe the number of
similar plan options offered by the same MA organization in each county
will necessarily increase significantly or create more confusion in
beneficiary decision-making related specifically to

[[Page 56482]]

the number of plan options. New flexibilities in benefit design and
more sophisticated approaches to consumer engagement and decision-
making should help beneficiaries, caregivers, and family members make
informed plan choices.
CMS does not believe this proposed change will have a significant
impact on health care providers. The number of plans offered by
organizations in each county are not expected to increase significantly
as a result of this change and health care provider contracts with MA
organizations typically include all of the organization's plans rather
than having separate contracts for each plan. In addition, CMS does not
expect a significant increase in time spent in bid review as a direct
result of eliminating meaningful difference nor increased provider
burden.
4. Physician Incentive Plans--Update Stop-Loss Protection Requirements
(Sec. 422.208)
Some physician contracts with MA organizations provide that the MA
organization pay the physician a capitated amount to assume financial
responsibility for services (for example, hospital costs) that they do
not personally render. CMS refers to capitations to physicians that
include services the physicians do not render as ``global capitation.''
When physicians are globally capitated to the extent that they can lose
more than 25 percent of their income, they are required to be covered
by stop-loss insurance. We propose to replace the current insurance
schedule in the regulation with updated stop-loss insurance
requirements that would allow insurance with higher deductibles. The
new schedule would result in a significant reduction to the cost of
obtaining stop-loss insurance. The higher deductibles are consistent
with the increase in medical costs due to inflation.
To determine the cost of different stop-loss insurance policies, we
used claim distributions from original Medicare enrollees. Then, we
assumed an average loading for administrative and profit of 20 percent.
Using these assumptions, we estimate that plans and physicians would
save an average of $100 per globally capitated member per year in total
costs. The derivation of this $100 figure is as follows:
Under the current regulation at Sec. 422.208(f)(2)(iii), stop-loss
insurance for the provider (at the MA organization's expense) is needed
only if the number of members in the physician's group at global risk
under the MA plan is less than 25,000. The average number of members in
the under 25,000 group estimated under the current regulation is 6,000
members. Ideally, to obtain an average, we should weight the panel
sizes in the chart at Sec. 422.208(f)(2)(iii) by the number of
physician practices and the number of capitated patients per practice
per plan. However, this information is not available. Therefore, we
used the median of the panel sizes listed in the chart at Sec.
422.208(f)(2)(iii), which is about 8,000. Since the per member per year
(PMPY) stop-loss premiums are greater for a smaller number of patients,
we lowered this 8,000 to 6,000 to reflect the fact that the
distribution of capitated patients is skewed to the left. We use this
rough estimate of 6,000 for its estimates.
For these 6,000 members, the current regulation at Sec.
422.208(f)(2)(iii) (the chart) shows the physician needs stop-loss
insurance for $37,000 in a combined attachment point (deductible). The
$37,000 is obtained by using linear interpolation on the chart at Sec.
422.208(f)(2)(iii), replacing panel sizes with midpoints of ranges and
rounding to the nearest 1,000. To find the premium for a stop-loss
insurance with a deductible of $37,000, we use Table 26, which reflects
current insurance rates, that is, what would be charged today. By using
linear interpolations on the columns with $30,000 and $40,000 and
rounding to the nearest $1,000, we see that the PMPY premium for
insurance with $37,000 combined attachment points is $2,000 PMPY. This
$2,000 premium reflects the baseline charge today for a combined
deductible of $37,000.
BILLING CODE 4120-01-P

[[Page 56483]]

[GRAPHIC] [TIFF OMITTED] TP28NO17.015

BILLING CODE 4120-01-C

[[Page 56484]]

Next, we compute the premium under the proposed rule. We still
assume an average of 6,000 capitated members. However, the proposed
rule allows higher deductibles corresponding to medical inflation. By
using linear interpolation on the columns headed with 50,000 and 60,000
combined attachment points and rounding. We see that a deductible
(combined attachment point) of $57,000 corresponds to 6,000 capitated
members and a premium of $1,500 PMPY.
The savings in premium between using Sec. 422.208(f)(iii) to
calculate deductibles (combined attachment point) and using Table A to
calculate deductibles is $2000 - $1500 = $500 PMPY. We assume that the
average loading for profit and administrative costs is roughly 20
percent. So our PMPY savings is 20 percent x 500 = $100 PMPY. The
remaining $500 - $100 = $400 in savings is on net benefits. That
reduction does not produce any savings since the plans and physicians
are simply trading claims for premiums.
In 2007, we estimated that 7 percent of enrollees were receiving
services under capitated arrangements. Although we do not have more
current data, based on CMS observation of managed care industry trends,
we believe that the percentage is now higher, and we assume that 11
percent of enrollees are now paid under global capitation. There are
currently 18.6 million MA beneficiaries. We estimate that about 18.6
million x 11 percent = 2,046,000 MA members are paid under some degree
of global capitation. Thus, the total aggregate projected annual
savings under this proposal is roughly $100 PMPY x 2,046,000 million
beneficiaries paid under global capitation = $204.6 million.
The $204.6 million savings is removed from the plan bid, but not
the CMS benchmark. If the benchmark exceeds the bid, Medicare pays the
MA organization the bid (capitation rate and risk adjustment) plus a
percentage of the difference between the benchmark and the bid, called
the rebate. The rebate is based on quality ratings and allows Medicare
to share in the savings to the plans; our experience with rebates shows
that the average rebate is on the order of 2/3. We assumed that of the
$204.6 million in annual savings, Medicare would save 35 percent x
$204.6 million = $71,610,000, and the remaining 65 percent x $204.6
million = $132,990,000 would be paid to the plans. The plan portion of
the savings we project for this proposal would fund extra benefits or
possibly reduce cost sharing for plan members.
The figures for 2019 were updated for 2020 to 2023 using enrollment
and inflation factors found in the CMS trustees report, accessible at:
https://www.cms.gov/reportstrustfunds.
5. Changes to the Agent/Broker Requirements (Sec. Sec. 422.2272(e) and
423.2272(e))
We propose to delete the limitation placed on MA organizations and
Part D sponsors as to how they can respond to an agent/broker who has
become unlicensed. We propose to delete a requirement that the MA plan
or Part D plan terminate an unlicensed agent or broker and contact
beneficiaries to notify them if they had been enrolled by the
unlicensed agent or broker. We already require MA organizations and
Part D sponsors to use only licensed agents/brokers. We have
established the requirement to have a licensed agent or broker in a
2008 final rule (73 FR 54219). That burden assessment is not changing
due to the proposal to remove paragraph (e) from these sections. The
impact analysis for the specific provision at paragraph (e) of
Sec. Sec. 422.2272 and 423.2272 was established in rule-making in
April 2011 (76 FR 21534). As for the impact of review and compliance
activities that remain to plans after removing the narrow scope of
compliance actions available to MA organizations and Part D sponsors,
we do not believe this change would have a significant increase in
burden or financial impact. Removing this requirement allows state
Department of Insurance (DOI) requirements to take precedence in this
situation. While some MA organizations and Part D sponsors may choose
to make operational changes to ensure compliance, these changes are not
based on this rule, but are required to meet existing requirements.
6. Coordination of Enrollment and Disenrollment Through MA
Organizations and Effective Dates of Coverage and Change of Coverage
We propose to revise our regulations at Sec. 422.66 to permit
default enrollment of Medicaid managed care plan members into an MA
special needs plan for dual eligible beneficiaries. Upon a Medicaid
managed care plan member becoming eligible for Medicare, qualification
for enrollment into the MA special needs plan for dual eligibles is
contingent on the following:
State support for the default enrollment process, and
The organization's ability to identify such individuals at
least 90 days in advance of their Medicare eligibility; and
To issue written notification of the enrollment a minimum
of 60 days in advance.
Our proposal represents the partial codification of existing policy
on seamless conversion enrollment that has been specified in
subregulatory guidance for contract years 2006 and subsequent years,
but with additional parameters and limits. Among the new limits
proposed for seamless conversion default enrollments are allowing such
enrollments only from the organization's Medicaid managed care plan
into an integrated D-SNP and requiring facilitation from applicable
state (in the form of a contract term and provision of data). This will
result in the discontinuation of the use of the seamless conversion
enrollment mechanism by some of the approved MA organizations. However,
as this enrollment mechanism is voluntary and not required for
participation in the MA program, we do not believe the proposed changes
would have any impact to the Medicare Trust Funds. We invite comments
on the potential impact of the proposed changes on MA organizations,
Medicaid managed care plans and beneficiaries.
7. Restoration of the MA Open Enrollment Period (Sec. Sec. 422.60,
422.62, 422.68, 423.38 & 423.40)
We expect that increasing the amount of time that MA-enrolled
individuals are given to switch plans will result in slightly more
beneficiaries selecting plans that receive Quality-Bonus Payments
(QBP). This assessment reflects our observation that beneficiaries tend
to choose plans with higher quality ratings when given the opportunity.
The projected costs to the Government by extending the open enrollment
period for the first 3 months of the calendar year are $9 million for
CY 2019, $10 million in 2020, $10 million in 2021, $11 million in 2022,
and $12 million in 2023.
In order to estimate the additional costs for the projection window
2019-2023, we first made an assumption that approximately 24,600 MA-
enrolled individuals will switch health plans from one without a QBP to
one with a QBP during the extended open enrollment period. The 24,600
enrollee assumption was determined by using a combination of published
research and by observing historical enrollment information. Published
research\1\ shows that 10 percent of MA enrollees voluntarily switch MA
plans and that MA enrollees who voluntarily switch plans change to
plans with slightly higher star ratings than their original plan, with
a modest improvement of

[[Page 56485]]

0.11 stars, on average. The Office of the Actuary confirmed these
findings by analyzing CMS enrollment data and provided further detail.
We estimate that of the 10 percent of MA plan enrollees who switch
plans, 15 percent move to a higher rated plan. Of those who go to a
higher rated plan, we estimate 40 percent move from a non-QBP plan to a
QBP plan. We also estimate that one-fifth of these enrollees would take
advantage of the new open enrollment period.
We apply these assumptions to the estimated MA enrollment for 2019,
20,512,000, which can be obtained from the CMS Trustee's Report
available at https://www.cms.gov/reportstrustfunds/. We find that
24,600 (20,512,000 x 10 percent x 15 percent x 40 percent x 20 percent)
people are expected to enroll in the proposed open enrollment period.
The $9 million in additional costs for 2019 was calculated by
multiplying the 24,600 impacted enrollment by the expected 2019 bonus
amount ($637.20). The Office of the Actuary experiences an average
rebate percentage of 66 percent and an 86 percent backing out of the
projected Part B premium. Hence, the net savings to the trust funds is
estimated as $9 million = 24,600 enrollees x $637.20 (Bonus payment) x
66 percent (rebate percentage) x 86 percent (Reduction in Part B
premium), rounding to $9 million.
Then, we applied trends from the Trustees Report to the 2019
estimate in order to project the costs for years 2020 to 2023. The data
from the Medicare Payments to Private Health Plans, by Trust Fund
(Table IV.C.2. of the 2017 Medicare Trustees Report) was used as the
basis for the trends. The trend estimates are presented in the Table 27
that demonstrates the calculations and displays the cost estimates for
each year 2019-2023.

Table 27--Calculation of Net Costs to the Medicare Trust Funds
for the Extended Open Enrollment Period
--------------------------------------------------------------------------------------------------------------------------------------------------------
Net costs
2019 Base Trend factor Trend factor Trend factor Trend factor (rounded to
Year year 2020 2021 2022 2023 nearest
(million) million)
--------------------------------------------------------------------------------------------------------------------------------------------------------
2019.................................................... 9 .............. .............. .............. .............. 9
2020.................................................... 9 1.078 .............. .............. .............. 10
2021.................................................... 9 1.078 1.084 .............. .............. 10
2022.................................................... 9 1.078 1.084 1.089 .............. 11
2023.................................................... 9 1.078 1.084 1.089 1.086 12
--------------------------------------------------------------------------------------------------------------------------------------------------------

8. Lengthening Adjudication Timeframes for Part D Payment
Redeterminations and IRE Reconsiderations
We believe the proposed changes will result in a reduction of
burden to Part D plan sponsors since they will have additional time to
adjudicate requests for payment. We also expect a reduction in burden
for the independent review entity (IRE) since the additional time for
Part D plan sponsors to process these requests will result in fewer
untimely payment redeterminations that must be auto-forwarded to the
IRE. Based on recent program data, about 2,000 retrospective payment
redetermination cases are auto-forwarded to the Part D IRE each plan
year. If the proposed 14-day timeframe for payment redeterminations is
implemented, we estimate that about 75 percent of the payment
redetermination cases that are currently auto-forwarded to the Part D
IRE due to the plan not being able to meet the adjudication timeframe
will not be auto-forwarded under the 14 day timeframe; the longer
timeframe will afford Part D plan sponsors an additional 7 days to
process a payment request, including obtaining necessary supporting
documentation, and to notify the enrollee of its decision. As a result,
overall plan sponsor burden will be reduced by not having to auto-
forward about 1,500 payment redetermination cases to the Part D IRE in
a given plan year and the Part D IRE's workload will be reduced by the
same number of cases. We estimate that it takes Part D plan sponsors an
average of 15 minutes (0.25 hours) to assemble and forward a case file
to the IRE, for an estimated savings of 375 hours (1500 cases x 0.25
hours). Using an adjusted hourly wage of $34.66 based on the Bureau of
Labor Statistics May 2016 Web site for occupation code 43-9199, ``All
other office and administrative support workers,'' (based on a mean
hourly salary of $17.33, which when multiplied by a factor of two to
include overhead, and fringe benefits, resulting in $34.66 an hour) the
total estimated savings to plans is $12,998 (375 hours x $34.66). Since
the proposed changes involve requests for payment where the enrollee
has already received the drug, we do not believe the proposed changes
will impose undue burden on enrollees.
9. Elimination of Medicare Advantage Plan Notice for Cases Sent to the
IRE
The proposed changes at Sec. 422.590(f) would result in a slight
reduction of burden to Part C plans by no longer requiring a Notice of
Appeal Status for each case file forwarded to the IRE. The estimated
savings of this proposed change is based on reduced plan administration
costs. Using the number of partially and fully adverse cases, we
estimate Part C plans forwarded 47,108 cases to the IRE in 2015. We
estimate it will take 5 minutes (0.083 hours) to complete this notice.
We used an adjusted hourly wage of $34.66 based on the Bureau of Labor
Statistics May 2016 Web site for occupation code 43-9199, ``All other
office and administrative support workers,'' which gives a mean hourly
salary of $17.33, which when multiplied by a factor of two to include
overhead, and fringe benefits, resulting in $34.66 an hour. Thus, the
reduction in administrative time spent would be 0.083 hours x 47,108
cases = 3,926 hours with a consequent savings of 3,926 hours x $34.66
per hour = $136,064.
We do not believe the proposed change will adversely impact health
plan enrollees. The notice we are proposing to eliminate is duplicative
and enrollees will be notified by the IRE that their case was received
by the IRE for review.
10. Revisions to Sec. Sec. 422 and 423 Subpart V, Communication/
Marketing Materials and Activities
CMS is proposing to narrow the definition of ``marketing
materials'' under Sec. Sec. 422.2260 and 423.2260 to only include
materials and activities that aim to influence enrollment decisions.
CMS believes the proposed definitions appropriately safeguard potential
and current MA/PDP enrollees from inappropriate steering of beneficiary
choice, while not including materials

[[Page 56486]]

that pose little risk to current or potential enrollees and are not
traditionally considered ``marketing.'' The proposed change would add
text to Sec. Sec. 422.2260 and 423.2260 and provide a narrower
definition than is currently provided for ``marketing materials.''
Consequently, this definition decreases the number of marketing
materials that must be reviewed by CMS before use. Additionally, the
proposal would more specifically outline the materials that are and are
not considered marketing materials.
We believe the net effects of the proposed changes would reduce the
burden to MA organizations and Part D Sponsors by reducing the number
of materials required to be submitted to CMS for review.
In section IV.F. of this proposed rule, we estimated the reduced
burden to industry at $1.3 million. There is also a reduced burden to
the federal government since CMS staff are no longer obligated to
review these materials. Although all marketing materials are submitted
for potential review by the MA plans to CMS, not all materials are
reviewed, since some MA plans, because of a history of compliance, have
a ``file and use'' status which exempts their materials from routine
reviews. We estimate that only 10 percent of submitted marketing
materials are reviewed by CMS staff. Consequently, the savings to the
federal government is 10 percent x 1.3 million = 0.13 million.
11. Part C & D Star Ratings
There has been a recent trend in the number of enrollees that have
moved from lower Star Ratings contracts that do not receive a Quality
Bonus Payment (QBP) to higher rated contracts that do receive a QBP as
part of contract consolidations. The proposal is to codify the
methodology of the assigned Star Ratings and to add requirements
addressing when contracts have consolidated. The methodology and
measures being proposed here are generally from recent practice and
policies finalized under the section 1853(b) of the Act Rate
Announcement. With regard to consolidations, the Star Ratings assigned
would be based on the enrollment weighted average of the measure scores
of the surviving and consumed contract(s) so that the ratings reflect
the performance of all contracts (surviving and consumed) involved in
the consolidation. We believe that the proposal would dissuade many
plans from consolidating contracts since it would be possible for some
plans to lose QBPs under certain scenarios. If less contracts
consolidate to higher Star Ratings, less QBPs would be paid to plans
and this would result in Trust Fund savings.
In order to estimate the savings amounts for the projection window
2019-2023, we first observed the number of enrollees that have been
impacted by contract consolidations for the prior 3 contract years
(2016 through 2018) using a combination of bid and CMS enrollment/
crosswalk data. The number of enrollees observed are those that have
moved from a non-QBP contract to a QBP contract and were found to be
approximately 830,000 in 2016, 530,000 in 2017, and 160,000 in 2018. We
assumed that the number of enrollees moving from a non-QBP contract to
a QBP contract would be 200,000 starting in 2019 and increasing by 3
percent per year throughout the projection period. The 200,000 starting
figure was chosen by observing the decreasing trend in the historical
data as well as placing the greatest weight on the most recent data
point. The 3 percent growth rate is approximately the projected growth
in the MA eligible population during the 2019-2023 period.
Similarly, we calculated the net per member per month (PMPM) dollar
impact of the QBP for those enrollees in contracts that consolidated to
be $44.73 in 2018. Again, the PMPM impact was projected for the 2019-
2023 period using the projected annual trend of 5 percent per year
which is similar to the projected growth rate for MA expenditures and
can be found in the 2017 Trustees Report. We also made an assumption
that even under the proposed Star Rating methodology changes, there
would still be 50 percent of the projected impacted enrollees that
would consolidate or individually move from a non-QBP contract to a QBP
contract when advantageous to the health plan (lessening the overall
savings impact). Combining the assumptions previously described, as
well as accounting for the average rebate percentage of 66 percent and
backing out the projected Part B premium, the net savings to the trust
funds were calculated to be $32 million for 2019, $35 million in 2020,
$37 million in 2021, $40 million in 2022, and $44 million in 2023. The
calculations for the five annual estimates are presented in Table 28.

Table 28--Calculations of Net Savings per Year for Star Ratings
--------------------------------------------------------------------------------------------------------------------------------------------------------
Average
Enrollment (3% PMPM cost (5% Number months Percent not rebate Backing out Net Savings
Year annual trend) annual trend) per year consolidating percentage of Part B ($ in
(%) (%) premium (%) millions)
--------------------------------------------------------------------------------------------------------------------------------------------------------
2019............................ 200,000........... 44.73 x 1.05...... 12 50 66 86 32
2020............................ 200,000 x 1.03.... 44.73 x 1.05 \2\.. 12 50 66 86 35
2021............................ 200,000 x 1.03 \2\ 44.73 x 1.05 \3\.. 12 50 66 86 37
2022............................ 200,000 x 1.03 \3\ 44.73 x 1.05 \4\.. 12 50 66 86 40
2023............................ 200,000 x 1.03 \4\ 44.73 x 1.05 \5\.. 12 50 66 86 44
--------------------------------------------------------------------------------------------------------------------------------------------------------

12. Any Willing Pharmacy Standard Terms and Conditions and Better
Define Pharmacy Types
a. Anticipated Effects
In considering the cost implications of this proposal, we received
varied perspectives from stakeholders. Part D plan sponsors, PBMs, and
manufacturers contend limited dispensing networks with accreditation
requirements generate cost savings and add value. Specialty pharmacies
contend the added value avoids additional costs. Independent community
pharmacies, and beneficiaries contend broader competition and
transparency will generate savings.
Because this provision clarifies existing any willing pharmacy
requirements, consistent with OACT estimates, we do not anticipate
additional government or beneficiary cost impacts from this provision.

[[Page 56487]]

Table 29--Estimated[thinsp]Aggregate Costs and Savings to the Health Care Sector by Provision
for Calendar Years 2019 Through 2023
----------------------------------------------------------------------------------------------------------------
Calendar year ($ in millions) Total CYs 2019-
Provision Regulation --------------------------------------------- 2023 ($ in
section(s) 2019 2020 2021 2022 2023 millions)
----------------------------------------------------------------------------------------------------------------
Federal Government (Medicare) Impacts
----------------------------------------------------------------------------------------------------------------
Any Willing Pharmacy Standard Various............ 0 0 0 0 0 0
Terms and Conditions and
Better Define Pharmacy Types.
----------------------------------------------------------------------------------------------------------------

b. Benefits
Proposed clarification of Any Willing Pharmacy rules, and
clarification of the definition of retail pharmacy would account for
recent changes in the pharmacy practice landscape and ensure that
existing statutorily-required Any Willing Pharmacy provisions are
extended to innovative pharmacy business and care delivery models.
Rural areas are predominantly served by independent community
pharmacies. The National Community Pharmacist's Association (NCPA)
estimates that ``independent pharmacies represent 52 percent of all
rural retail pharmacies and there are over 1800 independent community
pharmacies operating as the only retail pharmacy within their rural
communities ^{63 64}.'' Additionally, these pharmacies are
increasingly interested to diversify their business models to dispense
specialty drugs. Consequently, we believe this proposal may support
small businesses in rural areas and may help maintain beneficiary
access to specialty drugs from community pharmacies.
---------------------------------------------------------------------------

\63\ National Community Pharmacist's Association letter to CMS
Administrator, Seema Verma, June 7, 2017. Available at http://www.ncpa.co/pdf/ncpa-medicaid-recommend-cms-june-2017.pdf).
\64\ National Community Pharmacist's Association comment letter
to CMS-4159-P, March 2014. Available at //www.ncpa.co/pdf/NCPA-
Comments-to-CMS-Proposed-Rule-2015FINAL-3.7.14.pdf.
---------------------------------------------------------------------------

13. Eliminating the Requirement to Provide PDP Enhanced Alternative
(EA) to EA Plan Offerings With Meaningful Differences (Sec. 423.265)
The proposed revision of 423.265 eliminates the requirement for two
enhanced benefit plans offered by a PDP organization in a service area
to be ``substantially different''. If finalized this will result in
increased plan flexibilities and a potential increase in beneficiary
plan choice. We expect this provision to reduce plan burden and could
provide a very modest savings to plans sponsors of approximately
$60,000. The savings represent an estimate of the time not spent by
certifying actuaries to ensure that a meaningful difference threshold
is met between two PDP EA offerings. Based on the preliminary CY 2018
landscape, if all PDP organizations that submitted an EA benefit design
had also submitted the maximum of two EA plans, the result would be
approximately 275 EA to EA plan pairings that would have required
actuary time spent in evaluation of the meaningful difference
requirement. We further estimate that it would take an actuary 2 hours
to write a meaningful difference requirement. Based on the Bureau of
Labor Statistics (BLS) latest wage estimates, https://www.bls.gov/oes/current/oes152011.htm, the mean hourly wage for actuaries, occupation
code 15-2011 is $54.87 which when multiplied by 2 to allow 100 percent
for overhead and fringe benefits is $109.74 an hour. Thus our total
estimated burden is 275 EAs x 2 Hours per EA = 550 hours at a cost of
550 x $109.74 = $60357. While there is potential savings for PDP plan
sponsors under this proposal, these savings could be offset for
organizations who make the business decision to prepare and submit
additional bids if this proposal is finalized. If the EA to EA
threshold was the sole barrier to a PDP sponsor offering a second EA
plan, (that is, the sponsor currently only offers one enhanced plan),
based on the CY2018 PDP landscape, we could anticipate a modest
increase of approximately 125 additional enhanced plans (15 percent
increase). Although we believe it unlikely that all PDP sponsors would
opt to add an additional plan.
14. Preclusion List Requirements for Prescribers in Part D and
Individuals and Entities in MA, Cost Plans and PACE
The costs and savings, as reflected in the total net savings,
associated with our preclusion list proposals would be those identified
in the collection of information section of this rule: Specifically,
(1) the system costs associated with the Part D preclusion list; (2)
costs associated with the preparation and sending of written notices to
affected Part D prescribers and beneficiaries; and (3) the savings that
would accrue from individuals and entities no longer being required to
enroll in or opt-out of Medicare to prescribe Part D drugs or furnish
Part C services and items. Specifically, we project a total net
savings, as described in detail in the collection of information
portion of this rule, over the first 3 years of this rule of
$35,526,652 ($3,423,852 for Part D + $32,102,800 for Part C), or a 3-
year annual average of $11,842,217). Costs associated with an
alternative approach are found in the Alternatives Considered portion
of this section. We would be responsible for the development and
monitoring of the preclusion list using its own resources. This would
be funded as part of our screening activities. We do not anticipate a
change in the number of individuals or entities billing for service,
for we would only be denying payment to those parties that meet the
conditions of the preclusion list. Costs associated with an alternative
approach are found in the Alternatives Considered section of this rule.
We welcome public comment on these estimates, for stakeholder
feedback could assist us in developing more concrete projections.
15. Removal of Quality Improvement Project for Medicare Advantage
Organizations (Sec. 422.152)
This provision would result in a total savings of $19,305 to the
federal government. The driver of the savings is the removal of burden
for federal employees to review Quality Improvement Project (QIP)
attestations. MA organizations are required to annually attest that
they have an ongoing QIP in progress and the Central Office reviews
these attestation submissions. To estimate amounts, we considered how
many QIP attestations are performed annually.
We estimate that--
Central Office staff will require one person reviewing for
0.25 hours to review a single QIP attestation. The Central Office staff
typically have higher

[[Page 56488]]

GS levels. We assume a GS grade 13, step 5, with a mean wage of $51.48,
which with an allowance of 100 percent for overhead and fringe benefits
becomes $102.96. This is based on the 2017 publicly available wages
found on the Office of Personnel Management Web site at https://www.opm.gov/policy-data-oversight/pay-leave/salaries-wages/2017/general-schedule/.
We calculate the savings to the federal government by
multiplying the number of anticipated QIP attestation submissions (750)
times the number of CMS staff it takes to complete a review-- (1) times
the adjusted wage for that staff ($102.96) (750 x 1 x $102.96 x 0.25
hour), which equals $19,305.
Thus, the total savings of this provision are $31,968, of which
$12,663.75 are savings to the industry, as indicated in section III. of
this proposed rule, and $19,305 are savings to the federal government.
16. Reducing the Burden of the Medical Loss Ratio Reporting
Requirements
Our proposal to significantly reduce the amount of MLR data
submitted to CMS would eliminate the need for CMS to continue to pay a
contractor, approximately $390,000 a year for the following:
To perform initial analyses, or desk reviews, of the
detailed MLR reports submitted by MA organizations.
Part D sponsors in order to identify omissions and
suspected inaccuracies and to communicate their findings to MA
organizations and Part D sponsors in order to resolve potential
compliance issues.
In addition, because we would be receiving only the minimum amount
of data from MAOs and Part D sponsors, we expect that we would reduce
the amount we pay to contractors for software development, data
management, and technical support related to MLR reporting. We
currently pays a contractor $300,000 each year for these services.
Although we expect that MAOs and Part D sponsors would continue to use
the HPMS or a similar system to submit and attest to their simplified
MLR submissions, we would no longer need to maintain and update MLR
reporting software with validation features, to receive certain data
extract files, or to provide support for desk review functionality. We
estimate, by eliminating these services, we would reduce our payments
to contractors by approximately $100,000 a year.
In total, we estimate that the proposed changes to the MLR
reporting requirements will save the government $490,000 a year. As
noted in the Collection of Information section of this proposed rule,
the proposed changes to the MLR reporting requirement will save MA
organizations and Part D sponsors $904,884 a year. Thus, the total
annual savings of this proposal are $1,446,417: $490,000 to the
government and $904,884 to MA organizations and Part D sponsors.
We do not anticipate that our proposal to modify the regulations at
Sec. Sec. 422.2430 and 423.2430 to specify that Medication Therapy
Management (MTM) programs that comply with Sec. 423.153(d) are quality
improvement activities (QIA) will significantly reduce stakeholder
burden. As explained in section II.C.1.b.(2). of this proposed rule, we
stated in the May 23, 2013 final rule (78 FR 31294) that MTM activities
qualify as QIA, provided they meet the requirements set forth in
Sec. Sec. 422.2430 and 423.2430. We expect that most if not all MTM
programs that comply with Sec. 423.153(d) would already satisfy the
QIA requirements set forth in current Sec. Sec. 422.2430 and 423.2430.
Therefore, we do not anticipate that the proposal to explicitly include
MTM programs in QIA will have a significant impact on burden.
17. Expedited Substitutions of Certain Generics and Other Midyear
Formulary Changes (Sec. Sec. 423.100, 423.120, and 423.128)
The proposed provisions would specifically permit Part D sponsors
that meet our requirements to remove brand name drugs (or change their
cost-sharing status) when replacing them with (or adding) newly
approved generics without providing advance notice or submitting
formulary change requests. We would also permit Part D sponsors to make
such changes at any time of the year rather than waiting for them to
take effect 2 months after the start of the plan year. A related
proposal would except from our transition policy applicable generic
substitutions and additions with cost-sharing changes. Lastly, we are
proposing to decrease the days of enrollee notice and refill required
in cases in which (aside from generic substitutions and drugs deemed
unsafe or removed from the market) drug removal or changes in cost-
sharing will affect enrollees.
The FDA has noted that generics are typically sold at substantial
discounts from the branded price. (``Generic Drugs: Questions and
Answers,'' see FDA Web site, https://www.fda.gov/drugs/resourcesforyou/consumers/questionsanswers/ucm100100.htm, accessed June 22, 2017.)
However, we do not believe that significant savings will necessarily
result from these proposed provisions, because historically Part D
sponsors have been able to anticipate the generic launches well and
migrate the brand scripts to generics smoothly once the generic drugs
become available. The proposal could provide some administrative relief
for Part D sponsors, although the savings won't be very significant.
In addition regardless of any first year effect, we do not believe
there could be any significant effect for subsequent years. Our
proposed changes would permit immediate specified generic substitutions
throughout the plan year or a 30 rather than a 60 day notice period for
certain substitutions. Part D sponsors submit for review each year an
entirely new formulary and presumably the timing of substitutions would
overlap across plan years a minimal amount of times.
18. Treatment of Follow-On Biological Products as Generics for Non-LIS
Catastrophic and LIS Cost Sharing
a. Savings
Proposed codification of follow-on biological products as generics
for the purposes of LIS cost sharing and non-LIS catastrophic cost
sharing will reduce marketplace confusion about what level of cost-
sharing Part D enrollees should be charged for follow-on biological
products. By establishing cost sharing at the lower level, this
provision would also improve Part D enrollee incentives to use follow-
on biological products instead of reference biological products. As
discussed previously, this would reduce costs to Part D enrollees and
generate savings for the Part D program.
In addition, we believe that reducing confusion in the marketplace
surrounding this issue will improve beneficiary protections while
improving enrollee incentives to choose follow-on biological products
over reference biological products. (This proposed provision to
classify follow-on biological products as generic drugs are for the
purposes of cost sharing for non-LIS cost sharing in the catastrophic
portion of the benefit and LIS enrollees in any phase of the benefit.)
Improved incentives to choose lower cost alternatives will reduce costs
to Part D enrollees and the Part D program. OACT estimates this
proposal will provide a modest savings of $10 million in 2019, with
savings increasing by approximately $1 million each year through 2028.
OACT anticipates some natural shift from reference biological
products to follow-on biological products, but follow-on biological
products' price differential and market share are lower

[[Page 56489]]

than that observed for small molecule generic drugs. Currently,
Zarxio[supreg] data provide the only meaningful comparison available to
date, as very limited data exist on the other six approved (as of
September 14, 2017) follow-on biological products. The market dynamic
between Neupogen[supreg] and Zarxio[supreg] has behaved consistent with
OACT's anticipation and OACT expects other follow-on biological
products to follow the similar pattern. Based on 2017 year-to-date data
on the per script price difference between Neupogen[supreg] and
Zarxio[supreg], OACT estimated follow-on biological products to be 16
percent less expensive than their reference biological product. OACT
estimates this proposal will result in a minor shift of an additional 5
percent of prescriptions to follow-on biological products by LIS
enrollees under this proposal. Consequently, savings are not estimated
to be significant at this time.

Table 30--Estimated[thinsp]Aggregate Costs and Savings to the Health Care Sector by Provision
for Calendar Years 2019 Through 2023
----------------------------------------------------------------------------------------------------------------
Calendar year ($ in millions) Total CYs
Provision Regulation --------------------------------------------- 2019-2023 ($
section(s) 2019 2020 2021 2022 2023 in millions)
----------------------------------------------------------------------------------------------------------------
Federal Government (Medicare) Impacts
----------------------------------------------------------------------------------------------------------------
Treatment of Follow-On 423.4.............. 10 11 12 13 14 60
Biological Products as
Generics for LIS Cost Sharing
and Non-LIS Catastrophic Cost
Sharing.
----------------------------------------------------------------------------------------------------------------

b. Benefits of Treatment of Follow-On Biological Products as Generics
for Non-LIS Catastrophic and LIS Cost Sharing
Proposed codification of follow-on biological products as generics
for the purposes of LIS cost sharing and non-LIS catastrophic cost
sharing will reduce marketplace confusion about what level of cost-
sharing Part D enrollees should be charged for follow-on biological
products. By establishing cost sharing at the lower level, this
provision would also improve Part D enrollee incentives to use follow-
on biological products instead of reference biological products. As
discussed previously, this would reducing costs to Part D enrollees and
generate savings for the Part D program.
19. Changes to the Days' Supply Required by the Part D Transition
Process
We do not believe our proposal in this section would impose any new
burden on any stakeholder. Since Part D sponsors and their PBMs already
have prescription drug pharmacy claims systems programmed to provide
transition to plan enrollees in the outpatient setting, they would only
have to make a technical change to these systems that consists of
changing the required number of days' supply if it is not already 30
days. In addition, Part D sponsors and their PBMs would have to cease
treating these enrollees in the LTC setting separately from enrollees
in the outpatient setting for purposes of transition. We also do not
believe this proposal would impose any new burden on LTC facilities and
the pharmacies that serve them. If finalized, we believe this
regulation would eliminate the additional time that LTC facilities and
pharmacies have to transition Part D patients that we now believe they
do not need to effectuate the transition.
We believe this provision will produce cost-savings to the Medicare
Part D program because it requires fewer drugs to be dispensed under
transition, particularly in the LTC setting. However, we are unable to
estimate the cost-savings, because it largely depends upon which and
how many drugs are dispensed as transition drugs to Part D
beneficiaries in the LTC setting in the future. Also, we are unable to
determine which PDEs involve transition supplies in LTC in order to
provide an estimate of future savings based on past experience with
transition supplies in LTC in the Part D program.

G. Alternatives Considered

1. Follow-On Biological Products as Generics for Non-LIS Catastrophic
and LIS Cost Sharing
The critical policy decision was how broadly or narrowly to
classify follow-on biological products as generics. Overly broad
classification might easily overstep the distinctions between generic
drugs and follow-on biologics in statute and those drawn by the United
States Food and Drug Administration (FDA), leading to confusion in the
marketplace, and potentially jeopardizing Part D enrollee safety.
Inappropriate utilization of biological products and increased need for
additional medical services, in turn, increase costs to the Part D
program. A narrow classification can appropriately resolve marketplace
confusion while also improving Part D enrollee incentives to choose
lower cost alternatives.
2. Any Willing Pharmacy Standard Terms and Conditions and Better Define
Pharmacy Types
The critical policy decision was how to strike the right balance to
clarify confusion in the marketplace, afford Part D plan sponsor
flexibility, and incorporate recent innovations in pharmacy business
and care delivery models without prematurely and inappropriately
interfering with highly volatile market forces.
3. Preclusion List
We considered a preclusion list that would embody preventive
provisions that would place on the preclusion list not just those
providers and suppliers who are prescribing Part D drugs or who are
providing services to Medicare beneficiaries who are receiving their
Medicare benefit from a MA plan. The savings and cost estimates
associated with that alternative are based on the following.
Prescription drug event (PDE) and encounter data identifies providers
who furnish Part C services and items and prescribe Part D drugs to
Medicare beneficiaries. Given the frequency with which MA organizations
and Part D sponsors typically submit data to CMS, we estimate a delay
of approximately 1 month in obtaining this data. Delays in the
availability of this data and the screening and evaluation of the
providers and prescribers will result in delays in the identification
and inclusion of providers or prescribers on the preclusion list, which
would occur after the service, item or drug was provided to the
Medicare beneficiary. We estimate that it will cost the Trust Fund
approximately $44.7 million if we do not proactively screen providers
and prescribers and delay screening until after the PDE and encounter
data is

[[Page 56490]]

available. We estimate an additional 1.4 million providers or
prescribers would not be screened if we only rely on PDE and encounter
data. The current Medicare provider population consists of
approximately 2 million providers and historically we has revoked 0.4
percent of its existing Medicare enrolled providers., However this
percentage could be higher or lower for the population of prescribers
solely enrolled for prescribing. There are approximately 480,000 part C
and D unenrolled providers and prescribers, 120,000 of which are
billing Part C. Using the percentage of historical revocations, we
estimate approximately 1,920 new revocations. Based on the approximate
1-month delay in the availability of the PDE and encounter data, three
months for screening and an additional 3 months to evaluate the
offenses, we anticipate approximately a 7-month delay in the provider
or prescriber's inclusion on the preclusion list following the service,
item or drug being provided to the beneficiary, if we do not perform
proactive screening. The 7-month timeframe is dependent on whether the
PDE and encounter data is timely. Using a cost avoidance of $3,324 per
month average per provider and applying it to the estimated 1,920 new
revocations, a delay in screening would cost the Trust Fund
approximately $44.7 million (3,324 x 7 x 1,920). The $3,324 estimate is
based on Medicare fee-for-service revocation data and may be higher or
lower depending on whether the provider is an individual or
organization and their provider type.

H. Accounting Statement

As required by OMB Circular A-4 (available at https://obamawhitehouse.archives.gov/omb/circulars_a004_a-4/), in Table 31 we
have prepared an accounting statement showing the savings and transfers
associated with the provisions of this final rule for CYs 2019 through
2023. Table 31 is based on Table 32 which lists savings, costs, and
transfers by provision.

Table 31--Accounting Statement: Classifications of Estimated Savings, Costs, and Transfers From Calendar Years
2019 to 2023
[$ in millions]
----------------------------------------------------------------------------------------------------------------
Savings
--------------------------------------------------------
Category Discount rate Whom to whom
-------------------------- Period covered
7% 3%
----------------------------------------------------------------------------------------------------------------
Net Annualized Monetized Savings.. 82.34 82.02 CYs 2019-2023............... Federal government,
MA organizations
and Part D
Sponsors.
Annualized Monetized Savings...... 87.26 86.79 CYs 2019-2023............... Federal government,
MA organizations
and Part D
Sponsors.
Annualized Monetized Cost......... -4.92 -4.77 CYs 2019-2023............... Federal government,
MA organizations
and Part D
Sponsors.
Net Annualized Monetized Savings.. 13.80 13.82 CYs 2019-2023............... Trust Fund.
Annualized Monetized Savings...... 13.80 13.82 CYs 2019-2023............... Trust Fund.
Annualized Monetized Cost......... 0.00 0.00 CYs 2019-2023............... Trust Fund.
Net Annualized Monetized Savings.. 68.54 68.20 CYs 2019-2023............... Industry.
Annualized Monetized Savings...... 73.46 72.98 CYs 2019-2023............... Industry.
Annualized Monetized Cost......... -4.92 -4.77 CYs 2019-2023............... Industry.
Transfers......................... 155.90 154.95 CYs 2019-2023............... Federal Government,
MA plans and Part D
Sponsors.
----------------------------------------------------------------------------------------------------------------
Note: Monetized figures in 2018 dollars. Positive numbers indicate aggregate annual savings at the giving
percentage. Transfers are a separate line item. Savings and cost have been broken out separately for industry,
the trust fund and aggregate. For example, the industry provisions with positive amounts had a level monetized
amount of 72.32 at the 3 percent level but a cost of 11.87 at the 3 percent level resulting in an aggregate of
72.32 -11.87 = 60.45. Minor (cent) errors are due to rounding.

The following Table 32 summarizes savings, costs, and transfers by
provision and formed a basis for the accounting table.
BILLING CODE 4120-01-P

[[Page 56491]]

[GRAPHIC] [TIFF OMITTED] TP28NO17.016

BILLING CODE 4120-01-C

[[Page 56492]]

I. Conclusion

This proposed rule has a net savings of between $80 to $100 million
for each of the next 5 years. The savings are equivalent to a level
amount of about $80 million per year for both 7 percent and 3 percent
interest rates. These aggregate savings are to industry ($68.20 million
at the 3 percent level = $72.98 million savings--$4.77 million cost),
and the Federal government and the Trust Fund ($13.82 million at the 3
percent level which reflects savings to the trust fund without any
cost). Transfers between the Federal Government and Industry are
between $230 and $320 million and are equivalent to a monetized level
amount of about $270 million per year at the 3-percent and 7-percent
levels. Both industry and the Federal government save from program
efficiencies and reduced work.

J. Reducing Regulation and Controlling Regulatory Costs

This rule, if finalized as proposed, is expected to be an E.O.
13771 regulatory action. Details on the estimated costs and cost
savings can be found in the preceding analysis.

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.

List of Subjects

42 CFR Part 405

Administrative practice and procedure, Health facilities, Health
professions, Kidney diseases, Medical devices, Medicare, Reporting and
recordkeeping requirements, Rural areas, X-rays.

42 CFR Part 417

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

42 CFR Part 422

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

42 CFR Part 423

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

42 CFR Part 460

Aged, Health care, Health records, Medicaid, Medicare, and
Reporting and recordkeeping requirements

42 CFR Part 498

Administrative practice and procedure, Health facilities, Health
professions, Medicare, and Reporting and recordkeeping requirements.

For the reasons set forth in the preamble, the Centers for Medicare
& Medicaid Services proposes to amend 42 CFR chapter IV as set forth
below:

PART 405--FEDERAL HEALTH INSURANCE FOR THE AGED AND DISABLED

0
1. The authority citation for part 405 continues to read as follows:

Authority: Secs. 205(a), 1102, 1861, 1862(a), 1869, 1871, 1874,
1881, and 1886(k) of the Social Security Act (42 U.S.C. 405(a),
1302, 1395x, 1395y(a), 1395ff, 1395hh, 1395kk, 1395rr and
1395ww(k)), and sec. 353 of the Public Health Service Act (42 U.S.C.
263a).

0
2. Section Sec. 405.924 is amended by adding paragraph (a)(5) to read
as follows:

Sec. 405.924 Actions that are initial determinations.

(a) * * *
(5) An adjustment of premium for hospital or supplementary medical
insurance as outlined in Sec. Sec. 406.32(d), 408.20(e), and 408.22 of
this chapter, and 20 CFR 418.1301.
* * * * *

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

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

Authority: Secs. 1102 and 1871 of the Social Security Act (42
U.S.C. 1302 and 1395hh), secs. 1301, 1306, and 1310 of the Public
Health Service Act (42 U.S.C. 300e, 300e-5, and 300e-9), and 31
U.S.C. 9701.

0
4. Section 417.430 is amended by revising paragraph (a)(1) to read as
follows:

Sec. 417.430 Application procedures.

(a) * * *
(1) The application form must comply with CMS instructions
regarding content and format and be approved by CMS as described in
Sec. 422.2262 of this chapter. The application must be completed by an
HMO or CMP eligible (or soon to become eligible) individual and include
authorization for disclosure between HHS and its designees and the HMO
or CMP.
* * * * *
0
5. Section 417.472 is amended by adding paragraph (k) to read as
follows:

Sec. 417.472 Basic contract requirements.

* * * * *
(k) All cost contracts under section 1876 of the Act must agree to
be rated under the quality rating system specified at subpart D of part
422, and for cost plans that provide the Part D prescription benefit,
under the quality rating system specified at part 423 subpart D, of
this chapter. Cost contacts are not required to submit data on or be
rated on specific measures determined by CMS to be inapplicable to
their contract or for which data are not available, including hospital
readmission and call center measures.
0
6. Section 417.478 is amended by revising paragraph (e) to read as
follows:

Sec. 417.478 Requirements of other laws and regulations.

* * * * *
(e)(1) The prohibitions, procedures and requirements relating to
payment to individuals and entities on the preclusion list, defined in
Sec. 422.2 of this chapter, apply to HMOs and CMPs that contract with
CMS under section 1876 of the Act.
(2) In applying the provisions of Sec. Sec. 422.2, 422.222, and
422.224 of this chapter under paragraph (e)(1) of this section,
references to part 422 of this chapter must be read as references to
this part, and references to MA organizations as references to HMOs and
CMPs.
0
7. Section 417.484 is amended by revising paragraph (b)(3) to read as
follows:

Sec. 417.484 Requirement applicable to related entities.

* * * * *
(b) * * *
(3) That payments must not be made to individuals and entities
included on the preclusion list, defined in Sec. 422.2 of this
chapter.

[[Page 56493]]

PART 422--MEDICARE ADVANTAGE PROGRAM

0
8. 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).

0
9. Section 422.2 is amended by adding the definition of ``Preclusion
list'' in alphabetical order to read as follows:

Sec. 422.2 Definitions.

* * * * *
Preclusion list means a CMS-compiled list of individuals and
entities that--
(1) Meet all of the following requirements:
(i) The individual or entity is currently revoked from Medicare
under Sec. 424.535.
(ii) The individual or entity is currently under a reenrollment bar
under Sec. 424.535(c).
(iii) CMS determines that the underlying conduct that led to the
revocation is detrimental to the best interests of the Medicare
program. In making this determination under this paragraph, CMS
considers the following factors:
(A) The seriousness of the conduct underlying the individual's or
entity's revocation.
(B) The degree to which the individual's or entity's conduct could
affect the integrity of the Medicare program.
(C) Any other evidence that CMS deems relevant to its
determination; or
(2) Meet both of the following requirements:
(i) The individual or entity has engaged in behavior for which CMS
could have revoked the individual or entity to the extent applicable
had they been enrolled in Medicare.
(ii) CMS determines that the underlying conduct that would have led
to the revocation is detrimental to the best interests of the Medicare
program. In making this determination under this paragraph, CMS
considers the following factors:
(A) The seriousness of the conduct involved.
(B) The degree to which the individual's or entity's conduct could
affect the integrity of the Medicare program; and
(C) Any other evidence that CMS deems relevant to its
determination.
* * * * *
0
10. Section 422.54 is amended by revising paragraphs (c)(1)(i) and
(d)(4)(ii) to read as follows:

Sec. 422.54 Continuation of enrollment for MA local plans.

* * * * *
(c) * * *
(1) * * *
(i) Obtain CMS's approval of the continuation area, the
communication materials that describe the option, and the MA
organization's assurances of access to services.
* * * * *
(d) * * *
(4) * * *
(ii) Organizations that require enrollees to give advance notice of
intent to use the continuation of enrollment option, must stipulate the
notification process in the communication materials.
* * * * *
0
11. Section 422.60 is amended--
0
a. In paragraph (a)(2) by removing the reference ``Sec. 422.62(a)(3),
(a)(4), and (a)(5) if'' and adding in its place the reference ``Sec.
422.62(a)(3) and (4) if''; and
0
b. Revising paragraph (g).
The revision reads as follows:

Sec. 422.60 Election process.

* * * * *
(g) Passive enrollment by CMS--(1) Circumstances in which CMS may
implement passive enrollment. CMS may implement passive enrollment
procedures in any of the following situations:
(i) Immediate terminations as provided in Sec.
422.510(b)(2)(i)(B).
(ii) CMS determines that remaining enrolled in a plan poses
potential harm to the members.
(iii) CMS determines, after consulting with the State Medicaid
agency that contracts with the dual eligible special needs plan
described in paragraph (g)(2)(i) of this section, and that meets the
requirements of paragraph (g)(2) of this section, that the passive
enrollment will promote integrated care and continuity of care for a
full-benefit dual eligible beneficiary (as defined in Sec. 423.772 of
this chapter and entitled to Medicare Part A and enrolled in Part B
under title XVIII) who is currently enrolled in an integrated dual
eligible special needs plan.
(2) MA plans that may receive passive enrollments. CMS may
implement passive enrollment described in paragraph (g)(1)(iii) only
into MA-PD plans that meet all the following requirements:
(i) Operate as a fully integrated dual eligible special needs plan
as defined in Sec. 422.2, or a specialized MA plan for special needs
individuals that meets a high standard of integration, as described in
Sec. 422.102(e).
(ii) Have substantially similar provider and facility networks and
Medicare- and Medicaid-covered benefits as the plan (or plans) from
which the beneficiaries are passively enrolled.
(iii) Have an overall quality rating of at least 3 stars under the
rating system described in Sec. 422.160 through Sec. 422.166 for the
year prior to the plan year passive enrollments take effect or is a low
enrollment contract or new MA plan as defined in Sec. 422.252.
(iv) Not have any prohibition on new enrollment imposed by CMS.
(v) Have limits on premiums and cost-sharing appropriate to full-
benefit dual eligible beneficiaries.
(vi) Have the operational capacity to passively enroll
beneficiaries and agree to receive the enrollments.
(3) 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.
(4) Beneficiary notification. The MA organization that receives the
passive enrollment must provide to the enrollee a notice 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 notice must be
provided to all potential passively enrolled 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.
(5) Special election period. Individuals not otherwise eligible for
a special election period at the time of passive enrollment will be
provided with a special election period, in accordance with Sec.
422.62(b)(4).
0
12. Section Sec. 422.62 is amended by--
0
a. Revising paragraphs (a)(3) through (5);
0
b. Removing paragraphs (a)(6) and (7); and
0
c. Revising paragraph (b)(3)(ii).
The revisions read as follows:

Sec. 422.62 Election of coverage under an MA plan.

(a) * * *
(3) Open enrollment period for individuals enrolled in MA--(i) For
2019 and subsequent years. Except as provided in paragraphs (a)(3)(ii)
and (iii) and (a)(4) of this section, an individual who is enrolled in
an MA plan may make an election once during the first

[[Page 56494]]

3 months of the year to enroll in another MA plan or disenroll to
obtain Original Medicare. An individual who chooses to exercise this
election may also make a coordinating election to enroll in or
disenroll from Part D, as specified in Sec. 423.38(e).
(ii) Newly eligible MA individual. For 2019 and subsequent years, a
newly MA eligible individual who is enrolled in a MA plan may change
his or her election once during the period that begins the month the
individual is entitled to both Part A and Part B and ends on the last
day of the third month of the entitlement. An individual who chooses to
exercise this election may also make a coordinating election to enroll
in or disenroll from Part D, as specified in Sec. 423.38(e).
(iii) Single election limitation. The limitation to one election or
change in paragraphs (a)(3)(i) and (ii) of this section does not apply
to elections or changes made during the annual coordinated election
period specified in paragraph (a)(2) of this section, or during a
special election period specified in paragraph (b) of this section.
(4) Open enrollment period for institutionalized individuals. After
2005, an individual who is eligible to elect an MA plan and who is
institutionalized, as defined in Sec. 422.2, is not limited (except as
provided for in paragraph (d) of this section for MA MSA plans) in the
number of elections or changes he or she may make. Subject to the MA
plan being open to enrollees as provided under Sec. 422.60(a)(2), an
MA eligible institutionalized individual may at any time elect an MA
plan or change his or her election from an MA plan to Original
Medicare, to a different MA plan, or from original Medicare to an MA
plan.
(5) Annual 45-day period for disenrollment from MA plans to
Original Medicare. Through 2018, at any time from January 1 through
February 14, an individual who is enrolled in an MA plan may elect
Original Medicare once during this 45-day period. An individual who
chooses to exercise this election may also make a coordinating election
to enroll in a PDP as specified in Sec. 423.38(d) of this chapter.
(b) * * *
(3) * * *
(ii) The organization (or its agent, representative, or plan
provider) materially misrepresented the plan's provisions in
communication materials as outlined in subpart V of this part.
* * * * *
0
13. Section 422.66 is amended by revising paragraphs (c) and (d)(1) and
(5) to read as follows:

Sec. 422.66 Coordination of enrollment and disenrollment through MA
organizations.

* * * * *
(c) Election by default: Initial coverage election period--(1)
Basic rule. Subject to paragraph (c)(2) of this section, an individual
who fails to make an election during the initial coverage election
period is deemed to have elected original Medicare.
(2) Default enrollment into MA special needs plan--(i) Conditions
for default enrollment. During an individual's initial coverage
election period, an individual may be deemed to have elected a MA
special needs plan for individuals entitled to medical assistance under
a State plan under Title XIX offered by the organization provided all
the following conditions are met:
(A) At the time of the deemed election, the individual remains
enrolled in an affiliated Medicaid managed care plan. For purposes of
this section, an affiliated Medicaid managed care plan is one that is
offered by the MA organization that offers the MA special needs plan
for individuals entitled to medical assistance under Title XIX or is
offered by an entity that shares a parent organization with such MA
organization;
(B) The state has approved the use of the default enrollment
process in the contract described in Sec. 422.107 and provides the
information that is necessary for the MA organization to identify
individuals who are in their initial coverage election period;
(C) The MA organization offering the MA special needs plan has
issued the notice described in paragraph (c)(2)(iv) of this section to
the individual;
(D) Prior to the effective date described in paragraph (c)(2)(iii)
of this section, the individual does not decline the default enrollment
and does not elect to receive coverage other than through the MA
organization; and
(E) CMS has approved the MA organization to use default enrollment
under paragraph (c)(2)(ii) of this section.
(ii) CMS approval of default enrollment. An MA organization must
obtain approval from CMS before implementing any default enrollment as
described in this section. CMS may suspend or rescind approval when CMS
determines the MA organization is not in compliance with the
requirements of this section.
(iii) Effective date of default enrollment. Default enrollment in
the MA special needs plan for individuals entitled to medical
assistance under a State plan under Title XIX is effective the month in
which the individual is first entitled to both Part A and Part B.
(iv) Notice requirement for default enrollments. The MA
organization must provide notification that describes the costs and
benefits of the MA plan and the process for accessing care under the
plan and clearly explains the individual's ability to decline the
enrollment, up to and including the day prior to the enrollment
effective date, and either enroll in Original Medicare or choose
another plan. Such notification must be provided to all individuals who
qualify for default enrollment under paragraph (c)(2) of this section
no fewer than 60 calendar days prior to the enrollment effective date
described in paragraph (c)(2)(iii) of this section.
(d) * * *
(1) Basic rule. An MA plan offered by an MA organization must
accept any individual (regardless of whether the individual has end-
stage renal disease) who requests enrollment during his or her Initial
Coverage Election Period and is enrolled in a health plan offered by
the MA organization during the month immediately preceding the MA plan
enrollment effective date, and who meets the eligibility requirements
at Sec. 422.50.
* * * * *
(5) Election. An individual who requests seamless continuation of
coverage as described in paragraph (d)(1) of this section may complete
a simplified election, in a form and manner approved by CMS that meets
the requirements in Sec. 422.60(c)(1).
* * * * *
0
14. Section 422.68 is amended by revising paragraphs (a), (c), and (f)
to read as follows:

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

* * * * *
(a) Initial coverage election period. An election made during an
initial coverage election period as described in Sec. 422.62(a)(1) is
effective as follows:
(1) If made prior to the month of entitlement to both Part A and
Part B, it is effective as of the first day of the month of entitlement
to both Part A and Part B.
(2) If made during or after the month of entitlement to both Part A
and Part B, it is effective the first day of the calendar month
following the month in which the election is made.
* * * * *
(c) Open enrollment periods. For an election, or change in
election, made during an open enrollment period, as described in Sec.
422.62(a)(3) through (5), coverage is effective as of the first day

[[Page 56495]]

of the first calendar month following the month in which the election
is made.
* * * * *
(f) Annual 45-day period for disenrollment from MA plans to
Original Medicare. Through 2018, an election made from January 1
through February 14 to disenroll from an MA plan to Original Medicare,
as described in Sec. 422.62(a)(5), is effective the first day of the
first month following the month in which the election is made.
0
15. Section 422.100 is amended--
0
a. In paragraph (f)(2), by removing the phrase ``to services. and'' and
adding in its place the phrase ``to services.''; and
0
b. By revising paragraphs (f)(4), (f)(5) introductory text, (f)(5)(ii),
and (f)(6).
The revisions read as follows:

Sec. 422.100 General requirements.

* * * * *
(f) * * *
(4) Except as provided in paragraph (f)(5) of this section, MA
local plans (as defined in Sec. 422.2) must have an out-of pocket
maximum for Medicare Parts A and B services that is no greater than the
annual limit set by CMS using Medicare Fee-for-Service data. CMS sets
the annual limit to strike a balance between limiting maximum
beneficiary out of pocket costs and potential changes in premium,
benefits, and cost sharing, with the goal of ensuring beneficiary
access to affordable and sustainable benefit packages.
(5) With respect to a local PPO plan, the limit specified under
paragraph (f)(4) of this section applies only to use of network
providers. Such local PPO plans must include a total catastrophic limit
annually determined by CMS using Medicare Fee-for-Service and to
establish appropriate beneficiary out-of-pocket expenditures for both
in-network and out-of-network Parts A and B services that is--
* * * * *
(ii) Not greater than the annual limit set by CMS using Medicare
Fee-for-Service data to establish appropriate beneficiary out-of-pocket
expenditures. CMS will set the annual limit to strike a balance between
limiting maximum beneficiary out of pocket costs and potential changes
in premium, benefits, and cost sharing, with the goal of ensuring
beneficiary access to affordable and sustainable benefit packages.
(6) Cost sharing for Medicare Part A and B services specified by
CMS does not exceed levels annually determined by CMS to be
discriminatory for such services. CMS may use Medicare Fee-for-Service
data to evaluate the possibility of discrimination and to establish
non-discriminatory out-of-pocket limits and also use MA encounter data
to inform patient utilization scenarios used to help identify MA plan
cost sharing standards and thresholds that are not discriminatory.
* * * * *
0
16. Section 422.101 is amended by revising paragraphs (d)(2) and (3) to
read as follows:

Sec. 422.101 Requirements relating to basic benefits.

* * * * *
(d) * * *
(2) Catastrophic limit. MA regional plans are required to establish
a catastrophic limit on beneficiary out-of-pocket expenditures for in-
network benefits under the Medicare Fee-for-Service program (Part A and
Part B benefits) that is no greater than the annual limit set by CMS
using Medicare Fee-for-Service data to establish appropriate out-of-
pocket limits. CMS sets the annual limit to strike a balance between
limiting maximum beneficiary out of pocket costs and potential changes
in premium, benefits, and cost sharing, with the goal of ensuring
beneficiary access to affordable and sustainable benefit packages.
(3) Total catastrophic limit. MA regional plans are required to
establish a total catastrophic limit on beneficiary out-of-pocket
expenditures for in-network and out-of-network benefits under the
Medicare Fee-for-Service program (Part A and Part B benefits).
(i) This total out-of-pocket catastrophic limit, which would apply
to both in-network and out-of-network benefits under Medicare Fee-for-
Service, may be higher than the in-network catastrophic limit in
paragraph (d)(2) of this section, but may not increase the limit
described in paragraph (d)(2) of this section and may be no greater
than the annual limit set by CMS using Medicare Fee-for-Service data.
(ii) CMS sets the annual limit to strike a balance between limiting
maximum beneficiary out of pocket costs and potential changes in
premium, benefits, and cost sharing, with the goal of ensuring
beneficiary access to affordable and sustainable benefit packages.
* * * * *
0
17. Section 422.102 is amended by revising paragraph (d) to read as
follows:

Sec. 422.102 Supplemental benefits.

* * * * *
(d) Supplemental benefits packaging. MA organizations may offer
enrollees a group of services as one optional supplemental benefit,
offer services individually, or offer a combination of groups and
individual services.
* * * * *
0
18. Section 422.111 is amended by revising paragraphs (a) introductory
text, (a)(3), and (h)(2)(ii) to read as follows:

Sec. 422.111 Disclosure requirements.

(a) Detailed description. An MA organization must disclose the
information specified in paragraph (b) of this section in the manner
specified by CMS--
* * * * *
(3) At the time of enrollment and at least annually thereafter, by
the first day of the annual coordinated election period.
* * * * *
(h) * * *
(2) * * *
(ii) Copies of its evidence of coverage, summary of benefits, and
information (names, addresses, phone numbers, and specialty) on the
network of contracted providers. Posting does not relieve the MA
organization of its responsibility under paragraph (a) of this section
to provide hard copies to enrollees upon request.
* * * * *

Sec. 422.152 [Amended]

0
19. Section 422.152 is amended by removing and reserving paragraphs
(a)(3) and (d).
0
20. Sections 422.160, 422.162, 422.164 and 422.166 are added to Subpart
D to read as follows:

Subpart D-Quality Improvement

* * * * *
Sec.
422.160 Basis and scope of the Medicare Advantage Quality Rating
System.
422.162 Medicare Advantage Quality Rating System.
422.164 Adding, updating, and removing measures.
422.166 Calculation of Star Ratings.

Sec. 422.160 Basis and scope of the Medicare Advantage Quality Rating
System.

[[Page 56496]]

(2) To provide quality ratings on a 5-star rating system to be used
in determining quality bonus payment (QBP) status and in determining
rebate retention allowances.
(3) To provide a means to evaluate and oversee overall and specific
compliance with certain regulatory and contract requirements by MA
plans, where appropriate and possible to use data of the type described
in Sec. 422.162(c).
(c) Applicability. The regulations in this subpart will be
applicable beginning with the 2019 measurement period and the
associated 2021 Star Ratings that are released prior to the annual
coordinated election period for the 2021 contract year and used to
assign QBP ratings for the 2022 payment year.

Sec. 422.162 Medicare Advantage Quality Rating System.

(a) Definitions. In this subpart the following terms have the
meanings:
CAHPS refers to a comprehensive and evolving family of surveys that
ask consumers and patients to evaluate the interpersonal aspects of
health care. CAHPS surveys probe those aspects of care for which
consumers and patients are the best or only source of information, as
well as those that consumers and patients have identified as being
important. CAHPS initially stood for the Consumer Assessment of Health
Plans Study, but as the products have evolved beyond health plans the
acronym now stands for Consumer Assessment of Healthcare Providers and
Systems.
Case-mix adjustment means an adjustment to the measure score made
prior to the score being converted into a Star Rating to take into
account certain enrollee characteristics that are not under the control
of the plan. For example age, education, chronic medical conditions,
and functional health status that may be related to the enrollee's
survey responses.
Categorical Adjustment Index (CAI) means the factor that is added
to or subtracted from an overall or summary Star Rating (or both) to
adjust for the average within-contract (or within-plan as applicable)
disparity in performance associated with the percentages of
beneficiaries who are dually eligible for Medicare and enrolled in
Medicaid, beneficiaries who receive a Low Income Subsidy, or have
disability status in that contract (or plan as applicable).
Clustering refers to a variety of techniques used to partition data
into distinct groups such that the observations within a group are as
similar as possible to each other, and as dissimilar as possible to
observations in any other group. Clustering of the measure-specific
scores means that gaps that exist within the distribution of the scores
are identified to create groups (clusters) that are then used to
identify the four cut points resulting in the creation of five levels
(one for each Star Rating), such that scores in the same Star Rating
level are as similar as possible and scores in different Star Rating
levels are as different as possible. Technically, the variance in
measure scores is separated into within-cluster and between-cluster sum
of squares components. The clusters reflect the groupings of numeric
value scores that minimize the variance of scores within the clusters.
The Star Ratings levels are assigned to the clusters that minimize the
within-cluster sum of squares. The cut points for star assignments are
derived from the range of measure scores per cluster, and the star
levels associated with each cluster are determined by ordering the
means of the clusters.
Consolidation means when an MA organization that has at least two
contracts for health and/or drug services of the same plan type under
the same parent organization in a year combines multiple contracts into
a single contract for the start of the subsequent contract year.
Consumed contract means a contract that will no longer exist after
a contract year's end as a result of a consolidation.
Display page means the CMS Web site on which certain measures and
scores are publicly available for informational purposes; the measures
that are presented on the display page are not used in assigning Part C
and D Star Ratings.
Domain rating means the rating that groups measures together by
dimensions of care.
Dual-eligible (DE) means a beneficiary who is enrolled in both
Medicare and Medicaid.
HEDIS is the Healthcare Effectiveness Data and Information Set
which is a widely used set of performance measures in the managed care
industry, developed and maintained by the National Committee for
Quality Assurance (NCQA). HEDIS data include clinical measures
assessing the effectiveness of care, access/availability measures, and
service use measures.
Highest rating means the overall rating for MA-PDs, the Part C
summary rating for MA-only contracts, and the Part D summary rating for
PDPs.
Highly-rated contract means a contract that has 4 or more stars for
its highest rating when calculated without the improvement measures and
with all applicable adjustments (CAI and the reward factor).
HOS means the Medicare Health Outcomes Survey which is the first
patient reported outcomes measure that was used in Medicare managed
care. The goal of the Medicare HOS program is to gather valid,
reliable, and clinically meaningful health status data in the Medicare
Advantage (MA) program for use in quality improvement activities, pay
for performance, program oversight, public reporting, and improving
health. All managed care organizations with MA contracts must
participate.
Low income subsidy (LIS) means the subsidy that a beneficiary
receives to help pay for prescription drug coverage (see Sec. 423.34
of this chapter for definition of a low-income subsidy eligible
individual).
Measurement period means the period for which data are collected
for a measure or the performance period that a measures covers.
Measure score means the numeric value of the measure or an assigned
`missing data' message.
Measure star means the measure's numeric value is converted to a
Star Rating. It is displayed to the nearest whole star, using a 1-5
star scale.
Overall rating means a global rating that summarizes the quality
and performance for the types of services offered across all unique
Part C and Part D measures.
Part C summary rating means a global rating that summarizes the
health plan quality and performance on Part C measures.
Part D summary rating means a global rating that summarizes
prescription drug plan quality and performance on Part D measures.
Plan benefit package (PBP) means a set of benefits for a defined MA
or PDP service area. The PBP is submitted by Part D plan sponsors and
MA organizations to CMS for benefit analysis, bidding, marketing, and
beneficiary communication purposes.
Reliability means a measure of the fraction of the variation among
the observed measure values that is due to real differences in quality
(``signal'') rather than random variation (``noise''); it is reflected
on a scale from 0 (all differences in plan performance measure scores
are due to measurement error) to 1 (the difference in plan performance
scores is attributable to real differences in performance).
Reward factor means a rating-specific factor added to the
contract's summary or overall ratings (or both) if a contract has both
high and stable relative performance.

[[Page 56497]]

Statistical significance assesses how likely differences observed
in performance are due to random chance alone under the assumption that
plans are actually performing the same.
Surviving contract means the contact that will still exist under a
consolidation, and all of the beneficiaries enrolled in the consumed
contract(s) are moved to the surviving contracts.
Traditional rounding rules mean that the last digit in a value will
be rounded. If rounding to a whole number, look at the digit in the
first decimal place. If the digit in the first decimal place is 0, 1,
2, 3, or 4, then the value should be rounded down by deleting the digit
in the first decimal place. If the digit in the first decimal place is
5 or greater, then the value should be rounded up by 1 and the digit in
the first decimal place deleted.
(b) Contract ratings--(1) General. CMS calculates an overall Star
Rating, Part C summary rating, and Part D summary rating for each MA-PD
contract, and a Part C summary rating for each MA-only contract using
the 5-star rating system described in this subpart. Measures are
assigned stars at the contract level and weighted in accordance with
Sec. 422.166(a). Domain ratings are the unweighted mean of the
individual measure ratings under the topic area in accordance with
Sec. 422.166(b). Summary ratings are the weighted mean of the
individual measure ratings for Part C or Part D in accordance with
Sec. 422.166(c). Overall Star Ratings are calculated by using the
weighted mean of the individual measure ratings in accordance with
Sec. 422.166(d) with both the reward factor and CAI applied as
applicable, as described in Sec. 422.166(f).
(2) Plan benefit packages. All plan benefit packages (PBPs) offered
under an MA contract have the same overall and/or summary Star Ratings
as the contract under which the PBP is offered by the MA organization.
Data from all the PBPs offered under a contract are used to calculate
the measure and domain ratings for the contract except for Special
Needs Plan (SNP)-specific measures collected at the PBP level. A
contract level score is calculated using an enrollment-weighted mean of
the PBP scores and enrollment reported as part of the measure
specification in each PBP.
(3) Contract consolidations. (i) In the case of contract
consolidations involving two or more contracts for health or drug
services of the same plan type under the same parent organization, CMS
assigns Star Ratings for the first and second years following the
consolidation based on the enrollment-weighted mean of the measure
scores of the surviving and consumed contract(s) as provided in
paragraph (b)(3)(iv) of this section. Paragraph (b)(3)(iii) of this
section is applied to subsequent years that are not addressed in
paragraph (b)(3)(ii) of this section for assigning the QBP rating.
(ii) For the first year after a consolidation, CMS will determine
the QBP status of a contract using the enrollment-weighted means (using
traditional rounding rules) of what would have been the QBP Ratings of
the surviving and consumed contracts based on the contract enrollment
in November of the year the preliminary QBP ratings were released in
the Health Plan Management System (HPMS).
(iii) In subsequent years following the first year after the
consolidation, CMS will determine QBP status based on the consolidated
entity's Star Ratings displayed on Medicare Plan Finder.
(iv) The Star Ratings posted on Medicare Plan Finder for contracts
that consolidate are as follows:
(A) For the first year after consolidation, CMS will use
enrollment-weighted measure scores using the July enrollment of the
measurement period of the consumed and surviving contracts for all
measures, except the survey-based and call center measures. The survey-
based measures would use enrollment of the surviving and consumed
contracts at the time the sample is pulled for the rating year. The
call center measures would use average enrollment during the study
period.
(B) For the second year after consolidation, CMS will use the
enrollment-weighted measure scores using the July enrollment of the
measurement year of the consumed and surviving contracts for all
measures except those from the following data sources: HEDIS, CAHPS,
and HOS. HEDIS and HOS measure data will be scored as reported. CMS
will ensure that the CAHPS survey sample will include enrollees in the
sample frame from both the surviving and consumed contracts.
(c) Data sources. (1) CMS bases Part C Star Ratings on the type of
data specified in section 1852(e) of the Act and on CMS administrative
data. Part C Star Ratings measures reflect structure, process, and
outcome indices of quality. This includes information of the following
types: Clinical data, beneficiary experiences, changes in physical and
mental health, benefit administration information and CMS
administrative data. Data underlying Star Ratings measures may include
survey data, data separately collected and used in oversight of MA
plans' compliance with MA requirements and data submitted by plans.
(2) MA organizations are required to collect, analyze, and report
data that permit measurement of health outcomes and other indices of
quality. MA organizations must provide unbiased, accurate, and complete
quality data described in paragraph (c)(1) of this section to CMS on a
timely basis as requested by CMS.

Sec. 422.164 Adding, updating, and removing measures.

(a) General. CMS adds, updates, and removes measures used to
calculate the Star Ratings as provided in this section. CMS lists the
measures used for a particular Star Rating each year in the Technical
Notes or similar guidance document with publication of the Star
Ratings.
(b) Review of data quality. CMS reviews the quality of the data on
which performance, scoring and rating of a measure is based before
using the data to score and rate performance or in calculating a Star
Rating. This includes review of variation in scores among MA
organizations and Part D plan sponsors, and the accuracy, reliability,
and validity of measures and performance data before making a final
determination about inclusion of measures in each year's Star Ratings.
(c) Adding measures. (1) CMS will continue to review measures that
are in alignment with the private sector, such as measures developed by
NCQA and the Pharmacy Quality Alliance (PQA), or endorsed by the
National Quality Forum for adoption and use in the Part C and Part D
Quality Ratings System. CMS may develop its own measures as well when
appropriate to measure and reflect performance specific to the Medicare
program.
(2) In advance of the measurement period, CMS will announce
potential new measures and solicit feedback through the process
described for changes in and adoption of payment and risk adjustment
policies in section 1853(b) of the Act and then subsequently will
propose and finalize new measures through rulemaking.
(3) New measures added to the Part C Star Ratings program will be
on the display page on www.cms.gov for a minimum of 2 years prior to
becoming a Star Ratings measure.
(4) A measure will remain on the display page for longer than 2
years if CMS finds reliability or validity issues with the measure
specification.
(d) Updating measures--(1) Non-substantive updates. For measures
that are already used for Star Ratings, CMS will update measures so
long as the

[[Page 56498]]

changes in a measure are not substantive. CMS will announce non-
substantive updates to measures that occur (or are announced by the
measure steward) during or in advance of the measurement period through
the process described for changes in and adoption of payment and risk
adjustment policies in section 1853(b) of the Act. Non-substantive
measure specification updates include those that--
(i) Narrow the denominator or population covered by the measure;
(ii) Do not meaningfully impact the numerator or denominator of the
measure;
(iii) Update the clinical codes with no change in the target
population or the intent of the measure;
(iv) Provide additional clarifications:
(A) Adding additional tests that would meet the numerator
requirements;
(B) Clarifying documentation requirements;
(C) Adding additional instructions to identify services or
procedures; or
(v) Add alternative data sources.
(2) Substantive updates. For measures that are already used for
Star Ratings, in the case of measure specification updates that are
substantive updates not subject to paragraph (d)(1) of this section,
CMS will propose and finalize these measures through rulemaking similar
to the process for adding new measures. CMS will initially solicit
feedback on whether to make substantive measure updates through the
process described for changes in and adoption of payment and risk
adjustment policies in section 1853(b) of the Act. Once the update has
been made to the measure specification by the measure steward, CMS may
continue collection of performance data for the legacy measure and
include it in Star Ratings until the updated measure has been on
display for 2 years. CMS will place the updated measure on the display
page for at least 2 years prior to using the updated measure to
calculate and assign Star Ratings as specified in paragraph (c) of this
section.
(e) Removing measures. (1) CMS will remove a measure from the Star
Ratings program as follows:
(i) When the clinical guidelines associated with the specifications
of the measure change such that the specifications are no longer
believed to align with positive health outcomes; or
(ii) A measure shows low statistical reliability.
(2) CMS will announce in advance of the measurement period the
removal of a measure based upon its application of this paragraph
through the process described for changes in and adoption of payment
and risk adjustment policies in section 1853(b) of the Act in advance
of the measurement period.
(f) Improvement measure. CMS will calculate improvement measure
scores based on a comparison of the measure scores for the current year
to the immediately preceding year as provided in this paragraph; the
improvement measure score would be calculated for Parts C and D
separately by taking a weighted sum of net improvement divided by the
weighted sum of the number of eligible measures.
(1) Identifying eligible measures. Annually, the subset of measures
to be included in the Part C and Part D improvement measures will be
announced through the process described for changes in and adoption of
payment and risk adjustment policies in section 1853(b) of the Act. CMS
identifies measures to be used in the improvement measures if the
measures meet all of the following:
(i) CMS will include only measures available for the current and
previous year in the improvement measures and that have numeric value
scores in both the current and prior year.
(ii) CMS will exclude any measure for which there was a substantive
specification change from the previous year.
(iii) CMS will exclude any measures that are already focused on
improvement in MA organization performance from year to year.
(iv) The Part C improvement measure will include only Part C
measure scores; the Part D improvement measure will include only Part D
measure scores.
(2) Determining eligible contracts. CMS will calculate an
improvement score only for contracts that have numeric measure scores
for both years in at least half of the measures identified for use
applying the standards in paragraphs (f)(1)(i) through (iv) of this
section.
(3) Special rules for calculation of the improvement score. For any
measure used for the improvement measure for which a contract received
5 stars in each of the years examined, but for which the measure score
demonstrates a statistically significant decline based on the results
of the significance testing (at a level of significance of 0.05) on the
change score, the measure will be categorized as having no significant
change and included in the count of measures used to determine
eligibility for the measure (that is, for the denominator of the
improvement measure score).
(4) Calculation of the improvement score. The improvement measure
will be calculated as follows:
(i) The improvement change score (the difference in the measure
scores in the two year period) will be determined for each measure that
has been designated an improvement measure and for which a contract has
a numeric score for each of the 2 years examined.
(ii) Each contract's improvement change score per measure will be
categorized as a significant change or not a significant change by
employing a two-tailed t-test with a level of significance of 0.05.
(iii) The net improvement per measure category (outcome, access,
patient experience, process) would be calculated by finding the
difference between the weighted number of significantly improved
measures and significantly declined measures, using the measure weights
associated with each measure category.
(iv) The improvement measure score will then be determined by
calculating the weighted sum of the net improvement per measure
category divided by the weighted sum of the number of eligible
measures.
(v) The improvement measure score will be converted to a measure-
level Star Rating using hierarchical clustering algorithms.
(vi) The Part D improvement measure scores for MA-PDs and PDPs will
be determined using cluster algorithms in accordance with Sec. Sec.
422.166(a)(2)(ii) through (iv) and 423.186(a)(2)(ii) through (iv) of
this chapter. The Part D improvement measure thresholds for MA-PDs and
PDPs would be reported separately.
(g) Data integrity. (1) CMS will reduce a contract's measure rating
when CMS determines that a contract's measure data are inaccurate,
incomplete, or biased; such determinations may be based on a number of
reasons, including mishandling of data, inappropriate processing, or
implementation of incorrect practices that have an impact on the
accuracy, impartiality, or completeness of the data used for one or
more specific measure(s).
(i) CMS will reduce HEDIS measures to 1 star when audited data are
submitted to NCQA with a designation of ``biased rate'' or BR based on
an auditor's review of the data or a designation of ``nonreport'' or
NR.
(ii) CMS will reduce measures based on data that an MA organization
must submit to CMS under Sec. 422.516 to 1 star when a contract did
not score at least 95 percent on data validation for the applicable
reporting section or was not compliant with CMS data validation

[[Page 56499]]

standards for data directly used to calculate the associated measure.
(iii) For the appeals measures, CMS will use statistical criteria
to estimate the percentage of missing data for each contract using data
from multiple sources such as a timeliness monitoring study or audit
information to scale the star reductions to determine whether the data
at the independent review entity (IRE) are complete. The criteria would
allow CMS to use scaled reductions for the Star Ratings for the
applicable appeals measures to account for the degree to which the IRE
data are missing.
(A) The data submitted for the Timeliness Monitoring Project (TMP)
or audit that aligns with the Star Ratings year measurement period will
be used to determine the scaled reduction.
(B) The determination of the Part C appeals measure IRE data
reduction is done independently of the Part D appeals measure IRE data
reduction.
(C) The reductions range from a one-star reduction to a four-star
reduction; the most severe reduction for the degree of missing IRE data
would be a four-star reduction.
(D) The thresholds used for determining the reduction and the
associated appeals measure reduction are as follows:
(1) 20 percent, 1 star reduction.
(2) 40 percent, 2 star reduction.
(3) 60 percent, 3 star reduction.
(4) 80 percent, 4 star reduction.
(E) If a contract receives a reduction due to missing Part C IRE
data, the reduction is applied to both of the contract's Part C appeals
measures.
(F) If a contract receives a reduction due to missing Part D IRE
data, the reduction is applied to both of the contract's Part D appeals
measures.
(G) The scaled reduction is applied after the calculation for the
appeals measure-level Star Ratings. If the application of the scaled
reduction results in a measure-level star rating less than 1 star, the
contract will be assigned 1 star for the appeals measure.
(H) The Part C Calculated Error is determined using the quotient of
number of cases not forwarded to the IRE and the total number of cases
that should have been forwarded to the IRE. (The number of cases that
should have been forwarded to the IRE is the sum of the number of cases
in the IRE during the data collection or data sample period and the
number of cases not forwarded to the IRE during the same period.)
(I) The Part D Calculated Error is determined by the quotient of
the number of untimely cases not auto-forwarded to the IRE and the
total number of untimely cases.
(J) The projected number of cases not forwarded to the IRE in a 3-
month period is calculated by multiplying the number of cases found not
to be forwarded to the IRE based on the TMP or audit data by a constant
determined by the data collection or data sample time period. The value
of the constant will be 1.0 for contracts that submitted 3 months of
data; 1.5 for contracts that submitted 2 months of data; and 3.0 for
contracts that submitted 1 month of data.
(K) Contracts would be subject to a possible reduction due to lack
of IRE data completeness if both of the following conditions are met:
(1) The calculated error rate is 20 percent or more.
(2) The projected number of cases not forwarded to the IRE is at
least 10 in a 3-month period.
(L) A confidence interval estimate for the true error rate for the
contract is calculated using a Score Interval (Wilson Score Interval)
at a confidence level of 95 percent and an associated z of 1.959964 for
a contract that is subject to a possible reduction.
(M) A contract's lower bound is compared to the thresholds of the
scaled reductions to determine the IRE data completeness reduction.
(N) The reduction is identified by the highest threshold that a
contract's lower bound exceeds.
(2) CMS will reduce a measure rating to 1 star for additional
concerns that data inaccuracy, incompleteness, or bias have an impact
on measure scores and are not specified in paragraphs (g)(1)(i) through
(iii) of this section, including a contract's failure to adhere to
HEDIS, HOS, or CAHPS reporting requirements.

Sec. 422.166 Calculation of Star Ratings.

(a) Measure Star Ratings--(1) Cut points. CMS will determine cut
points for the assignment of a Star Rating for each numeric measure
score by applying either a clustering or a relative distribution and
significance testing methodology. For the Part D measures, CMS will
determine MA-PD and PDP cut points separately.
(2) Clustering algorithm for all measures except CAHPS measures.
(i) The method minimizes differences within star categories and
maximizes differences across star categories using the hierarchical
clustering method.
(ii) In cases where multiple clusters have the same measure score
value range, those clusters would be combined, leading to fewer than 5
clusters.
(iii) The clustering algorithm for the improvement measure scores
is done in two steps to determine the cut points for the measure-level
Star Ratings. Clustering is conducted separately for improvement
measure scores greater than or equal to zero and those with improvement
measure scores less than zero.
(A) Improvement scores of zero or greater would be assigned at
least 3 stars for the improvement Star Rating.
(B) Improvement scores less than zero would be assigned either 1 or
2 stars for the improvement Star Rating.
(3) Relative distribution and significance testing for CAHPS
measures. The method combines evaluating the relative percentile
distribution with significance testing and accounts for the reliability
of scores produced from survey data; no measure Star Rating is produced
if the reliability of a CAHPS measure is less than 0.60. Low
reliability scores are defined as those with at least 11 respondents
and reliability greater than or equal to 0.60 but less than 0.75 and
also in the lowest 12 percent of contracts ordered by reliability. The
following rules apply:
(i) A contract is assigned 1 star if both of the following criteria
in paragraphs (a)(3)(i)(A) and (B) of this section are met and the
criterion in paragraph (a)(3)(i)(C) or (D) of this section is met:
(A) Its average CAHPS measure score is lower than the 15th
percentile; and
(B) Its average CAHPS measure score is statistically significantly
lower than the national average CAHPS measure score;
(C) The reliability is not low; or
(D) Its average CAHPS measure score is more than one standard error
below the 15th percentile.
(ii) A contract is assigned 2 stars if it does not meet the 1 star
criteria and meets at least one of the following criteria:
(A) Its average CAHPS measure score is lower than the 30th
percentile and the measure does not have low reliability; or
(B) Criterion (b) its average CAHPS measure score is lower than the
15th percentile and the measure has low reliability; or
(C) Its average CAHPS measure score is statistically significantly
lower than the national average CAHPS measure score and below the 60th
percentile.
(iii) A contract is assigned 3 stars if it meets at least one of
the following criteria:
(A) Its average CAHPS measure score is at or above the 30th
percentile and lower than the 60th percentile, and it is not
statistically significantly different

[[Page 56500]]

from the national average CAHPS measure score; or
(B)(1) Its average CAHPS measure score is at or above the 15th
percentile and lower than the 30th percentile;
(2) The reliability is low; and
(3) The score is not statistically significantly lower than the
national average CAHPS measure score.
(C)(1) Its average CAHPS measure score is at or above the 60th
percentile and lower than the 80th percentile;
(2) The reliability is low; and
(3) The score is not statistically significantly higher than the
national average CAHPS measure score.
(iv) A contract is assigned 4 stars if it does not meet the 5-star
criteria and meets at least one of the following criteria:
(A) Its average CAHPS measure score is at or above the 60th
percentile and the measure does not have low reliability.
(B) Its average CAHPS measure score is at or above the 80th
percentile and the measure has low reliability.
(C) Its average CAHPS measure score is statistically significantly
higher than the national average CAHPS measure score and above the 30th
percentile.
(v) A contract is assigned five stars if both of the following
criteria in paragraphs (a)(3)(v)(A) and (B) of this section are met and
the criterion in paragraph (a)(3)(v)(C) or (D) of this section is met:
(A) Its average CAHPS measure score is at or above the 80th
percentile.
(B) Its average CAHPS measure score is statistically significantly
higher than the national average CAHPS measure score.
(C) The reliability is not low.
(D) Its average CAHPS measure score is more than one standard error
above the 80th percentile.
(4) Measure scores are converted to a 5-star scale ranging from 1
(worst rating) to 5 (best rating), with whole star increments for the
cut points.
(b) Domain Star Ratings. (1)(i) CMS groups measures by domains
solely for purposes of public reporting the data on Medicare Plan
Finder. They are not used in the calculation of the summary or overall
ratings. Domains are used to group measures by dimensions of care that
together represent a unique and important aspect of quality and
performance.
(ii) The 5 domains for the MA Star Ratings are: Staying Healthy:
Screenings, Tests and Vaccines; Managing Chronic (Long Term)
Conditions; Member Experience with Health Plan; Member Complaints and
Changes in the Health Plan's Performance; and Health Plan Customer
Service. The 4 domains for the Part D Star Ratings are: Drug Plan
Customer Service; Member Complaints and Changes in the Drug Plan's
Performance; Member Experience with the Drug Plan; and Drug Safety and
Accuracy of Drug Pricing.
(2) CMS calculates the domain ratings as the unweighted mean of the
Star Ratings of the included measures.
(i) A contract must have scores for at least 50 percent of the
measures required to be reported for that contract type for that domain
to have a domain rating calculated.
(ii) The domain ratings are on a 1- to 5- star scale ranging from 1
(worst rating) to 5 (best rating) in whole star increments using
traditional rounding rules.
(c) Part C summary ratings. (1) CMS will calculate the Part C
summary ratings using the weighted mean of the measure-level Star
Ratings for Part C, weighted in accordance with paragraph (e) of this
section with an adjustment to reward consistently high performance and
the application of the CAI under paragraph (f) of this section.
(2)(i) A contract must have scores for at least 50 percent of the
measures required to be reported for the contract type to have the
summary rating calculated.
(ii) The Part C improvement measure is not included in the count of
the minimum number of rated measures.
(3) The summary ratings are on a 1- to 5-star scale ranging from 1
(worst rating) to 5 (best rating) in half-star increments using
traditional rounding rules.
(d) Overall MA-PD rating. (1) The overall rating for a MA-PD
contract will be calculated using a weighted mean of the Part C and
Part D measure-level Star Ratings, weighted in accordance with
paragraph (e) of this section and with an adjustment to reward
consistently high performance and the application of the CAI, under
paragraph (f) of this section.
(2)(i) An MA-PD must have both Part C and Part D summary ratings
and scores for at least 50 percent of the measures required to be
reported for the contract type to have the overall rating calculated.
(ii) The Part C and D improvement measures are not included in the
count of measures needed for the overall rating.
(iii) Any measures that share the same data and are included in
both the Part C and Part D summary ratings will be included only once
in the calculation for the overall rating.
(iv) The overall rating is on a 1- to 5-star scale ranging from 1
(worst rating) to 5 (best rating) in half-increments using traditional
rounding rules.
(v) Low enrollment contracts (as defined in Sec. 422.252) and new
MA plans (as defined in Sec. 422.252) do not receive an overall and/or
summary rating. They are treated as qualifying plans for the purposes
of QBPs as described in Sec. 422.258(d)(7) and as announced through
the process described for changes in and adoption of payment and risk
adjustment policies in section 1853 (b) of the Act.
(e) Measure weights--(1) General rules. Subject to paragraphs
(e)(2) and (3) of this section, CMS will assign weights to measures
based on their categorization as follows.
(i) Improvement measures receive the highest weight of 5.
(ii) Outcome and Intermediate outcome measures receive a weight of
3.
(iii) Patient experience and complaint measures receive a weight of
1.5.
(iv) Access measures receive a weight of 1.5.
(v) Process measures receive a weight of 1.
(2) Rules for new measures. New measures to the Star Ratings
program will receive a weight of 1 for their first year in the Star
Ratings program. In subsequent years, the measure will be assigned the
weight associated with its category.
(3) Special rule for Puerto Rico. Contracts that have service areas
that are wholly located in Puerto Rico will receive a weight of zero
for the Part D adherence measures for the summary and overall rating
calculations and will have a weight of 3 for the adherence measures for
the improvement measure calculations.
(f) Completing the Part C summary and overall rating calculations.
CMS will adjust the summary and overall rating calculations to take
into account the reward factor (if applicable) and the categorical
adjustment index (CAI) as provided in this paragraph.
(1) Reward factor. This rating-specific factor is added to the both
the summary and overall ratings of contracts that qualify for the
reward factor based on both high and stable relative performance for
the rating level.
(i) The contract's performance will be assessed using its weighted
mean and its ranking relative to all rated contracts in the rating
level (overall for MA-PDs; Part C summary for MA-PDs and MA-only; and
Part D summary for MA-PDs and PDPs) for the same Star Ratings year. The
contract's stability of performance will be assessed using the weighted
variance and its ranking relative to all rated contracts in the rating
type (overall for MA-PDs; Part C

[[Page 56501]]

summary for MA-PDs and MA-only; and Part D summary for MA-PDs and
PDPs). The weighted mean and weighted variance are compared separately
for MA-PD and standalone Part D contracts. The measure weights are
specified in Sec. 422.166(e). Since highly-rated contracts may have
the improvement measure(s) excluded in the determination of their final
highest rating, each contract's weighted variance and weighted mean are
calculated both with and without the improvement measures. For an MA-
PD's Part C and D summary ratings, its ranking is relative to all other
contracts' weighted variance and weighted mean for the rating type
(Part C summary, Part D summary) with the improvement measure.
(ii) Relative performance of the weighted variance (or weighted
variance ranking) will be categorized as being high (at or above 70th
percentile), medium (between the 30th and 69th percentile) or low
(below the 30th percentile). Relative performance of the weighted mean
(or weighted mean ranking) will be categorized as being high (at or
above the 85th percentile), relatively high (between the 65th and 84th
percentiles), or other (below the 65th percentile).
(iii) The combination of the relative variance and relative mean is
used to determine the value of the reward factor to be added to the
contract's summary and overall ratings as follows:
(A) A contract with low variance and a high mean will have a reward
factor equal to 0.4.
(B) A contract with medium variance and a high mean will have a
reward factor equal to 0.3.
(C) A contract with low variance and a relatively high mean will
have a reward factor equal to 0.2.
(D) A contract with medium variance and a relatively high mean will
have a reward factor equal to 0.1.
(E) A contract with all other combinations of variance and relative
mean will have a reward factor equal to 0.0.
(iv) The reward factor is determined and applied before application
of the CAI adjustment under paragraph (f)(2) of this section; the
reward factor is based on unadjusted scores.
(2) Categorical Adjustment Index. CMS applies the categorical
adjustment index (CAI) as provided in this paragraph to adjust for the
average within-contract disparity in performance associated with the
percentages of beneficiaries who receive a low income subsidy or are
dual eligible (LIS/DE) or have disability status. The factor is
calculated as the mean difference in the adjusted and unadjusted
ratings (overall, Part C, Part D for MA-PDs, Part D for PDPs) of the
contracts that lie within each final adjustment category for each
rating type.
(i) The CAI is added to or subtracted from the contract's overall
and summary ratings and is applied after the reward factor adjustment
(if applicable).
(A) The adjustment factor is monotonic (that is, as the proportion
of LIS/DE and disabled increases in a contract, the adjustment factor
increases in at least one of the dimensions) and varies by a contract's
categorization into a final adjustment category that is determined by a
contract's proportion of LIS/DE and disabled beneficiaries.
(B) To determine a contract's final adjustment category, contract
enrollment is determined using enrollment data for the month of
December for the measurement period of the Star Ratings year. The count
of beneficiaries for a contract is restricted to beneficiaries that are
alive for part or all of the month of December of the applicable
measurement year. A beneficiary is categorized as LIS/DE if the
beneficiary was designated as full or partially dually eligible or
receiving a LIS at any time during the applicable measurement period.
Disability status is determined using the variable original reason for
entitlement (OREC) for Medicare using the information from the Social
Security Administration and Railroad Retirement Board record systems.
(C) MA-PD contracts may have up to three rating-specific CAI
adjustments: One for the overall Star Rating and one for each of the
summary ratings (Part C and Part D).
(D) An MA-only contract may be adjusted only once for the CAI for
the Part C summary rating.
(E) The CAI values are rounded and displayed with 6 decimal places.
(ii) In determining the CAI values, a measure will be excluded as a
candidate for inclusion for adjustment if the measure meets any of the
following:
(A) The measure is already case-mix adjusted for socioeconomic
status.
(B) The focus of the measurement is not a beneficiary-level issue
but rather a plan or provider-level issue.
(C) The measure is scheduled to be retired or revised.
(D) The measure is applicable only to SNPs.
(iii) CMS will announce the measures identified for inclusion in
the calculations of the CAI under this paragraph through the process
described for changes in and adoption of payment and risk adjustment
policies in section 1853(b) of the Act. The measures for inclusion in
the calculations of the CAI values will be selected based on the
analysis of the dispersion of the LIS/DE within-contract differences
using all reportable numeric scores for contracts receiving a rating in
the previous rating year. CMS calculates the results of each contract's
estimated difference between the LIS/DE and non-LIS/DE performance
rates per contract using logistic mixed effects models that includes
LIS/DE as a predictor, random effects for contract and an interaction
term of contract. For each contract, the proportion of beneficiaries
receiving the measured clinical process or outcome for LIS/DE and non-
LIS/DE beneficiaries would be estimated separately. The following
decision criteria is used to determine the measures for adjustment:
(A) A median absolute difference between LIS/DE and non-LIS/DE
beneficiaries for all contracts analyzed is 5 percentage points or
more.
(B) The LIS/DE subgroup performed better or worse than the non-LIS/
DE subgroup in all contracts.
(C) The Part D measures for MA-PDs and PDPs will be analyzed
independently, but the Part D measures selected for adjustment will
include measures that meet the selection criteria for either delivery
system.
(iv) The adjusted measures score for the selected measures are
determined using the results from regression models of beneficiary-
level measure scores that adjust for the average within-contract
difference in measure scores for MA or PDP contracts.
(A) A logistic regression model with contract fixed effects and
beneficiary-level indicators of LIS/DE and disability status is used
for the adjustment.
(B) The adjusted measure scores are converted to a measure-level
Star Rating using the measure thresholds for the Star Ratings year that
corresponds to the measurement period of the data employed for the CAI
determination.
(v) The rating-specific CAI values will be determined using the
mean differences between the adjusted and unadjusted Star Ratings
(overall, Part C summary, Part D summary for MA-PDs and Part D summary
for PDPs) in each final adjustment category.
(A) For the annual development of the CAI, the distribution of the
percentages for LIS/DE and disabled using the enrollment data that
parallels the previous Star Ratings year's data would be examined to
determine the number of equal-sized initial groups for each attribute
(LIS/DE and disabled).
(B) The initial categories are created using all groups formed by
the initial LIS/DE and disabled groups.

[[Page 56502]]

(C) The mean difference between the adjusted and unadjusted summary
or overall ratings per initial category would be calculated and
examined. The initial categories would then be collapsed to form the
final adjustment categories. The collapsing of the initial categories
to form the final adjustment categories would be done to enforce
monotonicity in at least one dimension (LIS/DE or disabled).
(D) The mean difference within each final adjustment category by
rating-type (Part C, Part D for MA-PD, Part D for PDPs or overall)
would be the CAI values for the next Star Ratings year.
(vi) CMS develops the model for the modified contract-level LIS/DE
percentage for Puerto Rico using the following sources of information:
(A) The most recent data available at the time of the development
of the model of both 1-year American Community Survey (ACS) estimates
for the percentage of people living below the Federal Poverty Level
(FPL) and the ACS 5-year estimates for the percentage of people living
below 150 percent of the FPL. The data to develop the model will be
limited to the 10 states, drawn from the 50 states plus the District of
Columbia with the highest proportion of people living below the FPL, as
identified by the 1-year ACS estimates.
(B) The Medicare enrollment data from the same measurement period
as the Star Ratings' year. The Medicare enrollment data would be
aggregated from MA contracts that had at least 90 percent of their
enrolled beneficiaries with mailing addresses in the 10 highest poverty
states.
(vii) A linear regression model is developed to estimate the
percentage of LIS/DE for a contacts that solely serve the population of
beneficiaries in Puerto Rico.
(A) The maximum value for the modified LIS/DE indicator value per
contract would be capped at 100 percent.
(B) All estimated modified LIS/DE values for Puerto Rico would be
rounded to 6 decimal places when expressed as a percentage.
(C) The model's coefficient and intercept are updated annually and
published in the Technical Notes.
(g) Applying the improvement measure scores. (1) CMS runs the
calculations twice for each highest level rating for each contract-type
(overall rating for MA-PD contracts and Part C summary rating for MA-
only contracts), with all applicable adjustments (CAI and the reward
factor), once including the improvement measure(s) and once without
including the improvement measure(s). In deciding whether to include
the improvement measures in a contract's final highest rating, CMS
applies the following rules:
(i) Contracts with 2 or fewer stars for their highest rating when
calculated without improvement and with all applicable adjustments (CAI
and the reward factor) will not have their rating calculated with the
improvement measure(s).
(ii) If the highest rating for each contract-type is 4 stars or
more without the use of the improvement measure(s) and with all
applicable adjustments (CAI and the reward factor), a comparison of the
highest rating with and without the improvement measure(s) is done. The
higher rating is used for the rating.
(iii) If the highest rating is between 2 stars and 4 stars with all
applicable adjustments (CAI and the reward factor), the rating will be
calculated with the improvement measure(s).
(2) The Part C summary rating for MA-PDs will include the Part C
improvement measure and the Part D summary rating for MA-PDs will
include the Part D improvement measure.
(h) Posting and display of ratings. For all ratings at the measure,
domain, summary and overall level, posting and display of the ratings
is based on there being sufficient data to calculate and assign
ratings. If a contract does not have sufficient data to calculate a
rating, the posting and display would be the flag ``Not enough data
available.'' If the measurement period is prior to one year past the
contract's effective date, the posting and display would be the flag
``Plan too new to be measured''.
(1) Medicare Plan Finder Performance icons. Icons are displayed on
Medicare Plan Finder to note performance as provided in this paragraph
(h):
(i) High-performing icon. The high performing icon is assigned to
an MA-only contract for achieving a 5-star Part C summary rating and an
MA-PD contract for a 5-star overall rating.
(ii) Low-performing icon. (A) A contract receives a low performing
icon as a result of its performance on the Part C or Part D summary
ratings. The low performing icon is calculated by evaluating the Part C
and Part D summary ratings for the current year and the past 2 years.
If the contract had any combination of Part C or Part D summary ratings
of 2.5 or lower in all 3 years of data, it is marked with a low
performing icon. A contract must have a rating in either Part C or Part
D for all 3 years to be considered for this icon.
(B) CMS may disable the Medicare Plan Finder online enrollment
function (in Medicare Plan Finder) for Medicare health and prescription
drug plans with the low performing icon; beneficiaries will be directed
to contact the plan directly to enroll in the low-performing plan.
(2) Plan preview of the Star Ratings. CMS will have plan preview
periods before each Star Ratings release during which MA organizations
can preview their Star Ratings data in HPMS prior to display on the
Medicare Plan Finder.
0
21. Section 422.204 is amended by removing paragraph (b)(5) and adding
paragraph (c).
The addition reads as follows:

Sec. 422.204 Provider selection and credentialing.

* * * * *
(c) An MA organization must follow a documented process that
ensures compliance with the preclusion list provisions in Sec.
422.222.
0
22. Amend Sec. 422.206 by revising paragraph (b)(2)(i) to read as
follows:

Sec. 422.206 Interference with health care professionals' advice to
enrollees prohibited.

(b) * * *
(2) * * *
(i) To CMS, with its application for a Medicare contract, within 10
days of submitting its bid proposal or, for policy changes, in
accordance with all applicable requirements under subpart V of this
part.
* * * * *
0
23. Section 422.208 is amended by revising paragraph (f)(2)(iii) and
adding paragraphs (f)(2)(iv) through (vii) and (f)(3) to read as
follows:

Sec. 422.208 Physician incentive plans: requirements and limitations.

* * * * *
(f) * * *
(2) * * *
(iii)(A) Stop-loss protection must cover 90 percent of costs above
the deductible or an actuarial equivalent amount of the costs of
referral services that exceed the per-patient deductible limit. The
single combined deductible, for policies that pay 90 percent of costs
above the deductible or an actuarial equivalent amount, for stop-loss
insurance for the various panel sizes for contract years beginning on
or after January 1, 2019 is determined using the table published by CMS
that is developed using the methodology in paragraph (f)(2)(iv) of this
section. For panel sizes not shown in the table, use linear
interpolation between the table values.
(B) To apply this table, a physician or physician group may use
linear interpolation to compute the deductible

[[Page 56503]]

for the globally capitated patients (DGCP) as well as the deductible
for globally capitated patients plus NPEs (DGCPNPE). The deductible for
the stop-loss insurance required to be provided for the physician or
physician group is then based on the lesser of DGCP+100,000 and
DGCPNPE.
(iv) The table referenced in paragraph (f)(2)(iii) of this section
will be created, updated, and published by CMS in guidance (such as an
attachment to the Rate Announcement issued under section 1853(b) of the
Act), as necessary, using the following methodology:
(A) The table and the methodology in this paragraph (f)(2)(iv) only
address capitation arrangements in the PIP and that other stop-loss
insurance needs to be used for non-capitated arrangements.
(B) If it is not a global capitation arrangement or is a different
stop/loss arrangement, the tables developed using this methodology do
not apply. The table is calculated using the following methodology and
assumptions:
(1) CMS used the population of all Fee For Service (FFS) Part A and
Part B claims for the most available recent year and assumed a multi-
specialty practice since all physician claims were allowed.
(2) CMS's estimate of medical group income was derived from CMS
claims files, which include payments for all Part A and Part B
services.
(3) The central limit theorem was used to obtain the distribution
of claim means for a multi-specialty group of any given panel size.
(4) The distribution was used to obtain, with 98 percent
confidence, the point at which a multi-specialty group of a given panel
size would, through referral services, lose more than 25 percent of the
net income derived from services that the physicians personally
rendered.
(i) This point is set as the deductible in the table described in
paragraph (f)(2)(iii) of this section.
(ii) The `net benefit premium' (NBP) column in that table is not
used for computation of combined insurance but is used to determine the
separate deductibles for physician/professional services and
institutional services.
(iii) The NBP is computed by dividing the total amount of stop loss
claims (90 percent of claims above the deductible) for that panel size
by the panel size.
(v)(A) Insurance using separate deductibles for professional and
institutional claims is permissible for contract years beginning on or
after January 1, 2019 so long as the separate deductibles for
institutional services and professional services are consistent with
the table published by CMS using the methodology and assumptions in
paragraphs (f)(2)(vi) and (vii) of this section. For deductible amounts
not shown in the table use linear interpolation between the table
values. The tables and methodology in paragraph (f)(2)(iv) of this
section only address capitation arrangements in the PIP and that other
stop-loss insurance needs to be used for non-capitated arrangements. If
it is not a global capitation arrangement or a different stop/loss
arrangement, these tables do not apply.
(B) The maximum deductibles for each category of services
(institutional and professional claims) are identified by using the net
benefit premium (NBP) for the patient panel size from the table
described in paragraph (f)(2)(iii) of this section. If the NBP is
identified using interpolation from the values in the table described
in paragraph (f)(2)(iii) of this section, interpolation is also used
from the NBP values in the table described in paragraph (f)(2)(v)(A) of
this section that are closest to the NBP identified by using the table
described in paragraph (f)(2)(iii) of this section. TAs with combined
stop-loss insurance, panel size may include non-risk patients. As with
combined stop-loss insurance, the deductible for separate insurance
that must be provided for the physician or physician group is the
lesser of DGCP+100,000 and DGCPNPE.
(vi) The table described in (f)(2)(v) of this section is calculated
using a methodology similar to the calculation of the table described
in paragraph (f)(2)(iii) of this section.
(A) The population of all Part A and Part B claims was obtained.
(B) The source for our estimate of medical group income and
institutional income is derived from CMS claims files which includes
payments for all Part A and Part B services.
(C) The central limit theorem is used to obtain the distribution of
claim means and deductibles are obtained at the 98 percent confidence
level.
(vii) In determining the number of global risk patients for the
types of services covered under Parts A and B of Medicare, commercial
and Medicaid patients who are at global risk and in the same stop-loss
risk pool may be included.
(A) The number of non-risk patient equivalents (NPEs) is equal to
the projected annual aggregate payments to the physician or physician
group for non-global risk patients, divided by an estimate of the
average capitation per member per year (PMPY) for all non-global risk
patients, whether or not they are capitated. Both numerator and
denominator are for physician services that are rendered by the
physician or physician group.
(B) The lowest deductible shown in the tables described in
paragraphs (f)(2)(iii) and (v) of this section would generally not be
available for sale from an insurance company. The number of risk
patients and the net premiums are shown for the case where the MA plan
might directly insure a contracted physician or physician group with
protection at these lower deductibles.
(3) Special insurance. If there is a different type of stop-loss
policy obtained by the physician group, it must be actuarially
equivalent to the coverage shown in the tables described in paragraphs
(f)(2)(iii) and (v) of this section. Actuarially equivalent deductibles
are acceptable if the insurance is actuarially certified by an
attesting actuary who fulfills all of the following requirements.
(i) Develops the deductibles to be actuarially equivalent to those
coverages in the tables.
(ii) Makes the computations in accordance with generally accepted
actuarial principles and practices.
(iii) Is certified as meeting the requirements in paragraphs
(f)(3)(i) and (ii) of this section by actuaries who meet the
qualification standards established by the American Academy of
Actuaries and follow the practice standards established by the
Actuarial Standards Board.
* * * * *
0
24. Section 422.222 is revised to read as follows:

Sec. 422.222 Preclusion list.

(a)(1) An MA organization must not make payment for a health care
item or service furnished by an individual or entity that is included
on the preclusion list, defined in Sec. 422.2.
(2) CMS sends written notice to the individual or entity via letter
of their inclusion on the preclusion list. The notice must contain the
reason for the inclusion and inform the individual or entity of their
appeal rights. An individual or entity may appeal their inclusion on
the preclusion list, defined in Sec. 422.2, in accordance with part
498 of this chapter.
(b) An MA organization that does not comply with paragraph (a) of
this section may be subject to sanctions under Sec. 422.750 and
termination under Sec. 422.510.
0
25. Section 422.224 is revised to read as follows:

Sec. 422.224 Payment to individuals and entities excluded by the OIG
or included on the preclusion list.

(a) An MA organization may not pay, directly or indirectly, on any
basis, for

[[Page 56504]]

items or services (other than emergency or urgently needed services as
defined in Sec. 422.113 of this chapter) furnished to a Medicare
enrollee by any individual or entity that is excluded by the Office of
the Inspector General (OIG) or is included on the preclusion list,
defined in Sec. 422.2.
(b) If an MA organization receives a request for payment by, or on
behalf of, an individual or entity that is excluded by the OIG or an
individual or entity that is included on the preclusion list, defined
in Sec. 422.2, the MA organization must notify the enrollee and the
excluded individual or entity or the individual or entity included on
the preclusion list in writing, as directed by contract or other
direction provided by CMS, that payments will not be made. Payment may
not be made to, or on behalf of, an individual or entity that is
excluded by the OIG or is included on the preclusion list.

Sec. 422.254 [Amended]

0
26. Section 422.254 is amended by removing paragraph (a)(4) and
redesignating paragraph (a)(5) as paragraph (a)(4).

Sec. 422.256 [Amended]

0
27. Section 422.256 is amended by removing paragraph (b)(4).

Sec. 422.258 [Amended]

0
28. Section 422.258 is amended in paragraph (d)(7) introductory text by
removing the phrase ``section 1852(e) of the Act)'' and adding in its
place the phrase ``section 1852(e) of the Act) specified in subpart 166
of this part 422''.
0
29. Section 422.260 is amended by revising paragraph (a) and revising
the definition of ``Quality bonus payment (QBP) determination
methodology'' in paragraph (b) to read as follows:

Sec. 422.260 Appeals of quality bonus payment determinations.

(a) Scope. The provisions of this section pertain to the
administrative review process to appeal quality bonus payment status
determinations based on section 1853(o) of the Act. Such determinations
are made based on the overall rating for MA-PDs and Part C summary
rating for MA-only contracts for the contract assigned under subpart D
of this part
(b) * * *
Quality bonus payment (QBP) determination methodology means the
quality ratings system specified in subpart 166 of this part 422 for
assigning quality ratings to provide comparative information about MA
plans and evaluating whether MA organizations qualify for a QBP. (Low
enrollment contracts and new MA plans are defined in Sec. 422.252.)
* * * * *
0
30. Section 422.310 by adding paragraph (d)(5) to read as follows:

Sec. 422.310 Risk adjustment data.

* * * * *
(d) * * *
(5) For data described in paragraph (d)(1) of this section as data
equivalent to Medicare fee-for-service data, which is also known as MA
encounter data, MA organizations must submit a NPI in a billing
provider field on each MA encounter data record, per CMS guidance.
* * * * *
0
31. Section 422.501 is amended by revising paragraphs (c)(1)(iv) and
(2) to read as follows:

Sec. 422.501 Application requirements.

* * * * *
(c) * * *
(1) * * *
(iv) Documentation that payment for health care services or items
is not being and will not be made to individuals and entities included
on the preclusion list, defined in Sec. 422.2.
(2) The authorized individual must thoroughly describe how the
entity and MA plan meet, or will meet, all the requirements described
in this part, including providing documentation that payment for health
care services or items is not being and will not be made to individuals
and entities included on the preclusion list, defined in Sec. 422.2.
* * * * *

Sec. 422.502 [Amended]

0
32. Section 422.502 is amended in paragraphs (b)(1) and (2) by removing
the phrase ``14 months'' and adding in its place ``12 months'' each
time it appears.
0
33. Section 422.503 is amended--
0
a. In paragraph (b)(4)(ii), by removing the phrase ``financial and
marketing activities'' and adding in its place ``financial and
communication activities''; and
0
b. Revising paragraph (b)(4)(vi)(C).
The revision reads as follows:

Sec. 422.503 General provisions.

* * * * *
(b) * * *
(4) * * *
(vi) * * *
(C)(1) Each MA organization must establish and implement effective
training and education for its compliance officer and organization
employees, the MA organization's chief executive and other senior
administrators, managers and governing body members.
(2) Such training and education must occur at a minimum annually
and must be made a part of the orientation for a new employee and new
appointment to a chief executive, manager, or governing body member.
* * * * *
0
34. Section 422.504 is amended by--
0
a. Revising paragraphs (a) introductory text and (a)(6).
0
b. Removing paragraph (a)(16).
0
c. Redesignating paragraphs (a)(17) and (18) as paragraphs (a)(16) and
(17), respectively; and
0
d. Revising newly redesignated paragraph (a)(17).
0
e. Revising paragraph (i)(2)(v).
The revisions read as follows:

Sec. 422.504 Contract provisions.

* * * * *
(a) Agreement to comply with regulations and instructions. The MA
organization agrees to comply with all the applicable requirements and
conditions set forth in this part and in general instructions.
Compliance with the terms of this paragraph is material to the
performance of the MA contract. The MA organization agrees--
* * * * *
(6) To comply with all applicable provider and supplier
requirements in subpart E of this part, including provider
certification requirements, anti-discrimination requirements, provider
participation and consultation requirements, the prohibition on
interference with provider advice, limits on provider indemnification,
rules governing payments to providers, limits on physician incentive
plans, and the preclusion list requirements in Sec. Sec. 422.222 and
422.224.
* * * * *
(17) To maintain a Part C summary plan rating score of at least 3
stars under the 5-star rating system specified in part 422 subpart D. A
Part C summary plan rating is calculated as provided in Sec. 422.166.
* * * * *
(i) * * *
(2) * * *
(v) They will ensure that payments are not made to individuals and
entities included on the preclusion list, defined in Sec. 422.2.
* * * * *

Sec. 422.506 [Amended]

0
35. Section 422.506 is amended by--
0
a. Removing paragraph (a)(3);
0
b. Redesignating paragraphs (a)(4) and (5) as paragraphs (a)(3) and
(4); and
0
c. Removing and reserving paragraph (b).

[[Page 56505]]

0
36. Section 422.508 is amended by adding paragraph (a)(3) to read as
follows:

Sec. 422.508 Modification or termination of contract by mutual
consent.

(a) * * *
(3) If the organization submits a request to end the term of its
contract after the deadline provided in Sec. 422.506(a)(2)(i), the
contract may be terminated by mutual consent in accordance with
paragraphs (a) through (d) of this section. CMS may mutually consent to
the contract termination if the contract termination does not
negatively affect the administration of the Medicare program.
* * * * *
0
37. Section 422.510 is amended by revising paragraphs (a)(4)(viii) and
(xiii) and adding paragraphs (a)(4)(xiv) and (xv) and (b)(2)(v) to read
as follows:

Sec. 422.510 Termination of contract by CMS.

(a) * * *
(4) * * *
(viii) Substantially fails to comply with the requirements in
subpart V of this part.
* * * * *
(xiii) Fails to meet the preclusion list requirements in accordance
with Sec. 422.222 and 422.224.
(xiv) The MA organization has committed any of the acts in Sec.
422.752(a) that support the imposition of intermediate sanctions or
civil money penalties under Subpart O of this part.
(xv) Following the issuance of a notice to the MA organization no
later than August 1, CMS must terminate, effective December 31 of the
same year, an individual MA plan if that plan does not have a
sufficient number of enrollees to establish that it is a viable
independent plan option.
(b) * * *
(2) * * *
(v) In the event that CMS issues a termination notice to an MA
organization on or before August 1 with an effective date of the
following December 31, the MA organization must issue notification to
its Medicare enrollees at least 90 days before to the effective date of
the termination.
* * * * *
0
38. Section 422.514 is amended by revising paragraph (b) to read as
follows:

Sec. 422.514 Minimum enrollment requirements.

* * * * *
(b) Minimum enrollment waiver. For a contract applicant that does
not meet the applicable requirement of paragraph (a) of this section at
application for an MA contract, CMS may waive the minimum enrollment
requirement for the first 3 years of the contract. To receive a waiver,
a contract applicant must demonstrate to CMS's satisfaction that it is
capable of administering and managing an MA contract and is able to
manage the level of risk required under the contract during the first 3
years of the contract. Factors that CMS takes into consideration in
making this evaluation include the extent to which--
(1)(i) The contract applicant management and providers have
previous experience in managing and providing health care services
under a risk-based payment arrangement to at least as many individuals
as the applicable minimum enrollment for the entity as described in
paragraph (a) of this section; or
(ii) The contract applicant has the financial ability to bear
financial risk under an MA contract. In determining whether an
organization is capable of bearing risk, CMS considers factors such as
the organization's management experience as described in this paragraph
(b)(1) and stop-loss insurance that is adequate and acceptable to CMS;
and
(2) The contract applicant is able to establish a marketing and
enrollment process that allows it to meet the applicable enrollment
requirement specified in paragraph (a) of this section before
completion of the third contract year.
* * * * *

Sec. 422.590 [Amended]

0
39. Section 422.590 is amended by removing paragraph (f) and
redesignating paragraphs (g) and (h) as paragraphs (f) and (g),
respectively.

Sec. 422.664 [Amended]

0
40. Section 422.664 is amended in paragraph (b)(1) by removing the
phrase ``July 15'' and adding in its place ``September 1''.
0
41. Section 422.750 is amended by revising paragraph (a)(3) to read as
follows:

Sec. 422.750 Types of intermediate sanctions and civil money
penalties.

(a) * * *
(3) Suspension of communication activities to Medicare
beneficiaries by an MA organization, as defined by CMS.
* * * * *
0
42. Section 422.752 is amended by revising paragraphs (a)(11) and (13)
and (b) to read as follows:

Sec. 422.752 Basis for imposing intermediate sanctions and civil
money penalties.

(a) * * *
(11) Fails to comply with communication restrictions described in
subpart V of this part or applicable implementing guidance.
* * * * *
(13) Fails to comply with Sec. Sec. 422.222 and 422.224, that
requires the MA organization not to make payment to excluded
individuals and entities, nor to individuals and entities on the
preclusion list, defined in Sec. 422.2.
(b) Suspension of enrollment and communications. If CMS makes a
determination that could lead to a contract termination under Sec.
422.510(a), CMS may impose the intermediate sanctions at Sec.
422.750(a)(1) and (3).
* * * * *

Subpart V--Medicare Advantage Communication Requirements

0
43. The subpart heading for Subpart V is revised to read as set forth
above.
0
44. Section 422.2260 is revised to read as follows:

Sec. 422.2260 Definitions.

For the purposes of this section--
Communications means activities and use of materials to provide
information to current and prospective enrollees.
Communication materials means all information provided to current
and prospective enrollees. Marketing materials are a subset of
communication material.
Marketing means the use of materials or activities that meet the
following:
(1) By the MA organization or downstream entities.
(2) Intended to draw a beneficiary's attention to a MA plan or
plans.
(3) Influence a beneficiary's decision-making process when making a
MA plan selection or influence a beneficiary's decision to stay
enrolled in a plan (that is, retention-based marketing).
Marketing materials include, but are not limited to the following:
(1) Materials such as brochures; posters; advertisements in media
such as newspapers, magazines, television, radio, billboards, or the
Internet; and social media content.
(2) Marketing representative materials such as scripts or outlines
for telemarketing or other presentations.
(3) Presentation materials such as slides and charts.
Marketing materials exclude materials that--
(1) Do not include information about the plan's benefit structure
or cost sharing;
(2) Do not include information about measuring or ranking standards
(for example, star ratings);
(3) Mention benefits or cost sharing, but do not meet the
definition of marketing in this section; or

[[Page 56506]]

(4) Unless otherwise specified by CMS because of their use or
purpose, are required under Sec. 422.111.
0
45. Section 422.2262 is amended by revising paragraph (d) to read as
follows:

Sec. 422.2262 Review and distribution of marketing materials.

* * * * *
(d) Enrollee communication materials. Enrollee communication
materials may be reviewed by CMS, which may upon review determine that
such materials must be modified, or may no longer be used.
0
46. Section 422.2264 is revised to read as follows:

Sec. 422.2264 Guidelines for CMS review.

In reviewing marketing material or election forms under Sec.
422.2262, CMS determines that the materials--
(a) Provide, in a format (and, where appropriate, print size), and
using standard terminology that may be specified by CMS, the following
information to Medicare beneficiaries interested in enrolling:
(1) Adequate written description of rules (including any
limitations on the providers from whom services can be obtained),
procedures, basic benefits and services, and fees and other charges.
(2) Adequate written description of any supplemental benefits and
services.
(b) Notify the general public of its enrollment period in an
appropriate manner, through appropriate media, throughout its service
area and if applicable, continuation areas.
(c) Include in written materials notice that the MA organization is
authorized by law to refuse to renew its contract with CMS, that CMS
also may refuse to renew the contract, and that termination or non-
renewal may result in termination of the beneficiary's enrollment in
the plan.
(d) Ensure that materials are not materially inaccurate or
misleading or otherwise make material misrepresentations.
0
47. Section 422.2268 is amended by:
0
a. Removing the introductory text; and
0
b. Revising paragraphs (a) and (b).
The revisions read as follows:

Sec. 422.2268 Standards for MA organization communications and
marketing.

(a) In conducting communication activities, MA organizations may
not do any of the following:
(1) Provide information that is inaccurate or misleading.
(2) Engage in activities that could mislead or confuse Medicare
beneficiaries, or misrepresent the MA organization.
(3) Claim the MA organization is recommended or endorsed by CMS or
Medicare or that CMS or Medicare recommends that the beneficiary enroll
in the MA plan. It may explain that the organization is approved for
participation in Medicare.
(4) Employ MA plan names that suggest that a plan is not available
to all Medicare beneficiaries. This prohibition must not apply to MA
plan names in effect on July 31, 2000.
(5) Display the names and/or logos of co-branded network providers
on the organization's member identification card, unless the provider
names, and/or logos are related to the member selection of specific
provider organizations (for example, physicians, hospitals).
(6) Use a plan name that does not include the plan type. The plan
type should be included at the end of the plan name.
(7) For markets with a significant non-English speaking population,
provide materials, as defined by CMS, unless in the language of these
individuals. Specifically, MA organizations must translate materials
into any non-English language that is the primary language of at least
5 percent of the individuals in a plan benefit package (PBP) service
area.
(b) In marketing, MA organizations may not do any of the following:
(1) Provide cash or other monetary rebates as an inducement for
enrollment or otherwise.
(2) Offer gifts to potential enrollees, unless the gifts are of
nominal (as defined in the CMS Marketing Guidelines) value, are offered
to all potential enrollees without regard to whether or not the
beneficiary enrolls, and are not in the form of cash or other monetary
rebates.
(3) Market non-health care related products to prospective
enrollees during any MA or Part D sales activity or presentation. This
is considered cross-selling and is prohibited.
(4) Market any health care related product during a marketing
appointment beyond the scope agreed upon by the beneficiary, and
documented by the plan, prior to the appointment.
(5) Market additional health related lines of plan business not
identified prior to an individual appointment without a separate scope
of appointment identifying the additional lines of business to be
discussed.
(6) Distribute marketing materials for which, before expiration of
the 45-day period, the MA organization receives from CMS written notice
of disapproval because it is inaccurate or misleading, or misrepresents
the MA organization, its marketing representatives, or CMS.
(7) Conduct sales presentations or distribute and accept MA plan
enrollment forms in provider offices or other areas where health care
is delivered to individuals, except in the case where such activities
are conducted in common areas in health care settings.
(8) Conduct sales presentations or distribute and accept plan
applications at educational events.
(9) Display the names and/or logos of provider co-branding partners
on marketing materials, unless the materials clearly indicate that
other providers are available in the network.
(10) Knowingly target or send marketing materials to any MA
enrollee during the Open Enrollment Period.
(11) Engage in any other marketing activity prohibited by CMS in
its marketing guidance.
(12) Engage in any discriminatory activity such as attempting to
recruit Medicare beneficiaries from higher income areas without making
comparable efforts to enroll Medicare beneficiaries from lower income
areas.
(13) Solicit door-to-door for Medicare beneficiaries or through
other unsolicited means of direct contact, including calling a
beneficiary without the beneficiary initiating the contact.
(14) Use providers or provider groups to distribute printed
information comparing the benefits of different health plans unless the
providers, provider groups, or pharmacies accept and display materials
from all health plans with which the providers, provider groups, or
pharmacies contract. The use of publicly available comparison
information is permitted if approved by CMS in accordance with the
Medicare marketing guidance.
(15) Provide meals to potential enrollees, which is prohibited,
regardless of value.
* * * * *

Sec. 422.2272 [Amended]

0
48. Section Sec. 422.2272 is amended by removing paragraph (e).

Sec. 422.2274 [Amended]

0
49. Section 422.2274 is amended by--
0
a. Redesignating paragraph (b)(1)(iii) as paragraph (b)(1)(iv).
0
b. Redesignating paragraph (b)(2)(iii) as paragraph (b)(1)(iii).
0
c. Removing paragraph (b)(2); and
0
d. Redesignating paragraph (b)(3) as paragraph (b)(2).

Sec. 422.2410 [Amended]

0
50. Section 422.2410 is amended in paragraph (a) by removing the phrase

[[Page 56507]]

``an MLR'' and adding in its place the phrase ``the information
required under Sec. 422.2460''.

Sec. 422.2420 [Amended]

0
51. Section 422.2420 is amended--
0
a. By removing and reserving paragraph (b)(2)(ix); and
0
b. In paragraph (d)(2)(i), removing the phrase ``in Sec. 422.2420(b)
or (c)'' and adding in its place the phrase ``in paragraph (b) or (c)
of this section''.
0
52. Section 422.2430 is amended by--
0
a. Redesignating paragraph (a) introductory text and paragraphs (a)(1)
and (2) as paragraphs (a)(1), (2), and (3), respectively;
0
b. Adding a paragraph (a) subject heading and revising newly
redesignated paragraph (a)(1);
0
c. Adding paragraph (a)(4); and
0
d. Removing and reserving paragraph (b)(8).
The revision and addition read as follows:

Sec. 422.2430 Activities that improve health care quality.

(a) Activity requirements. (1) Activities conducted by an MA
organization to improve quality must either--
(i) Fall into one of the categories in paragraph (a)(2) of this
section and meet all of the requirements in paragraph (a)(3) of this
section; or
(ii) Be listed in paragraph (a)(4).
* * * * *
(4)(i) For an MA contract that includes MA-PD plans (described in
Sec. 422.2420(a)(2)), Medication Therapy Management Programs meeting
the requirements of Sec. 423.153(d) of this chapter.
(ii) Fraud reduction activities, including fraud prevention, fraud
detection, and fraud recovery.
* * * * *
0
53. Section 422.2460 is revised to read as follows:

Sec. 422.2460 Reporting requirements.

(a) For each contract year, from 2014 through 2017, each MA
organization must submit to CMS, in a timeframe and manner specified by
CMS, a report that includes but is not limited to the data needed by
the MA organization to calculate and verify the MLR and remittance
amount, if any, for each contract, under this part, such as incurred
claims, total revenue, expenditures on quality improving activities,
non-claims costs, taxes, licensing and regulatory fees, and any
remittance owed to CMS under Sec. 422.2410.
(b) For contract year 2018 and for each subsequent contract year,
each MA organization must submit to CMS, in a timeframe and manner
specified by CMS, the following information:
(1) Fully credible and partially credible contracts. For each
contract under this part that has fully credible or partially credible
experience, as determined in accordance with Sec. 422.2440(d), the MA
organization must report to CMS the MLR for the contract and the amount
of any remittance owed to CMS under Sec. 422.2410.
(2) Non-credible contracts. For each contract under this part that
has non-credible experience, as determined in accordance with Sec.
422.2440(d), the MA organization must report to CMS that the contract
is non-credible.
(c) Total revenue included as part of the MLR calculation must be
net of all projected reconciliations.
(d) The MLR is reported once, and is not reopened as a result of
any payment reconciliation processes.

Sec. 422.2480 [Amended]

0
54. Section 422.2480 is amended--
0
a. In the introductory text by removing the phrase ``reviews of reports
submitted'' and adding in its place ``review of data submitted''.
0
b. In paragraph (d) introductory text by removing the phrase ``Reports
submitted '' and adding in its place the phrase ``Data submitted''.

Sec. 422.2490 [Amended]

0
55. Section 422.2490 is amended in paragraph (a) by removing the phrase
``information contained in reports submitted'' and adding in its place
the phrase ``information submitted''.

PART 423--MEDICARE PROGRAM; MEDICARE PRESCRIPTION DRUG PROGRAM

0
56. 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).

0
57. Amend Sec. 423.4 by revising the definition of ``Generic drug'' to
read as follows:

Sec. 423.4 Definitions.

* * * * *
Generic drug means--
(1) A drug for which an application under section 505(j) of the
Federal Food, Drug, and Cosmetic Act (21 U.S.C. 355(j)) is approved;
and
(2) For purposes of cost sharing under sections 1860D-2(b)(4) and
1860D-14(a)(1)(D) of the Act only, a biological product for which an
application under section 351(k) of the Public Health Service Act (42
U.S.C. 262(k)) is approved.
* * * * *
0
58. Amend Sec. 423.32 by revising paragraph (b) introductory text and
redesignating paragraphs (b)(i) and (ii) as (b)(1) and (2).
The revision reads as follows:

Sec. 423.32 Enrollment process.

* * * * *
(b) Enrollment form or CMS-approved enrollment mechanism. The
enrollment form or CMS-approved enrollment mechanism must comply with
CMS instructions regarding content and format and must have been
approved by CMS as described in Sec. 423.2262.
* * * * *
0
59. Section 423.38 is amended by--
0
a. Revising paragraph paragraphs (c) introductory text, (c)(4), and
(c)(8)(i)(C);
0
b. Adding paragraph (c)(9);
0
c. Revising paragraph (d); and
0
d. Adding paragraph (e).
The revisions and additions read as follows:

Sec. 423.38 Enrollment periods.

* * * * *
(c) Special enrollment periods. A Part D eligible individual may
enroll in a PDP or disenroll from a PDP and enroll in another PDP or
MA-PD plan (as provided at Sec. 422.62(b) of this chapter), as
applicable, under any of the following circumstances:
* * * * *
(4) The individual is a full-subsidy eligible individual or other
subsidy-eligible individual as defined in Sec. 423.772, who has not
been identified as a ``potential at-risk beneficiary'' or ``at-risk
beneficiary'' as defined in Sec. 423.100 and--
(i) Making an allowable onetime-per-calendar-year election; or
(ii) Making an election after notification of a CMS or State-
initiated enrollment action or within 2 months of that enrollment
action's effective date.
* * * * *
(8) * * *
(i) * * *
(C) The PDP (or its agent, representative, or plan provider)
materially misrepresented the plan's provisions in communication
materials as outlined in subpart V.
* * * * *
(9) The individual is making an election within 2 months of a gain,
loss, or change to Medicaid or LIS eligibility, or notification of such
a change, whichever is later.
(d) Enrollment period to coordinate with MA annual 45-day
disenrollment

[[Page 56508]]

period. Through 2018, an individual enrolled in an MA plan who elects
Original Medicare from January 1 through February 14, as described in
Sec. 422.62(a)(5), may also elect a PDP during this time.
(e) Enrollment period to coordinate with MA open enrollment period.
For 2019 and subsequent years, an individual who makes an election as
described in Sec. 422.62(a)(3), may make an election to enroll in or
disenroll from Part D coverage. An individual who elects Original
Medicare during the MA open enrollment period may elect to enroll in a
PDP during this time.
0
60. Section 423.40 is amended by revising paragraph (d) and adding
paragraph (e) to read as follows:

Sec. 423.40 Effective dates.

* * * * *
(d) PDP enrollment period to coordinate with the MA annual
disenrollment period. Through 2018, an enrollment made from January 1
through February 14 by an individual who has disenrolled from an MA
plan as described in Sec. 422.62(a)(5) will be effective the first day
of the month following the month in which the enrollment in the PDP is
made.
(e) PDP enrollment period to coordinate with the MA annual
disenrollment period. For 2019 and subsequent years, an enrollment made
by an individual who elects Original Medicare during the MA open
enrollment period as described in Sec. 422.62(a)(3), will be effective
the first day of the month following the month in which the election is
made.
0
61. Section Sec. 423.100 is amended--
0
a. By revising the definition of ``Affected enrollee'';
0
b. By adding in alphabetical order definitions for ``At risk
beneficiary'', ``Clinical guidelines'', ``Exempted beneficiary'',
``Frequently abused drug'', and ``Mail-Order pharmacy'';
0
c. By removing the definition of ``Other authorized prescriber'';
0
d. By adding in alphabetical order definitions for ``Potential at-risk
beneficiary'', ``Preclusion List'', and ``Program size''; and
0
e. By revising the definition of ``Retail pharmacy''.
The revisions and additions read as follows:

Sec. 423.100 Definitions.

* * * * *
Affected enrollee means a Part D enrollee who is currently taking a
covered Part D drug that is either being removed from a Part D plan's
formulary, or whose preferred or tiered cost-sharing status is changing
and such drug removal or cost-sharing change affects the Part D
enrollee's access to the drug during the current plan year.
* * * * *
At-risk beneficiary means a Part D eligible individual--
(1) Who is--
(i) Identified using clinical guidelines (as defined in Sec.
423.100);
(ii) Not an exempted beneficiary; and
(iii) Determined to be at-risk for misuse or abuse of such
frequently abused drugs under a Part D plan sponsor's drug management
program in accordance with the requirements of Sec. 423.153(f); or
(2) With respect to whom a Part D plan sponsor receives a notice
upon the beneficiary's enrollment in such sponsor's plan that the
beneficiary was identified as an at-risk beneficiary (as defined in the
paragraph (1) of this definition) under the prescription drug plan in
which the beneficiary was most recently enrolled, such identification
had not been terminated upon disenrollment, and the new plan has
adopted the identification.
* * * * *
Clinical guidelines, for the purposes of a drug management program
under Sec. 423.153(f), are criteria--
(1) To identify potential at-risk beneficiaries who may be
determined to be at-risk beneficiaries under such programs; and
(2) That are developed in accordance with Sec. 423.153(f)(16) and
published in guidance annually.
* * * * *
Exempted beneficiary means with respect to a drug management
program, an enrollee who--
(1) Has elected to receive hospice care;
(2) Is a resident of a long-term care facility, of a facility
described in section 1905(d) of the Act, or of another facility for
which frequently abused drugs are dispensed for residents through a
contract with a single pharmacy; or
(3) Has a cancer diagnosis.
Frequently abused drug means a controlled substance under the
Federal Controlled Substances Act that the Secretary determines is
frequently abused or diverted, taking into account all of the following
factors:
(1) The drug's schedule designation by the Drug Enforcement
Administration.
(2) Government or professional guidelines that address that a drug
is frequently abused or misused.
(3) An analysis of Medicare or other drug utilization or scientific
data.
* * * * *
Mail-order pharmacy means a licensed pharmacy that dispenses and
delivers extended days' supplies of covered Part D drugs via common
carrier at mail-order cost sharing.
* * * * *
Potential at-risk beneficiary means a Part D eligible individual--
(1) Who is identified using clinical guidelines (as defined in
Sec. 423.100); or
(2) With respect to whom a Part D plan sponsor receives a notice
upon the beneficiary's enrollment in such sponsor's plan that the
beneficiary was identified as a potential at-risk beneficiary (as
defined in paragraph (1) of this definition) under the prescription
drug plan in which the beneficiary was most recently enrolled, such
identification had not been terminated upon disenrollment, and the new
plan has adopted the identification.
Preclusion list means a CMS compiled list of prescribers who--
(1) Meet all of the following requirements:
(i) The prescriber is currently revoked from the Medicare program
under Sec. 424.535.
(ii) The prescriber is currently under a reenrollment bar under
Sec. 424.535(c).
(iii) CMS determines that the underlying conduct that led to the
revocation is detrimental to the best interests of the Medicare
program. In making this determination under this paragraph, CMS
considers the following factors:
(A) The seriousness of the conduct underlying the prescriber's
revocation;
(B) The degree to which the prescriber's conduct could affect the
integrity of the Part D program; and
(C) Any other evidence that CMS deems relevant to its
determination; or.
(2) Meet both of the following requirements:
(i) The prescriber has engaged in behavior for which CMS could have
revoked the prescriber to the extent applicable if he or she had been
enrolled in Medicare.
(ii) CMS determines that the underlying conduct that would have led
to the revocation is detrimental to the best interests of the Medicare
program. In making this determination under this paragraph, CMS
considers the all of the following factors:
(A) The seriousness of the conduct involved.
(B) The degree to which the prescriber's conduct could affect the
integrity of the Part D program.
(C) Any other evidence that CMS deems relevant to its
determination.
* * * * *
Program size means the estimated population of potential at-risk
beneficiaries in drug management

[[Page 56509]]

programs (described in Sec. 423.153(f)) operated by Part D plan
sponsors that the Secretary determines can be effectively managed by
such sponsors as part of the process to develop clinical guidelines.
* * * * *
Retail pharmacy means any licensed pharmacy that is open to
dispense prescription drugs to the walk-in general public from which
Part D enrollees could purchase a covered Part D drug at retail cost
sharing without being required to receive medical services from a
provider or institution affiliated with that pharmacy.
* * * * *
0
62. Section 423.120 is amended by--
0
a. Redesignating paragraph (b)(3)(i) introductory text and paragraphs
(b)(3)(i)(A) through (D) as paragraphs (b)(3)(i)(A) introductory text
and (b)(3)(i)(A)(1) through (4);
0
b. Adding a new paragraph (b)(3)(i)(B);
0
c. Revising paragraph (b)(3)(iii);
0
d. In paragraph (b)(5)(i) introductory text, by removing the figure
``60'' and adding in its place the figure ``30'' and by adding the
phrase ``(for purposes of this paragraph (b)(5) these entities are
referred to as ``CMS and other specified entities'') after the word
``pharmacists'';
0
e. In paragraph (b)(5)(i)(A), by removing the phrase ``60 days'' and
adding in its place the phrase ``2 months'';
0
f. In paragraph (b)(5)(i)(B), by removing the figure ``60'' and adding
in its place the figure ``30'';
0
g. In paragraph (b)(5)(iii), by removing the phrase ``, CMS, State
Pharmaceutical Assistance Programs (as defined in Sec. 423.454),
entities providing other prescription drug coverage (as described in
Sec. 423.464(f)(1)), authorized prescribers, network pharmacies, and
pharmacists'' and adding in its place the phrase ``and CMS and other
specified entities'';
0
h. Adding paragraph (b)(5)(iv);
0
i. In paragraph (b)(6), by removing the phrase ``under paragraphs
(b)(5)(iii) of this section'' and adding in its place the phrase
``under paragraphs (b)(5)(iii) and (iv) of this section''; and
0
j. Revising paragraphs (c)(5) and (6).
The additions and revisions read as follows:

Sec. 423.120 Access to covered Part D drugs.

* * * * *
(b) * * *
(3) * * *
(B) Not apply in cases in which a Part D sponsor substitutes a
generic drug for a brand name drug as permitted under paragraphs
(b)(5)(iv) and (b)(6) of this section.
* * * * *
(iii) Ensure the provision of a temporary fill when an enrollee
requests a fill of a non-formulary drug during the time period
specified in paragraph (b)(3)(ii) of this section (including Part D
drugs that are on a plan's formulary but require prior authorization or
step therapy under a plan's utilization management rules) by providing
a one-time, temporary supply of at least a month's supply of
medication, unless the prescription is written by a prescriber for less
than a month's supply and requires the Part D sponsor to allow multiple
fills to provide up to a total of a month's supply of medication.
* * * * *
(5) * * *
(iv) A Part D sponsor may immediately remove a brand name drug (as
defined in Sec. 423.4) from its Part D formulary or change the brand
name drug's preferred or tiered cost-sharing without meeting the
deadlines and refill requirements of paragraph (b)(5)(i) of this
section provided that the Part D sponsor does all of the following:
(A) At the same time that it removes such brand name drug or
changes its preferred or tiered cost-sharing, it adds a therapeutically
equivalent (as defined in Sec. 423.100) generic drug (as defined in
Sec. 423.4) to its formulary with the same or lower cost-sharing and
the same or less restrictive utilization management criteria.
(B) The Part D sponsor previously could not have included such
therapeutically equivalent generic drug on its formulary when it
requested CMS formulary approval consistent with Sec. 423.120(b)(2)
because such generic drug was not yet available on the market.
(C) Before making any permitted generic substitutions, the Part D
sponsor provides general notice to all current and prospective
enrollees in its formulary and other applicable beneficiary
communication materials advising them that--
(1) Such changes may be made at any time when a new generic is
added in place of a brand name drug, and there may be no advance direct
notice to the affected enrollees;
(2) If such a substitution should occur, affected enrollees will
receive direct notice including information on the specific drugs
involved and steps they may take to request coverage determinations and
exceptions under Sec. Sec. 423.566 and 423.578; and
(D) Before making any permitted generic substitutions, the Part D
sponsor provides advance general notice to CMS and other specified
entities.
(E) The Part D sponsor provides notice of any such formulary
changes to affected enrollees and CMS and other specified entities
consistent with the requirements of paragraphs (b)(5)(i) (as
applicable) and (ii) of this section. This would include direct notice
to the affected enrollees.
* * * * *
(c) * * *
(5)(i) A Part D plan sponsor must reject, or must require its
pharmacy benefit manager (PBM) to reject, a pharmacy claim for a Part D
drug unless the claim contains the active and valid National Provider
Identifier (NPI) of the prescriber who prescribed the drug.
(ii) The sponsor must communicate at point-of sale whether or not a
submitted NPI is active and valid in accordance with this paragraph
(c)(5)(ii).
(A) If the sponsor communicates that the NPI is not active and
valid, the sponsor must permit the pharmacy to--
(1) Confirm that the NPI is active and valid; or
(2) Correct the NPI.
(B) If the pharmacy confirms that the NPI is active and valid or
corrects the NPI, the sponsor must pay the claim if it is otherwise
payable.
(iii) A Part D sponsor must not later recoup payment from a network
pharmacy for a claim that does not contain an active and valid
individual prescriber NPI on the basis that it does not contain one,
unless the sponsor--
(A) Has complied with paragraph (ii) of this section;
(B) Has verified that a submitted NPI was not in fact active and
valid; and
(C) The agreement between the parties explicitly permits such
recoupment.
(iv) With respect to requests for reimbursement submitted by
Medicare beneficiaries, a Part D sponsor may not make payment to a
beneficiary dependent upon the sponsor's acquisition of an active and
valid individual prescriber NPI, unless there is an indication of
fraud. If the sponsor is unable to retrospectively acquire an active
and valid individual prescriber NPI, the sponsor may not seek recovery
of any payment to the beneficiary solely on that basis.
(6)(i) Except as provided in paragraph (c)(6)(iv) of this section,
a Part D sponsor must reject, or must require its PBM to reject, a
pharmacy claim for a Part D drug if the individual who prescribed the
drug is included on the preclusion list, defined in Sec. 423.100.
(ii) Except as provided in paragraph (c)(6)(iv) of this section, a
Part D sponsor must deny, or must require its

[[Page 56510]]

PBM to deny, a request for reimbursement from a Medicare beneficiary if
the request pertains to a Part D drug that was prescribed by an
individual who is identified by name in the request and who is included
on the preclusion list, defined in Sec. 423.100.
(iii) A Part D plan sponsor may not submit a prescription drug
event (PDE) record to CMS unless it includes on the PDE record the
active and valid individual NPI of the prescriber of the drug, and the
prescriber is not included on the preclusion list, defined in Sec.
423.100, for the date of service.
(iv)(A) A Part D sponsor or its PBM must not reject a pharmacy
claim for a Part D drug under paragraph (c)(6)(i) of this section or
deny a request for reimbursement under paragraph (c)(6)(ii) of this
section unless the sponsor has provided the provisional coverage of the
drug and written notice to the beneficiary required by paragraph
(c)(6)(iv)(B) of this section.
(B) Upon receipt of a pharmacy claim or beneficiary request for
reimbursement for a Part D drug that a Part D sponsor would otherwise
be required to reject or deny in accordance with paragraph (c)(6)(i) or
(ii) of this section, a Part D sponsor or its PBM must do the
following:
(1) Provide the beneficiary with the following, subject to all
other Part D rules and plan coverage requirements:
(i) A provisional supply coverage period during which the sponsor
must cover all drugs dispensed to the beneficiary in accordance with
prescriptions written by the individual on the preclusion list. The
provisional supply period begins on the date-of-service the first drug
is dispensed in accordance with a prescription written by the
individual on the preclusion list.
(ii) Written notice within 3 business days after adjudication of
the first claim or request for the drug in a form and manner specified
by CMS.
(2) Ensure that reasonable efforts are made to notify the
prescriber of a beneficiary who was sent a notice under paragraph
(c)(6)(iv)(B)(1)(ii) of this section.
(v)(A) CMS sends written notice to the prescriber via letter of his
or her inclusion on the preclusion list. The notice must contain the
reason for the inclusion on the preclusion list and inform the
prescriber of his or her appeal rights.
(B) A prescriber may appeal his or her inclusion on the preclusion
list under this section in accordance with 42 CFR part 498.
(vi) CMS has the discretion not to include a particular individual
on (or if warranted, remove the individual from) the preclusion list
should it determine that exceptional circumstances exist regarding
beneficiary access to prescriptions. In making a determination as to
whether such circumstances exist, CMS takes into account--
(A) The degree to which beneficiary access to Part D drugs would be
impaired; and
(B) Any other evidence that CMS deems relevant to its
determination.
* * * * *
0
63. Section 423.128 is amended by revising paragraph (d)(2)(iii) to
reads as follows:

Sec. 423.128 Dissemination of Part D plan information.

* * * * *
(d) * * *
(2) * * *
(iii) Provides current and prospective Part D enrollees with notice
that is timely under Sec. 423.120(b)(5) regarding any removal or
change in the preferred or tiered cost-sharing status of a Part D drug
on its Part D plan's formulary.
* * * * *
0
64. Section 423.153 is amended by adding a sentence at the end of
paragraph (a) and adding paragraph (f) to read as follows:

Sec. 423.153 Drug utilization management, quality assurance, and
medication therapy management programs (MTMPs).

(a) * * *
A Part D plan sponsor may establish a drug management program for
at-risk beneficiaries enrolled in their prescription drug benefit plans
to address overutilization of frequently abused drugs, as described in
paragraph (f) of this section.
* * * * *
(f) Drug management programs. A drug management program must meet
all the following requirements:
(1) Written policies and procedures. A sponsor must document its
drug management program in written policies and procedures that are
approved by the applicable P&T committee and reviewed and updated as
appropriate. These policies and procedures must address all aspects of
the sponsor's drug management program, including but not limited to the
following:
(i) The appropriate credentials of the personnel conducting case
management required under paragraph (f)(2) of this section.
(ii) The necessary and appropriate contents of files for case
management required under paragraph (f)(2) of this section.
(iii) Monitoring reports and notifications about incoming enrollees
who meet the definition of an at-risk beneficiary and a potential at-
risk beneficiary in Sec. 423.100 and responding to requests from other
sponsors for information about at-risk beneficiaries and potential at-
risk beneficiaries who recently disenrolled from the sponsor's
prescription drug benefit plan.
(2) Case management/clinical contact/prescriber verification--(i)
General rule. The sponsor's clinical staff must conduct case management
for each potential at-risk beneficiary for the purpose of engaging in
clinical contact with the prescribers of frequently abused drugs and
verifying whether a potential at-risk beneficiary is an at-risk
beneficiary. Except as provided in paragraph (f)(2)(ii) of this
section, the sponsor must do all of the following:
(A) Send written information to the beneficiary's prescribers that
the beneficiary meets the clinical guidelines and is a potential at
risk beneficiary.
(B) Elicit information from the prescribers about any factors in
the beneficiary's treatment that are relevant to a determination that
the beneficiary is an at-risk beneficiary, including whether prescribed
medications are appropriate for the beneficiary's medical conditions or
the beneficiary is an exempted beneficiary.
(C) In cases where the prescribers have not responded to the
inquiry described in paragraph (f)(2)(i)(B) of this section, make
reasonable attempts to communicate telephonically with the prescribers
within a reasonable period after sending the written information.
(ii) Exception for identification by prior plan. If a beneficiary
was identified as a potential at-risk or an at-risk beneficiary by his
or her most recent prior plan and such identification has not been
terminated in accordance with paragraph (f)(14) of this section, the
sponsor meets the requirements in paragraph (f)(2)(i) of this section,
so long as the sponsor obtains case management information from the
previous sponsor and such information is clinically adequate and up to
date.
(3) Limitation on access to coverage for frequently abused drugs.
Subject to the requirements of paragraph (f)(4) of this section, a Part
D plan sponsor may do all of the following:
(i) Implement a point-of-sale claim edit for frequently abused
drugs that is specific to an at-risk beneficiary.
(ii) In accordance with paragraphs (f)(10) and (11) of this
section, limit an at-risk beneficiary's access to coverage for
frequently abused drugs to those that are--
(A) Prescribed for the beneficiary by one or more prescribers;

[[Page 56511]]

(B) Dispensed to the beneficiary by one or more network pharmacies;
or
(C) Specified in both paragraphs (f)(3)(ii)(A) and (C) of this
section.
(iii)(A) If the sponsor implements an edit as specified in
paragraph (f)(3)(i) of this section, the sponsor must not cover
frequently abused drugs for the beneficiary in excess of the edit,
unless the edit is terminated or revised based on a subsequent
determination, including a successful appeal.
(B) If the sponsor limits the at-risk beneficiary's access to
coverage as specified in paragraph (f)(3)(ii) of this section, the
sponsor must cover frequently abused drugs for the beneficiary only
when they are obtained from the selected pharmacy(ies) or prescriber(s)
or both, as applicable--
(1) In accordance with all other coverage requirements of the
beneficiary's prescription drug benefit plan, unless the limit is
terminated or revised based on a subsequent determination, including a
successful appeal; and
(2) Except as necessary to provide reasonable access in accordance
with paragraph (f)(12) of this section.
(4) Requirements for limiting access to coverage for frequently
abused drugs. (i) A sponsor may not limit the access of an at-risk
beneficiary to coverage for frequently abused drugs under paragraph
(f)(3) of this section, unless the sponsor has done all of the
following:
(A) Conducted case management as required by paragraph (f)(2) of
this section and updated it, if necessary.
(B) Obtained the agreement of the prescribers of frequently abused
drugs for the beneficiary that the specific limitation is appropriate.
(C) Provided the notices to the beneficiary in compliance with
paragraphs (f)(5) and (6) of this section.
(ii) If the sponsor has complied with the requirement of paragraph
(f)(2)(i)(C) of this section, and the prescribers were not responsive
after 3 attempts by the sponsor to contact them by telephone within 10
business days, then the sponsor has met the requirement of paragraph
(f)(4)(i)(B) of this section.
(iii) The sponsor has met the case management requirement in
paragraph (f)(2)(i) of this section if--
(A) The beneficiary meets paragraph (2) of the definition of a
potential at-risk beneficiary or an at-risk beneficiary; and
(B) The sponsor has obtained the applicable case management
information from the sponsor of the beneficiary's most recent plan and
updated it as appropriate.
(iv) A Part D sponsor must not limit an at-risk beneficiary's
access to coverage for frequently abused drugs to those that are
prescribed for the beneficiary by one or more prescribers under
paragraph (f)(3)(ii)(A) of this section unless--
(A) At least 6 months has passed from the date the beneficiary was
first identified as a potential at-risk beneficiary from the date of
the applicable CMS identification report; and
(B) The beneficiary meets the clinical guidelines and was reported
by the most recent CMS identification report.
(5) Initial notice to a beneficiary. (i) A Part D sponsor that
intends to limit the access of a potential at-risk beneficiary to
coverage for frequently abused drugs under paragraph (f)(3) of this
section must provide an initial written notice to the beneficiary.
(ii) The notice must do all of the following:
(A) Use language approved by the Secretary.
(B) Be in a readable and understandable form.
(C) Provide all of the following information:
(1) An explanation that the beneficiary's current or immediately
prior Part D plan sponsor has identified the beneficiary as a potential
at-risk beneficiary.
(2) A description, of all State and Federal public health resources
that are designed to address prescription drug abuse to which the
beneficiary has access, including mental health and other counseling
services and information on how to access such services, including any
such services covered by the plan under its Medicare benefits,
supplemental benefits, or Medicaid benefits (if the plan integrates
coverage of Medicare and Medicaid benefits).
(3) An explanation of the beneficiary's right to a redetermination
if the sponsor issues a determination that the beneficiary is an at-
risk beneficiary and the standard and expedited redetermination
processes described at Sec. 423.580 et seq.
(4) A request that the beneficiary submit to the sponsor within 30
days of the date of this initial notice any information that the
beneficiary believes is relevant to the sponsor's determination,
including which prescribers and pharmacies the beneficiary would prefer
the sponsor to select if the sponsor implements a limitation under
paragraph (f)(3)(ii) of this section.
(5) An explanation of the meaning and consequences of being
identified as an at-risk beneficiary, including the following:
(i) An explanation of the sponsor's drug management program, the
specific limitation the sponsor intends to place on the beneficiary's
access to coverage for frequently abused drugs under the program.
(ii) The timeframe for the sponsor's decision
(iii) If applicable, any limitation on the availability of the
special enrollment period described in Sec. 423.38.
(6) Clear instructions that explain how the beneficiary can contact
the sponsor, including how the beneficiary may submit information to
the sponsor in response to the request described in paragraph
(f)(5)(ii)(C)(4) of this section.
(7) Contact information for other organizations that can provide
the beneficiary with assistance regarding the sponsor's drug management
program.
(8) Other content that CMS determines is necessary for the
beneficiary to understand the information required in this notice.
(iii) The Part D plan sponsor must make reasonable efforts to
provide the beneficiary's prescriber(s) of frequently abused drugs with
a copy of the notice required under paragraph (f)(5)(i) of this
section.
(6) Second notice. (i) Upon making a determination that a
beneficiary is an at-risk beneficiary and to limit the beneficiary's
access to coverage for frequently abused drugs under paragraph (f)(3)
of this section, a Part D sponsor must provide a second written notice
to the beneficiary.
(ii) The second notice must do all of the following:
(A) Use language approved by the Secretary.
(B) Be in a readable and understandable form.
(C) Provide all of the following information:
(1) An explanation that the beneficiary's current or immediately
prior Part D plan sponsor has identified the beneficiary as an at-risk
beneficiary.
(2) An explanation that the beneficiary is subject to the
requirements of the sponsor's drug management program, including--
(i) The limitation the sponsor is placing on the beneficiary's
access to coverage for frequently abused drugs and the effective and
end date of the limitation; and
(ii) If applicable, any limitation on the availability of the
special enrollment period described in Sec. 423.38.
(3) The prescriber(s) or pharmacy(ies) or both, if and as
applicable, from which the beneficiary must obtain frequently abused
drugs in order for them to be covered by the sponsor.

[[Page 56512]]

(4) An explanation of the beneficiary's right to a redetermination
under Sec. 423.580 et seq., including--
(i) A description of both the standard and expedited
redetermination processes; and
(ii) The beneficiary's right to, and conditions for, obtaining an
expedited redetermination.
(5) An explanation that the beneficiary may submit to the sponsor,
if the beneficiary has not already done so, the prescriber(s) and
pharmacy(ies), as applicable, from which the beneficiary would prefer
to obtain frequently abused drugs.
(6) Clear instructions that explain how the beneficiary may contact
the sponsor, including how the beneficiary may submit information to
the sponsor in response to the request described in paragraph
(f)(6)(ii)(C)(5) of this section.
(7) Other content that CMS determines is necessary for the
beneficiary to understand the information required in this notice.
(iii) The Part D plan sponsor must make reasonable efforts to
provide the beneficiary's prescriber(s) of frequently abused drugs with
a copy of the notice required by paragraph (f)(6)(i) of this section.
(7) Alternate second notice. (i) If, after providing an initial
notice to a potential at-risk beneficiary under paragraph (f)(4) of
this section, a Part D sponsor determines that the potential at-risk
beneficiary is not an at-risk beneficiary, the sponsor must provide an
alternate second written notice to the beneficiary.
(ii) The alternate second notice must do all of the following:
(A) Use language approved by the Secretary.
(B) Be in a readable and understandable form.
(C) Provide all of the following information:
(1) The sponsor has determined that the beneficiary is not an at-
risk beneficiary.
(2) The sponsor will not limit the beneficiary's access to coverage
for frequently abused drugs.
(3) If applicable, the SEP limitation no longer applies.
(4) Clear instructions that explain how the beneficiary may contact
the sponsor.
(5) Other content that CMS determines is necessary for the
beneficiary to understand the information required in this notice.
(ii) The Part D sponsor must make reasonable efforts to provide the
beneficiary's prescriber(s) of frequently abused drugs with a copy of
the notice required in accordance with paragraph (f)(7)(i) of this
section.
(8) Timing of notices. (i) Subject to paragraph (f)(8)(ii) of this
section, a Part D sponsor must provide the second notice described in
paragraph (f)(6) of this section or the alternate second notice
described in paragraph (f)(7) of this section, as applicable, on a date
that is not less than 30 days and not more than the earlier of the date
the sponsor makes the relevant determination or 90 days after the date
of the initial notice described in paragraph (f)(5) of this section.
(ii) Immediately upon the beneficiary's enrollment in the gaining
plan, the gaining plan sponsor may immediately provide a second notice
described in paragraph (f)(6) of this section to a beneficiary for whom
the gaining sponsor received a notice that the beneficiary was
identified as an at-risk beneficiary by his or her most recent prior
plan, and such identification had not been terminated in accordance
with paragraph (f)(14) of this section, if the sponsor is implementing
either of the following:
(A) A beneficiary-specific point-of-sale claim edit as described in
paragraph (f)(3)(i) of this section.
(B) A limitation on access to coverage as described in paragraph
(f)(3(ii) of this section, if such limitation would require the
beneficiary to obtain frequently abused drugs from the same location of
pharmacy and/or the same prescriber, as applicable, that was selected
under the immediately prior plan under paragraph (f)(9) of this
section.
(9) Beneficiary preferences. Except as described in paragraph
(f)(10) of this section, if a beneficiary submits preferences for
prescribers or pharmacies or both from which the beneficiary prefers to
obtain frequently abused drugs, the sponsor must do the following:
(i) Review such preferences.
(ii) If the beneficiary is--
(A) Enrolled in a stand-alone prescription drug benefit plan and
specifies a prescriber(s) or network pharmacy(ies) or both, select or
change the selection of prescriber(s) or network pharmacy(ies) or both
for the beneficiary based on beneficiary's preference(s).
(B) Enrolled in a Medicare Advantage prescription drug benefit plan
and specifies a network prescriber(s) or network pharmacy(ies) or both,
select or change the selection of prescriber(s) or pharmacy(ies) or
both for the beneficiary based on the beneficiary's preference(s).
(iii) The sponsor must inform the beneficiary of the selection in--
(A) The second notice; or
(B) If the second notice is not feasible due to the timing of the
beneficiary's submission, in a subsequent written notice, issued no
later than 14 days after receipt of the submission.
(10) Exception to beneficiary preferences. (i) If the Part D
sponsor determines that the selection or change of a prescriber or
pharmacy under paragraph (f)(9) of this section would contribute to
prescription drug abuse or drug diversion by the at-risk beneficiary,
the sponsor may change the selection without regard to the
beneficiary's preferences if there is strong evidence of inappropriate
action by the prescriber, pharmacy, or beneficiary.
(ii) If the sponsor changes the selection, the sponsor must provide
the beneficiary with--
(A) At least 30 days advance written notice of the change; and
(B) A rationale for the change.
(11) Reasonable access. In making the selections under paragraph
(f)(12) of this section, a Part D plan sponsor must ensure both of the
following:
(i) That the beneficiary continues to have reasonable access to
frequently abused drugs, taking into account--
(1) Geographic location;
(2) Beneficiary preference;
(3) The beneficiary's predominant usage of a prescriber or pharmacy
or both;
(4) The impact on cost-sharing; and
(5) Reasonable travel time.
(ii) Reasonable access to frequently abused drugs in the case of--
(A) Individuals with multiple residences;
(B) Natural disasters and similar situations; and
(C) The provision of emergency services.
(12) Selection of prescribers and pharmacies. (i) A Part D plan
sponsor must select, as applicable--
(A) One, or, if the sponsor reasonably determines it necessary to
provide the beneficiary with reasonable access, more than one, network
prescriber who is authorized to prescribe frequently abused drugs for
the beneficiary, unless the plan is a stand-alone PDP and the selection
involves a prescriber(s), in which case, the prescriber need not be a
network prescriber; and
(B) One, or, if the sponsor reasonably determines it necessary to
provide the beneficiary with reasonable access, more than one, network
pharmacy that may dispense such drugs to such beneficiary.
(ii)(A) For purposes of this paragraph (f)(12) of this section, in
the case of a pharmacy that has multiple locations that share real-time
electronic data, all such locations of the pharmacy must collectively
be treated as one pharmacy.

[[Page 56513]]

(B) For purposes of this paragraph (f)(12) of this section, in the
case of a group practice, all prescribers of the group practice must be
treated as one prescriber.
(13) Confirmation of selections(s). (i) Before selecting a
prescriber or pharmacy under this paragraph, a Part D plan sponsor must
notify the prescriber or pharmacy, as applicable, that the beneficiary
has been identified for inclusion in the drug management program for
at-risk beneficiaries and that the prescriber or pharmacy or both is
(are) being selected as the beneficiary's designated prescriber or
pharmacy or both for frequently abused drugs.
(ii) The sponsor must receive confirmation from the prescriber(s)
or pharmacy(ies) or both that the selection is accepted before
conveying this information to the at-risk beneficiary, unless the
prescriber or pharmacy has agreed in advance in its network agreement
with the sponsor to accept all such selections and the agreement
specifies how the prescriber or pharmacy will be notified by the
sponsor of its selection.
(14) Termination of identification as an at-risk beneficiary. The
identification of an at-risk beneficiary as such must terminate as of
the earlier of the following:
(i) The date the beneficiary demonstrates through a subsequent
determination, including but not limited to, a successful appeal, that
the beneficiary is no longer likely, in the absence of the limitations
under this paragraph, to be an at-risk beneficiary.
(ii) The end of a 12-calendar month period calculated from the
effective date of the limitation, as specified in the notice provided
under paragraph (f)(6) of this section.
(15) Data disclosure. (i) CMS identifies each potential at-risk
beneficiary to the sponsor of the prescription drug plan in which the
beneficiary is enrolled.
(ii) A Part D sponsor that operates a drug management program must
disclose any data and information to CMS and other Part D sponsors that
CMS deems necessary to oversee Part D drug management programs at a
time, and in a form and manner specified by CMS. The data and
information disclosures must do all of the following:
(A) Respond to CMS within 30 days of receiving a report about a
potential at-risk beneficiary from CMS.
(B) Provide information to CMS about any potential at-risk
beneficiary that a sponsor identifies within 30 days from the date of
the most recent CMS report identifying potential at-risk beneficiaries;
(C) Provide information to CMS within 7 business days of the date
of the initial notice or second notice that the sponsor provided to a
beneficiary, or within 7 days of a termination date, as applicable,
about a beneficiary-specific opioid claim edit or a limitation on
access to coverage for frequently abused drugs.
(D) Transfer case management information upon request of a gaining
sponsor as soon as possible but not later than 2 weeks from the gaining
sponsor's request when--
(1) An at-risk beneficiary or potential at-risk beneficiary
disenrolls from the sponsor's plan and enrolls in another prescription
drug plan offered by the gaining sponsor; and
(2) The edit or limitation that the sponsor had implemented for the
beneficiary had not terminated before disenrollment.
(16) Clinical guidelines. Potential at-risk beneficiaries and at-
risk beneficiaries are identified by CMS or the Part D sponsor using
clinical guidelines that--
(i) Are developed with stakeholder consultation;
(ii) Are based on the acquisition of frequently abused drugs from
multiple prescribers, multiple pharmacies, the level of frequently
abused drugs used, or any combination of this factors;
(iii) Are derived from expert opinion and an analysis of Medicare
data; and
(iv) Include a program size estimate.
0
65. Section 423.160 is amended by
0
a. Revising paragraph (b)(1)(iv);
0
b. Adding paragraph (b)(1)(v);
0
c. Revising paragraph (b)(2)(iii);
0
d. Adding paragraph (b)(2)(iv);
0
e. Revising paragraph (b)(4); and
0
f. Adding paragraph (c)(1)(vii).
The revisions and additions read as follows:

Sec. 423.160 Standards for electronic prescribing.

* * * * *
(b) * * *
(1) * * *
(iv) From March 1, 2015 until January 1, 2019, the standards
specified in paragraphs (b)(2)(iii), (b)(3), (b)(4)(i), (b)(5)(iii),
and (b)(6).
(v) On or after January 1, 2019, the standards specified in
paragraphs (b)(2)(iii) and (b)(3), (b)(4)(ii), (b)(5)(iii), and (b)(6)
of this section.
(2) * * *
(iii) National Council for Prescription Drug Programs Prescriber/
Pharmacist Interface SCRIPT Standard, Implementation Guide, Version 10,
Release 6 (Version 10.6), November 12, 2008 (incorporated by reference
in paragraph (c)(1)(i) of this section), to provide for the
communication of a prescription or prescription-related information
between prescribers and dispensers, for the following:
(A) Get message transaction.
(B) Status response transaction.
(C) Error response transaction.
(D) New prescription transaction.
(E) Prescription change request transaction.
(F) Prescription change response transaction.
(G) Refill/Resupply prescription request transaction.
(H) Refill/Resupply prescription response transaction.
(I) Verification transaction.
(J) Password change transaction.
(K) Cancel prescription request transaction.
(L) Cancel prescription response transaction.
(M) Fill status notification.
(iv) The National Council for Prescription Programs SCRIPT
standard, Implementation Guide Version 2017071 approved July 28, 2017
(incorporated by reference in paragraph (c)(1)(i) of this section), to
provide for the communication of a prescription or related
prescription-related information between prescribers and dispensers for
the following:
(A) Get message transaction.
(B) Status response transaction.
(C) Error response transaction.
(D) New prescription transaction.
(E) Prescription change request transaction.
(F) Prescription change response transaction.
(G) Refill/Resupply prescription request transaction.
(H) Refill/Resupply prescription response transaction.
(I) Verification transaction.
(J) Password change transaction.
(K) Cancel prescription request transaction.
(L) Cancel prescription response transaction.
(M) Fill status notification.
(N) Prescription drug administration message.
(O) New prescription requests.
(P) New prescription response denials.
(Q) Prescription transfer message.
(R) Prescription fill indicator change.
(S) Prescription recertification.
(T) REMS initiation request.
(U) REMS initiation response.
(V) REMS request.
(W) REMS response.
* * * * *
(4) Medication history. Medication history to provide for the

[[Page 56514]]

communication of Medicare Part D medication history information among
Medicare Part D sponsors, prescribers and dispensers:
(i) Until January 1, 2017, Either the National Council for
Prescription Drug Programs Prescriber/Pharmacist Interface SCRIPT
Standard, Implementation Guide Version 8, Release 1 (Version 8.1),
October 2005 (incorporate by reference in paragraph (c)(1)(v) of this
section, or the National Council for Prescription Drug Programs SCRIPT
Standard, Implementation Guide Version 10.6, approved November 12, 2008
(incorporated by reference in paragraph (c)(1)(vi) of this section.
(ii) On or after January 1, 2019, the National Council for
Prescription Drug Programs SCRIPT Standard, Implementation Guide
Version 2017071, approved July 28, 2017 (incorporated by reference in
paragraph (c)(1)(vii) of this section).
* * * * *
(c) * * *
(1) * * *
(vii) National Council for Prescription Drug Programs SCRIPT
Standard, Implementation Guide Version 2017071, approved July 28, 2017.
* * * * *
0
66. Sections 423.180, 423.182, 423.184 and 423.186 are added Subpart D
to read as follows:

Subpart D--Cost Control and Quality Improvement Requirements

* * * * *
Sec.
423.180 Basis and scope of the Part D Quality Rating System.
423.182 Part D Quality Rating System.
423.184 Adding, updating, and removing measures.
423.186 Calculation of star ratings.

Sec. 423.180 Basis and scope of the Part D Quality Rating System.

(a) Basis. This subpart is based on sections 1851(d), 1852(e),
1853(o) and 1854(b)(3)(iii), (v), and (vi) of the Act and the general
authority under section 1856(b) of the Act requiring the establishment
of standards consistent with and to carry out Part D.
(b) Purpose. Ratings calculated and assigned under this subpart
will be used by CMS for the following purposes:
(1) To provide comparative information on plan quality and
performance to beneficiaries for their use in making knowledgeable
enrollment and coverage decisions in the Medicare program.
(2) To provide quality ratings on a 5-star rating system.
(3) To provide a means to evaluate and oversee overall and specific
compliance with certain regulatory and contract requirements by Part D
plans, where appropriate and possible to use data of the type described
in Sec. 423.182(c).
(c) Applicability. The regulations in this subpart will be
applicable beginning with the 2019 measurement period and the
associated 2021 Star Ratings that are released prior to the annual
coordinated election period for the 2021 contract year.

Sec. 423.182 Part D Quality Rating System.

[[Page 56515]]

Overall rating means a global rating that summarizes the quality
and performance for the types of services offered across all unique
Part C and Part D measures.
Part C summary rating means a global rating that summarizes the
health plan quality and performance on Part C measures.
Part D summary rating means a global rating that summarizes
prescription drug plan quality and performance on Part D measures.
Plan benefit package (PBP) means a set of benefits for a defined MA
or PDP service area. The PBP is submitted by Part D plan sponsors and
MA organizations to CMS for benefit analysis, bidding, marketing, and
beneficiary communication purposes.
Reliability means a measure of the fraction of the variation among
the observed measure values that is due to real differences in quality
(``signal'') rather than random variation (``noise''); it is reflected
on a scale from 0 (all differences in plan performance measure scores
are due to measurement error) to 1 (the difference in plan performance
scores is attributable to real differences in performance).
Reward factor means a rating-specific factor added to the
contract's summary or overall ratings (or both) if a contract has both
high and stable relative performance.
Statistical significance assesses how likely differences observed
in performance are due to random chance alone under the assumption that
plans are actually performing the same.
Surviving contract means the contact that will still exist under a
consolidation, and all of the beneficiaries enrolled in the consumed
contract(s) are moved to the surviving contracts.
Traditional rounding rules mean that the last digit in a value will
be rounded. If rounding to a whole number, look at the digit in the
first decimal place. If the digit in the first decimal place is 0, 1,
2, 3 or 4, then the value should be rounded down by deleting the digit
in the first decimal place. If the digit in the first decimal place is
5 or greater, then the value should be rounded up by 1 and the digit in
the first decimal place deleted.
(b) Contract ratings--(1) General. CMS calculates an overall Star
Rating, Part C summary rating, and Part D summary rating for each MA-PD
contract and a Part D summary rating for each PDP contract using the 5-
star rating system described in this subpart. For PDP contracts, the
Part D summary rating is the highest rating. Measures are assigned
stars at the contract level and weighted in accordance with Sec.
423.186(a). Domain ratings are the average of the individual measure
ratings under the topic area in accordance with Sec. 423.186(b).
Summary ratings are the weighted average of the individual measure
ratings for Part C or Part D in accordance with Sec. 423.186(c).
Overall Star Ratings are calculated by using the weighted average of
the individual measure ratings in accordance with Sec. 423.186(d) with
both the reward factor and CAI applied as applicable, as described in
Sec. 423.186(f).
(2) Plan benefit packages. All plan benefit packages (PBPs) offered
under an MA contract or PDP plan sponsor have the same overall and/or
summary Star Ratings as the contract under which the PBP is offered by
the MA organization or PDP plan sponsor. Data from all the PBPs offered
under a contract are used to calculate the measure and domain ratings
for the contract. A contract level score is calculated using an
enrollment-weighted mean of the PBP scores and enrollment reported as
part of the measure specification in each PBP.
(3) Contract consolidations. (i) In the case of contract
consolidations involving two or more contracts for health and/or drug
services of the same plan type under the same parent organization, CMS
assigns Star Ratings for the first and second years following the
consolidation based on the enrollment-weighted mean of the measure
scores of the surviving and consumed contract(s) as provided in
paragraph (b)(3)(ii) of this section.
(ii) The Star Ratings posted on Medicare Plan Finder for contracts
that consolidate are as follows:
(A) For the first year after consolidation, CMS will use
enrollment-weighted measure scores using the July enrollment of the
measurement period of the consumed and surviving contracts for all
measures, except the survey-based and call center measures. The survey-
based measures would use enrollment of the surviving and consumed
contracts at the time the sample is pulled for the rating year. The
call center measures would use average enrollment during the study
period.
(B) For the second year after consolidation, CMS will use the
enrollment-weighted measure scores using the July enrollment of the
measurement year of the consumed and surviving contracts for all
measures except those from CAHPS. CMS will ensure that the CAHPS survey
sample will include enrollees in the sample frame from both the
surviving and consumed contracts.
(c) Data sources. (1) Part D Star Ratings measures reflect
structure, process, and outcome indices of quality. This includes
information of the following types: Beneficiary experiences, benefit
administration information, clinical data, and CMS administrative data.
Data underlying Star Ratings measures may include survey data, data
separately collected and used in oversight of Part D plans' compliance
with contract requirements, data submitted by plans, and CMS
administrative data.
(2) Part D sponsors are required to collect, analyze, and report
data that permit measurement of indices of quality. Part D sponsors
must provide unbiased, accurate, and complete quality data described in
paragraph (c)(1) to CMS on a timely basis as requested by CMS.

Sec. 423.184 Adding, updating, and removing measures.

(a) General. CMS adds, updates, and removes measures used to
calculate the Star Ratings as provided in this section. CMS lists the
measures used for a particular Star Rating each year in the Technical
Notes or similar guidance document with publication of the Star
Ratings.
(b) Review of data quality. CMS reviews the quality of the data on
which performance, scoring and rating of a measure is based before
using the data to score and rate performance or in calculating a Star
Rating. This includes review of variation in scores among MA
organizations and Part D plan sponsors, and the accuracy, reliability,
and validity of measures and performance data before making a final
determination about inclusion of measures in each year's Star Ratings.
(c) Adding measures. (1) CMS will continue to review measures that
are nationally endorsed and in alignment with the private sector, such
as measures developed by National Committee for Quality Assurance and
the Pharmacy Quality Alliance or endorsed by the National Quality Forum
for adoption and use in the Part D Quality Ratings System. CMS may
develop its own measures as well when appropriate to measure and
reflect performance specific to the Medicare program.
(2) In advance of the measurement period, CMS will announce
potential new measures and solicit feedback through the process
described for changes in and adoption of payment and risk adjustment
policies in section 1853(b) of the Act and then subsequently will
propose and finalize new measures through rulemaking.

[[Page 56516]]

(3) New measures added to the Part D Star Ratings program will be
on the display page on www.cms.gov for a minimum of 2 years prior to
becoming a Star Ratings measure.
(4) A measure will remain on the display page for longer than 2
years if CMS finds reliability or validity issues with the measure
specification.
(d) Updating measures--(1) Non-substantive updates. For measures
that are already used for Star Ratings, CMS will update measures so
long as the changes in a measure are not substantive. CMS will announce
non-substantive updates to measures that occur (or are announced by the
measure steward) during or in advance of the measurement period through
the process described for changes in and adoption of payment and risk
adjustment policies in section 1853(b) of the Act. Non-substantive
measure specification updates include those that--
(i) Narrow the denominator or population covered by the measure;
(ii) Do not meaningfully impact the numerator or denominator of the
measure;
(iii) Update the clinical codes with no change in the target
population or the intent of the measure;
(iv) Provide additional clarifications:
(A) Adding additional qualifiers that would meet the numerator
requirements;
(B) Clarifying documentation requirements;
(C) Adding additional instructions; or
(v) Add alternative data sources.
(2) Substantive updates. For measures that are already used for
Star Ratings, in the case of measure specification updates that are
substantive updates not subject to paragraph (d)(1), CMS will propose
and finalize these measures through rulemaking similar to the process
for adding new measures. CMS will initially solicit feedback on whether
to make substantive measure updates through the process described for
changes in and adoption of payment and risk adjustment policies in
section 1853(b) of the Act. Once the update has been made to the
measure specification by the measure steward, CMS may continue
collection of the performance data for the legacy measure and include
it in Star Ratings until the updated measure has been on display for 2
years. CMS will place the updated measure on the display page for at
least 2 years prior to using the updated measure to calculate and
assign Star Ratings as specified in paragraph (c) of this section.
(e) Removing measures. (1) CMS will remove a measure from the Star
Ratings program as follows:
(i) When the clinical guidelines associated with the specifications
of the measure change such that the specifications are no longer
believed to align with positive health outcomes, or
(ii) A measure shows low statistical reliability.
(2) CMS will announce in advance of the measurement period the
removal of a measure based upon its application of this paragraph
through the process described for changes in and adoption of payment
and risk adjustment policies in section 1853(b) of the Act in advance
of the measurement period.
(f) Improvement measure. CMS will calculate improvement measure
scores based on a comparison of the measure scores for the current year
to the immediately preceding year as provided in this paragraph; the
improvement measure score would be calculated for Parts C and D
separately by taking a weighted sum of net improvement divided by the
weighted sum of the number of eligible measures.
(1) Identifying eligible measures. Annually, the subset of measures
to be included in the Part D improvement measure will be announced
through the process described for changes in and adoption of payment
and risk adjustment policies in section 1853(b) of the Act. CMS
identifies measures to be used in the improvement measure if the
measures meet all the following:
(i) CMS will include only measures available for the current and
previous year in the improvement measures and that have numeric value
scores in both the current and prior year.
(ii) CMS will exclude any measure for which there was a substantive
specification change, from the previous year.
(iii) The Part D improvement measure will include only Part D
measure scores.
(2) Determining eligible contracts. CMS will calculate an
improvement score only for contracts that have numeric measure scores
for both years in at least half of the measures identified for use
applying the standards in paragraphs (f)(1)(i) through (iii) of this
section.
(3) Special rules for calculation of the improvement score. For any
measure used for the improvement measure for which a contract received
5 stars in each of the years examined, but for which the measure score
demonstrates a statistically significant decline based on the results
of the significance testing (at a level of significance of 0.05) on the
change score, the measure will be categorized as having no significant
change and included in the count of measures used to determine
eligibility for the measure (that is, for the denominator of the
improvement measure score).
(4) Calculation of the improvement score. The improvement measure
will be calculated as follows:
(i) The improvement change score (the difference in the measure
scores in the 2-year period) will be determined for each measure that
has been designated an improvement measure and for which a contract has
a numeric score for each of the 2 years examined.
(ii) Each contract's improvement change score per measure will be
categorized as a significant change or not a significant change by
employing a two-tailed t-test with a level of significance of 0.05.
(iii) The net improvement per measure category (outcome, access,
patient experience, process) would be calculated by finding the
difference between the weighted number of significantly improved
measures and significantly declined measures, using the measure weights
associated with each measure category.
(iv) The improvement measure score will then be determined by
calculating the weighted sum of the net improvement per measure
category divided by the weighted sum of the number of eligible
measures.
(v) The improvement measure score will be converted to a measure-
level Star Rating using hierarchical clustering algorithms.
(vi) The Part D improvement measure scores for MA-PDs and PDPs will
be determined using cluster algorithms in accordance with Sec.
423.186(a)(2)(ii). The Part D improvement measure thresholds for MA-PDs
and PDPs would be reported separately.
(g) Data integrity. (1) CMS will reduce a contract's measure rating
when CMS determines that a contract's measure data are inaccurate,
incomplete, or biased; such determinations may be based on a number of
reasons, including mishandling of data, inappropriate processing, or
implementation of incorrect practices that have an impact on the
accuracy, impartiality, or completeness of the data used for one or
more specific measures.
(i) CMS will reduce measures based on Part D reporting requirements
data to 1 star when a contract did not score at least 95 percent on
data validation for the applicable reporting section or was not
compliant with CMS data validation standards/sub-standards for data
directly used to calculate the associated measure.

[[Page 56517]]

(ii) For the appeals measures, CMS will use statistical criteria to
estimate the percentage of missing data for each contract using data
from multiple sources such as a timeliness monitoring study or audit
information to scale the star reductions to determine whether the data
at the independent review entity (IRE) are complete.
(A) The criteria would allow CMS to use scaled reductions for the
Star Ratings for the applicable appeals measures to account for the
degree to which the IRE data are missing.
(B) The data submitted for the timeliness monitoring project (TMP)
or audit that aligns with the Star Ratings year measurement period will
be used to determine the scaled reduction.
(C) The determination of the Part C appeals measure IRE data
reduction is done independently of the Part D appeals measure IRE data
reduction.
(D) The reductions range from a one-star reduction to a four-star
reduction; the most severe reduction for the degree of missing IRE data
would be a four-star reduction.
(E) The thresholds used for determining the reduction and the
associated appeals measure reduction are as follows:
(1) 20 percent, 1 star reduction.
(2) 40 percent, 2 star reduction.
(3) 60 percent, 3 star reduction.
(4) 80 percent, 4 star reduction.
(F) If a contract receives a reduction due to missing Part D IRE
data, the reduction is applied to both of the contract's Part D appeals
measures.
(G) The scaled reduction is applied after the calculation for the
appeals measure-level star ratings. If the application of the scaled
reduction results in a measure-level star rating less than one-star,
the contract will be assigned one-star for the appeals measure.
(H) The Part D Calculated Error is determined by the quotient of
the number of untimely cases not auto-forwarded to the IRE and the
total number of untimely cases.
(I) The projected number of cases not forwarded to the IRE in a 3-
month period is calculated by multiplying the number of cases found not
to be forwarded to the IRE based on the TMP or audit data by a constant
determined by the data collection or data sample time period. The value
of the constant will be 1.0 for contracts that submitted 3 months of
data; 1.5 for contracts that submitted 2 months of data; and 3.0 for
contracts that submitted 1 month of data.
(J) Contracts would be subject to a possible reduction due to lack
of IRE data completeness if both of the following conditions are met:
(1) The calculated error rate is 20 percent or more; and
(2) The projected number of cases not forwarded to the IRE is at
least 10 in a 3-month period.
(K) A confidence interval estimate for the true error rate for the
contract is calculated using a Score Interval (Wilson Score Interval)
at a confidence level of 95 percent and an associated z of 1.959964 for
a contract that is subject to a possible reduction.
(1) A contract's lower bound is compared to the thresholds of the
scaled reductions to determine the IRE data completeness reduction.
(2) The reduction is identified by the highest threshold that a
contract's lower bound exceeds.
(2) CMS will reduce a measure rating to 1 star for additional
concerns that data inaccuracy, incompleteness, or bias have an impact
on measure scores and are not specified in paragraphs (g)(1)(i) and
(ii) of this section, including a contract's failure to adhere to CAHPS
reporting requirements.

Sec. 423.186 Calculation of Star Ratings.

(a) Measure Star Ratings--(1) Cut points. CMS will determine cut
points for the assignment of a Star Rating for each numeric measure
score by applying either a clustering or a relative distribution and
significance testing methodology. For the Part D measures, we propose
to determine MA-PD and PDP cut points separately.
(2) Clustering algorithm for all measures except CAHPS measures.
(i) The method minimizes differences within star categories and
maximize differences across star categories using the hierarchical
clustering method.
(ii) In cases where multiple clusters have the same measure score
value range, those clusters would be combined, leading to fewer than 5
clusters.
(iii) The clustering algorithm for the improvement measure scores
is done in two steps to determine the cut points for the measure-level
Star Ratings. Clustering is conducted separately for improvement
measure scores greater than or equal to zero and those with improvement
measure scores less than zero.
(A) Improvement scores of zero or greater would be assigned at
least 3 stars for the improvement Star Rating.
(B) Improvement scores less than zero would be assigned either 1 or
2 stars for the improvement Star Rating.
(3) Relative distribution and significance testing for CAHPS
measures. The method combines evaluating the relative percentile
distribution with significance testing and accounts for the reliability
of scores produced from survey data; no measure Star Rating is produced
if the reliability of a CAHPS measure is less than 0.60. Low
reliability scores are those with at least 11 respondents, reliability
greater than or equal to 0.60 but less than 0.75, and also in the
lowest 12 percent of contracts ordered by reliability. The following
rules apply:
(i) A contract is assigned 1 star if both of the following criteria
in paragraphs (a)(3)(i)(A) and (B) of this section are met and the
criterion in paragraph (a)(3)(i)(C) or (D) of this section is met:
(A) Its average CAHPS measure score is lower than the 15th
percentile; and
(B) Its average CAHPS measure score is statistically significantly
lower than the national average CAHPS measure score.
(C) The reliability is not low.
(D) Its average CAHPS measure score is more than one standard error
below the 15th percentile.
(ii) A contract is assigned two stars if it does not meet the 1
star criteria and meets at least one of the following criteria:
(A) Its average CAHPS measure score is lower than the 30th
percentile and the measure does not have low reliability.
(B) Its average CAHPS measure score is lower than the 15th
percentile and the measure has low reliability.
(C) Its average CAHPS measure score is statistically significantly
lower than the national average CAHPS measure score and below the 60th
percentile.
(iii) A contract is assigned three stars if it meets at least one
of the following criteria:
(A) Its average CAHPS measure score is at or above the 30th
percentile and lower than the 60th percentile, and it is not
statistically significantly different from the national average CAHPS
measure score.
(B)(1) Its average CAHPS measure score is at or above the 15th
percentile and lower than the 30th percentile;
(2) The reliability is low; and
(3) The score is not statistically significantly lower than the
national average CAHPS measure score.
(C)(1) Its average CAHPS measure score is at or above the 60th
percentile and lower than the 80th percentile;
(2) The reliability is low; and
(3) The score is not statistically significantly higher than the
national average CAHPS measure score.
(iv) A contract is assigned 4 stars if it does not meet the 5-star
criteria and meets at least one of the following criteria:
(A) Its average CAHPS measure score is at or above the 60th
percentile and

[[Page 56518]]

the measure does not have low reliability.
(B) Its average CAHPS measure score is at or above the 80th
percentile and the measure has low reliability.
(C) Its average CAHPS measure score is statistically significantly
higher than the national average CAHPS measure score and above the 30th
percentile.
(v) A contract is assigned five stars if both of the following
criteria in paragraphs (a)(3)(v)(A) and (B) of this section are met and
the criterion in paragraph (a)(3)(v)(C) or (D) of this section is met:
(A) Its average CAHPS measure score is at or above the 80th
percentile.
(B) Its average CAHPS measure score is statistically significantly
higher than the national average CAHPS measure score.
(C) The reliability is not low.
(D) Its average CAHPS measure score is more than one standard error
above the 80th percentile.
(4) Measure scores are converted to a 5-star scale ranging from 1
(worst rating) to 5 (best rating), with whole star increments for the
cut points.
(b) Domain Star Ratings. (1)(i) CMS groups measures by domains
solely for purposes of public reporting the data on Medicare Plan
Finder. They are not used in the calculation of the summary or overall
ratings. Domains are used to group measures by dimensions of care that
together represent a unique and important aspect of quality and
performance.
(ii) The 4 domains for the Part D Star Ratings are: Drug Plan
Customer Service; Member Complaints and Changes in the Drug Plan's
Performance; Member Experience with the Drug Plan; and Drug Safety and
Accuracy of Drug Pricing.
(2) CMS calculates the domain ratings as the unweighted mean of the
Star Ratings of the included measures.
(i) A contract must have scores for at least 50 percent of the
measures required to be reported for that contract type for that domain
to have a domain rating calculated.
(ii) The domain ratings are on a 1 to 5 star scale ranging from 1
(worst rating) to 5 (best rating) in whole star increments using
traditional rounding rules.
(c) Part D summary ratings. (1) CMS will calculate the Part D
summary ratings using the weighted mean of the measure-level Star
Ratings for Part D, weighted in accordance with paragraph (e) with an
adjustment to reward consistently high performance described and the
application of the CAI, under paragraph (f) of this section.
(2)(i) A contract must have scores for at least 50 percent of the
measures required to be reported for the contract type to have a
summary rating calculated.
(ii) The Part D improvement measure is not included in the count of
the minimum number of rated measures.
(3) The summary ratings are on a 1 to 5 star scale ranging from 1
(worst rating) to 5 (best rating) in half-star increments using
traditional rounding rules.
(d) Overall MA-PD rating. (1) The overall rating for a MA-PD
contract will be calculated using a weighted mean of the Part C and
Part D measure-level Star Ratings, weighted in accordance with
paragraph (e) of this section and with an adjustment to reward
consistently high performance described and the application of the CAI,
under paragraph (f).
(2)(i) An MA-PD must have both Part C and Part D summary ratings
and scores for at least 50 percent of the measures required to be
reported for the contract type to have the overall rating calculated.
(ii) The Part C and D improvement measures are not included in the
count of measures needed for the overall rating.
(iii) Any measures that share the same data and are included in
both the Part C and Part D summary ratings will be included only once
in the calculation for the overall rating.
(iv) The overall rating is on a 1 to 5 star scale ranging from 1
(worst rating) to 5 (best rating) in half-increments using traditional
rounding rules.
(e) Measure weights--(1) General rules. Subject to paragraphs
(e)(2) and (3) of this section, CMS will assign weights to measures
based on their categorization as follows.
(i) Improvement measures receive the highest weight of 5.
(ii) Outcome and Intermediate outcome measures receive a weight of
3.
(iii) Patient experience and complaint measures receive a weight of
1.5.
(iv) Access measures receive a weight of 1.5.
(v) Process measures receive a weight of 1.
(2) Rules for new measures. New measures to the Star Ratings
program will receive a weight of 1 for their first year in the Star
Ratings program. In subsequent years, the measure will be assigned the
weight associated with its category.
(3) Special rule for Puerto Rico. Contracts that have service areas
that are wholly located in Puerto Rico will receive a weight of zero
for the Part D adherence measures for the summary and overall rating
calculations and will have a weight of 3 for the adherence measures for
the improvement measure calculations.
(f) Completing the Part D summary and overall rating calculations.
CMS will adjust the summary and overall rating calculations to take
into account the reward factor (if applicable) and the categorical
adjustment index (CAI) as provided in this paragraph.
(1) Reward factor. This rating-specific factor is added to both the
summary and overall ratings of contracts that qualify for the reward
factor based on both high and stable relative performance for the
rating level.
(i) The contract's performance will be assessed using its weighted
mean and its ranking relative to all rated contracts in the rating
level (overall for MA-PDs and Part D summary for MA-PDs and PDPs) for
the same Star Ratings year. The contract's stability of performance
will be assessed using the weighted variance and its ranking relative
to all rated contracts in the rating type (overall for MA-PDs and Part
D summary for MA-PDs and PDPs). The weighted mean and weighted variance
are compared separately for MA-PD and standalone Part D contracts
(PDPs). The measure weights are specified in paragraph (e) of this
section. Since highly-rated contracts may have the improvement
measure(s) excluded in the determination of their final highest rating,
each contract's weighted variance and weighted mean will be calculated
both with and without the improvement measures. For an MA-PD's Part C
and D summary ratings, its ranking is relative to all other contracts'
weighted variance and weighted mean for the rating type (Part C
summary, Part D summary) with the improvement measure.
(ii) Relative performance of the weighted variance (or weighted
variance ranking) will be categorized as being high (at or above 70th
percentile), medium (between the 30th and 69th percentile) or low
(below the 30th percentile). Relative performance of the weighted mean
(or weighted mean ranking) will be categorized as being high (at or
above the 85th percentile), relatively high (between the 65th and 84th
percentiles), or other (below the 65th percentile).
(iii) The combination of the relative variance and relative mean is
used to determine the reward factor to be added to the contract's
summary and overall ratings as follows:
(A) A contract with low variance and a high mean will have a reward
factor equal to 0.4.

[[Page 56519]]

(B) A contract with medium variance and a high mean will have a
reward factor equal to 0.3.
(C) A contract with low variance and a relatively high mean will
have a reward factor equal to 0.2.
(D) A contract with medium variance and a relatively high mean will
have a reward factor equal to 0.1.
(E) A contract with all other combinations of variance and relative
mean will have a reward factor equal to 0.0.
(iv) The reward factor is determined and applied before application
of the CAI adjustment under paragraph (f)(2) of this section; the
reward factor is based on unadjusted scores.
(2) Categorical adjustment index. CMS applies the categorical
adjustment index (CAI) as provided in this paragraph to adjust for the
average within-contract disparity in performance associated with the
percentages of beneficiaries who receive a low income subsidy or are
dual eligible (LIS/DE)/or have disability status. The factor is
calculated as the mean difference in the adjusted and unadjusted
ratings (overall, Part D for MA-PDs, Part D for PDPs) of the contracts
that lie within each final adjustment category for each rating type.
(i) The CAI is added to or subtracted from the contract's overall
and summary ratings and is applied after the reward factor adjustment
(if applicable).
(A) The adjustment factor is monotonic (that is, as the proportion
of LIS/DE and disabled increases in a contract, the adjustment factor
increases in at least one of the dimensions) and varies by a contract's
categorization into a final adjustment category that is determined by a
contract's proportion of LIS/DE and disabled beneficiaries.
(B) To determine a contract's final adjustment category, contract
enrollment is determined using enrollment data for the month of
December for the measurement period of the Star Ratings year. The count
of beneficiaries for a contract is restricted to beneficiaries that are
alive for part or all of the month of December of the applicable
measurement year. A beneficiary is categorized as LIS/DE if the
beneficiary was designated as full or partially dually eligible or
receiving a LIS at any time during the applicable measurement period.
Disability status is determined using the variable original reason for
entitlement (OREC) for Medicare using the information from the Social
Security Administration and Railroad Retirement Board record systems.
(C) A MA-PD contract may be adjusted up to three times with the
CAI: one for the overall Star Rating and one for each of the summary
ratings (Part C and Part D).
(D) A PDP contract may be adjusted only once for the CAI: For the
Part D summary rating.
(E) The CAI values are rounded and displayed with 6 decimal places.
(ii) In determining the CAI values, a measure will be excluded as a
candidate for inclusion for adjustment if the measure meets any of the
following:
(A) The measure is already case-mix adjusted for socioeconomic
status.
(B) The focus of the measurement is not a beneficiary-level issue
but rather a plan or provider-level issue.
(C) The measure is scheduled to be retired or revised.
(D) The measure is applicable only to SNPs.
(iii) CMS will announce the measures identified for inclusion in
the calculations of the CAI in accordance with this paragraph through
the process described for changes in and adoption of payment and risk
adjustment policies in section 1853(b) of the Act. The measures for
inclusion in the calculations of the CAI values will be selected based
on the analysis of the dispersion of the LIS/DE within contract
differences using all reportable numeric scores for contracts receiving
a rating in the previous rating year. CMS calculates the results of
each contract's estimated difference between the LIS/DE and non-LIS/DE
performance rates per contract using logistic mixed effects model that
includes LIS/DE as a predictor, random effects for contract and an
interaction term of contract. For each contract, the proportion of
beneficiaries receiving the measured clinical process or outcome for
LIS/DE and non-LIS/DE beneficiaries would be estimated separately. The
following decision criteria is used to determine the measures for
adjustment:
(A) A median absolute difference between LIS/DE and non-LIS/DE
beneficiaries for all contracts analyzed is 5 percentage points or
more.
(B) The LIS/DE subgroup performed better or worse than the non-LIS/
DE subgroup in all contracts.
(C) The Part D measures for MA-PDs and PDPs will be analyzed
independently, but the Part D measures selected for adjustment will
include measures that meet the selection criteria for either delivery
system.
(iv) The adjusted measures scores for the selected measures are
determined using the results from regression models of beneficiary
level measure scores that adjust for the average within contract
difference in measure scores for MA or PDP contracts.
(A) A logistic regression model with contract fixed effects and
beneficiary level indicators of LIS/DE and disability status is used
for the adjustment.
(B) The adjusted measure scores are converted to a measure-level
Star Rating using the measure thresholds for the Star Ratings year that
corresponds to the measurement period of the data employed for the CAI
determination.
(v) The rating-specific CAI values will be determined using the
mean differences between the adjusted and unadjusted Star Ratings
(overall, Part D summary for MA-PDs and Part D summary for PDPs) in
each final adjustment category.
(A) For the annual development of the CAI, the distribution of the
percentages for LIS/DE and disabled (using the enrollment data that
parallels the previous Star Ratings year's data) would be examined to
determine the number of equal-sized initial groups for each attribute
(LIS/DE and disabled).
(B) The initial categories are created using all groups formed by
the initial LIS/DE and disabled groups.
(C) The mean difference between the adjusted and unadjusted summary
or overall ratings per initial category would be calculated and
examined. The initial categories would then be collapsed to form the
final adjustment categories. The collapsing of the initial categories
to form the final adjustment categories would be done to enforce
monotonicity in at least one dimension (LIS/DE or disabled).
(D) The mean difference within each final adjustment category by
rating-type (Part D for MA-PD, Part D for PDPs or overall) would be the
CAI values for the next Star Ratings year.
(vi) CMS develops the model for the modified contract-level LIS/DE
percentage for Puerto Rico using the following sources of information:
(A) The most recent data available at the time of the development
of the model of both 1-year American Community Survey (ACS) estimates
for the percentage of people living below the Federal Poverty Level
(FPL) and the ACS 5-year estimates for the percentage of people living
below 150 percent of the FPL. The data to develop the model will be
limited to the 10 states, drawn from the 50 states plus the District of
Columbia with the highest proportion of people living below the FPL, as
identified by the 1-year ACS estimates.
(B) The Medicare enrollment data from the same measurement period
as the Star Rating's year. The Medicare enrollment data would be
aggregated from MA contracts that had at least 90 percent of their
enrolled beneficiaries

[[Page 56520]]

with mailing addresses in the 10 highest poverty states.
(vii) A linear regression model is developed to estimate the
percentage of LIS/DE for a contacts that solely serve the population of
beneficiaries in Puerto Rico.
(A) The maximum value for the modified LIS/DE indicator value per
contract would be capped at 100 percent.
(B) All estimated modified LIS/DE values for Puerto Rico would be
rounded to 6 decimal places when expressed as a percentage.
(C) The model's coefficient and intercept are updated annually and
published in the Technical Notes.
(g) Applying the improvement measure scores. (1) CMS runs the
calculations twice for each highest rating for each contract-type
(overall rating for MA-PD contracts and Part D summary rating for
PDPs), with all applicable adjustments (CAI and the reward factor),
once including the improvement measure(s) and once without including
the improvement measure(s). In deciding whether to include the
improvement measures in a contract's highest rating, CMS applies the
following rules:
(i) Contracts with 2 or fewer stars for their highest rating when
calculated without improvement and with all applicable adjustments (CAI
and the reward factor) will not have their rating calculated with the
improvement measure(s).
(ii) If the highest rating for each contract-type is 4 stars or
more without the use of the improvement measure(s) and with all
applicable adjustments (CAI and the reward factor), a comparison of the
highest rating with and without the improvement measure(s) is done. The
higher rating is used for the rating.
(iii) If the highest rating is between 2 stars and 4 stars with all
applicable adjustments (CAI and the reward factor), the rating will be
calculated with the improvement measure(s).
(2) The Part D summary rating for MA-PDs will include the Part D
improvement measure.
(h) Posting and display of ratings. For all ratings at the measure,
domain, summary and overall level, posting and display of the ratings
is based on there being sufficient data to calculate and assign
ratings. If a contract does not have sufficient data to calculate a
rating, the posting and display would be the flag ``Not enough data
available.'' If the measurement period is prior to one year past the
contract's effective date, the posting and display would be the flag
``Plan too new to be measured''.
(i) Medicare Plan Finder performance icons. Icons are displayed on
Medicare Plan Finder to note performance as provided in this paragraph:
(1) High-performing icon. The high performing icon is assigned to a
Part D plan sponsor for achieving a 5-star Part D summary rating and an
MA-PD contract for a 5-star overall rating.
(2) Low-performing icon. (i) A contract receives a low performing
icon as a result of its performance on the Part C or Part D summary
ratings. The low performing icon is calculated by evaluating the Part C
and Part D summary ratings for the current year and the past 2 years.
If the contract had any combination of Part C or Part D summary ratings
of 2.5 or lower in all 3 years of data, it is marked with a low
performing icon. A contract must have a rating in either Part C or Part
D for all 3 years to be considered for this icon.
(ii) CMS may disable the Medicare Plan Finder online enrollment
function (in Medicare Plan Finder) for Medicare health and prescription
drug plans with the low performing icon; beneficiaries will be directed
to contact the plan directly to enroll in the low-performing plan.
(3) Plan preview of the Star Ratings. CMS will have plan preview
periods before each Star Ratings release during which Part D plan
sponsors can preview their Star Ratings data in HPMS prior to display
on the Medicare Plan Finder.
0
67. Section 423.265 is amended by revising paragraph (b)(2) to read as
follows.

Sec. 423.265 Submission of bids and related information.

* * * * *
(b) * * *
(2) Substantial differences between bids--(i) General rule. Except
as provided in paragraph (b)(2)(ii) of this section, potential Part D
sponsors' bid submissions must reflect differences in benefit packages
or plan costs that CMS determines to represent substantial differences
relative to a sponsor's other bid submissions. In order to be
considered ``substantially different,'' each bid must be significantly
different from the sponsor's other bids with respect to beneficiary
out-of-pocket costs or formulary structures.
(ii) Exception. A potential Part D sponsor's enhanced bid
submission does not have to reflect the substantial differences as
required in paragraph (b)(2)(i) of this section relative to any of its
other enhanced bid submissions.
* * * * *

Sec. 423.503 [Amended]

0
68. Section 423.503 is amended in paragraphs (b)(1) and (2) by removing
the phrase ``14 months'' and adding in its place ``12 months'' each
time it appears.
0
69. Section 423.504 is amended by revising paragraphs (b)(4)(ii) and
(b)(4)(vi)(C) to read as follows.

Sec. 423.504 General provisions.

* * * * *
(b) * * *
(4) * * *
(ii) Personnel and systems sufficient for the Part D plan sponsor
to organize, implement, control, and evaluate financial and
communication activities, the furnishing of prescription drug services,
the quality assurance, medical therapy management, and drug and or
utilization management programs, and the administrative and management
aspects of the organization.
* * * * *
(vi) * * *
(C)(1) Each Part D plan sponsor must establish and implement
effective training and education for its compliance officer and
organization employees, the Part D sponsor's chief executive and other
senior administrators, managers and governing body members.
(2) Such training and education must occur at a minimum annually
and must be made a part of the orientation for a new employee, and new
appointment to a chief executive, manager, or governing body member.
* * * * *
0
70. Section 423.505 is amended--
0
a. By revising paragraph (b)(18);
0
b. In paragraph (b)(25), by removing the word ``marketing'' and adding
in its place the word ``communication''; and
0
c. By revising paragraph (b)(26).
The revisions read as follows:

Sec. 423.505 Contract provisions.

* * * * *
(b) * * *
(18) To agree to have a standard contract with reasonable and
relevant terms and conditions of participation whereby any willing
pharmacy may access the standard contract and participate as a network
pharmacy including all of the following:
(i) Making standard contracts available upon request from
interested pharmacies no later than September 15 of each year for
contracts effective January 1 of the following year.
(ii) Providing a copy of a standard contract to a requesting
pharmacy within 2 business days after receiving such a request from the
pharmacy.
* * * * *

[[Page 56521]]

(26) Maintain a Part D summary plan rating score of at least 3
stars under the 5-star rating system specified in subpart 186 of this
part 423. A Part D summary plan rating is calculated as provided in
Sec. 423.186.
* * * * *

Sec. 423.507 [Amended]

0
71. Section 423.507 is amended by removing and reserving paragraph (b).
0
72. Section 423.508 is amended by revising paragraph (a) to read as
follows:

Sec. 423.508 Modification or termination of contract by mutual
consent.

(a) General rule. A contract may be modified or terminated at any
time by written mutual consent. If the PDP sponsor submits a request to
end the term of its contract after the deadline provided in Sec.
423.507(a)(2)(i), the contract may be terminated by mutual consent in
accordance with paragraphs (b) through (f) of this section. CMS may
mutually consent to the contract termination if the contract
termination does not negatively affect the administration of the
Medicare Part D program.
* * * * *
0
73. Section 423.509 is amended by revising paragraph (a)(4)(v)(A) and
adding paragraphs (a)(4)(xiii) and (xiv) and (b)(2)(v) to read as
follows:

Sec. 423.509 Termination of contract by CMS.

(a) * * *
(4) * * *
(v) * * *
(A) Requirements in subpart V of this part.
* * * * *
(xiii) The Part D plan sponsor has committed any of the acts in
Sec. 423.752 that support the imposition of intermediate sanctions or
civil money penalties under Sec. 423.750.
(xiv) Following the issuance of a notice to the sponsor no later
than August 1, CMS must terminate, effective December 31 of the same
year, an individual PDP if that plan does not have a sufficient number
of enrollees to establish that it is a viable independent plan option.
(b) * * *
(2) * * *
(v) In the event that CMS issues a termination notice to a Part D
plan sponsor on or before August 1 with an effective date of the
following December 31, the Part D plan sponsor must issue notification
to its Medicare enrollees at least 90 days prior to the effective date
of the termination.
* * * * *
0
74. Section 423.558 is amended by adding paragraph (a)(4) to read as
follows:

Sec. 423.558 Scope.

(a) * * *
(4) Review of at-risk determinations made under a drug management
program in accordance with Sec. 423.153(f).
* * * * *
0
75. Section 423.560 is amended by revising the definitions of
``Appeal'', ``Grievance'', ``Reconsideration'', and ``Redetermination''
and adding in alphabetical order a definition for ``Specialty tier'' to
read as follows:

Sec. 423.560 Definitions.

* * * * *
Appeal means any of the procedures that deal with the review of
adverse coverage determinations made by the Part D plan sponsor on the
benefits under a Part D plan the enrollee believes he or she is
entitled to receive, including delay in providing or approving the drug
coverage (when a delay would adversely affect the health of the
enrollee), or on any amounts the enrollee must pay for the drug
coverage, as defined in Sec. 423.566(b). Appeal also includes the
review of at-risk determinations made under a drug management program
in accordance with Sec. 423.153(f). These procedures include
redeterminations by the Part D plan sponsor, reconsiderations by the
independent review entity, ALJ hearings, reviews by the Medicare
Appeals Council (Council), and judicial reviews.
* * * * *
Grievance means any complaint or dispute, other than one that
involves a coverage determination or at-risk determination, expressing
dissatisfaction with any aspect of the operations, activities, or
behavior of a Part D plan sponsor, regardless of whether remedial
action is requested.
* * * * *
Reconsideration means a review of an adverse coverage determination
or at-risk determination by an independent review entity (IRE), the
evidence and findings upon which it was based, and any other evidence
the enrollee submits or the IRE obtains.
Redetermination means a review of an adverse coverage determination
or at-risk determination by a Part D plan sponsor, the evidence and
findings upon which it is based, and any other evidence the enrollee
submits or the Part D plan sponsor obtains.
Specialty tier means a formulary cost-sharing tier dedicated to
very high cost Part D drugs and biological products that exceed a cost
threshold established by the Secretary.
0
76. Section 423.562 is amended by revising paragraph (a)(1)(ii), adding
paragraph (a)(1)(v), and revising paragraph (b)(4) to read as follows:

Sec. 423.562 General provisions.

(a) * * *
(1) * * *
(ii) Use a single, uniform exceptions and appeals process which
includes procedures for accepting oral and written requests for
coverage determinations and redeterminations that are in accordance
with Sec. 423.128(b)(7) and (d)(1)(iv).
* * * * *
(v) If the Part D plan sponsor has established a drug management
program under Sec. 423.153(f), appeal procedures that meet the
requirements of this subpart for issues that involve at-risk
determinations.
* * * * *
(b) * * *
(4) If dissatisfied with any part of a coverage determination or an
at-risk determination under a drug management program in accordance
with Sec. 423.153(f), all of the following appeal rights:
(i) The right to a redetermination of the adverse coverage
determination or at-risk determination by the Part D plan sponsor, as
specified in Sec. 423.580.
(ii) The right to request an expedited redetermination, as provided
under Sec. 423.584.
(iii) If, as a result of the redetermination, a Part D plan sponsor
affirms, in whole or in part, its adverse coverage determination or at-
risk determination, the right to a reconsideration or expedited
reconsideration by an independent review entity (IRE) contracted by
CMS, as specified in Sec. 423.600.
(iv) If the IRE affirms the plan's adverse coverage determination
or at-risk determination, in whole or in part, the right to an ALJ
hearing if the amount in controversy meets the requirements in Sec.
423.1970.
(v) If the ALJ or attorney adjudicator affirms the IRE's adverse
coverage determination or at-risk determination, in whole or in part,
the right to request Council review of the ALJ's or attorney
adjudicator's decision, as specified in Sec. 423.1974.
(vi) If the Council affirms the ALJ's or attorney adjudicator's
adverse coverage determination or at-risk determination, in whole or in
part, the right to judicial review of the decision if the amount in

[[Page 56522]]

controversy meets the requirements in Sec. 423.1976.
* * * * *
0
77. Section 423.564 is amended by revising paragraph (b) to read as
follows:

Sec. 423.564 Grievance procedures.

* * * * *
(b) Distinguished from appeals. Grievance procedures are separate
and distinct from appeal procedures, which address coverage
determinations as defined in Sec. 423.566(b) and at-risk
determinations made under a drug management program in accordance with
Sec. 423.153(f). Upon receiving a complaint, a Part D plan sponsor
must promptly determine and inform the enrollee whether the complaint
is subject to its grievance procedures or its appeal procedures.
* * * * *
0
78. Section 423.578 is amended by--
0
a. Revising paragraphs (a) introductory text, (a)(1) and (2), (a)(4)
introductory text, and (a)(5) and (6);
0
b. Removing paragraph (a)(7); and
0
c. Revising paragraph (c)(3).
The revisions read as follows:

Sec. 423.578 Exceptions process.

(a) Requests 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 requested non-preferred drug for
treatment of the enrollee's condition is medically necessary,
consistent with the physician's or other prescriber's statement under
paragraph (a)(4) of this section.
(1) The tiering exceptions procedures must address situations where
a formulary's tiering structure changes during the year and an enrollee
is using a drug affected by the change.
(2) Part D plan sponsors must establish criteria that provide for a
tiering exception, consistent with paragraphs (a)(3) through (6) of
this section.
* * * * *
(4) A prescribing physician or other prescriber must provide an
oral or written supporting statement that the preferred drug(s) for the
treatment of the enrollee's condition--
* * * * *
(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. 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.
(6) Limitations on tiering exceptions: A Part D plan sponsor is
permitted to design its tiering exceptions procedures such that an
exception is not approvable in the following circumstances:
(i) To cover a brand name drug, as defined in Sec. 423.4, at a
preferred cost-sharing level that applies only to alternative drugs
that are--
(A) Generic drugs, for which an application is approved under
section 505(j) of the Federal Food, Drug, and Cosmetic Act; or
(B) Authorized generic drugs as defined in section 505(t)(3) of the
Federal Food, Drug, and Cosmetic Act.
(ii) To cover a biological product licensed under section 351 of
the Public Health Service Act at a preferred cost-sharing level that
does not contain any alternative drug(s) that are biological products.
(iii) If a Part D plan sponsor maintains a specialty tier, as
defined in Sec. 423.560, the sponsor may design its exception process
so that Part D drugs and biological products on the specialty tier are
not eligible for a tiering exception.
* * * * *
(c) * * *
(3) When a tiering exceptions request is approved. Whenever an
exceptions request made under paragraph (a) of this section is
approved--
(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;
(B) The drug continues to be considered safe for treating the
enrollee's disease or medical condition; and
(C) The enrollment period has not expired. If an enrollee renews
his or her membership after the plan year, the plan may choose to
continue coverage into the subsequent plan year.
(ii) The Part D plan sponsor must provide coverage for the approved
prescription drug at the cost-sharing level that applies to preferred
alternative drugs. If the plan's formulary contains alternative drugs
on multiple tiers, cost-sharing must be assigned at the lowest
applicable tier, under the requirements in paragraph (a) of this
section.
* * * * *
0
79. Section 423.580 is revised 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. 423.1978) or an
at-risk determination under a drug management program in accordance
with Sec. 423.153(f) 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
80. Section 423.582 is amended by revising paragraphs (a) and (b) 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 or the at-risk determination under a drug management
program in accordance with Sec. 423.153(f). 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 or the at-risk determination under a drug management
program in accordance with Sec. 423.153(f).
* * * * *
0
81. Section 423.584 is amended by revising paragraph (a) 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

[[Page 56523]]

Sec. 423.566(b) or an at-risk determination made under a drug
management program in accordance with Sec. 423.153(f). (This does not
include requests for payment of drugs already furnished.)
* * * * *
0
82. Section 423.590 is amended by revising paragraphs (a), (b)(1) and
(2), the paragraph (f) subject heading, and paragraphs (f)(1) and
(g)(3)(i) to read as follows:

Sec. 423.590 Timeframes and responsibility for making
redeterminations.

(a) Standard redetermination--request for covered drug benefits or
review of an at-risk determination. (1) If the Part D plan sponsor
makes a redetermination that is completely favorable to the enrollee,
the Part D plan sponsor must notify the enrollee in writing of its
redetermination (and effectuate it in accordance with Sec.
423.636(a)(1) or (3) as expeditiously as the enrollee's health
condition requires, but no later than 7 calendar days from the date it
receives the request for a standard redetermination.
(2) If the Part D plan sponsor makes a redetermination that
affirms, in whole or in part, its adverse coverage determination or at-
risk determination, it must notify the enrollee in writing of its
redetermination as expeditiously as the enrollee's health condition
requires, but no later than 7 calendar days from the date it receives
the request for a standard redetermination.
(b) * * *
(1) If the Part D plan sponsor makes a redetermination that is
completely favorable to the enrollee, the Part D plan sponsor must
issue its redetermination (and effectuate it in accordance with Sec.
423.636(a)(2)) no later than 14 calendar days from the date it receives
the request for redetermination.
(2) If the Part D plan sponsor affirms, in whole or in part, its
adverse coverage determination, it must notify the enrollee in writing
of its redetermination no later than 14 calendar days from the date it
receives the request for redetermination.
* * * * *
(f) Who must conduct the review of an adverse coverage
determination or at-risk determination. (1) A person or persons who
were not involved in making the coverage determination or an at-risk
determination under a drug management program in accordance with Sec.
423.153(f) must conduct the redetermination.
* * * * *
(g) * * *
(3) * * *
(i) For adverse drug coverage redeterminations, or redeterminations
related to a drug management program in accordance with Sec.
423.153(f), describe both the standard and expedited reconsideration
processes, including the enrollee's right to, and conditions for,
obtaining an expedited reconsideration and the rest of the appeals
process;
* * * * *
0
83. Section 423.602 is amended by revising paragraph (b)(2) to read as
follows:

Sec. 423.602 Notice of reconsideration determination by the
independent review entity.

* * * * *
(b) * * *
(2) If the reconsideration determination is adverse (that is, does
not completely reverse the adverse coverage determination or
redetermination by the Part D plan sponsor), inform the enrollee of his
or her right to an ALJ hearing if the amount in controversy meets the
threshold requirement under Sec. 423.1970;
* * * * *
0
84. Section 423.636 is amended by revising paragraph (a)(2) and adding
paragraphs (a)(3) and (b)(3) to read as follows:.

Sec. 423.636 How a Part D plan sponsor must effectuate standard
redeterminations, reconsiderations, or decisions.

(a) * * *
(2) Requests for payment. If, on redetermination of a request for
payment, the Part D plan sponsor reverses its coverage determination,
the Part D plan sponsor must authorize payment for the benefit within
14 calendar days from the date it receives the request for
redetermination, and make payment no later than 30 calendar days after
the date the plan sponsor receives the request for redetermination.
(3) Review of an at-risk determination. If, on redetermination of
an at-risk determination made under a drug management program in
accordance with Sec. 423.153(f), the Part D plan sponsor reverses its
at-risk determination, the Part D plan sponsor must implement the
change to the at-risk determination as expeditiously as the enrollee's
health condition requires, but no later than 7 calendar days from the
date it receives the request for redetermination.
(b) * * *
(3) Review of an at-risk determination. If, on appeal of an at-risk
determination made under a drug management program in accordance with
Sec. 423.153(f), the determination by the Part D plan sponsor is
reversed in whole or in part by the independent review entity, or at a
higher level of appeal, the Part D plan sponsor must implement the
change to the at-risk determination within 72 hours from the date it
receives notice reversing the determination. The Part D plan sponsor
must inform the independent review entity that the Part D plan sponsor
has effectuated the decision.
0
85. Section 423.638 is revised to read as follows:

Sec. 423.638 How a Part D plan sponsor must effectuate expedited
redeterminations or reconsiderations.

(a) Reversals by the Part D plan sponsor--
(1) Requests for benefits. If, on an expedited redetermination of a
request for benefits, the Part D plan sponsor reverses its coverage
determination, the Part D plan sponsor must authorize or provide the
benefit under dispute as expeditiously as the enrollee's health
condition requires, but no later than 72 hours after the date the Part
D plan sponsor receives the request for redetermination.
(2) Review of an at-risk determination. If, on an expedited
redetermination of an at-risk determination made under a drug
management program in accordance with Sec. 423.153(f), the Part D plan
sponsor reverses its at-risk determination, the Part D plan sponsor
must implement the change to the at-risk determination as expeditiously
as the enrollee's health condition requires, but no later than 72 hours
after the date the Part D plan sponsor receives the request for
redetermination.
(b) Reversals other than by the Part D plan sponsor--
(1) Requests for benefits. If the expedited determination or
expedited redetermination for benefits by the Part D plan sponsor is
reversed in whole or in part by the independent review entity, or at a
higher level of appeal, the Part D plan sponsor must authorize or
provide the benefit under dispute as expeditiously as the enrollee's
health condition requires but no later than 24 hours from the date it
receives notice reversing the determination. The Part D plan sponsor
must inform the independent review entity that the Part D plan sponsor
has effectuated the decision.
(2) Review of an at-risk determination. If the expedited
redetermination of an at-risk determination made under a drug
management program in accordance with Sec. 423.153(f) by the Part D
plan sponsor is reversed in whole or in part by the independent review
entity, or at a higher level of appeal, the Part D plan

[[Page 56524]]

sponsor must implement the change to the at-risk determination as
expeditiously as the enrollee's health condition requires but no later
than 24 hours from the date it receives notice reversing the
determination. The Part D plan sponsor must inform the independent
review entity that the Part D plan sponsor has effectuated the
decision.

Sec. 423.652 [Amended]

0
86. Section 423.652 is amended paragraph (b)(1) by removing the phrase
``July 15'' and adding in its place ``September 1''.
0
87. Section 423.750 is amended by revising paragraph (a)(3) to read as
follows:

Sec. 423.750 Types of intermediate sanctions and civil money
penalties.

(a) * * *
(3) Suspension of communication activities to Medicare
beneficiaries by a Part D plan sponsor, as defined by CMS.
* * * * *
0
88. Section 423.752 is amended by revising paragraphs (a)(9) and (b) to
read as follows:

Sec. 423.752 Basis for imposing intermediate sanctions and civil
money penalties.

(a) * * *
(9) Fails to comply with communication restrictions described in
subpart V or applicable implementing guidance.
* * * * *
(b) Suspension of enrollment and communications. If CMS makes a
determination that could lead to a contract termination under Sec.
423.509(a), CMS may impose the intermediate sanctions at Sec.
423.750(a)(1) and (3).
* * * * *
0
89. Section 423.756 is amended by revising paragraph (c)(3)(ii)
introductory text to read as follows:

Sec. 423.756 Procedures for imposing intermediate sanctions and civil
money penalties.

(c) * * *
(3) * * *
(ii) In instances where intermediate sanctions have been imposed,
CMS may require a Part D plan sponsor to market or to accept
enrollments or both for a limited period of time in order to assist CMS
in making a determination as to whether the deficiencies that are the
bases for the intermediate sanctions have been corrected and are not
likely to recur.
* * * * *
0
90. Section 423.1970 is amended by revising paragraph (b) to read as
follows:

Sec. 423.1970 Right to an ALJ hearing.

* * * * *
(b) Calculating the amount in controversy in specific
circumstances. (1) If the basis for the appeal is the refusal by the
Part D plan sponsor to provide drug benefits, CMS uses the projected
value of those benefits to compute the amount remaining in controversy.
The projected value of a Part D drug or drugs must include any costs
the enrollee could incur based on the number of refills prescribed for
the drug(s) in dispute during the plan year.
(2) If the basis for the appeal is an at-risk determination made
under a drug management program in accordance with Sec. 423.153(f),
CMS uses the projected value of the drugs subject to the drug
management program to compute the amount remaining in controversy. The
projected value of the drugs subject to the drug management program
shall include the value of any refills prescribed for the drug(s) in
dispute during the plan year.
* * * * *

Sec. 423.2018 [Amended]

0
91. Section 423.2018 is amended--
0
a. In paragraph (a)(1), by removing the phrase ``appealed coverage
determination was made'' and adding in its place the phrase ``appealed
coverage determination or at-risk determination was made''; and
0
b. In paragraph (a)(2), by removing the phrase ``after the coverage
determination to be considered'' and adding in its place the phrase
``after the coverage determination or at-risk determination to be
considered''.

Sec. 423.2020 [Amended]

0
92. Section 423.2020 is amended in paragraph (c)(1) by removing the
phrase ``the coverage determination, and'' and adding in its place the
phrase ``the coverage determination or at-risk determination, and''.

Sec. 423.2022 [Amended]

0
93. Section 423.2022 is amended by--
0
a. Removing the first appearance of paragraph the (b) subject heading
and paragraph (b)(1) introductory text; and.
0
b. In paragraph (b)(1)(i) by removing the phrase ``the coverage
determination, redetermination,'' and adding in its place the phrase
``the coverage determination or at-risk determination,
redetermination,''.

Sec. 423.2032 [Amended]

0
94. Section 423.2032 is amended in paragraph (a) by removing the phrase
``the coverage determination, redetermination,'' and adding in its
place the phrase ``the coverage determination or at-risk determination,
redetermination,''.

Sec. 423.2036 [Amended]

0
95. Section 423.2036 is amended in paragraph (e) by removing the phrase
``a coverage determination'' and adding in its place the phrase ``a
coverage determination or at-risk determination''.

Sec. 423.2038 [Amended]

0
96. Section 423.2038 is amended in paragraph (c) by removing the phrase
``may be made, and'' and adding in its place the phrase ``may be made,
or an enrollee's at-risk determination should be reversed, and''.

Sec. 423.2046 [Amended]

0
97. Section 423.2046 is amended in paragraph (a)(1)(iii) by removing
the phrase ``the coverage determination.'' and adding in its place the
phrase ``the coverage determination or at-risk determination.

Sec. 423.2056 [Amended]

0
98. Section 423.2056 is amended--
0
a. In paragraph (a)(1) by removing the phrase ``appealed coverage
determination'' and adding in its place the phrase ``appealed coverage
determination or at-risk determination'', and
0
b. In paragraph (e) by removing the phrase ``the coverage determination
to be considered in the appeal.'' and adding in its place ``the
coverage determination or at-risk determination to be considered in the
appeal.''

Sec. 423.2062 [Amended]

0
99. Section 423.2062 is amended in paragraph (b) by removing the phrase
``coverage determination being considered and does not have
precedential effect'' and adding in its place the phrase ``coverage
determination or at-risk determination being considered and does not
have precedential effect''.

Sec. 423.2122 [Amended]

0
100. Section 423.2122 is amended--
0
a. In paragraph (a)(1) by removing the phrase ``the coverage
determination.'' and adding in its place the phrase ``the coverage
determination or at-risk determination'';
0
b. In paragraph (a)(3) by removing the phrase ``a coverage
determination is made'' and adding in its place ``a coverage
determination or at-risk determination is made'' and by removing the
phrase ``after the coverage determination considered'' and adding in
its place ``after the coverage determination or at-risk determination
considered''.

[[Page 56525]]

Sec. 423.2126 [Amended]

0
101. Section 423.2126 is amended in paragraph (b) by removing the
phrase ``coverage determination to be considered in the appeal.'' and
adding in its place the phrase ``coverage determination or at-risk
determination to be considered in the appeal.''

Subpart V--Part D Communication Requirements

0
102. The subpart V heading is amended to read as set forth above.
0
103. Section 423.2260 is amended by--
0
a. Revising the section heading;
0
b. Adding in alphabetical order definitions for ``Communications'',
``Communications materials'', and ``Marketing''; and
0
c. Revising the definition of ``Marketing materials''.
The revisions and additions read as follows:

Sec. 423.2260 Definitions.

* * * * *
Communications means activities and use of materials to provide
information to current and prospective enrollees.
Communication materials means all information provided to current
and prospective enrollees. Marketing materials are a subset of
communication materials.
Marketing means the use of materials or activities that meet the
following:
(1) By the Part D sponsor or downstream entities.
(2) Intended to draw a beneficiary's attention to a Part D plan or
plans.
(3) Influence a beneficiary's decision making process when making a
Part D plan selection or influence a beneficiary's decision to stay
enrolled in a plan (that is, retention-based marketing).
Marketing materials--
(1) Include, but are not limited to following:
(i) Materials such as brochures; posters; advertisements in media
such as newspapers, magazines, television, radio, billboards, or the
Internet; and social media content.
(ii) Marketing representative materials such as scripts or outlines
for telemarketing or other presentations.
(iii) Presentation materials such as slides and charts.
(2) Exclude the following materials:
(i) Information about the plan's benefit structure or cost sharing;
(ii) Information about measuring or ranking standards (for example,
star ratings);
(iii) Mention benefits or cost sharing, but do not meet the
definition of marketing in this section; or
(3) Unless otherwise specified by CMS because of their use or
purpose, are required under Sec. 423.128.
0
104. Section 422.2262 is amended by revising paragraph (d) to read as
follows:

Sec. 422.2262 Review and distribution of marketing materials.

* * * * *
(d) Enrollee communication materials. Enrollee communication
materials may be reviewed by CMS, which may upon review determine that
such materials must be modified, or may no longer be used.
0
105. Section 423.2264 is revised to read as follows:

Sec. 423.2264 Guidelines for CMS review.

In reviewing marketing material or election forms under Sec.
423.2262 of this part, CMS determines that the materials--
(a) Provide to Medicare beneficiaries interested in enrolling,
adequate written description of rules (including any limitations on the
providers from whom services can be obtained), procedures, basic
benefits and services, and fees and other charges in a format (and,
where appropriate, print size) and using standard terminology that may
be specified by CMS.
(b) Notify the general public of its enrollment period in an
appropriate manner, through appropriate media, throughout its service
area.
(c) Include in written materials notice that the Part D sponsor is
authorized by law to refuse to renew its contract with CMS, that CMS
also may refuse to renew the contract, and that termination or non-
renewal may result in termination of the beneficiary's enrollment in
the Part D plan. In addition, the Part D plan may reduce its service
area and no longer be offered in the area where a beneficiary resides.
(d) Ensure that materials are not materially inaccurate or
misleading or otherwise make material misrepresentations.
0
106. Section 423.2268 is revised to read as follows:

Sec. 423.2268 Standards for Part D Sponsor communications and
marketing.

(a) In conducting communication activities, Part D sponsors may not
do any of the following:
(1) Provide information that is inaccurate or misleading.
(2) Engage in activities that could mislead or confuse Medicare
beneficiaries, or misrepresent the Part D sponsor.
(3) Claim the Part D sponsor is recommended or endorsed by CMS or
Medicare or that CMS or Medicare recommends that the beneficiary enroll
in the Part D plan. It may explain that the organization is approved
for participation in Medicare.
(4) Employ Part D plan names that suggest that a plan is not
available to all Medicare beneficiaries.
(5) Display the names and/or logos of co-branded network providers
or pharmacies on the sponsor's member identification card, unless the
names, and/or logos are related to the member selection of specific
provider organizations (for example, physicians, hospitals).
(6) Use a plan name that does not include the plan type. The plan
type should be included at the end of the plan name.
(7) For markets with a significant non-English speaking population,
provide materials, as defined by CMS, unless in the language of these
individuals. Specifically, MA organizations must translate materials
into any non-English language that is the primary language of at least
5 percent of the individuals in a plan benefit package (PBP) service
area.
(b) In marketing, Part D sponsors may not do any of the following:
(1) Provide cash or other monetary rebates as an inducement for
enrollment or otherwise.
(2) Offer gifts to potential enrollees, unless the gifts are of
nominal (as defined in the CMS Marketing Guidelines) value, are offered
to all potential enrollees without regard to whether or not the
beneficiary enrolls, and are not in the form of cash or other monetary
rebates.
(3) Market non-health care/non-prescription drug plan related
products to prospective enrollees during any Part D sales activity or
presentation. This is considered cross-selling and is prohibited.
(4) Market any health care related product during a marketing
appointment beyond the scope agreed upon by the beneficiary, and
documented by the plan, prior to the appointment.
(5) Market additional health related lines of plan business not
identified prior to an individual appointment without a separate scope
of appointment identifying the additional lines of business to be
discussed.
(6) Distribute marketing materials for which, before expiration of
the 45-day period, the Part D sponsor receives from CMS written notice
of disapproval because it is inaccurate or misleading, or misrepresents
the Part D sponsor, its marketing representatives, or CMS.

[[Page 56526]]

(7) Conduct sales presentations or distribute and accept Part D
plan enrollment forms in provider offices or other areas where health
care is delivered to individuals, except in the case where such
activities are conducted in common areas in health care settings.
(8) Conduct sales presentations or distribute and accept plan
applications at educational events.
(9) Display the names and/or logos of provider co-branding partners
on marketing materials, unless the materials clearly indicate that
other providers are available in the network.
(10) Knowingly target or send marketing materials to any Part D
enrollee, whose prior year enrollment was in an MA plan, during the
Open Enrollment Period.
(11) Engage in any other marketing activity prohibited by CMS in
its marketing guidance.
(12) Engage in any discriminatory activity such as attempting to
recruit Medicare beneficiaries from higher income areas without making
comparable efforts to enroll Medicare beneficiaries from lower income
areas.
(13) Solicit door-to-door for Medicare beneficiaries or through
other unsolicited means of direct contact, including calling a
beneficiary without the beneficiary initiating the contact.
(14) Use providers or provider groups to distribute printed
information comparing the benefits of different health plans unless the
providers, provider groups, or pharmacies accept and display materials
from all health plans with which the providers, provider groups, or
pharmacies contract. The use of publicly available comparison
information is permitted if approved by CMS in accordance with the
Medicare marketing guidance.
(15) Provide meals to potential enrollees, which is prohibited,
regardless of value.

Sec. 423.2272 [Amended]

0
107. Section 423.2272 is amended by removing paragraph (e).

Sec. 423.2274 [Amended]

0
108. Section 423.2274 is amended--
0
a. By redesignating paragraph (b)(1)(iii) as paragraph (b)(1)(iv);
0
b. By redesignating paragraph (b)(2)(iii) as paragraph (b)(1)(iii);
0
c. By removing paragraph (b)(2);
0
d. By redesignating paragraph (b)(3) as paragraph (b)(2); and
0
e. In newly redesignated paragraph (b)(2)(iii), by removing the phrase
``from an MA plan,'' and adding the phrase ``from a Part D sponsor,''
in its place.

Sec. 423.2410 [Amended]

0
109. Section 423.2410 is amended in paragraph (a) by removing the
phrase ``an MLR'' and adding in its place the phrase ``the information
required under Sec. 423.2460''.

Sec. 423.2420 [Amended]

0
110. Section 423.2420 is amended by--
0
a. Removing and reserving paragraph (b)(2)(viii);
0
b. Revising paragraph (d)(2)(i); and
0
c. Removing the first paragraph designated as (d)(2)(ii).
The revision reads as follows:

Sec. 423.2420 Calculation of medical loss ratio.

* * * * *
(d) * * *
(2)
(i) Allocation to each category must be based on a generally
accepted accounting method that is expected to yield the most accurate
results. Specific identification of an expense with an activity that is
represented by one of the categories in paragraph (b) or (c) of this
section will generally be the most accurate method.
* * * * *
0
111. Section 423.2430 is amended by--
0
a. Redesignating paragraphs (a) introductory text and paragraphs (a)(1)
and (2) as paragraphs (a)(1), (2), and (3), respectively;
0
b. Revising newly redesignated paragraph (a)(1);
0
c. Adding paragraph (a)(4); and
0
d. Removing and reserving paragraph (b)(8).
The revisions and additions read as follows:

Sec. 423.2430 Activities that improve health care quality.

(a) Activity requirements. (1) Activities conducted by a Part D
sponsor to improve quality must either--
(i) Fall into one of the categories in paragraph (a)(2) of this
section and meet all of the requirements in paragraph (a)(3) of this
section; or
(ii) Be listed in paragraph (a)(4) of this section.
* * * * *
(4)(i) Medication Therapy Management Programs meeting the
requirements of Sec. 423.153(d).
(ii) Fraud reduction activities, including fraud prevention, fraud
detection, and fraud recovery.
* * * * *
0
112. Section 423.2460 is revised to read as follows:

Sec. 423.2460 Reporting requirements.

(a) For each contract year, from 2014 through 2017, each Part D
sponsor must submit to CMS, in a timeframe and manner specified by CMS,
a report that includes but is not limited to the data needed by the
Part D sponsor to calculate and verify the MLR and remittance amount,
if any, for each contract, under this part, such as incurred claims,
total revenue, expenditures on quality improving activities, non-claims
costs, taxes, licensing and regulatory fees, and any remittance owed to
CMS under Sec. 423.2410.
(b) For contract year 2018 and for each subsequent contract year,
each Part D sponsor must submit to CMS, in a timeframe and manner
specified by CMS, the following information:
(1) Fully credible and partially credible contracts. For each
contract under this part that has fully credible or partially credible
experience, as determined in accordance with Sec. 423.2440(d), the
Part D sponsor must report to CMS the MLR for the contract and the
amount of any remittance owed to CMS under Sec. 423.2410.
(2) Non-credible contracts. For each contract under this part that
has non-credible experience, as determined in accordance with Sec.
423.2440(d), the Part D sponsor must report to CMS that the contract is
non-credible.
(c) Total revenue included as part of the MLR calculation must be
net of all projected reconciliations.
(d) The MLR is reported once, and is not reopened as a result of
any payment reconciliation processes.

Sec. 423.2480 [Amended]

0
113. Section 423.2480 is amended--
0
a. In the introductory text by removing the phrase ``reviews of reports
submitted'' and adding in its place ``review of data submitted''; and
0
b. In paragraph (d) introductory text by removing the phrase ``Reports
submitted under'' and adding in its place the phrase ``Data submitted
under''.

Sec. 423.2490 [Amended]

0
114. Section 423.2490 is amended in paragraph (a) by removing the
phrase ``information contained in reports submitted'' and adding in its
place the phrase ``information submitted''.

PART 460--PROGRAMS OF ALL-INCLUSIVE CARE FOR THE ELDERLY (PACE)

0
115. The authority citation for part 460 continues to read as follows:

[[Page 56527]]

Authority: Secs. 1102, 1871, 1894(f), and 1934(f) of the Social
Security Act (42 U.S.C. 1302, 1395, 1395eee(f), and 1396u-4(f)).

0
116. Section 460.40 is amended by revising paragraph (j) to read as
follows:

Sec. 460.40 Violations for which CMS may impose sanctions.

* * * * *
(j) Makes payment to any individual or entity that is included on
the preclusion list, defined in Sec. 422.2 of this chapter.
0
117. Section 460.50 is amended by revising paragraph (b)(1)(ii) to read
as follows:

Sec. 460.50 Termination of PACE program agreement.

* * * * *
(b) * * *
(1) * * *
(ii) The PACE organization failed to comply substantially with
conditions for a PACE program or PACE organization under this part, or
with terms of its PACE program agreement, including making payment to
an individual or entity that is included on the preclusion list,
defined in Sec. 422.2 of this chapter.
* * * * *

Sec. 460.68 [Amended]

0
118. Section 460.68 is amended by removing paragraph (a)(4).

Sec. 460.70 [Amended]

0
119. Section 460.70 is amended by removing paragraph (b)(1)(iv).

Sec. 460.71 [Amended]

0
120. Section 460.71 is amended by removing paragraph (b)(7).
0
121. Section 460.86 is revised to read as follows:

Sec. 460.86 Payment to individuals and entities excluded by the OIG
or included on the preclusion list.

(a) A PACE organization may not pay, directly or indirectly, on any
basis, for items or services (other than emergency or urgently needed
services as defined in Sec. 460.100) furnished to a Medicare enrollee
by any individual or entity that is excluded by the OIG or is included
on the preclusion list, defined in Sec. 422.2 of this chapter.
(b) If a PACE organization receives a request for payment by, or on
behalf of, an individual or entity that is excluded by the OIG or is
included on the preclusion list, defined in Sec. 422.2 of this
chapter, the PACE organization must notify the enrollee and the
excluded individual or entity or the individual or entity that is
included on the preclusion list in writing, as directed by contract or
other direction provided by CMS, that payments will not be made.
Payment may not be made to, or on behalf of, an individual or entity
that is excluded by the OIG or is included on the preclusion list.

PART 498--APPEALS PROCEDURES FOR DETERMINATIONS THAT AFFECT
PARTICIPATION IN THE MEDICARE PROGRAM AND FOR DETERMINATIONS THAT
AFFECT THE PARTICIPATION OF ICFs/IID AND CERTAIN NFs IN THE
MEDICAID PROGRAM

0
122. The authority for part 498 continues to read as follows:

Authority: Secs. 1102, 1128I and 1871 of the Social Security
Act (42 U.S.C. 1302, 1320a-7j, and 1395hh).

0
123. Section 498.3 is amended by adding paragraph (b)(20) to read as
follows:

Sec. 498.3 Scope and applicability.

* * * * *
(b) * * *
(20) An individual or entity is to be included on the preclusion
list as defined in Sec. 422.2 or Sec. 423.100 of this chapter.
* * * * *
0
124. Section 498.5 is amended by adding paragraph (n) to read as
follows:

Sec. 498.5 Appeal rights.

* * * * *
(n) Appeal rights of individuals and entities on preclusion list.
(1) Any individual or entity that is dissatisfied with an initial
determination or revised initial determination that they are to be
included on the preclusion list (as defined in Sec. 422.2 or Sec.
423.100 of this chapter) may request a reconsideration in accordance
with Sec. 498.22(a).
(2) If CMS or the individual or entity under paragraph (n)(1) of
this section is dissatisfied with a reconsidered determination under
paragraph (n)(1) of this section, or a revised reconsidered
determination under Sec. 498.30, CMS or the individual or entity is
entitled to a hearing before an ALJ.
(3) If CMS or the individual or entity under paragraph (n)(2) of
this section is dissatisfied with a hearing decision as described in
paragraph (n)(2) of this section, CMS or the individual or entity may
request Board review and the individual or entity has a right to seek
judicial review of the Board's decision.

Dated: October 27, 2017.
Seema Verma,
Administrator, Centers for Medicare & Medicaid Services.
Dated: October 30, 2017.
Eric D. Hargan,
Acting Secretary, Department of Health and Human Services.
[FR Doc. 2017-25068 Filed 11-16-17; 4:15 pm]
BILLING CODE 4120-01-P

82_FR_56563

Category		Regulatory Information
Collection		Federal Register
sudoc Class		AE 2.7: GS 4.107: AE 2.106:
Publisher		Office of the Federal Register, National Archives and Records Administration
Section		Proposed Rules
Action		Proposed rule.
Dates		To be assured consideration, comments must be received at one of
Contact		Theresa Wachter, (410) 786-1157, Part C Issues.
FR Citation		82 FR 56336
RIN Number		0938-AT08
CFR Citation		42 CFR 405 42 CFR 417 42 CFR 422 42 CFR 423 42 CFR 498
CFR Associated		Administrative Practice and Procedure; Health Facilities; Health Professions; Kidney Diseases; Medical Devices; Medicare; Reporting and Recordkeeping Requirements; Rural Areas; X-Rays; Grant Programs-Health; Health Care; Health Insurance; Health Maintenance Organizations (hmo); Loan Programs-Health; Penalties; Privacy; Emergency Medical Services; Health Professionals and Incorporation by Reference

82 FR 56336 - Medicare Program; Contract Year 2019 Policy and Technical Changes to the Medicare Advantage, Medicare Cost Plan, Medicare Fee-for-Service, the Medicare Prescription Drug Benefit Programs, and the PACE Program

DEPARTMENT OF HEALTH AND HUMAN SERVICESCenters for Medicare & Medicaid Services

Federal Register Volume 82, Issue 227 (November 28, 2017)

DEPARTMENT OF HEALTH AND HUMAN SERVICES
Centers for Medicare & Medicaid Services