83 FR 16440 - 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 83, Issue 73 (April 16, 2018)

Page Range		16440-16757
FR Document		2018-07179

This final rule will revise the Medicare Advantage (MA) program (Part C) regulations and Prescription Drug Benefit program (Part D) regulations to implement certain provisions of the Comprehensive Addiction and Recovery Act (CARA) to further reduce the number of beneficiaries who may potentially misuse or overdose on opioids while still having access to important treatment options; implement certain provisions of the 21st Century Cures Act; support innovative approaches to improve program quality, accessibility, and affordability; offer beneficiaries more choices and better care; improve the CMS customer experience and maintain high beneficiary satisfaction; address program integrity policies related to payments based on prescriber, provider and supplier status in MA, Medicare cost plan, Medicare Part D and the PACE programs; provide an 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 83 Issue 73 (Monday, April 16, 2018)

[Federal Register Volume 83, Number 73 (Monday, April 16, 2018)]
[Rules and Regulations]
[Pages 16440-16757]
From the Federal Register Online [www.thefederalregister.org]
[FR Doc No: 2018-07179]

[[Page 16439]]

Vol. 83

Monday,

No. 73

April 16, 2018

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;
Final Rule

Federal Register / Vol. 83 , No. 73 / Monday, April 16, 2018 / Rules
and Regulations

[[Page 16440]]

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 405, 417, 422, 423, 460, and 498

[CMS-4182-F]
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: Final rule.

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SUMMARY: This final rule will revise the Medicare Advantage (MA)
program (Part C) regulations and Prescription Drug Benefit program
(Part D) regulations to implement certain provisions of the
Comprehensive Addiction and Recovery Act (CARA) to further reduce the
number of beneficiaries who may potentially misuse or overdose on
opioids while still having access to important treatment options;
implement certain provisions of the 21st Century Cures Act; support
innovative approaches to improve program quality, accessibility, and
affordability; offer beneficiaries more choices and better care;
improve the CMS customer experience and maintain high beneficiary
satisfaction; address program integrity policies related to payments
based on prescriber, provider and supplier status in MA, Medicare cost
plan, Medicare Part D and the PACE programs; provide an 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:
Effective Date: This rule is effective June 15, 2018.
The incorporation by reference of certain publications listed in
the rule is approved by the Director of the Federal Register as of June
15, 2018.
Applicability Dates: The applicability date of the provisions of
this rule is January 1, 2019 except for the provisions in Sec. Sec.
422.100(f)(4) and (5) and 422.101(d) (discussed in section II.A.4. of
this final rule (Maximum Out-of-Pocket Limit for Medicare Parts A and B
Services)) and Sec. 422.100(f)(6) (discussed in section II.A.5. of
this final rule (Cost Sharing Limits for Medicare Parts A and B
Services)). Those provisions are applicable for contract year 2020
(January 1, 2020). E-Prescribing and the Part D Prescription Drug
Program; Updating Part D E Prescribing Standards discussed in section
II.D.8. of this final rule is applicable January 1, 2020 conditioned on
The Office of the National Coordinator for Health Information
Technology (ONC) adopting the same standard for use in its Electronic
Health Record Certification Program by that date.

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, (443) 826-9925, Compliance Program
Training Issues.
Frank Whelan, (410) 786-1302, Preclusion List Issues.
Shelly Winston, (410) 786-3694, Part D E-Prescribing Program.

SUPPLEMENTARY INFORMATION:

I. Executive Summary and Background

A. Executive Summary

1. Purpose
The primary purpose of this final 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 changes are necessary to--
Support Innovative Approaches to Improving Quality,
Accessibility, and Affordability;
Improve the CMS Customer Experience; and
Implement Other Changes.
In addition, this final rule makes technical changes related to
treatment of Part A and Part B premium adjustments and updates the
NCPDP SCRIPT standard used for Part D electronic prescribing. While the
Part C and Part D programs have high satisfaction among enrollees, we
continually evaluate program policies and regulations to remain
responsive to current trends and newer technologies, and provide
increased flexibility to serve patients. 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 patient's health care needs. These changes being
finalized will empower MA and Part D plans to meet the needs of
enrollees at the local level, and should result in more enrollee choice
and more affordable options. 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.
2. Summary of the Major Provisions
a. Implementation of the Comprehensive Addiction and Recovery Act of
2016 (CARA) Provisions
In line with the agency's response to the President's call to end
the scourge of the opioid epidemic, this final rule implements
statutory provisions of the Comprehensive Addiction and Recovery Act of
2016 (CARA), which amended the Social Security Act and was enacted into
law on July 22, 2016. CARA includes new authority for Medicare Part D
plans to establish drug management programs effective on or after
January 1, 2019. Through this final rule, CMS has established 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.'' Specifically, under drug
management programs, Part D plans will engage in case management of
potential at-risk beneficiaries, through contact with their
prescribers, when such beneficiary is found to be taking a specific
dosage of opioids and/or obtaining them from multiple prescribers and
multiple pharmacies who may not know about each other. Sponsors may
then 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) after case
management with the prescribers for the safety of the enrollee. CMS
also limits the use of the special enrollment period (SEP) for dually-
or other low income subsidy (LIS)-eligible beneficiaries by those LIS-
eligible beneficiaries who are identified as at-risk or potentially at-
risk for prescription drug abuse under such a drug management program.
Finally, these provisions will codify the current Part D Opioid Drug
Utilization Review (DUR) Policy and Overutilization Monitoring System
(OMS) by integrating this current policy with drug management program
provisions.

[[Page 16441]]

Through the adoption of this policy, from 2011 through 2017, there was
a 76 percent decrease (almost 22,500 beneficiaries) in the number of
Part D beneficiaries identified as potential very high risk opioid
overutilizers. Thus, drug management programs will expand 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, and will be an important next step in addressing the
opioid epidemic and safeguarding the health and safety of our nation's
seniors.
b. Revisions to Timing and Method of Disclosure Requirements
Consistent with agency efforts supporting innovative approaches to
improve quality, accessibility, and affordability and reduce burden, we
are finalizing changes to align the MA and Part D regulations in
authorizing CMS to set the manner of delivery for mandatory disclosures
in both the MA and Part D programs. CMS will use this authority to
allow MA plans to meet the disclosure and delivery requirements for
certain documents by relying on notice of electronic posting and
provision of the documents in hard copy when requested, when previously
the documents, such as the Evidence of Coverage (EOC), had to be
provided in hard copy. Additionally, we are changing the timeframe for
delivery of the MA and Part D EOC to the first day of the Annual
Election Period (AEP), rather than 15 days prior to that date. Allowing
Part C and Part D plans to provide the EOC electronically will
alleviate plan burden related to printing and mailing and reduce the
number of paper documents that enrollees receive from plans. Changing
the date by which plans must provide the EOC to enrollees will allow
plans more time to finalize the formatting and ensure the accuracy of
the information in the EOC. Changing the date will also separate the
mailing and receipt of the EOC from the Annual Notice of Change (ANOC),
which describes the important changes in a patient's plan from one year
to the next. The ANOC must be delivered 15 days prior to the AEP and
will be received by enrollees ahead of the EOC, thus allowing enrollees
to focus on materials that drive decision-making during the AEP. We see
this final change as an overall reduction of burden that our
regulations have on plans and enrollees. In aggregate, we estimate a
savings (to plans for not producing and mailing hardcopy EOCs) of
approximately $54.7 million each year, 2019 through 2023.
c. Preclusion List Requirements for Prescribers in Part D and
Individuals and Entities in MA, Cost Plans, and PACE
This final rule will rescind current regulatory provisions that
require prescribers of Part D drugs and providers of MA services and
items to enroll in Medicare in order for the Part D drug or MA service
or item to be covered. As a replacement, a Part D plan sponsor will be
required to reject, or 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.'' Similarly, an MA service
or item will not be covered if the provider that furnished the service
or item is on the preclusion list. The preclusion list will consist of
certain individuals and entities that are currently revoked from the
Medicare program under 42 CFR 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 they 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 believe that this
change from an enrollment requirement to a preclusion list requirement
will reduce the burden on Part D prescribers and MA providers without
compromising our program integrity efforts.
3. Summary of Costs, Savings and Benefits of the Major Provisions

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Provision Savings and benefits Costs
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Implementation of the The purpose of this The creation of lock
Comprehensive Addiction and provision is to in-status is a
Recovery Act of 2016. create a lock-in burden to plans.
status for certain The cost to
at-risk industry is
beneficiaries. In estimated at about
addition to the $2.8 million per
benefits of year. This $2.8
preventing opioid million cost arises
and benzodiazepine from (i) the
dependency in uploading and
beneficiaries, we preparing of
estimate, in 2019, additional notices
a reduction of $19 to enrollees
million in Trust ($101,721), (ii)
Fund expenditures the re-negotiation
because of reduced of contracts
opioid scripts. between Part D
This $19 million sponsors and
reduction modestly pharmacies
increases to a $20 ($547,415), (iii)
million reduction the programming of
in 2023. edits about lock-
ins into the
systems of Part D
sponsors
($2,152,332), and
(iv) the right of
enrollees to appeal
a status of lock-in
($35,183).
Revisions to Timing and We estimate 67% of ....................
Method of Disclosure the current 47.8
Requirements. million
beneficiaries will
prefer use of the
internet versus
hard copies. This
will result in a
savings to the
industry of $54.7
million each year,
2019 through 2023.
This is due to a
reduction in
printing and
mailing costs.
Preclusion List Requirements For 2019, this For 2019, this
for Prescribers in Part D provision saves provision costs
and Individuals and providers $34.4 Part D sponsors or
Entities in MA, Cost Plans, million. For 2020 their PBMs $9.3
and PACE. and future years, million. For 2020
there are no and future years,
savings. The $34.4 costs are
million in savings negligible (below
to providers arises $50,000). The $9.3
because of removal million cost arises
of the requirement because of
of MA providers and programming and
suppliers and Part staff resources
D prescribers to needed to produce
enroll in Medicare and send required
as a prerequisite notifications to
for furnishing enrollees and
health care items prescribers.
and services. Part
C providers and
suppliers save
$24.1 million in
reduced costs while
Part D providers
save $10.3 million
in reduced costs.

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Physician Incentive Plans-- For 2019, this ....................
Update Stop-Loss Protection provision reduces
Requirements. required
reinsurance
resources by $204.6
million. The $204.6
million savings
increases yearly
because of expected
enrollment
increases and
medical inflation;
the savings is
$281.8 million in
2023. The savings
arise because we
are replacing the
current insurance
schedule in the
regulation with
updated stop-loss
insurance
requirements that
will allow
insurance with
higher deductibles.
This updated
schedule will
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.
Through transfers,
the 2019 $204.6
million savings
results in $71.6
savings to the
Medicare Trust Fund
and $133 million
savings (in the
form of rebates) to
Medicare Advantage
(MA) organizations.
It is likely that
some of the savings
to MA organizations
will result in
increased health
care benefits to MA
enrollees.
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B. Background

In the proposed rule titled ``Medicare Program; Contract Year 2019
Policy and Technical Changes to the Medicare Advantage, Medicare Cost
Plan, Medicare Fee-for-Service, the Medicare Prescription Drug Benefit
Programs, and the PACE Program'' which appeared in the November 28,
2017 Federal Register (82 FR 56336), we proposed to 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; clarify program requirements; and
make certain technical changes regarding treatment of Medicare Part A
and Part B appeal rights related to premium adjustments.
We received approximately 1,669 timely pieces of correspondence
containing multiple comments on the CY 2019 proposed rule. While we are
finalizing several of the provisions from the proposed rule, there are
a number of provisions from the proposed rule that we intend to address
later and a few that we do not intend to finalize. We also note that
some of the public comments were outside of the scope of the proposed
rule. These out-of-scope public comments are not addressed in this
final rule. Summaries of the public comments that are within the scope
of the proposed rule and our responses to those public comments are set
forth in the various sections of this final rule under the appropriate
heading. However, we note that in this final rule we are not addressing
comments received with respect to the provisions of the proposed rule
that we are not finalizing at this time. Rather, we will address them
at a later time, in a subsequent rulemaking document, as appropriate.

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

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 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.
Thus, although drug management programs are voluntary, this rule
codifies a framework that will place requirements upon such programs
when established by Part D sponsors.
This final rule implements 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'').\1\ This integration will mean that Part D
plan sponsors implementing a drug management program could limit an at-
risk beneficiary's access to coverage of frequently abused drugs
beginning 2019 through a beneficiary-specific point-of-sale (POS) claim
edit and/or by requiring the beneficiary to obtain frequently abused
drugs from a selected

[[Page 16443]]

pharmacy(ies) and/or prescriber(s) after case management and notice to
the beneficiary. To do so, the beneficiary will have to meet clinical
guidelines that factor in that the beneficiary is taking opioids over a
sustained time period and that the beneficiary is obtaining them from
multiple prescribers and/or multiple pharmacies. This final rule also
implements 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 or at-risk beneficiaries.
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\1\ 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 and case management. Please refer to the CMS
website, ``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.
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We received the following general comments and our responses
follow:
Comment: Commenters were overall supportive of our proposal. Some
commenters found it to be a conservative and uniform approach to
implementing the CARA drug management program provisions. Other
commenters included specific suggestions for improvements with their
overall supportive or neutral comments.
Response: We thank the commenters for their comments. We summarize
and respond to specific recommendations later in this preamble.
Comment: We received a request that we confirm that nothing in the
final rule impacts PACE organizations' waivers of Part D requirements
in Sec. 423.153. This commenter also asked that existing waivers of
Sec. 423.153 be extended to include Sec. 423.153(f) unless such a
waiver is not needed due to the voluntary nature of drug management
programs.
Response: PACE organizations are not excluded from OMS reporting
under the current policy. Additionally, because of the voluntary nature
of the provisions under Sec. 423.153(f), a waiver is not necessary for
PACE organizations. However, to the extent that PACE organizations
commence drug utilization management activities covered under Sec.
423.153(f), PACE organizations must comply with the requirements of
423.153(f).
Comment: We received comments that expressed concern about the time
needed for Part D plan sponsors to make the necessary systems changes
to implement compliant drug management programs.
Response: Section 704(g)(1) of CARA states that the amendments made
by this section shall apply to prescription drug plans (and MA-PD
plans) for plan years beginning on or after January 1, 2019. However,
given the current national opioid epidemic, we expect that Part D
sponsors will diligently implement fully-functional drug management
programs in 2019. Moreover, as the new requirements for drug management
programs build from and are integrated with existing policy, we expect
sponsors will be able to implement them expeditiously.
Comment: We received one suggestion that CMS pilot different
approaches for implementing the CARA drug management program
provisions, specifically the ``lock-in'' provisions, as we did before
implementing our current policy.
Response: Because the CARA drug management provisions will be
integrated with our current policy, albeit with some modifications to
that policy, we are not persuaded that an additional pilot is necessary
since plan sponsors already have experience with addressing potential
opioid overutilization.
Comment: A commenter requested that CMS acknowledge the work it
will take for Standard Development Organizations (SDOs) to implement
the finalized CARA provisions. In particular, the commenter noted that
development of any codes and messaging associated with the new CARA-
related requirements will take time to implement.
Response: We understand that any modifications to existing
standards to accurately achieve the desired functionalities to further
the electronic exchange of information between healthcare stakeholders
about the final CARA provisions may require time. We rely on SDOs to
coordinate these efforts, and CMS is committed to working with the SDOs
during this process, if needed.
Comment: A commenter requested clarification on how to handle
concurrent DUR edits, such as formulary-level cumulative opioid MME
safety edits, and the drug management program. Specifically, the
comment sought clarification on whether the drug management program
beneficiary-specific POS claim edits or lock-in limitations would take
precedence over an approved exception to a cumulative opioid MME safety
edit.
Response: A plan sponsor may implement formulary-level coverage
rules for opioids (that is, prior authorization, quantity limits or
step therapy) or safety edits, and implement a drug management program.
The formulary and coverage rules would apply to all enrollees (unless
they obtain an exception), and the drug management program would apply
to potential at-risk and at-risk beneficiaries. A Part D sponsor's
concurrent and retrospective DUR programs should be closely
coordinated. In certain circumstances, it may be appropriate for a
sponsor to make an at-risk determination through the drug management
program for a beneficiary who received an approved exception to a
cumulative opioid MME safety edit, and as part of the at-risk
determination, may determine that continuing the approved exception is
no longer appropriate.
For example, a plan implemented a hard formulary-level cumulative
MME opioid edit at 200 MME with 2 or more opioid prescribers. A
beneficiary received their opioids from 2 prescribers and has a
cumulative MME that exceeds 200 MME. They trigger the edit and request
a coverage determination. The prescriber attests to medical necessity
and the exception request is approved. At a later time, the beneficiary
seeks opioids from 3 additional prescribers, and meets the CARA/OMS
criteria. Through case management, the prescriber verifies the
beneficiary is at-risk and agrees to prescriber lock-in due to care
coordination issues.
b. Integration of CARA and the Current Part D Opioid DUR Policy and OMS
Our proposal was to integrate the CARA Part D drug management
program provisions with our current policy and codify them both.
Specifically, under this regulatory framework, we proposed that Part D
plan sponsors may voluntarily adopt drug management programs through
which they address potential overutilization of frequently abused drugs
identified retrospectively through the application of clinical
guidelines/OMS 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 through OMS and any beneficiary coverage limitations
they have implemented through MARx, CMS' system for payment and
enrollment transactions. Thus, although drug management programs are
voluntary, our proposal was to codify a framework that will place
requirements upon such programs when established by Part D sponsors.
We stated that 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; the fact that our
proposal largely incorporates the CARA drug management provisions into
existing

[[Page 16444]]

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.
Comment: Commenters expressed strong support for integrating the
drug management program provisions of CARA with the current policy.
Commenters expressed that our proposal is reasonable, thoughtful,
thorough, practical, and comprehensive; that it builds on a successful
existing Medicare Part D program; that it will involve a common set of
procedures and help ensure a streamlined and efficient process rather
than creating a separate one that would require additional oversight
and add administrative burden. We did not receive comments that opposed
integrating the drug management program provisions of CARA with the
current policy.
Response: We thank the commenters for their supportive comments and
are finalizing this integration approach to our proposal.
(1) Requirements for Part D Drug Management Programs (Sec. Sec.
423.100 and 423.153)
We proposed the following definitions 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 proposed 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 refers to a
beneficiary who is potentially at-risk in several subsections.
Accordingly, we proposed 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 recently
enrolled, such identification had not been terminated upon
disenrollment, and the new plan has adopted the identification. We
noted that we included 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.
We received the following comments and our response follows:
Comment: A commenter did not believe that a definition for a
``potential at-risk beneficiary'' was needed, nor the additional
prescriber verification the commenter associated with the definition.
Response: We disagree. Although as we noted above, section 1860D-
4(c)(5) of the Act does not explicitly define a ``potential at-risk
beneficiary,'' it refers to a beneficiary who is potentially at-risk in
section 1860D-4(c)(5)(B)(ii), which addresses initial notices; in
1860D-4(c)(5)(H)(i) which addresses data disclosures; and in section
1860D-4(c)(5)(I) which addresses the sharing of information for
subsequent plan enrollments. Therefore, we proposed to define a
potential at-risk beneficiary in Sec. 423.100, as the CARA drug
management program provisions clearly contemplate this status for a
beneficiary.
With respect to additional prescriber verification of a potential
at-risk beneficiary, we believe this comment is based on a
misunderstanding of our proposal, as we did not propose that a
beneficiary's status as a potential at-risk beneficiary must be
verified. Rather, we proposed and are finalizing a requirement, as we
discuss later in this preamble, that a prescriber must verify that a
beneficiary is at-risk, which serves as his or her professional opinion
that a Part D plan sponsor takes into account during case management.
Comment: We received a question whether an individual who is
subject to lock-in under his or her Medicaid program and then becomes
dually-eligible constitutes a potential or at-risk beneficiary under
our proposed definitions.
Response: Such a beneficiary would not automatically be considered
to be a potential at-risk or an at-risk beneficiary under a Part D
sponsor's drug management program. Rather, whether such a beneficiary
is a potential at-risk or at-risk beneficiary would depend upon whether
he or she meets the clinical guidelines and is determined to be an at-
risk beneficiary under the process set forth in this rule. An automatic
determination based on a beneficiary's inclusion and status in a
Medicaid drug management program would not be appropriate because each
Medicaid drug management program has its own criteria and requirements
for reviewing and addressing recipients who may be at-risk for
prescription drug abuse or misuse and its own interventions. We also
note that Medicaid programs are not required to comply with section
1860D-4(c)(5) as Part D drug management programs are.
To the extent a Part D sponsor is aware or discovers based on
reliable information that a beneficiary who meets the clinical
guidelines was locked-in under a Medicaid drug management program, that
sponsor may consider that information in deciding whether to determine
that a beneficiary is an at-risk beneficiary under the requirements of
this final rule. Also, any beneficiary entering the Part D program will
be immediately subject to their plan's formulary-level controls to
address opioid overutilization before they may be identified as
potentially at-risk, so any opioid overutilization by the beneficiary
in his or her new Part D plan may be addressed by these controls.
Comment: We received a comment requesting clarification with regard
to a person who is locked-in under an employer plan and then becomes
eligible for a Part D EGWP, if the EGWP can continue the lock-in in the
Part D plan or at least consider the prior lock-in as part of a new
determination.
Response: Beginning with plan year 2019, Part D sponsors, including
sponsors of EGWPs, may adopt drug management programs that meet the
requirements we are finalizing in this rule. Under a Part D
prescription drug management program, sponsors may implement a
prescriber and/or pharmacy lock-in or beneficiary-specific POS claim
edit for frequently abused drugs with respect to an at-risk
beneficiary. Similar to a Medicaid beneficiary who becomes newly
eligible for Medicare and enrolls in Part D, a person who is locked-in
under a

[[Page 16445]]

commercial plan does not automatically meet the definition of an at-
risk beneficiary we are finalizing in Sec. 423.100. Rather, such a
person first must be determined to be an at-risk beneficiary in
accordance with the requirements we are finalizing at Sec. 423.153(f).
In other words, in order for a beneficiary to be eligible to be
immediately locked-in to a prescriber or pharmacy in a Part D plan in
which they are newly enrolled, the plan from which they most recently
disenrolled must be a Part D plan in which he or she was determined to
be an at-risk beneficiary under that plan's drug management program.
When a new enrollee comes from a non-Part D plan in which the
beneficiary was subject to lock-in, however, the sponsor can consider
the prior lock-in if it learns or knows of it based upon reliable
information which is legally available to the sponsor in conjunction
with the information it gathers from the case management process, the
beneficiary, and the sponsor's other relevant internal sources and
data.
Comment: A commenter asked if a Part D sponsor may consider opioid
utilization information from external sources during case management,
such as a state prescription drug monitoring program (PDMP) in making
the determination if a beneficiary is at-risk.
Response: As noted above with respect to beneficiaries who were
locked-in under an employer or Medicaid plan before enrolling in
Medicare Part D, we encourage sponsors to use all reliable sources
legally available to them to obtain an accurate account of a potential
at-risk or at-risk beneficiary's utilization of frequently abused
drugs.
After considering the comments, we are finalizing the definition of
potential at-risk beneficiary and at-risk beneficiary with minor
modifications for clarity. First, we are removing the phrase ``and the
new plan adopted the identification'' from paragraph (2) of both
definitions. As we noted above, the purpose of this language was to
indicate that the beneficiary's at-risk status in the subsequent plan
is not automatic, which we meant for purposes of the limitation on the
special enrollment period (SEP) for LIS beneficiaries with an at-risk
status. However, as we discuss later in this preamble, this limitation
will be triggered or continued by Part D sponsors sending the initial
and second notices to such beneficiaries, as applicable, so we no
longer believe this phrase is necessary in these definitions.
Second, we also are making a minor clarifying change in the
definition of at-risk beneficiary to explicitly acknowledge that it is
the Part D sponsor that determines which beneficiaries are at-risk
beneficiaries under its drug management program.
The definition of potential at-risk beneficiary will read: 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 and such identification had not been terminated upon
disenrollment. The definition of at-risk beneficiary will read: 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 by a Part D plan
sponsor under its 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 and such identification had not been terminated upon
disenrollment.
(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
proposed 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 proposed 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.
Since we did not receive any specific comments to change this
definition, we are finalizing it as proposed.
Comment: A commenter requested that CMS include the criteria,
resources, and the evidence basis upon which it will rely to determine
that a drug is a frequently abused drug for purposes of a drug
management program.
Response: The definition of frequently abused drug that we are
finalizing indicates that criteria, resources, and evidence basis will
be the DEA schedule designation, government, and professional drug
guidelines, and analyses of drug utilization or scientific data.
We did not receive any further comment on the definition of
``frequently abused drug'' and are therefore finalizing it as proposed.
Consistent with current policy, we proposed that opioids are
frequently abused drugs, except buprenorphine for medication-assisted
treatment (MAT) and injectables. As we stated in the preamble to the
proposed rule, we plan to publish and update a list of frequently
abused drugs for purposes of Part D drug management programs.
Comment: All commenters agreed that the Secretary should determine
that opioids are frequently abused drugs, many referencing the national
opioid overuse epidemic.
Response: We appreciate that stakeholders are focused on the opioid
public health emergency.
Comment: Some of these commenters agreed with our proposal to
determine only opioids, except buprenorphine for medication-assisted
treatment (MAT) and injectables, as frequently abused drugs, at least
in the initial implementation of Part D drug management programs, in
order to allow CMS and stakeholders to focus on opioid overuse and gain
experience with the use of lock-in as a tool to address overutilization
in the Part D program, before potentially determining other controlled
substances as

[[Page 16446]]

frequently abused drugs. These commenters urged CMS to wait until drug
management programs were established, and testing and monitoring
indicate that the program can be administered in a manner that does not
limit beneficiary access to needed medications before expanding the
programs further. Some of these commenters were concerned that an at-
risk beneficiary would have to obtain all frequently abused drugs from
one pharmacy or one prescriber and that this could disrupt patient care
if the pharmacy did not carry all frequently abused drugs.
However, some commenters urged us to determine that all controlled
substances are frequently abused drugs. These commenters were
particularly focused on a determination as to benzodiazepines, and to a
lesser extent, muscle relaxants. Due to this focus, these commenters
referred to the CDC Guideline that specifically recommends that
clinicians avoid prescribing opioid pain medication and benzodiazepines
concurrently whenever possible due to increased risk for overdose. They
also referred to CMS work in this area: (1) The fact that CMS added a
concurrent benzodiazepine-opioid flag to OMS in October 2016 in
response to the CDC Guideline and after our own research on the use of
benzodiazepines among Medicare beneficiaries \2\ to alert Part D
sponsors that concurrent use may be an issue that should be addressed
during case management; \3\ and (2) the fact that we have stated that a
sponsor may implement a beneficiary-specific claim edit at POS for non-
opioid medications under the current policy.\4\ They further referred
to a statistic from the National Institute on Drug Abuse that 30
percent of overdoses involving opioids also involve benzodiazepines.\5\
Finally, these commenters pointed out that the FDA has found that the
growing combined use of opioid medicines with benzodiazepines or other
drugs that depress the central nervous system has resulted in serious
side effects, including slowed or difficult breathing and deaths. These
commenters further noted that in an effort to decrease the use of
opioids and benzodiazepines, and opioids and other such depressants,
the FDA added Boxed Warnings--its strongest warnings--to the drug
labeling of prescription opioid pain and cough medicines, and
benzodiazepines.\6\ Given these developments, these commenters stressed
the importance of Part D plan sponsors being able to use the tools that
will be available to them under drug management programs to address the
dangers of concurrent opioid and benzodiazepine use.
---------------------------------------------------------------------------

\2\ https://www.cms.gov/Medicare/Prescription-Drug-Coverage/PrescriptionDrugCovContra/Downloads/Concurrent-Use-of-Opioids-and-Benzodiazepines-in-a-Medicare-Part-D-Population-CY-2015.pdf.
\3\ 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.
\4\ Supplemental Guidance Related to Improving Drug Utilization
Review Controls in Part D'' September 6, 2012.
\5\ https://www.drugabuse.gov/drugs-abuse/opioids/benzodiazepines-opioids.
\6\ https://www.fda.gov/Drugs/DrugSafety/ucm518473.htm.
---------------------------------------------------------------------------

Response: In light of these comments, we are persuaded that it is
appropriate that drug management programs are able to address
concurrent opioid and benzodiazepine use. Such a determination is
consistent with the definition of frequently abused drugs that we are
finalizing. First, the Secretary determines benzodiazepines are
frequently abused or diverted, taking into account that they are
controlled substances under the Controlled Substances Act (CSA) and
that prescription benzodiazepines are on Schedule IV, where the DEA
places substances that have a potential for abuse. In addition, the
Secretary takes into account that the FDA has issued a warning about
the risks associated with using opioids and benzodiazepines
concurrently. Further, the CDC included in its evidence-based opioid
prescribing guideline a caution to co-prescribe opioids and
benzodiazepines. Finally, CMS' own statistics reveal that 51 percent of
Part D beneficiaries that will be identified as potentially at-risk
under the 2019 clinical guidelines we are finalizing are using opioids
and benzodiazepines concurrently compared to 24 percent across all Part
D opioid users. This statistic is indicative that concurrent use is
even more of a danger among potential at-risk beneficiaries than
Medicare Part D beneficiaries generally. Therefore, the Secretary
determines that benzodiazepines are a frequently abused drug for
purposes of Part D drug management programs beginning in 2019. However,
the clinical guidelines will still only consider a beneficiary's opioid
use, as we explain just below.
Comment: A commenter agreed with our statement in the proposed rule
that there is difficulty in establishing overuse guidelines for non-
opioid substances. The commenter stated that this underscores the need
for a robust evidence base to support determining that additional types
of drugs are frequently abused drugs.
Response: We agree with the commenter's concern, and for this
reason we are not modifying the clinical guidelines for 2019 to include
benzodiazepine use, even though benzodiazepines will be considered a
frequently abused drug for 2019. This means that a beneficiary who is
determined to be at-risk based on clinical guidelines that look at the
beneficiary's opioid use could have a coverage limitation applied under
a drug management program to both opioids and benzodiazepines to manage
current and future concurrent use. For example, a sponsor could require
an at-risk beneficiary to obtain both opioids and benzodiazepines from
one selected pharmacy.
We believe that this is appropriate based on the robust evidence
that concurrent benzodiazepine use with opioids results in an even
higher risk of an adverse health event than use of opioids alone. We
will expect to rarely see a sponsor apply a limitation only to an at-
risk beneficiary's access to coverage for benzodiazepines, since to do
so, the beneficiary would have to have met the clinical guidelines
which look at opioid use that is potentially risky. However, we
acknowledge that prescriber agreement during case management could
rarely lead to such an outcome. For example, no opioid prescriber
agrees to a beneficiary-specific POS claim edit for opioids, but
rather, all but one states they will no longer prescriber opioids to
coordinate the beneficiary's use. However, the benzodiazepine
prescriber agrees to such an edit for benzodiazepines. We discuss
prescriber agreement in more detail later in this preamble.
Given that we are finalizing two categories of drugs as frequently
abused drugs for 2019, depending upon what a plan sponsor learns during
case management, we reiterate that the sponsor may have to permit a
beneficiary to obtain frequently abused drugs from more than one
pharmacy and/or more than one prescriber in order to provide reasonable
access, if the sponsor applies lock-in as a coverage limitation, which
we discuss later in this preamble.
Comment: A few commenters suggested that Part D sponsors be able to
expand their drug management programs to include additional frequently
abused drugs based on their experience with their enrollees. One
suggested that a sponsor be required to submit such an expansion to CMS
for approval.
Response: We disagree with this comment. Section 1860D-4(c)(5)(G)
of the Act defines ``frequently abused

[[Page 16447]]

drug'' as a drug that is a controlled substance that the Secretary
determines to be frequently abused or diverted. Consistent with this
statutory provision, we believe it is appropriate that the
determination of frequently abused drugs not be plan-specific, but
rather be consistent across Part D plans, as this will permit better
oversight and promote consistency across all Part D drug management
programs.
We proposed that future determinations of frequently abused drugs
by the Secretary primarily be included in the annual Medicare Parts C&D
Call Letter or in similar guidance, if necessary, to address midyear
entries to the drug market or evolving government or professional
guidelines or relevant data analysis, which will be subject to public
comment. We proposed that 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.
Comment: We received comments supportive of our proposal to apply
the standards we are establishing in rulemaking to future
determinations of frequently abused drugs through the annual Medicare
Parts C&D Call Letter, or in similar guidance. We did not receive any
comments that opposed this proposed approach.
Response: We appreciate the comments.
Comment: A commenter asked us to confirm that we would use the same
process to determine that a drug is no longer a frequently abused drug.
Response: We will apply the same regulatory standards and use the
same process that we use to determine that a drug is a frequently
abused drug when determining that a drug no longer is a frequently
abused drug for purposes of Part D drug management programs.
Comment: A few commenters urged CMS to exclude abuse-deterrent (AD)
opioids from this definition of ``frequently abused drug'' as there is
no evidentiary data to support the thesis that AD opioids are
frequently abused and existing observation data supports their
exclusion from this broad standard.
Response: The FDA requires a boxed warning on opioid abuse-
deterrent formulations (ADFs), because even with these formulations
there is still potential for addiction, abuse, misuse, and diversion.
The FDA has also noted \7\ that ``abuse-deterrent technologies have not
yet proven successful at deterring the most common form of abuse--
swallowing a number of intact capsules or tablets to achieve a feeling
of euphoria. Moreover, the fact that a product has abuse-deterrent
properties does not mean that there is no risk of abuse. It means,
rather, that the risk of abuse is lower than it would be without such
properties.'' Also, ADFs do not prevent patients who may be using
opioids for therapeutic reasons from taking higher doses than
prescribed or diverting the opioid. For these reasons, we disagree that
abuse-deterrent formulations should be excluded from the determination
of frequently abused drugs.
---------------------------------------------------------------------------

\7\ ``Abuse-Deterrent Opioids--Evaluation and Labeling Guidance
for Industry'', U.S. Department of Health and Human Services, Food
and Drug Administration, Center for Drug Evaluation and Research
(CDER), Clinical Medical, April 2015.
---------------------------------------------------------------------------

Comment: A few commenters asked CMS to clarify whether methadone, a
Part D drug when indicated for pain, would be included in the
definition of a frequently abused drug under the drug management
program. Other commenters agreed with excluding buprenorphine for MAT
from the definition of frequently abused drug as not to limit patient
access to treatment and noted that removing buprenorphine as a
frequently abused drug is consistent with the CDC's approach to exclude
buprenorphine from the determination of a person's daily opioid MME.
Response: Yes, methadone for pain is included in the definition of
a frequently abused drug for purposes of Part D drug management
programs, consistent with current policy/OMS. Although buprenorphine is
recognized by the DEA as a drug of abuse, we thank the commenters that
agreed with excluding buprenorphine for MAT from the definition of
frequently abused drug so that access to MAT, such as buprenorphine, is
not impacted. However, the commenters' reference to the CDC's exclusion
of buprenorphine from the determination of a person's daily opioid MME
made us believe that commenters may be conflating the definition of a
frequently abused drug with the clinical guidelines and associated
opioid dosage thresholds. Therefore, we realize that we need to be more
specific about what opioid use, opioid prescribers, and opioid
dispensing pharmacies means in the clinical guidelines, which we also
discuss later.
Since the publication of the proposed rule, the CDC removed the
conversion factors for all formulations of buprenorphine, for pain and
for MAT, from the most recent CDC MME conversion factor file (https://www.cdc.gov/drugoverdose/data-files/CDC_Oral_Morphine_Milligram_Equivalents_Sept_2017.xlsx). Therefore, CMS
cannot determine the MME. As such, buprenorphine products are not used
to determine the beneficiary's average daily MME. However, we will
still use prescription opioids, including all formulations of
buprenorphine for pain and MAT, to determine opioid prescribers and
opioid dispensing pharmacies in the clinical guidelines.
Clinical Guidelines & 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 by
the Secretary in consultation with stakeholders. We proposed to include
a definition of ``clinical guidelines'' that cross references standards
that we proposed at Sec. 423.153(f) for how the guidelines will be
established and updated. Specifically, we proposed to define clinical
guidelines for purposes of a Part D drug management program in Sec.
423.100 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 standards in Sec. 423.153(f)(16)
and beginning with contract year 2020, will be published in guidance
annually.
We also proposed to add Sec. 423.153(f)(16) to state that
potential at-risk beneficiaries and at-risk beneficiaries are
identified by CMS or a 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 will determine the guidelines by identifying the
standards we will apply in determining them.
This proposed approach also indicated that the program size will be
determined as part of the process to develop the clinical guidelines--a
process into which stakeholders will 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 proposed to define ``program size'' in

[[Page 16448]]

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, as part of the process to develop clinical guidelines, can
be effectively managed by such sponsors.
Comment: We did not receive any specific comments about the
definition we proposed for clinical guidelines in Sec. 423.100, nor
the standards we proposed in Sec. 423.153(f)(16).
Response: We are therefore finalizing the definition and standards
as proposed, with one modification adding language so that the
guidelines will be published in guidance annually beginning with
contract year 2020 guidance, since we are publishing the 2019 clinical
guidelines in this final rule.
Comment: We received comments supportive of our proposal to apply
the standards we are establishing in rulemaking for clinical guidelines
in Sec. 423.153(f)(16) to develop future OMS criteria through the
annual Medicare Parts C&D Call Letter process beginning with plan year
2020.
We did not receive comments that specifically opposed this proposed
approach.
Response: We appreciate these comments.
Because Part D drug management programs will be integrated with the
current policy/OMS beginning in 2019, there will be no separate OMS
criteria in 2019 and beyond. For plan year 2019, we proposed the
clinical guidelines to be the OMS criteria established for plan year
2018. The clinical guidelines for use in drug management programs we
proposed 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 estimated that these criteria would identify approximately
33,053 potential at-risk beneficiaries in the Part D program based on
2015 data, whom we believe are at the highest risk of death or overdose
due to their opioid use. Also, under our proposal, we stated that Part
D plan sponsors will not be able to vary the criteria of the guidelines
to include more or fewer beneficiaries in their drug management
programs, as they may under the current policy, except that we proposed
to continue to permit plan sponsors to apply the criteria more
frequently than CMS will 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).
We also described other clinical guidelines that we considered in
the Regulatory Impact Analysis section of the proposed rule.
Stakeholders were invited to comment on those options and any others
that would identify more or fewer potential at-risk beneficiaries.
Comment: We received comments that were overall supportive of the
clinical guidelines/criteria we proposed for 2019 with the estimated
program size of 33,053. However we did receive a few comments
suggesting criteria for the clinical guidelines that were not among the
alternate options we included in the RIA. Some of these supportive
comments supported the guidelines without reservation, making
statements such as noting the guidelines align with the CDC Guideline
or that they understood or supported CMS' desire to gain experience
with the use of lock-in as a drug management tool before adopting
clinical guidelines with flexibility and/or that would identify more
potential at-risk beneficiaries. These commenters want CMS to adopt a
clear and universal set of guidelines which minimizes customer and
provider confusion, as well as administrative burden when submitting
and receiving OMS quarterly reports. These commenters assert that
voluntary plan guidelines would increase confusion and fragmentation
across the Medicare landscape. However, some commenters urged that Part
D plan sponsors should have complete flexibility to identify potential
at-risk beneficiaries, or at least some flexibility to identify
additional ones consistent with our current policy. These commenters
emphasized that sponsors should be able to establish and update
targeting criteria and program features based on evolving clinical
evidence and feedback and the specific needs of their members. Some of
these commenters referred to the experience Part D sponsors and their
PBMs have gained in identifying opioid overutilization among their plan
members over the last several years and the need to be able to do more
to address the opioid overuse crisis. Some commenters referred in
particular to beneficiaries who do not have an average daily MME of
greater or equal to 90 mg but who are filling opioids prescriptions
from many different prescribers or pharmacies that they may currently
address but would not be able to under our proposal. These commenters
pointed out that such beneficiaries benefit from better coordination of
care, which case management and coverage limitations on frequently
abused drugs can support. Another commenter referred to beneficiaries
with high dose utilization regardless of the number of prescribers as
appropriate for review by drug management programs.
As to program size, a commenter stated that the proposed clinical
guidelines would identify a reasonable number of potential at-risk
beneficiaries. Another commenter proposed alternative criteria
involving a lower MME level that it stated would identify more than
300,000 Part D beneficiaries as potentially at-risk, whereas the other
commenters (including those commenters that requested increased
flexibility) did not provide a program size estimate. On the other
hand, we did not receive comments that the clinical guidelines we
proposed would identify a potential at-risk beneficiary population that
cannot be effectively managed by Part D plan sponsors, and because the
proposed guidelines are the same as the OMS criteria for 2018 that were
established through the 2018 Parts C&D Call Letter process, we did not
expect such comments.
We received a few comments that the proposed clinical guidelines
appear to be aimed at primarily limiting the program size arbitrarily
rather than permitting scientific evidence and clinical research to
dictate the most appropriate guidelines.
Response: We appreciate the commenters that provided a specific
suggestion for criteria; however, these criteria were not among the
alternate options we included in the RIA. Therefore, we decline to
adopt these suggestions, as the clinical guidelines are to be developed
by the Secretary in consultation with stakeholders.
We were persuaded by the commenters that Part D sponsors should
have some flexibility in adopting targeting criteria for potential at-
risk beneficiaries in order to be able to identify more such
beneficiaries, which in turn enables sponsors to be able to do more to
address the opioid overuse public health emergency. In addition,
flexibility in adopting targeting criteria for potential at-risk
beneficiaries is consistent with the current policy, and we wish to be
more conservative in varying from that policy for the same reasons.
However, we still believe it prudent to place certain parameters around
the beneficiaries who may be identified as potentially at-risk by
sponsors for their drug management programs, particularly as we gain

[[Page 16449]]

experience with the use of lock-in as a drug management tool.
Given that no other commenter recommended a specific program size,
there is no discernible consensus that a population of more than
300,000 would be manageable for Part D sponsors. We therefore decline
to adopt these criteria as the clinical guidelines for that reason, and
also because we want sponsors to focus on the Part D population that is
at the highest risk. Also, as we noted previously, the statute requires
us to establish policies to ensure that the populations of enrollees in
a prescription drug management program can be effectively managed by
plans. Therefore, we disagree that the clinical guidelines arbitrarily
limit the size of these programs.
After publication of the proposed rule, we conducted an analysis of
the clinical guidelines/OMS criteria for 2019 that we proposed using
2017 PDE data, as the original estimates were based on 2015 data. We
were pleased to confirm that the current policy, which will be
integrated into Part D drug management programs, continues to make
substantial progress in reducing potential opioid overutilization in
the Part D program. The reduction in the number of beneficiaries
meeting the OMS criteria between 2015 and 2017 far outpaced previous
trends. We thank the Part D sponsors that have executed the current
policy, the providers who have participated, and the various
stakeholders who have provided helpful input over the years.
According to this analysis, the 2019 clinical guidelines/OMS
criteria we proposed would identify an estimated 11,753 potential at-
risk beneficiaries rather than the 33,053 we originally estimated.
Given the incremental approach we have taken with the current policy
over the years since its inception, this revised estimate provides an
opportunity to adjust the clinical guidelines/OMS criteria downward in
terms of prescriber and pharmacy thresholds which will incorporate more
potential at-risk beneficiaries in 2019.
Therefore, after considering the comments and this updated data, we
are doing two things with respect to our clinical guidelines proposal,
which we will identify a similar program size as the one we proposed,
as well as strike a balance between those commenters wanting complete
flexibility to adopt criteria to identify potential at-risk
beneficiaries and those urging no flexibility. First, we are finalizing
alternative criteria that we considered in the RIA as Option 3 as
minimum criteria. These minimum criteria 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: 3 or more opioid
prescribers and 3 or more opioid dispensing pharmacies OR 5 or more
opioid prescribers, regardless of the number of opioid dispensing
pharmacies.
This means that beneficiaries meeting these criteria will be
reported to sponsors by OMS and sponsors with drug management programs
must review each case and report their findings back to OMS as they do
today consistent with how they have operated under the current policy.
In addition, sponsors may not vary these minimum criteria. However, as
we previously stated, sponsors will be permitted to apply the minimum
criteria more frequently using their own prescription claims data than
CMS will apply them through OMS quarterly. According to our analysis of
2017 PDE data, these minimum criteria would identify 44,332 potential
at-risk beneficiaries and is the option based on 90 MME in the RIA that
has a revised program size estimate which is closest to our original
estimate of 33,053 but that would not identify fewer at-risk
beneficiaries. Given the scope of the opioid crisis, and current data
showing significant reduction in the number of beneficiaries meeting
the OMS criteria, finalizing criteria that would have resulted in a
smaller program size could undermine the increasing momentum in
addressing opioid overutilization in the Medicare Part D program.
Second, we are finalizing supplemental criteria to provide sponsors
with some flexibility in adopting criteria for their drug management
programs. This means that sponsors may continue to report additional
beneficiaries to OMS--as they do today under the current policy.
However, unlike the current policy, such beneficiaries must meet the
following supplemental criteria: Use of opioids (regardless of average
daily MME) during the most recent 6 months with 7 or more opioid
prescribers OR 7 or more opioid dispensing pharmacies.
These supplemental criteria were included in the additional
criteria options that we considered and are included in a options chart
in the Regulatory Impact Analysis (RIA) of the proposed rule;
specifically, in Row 2 of option 6. Using 2017 data, we estimate that
these supplemental criteria would identify an additional 22,841
potential at-risk beneficiaries. We believe these criteria would be
responsive to the concern of the commenters who, in urging us to allow
flexibility for sponsors to adopt targeting criteria, expressed
concerns about not being able to continue to address plan members who
are receiving opioids from a large number of prescribers or pharmacies
but who do not meet a particular MME threshold.
We note that we do not anticipate that OMS will report
beneficiaries meeting these supplemental criteria to sponsors; however,
Part D sponsors may review beneficiaries who meet them--and must report
them to OMS if they do--at a level that is manageable for their drug
management programs in conjunction with the potential at-risk
beneficiaries reported by OMS minimum criteria, whom they must address.
Thus, the final clinical guidelines for 2019 will result in an
estimated program size of approximately 67,173 beneficiaries--44,332 of
whom Part D sponsors with drug management programs must review and
22,841 of whom such sponsors may review. We believe this program size
can be effectively managed by plans because we have already received
feedback from Part D sponsors through the final 2018 Medicare Parts C&D
Call Letter process that 33,000 beneficiaries are manageable. Thus, we
conclude that 44,332 beneficiaries are associated with the option
included in the RIA of the proposed rule that is the closest in number
without identifying fewer potential at-risk beneficiaries and is
consistent with historical program size under the current policy.
Moreover, we received no comments that 33,053 beneficiaries is the
largest program size Part D sponsors can manage. Finally, as we stated
above, sponsors may review the additional 22,841 beneficiaries at a
level that is manageable for their drug management programs.
These final criteria for 2019 meet the definition of clinical
guidelines that we are finalizing. They are criteria to identify
potential at-risk beneficiaries who may be determined to be at-risk
beneficiaries under drug management programs, and they were developed
in accordance with the standards we are finalizing in Sec.
423.153(f)(16) and beginning for 2020, will be published in guidance
annually. These criteria also adhere to the standards we proposed in
Sec. 423.153(f)(16) because: (1) They were developed with stakeholder
consultation in that we solicited comment on them in the proposed rule;
(2) they are based on the acquisition of frequently abused drugs from
multiple prescribers, multiple pharmacies, and the level of frequently
abused drugs in that they identify potential at-risk beneficiaries
taking opioids and obtaining them from 7 or more prescribers or 7 or
more pharmacies; (3)

[[Page 16450]]

they are derived from our and commenters' expert opinion that obtaining
opioids from many prescribers or many pharmacies is a potentially
dangerous utilization pattern of frequently abused drugs due to an
apparent lack of coordination of care that warrants further review and
this opinion is supported by the fact that this pattern is highly
unusual in the Part D program as it represents 0.11 percent of
beneficiaries; and (4) they include a program size estimate.
We have consolidated the clinical guidelines/OMS criteria in Table
1 for easier reference. We note that we were not persuaded by the
commenter who urged us to adopt criteria that would address high opioid
use regardless of the number of prescribers or pharmacies, as one
purpose of drug management programs, and lock-in tools specifically, is
to promote better care coordination among multiple providers.
Comment: Some commenters suggested that if we have concerns with
allowing Part D sponsors flexibility in adopting targeting criteria for
potential at-risk beneficiaries, that we establish a process through
which a sponsor could submit their guidelines to CMS.
Response: We thank these commenters for their idea, but we prefer
the approach we have taken as providing consistency across the entire
Part D program and a program size, as required by CARA.
Comment: A few commenters urged caution in the use of policies
determining access to medications based upon thresholds such as MME,
which the commenters viewed as a potentially problematic type of one-
size-fits all approach. These commenters noted that scientific
literature does not support the establishment of a recommended maximum
dose for opioids. These commenters also pointed out that the use of
such thresholds may result in a false impression of a superior safety
profile, which we interpreted to mean that referring to a specific MME
level as potentially dangerous may give the impression that a level
below that amount is universally safe.
Response: We agree with the commenter that the CDC Guideline--and
our clinical guidelines for Part D drug management programs that refer
to it--are not intended as a maximum threshold for prescribing, as we
noted in the preamble to the proposed rule. In the absence of dosing
limits in the FDA-approved labeling for opioids, we are using the CDC
guideline to establish a threshold to identify potentially high-risk
beneficiaries who may benefit from closer monitoring and to create
alignment between Government programs.
Moreover, our implementation of the CARA drug management program
provisions focuses on beneficiaries who are receiving opioids from
multiple prescribers and/or multiple pharmacies, not just at a certain
MME level. In addition, our finalized requirements for drug management
programs require Part D sponsors to engage in case management with
prescribers, obtain their verification that the beneficiary is at-risk
and their agreement before implementing a prescriber lock-in or
beneficiary-specific claim edit, as long as the prescribers are
responsive to case management. This means that decisions about the
amount of frequently abused drugs an at-risk beneficiary should receive
are made by the beneficiary's prescriber(s) if they are responsive and
not based on the targeting threshold for review of the beneficiary's
utilization. Thus, this approach is aimed at addressing overutilization
of frequently abused drugs while maintaining access to such drugs when
medically necessary in the Part D program.
Comment: A commenter proposed modifying ``for any duration'' in the
clinical guidelines to permit beneficiaries a reasonable overlap time
to refill medications and suggested that CMS set a reasonable overlap
period of no more than 3 days for the purposes of identifying potential
at-risk beneficiaries.
Response: CMS performed an extensive analysis of the OMS criteria
using 2015 data (https://www.cms.gov/Medicare/Prescription-Drug-Coverage/PrescriptionDrugCovContra/Downloads/Revised-OMS-Criteria-Modification-Analysis.pdf). Adjusting the clinical guideline MME
calculation for each beneficiary to account for overlapping fills would
be difficult to operationalize from a data analysis perspective since
it would be dependent on the number of fills and the opioids dispensed,
including strength each beneficiary received. For this reason, CMS
chose to calculate the MME daily dose using the average daily dose
during the opioid usage. We included ``for any duration'' in the
clinical guidelines since this means that these beneficiaries reached
or exceeded the MME level in a short period of time, and received their
opioids from multiple prescribers and pharmacies. This indicates
potential coordination of care issues or misuse. We found that the
number of additional overutilizers with an episode length less than 90
days for any of the MME dose thresholds analyzed ranged from only 57 to
320 beneficiaries, or 1 to 2 percent of the 90+ day episode opioid
overutilizer count. Therefore, we included these beneficiaries as
potential opioid overutilizers under the current policy, and we will
continue to utilize this methodology for OMS reporting of potential at-
risk beneficiaries for drug management programs.
If a sponsor performs case management for a potential at-risk
beneficiary who was reported through OMS and discovers that the high
use was a result of appropriate prescription overlap and not misuse, we
would expect the sponsor to stop conducting case management for that
beneficiary, and to not send the initial notice to the beneficiary.
Comment: A commenter requested that CMS clarify that the language
``for any duration during the most recent 6 months'' means that the
opioid use occurred during the most recent 6 months and not 6 months of
consistent use.
Response: We confirm that this language means that the opioid use
occurred during the most recent 6 months.
Comment: A commenter suggested that CMS apply path analysis to
develop clinical guidelines to identify potential at-risk beneficiaries
using the Integrated Data Repository (IDR), which is a data warehouse
that integrates multiple data sources and supports analytics across
CMS.
Response: We thank the commenter for suggesting an approach in the
IDR to improve identification of potential at-risk beneficiaries for
CMS to consider.
We proposed that under the clinical guidelines, prescribers
associated with the same single Tax Identification Number (TIN) be
counted as a single prescriber, because we have found under the current
policy that such prescribers are typically in the same group practice
that is coordinating the care of the patients served by it, and failing
to do so would result in a high volume of false positives reported
through OMS. Thus, it is appropriate to count such prescribers as one,
so as not to identify beneficiaries through OMS who are not potentially
at-risk.
In this regard, in applying the clinical guidelines criteria, CMS
proposed to count prescribers with the same TIN as one prescriber,
unless any of the prescribers are associated with multiple TINs. We
also proposed that when 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. For example,
under the criteria we are finalizing, a beneficiary who meets the 90
MME criterion and received opioid

[[Page 16451]]

prescriptions from 3 prescribers in the same group practice and 2
independent opioid prescribers (1 group practice + 2 prescribers = 3
prescribers) and filled the prescriptions at 4 opioid dispensing
pharmacies that do not share real-time electronic data, will still meet
the criteria, which is appropriate. However, a beneficiary who meets
that 90 MME criterion and received opioid prescriptions from 3
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 that do not share
real-time electronic data will not meet the criteria.
Comment: Several commenters supported the proposal conceptually to
count prescribers associated with the same single TIN as a single
prescriber, but many of these commenters noted that some Part D plans
sponsors and PBMs do not have access to prescriber TIN information. A
few commenters recommended that CMS count prescribers with the same
National Provider Identifier (NPI) as a single prescriber, and a
commenter suggested that CMS require prescribers to share real-time
electronic data through an electronic health record (EHR).
Response: We appreciate the support for this proposal as well as
the information on the operational challenges. After considering these
comments, we are finalizing this aspect of the clinical guidelines for
2019. Part D plan sponsors without the ability to group prescribers
using the TIN through data analysis will have to make these
determinations during case management. If a sponsor finds that the
multiple opioid prescribers for the beneficiary are from a single group
practice, and therefore, the beneficiary does not meet the clinical
guidelines, the sponsor could stop conducting case management for that
beneficiary, and would not send the initial notice to the beneficiary.
We will issue guidance and updated OMS technical user guides to plan
sponsors at a later time, including data sources and standard responses
used in OMS reporting, which may include providing such feedback to
CMS.
In addition, this information may be discovered after the sponsor
provided the beneficiary the initial notice. In such an event, the
sponsor would send the beneficiary an alternate second notice that the
beneficiary is not at-risk. To the comments about grouping by NPI, we
clarify that under the current policy/OMS we use the NPI to first
identify single prescribers, and then we further group single
prescribers with the same single TIN. We will continue this methodology
for the clinical guidelines under the drug management program. We
appreciate the comment regarding real-time prescriber data, but we did
not propose such a system for Part D prescribers.
Comment: We received several comments supporting our proposal that
when 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. We also received many comments
that Part D plan sponsors and their PBMs do not have the systems
capabilities to account for pharmacies that have multiple locations
that share real-time electronic data, in order to treat all locations
of the pharmacy collectively as one pharmacy. We received one comment
that they are able to, but that there are operational challenges to
synthesizing the data to be useful for drug management programs.
Response: As we stated in the proposed rule, 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. Because of this statutory requirement, it
makes sense to us to consider such multiple locations as one pharmacy
for purposes of the clinical guidelines, similar to how we account for
group practices, to reduce false positives, particularly because the
purpose of the guidelines is to identify when a beneficiary may be at
risk for overutilization because they use multiple pharmacies.
Therefore, we are finalizing this aspect of the clinical guidelines for
2019.
We understand that we, and apparently most sponsors and their PBMs,
do not have the systems capability to automatically determine when a
pharmacy is part of a chain. Therefore, Part D plan sponsors without
this capability will have to make these determinations during case
management. If through such case management, a plan sponsor finds that
multiple locations of a pharmacy used by the beneficiary share real-
time electronic data, the sponsor will be required to treat those
locations as one pharmacy. This may result in the sponsor not or no
longer conducting case management for a beneficiary because the
beneficiary does not meet the clinical guidelines, or in the sponsor
sending the beneficiary an alternate second notice that the beneficiary
is not at-risk if the sponsor discovers this information after it
provided the beneficiary with the initial notice.
We note that group practices and chain pharmacies are discussed
later in this preamble in the context 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).
As noted above, Table 1 shows that in 2017 approximately 44,332
beneficiaries would have met the minimum criteria of the 2019 clinical
guidelines that we are finalizing, which is approximately 0.10 percent
of the 45 million beneficiaries enrolled in Part D in 2017.
Approximately, 22,841 additional beneficiaries will have met the
supplemental criteria that we are finalizing, which is approximately
0.05 percent. To derive this estimated population of potential at-risk
beneficiaries, we analyzed prescription drug event data (PDE) from
2017,\8\ using the CDC opioid drug list and MME conversion factors, and
applying the criteria we are finalizing as the clinical guidelines.
This estimate is over-inclusive because we did not exclude
beneficiaries in long-term care (LTC) facilities who will be exempted
from drug management programs, as we discuss later in this section.
---------------------------------------------------------------------------

\8\ Unique count of beneficiaries who met the criteria in any 6
month measurement period (January 2017-June 2017; April 2017-
September 2017; or July 2017-December 2017).
---------------------------------------------------------------------------

However, based on similar analyses we have conducted, this
exclusion will 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 will 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.

[[Page 16452]]

[GRAPHIC] [TIFF OMITTED] TR16AP18.000

As clarified above, since the CDC removed all formulations of
buprenorphine, for pain and for MAT, from the most recent CDC MME
conversion factor file, buprenorphine products are not used to
determine the beneficiary's average daily MME. However, we will use
prescription opioids, including all buprenorphine products for pain and
MAT, to determine opioid prescribers and opioid dispensing pharmacies
under the minimum criteria. Similarly, sponsors must include all
prescription opioids, including all buprenorphine products, to
determine opioid prescribers and opioid dispensing pharmacies under the
supplemental criteria.
Exempted Beneficiary
We proposed 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
through a contract with a single pharmacy; or (3) Has a cancer
diagnosis. While the first two exceptions are required under CARA, we
proposed 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. We did not propose to exempt additional categories
of beneficiaries.
We received the following comments and our response follows:
Comment: Commenters were overall supportive of our proposal to
exempt beneficiaries who have a cancer diagnosis. A few of the
commenters noted that the CDC Guideline recommendations do not apply to
active cancer treatment. Many of these commenters asked for more
guidance on how this exemption, which is a feature of the current
policy, would be operationalized. Others felt the exemption is too
broad and could be applied to beneficiaries who have not been treated
for cancer in years or who are being treated for non-terminal cancer
but possibly do have an opioid overuse issue that needs to be
addressed. A few commenters disagreed with the exemption as an
inappropriate

[[Page 16453]]

one-size-fits-all approach. Even the commenters who did not support the
exemption noted that the cancer population is unique and must be
handled delicately.
Response: We thank the commenters for their supportive comments as
to the exemption for cancer. Our intent is to exempt beneficiaries who
are currently being treated for active cancer-related pain from Part D
drug management programs and this is the exemption we are finalizing
based on the comments. While our current policy generally excludes
beneficiaries with cancer diagnoses from OMS reporting,\9\ we believe
it is appropriate to be more specific with respect to regulatory
parameters for Part D prescription drug management programs. Therefore,
the comments have persuaded us that we need to be more precise with
this codified exemption.
---------------------------------------------------------------------------

\9\ Currently, for OMS, the following beneficiaries are excluded
from OMS reporting: Those with ICD-10-CM codes associated with
American Medical Association (AMA) Physician Consortium for
Performance Improvement (PCPI) ICD-10 cancer diagnoses in the Common
Working File (CWF) data during the 12 months prior to the end of the
measurement period or cancer RxHCCs in the latest Risk Adjustment
Processing System (RAPS). Note, this is currently aligned with the
Pharmacy Quality Alliance opioid overuse measure specifications.
---------------------------------------------------------------------------

As we noted in the proposed rule, there are some limitations around
this exemption under the current policy due to our current data sources
which will remain when implementing the drug management program
clinical guidelines. For example, there may be a lag in current year
diagnosis data in CMS systems and the RxHCC codes from the risk
adjustment processing system are based on diagnosis data from the past
year. Therefore, Part D plan sponsors will have to identify such
exempted beneficiaries through the case management process if they are
inadvertently reported through OMS or when the sponsor is reviewing
cases pursuant to applying the minimum clinical guidelines more
frequently than CMS and the supplemental criteria of the clinical
guidelines. Plan sponsors may have more recent cancer diagnosis
information or learn this information through clinical contact with
prescribers. Plan sponsors may currently refer to the CDC Guideline as
a reference which distinguishes active cancer treatment from cancer
survivors with chronic pain who have completed cancer treatment, are in
clinical remission, or are under cancer surveillance only. We will
monitor health care guidelines that address this topic and issue
guidance as warranted to further refine the execution of the exemption
for beneficiaries being treated for active cancer-related pain that we
are finalizing.
While we understand the concerns of the commenters who did not
support this exemption about potential inappropriate opioid use among
this population, we note that this exemption is a feature of the
current policy, which has reportedly been working well and we therefore
believe it is appropriate to extend it to drug management programs. We
agree that this population deserves heightened protection but we are
finalizing an exemption that we believe is narrowly tailored to address
the concerns of commenters who urged us to proceed with caution with
respect to this exemption.
Comment: Many commenters supported the exemption for beneficiaries
in the LTC setting. A few commenters recommended that we not exempt LTC
beneficiaries from retrospective drug utilization review (DUR)
processes. A commenter asked if it could still implement a beneficiary-
specific claim edit at POS for frequently abused drugs if it
independently determined an LTC resident to be at-risk.
Response: Section 1860D-4(c)(5)(C)(ii) exempts beneficiaries in the
LTC setting, and we therefore do not have the authority to permit plans
to include them in Part D drug management programs. We are finalizing
this exemption as proposed. Because beneficiary-specific POS claim
edits for frequently abused drugs are included in drug management
programs through the integration approach we are finalizing, a sponsor
may not implement such an edit for an exempt beneficiary.
However, while exempt beneficiaries are exempt from drug management
programs, they are not exempt from retrospective DUR processes. Part D
plan sponsors still must comply with its other utilization management
obligations in Sec. 423.153, and could implement a beneficiary-
specific edit for drugs other than frequently abused drugs, for
example, if necessary to comply with those obligations. In addition,
sponsors may also still review the use of drugs that constitute
frequently abused drugs by beneficiaries in LTC facilities and work
with such facilities to identify patterns of inappropriate or medically
unnecessary care among enrollees. However, as just stated, the sponsors
cannot implement beneficiary-specific edits for drugs that constitute
frequently abused drugs, nor prescriber or pharmacy lock-in for such
drugs.
Comment: A commenter requested that CMS exempt any Part D claim
submitted by a Network Long-Term Care Pharmacy (NLTCP), as defined in
Chapter 5 of the Medicare Prescription Drug Benefit Manual, asserting
that such pharmacies are required to meet minimum performance and
service criteria, including performing drug utilization reviews and
identifying inappropriate drug usage. Another asked for clarification
on whether beneficiaries serviced by long-term care pharmacies are
exempt or if the exemption is limited to beneficiaries in long-term
care facilities.
Response: Section 1860D-4(c)(5)(C)(ii) of the Act exempts residents
of a long-term care facility rather than pharmacy claims submitted by
long-term care pharmacies. Therefore, we find it is appropriate to
finalize an exemption that takes the same approach as the statute.
However, we note that beneficiaries serviced by long-term care
pharmacies may meet another exemption, such as the one for
beneficiaries residing in facilities for which frequently abused drugs
are dispensed for residents through a contract with a single pharmacy.
Comment: A few commenters stated that they will need the Long-Term
Institution (LTI) report to be released on a monthly basis rather than
the current quarterly basis.
Response: We thank the commenters for their comment and will
explore if more frequent reporting is feasible.
Comment: Many commenters supported the proposed exemption for
beneficiaries who are residents of a facility for which frequently
abused drugs are dispensed for residents through a contract with a
single pharmacy. Others urged us to propose one.
Response: We clarify for commenters that the proposed rule included
an exemption for beneficiaries who are residents of a facility for
which frequently abused drugs are dispensed for residents through a
contract with a single pharmacy, as required by Section 1860D-
4(c)(5)(C)(ii). Therefore, we are finalizing this exemption as
proposed.
Comment: Many commenters urged us to extend an exemption to
beneficiaries in assisted living facilities, asserting that such
beneficiaries are at very low risk of substance abuse and that applying
lock-in to them could be disruptive and undermine their care. Other
commenters opposed such an exemption and urged us to proceed with
caution in carving out multiple exemptions that could undermine the
purpose of drug management programs. Other commenters referred to the
difficulty in identifying such beneficiaries to exempt them.

[[Page 16454]]

Response: Based on the comments received, we are not persuaded that
beneficiaries in assisted living facilities should be exempt from Part
D drug management programs, because we do not believe that these
facilities routinely dispense drugs to their residents through a
contract with a single pharmacy, and therefore these beneficiaries
could be identified by the clinical guidelines on this or another basis
and be potentially at-risk. However, if a sponsor learned during case
management that a beneficiary resides in an assisted living facility
that does dispense drugs through a contract with a single pharmacy,
then the sponsor must exempt such resident from its drug management
program.
In addition, we are persuaded that many exemptions for certain
group of beneficiaries or ones that are crafted too broadly would risk
undermining the purpose of drug management programs. Therefore, we
decline to establish a separate exemption for assisted living facility
residents. We note that several required features of Part D drug
management programs, such as case management, multiple written
beneficiary notices, the right to appeal and our general oversight,
will serve as beneficiary safeguards should a Part D sponsor
inappropriately limit a beneficiary's coverage to frequently abused
drugs through a drug management program.
Comment: A commenter questioned how a drug management program
should handle at-risk beneficiaries who move in and out of an LTC
facility.
Response: An at-risk beneficiary who moves into an LTC facility
becomes an individual exempted from a drug management program and a
sponsor must remove such beneficiary from such program as soon as it
reliably learns that the beneficiary has moved into an LTC facility,
whether that be via the beneficiary, the facility, a pharmacy, a
prescriber, or an internal or external report. A beneficiary who moves
out of an LTC facility is no longer exempted unless he or she meets
another prong of the finalized definition of exempted beneficiary.
Comment: Several commenters suggested that an exemption for
beneficiaries who are receiving non-hospice palliative and end-of-life
care would be appropriate in light of the exemption for beneficiaries
who have elected hospice care. A few of these commenters asserted that
without an exemption in the regulation, beneficiaries could be included
in a drug management program at a plan sponsor's discretion and
experience restricted access to pain-control medication when they need
them the most. Some commenters noted that the CDC Guideline exempts
patients receiving palliative and end-of-life care. Others disagreed,
asserting that we had put sufficient safeguards in place to protect
such beneficiaries in drug management programs. Other commenters
referred to the difficulty in identifying such beneficiaries in order
to exempt them.
Response: We are persuaded that beneficiaries who are receiving
non-hospice palliative and end-of-life care but have not elected
hospice should be exempted from Part D drug management programs. While
we wish to exercise caution and thoughtfulness in establishing
regulatory exemptions versus clinical guidelines/criteria, as we noted
above, we agree based on the multiple comments that such beneficiaries
should be treated the same as beneficiaries who have elected hospice
care for purposes of drug management programs, as they are very similar
in their health care status, if not their health benefit plan status.
While we expect that Part D plan sponsors and PBMs would not
inappropriately place such beneficiaries in their drug management
programs, an actual regulatory exemption from drug management programs
would be more definitive. Furthermore, adding these exemptions would
align the drug management programs with the CDC Guideline, which was
developed by experts and specifically provides recommendations for
primary care clinicians who are prescribing opioids for chronic pain
outside of active cancer treatment, palliative care, and end-of-life
care. Therefore for consistency with the CDC Guideline, beneficiaries
who are receiving non-hospice palliative and end-of-life care but who
have not elected hospice will be exempted from Part D drug management
programs as well.
As discussed in the proposed rule, the data challenges to identify
these Part D beneficiaries will still exist for CMS and we anticipate
for Part D sponsors also. Therefore, we will explore options for
refining OMS reporting in this regard, and sponsors will have to
identify these exempted beneficiaries through the case management
process.
We also remind Part D sponsors that drugs and biologicals covered
under the Medicare Part A per-diem payments to a Medicare hospice
program are excluded from coverage under Part D. For a prescription
drug to be covered under Part D for a beneficiary who has elected
hospice, the drug must be for treatment unrelated to the terminal
illness or related conditions. This is because drugs and biologicals
covered under the Medicare Part A per-diem payments to a Medicare
hospice program are excluded from coverage under Part D. Therefore, in
2014,\10\ we strongly encouraged sponsors to place beneficiary-level PA
requirements on only four categories of prescription drugs including
analgesics. As a result, a small number of beneficiaries who elected
hospice care have been identified and excluded from the current policy/
OMS.
---------------------------------------------------------------------------

\10\ Please see the most recent CMS guidance, ``Update on Part D
Payment Responsibility for Drugs for Beneficiaries Enrolled in
Medicare Hospice'', issued on November 15, 2016.
---------------------------------------------------------------------------

Comment: A few commenters requested clarification on the practical
meaning of an exempted individual. Specifically, they asked if the
beneficiary is exempted from only coverage limitations or from
retrospective DUR processes. A commenter opposed our proposal that drug
management programs would supersede the current policy in that
beneficiary-specific edits would no longer be permitted on non-opioid
medications. Another commenter requested clarification on the status of
existing beneficiary-specific POS claim edits for opioids and
benzodiazepines beginning January 1, 2019.
Response: Exempted beneficiaries are exempted from Part D drug
management programs. Also, because we are integrating the ``lock-in''
component of the drug management programs with the current policy,
going forward, beneficiary-specific POS edits and lock-in for
frequently abused drugs will be permitted only in compliance with Sec.
423.153(f). However, as we noted earlier, the prescription drug
management program requirements that we are finalizing in this rule do
not affect plan sponsors' obligation to comply with other requirements
pertaining to coverage or utilization management. Part D plan sponsors
are still obligated to conduct other drug utilization review and
management consistent with existing DUR requirements, which includes
reviewing utilization for any Part D drug and may include implementing
beneficiary-specific POS claim edits on drugs that are not frequently
abused drugs, if necessary. However, we do not have specific guidance
in this area, but we would expect the sponsor to employ the same level
of diligence and documentation with respect to beneficiary-level POS
claim edits for non-frequently abused drugs that we

[[Page 16455]]

require for drug management programs, consistent with current
policy.\11\
---------------------------------------------------------------------------

\11\ See ``Supplemental Guidance Related to Improving Drug
Utilization Review Controls in Part D,'' dated September 6, 2012.
---------------------------------------------------------------------------

In addition, beneficiaries for whom Part D sponsors have
implemented beneficiary-specific POS claim edits for opioids and/or
benzodiazepines before January 1, 2019 can continue to be subject to
those edits under the current policy after December 31, 2018, which
means that they may remain in place unless removed under the current
policy. For example, as the result of a coverage determination or
appeal.\12\ To the extent that such a beneficiary is reported through
OMS on January 1, 2019 or later to a sponsor with a drug management
program, that sponsor must comply with the requirements we are
finalizing in this rule.
---------------------------------------------------------------------------

\12\ Patient Safety Analysis Overutilization Monitoring System
User Guide. January 2018.
---------------------------------------------------------------------------

Comment: A commenter suggested that CMS develop a process by which
additional categories of exempted individuals could be evaluated and
added that are evidence-based and involve health care practitioners.
Response: We will evaluate the implementation of the drug
management programs. Based on this experience or new or emerging
relevant health care information, we will consider proposing additional
exemptions through rulemaking as necessary.
Comment: A commenter asked how to handle retroactive notifications
that would qualify a beneficiary for an exemption.
Response: As we stated in a previous response with regard to
beneficiaries who move into LTC facilities, a sponsor must remove an
exempted beneficiary from a drug management program as soon as it
reliably learns that the beneficiary is exempt, whether that be via the
beneficiary, the facility, a pharmacy, a prescriber, or an internal or
external report.
Based on these comments, we are finalizing with modification the
following definition for exempted beneficiary: An exempted beneficiary,
with respect to a drug management program, will mean an enrollee who:
(1) Has elected to receive hospice care or is receiving palliative or
end-of-life 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) is being treated for
active cancer-related pain. Given this exemption, CMS will report
potential at-risk beneficiaries who meet the minimum criteria of the
clinical guidelines to sponsors through the OMS. Currently, we have the
ability to exempt beneficiaries in LTC facilities, in hospice, and with
active cancer-related pain. Sponsors may have more current data or
obtain information through the case management and notification
processes to further exempt beneficiaries, including those receiving
palliative or end-of-life care.
(ii) Requirements of Drug Management Programs (Sec. Sec. 423.153,
423.153(f))
As noted previously, we proposed 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
proposed 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 proposed to revise Sec. 423.153 by adding a new paragraph
(f) about drug management programs for which the introductory sentence
will 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
will be codified in various provisions under Sec. 423.153(f).
We received the following comments and our response follows:
Comment: While CMS received many comments that were supportive of
drug management programs as a whole, we did not receive comments
specific to these provisions.
Response: We are therefore finalizing as proposed.
(iii) Written Policies & Procedures (Sec. 423.153(f)(1))
We proposed 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
proposed to require that these policies and procedures address the
appropriate credentials of the personnel conducting case management and
the necessary and appropriate contents of files for case management. We
additionally proposed to require sponsors to monitor information about
incoming enrollees who will 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.
To codify these requirements, we proposed the written policies and
procedures specified at Sec. 423.153(f)(1) (see 82 FR 56510).
We received the following comments and our response follows:
Comment: We received a comment strongly supportive of the
requirements in this provision.
Response: We thank the commenter for the support.
Comment: We received a few comments inquiring what credentials are
needed for clinical staff who conduct case management. The commenters
were concerned that the clinical staff conducting case management be
adequately qualified to perform it in terms of education and training.
These commenters stated that unqualified case managers could
significantly detract from the benefit of Part D drug management
programs.
Response: We agree that the requirement that clinical staff conduct
case management needs more detail. CMS expects that such clinical staff
conducting case management as part of a Part D plan sponsor's drug
management program would be a physician or other appropriate health
care professional with sufficient expertise to conduct medical
necessity reviews related to potential opioid overutilization. While we
are not specifying particular credentials for clinical staff, in
response to these comments, we are clarifying in the finalized version
of Sec. 423.153(f)(1)(i) that clinical staff must have a current and
unrestricted license to practice within the scope of his or her
profession in a State, Territory, Commonwealth of the United States
(that is, Puerto Rico), or the District of Columbia.
Comment: We received several comments that a dentist should be
required to be included on the case management team when a prescriber
of frequently abused drugs is a dentist.
Response: We decline to adopt this recommendation. We do not want
to be overly prescriptive as to the specific background of licensed
clinical staff conducting case management. We believe the plan should
have some flexibility, beyond what is discussed in the preceding
response and described in Sec. 423.153(f)(1)(i), to determine
appropriate credentials of the clinical

[[Page 16456]]

staff conducting case management based on the facts and circumstances
of the case.
Comment: We received a question asking how prescriber agreement
should be documented and shared with appropriate parties. We also
received a few comments that a Part D sponsor must ensure that any
records of contacts between the sponsors and prescribers under drug
management programs must be easily accessible to at-risk beneficiaries
who wish to appeal and that these records are easily able to be auto-
forwarded to the Independent Review Entity (IRE).
Response: We agree that such information must be documented and
available to appropriate parties including at-risk beneficiaries and
the IRE, when applicable. To comply with Sec. 423.153(f)(1)(ii),
sponsors must document contact with prescribers during case management,
for example, if a prescriber agreed with the plan sponsor to implement
a limit on the beneficiary's access to coverage for frequently abused
drugs pursuant to Sec. 423.153(f)(4). Also, the sponsor must document
if the beneficiary calls the sponsor to provide his or her pharmacy or
prescriber preferences for lock-in. To make this clearer, we are adding
language to Sec. 423.153(f)(1)(ii) such that the necessary and
appropriate contents of files for case management must include
documentation of the substance of prescriber and beneficiary contacts.
Comment: We received a comment that we should require Part D plan
sponsors' policies and procedures for clinical contact to include
secure identity verification safeguards to protect prescribers from
``phishing'' communications that attempt to trick prescribers into
disclosing patient information.
Response: We decline to make this a requirement specific to Part D
drug management programs. We note that health care providers' offices
and Part D sponsors are both covered entities under Health Insurance
Portability and Accountability Act of 1996. We also encourage Part D
sponsors to have written policies and procedures for their staff who
contact providers to proactively identify themselves in a manner that
should reasonably satisfy the providers of their identity and for
providers to likewise have written practice policies and procedures to
reasonably establish the identity of the staff of health benefit plans
who contact them and do not proactively establish their identity.
Given these comments and our responses, we are finalizing Sec.
423.153(f)(1) with modification to include the changes regarding the
licensure of the clinical staff conducting case management and the
required documentation of the substance of prescriber and beneficiary
contacts.
(iv) Case Management/Clinical Contact/Prescriber Verification (Sec.
423.153(f)(2))
To meet the requirements of section 1860D-4(c)(5)(C) and section
1860D-4(c)(5)(B)(i)(II) of the Act, we proposed in a new Sec.
423.153(f)(2) to require Part D sponsors' clinical staff to engage in
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. Specifically, we proposed that a new Sec.
423.153(f)(2) would state that 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:
Send written information to the beneficiary's prescribers
that the beneficiary meets the clinical guidelines and is a potential
at-risk beneficiary;
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
In cases where the prescribers have not responded to the
inquiry described in (f)(2)(i)(B), make reasonable attempts to
communicate telephonically with the prescribers within a reasonable
period after sending the written information.
We proposed to add paragraph (ii) to Sec. 423.153(f)(2) that would
specify that the exception would be 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 because it has already been
performed by a prior Part D sponsors for the beneficiary. 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 limitation on access
to coverage for frequently abuse drugs is warranted for the safety of
the beneficiary. Also, sponsors will use this information to choose
standardized responses in OMS and provide information to MARx about any
plan coverage limitations that the sponsors implement. We will address
required reporting to OMS and MARx by sponsors again later.
Our proposed Sec. 423.153(f)(2) used the terms ``reasonable
attempts'' and ``reasonable period'' rather than specify a required
number of attempts or a specific timeframe for plan sponsor to call
prescribers. We explained that this was due to 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 further stated that we wished to leave
flexibility in the regulation text for sponsors to balance these
priorities on a case-by-case basis in their drug management programs.
However, we note that we proposed 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.
We received the following comments and our response follows:
Comment: We received a comment requesting that a plan sponsor be
able to communicate to CMS if no prescriber will verify that the
beneficiary is at-risk.
Response: We plan to expand and modify OMS and the MARx system to
accommodate the CARA drug management program provisions we are
finalizing here. We will issue additional guidance and technical
instructions as needed.
Comment: We received a comment asking that we recommend that Part D
sponsors encourage prescribers during case management to discuss drug
management programs with their patients. We also received a request
that we issue guidance to plan sponsors directing them to encourage
prescribers, as part of the required clinical contact,

[[Page 16457]]

to perform a comprehensive substance abuse disorder screening and/or
assessment of the patient deemed to be a potential at-risk beneficiary,
and if indicated, refer him or her for follow-up treatment with a pain
specialist or addiction treatment provider.
Response: We encourage Part D plan sponsors to undertake both of
these suggestions, but decline to require it at this time, as we
believe prescribers, in their professional discretion by and large will
undertake appropriate adjusted treatment plans with their patients and/
or MA-PDs will negotiate such issues with their network providers. We
also remind commenters that not all Part D prescription drug plans have
network providers.
Comment: We received some comments that Part D sponsors should not
be permitted to telephone prescribers in order to avoid disrupting
their practices.
Response: We decline to adopt this suggestion. The clinical
guidelines identify beneficiaries who are potentially at-risk for a
serious adverse health event, including death, due to their opioid use
and apparent lack of coordinated care. The requirements we are
finalizing permit sponsors to escalate the steps they take during case
management to engage in clinical contact with the beneficiary's
prescribers of frequently abused drugs. We would expect such
prescribers to understand such sponsors' attempts to make them aware of
important information in this regard that they likely do not know.
Comment: We received a comment that integrated delivery systems use
communication tools other than telephone calls to escalate matters to
prescribers and that CMS should allow such systems to use such tools
instead.
Response: Our intent is for Part D sponsors to use the most
effective means designed to elicit a prescriber response to case
management. Therefore, based on this comment, we are modifying the
regulatory language in Sec. 423.153(f)(2)(i)(C).
Comment: We received a question whether a gaining sponsor must
immediately lock-in a new enrollee if the sponsor receives notice from
the losing sponsor that the enrollee was locked-in by the losing
sponsor.
Response: No. Part D sponsors are responsible for their own drug
management programs. As such, a gaining sponsor is not required to but
may do so under certain circumstances as we discuss later in this
preamble. Also, we note that with respect to at-risk beneficiaries that
are new to a plan, sponsors that do not take any action should be aware
that such beneficiaries may later be reported through OMS if they meet
the clinical guidelines. Also, we note that pursuant to Sec.
423.153(f)(2)(i), the sponsor must conduct case management for every
potential at-risk beneficiary, unless an exception applies.
After considering these comments, we are finalizing the proposed
language in Sec. 423.153(f)(2) with the modification described.
(v) Limitations on Access to Coverage for Frequently Abused Drugs
(Sec. 423.153(f)(3))
We proposed to describe all the tools that will be available to
sponsors to limit an at-risk beneficiary's access to coverage for
frequently abused drugs under a drug management program in Sec.
423.153(f)(3). Our proposal specified that subject to the requirements
of paragraph (f)(4) of this section, a Part D plan sponsor may do all
of the following:
Implement a point-of-sale claim edit for frequently abused
drugs that is specific to an at-risk beneficiary.
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--
++ Prescribed for the beneficiary by one or more prescribers;
++ Dispensed to the beneficiary by one or more network pharmacies;
or
++ Specified in both paragraphs (f)(3)(ii)(B)(1) and (2) of this
section.
Paragraph (iii)(A) will 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) will 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.
We received the following comments and our response follows:
Comment: We received a question whether a Part D sponsor, under a
drug management program, may implement a combination of a beneficiary-
specific POS claim edit, prescriber and/or pharmacy lock-in for
frequently abused drugs, and whether these limitations may be
implemented at different times. Another comment recommended that plan
sponsors be permitted to establish a prescriber lock-in concurrently
with a beneficiary-specific POS claim edit and not require the plan to
contact the prescribers separately for each limitation.
Response: We acknowledge that there may be cases where a plan may
impose one or more coverage limitations for frequently abused drugs
simultaneously on an at-risk beneficiary, and at a later time, add new
limitations and/or terminate existing ones. Thus, a plan sponsor may
choose to implement multiple limitations on access to coverage for
frequently abused drugs for an at-risk beneficiary at one time.
For instance, after case management, a plan sponsor may decide to
pursue implementation of a POS claim edit, prescriber lock-in, and
pharmacy lock-in for an at-risk beneficiary simultaneously because of
the circumstances of the particular case. In this instance, prescriber
agreement would be necessary to implement the POS edit and the
prescriber lock-in.
A plan sponsor may also implement additional coverage limitations
over time (for example, start with a beneficiary-level POS edit,
subsequently add a prescriber lock-in, and subsequently add a pharmacy
lock-in) because the case has not resolved itself as expected after
initial case management. We remind plan sponsors that when implementing
additional coverage limitations, the plan sponsor must repeat the case
management process including prescriber verification, prescriber
agreement, if applicable, and notice requirements for each additional
limitation, and that such actions would also confer a new 60 day appeal
timeframe. We discuss this scenario further in the appeal section of
this preamble.
Furthermore, a plan sponsor might also terminate existing
limitations on access to coverage over time (for example, an at-risk
beneficiary may have a POS edit and pharmacy lock-in and the plan
sponsor terminates the pharmacy lock-in and leaves in place the POS
edit).
While we are allowing plan sponsors to make such additions/
terminations to limitations to access to coverage for frequently abused
drugs for an at-risk beneficiary, we recognize that such

[[Page 16458]]

changes might be disruptive and/or confusing for the beneficiary, and
thus strongly discourage plans from making frequent changes to such
limitations for a particular at-risk beneficiary. To minimize such
disruption and ensure such actions are taken in the manner contemplated
by the statute, we have added a provision at Sec. 423.153(f)(5)(iv) to
the regulation text which specifies that, if a plan intends to make
changes to the limitations imposed on a beneficiary under their drug
management program after the beneficiary has been identified as at-
risk, the plan sponsor is required to provide the beneficiary notices
under the rules established at Sec. 423.153(f)(5) through (f)(8) and
discussed later in this preamble. Additionally, we will closely monitor
information submitted by sponsors to CMS in OMS and MARx and complaint
data to make sure plans are not inappropriately disrupting beneficiary
access to coverage for frequently abused drugs by making frequent
changes to the limitations on access to coverage. While we are not
currently imposing limitations on how many times the plan can make such
changes, we will re-evaluate this policy in the future if it becomes
problematic.
In response to this comment, we are finalizing this provision as
proposed, except we are modifying Sec. 423.153(f)(3) to state a Part D
plan sponsor may do ``any or all of the following,'' and Sec.
423.153(f)(3)(ii)(C) to simply state ``both.'' This will make clearer
that read as a whole, Sec. 423.153(f)(3) means that a Part D sponsor
may use the tool of a beneficiary-specific point-of-sale edit, or
prescriber or pharmacy lock-in, or any combination of these three tools
to limit an at-risk beneficiary's access to coverage of frequently
abused drugs under its drug management program.
(vi) Requirements for Limiting Access to Coverage for Frequently Abused
Drugs (Sec. 423.153(f)(4))
We proposed in Sec. 423.153(f)(4) that before a Part D plan
sponsor could limit the access of at-risk beneficiary to coverage for
frequently abused drugs, the sponsor would first be required to take
certain actions. We proposed in paragraph Sec. 423.153(f)(4)(i)(A)
that a sponsor would be required to 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 that is required by section 1860D-
4(c)(5)(C)(iv) of the Act and prescriber verification that the
beneficiary is an at-risk beneficiary in accordance with Section 1860D-
4(c)(5)(B)(i)(II).
We also proposed in paragraph Sec. 423.153(f)(4)(i)(B) that the
sponsor would be required to obtain the agreement of the prescribers of
frequently abused drugs with the limitation, unless the prescribers
were not responsive to the required case management. We invited
stakeholders to comment on not requiring prescriber agreement to
implement pharmacy lock-in.
We further proposed in paragraph Sec. 423.153(f)(4)(i)(C) that the
sponsor must first provide notices that complied with Sec.
423.153(f)(5) and (f)(6) to the beneficiary in accordance with section
1860D-4(c)(5)(B)(i)(I) of the Act. We additionally proposed in
paragraph Sec. 423.153(f)(4)(ii) that a sponsor has complied with the
requirement in Sec. 423.153(f)(2)(i)(C) to make reasonable attempts to
communicate telephonically with prescribers with a reasonable period if
the prescribers were not responsive after 3 attempts to contact them
within 10 business days. Finally, we proposed language in Sec.
423.153(f)(4)(ii) that would provide an exception to the case
management requirement in Sec. 423.153(f)(2) in cases when a potential
or an at-risk beneficiary was identified as such by the beneficiary's
most recent prior prescription drug benefit plan and the sponsor had
obtained the case management information from the sponsor and updated
it as appropriate. We discussed such cases elsewhere in this section.
We also discuss proposed Sec. 423.153(f)(4)(iv) that would have
imposed a 6-month delay before a sponsor could implement prescriber
lock-in later in this preamble.
We received the following comments and our responses follow:
Comment: A commenter suggested that we allow a coverage limitation
to be put in place through a drug management program if a prescriber
requests one to assist in coordinating the care for his or her patient.
Response: If the beneficiary meets the clinical guidelines/OMS
criteria we are finalizing, and a prescriber requests during case
management that a coverage limitation be implemented for the
beneficiary, the sponsor may implement it in accordance with the
requirements we are finalizing for drug management programs in this
rule.
Comment: Many commenters stated that Part D sponsors should not
have to seek prescriber agreement to limit at-risk beneficiaries to a
pharmacy(ies) for access to coverage for frequently abused drugs. These
commenters argued that requiring prescriber agreement for pharmacy
lock-in would create additional administrative burden and
inefficiencies and thus prevent drug management programs from
responding in a timely fashion to potentially dangerous overutilization
of frequently abused drugs. These commenters also argued that sponsors
of stand-alone Part D plans do not have contracts with most of the
prescribers and, therefore, have limited opportunity to have clinical
contact with these prescribers. Moreover, many commenters felt it was
not appropriate to require that the prescriber agree to pharmacy lock-
in when the pharmacy is not required to agree when a sponsor applies
prescriber lock-in to an at-risk beneficiary.
Other commenters supported our proposal to require prescriber
agreement for pharmacy lock-in. These commenters argued that provider
discretion and clinical judgment is appropriate to prevent pharmacy
lock-in from being implemented by Part D sponsors inappropriately and
impeding legitimate patient access.
Response: CMS was persuaded by commenters' rationale that requiring
prescriber agreement for pharmacy lock-in could undermine one purpose
of drug management programs, which is to promptly address potentially
dangerous overutilization of frequently abused drugs. While we
recognize that prescriber agreement is an essential component of
prescriber lock-in, and prescriber agreement is preferred in the case
of a beneficiary-specific claim edit for frequently abused drugs, we
are now persuaded that prescriber agreement to pharmacy lock-in is not
essential, as pharmacy lock-in is primarily about where the drugs are
dispensed and not who wrote the prescription or its dosage. Therefore,
we are finalizing this provision with this modification. Plan sponsors
will not be required to obtain the agreement of the prescribers of
frequently abused drugs to implement a pharmacy lock-in. However, we do
note that should a prescriber proactively alert the plan sponsor that
they do not believe that pharmacy lock-in is appropriate for a
particular at-risk beneficiary, we expect the plan sponsor to take such
information into consideration.
On the point of prescriber agreement, we also wish to note that it
was unclear in some of the statements if the commenters understood that
section 1860D-4(c)(5)(C)(iv) and Section 1860D-4(c)(5)(B)(i)(II) of the
Act require, respectively, that a Part D sponsor engage in clinical
contact with prescribers regarding whether medications are appropriate
for a beneficiary's medical condition and to

[[Page 16459]]

verify that a beneficiary is at-risk before limiting access to coverage
for frequently abused drugs. Thus, eliminating the need to obtain
prescriber agreement to a pharmacy lock-in does not eliminate the
requirement to comply with Sec. 423.153(f)(2) and (f)(4)(i)(A) with
respect to pharmacy lock-in.
Comment: Several commenters asked CMS to provide additional details
about what options Part D plan sponsors would have if a prescriber does
not agree to a pharmacy lock-in.
Response: As mentioned above, we are not finalizing the proposal
that sponsors must receive prescriber agreement before placing an at-
risk beneficiary in pharmacy lock-in.
Comment: In general, commenters supported our proposal that a Part
D sponsor would have to obtain prescriber agreement before implementing
prescriber lock-in or a beneficiary-specific claim edit at POS for
frequently abused drugs to limit an at-risk beneficiary's access to
coverage for frequently abused drugs, in cases when a prescriber is
responsive to case management. These commenters maintained that the
prescribers are in the best position to understand the beneficiary's
background and know additional relevant considerations.
However, many commenters voiced their recommendation that the Part
D sponsor be able to implement prescriber lock-in without obtaining
agreement from all prescribers. Several commenters expressed that it
would be difficult to get all prescribers to agree to any limitation,
and suggested that as long as at least one prescriber of frequently
abused drugs agreed to the limitation, sponsors should be able to
proceed with a prescriber lock-in. Commenters suggested that plan
sponsors will have already coordinated with the prescribers during case
management, at which time the sponsor will have confirmed the
appropriateness of the medication and verified with a prescriber that
the beneficiary is at risk. Thus, these commenters further suggested
that obtaining formal approval of the lock-in will only serve to delay
initiating the lock-in.
Commenters also raised the point that a given prescriber may be
contributing to the overutilization, in which case his or her approval
may not be obtained and requested clarification how a sponsor should
act in a beneficiary's best interest if prescribers disagree with each
other about the implementation of a claim edit or lock-in. Some
commenters recommended that CMS require approval only from the primary
prescriber of frequently abused drugs, as determined by case
management.
Response: We agree that in order for drug management programs to
operate effectively, and prevent the resource-intensive process of
obtaining agreement from multiple prescribers, a Part D sponsor should
not have to obtain the agreement to prescriber lock-in of all the at-
risk beneficiary's prescribers of frequently abused drugs. Therefore,
we are changing the language of Sec. 423.153(f)(4)(i)(B) to refer to
at least one prescriber, which means that only one prescriber has to
agree to prescriber lock-in or a beneficiary-specific POS edit.
In addition, we believe the language of Sec. 423.153(f)(4)(ii)(B)
needs to be clearer that prescribers must be responsive in the case of
a prescriber lock-in, meaning that non-responsive prescribers cannot
constitute agreement as they can in the case of a beneficiary-specific
POS edit. Therefore, we are finalizing the Sec. 423.153(f)(4) with
this modification in paragraph (ii)(A) and a new (B).
Comment: We received a comment suggesting that a better approach to
prescriber agreement would be for at-risk beneficiaries to identify a
primary prescriber to help drug management and increase beneficiary
safety.
Response: As noted above, we have modified our proposal and are
finalizing that all prescribers do not have to agree to prescriber
lock-in in order for a plan to implement prescriber lock-in for an at-
risk beneficiary; rather, at least one prescriber has to agree.
However, we believe that the prescriber who agrees to prescriber lock-
in for a beneficiary should be identified through the plan sponsor as a
result of case management, and not the at-risk beneficiary. There may
be a conflict of interest in having an at-risk beneficiary select whom
they consider to be their ``primary'' prescriber for purposes of
prescriber agreement, given they might be motivated to select a
``primary'' prescriber that they feel would not agree to prescriber
lock-in, such that they can continue receiving inappropriate amounts of
frequently abused drugs. We reiterate that the requirement that at
least one prescriber agree is for agreement to lock-in is different
from the beneficiary's preferences for the prescriber to which they
will be locked into, which we discuss later in this preamble.
Comment: We received comments that a prescriber should be able to
agree, disagree or neither agree nor disagree with a limitation on a
beneficiary's access to coverage for frequently abused drugs.
Response: A prescriber is of course free to have any of these
reactions to case management. A plan sponsor cannot implement
prescriber lock-in for the beneficiary, unless at least one prescriber
agrees to prescriber lock-in, as discussed earlier. Typically, we would
expect the one prescriber to agree to prescriber lock-in and agree to
serve as the prescriber. A sponsor cannot lock-in a beneficiary to a
prescriber who disagrees, unless the prescriber changes their mind,
which must be documented in the case file.
We foresee a situation when a prescriber initially disagrees with
prescriber lock-in and asserts that he or she must be able to continue
to prescribe frequently abused drugs for the beneficiary. In such a
case, if another prescriber has agreed to serve as the prescriber to
which the beneficiary is locked into, a plan sponsor may need to again
ask the first prescriber if he or she would agree to be a prescriber
the beneficiary is locked into, and the beneficiary is ultimately
locked into two prescribers to ensure reasonable access pursuant to
Sec. 423.153(f)(12), which we discuss further below. This could
happen, for example, when a beneficiary has been obtaining opioids from
multiple prescribers and benzodiazepines from one psychiatrist. A
sponsor may have to permit an at-risk beneficiary to obtain opioids
from the prescriber who agreed to the lock-in limitation and
benzodiazepines from the psychiatrist, who initially did not agree to
prescriber lock-in, but ultimately does agree to serve that beneficiary
in a lock-in capacity.
With respect to a beneficiary-specific POS claim edit for
frequently abused drugs, however, a plan sponsor may not implement one
at a dosage that is lower than the highest dosage a prescriber asserts
is medically necessary, which is consistent with our current
policy.\13\
---------------------------------------------------------------------------

\13\ Supplemental Guidance Related to Improving Drug Utilization
Review Controls in Part D, September 6, 2012.
---------------------------------------------------------------------------

If a prescriber neither agrees nor disagrees with a limitation on
access to coverage for frequently abused drugs, such a prescriber may
be considered by the sponsor to be non-responsive, and an at-risk
beneficiary could not be locked into that prescriber.
Comment: We received a comment suggesting that 30 days be the time
period during which a Part D sponsors must attempt to reach an
unresponsive prescriber.
Response: We believe 30 days is too long considering that drug
management programs involve frequently abused drugs and multiple
prescribers and

[[Page 16460]]

pharmacies; that the clinical guidelines identify beneficiaries who are
at potentially at high risk for an adverse health event due to the
amount of such drugs they are taking; and that there is an apparent
lack of coordinated care.
Comment: We received a comment that a sponsor should only be
required to attempt to reach a prescriber twice in 10 business days
rather than 3 times in order to establish that the prescriber is
unresponsive.
Response: We decline to make this change as this is our current
policy and we received minimal comment on this proposed requirement.
The purpose of the policy is to ensure that sponsors have diligently
tried to involve prescribers in the case management process.
We wish to note that we believe the language we proposed in Sec.
423.153(f)(4)(iii) which provides an exception to case management is
duplicative of the language we discussed above that we are finalizing
in Sec. 423.153(f)(2)(ii). Therefore, we are deleting the language in
Sec. 423.153(f)(4)(iii).
Given the foregoing, we are finalizing Sec. 423.153(f)(4) with
modification, including ones to assist the reader in more easily
understanding the cross-references.
We will also state in paragraph (ii)(A) that, except as provided in
paragraph (ii)(B) which regards a prescriber limitation, if the sponsor
complied with the requirement of paragraph (f)(2)(i)(C) of this section
about attempts to reach prescribers, and the prescribers were not
responsive after 3 attempts by the sponsor to contact them within 10
business days, then the sponsor has met the requirement of paragraph
(f)(4)(i)(B) of this section which regards eliciting information from
the prescribers. Paragraph (i)(B) will state that the sponsor may not
implement a prescriber limitation pursuant to Sec.
423.153(f)(3)(ii)(A) if no prescriber was responsive.
(vii) Beneficiary Notices and Limitation of Special Enrollment Period
(Sec. Sec. 423.153(f)(5), 423.153(f)(6), 423.153(f)(7), 423.153(f)(8),
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 proposed 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 will be required to
provide an initial written notice to the potential at-risk beneficiary.
We also proposed 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, as well as
additional detail specified in the proposed regulation text.
In proposed paragraph (f)(5)(ii)(C)(2)--which will require a
description of public health resources that are designed to address
prescription drug abuse--we proposed 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 will have 30 days to provide information to the sponsor,
which is a timeframe we discuss later in this preamble. We proposed an
additional requirement in paragraph (ii)(C)(5) that the sponsor include
the limitation the sponsor 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 noted that our proposed implementation of the statutory
requirements for the initial notice will permit the notice also to be
used when the sponsor intends to implement a beneficiary-specific POS
claim edit for frequently abused drugs.
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 proposed to implement these requirements such that they will
occur in the following order: first, the plan sponsor will conduct the
case management which encompasses clinical contact and prescriber
verification required by Sec. 423.153(f)(2) and obtain prescriber
agreement if required by Sec. 423.153(f)(4), and subsequently, if
applicable, the plan sponsor will provide the initial notice indicating
the sponsor's intent to limit the beneficiary's access to frequently
abused drugs. 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 will
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 proposed that 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 as part of case management, so as to avoid unnecessarily alarming
the beneficiary. This is because the result of case management may be
that the sponsors takes a ``wait and see'' approach to observe if the
prescribers adjust their management of, and opioid prescriptions they
are writing for, the beneficiary. We noted that while this approach is
acceptable, we still expect sponsors to address the most egregious
cases of apparent opioid overutilization without unreasonable delay.
Under our proposed approach, a sponsor will 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 will provide a second notice to an at-risk beneficiary
when it actually imposes a limit on the beneficiary's access to
coverage for frequently abused drugs. Alternatively, the sponsor will
provide an alternate second notice if it decides not to limit the
beneficiary's access to coverage for frequently abused drugs. The
second notice and alternate second notice are discussed later in this
final rule.
Finally, we proposed 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).
We received the following comments related to the initial notice,
and general comments applicable to all the proposed notices, and our
responses follow:
Comment: We received many comments related to our proposal to
require written beneficiary notice both when a plan identifies the
beneficiary as potentially at risk for prescription drug abuse, and
again when the plan determines the beneficiary is at risk and
implements a beneficiary-level POS edit

[[Page 16461]]

and/or a pharmacy or prescriber lock-in for frequently abused drugs.
Some commenters disagreed with our proposal to require two notices,
stating that a second notice would be unnecessary, confusing, or overly
burdensome.
Several other commenters strongly supported our proposal to require
the two notifications, including the proposed change to the existing
OMS process that would require the initial and second notices before a
plan imposes a beneficiary-specific edit at POS. Commenters stated that
requiring multiple notices will increase the likelihood that affected
beneficiaries will be notified of their status and aware of how they
could dispute it. A commenter wanted CMS to require more than two
notices, because CMS did not propose to require acknowledgement of
receipt from the beneficiary.
Response: We thank those commenters who agreed with our proposals
to require two notices and to integrate existing OMS process into a
uniform process for all drug management program restrictions. While we
appreciate the concerns expressed by commenters who do not agree with
our proposal, as we noted in the proposed rule, the statute at Sec.
1860D-4(c)(5)(B) clearly requires written beneficiary notification both
upon identification as a potential at-risk beneficiary and again when
the plan determines the beneficiary is at risk. We do not agree that
additional notices beyond what we proposed should be required, as it
would be overly burdensome on plans and provide little value to
beneficiaries.
Comment: Several commenters asked if stakeholders will have an
opportunity to comment on the beneficiary notices and for more
information on whether they can be modified by plans and when they will
be released. A commenter requested that CMS conduct focus-group testing
with beneficiaries to ensure the notice is understandable.
Response: As discussed in section III.B.14 of this final rule,
these notices are subject to approval by the Office of Management and
Budget (OMB) under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501
et seq.). The notices will be posted in the Federal Register to give
stakeholders an opportunity to review and comment before final versions
of the notices are posted. CMS will consider testing through
beneficiary focus groups, time permitting. The notices and accompanying
instructions will contain detailed information about permissible
modifications by plans. CMS intends to release the notices with
sufficient time for plan sponsors to implement them into their drug
management programs.
Comment: We received some comments related to requirements to
translate these beneficiary notices. Some of the commenters stated that
these notices should be designated to be among materials subject to
translation requirements in proposed Sec. Sec. 422.2268 and 423.2268.
A commenter asked for clarification on whether plans are required to
include section 1557 taglines with these notices.
Response: While CMS is still developing instructions related to
translation requirements to provide guidance on the requirements at
Sec. Sec. 422.2268 and 423.2268, we note that, 423.128(d)(1)(iii)
requires Part D plan sponsors' call centers to have interpreter
services available to call center personnel to answer questions from
limited-English proficient beneficiaries. These obligations are based
on Medicare regulations and other civil rights laws, such as Title VI
of the Civil Rights Act of 1964, that apply to Medicare health and drug
plans. Applicability of Section 1557, and the scope of requirements for
access for limited English proficient beneficiaries, and what is a
significant communication are determined by the Office for Civil Rights
(OCR).
Comment: A commenter urged CMS to consider implementing additional
requirements for beneficiary notification, including establishing
requirements stipulating information that must be written on envelopes
containing written notices, adding requirements for telephonic or email
notification in addition to written notices, and requirements for
prescribers to contact beneficiaries to confirm receipt of the required
notices.
Response: We agree with the commenter that detailed beneficiary
notification is important, both upon identification as a potential at-
risk beneficiary and again either confirming the at-risk identification
or that the plan has determined the beneficiary is not at-risk.
However, we disagree with this commenter that additional notice
requirements are necessary or advisable. We believe it would be overly
burdensome to require plans to include specific information on the
outside of mailing envelopes and there is no such precedent for similar
beneficiary notices in the Part D program, such as notices of coverage
denials or transition letters. While CMS expects that prescribers of
frequently abused drugs will communicate regularly with their patients,
we do not believe it is necessary to require prescribers to confirm
that beneficiaries received the required plan notices. Finally, we note
that, while CMS does not require telephonic or email notification in
addition to the required written notices, plans are not precluded from
doing so.
Comment: A commenter asked why CMS proposed to require that the
initial notice contain contact information for other organizations that
can provide assistance to beneficiaries regarding the sponsor's drug
management program.
Response: Such information is statutorily required under Sec.
1860D-4(c)(5)(B)(ii)(VII) to be included in the initial notice. As
specified in the statute, it should be similar to the information
provided in other standardized Part D beneficiary notices. We expect
the notice may include, for example, contact information for the
enrollee's State Health Insurance Program (SHIP), 1-800-MEDICARE, the
Medicare Rights Center, and/or other organizations as appropriate.
Comment: We received some comments that supported our proposal to
require plan sponsors to make reasonable efforts to provide copies of
notices to the potentially at-risk and at-risk beneficiary's
prescriber(s).
Response: We thank these commenters for their support.
Comment: A few commenters opined that Part D plan sponsors and
third party administrators do not have access to a list of all State
and Federal public health resources designed to address prescription
drug abuse. These commenters stated that requiring plans operating in
multiple states to compile such a list would be overly burdensome, and
requested that CMS provide templates containing such information as
required under proposed Sec. 423.153(f)(5)(ii)(C)(2). Another
commenter asked if MA-PD plans will be allowed to include information
about plan-specific mental health benefits in addition to State and
Federal resources.
Response: CMS appreciates the input provided by these commenters.
While the notice templates and instructions are still under
development, CMS expects to provide information on Federal and State
public health resources to assist plans in meeting the statutory
requirement at Sec. 1860D-4(c)(5)(B)(ii)(II) to include such
information in the initial notice. Under the existing regulations at
Sec. 423.505(i), Part D plan sponsors are ultimately responsible for
adhering to all terms and conditions of their contract with CMS,
including compliance with all Federal laws, regulations and CMS
instructions related to activities or responsibilities delegated to a
third party. Pursuant to the regulation at Sec.
423.153(f)(5)(ii)(C)(2), which we are finalizing as proposed, plans
will be also required to include

[[Page 16462]]

information about relevant benefits and services covered by the plan,
such as medical, mental health and MAT benefits.
Comment: Some commenters stated that CMS should specify in
regulation text that initial notices must not be sent to potential at-
risk beneficiaries until the plan has communicated with and received
clinical information from the beneficiary's prescribers. These
commenters noted that failure to conduct case management prior to
sending the initial notice would interfere with doctor-patient
relationships and unnecessarily alarm beneficiaries who may be
determined not to be at-risk.
Response: We agree with these commenters that initial notices
should not be sent to beneficiaries before the plan has engaged in case
management and attempted to communicate with the beneficiary's
prescriber(s), and this is specified in the regulation text at Sec.
423.153(f)(2)(i). However, we know from experience with the OMS process
that prescribers are not always responsive to the plan's attempts to
make clinical contact; therefore, we proposed at Sec.
423.153(f)(2)(i)(C) that plans must make additional attempts to contact
such prescribers. Additionally, we proposed at Sec. 423.153(f)(4) that
plans cannot limit access to frequently abused drugs unless the plan
has conducted case management and obtained agreement from prescribers
(or made certain attempts to contact prescribers). We believe this
approach strikes an appropriate balance between ensuring sufficient
access to frequently abused drugs and protecting at-risk beneficiaries
from potential harm in the absence of improved care coordination.
After consideration of the comments received on this section, we
are finalizing our proposal with modification to clearly codify the
policy that a sponsor should not provide the initial notice to the
beneficiary until after the sponsor has engaged in the required case
management by adding the phrase ``after conducting the case management
required by Sec. 423.153(f)(2)'' at the beginning of Sec.
423.153(f)(5)(i).
(B) Limitation on the Special Enrollment Period for LIS Beneficiaries
With an At-Risk Status (Sec. 423.38)
Section 704(a)(3) of CARA gave the Secretary the discretion to
limit the SEP for full benefit dually eligible (FBDE) beneficiaries
outlined in section 1860D-1(b)(3)(D) of the Act. In addition to
providing relevant information to a potential at-risk beneficiary, we
proposed that the initial notice will notify dually- and other low
income subsidy (LIS)-eligible beneficiaries that they would be unable
to use the special enrollment period (SEP) for LIS beneficiaries due to
their potential at-risk status. (Hereafter, this SEP is referred to as
the ``duals' SEP''). This limitation is related to, but distinct from,
other changes to the duals' SEP discussed in the proposed rule.
We proposed that once a dually- or other LIS-eligible 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 will 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.
We proposed 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 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 of the limitation, as specified in the second notice
provided under Sec. 423.153(f)(6), whichever is sooner.
We noted 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. Furthermore, we noted 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,
including when an individual has a gain, loss, or change in Medicaid or
LIS eligibility. We proposed that the ability to use the duals' SEP
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 under Sec. 423.100 of this final rule. (See section
II.A.10 for a more detailed discussion of Part D SEP changes.)
We received the following comments and our response follows:
Comment: We received many comments supporting the limitation of the
duals' SEP for those individuals identified as potential at-risk or at-
risk for overutilizing frequently abused drugs. Commenters noted that
this limitation would support care coordination for this population,
ensure that these beneficiaries are effectively managed, and prevent
those that do abuse drugs from frequent plan switching, and either
changing to a Part D plan without a drug management program, or
accessing opioids because of a gap in information sharing across plans.
Several commenters stated that this move would support their state's
efforts in curbing the opioid epidemic.
Response: We appreciate the support for our proposal to limit the
SEP for individuals identified as potential at-risk or at-risk for
overutilizing frequently abused drugs.
Comment: A commenter requested that CMS confirm that any
limitations on Part D LIS-eligible individuals would not impact the
ability of such individuals to make an enrollment or disenrollment
during other enrollment periods for which he or she is eligible.
Commenters specifically asked about the AEP and the SEPs available for
individuals to enroll in or disenroll from Program for All-inclusive
Care (PACE) or enroll in a 5-Star plan.
Response: We note that the enrollment limitation for a potential
at-risk or an at-risk individual will not apply to other Part D
enrollment periods, including the AEP or other SEPs, including new SEPs
that will be established at Sec. 423.38(c)(9) and (c)(10) and are
discussed in more detail in section II.A.10. of this final rule. In the
event that an individual is subject to this limitation, but is eligible
for another enrollment period, he or she may use that enrollment period
to make a change. For example, a potential at-risk or at-risk dually-
or other LIS-eligible individual who is subject to the duals' SEP
limitation may use the PACE SEP to enroll in or disenroll from PACE, or
they may use the 5-Star Rating SEP to enroll in an MA plan, PDP, or
cost plan with a Star Rating of 5 stars during the year in which that
plan has the 5-star overall rating, provided the enrollee meets the
other requirements to enroll in that plan.
Comment: A commenter asked for clarification as to whether the SEP
limitation for potential at-risk or at-risk individuals would apply
when a

[[Page 16463]]

beneficiary loses Medicaid eligibility and goes through the deeming
process permitted in capitated models under Financial Alignment
Initiative demonstrations. The commenter stated that, in their state, a
beneficiary is allowed to remain in the demonstration Medicare-Medicaid
Plan (MMP) for up to 3 months while he or she tries to regain Medicaid
eligibility. If the beneficiary regains Medicaid eligibility within
this 3 month window, would the state be required to allow the
beneficiary to change his or her enrollment? The commenter stated,
that, now, they automatically re-enroll the beneficiary back into the
MMP.
Response: The period of deemed continued eligibility provides an
opportunity for individuals in Dual Special Needs Plans (D-SNPs) or
MMPs who lose Medicaid eligibility to stay enrolled in their plan for a
short time,\14\ while they try to regain Medicaid eligibility. However,
should an individual be eligible to leave the plan, and takes an action
to leave the plan, using any valid SEP, the plan must honor the
disenrollment request. It is our view that a change in Medicaid status,
especially loss of Medicaid eligibility, is an important event with
potentially significant financial impacts to the beneficiary. As a
result, the SEP outlined in Sec. 423.38(c)(9) will remain available to
a potential at-risk or at-risk individual, even if the person is
provided a deeming period by an MMP or D-SNP. This will permit
individuals in a capitated model under the Financial Alignment
Initiative demonstrations to change plans using the duals' SEP, within
3 months of a gain, loss, or change to Medicaid or LIS eligibility, or
notification of such.
---------------------------------------------------------------------------

\14\ Under the capitated model of the Financial Alignment
Initiative demonstration, MMPs may provide up to 3 months of deemed
continued eligibility for individuals who lose MMP eligibility due
to short-term loss of Medicaid. As outlined in Chapter 2 of the
Medicare Managed Care Manual, D-SNPs must provide at least 1 month
and up to 6 months of deemed continued eligibility for individuals
who lose eligibility due to loss of Medicaid, but are reasonably
expected to regain Medicaid within that timeframe.
---------------------------------------------------------------------------

Comment: We received several comments relating to the operational
aspects of implementing this limitation on the duals' SEP. Commenters
requested clarification on how a plan sponsor would know if a potential
at-risk or at-risk beneficiary was not eligible to use the duals' SEP,
and how the MARx system would be operationalized to effectuate this
change. A commenter requested clarification on how these individuals
would be prevented from utilizing the duals' SEP.
Response: Information related to an individual's at-risk status,
including the beginning and end dates for any limitation imposed, will
be stored in MARx and available to plans for enrollment processing via
the User Interface (UI) and the beneficiary eligibility query (BEQ).
CMS will reject a submitted enrollment for a beneficiary who is subject
to the SEP limitation and the plan will be notified with a unique
transaction reply code (TRC). We will also notify plans via a TRC if a
member has a change in their at-risk status period. We will provide
further subregulatory guidance on system and operational changes that
will occur to effectuate this limitation, as well as the larger drug
management program.
Comment: To further assist in these efforts to curb opioid misuse,
a commenter requested that CMS share data about any members in Part D
plans who are subject to this SEP limitation to target Medicaid wrap
services, including supplemental behavioral health and substance use
treatment services.
Response: We thank the commenter for their suggestion and we will
explore data sharing for states to provide additional services to these
individuals.
Comment: A commenter recommended that CMS allow potential at-risk
or at-risk individuals to use the duals' SEP to change to another plan
if that plan has an established drug management program in place.
Response: We appreciate the comment; however, we disagree with
allowing individuals identified as potentially at risk or at risk to
use the duals' SEP. Even if an at-risk individual 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 the timing of
information sharing between the plans and possible difference in
provider networks.
Comment: A commenter stated that because the ``at-risk'' status is
transferable from one plan to another, an individual will not avoid the
implications of the lock-in by utilizing the SEP. As such, the
commenter believed that the dual SEP should not be limited.
Response: We disagree. First, for general clarification purposes,
the at-risk determination will not automatically transfer and be
applied by a new Part D plan in the event a potentially at-risk or at-
risk beneficiary changes plans. Even though a gaining plan will be able
to see if a new member had an at-risk determination with their prior
plan, the new plan will still have to make their own determination
regarding the individual's status and send the individual the
appropriate notice, which will trigger the SEP limitation, as we have
explained elsewhere in this preamble. Although the beneficiary's prior
at-risk designation is an indicator that the new plan will have to
initiate case management and may even allow them to bypass the first
notice and go straight to issuing the second notice, the at-risk
determination is not directly transferable.
In addition, while we assume that all Part D sponsors will have
drug management programs in place, it is not a requirement.
With respect to the need for the SEP limitation, this policy is
still needed to prevent potential and at-risk beneficiaries from making
frequent plan changes after they receive the initial and second
notices, as applicable, and thus, avoid the care coordination that drug
management plans are intended to provide.
We note that the SEP limitation--whether it is a first time
designation or one that is being applied after enrollment into a new
plan--will be effective as of the date on the initial notice that the
Part D plan sponsor provides to an individual identified to be
potentially at-risk. We are revising that language in Sec.
423.38(c)(4) to state that beneficiaries that have been notified that
they are potentially at-risk or at-risk, and such identification has
not been terminated in accordance with Sec. 423.153(f)), will not be
able to use the duals' SEP.
Comment: A commenter encouraged CMS to offer increased resources to
SHIPs to provide targeted outreach to the dual eligible and LIS
populations who will be impacted by these changes. The commenter stated
that CMS should also conduct outreach and education to providers and
pharmacies, including mental health and substance use providers, as
well as community based organizations (such as recovery learning
communities), as these changes have a specific impact on beneficiaries
with substance use disorders. The commenter stated that these efforts
will help ensure that beneficiaries most likely to be impacted by these
changes, and their providers, are made aware well in advance of
implementation. Also, the commenter encouraged CMS and the
Administration for Community Living (ACL) to provide continued funding
for state Ombudsman programs that serve dual eligible populations
enrolled in demonstration products, and to allow states to use this
funding to serve dual

[[Page 16464]]

eligible beneficiaries enrolled in any integrated care product,
including, for example FIDE SNPs.
Response: CMS appreciates the comment, and we will continue to
explore avenues for beneficiary and provider outreach and education;
however, provisions for addressing cost and funding resources is
outside of the scope of this rule.
Comment: Several commenters opposed the limitation of the duals'
SEP for at-risk beneficiaries. Commenters cited issues, such as limited
access to prescription drugs and the possible risks of medical
complications and increased costs resulting from such access barriers.
They also noted the vulnerability and special needs of this population.
A commenter stated that this limitation is unnecessary, as the current
OMS program in Part D typically resolves cases of potential misuse
without resorting to any beneficiary-specific tactic and would result
in beneficiaries losing access to an important patient protection.
Response: We appreciate the comments. As we stated in the proposed
rule, 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. It is our view that the SEP limitation will be an
important tool to reduce the opportunities for dual and LIS-eligible
beneficiaries designated as at-risk to switch plans, and circumvent the
care coordination that a drug management program is designed to provide
for this vulnerable population, especially as our nation faces an
opioid epidemic. As stated previously, the enrollment limitation for a
potential at-risk or an at-risk individual would not apply to other
Part D enrollment periods, including the AEP or other SEPs. In the
event that a potential at-risk or at-risk dually- or other LIS-eligible
individual is subject to this limitation, but that individual is
eligible to make an enrollment change using a different and valid
election period, he or she may do so.
In the case where an individual is prescribed a specific drug that
is not on the sponsor's formulary, the individual always has the right
to request a coverage determination for the drug. Each Part D sponsor
that provides prescription drug benefits for Part D drugs and manages
this benefit through the use of a formulary must establish and maintain
exceptions procedures for receipt of an off formulary drug. A Part D
sponsor must grant an exception whenever it determines that the drug is
medically necessary, consistent with the physician's or other
prescriber's statement, and that the drug would be covered but for the
fact that it is an off formulary drug. Since these protections apply to
all beneficiaries, they also protect dually-eligible and other LIS-
eligible beneficiaries.
Comment: A couple of commenters stated that maintaining maximum
flexibility regarding enrollment in Medicare Part D and the ability to
change PDPs best serves the interests of low-income beneficiaries,
especially American Indian and Alaskan Native (A/I and A/N)
beneficiaries. The commenters further stated that a decision to change
plans is often made in order to access a specific prescription drug.
The commenters further requested that, if the proposed regulation is
retained, CMS specify an exemption for Indian Health Service (IHS)-
eligible individuals as inserting the Medicare Part D drug plans into
the relationship between Medicare/IHS beneficiaries and their IHS/
Tribal providers would not be helpful. We discuss IHS beneficiaries
again further below.
Response: CMS disagrees with establishing population-based
exceptions to the duals' SEP limitation. In our view, all potential at-
risk and at-risk beneficiaries should be afforded the opportunity to
benefit from the care coordination that the drug management program is
designed to provide. We do not believe it is prudent at this time to
carve out a subset of at-risk beneficiaries to which special rules
apply. As previously mentioned, there are opportunities for potential
at-risk and at-risk individuals to make enrollment choices during other
election periods. Also, an individual always has the right to request a
coverage determination, including an exception request for an off-
formulary drug.
Comment: A couple of commenters expressed concern about this SEP
limitation not being appealable. A commenter urged CMS to make the loss
of the duals' SEP for potential at-risk beneficiaries appealable, as an
at-risk beneficiary's other non-opioid-related conditions may justify
the using of an SEP. A commenter noted that the proposal stipulated an
appeals process for beneficiaries wishing to appeal their at-risk
status, but encouraged CMS in its final rule to clarify whether the
loss of a duals' SEP would be appealable in any way, and urge CMS to
make a provision for beneficiaries who may need access to this SEP
despite their at-risk status.
Response: Similar to all other enrollment decisions, the limitation
on the duals' SEP for potential at-risk or at-risk individuals is not
appealable. However, after an individual is determined to be at-risk,
he or she may appeal that determination. We intend to provide maximum
transparency to the beneficiary by ensuring, consistent with the
statutory requirements, that the beneficiary has information about
appeal rights during the at-risk determination process.
Comment: A commenter stated that nothing in the law would make a
dual-eligible at- risk or potentially at-risk beneficiary ineligible
for an SEP.
Response: We disagree with the commenter. 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 Social
Security Act (the Act). As discussed previously, the duals' SEP was
extended to all other subsidy-eligible beneficiaries by regulation so
that all LIS-eligible beneficiaries are treated uniformly.
Comment: A commenter is concerned that dually- and other LIS-
eligible individuals inappropriately identified as potentially at-risk
may not understand the process for correcting a determination that was
made in error or may otherwise be inappropriate. The commenter further
stated that some beneficiaries will be erroneously identified and not
confirmed as at-risk and they should not be subject to the SEP
limitation as a result of poor data, plan error, or some other reason
unrelated to the beneficiary's action.
Response: We appreciate the comments. We believe that there will be
sufficient safeguards in the design and implementation of prescription
drug management programs to prevent errors and provide beneficiaries
with an opportunity to make corrections. CMS expects that exempt
individuals will be identified through OMS. For those that are not
excluded based on this data, they should be excluded by their plans
during case management, as clinical contact and prescriber verification
and agreement should occur before an initial notice of potential at-
risk status is sent to the individual and the SEP limitation is
imposed. Thereafter, if a beneficiary believes he or she has been
identified in error, the beneficiary has a chance to submit relevant
information in response to the initial notice. If a determination is
made that a beneficiary is an at-risk beneficiary, a Part D sponsor
must also provide a second written notice to the beneficiary which is
required to provide clear instruction on how a beneficiary may submit
further applicable information to the sponsor. A beneficiary is also
provided a right to redetermination of the at-risk status. CMS expects
these measures will provide adequate protections for all beneficiaries.

[[Page 16465]]

Comment: Another commenter requested clarification that the SEP is
only removed for LIS beneficiaries once the plan sponsor has completed
case management activities, including prescriber agreement.
Response: We appreciate the question regarding when the duals' SEP
limitation goes into effect. The duals' SEP limitation can go into
effect without prescriber agreement; however, before the initial notice
is sent, which informs the beneficiary of the limitation, the sponsor
is required to engage in case management and attempt to communicate
with the beneficiary's prescriber(s).
Comment: A commenter urged CMS to make a provision for LIS
beneficiaries who lose access to their SEP, but need access to non-
opioid drugs. For example, if an LIS beneficiary is determined to be
at-risk and loses an SEP, and is later diagnosed with a different
chronic condition that requires medication not on the beneficiary's
current formulary. The commenter requested that CMS specify in the
final rule that such a beneficiary would be given special consideration
when submitting an appeal to their current plan to gain coverage of
necessary non-opioid drugs.
Response: We do not believe any ``special consideration'' is
necessary. An enrollee--regardless of LIS eligibility--always has the
right to request a coverage determination for a drug. In all cases, the
standard is that the plan must notify the enrollee of its coverage
determination decision as expeditiously as the enrollee's health
condition requires, but no later than the applicable adjudication
timeframe (24 hours for an expedited coverage determination, 72 hours
for a standard coverage determination).
Comment: A commenter noted that, while they agree with the proposal
to implement the SEP provision, there may be an increase in complaints
and grievances against the sponsor. The commenter encourages CMS to
exclude beneficiaries identified as potentially at-risk and at-risk
from Consumer Assessment of Healthcare Providers and Systems (CAHPS)
surveys and not count complaints related to the duals' SEP limitation
in the Complaint Tracking Module (CTM) numbers for star-rating
purposes.
Response: Thank you for the comment. Our Star Ratings proposal did
not address this topic, and we plan to take this comment under
advisement.
After consideration of these comments, we are finalizing the
provision on the CARA duals' SEP limitation at Sec. 423.38(c)(4) with
a modification to specify that beneficiaries that have been notified
that they are potentially at-risk or at-risk as defined in Sec.
423.100, and such identification has not been terminated in accordance
with Sec. 423.153(f)), will not be able to use the duals' SEP.
The duals' SEP limitation will align with the revised timeframes
for the potential-at-risk and at-risk status as addressed in section
423.153(f) of this final rule. That is, if the Part D plan sponsor
takes no additional action to identify the individual as an at-risk
beneficiary within 60 days from the date on the initial notice, the
``potentially at-risk'' designation and the duals' SEP limitation will
expire. At-risk determinations will be for an initial 12 month period,
with the option to extend for a maximum of 24 months in total (that is,
an additional 12 month period) upon reassessment of the beneficiary's
at-risk status at the completion of the initial 12 month period.
(C) Second Notice to Beneficiary and Sponsor Implementation of
Limitation on Access to Coverage for Frequently Abused Drugs (Sec.
423.153(f)(6))
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. We proposed
to codify this requirement in Sec. 423.153(f)(6)(i). As with the
initial notice, our proposed implementation of the statutory
requirement for the second notice will also permit it to be used when
the sponsor implements a beneficiary-specific POS claim edit for
frequently abused drugs. Specifically, we proposed 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 proposed to
require the second notice to include the effective and end date of the
limitation. Thus, this second notice will 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 proposed 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 proposed to add detail in the regulation text. The second
notice must also 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 the notice. In paragraph (2), we proposed
language that will require a sponsor to include the limitation the
sponsor 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
proposed an additional requirement in paragraph (6) that the sponsor
include instructions how the beneficiary may submit information to the
sponsor in response to the request described in paragraph (4). In Sec.
423.153(f)(6)(iii), we proposed 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. 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.
Also, the sponsor will 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 will 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.
We received the following comments and our responses follow:
Comment: We received many comments related to our proposal
requiring plans to provide a second written notice to beneficiaries
before implementing a restriction under the plan's drug management
program, most of which supported the proposal. Other commenters opposed
it, expressing a belief that only one notice would be sufficient. Some
of these commenters offered ideas for various alternative approaches
for CMS to consider, such as including information in the plan's
Evidence of Coverage that would replace the notices described in the
proposed rule, or using a single notice similar to the current OMS
requirement. Other commenters stated that the two notices required for
lock-in should be limited to lock-in and plans should continue to be
permitted to send a single notice when implementing a beneficiary-level
POS edit.
Response: We disagree with the comments recommending requiring a
single beneficiary notice or replacing one or both notices with general
information in other documents. Section

[[Page 16466]]

1860D-4(c)(5)(B) requires two written notices before a beneficiary can
be locked-in to a prescriber or pharmacy, and includes a high level of
specificity about the content of the notices. Moreover, the required
initial and second notices contain important information about access
restrictions that may be or will be placed on potentially at-risk and
at-risk beneficiaries, resources such beneficiaries may need to treat
potential drug dependency issues, and notification of important
beneficiary rights.
We also disagree with comments stating that the proposed notice
requirements for the lock-in program should be limited to lock-in, and
that CMS should retain existing beneficiary notice policies, including
sending only one notice, when implementing beneficiary-level POS edits.
Currently, the application of a beneficiary-level POS claim edit is not
considered a coverage determination and does not trigger appeal rights
under Subpart M. As we explained in the proposed rule, 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) will be an aspect of an at-risk
determination (a type of initial determination that will confer appeal
rights on the beneficiary, consistent with section 1860D-4(c)(5)(E) of
the Act) under our proposal establishing the Part D drug management
program. As discussed in subsection (c) of this preamble, we are
finalizing the proposal to integrate the current OMS process with lock-
in to create a uniform drug management program for Part D. Under this
final rule, since the application of a beneficiary-level POS edit for
frequently abused drugs can only be applied upon the plan's at-risk
determination and is subject to appeal, it is necessary to treat those
edits the same as limitations on selected pharmacy(ies) or
prescriber(s). Furthermore, we believe that establishing an
inconsistency with respect to notice requirements would be confusing
for beneficiaries and plans. For these reasons, and because we believe
the second notice, which identifies the action taken by the plan and
instructs the beneficiary how to exercise their statutory appeal
rights, is an important beneficiary protection, the notice is required
both for lock-in and for POS edits for frequently abused drugs.
Comment: A commenter suggested that CMS require that the second
notice, in addition to the initial notice, include a description of all
State and Federal public health resources addressing prescription drug
abuse that are available to the beneficiary.
Response: While we agree that this information is important to
communicate to affected beneficiaries, we recognize the potential
burden that multiple notices may place on plan sponsors as well as
beneficiaries. We note that such information is required in the initial
notice, and the statute does not require it in the second notice. While
CMS will not preclude plans from providing this information again, for
example, if requested by the enrollee, we do not believe it is
necessary to require that it be included in both notices.
After consideration of comments received, we are finalizing our
proposal without modification to require plans to send both the initial
and second notice before implementing a beneficiary-level POS edit or a
pharmacy or prescriber lock-in under a 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))
Although not explicitly required by the statute, we proposed at
Sec. 423.153(f)(7) that if a sponsor determines that a potential at-
risk beneficiary is not an at-risk beneficiary and 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 will be required to provide the beneficiary with an
alternate second notice. Specifically, we proposed that such alternate
second notice use language approved by the Secretary in a readable and
understandable form, and contain the following information: The sponsor
has determined that the beneficiary is not an at-risk beneficiary; the
sponsor will not limit the beneficiary's access to coverage for
frequently abused drugs; if applicable, the SEP limitation no longer
applies; clear instructions that explain how the beneficiary may
contact the sponsor; and other content that CMS determines is necessary
for the beneficiary to understand the information required in this
notice.
As with the other notices, we proposed 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 this notice.
We received the following comments and our response follows:
Comment: We received a few comments on this proposal. Some of these
commenters supported the proposal and agreed that such notice is
necessary to minimize beneficiary confusion and limit unneeded appeals
when a plan decides not to implement any restrictions on frequently
abused drugs. A commenter disagreed with our proposal to require an
alternate second notice, stating such notice is not necessary.
Response: As we stated in the proposed rule, we believe that this
alternate notice is necessary to ensure beneficiaries who received the
initial notice of an intended limitation on access to frequently abused
drugs under the plan's drug management program are informed of the
outcome of the plan's decision not to take such action. We are
finalizing Sec. 423.153(f)(7) without modification.
(E) Timing of Notices and Exceptions to Timing (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. Although not specifically required by CARA, we believe it
is also important to establish a maximum timeframe by which the plan
must send the second notice or the alternate second notice, to ensure
that plans do not leave a case open indefinitely. We proposed to
specify at Sec. 423.153(f)(8)(i) that a Part D sponsor must provide
the second notice described in paragraph (f)(6) or the alternate second
notice described in paragraph (f)(7), 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).
Section 1860D-4(c)(5)(B)(iv)(II) of the Act explicitly provides for
an exception to the required 30 day minimum 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 will
necessitate that a Part D sponsor provide the second written notice to
the beneficiary before the minimum 30 day time period normally required
has elapsed.
As we explained in the proposed rule, because this provision also
allows an at-risk identification to carry forward to the next plan, we
believe it is appropriate to permit a gaining plan to provide the
second notice to an at-risk beneficiary so identified by the most

[[Page 16467]]

recent prior plan without having to wait the minimum 30 days, if
certain conditions are met. This is consistent with our current policy
under which a gaining sponsor may immediately implement a beneficiary-
specific 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.\15\
---------------------------------------------------------------------------

\15\ See ``Beneficiary-Level Point-of-Sale Claim Edits and Other
Overutilization Issues,'' August 25, 2014.
---------------------------------------------------------------------------

As such, at Sec. 423.153(f)(8)(ii), we proposed one exception to
the timing of the notices, applicable to at-risk beneficiaries who
switch plans. The exception allows a gaining plan sponsor to
immediately provide the 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 the prior plan
and such identification had not been terminated. The exception is only
permissible if the gaining sponsor is implementing either a
beneficiary-specific POS edit as described in paragraph (f)(3)(i) under
the same terms as the prior plan, or a limitation on access to coverage
as described in paragraph (f)(3)(ii), if such limitation will require
the beneficiary to obtain frequently abused drugs from the same
pharmacy location and/or the same prescriber, as applicable, that was
selected under the immediately prior plan under (f)(9).
We received the following comments and our responses follow:
Comment: Some commenters recommended that the timeframe between the
first and second notices be shortened to within 15 days, which the
commenters believe would provide sufficient time for beneficiaries to
submit preferences. A commenter noted that there is no added value in
waiting 30 days after the initial notice to provide the second notice
because it contains similar information.
Response: We disagree with these commenters. Outside of
circumstances identified by the Secretary through rulemaking, section
1860D-4(c)(5)(B)(iv) requires that the second notice be provided ``on a
date that is not less than 30 days'' after the initial notice.
Moreover, because the statute gives significant deference to
beneficiary preferences, CMS does not believe that 15 days is
sufficient for beneficiaries to receive the initial notice, identify
their preferences for prescribers and/or pharmacies, potentially confer
with the preferred prescribers and/or pharmacies, communicate
preferences to their plan, and give the plan sufficient time to
implement the limitation in their systems, including situations where
the plan determines that an exception to preferences under Sec.
423.153(f)(10) is warranted.
Comment: We received several comments supporting our proposal to
establish a maximum timeframe by which sponsors must send the second or
alternate second notice. However, most of these commenters expressed
concerns that 90 days is too long because potentially at-risk
beneficiaries would be subject to a limitation on their SEP without
appeal rights during that 90 day timeframe. Commenters stated that, if
those beneficiaries identified as potentially at-risk did not lose
access to the SEP, 90 days would be acceptable. Other commenters
expressed a belief that plans would not need 90 days to obtain
beneficiary preferences and implement relevant access limitations upon
receipt of those preferences.
Response: We appreciate the commenters' feedback about the proposed
90 day maximum timeframe. As we noted in the preamble to the proposed
rule, while section 1860D-4(c)(5)(B)(iv) of the Act requires plans to
wait a minimum of 30 days from the initial notice before providing the
second notice, Congress did not establish a maximum timeframe. Because
case management, clinical contact and prescriber verification
requirements would be met before the plan sends the initial notice, we
agree with the commenters that our proposed 90 day maximum timeframe
between notices could be shortened. Therefore, we are modifying Sec.
423.153(f)(8)(i) to require the notice required under (f)(6) or
alternate notice required under (f)(7) to be provided to the
beneficiary no more than the earlier of the date the sponsor makes the
relevant determination or 60 days after the date of the initial notice
required under (f)(5).
Given the comments received, many of which stated that the 90 day
maximum timeframe we proposed is too long, we believe 60 days strikes
the right balance. We do not believe the maximum timeframe should be
shorter than 60 days, because sponsors may need this time to process
information from beneficiaries that is received at the end of the
minimum 30 day timeframe, or to communicate with prescribers who may
have been unresponsive prior to receiving a copy of the initial notice
the plan provided to the beneficiary. This revised timeframe is still
sufficient to limit any potential compliance issues for sponsors
related to timeliness and unnecessary appeals where such information is
still being processed. However, we do not expect sponsors to routinely
take the maximum amount of time to issue the second notice, and note
that they must send it sooner if they make the relevant determination
sooner. We note that the SEP is addressed in an earlier section of this
preamble.
Comment: We received several comments related to our proposal at
Sec. 423.153(f)(8)(ii) to, under certain circumstances, permit a
gaining plan to immediately send a second notice without waiting 30
days to a beneficiary who is already subject to a drug management
program coverage limitation (a beneficiary-specific POS claim edit or
pharmacy or prescriber lock-in) in their immediately prior plan. Most
commenters supported our proposal to establish an exception to the 30-
day notice for at-risk beneficiaries, as identified by the losing plan,
when such beneficiaries switch plans and the gaining plan decides to
continue the same limitation(s). Some of these commenters agreed that
exceptions to the 30 day notice should be limited to circumstances
where the beneficiary was already given notice by the previous plan.
Some commenters noted that because a beneficiary may be changing plans
due to dissatisfaction with their current providers, these
beneficiaries must also have an opportunity to change their preferences
with respect to pharmacies and prescribers when they change plans.
Other commenters supported the exception that we proposed but stated
that the statute allows exceptions under additional circumstances based
on the health and safety of the beneficiary or significant drug
diversion activity. A commenter recommended that CMS should specify
that when a beneficiary who moves to a new plan offered by the same
parent organization as their prior plan, the plan is not required to
send any notice to the beneficiary to continue the restriction because
such notice would only serve to confuse the beneficiary.
Response: As we explained in the proposed rule, we believe that
exceptions to the statutory requirement to wait at least 30 days before
sending the second notice and implementing a coverage limitation under
a drug management program should be very limited. Since the drug
management program is focused on improved care coordination for
beneficiaries who are utilizing high doses of frequently abused drugs
and/or have multiple providers, and the statute specifies that such
exceptions be identified through rulemaking regarding the health or

[[Page 16468]]

safety of the beneficiary or regarding significant drug diversion
activities, we do not believe that it is appropriate to permit such an
exception based on a sponsor's concerns about the health and safety of
a particular beneficiary because that is too subjective and could
adversely impact such beneficiaries, who could be subject to a coverage
limitation without notice. Rather, we are finalizing the exception we
proposed related to at-risk beneficiaries who switch plans and the
gaining plan decides to continue a limitation(s) under the same terms
as the losing plan, because we believe, in this instance, the coverage
limitation(s) can safely be immediately implemented--namely, when the
beneficiary already has been identified as at-risk by his or her prior
plan, and the coverage limitations would continue in the same manner
under his or her new plan. We have not at this time identified
additional circumstances under which an exception to the 30-day minimum
between the first and second notices is warranted. We note that this
final rule does not change existing requirements that Part D plan
sponsors cannot pay fraudulent claims. With respect to a beneficiary
who changes plans within the same parent organization, we are
clarifying that the gaining plan must still meet the requirements set
forth at Sec. 423.153(f)(8)(ii). We do not believe it is advisable to
apply a different standard to a gaining plan just because it has the
same parent organization as the losing plan.
While we are finalizing our proposed exception to the timing of the
notices, we agree with the commenters who stated that beneficiaries who
change plans should still have an opportunity to change their
preferences for prescribers and pharmacies. Therefore, we are
clarifying that an at-risk beneficiary's right to submit new
preferences we are finalizing at (f)(9) also applies to beneficiaries
who switch plans. While a gaining plan could still implement the
restriction without providing 30 day advance notice, they must comply
with the statutory and regulatory requirements to accept beneficiary
preferences. Under the exception to the notice requirements that we are
finalizing in this rule, a gaining plan choosing to immediately impose
the restriction(s) of the prior plan is not required to resend the
initial notice described at (f)(5) that was sent by the prior plan, but
must issue a new version of the second notice described at (f)(6). This
notice, which is being developed by CMS, will allow the gaining plan to
include updated information from the initial notice that changes with
the change to the new plan (for example, plan contact information or
relevant medical benefits available to such beneficiary under the new
plan).
After consideration of all comments received on Sec.
423.153(f)(8), we are finalizing our proposal at paragraph (f)(8)(i) to
retain the minimum 30 day timeframe between the initial and second or
alternate second beneficiary notices (except as provided in
subparagraph (ii)), with a modification establishing a maximum
timeframe of 60 days between the notices.
Additionally, we are finalizing the proposed exception to the
minimum 30 day timeframe at Sec. 423.153(f)(8)(ii), which permits a
gaining plan to immediately issue the second beneficiary notice
required by (f)(6) and implement a continuation of the same claim edit
and/or pharmacy or prescriber lock-in for an at-risk beneficiary who
was already provided the initial and second notice for such
limitation(s) from the losing plan. As discussed above, we believe the
circumstances under which a limitation can be safely implemented
without advance beneficiary notice and are consistent with the
requirements for such exceptions at section 1860D-4(c)(5)(iv)(II) are
limited in scope. While, at this time, we have not identified
additional circumstances under which we believe an exception to the 30
day beneficiary notice is warranted under section 1860D-
4(c)(5)(B)(iv)(II), we will continue to evaluate this issue, and may
establish additional exceptions through future rulemaking.
(viii) Provisions Specific to Limitations on Access to Coverage of
Frequently Abused Drugs to Selected Pharmacies and Prescribers
(Sec. Sec. 423.153(f)(4) and 423.153(f)(9) Through (13))
Some of the drug management program provisions in CARA are only
relevant to ``lock-in.'' We proposed 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))
In the proposed rule, we noted that, at that time, we viewed
prescriber lock-in as 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 after case management or the implementation of a beneficiary
specific POS claim edit or a pharmacy lock-in. We also were concerned
about impacting an at-risk beneficiary's relationship with their
provider, and we sought comment on whether a 6-month delay before a
sponsor could implement prescriber lock-in would lessen burden on
prescribers.
As a result, we proposed in Sec. 423.153(f)(4)(iv) 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 specifically sought 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
later believed a beneficiary's access to coverage of frequently abused
drugs should be limited to a selected prescriber(s).
We received the following comments and our response follows:
Comment: Many commenters expressed significant concerns with the
proposal to require a Part D plan sponsor to wait at least six months
from the date the beneficiary is first identified as a potential at-
risk beneficiary before limiting that beneficiary to a prescriber for
frequently abused drugs, noting that it works against the goal of CARA
and defeats the purpose of the lock-in program. Moreover, many
commenters also expressed that a 6 month delay to prescriber lock-in
was not in the spirit of a national public health emergency, and may
actually place at-risk beneficiaries at even greater risk for adverse
health outcomes. A commenter expressed support for the 6 month delay,
noting that it would allow time for alternative interventions to be
implemented so as to not burden the prescriber unnecessarily. A
commenter offered a lengthy legal argument against the 6-month delay
for prescriber lock-in.
Response: In light of these comments, we have been persuaded not to
finalize require a 6 month waiting period before a plan may limit an
at-risk beneficiary to a prescriber for frequently abused drugs. We
agree with the majority of commenters that CMS should not impose a
waiting period for plan sponsors to implement a prescriber lock-in for
at-risk beneficiaries, and that once a beneficiary is deemed at-risk, a
plan sponsor should have the full range of limitations on access to
coverage for frequently abused drugs to employ for such beneficiaries.
We are persuaded

[[Page 16469]]

that our initial concern about the beneficiary's relationship with a
provider is significantly outweighed by the more immediate concerns for
the beneficiary's safety.
In addition, we are unpersuaded that our proposal would reduce
burden on providers. This is because a sponsor, in conducting the case
management is required under Sec. 423.153(f)(2), to contact
prescribers and the sponsor may seek a prescriber's agreement to a
beneficiary-specific POS claim edit pursuant to Sec. 423.153(f)(4).
Thus, we now believe that requiring a sponsor to wait 6 months to
contact the prescriber again to assist with additional case management
for the prescriber lock-in, and to possibly obtain the prescriber's
agreement to such lock-in, will actually increase provider burden.
For these reasons, we are not finalizing the proposal 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. Therefore, we have removed the
language from Sec. 423.153(f)(4) relevant to this 6-month waiting
period for prescriber lock-in.
(B) Selection of Pharmacies and Prescribers (Sec. Sec. 423.153(f)(9)
Through (13))
(1) Beneficiary Preferences (Sec. 423.153(f)(9))
Section 1860D-4(c)(5)(D)(iii) 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 network 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, for example, the beneficiary's preferred provider
would contribute to the beneficiary's abuse of prescription drugs. We
address exceptions to beneficiary's preferences later in the preamble.
In light of this language, we proposed a Part D plan sponsor must
accept an at-risk beneficiary's preferences for in-network prescribers
and pharmacies from which to obtain frequently abused drugs unless an
exception applies. In cases that involve stand-alone PDPs, we proposed
that a sponsor must accept the beneficiary's selection of prescriber,
unless an exception applies, because such PDPs do not have provider
networks. We further proposed that a stand-alone PDP or MA-PD does not
have to accept a beneficiary's selection of a non-network pharmacy,
except as necessary to provide reasonable access, which we discuss
later in this section. Our rationale for this proposal was that the
selection of network prescribers and pharmacies puts the plan sponsor
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.
Also, we did not propose to place a limit on how many times
beneficiaries can submit their preferences, but we did solicit
additional comments on this topic. Finally, under our proposal, the
sponsor would be required to confirm the selection of pharmacy and/or
prescriber in writing to the beneficiary either in the second notice,
if feasible, or within 14 days of receipt of the beneficiary's
submission.
We received the following comments and our response follows:
Comment: Commenters widely supported CMS's proposal that the
pharmacy or prescriber in which an at-risk beneficiary is locked-into
must be in-network for a plan, except to provide reasonable access or
when the plan does not have a relevant network. Specifically,
commenters noted that allowing selection of out of network pharmacies
or prescribers would undermine keeping beneficiary costs low, and
efforts to combat pharmacy-based fraud and abuse.
Response: We thank commenters for their support.
Comment: CMS received a handful of comments that disagreed that a
prescriber should have to be in-network, given some Medicare Advantage
beneficiaries may receive out-of-network treatment from providers due
to their relationships with the prescriber and the high quality of care
that they provide. These commenters requested that CMS eliminate the
requirement that a prescriber generally must be in-network if the plan
sponsor imposes a limit on a beneficiary's access to coverage for
frequently abused drugs to a selected prescriber or prescribers.
Response: We were not persuaded that sponsors should have to accept
a beneficiary's selection of an out-of-network prescriber or pharmacy,
unless needed to maintain reasonable access or if the plan does not
have a relevant network. Our rationale for this is that Section 1860D-
4(c)(5)(D)(iii) refers specifically to the beneficiary selecting a
network prescriber(s) and/or pharmacy(ies) and the plan sponsor
accepting such selections based on the beneficiary's preference. We
therefore believe that the statute does not contemplate requiring Part
D plan sponsors to select a beneficiary's preference of an out-of-
network prescriber or pharmacy in all instances.
However, because our requirements for drug management programs--as
proposed and finalized--permit stand-alone PDPs to use prescriber lock-
in, the requirement for a sponsor to accept the beneficiary's selection
of a network prescriber is inapplicable, and the sponsor must accept
the beneficiary's selection of a prescriber, unless an exception
applies, such as if the selection would contribute to the beneficiary's
abuse of prescription drugs. With regard to this exception, we note
that when there is a prescriber or pharmacy network, and the plan
sponsor asserts it would accept a beneficiary's in-network pharmacy or
prescriber preference(s) but such selection would contribute to
prescription drug abuse or drug diversion by the beneficiary, we would
question why such pharmacy or prescriber is in the sponsor's network.
We realize that in the case of at-risk beneficiaries enrolled in MA
plans that provide out-of-network coverage of services and are designed
and specifically authorized for that purpose (that is, PPO, PFFS, and
cost plans), these beneficiaries have access to supplemental services
out of network. However, as we stated above, Section 1860D-
4(c)(5)(D)(iii) states that if an at-risk beneficiary submits
preferences for which in-network prescribers and pharmacies the
beneficiary would prefer, the PDP sponsor shall select them. The
requirement, discussed later, that Part D prescription drug management
programs ensure reasonable access addresses the sponsor's selection
out-of-network prescribers and pharmacies when necessary and therefore
accommodate our regulations at Sec. 422.105; Sec. 422.112 that permit
out-of-network coverage.
We note that by requiring a plan sponsor to accept an at-risk
beneficiary's selection of an out-of-network prescriber, we would in
effect have a blanket requirement that a coordinated health plan to
manage an at-risk beneficiary out-of-network, which would be difficult
to achieve. For those at-risk beneficiaries locked into a particular
prescriber(s) and/or pharmacy(ies), prescriptions for frequently abused
drugs would need to be obtained from an in-network prescriber (when
such a network exists), even in the case of at-risk beneficiaries who
are enrolled in MA plan that provide for out-of-network coverage.

[[Page 16470]]

Therefore, we are finalizing our provision as proposed.
We wish to make a point of clarification regarding at-risk
beneficiaries who are entitled to fill prescriptions or receive
services from IHS, Tribal, and Urban Indian (ITU) organization
pharmacies and providers. An IHS I/T/U pharmacy or provider may be the
selected pharmacy or prescriber for such beneficiaries and they may go
to such a pharmacy or prescriber pursuant to our reasonable access
requirement, even if they are not in-network which we discuss again
later.
Comment: Regarding a limitation on how many times beneficiaries can
submit their preferences, many commenters suggested that we allow an
at-risk beneficiary to submit his or her preferences anywhere from 1 to
3 times per year, noting that it was important to cap the number of
times preferences can be submitted. A commenter noted that the
beneficiary's unlimited opportunity to change preferences for
prescribers and pharmacies will be problematic and burdensome, and
recommended that CMS place a limit on the number of times a beneficiary
may change preferences on an annual basis, unless they can provide good
cause for requesting the change. Suggested examples of good cause would
include moving beyond easy access to the prescriber or pharmacy; the
prescriber has discharged the beneficiary from his/her practice; or the
pharmacy is unable to provide the requested drugs.
Response: While commenters raised concerns that at-risk
beneficiaries should have some parameters around changing their
preferences for a selected pharmacy or prescriber, CMS must balance
curbing opioid overuse and misuse with ensuring reasonable access to
selected pharmacies and prescribers. Therefore, we will allow at-risk
beneficiaries to submit their preferences to plan sponsors without a
numerical restriction during the plan year. We note that the sponsor
does not have to make changes to the selection of pharmacy(ies) and
prescriber(s) based on the at-risk beneficiaries preferences if the
plan sponsor believes such changes are contributing to abuse or
diversion of frequently abused drugs, pursuant to Sec. 423.153(f)(10),
discussed above. Also, CMS will monitor for these issues and act
accordingly to ensure efficient operation of the program and prevention
of excessive administrative burden.
Comment: A commenter stated that an at-risk beneficiary should not
be locked-into pharmacies in which the plan sponsor or PBM overseeing
the drug management program has a financial interest.
Response: Since the selection of the pharmacy in which an at-risk
beneficiary is locked into is largely a beneficiary choice, and one
they are provided specifically in the statute with little exception,
CMS does not find this comment persuasive, and will finalize this
provision as proposed.
Comment: A commenter stated that plan sponsors should be able to
implement the change in a beneficiary's preference within 14 days after
the beneficiary has submitted the preference.
Response: We note that our proposal, which we are finalizing,
requires the sponsor to inform the beneficiary of the selection in the
second notice or if not feasible due to the timing of the beneficiary's
submission of preference, in a subsequent written notice issue no later
than 14 days after receipt of the submission.
Accordingly, we are finalizing Sec. 423.153(f)(9), as proposed. We
note that we added the words ``or change'' in paragraph (iii) for
consistency with the rest of the regulation text in this section.
(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 will
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 accepting his or her allowable
preference for pharmacy or prescriber from which the beneficiary must
obtain frequently abused drugs under the plan.
We received the following comments and our response follows:
Comment: Commenters generally agreed with our proposal that plan
sponsors may disallow a beneficiary's selection of a prescriber or
pharmacy that may contribute to prescription drug abuse or drug
diversion.
Response: We appreciate the commenters support.
Comment: A commenter suggested that CMS require plans/PBMs to
report the percentage of times when beneficiary preference is/is not
considered and to track which pharmacy the plan/PBM utilizes to
override patient preference.
Response: While we are not currently requiring that plans or PBMs
report to CMS the percentage of times when beneficiary preference is/is
not considered and to track which pharmacy the plan/PBM utilizes to
override patient preference, we will re-evaluate this policy in the
future if it becomes problematic. Therefore, we will closely monitor to
make sure plans are not inappropriately choosing to not accept
beneficiary preferences, in order to ensure efficient operation of the
program and prevention of excessive administrative burden.
While we received no comments specific to beneficiary appeal rights
when the plan's selection of pharmacies or prescribers for lock-in are
not aligned with the beneficiary's submitted preferences, we remind
plans that the statute at Sec. 1860D-2(c)(5)(E) specifically states
that the selection of pharmacy or prescriber for lock-in is subject to
appeal. If a beneficiary complains about being locked into a pharmacy
or prescriber that is not the one they selected, such complaint must be
treated as an appeal. We address beneficiary appeals rights later in
this preamble.
We are finalizing the following at Sec. 423.153(f)(10) Exception
to Beneficiary Preferences, as proposed.
(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, the
beneficiary's predominant usage of prescriber or pharmacy or both,
impact on cost-sharing, and reasonable travel time. We proposed Sec.
423.153(f)(11) to codify these statutory provisions.
Since the statute explicitly allows the beneficiary to submit
preferences, we interpreted 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

[[Page 16471]]

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 plan recognition that the beneficiary's selection will contribute to
prescription drug abuse or drug diversion, we proposed that the sponsor
must ensure reasonable access by choosing the network pharmacy or
prescriber that the beneficiary uses most frequently 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
proposed 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. We stated that 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. Sections 1860D-4(c)(5)(D)(ii)(I) and (II) address 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, which we proposed to codify at Sec. 423.153(f)(12). To address
chain pharmacies and group practices, we proposed that in the case of a
group practice, all prescribers of the group practice shall be treated
as one prescriber and all locations of a pharmacy that share real-time
electronic data should be treated as one pharmacy.
We proposed to interpret these provisions to mean that a sponsor
will be required to select more than one prescriber of frequently
abused drugs, if more than one prescriber has asserted during case
management that multiple prescribers of frequently abused drugs are
medically necessary for the at-risk beneficiary.
We received the following comments and our response follows:
Comment: A commenter noted that the reasonable access provisions
did not allow for situations where a patient who is locked-in is
hospitalized or develops a new medical condition that requires they see
a new physician, and that CMS should consider providing additional
flexibility in such unexpected or unplanned situations.
Response: We note that drugs dispensed during a hospitalization are
covered under the Medicare Part A benefit. Aside from that, plans are
required to provide reasonable access to at-risk beneficiaries in their
drug management programs under proposed Sec. 423.153(f)(11). Proposed
Sec. 423.153(f)(12) requires a Part D plan sponsor to select more than
one prescriber to prescribe frequently abused drugs when it reasonably
determines it is necessary to do so to provide the at-risk beneficiary
with reasonable access. To the extent that a new health condition
necessitates an at-risk beneficiary to change providers who prescribe
frequently abused drugs rather than see more than one, the beneficiary
can submit a new prescriber preference, as discussed earlier.
With respect to a hospital emergency room visit, for example, we
stated that in urgent circumstances, proposed Sec. 423.153(f)(11)
requires a Part D sponsor to ensure an at-risk beneficiary has
reasonable access in the case of emergency services, which we stated
means that 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. Thus, we believe Sec. 423.153(f)(11) and (12) address the
commenter's concerns.
Comment: We received a comment requesting that group practices be
permitted to designate one or more prescribers when a plan sponsor
intends to limit a beneficiary's access to coverage of frequently
abused drugs to a selected prescriber or prescribers at a group
practice, and permit the group practice to modify such designation from
time to time. The commenter stated that this requirement should apply
whether or not the prescribers at the group practice are all associated
with the same single Tax Identification Number (TIN).
Response: Under the provision we proposed and are finalizing, all
prescribers of a group practice are treated as one prescriber. A TIN is
a mechanism that can assist Part D sponsors in identifying group
practices, but as discussed earlier in the preamble, case management
can also reveal the existence of a group practice that is prescribing
frequently abused drugs to a beneficiary.
Comment: We received several comments that recommended that CMS re-
evaluate its policy for determining chain pharmacies, as identification
of which pharmacies share real-time data may be difficult in many
situations, noting that sponsors do not have an effective way to manage
such arrangements, and PBMs do not have the systems capabilities to
discern if their systems are integrated and interchangeable. A
commenter stated support for CMS' proposal as it relates to chain
pharmacies, but noted that managing this option will be challenging
absent additional instructions from CMS.
Response: Section 1860D-4(c)(5)(D)(ii) of the Act states that with
respect to 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 for purposes of an at-risk beneficiary's
selection of pharmacies. Until such pharmacies can be determined
through data, sponsors with drug management programs will have to
ascertain such pharmacies through the case management and beneficiary
notification processes. We therefore are finalizing this provision as
proposed.
Earlier in the preamble in responding to comments about prescriber
agreement, we stated that in the case of prescriber lock-in, if a
prescriber who has not agreed to this limitation insists that he or she
must be able to continue to prescribe frequently abused drugs for the
beneficiary, a plan sponsor may need to offer to lock-in the at-risk
beneficiary to more than one prescriber to ensure reasonable access
pursuant to Sec. 423.153(f)(12), for example, if the beneficiary has
been obtaining opioids from one prescriber and benzodiazepines from
another. Thus, we point out that in finalizing the drug management
program regulations, we are not interpreting the reasonable access
provisions to require a sponsor to select more than one prescriber, if
more than one prescriber has asserted during case management that
multiple prescribers of frequently abused drugs are medically necessary
for the at-risk beneficiary but only to consider it in the context of
the requirement to provide reasonable access. This should also be the
sponsor's approach when a beneficiary submits a preference for more
than one prescriber and/or more than one pharmacy as his or her
preference.
Also earlier in this preamble, we stated that an IHS pharmacy or
provider may be the selected pharmacy or

[[Page 16472]]

prescriber for at-risk beneficiaries who are entitled to fill
prescriptions from IHS, tribal, or Urban Indian (I/T/U) organization
pharmacies and receive services through the IHS health system, and that
they may go to such a pharmacy or prescriber pursuant to our reasonable
access requirement, even if they are not in-network. Therefore, we are
adding language to Sec. 423.153(f)(12) to address situations when the
sponsor reasonably determines that the selection of an out-of-network
prescriber or pharmacy is necessary to provide the beneficiary with
reasonable access. This language also addresses our earlier comment
that a stand-alone PDP or MA-PD does not have to accept a beneficiary's
selection of a non-network pharmacy or prescriber, except as necessary
to provide reasonable access.
Given the foregoing, we therefore finalize as proposed the
following at Sec. 423.153(f)(11), with a modification to include
language that the sponsor must ensure reasonable access by taking into
account ``all relevant factors, including but not limited to'' and to
renumber for better clarity: Reasonable access. In making the
selections under paragraph (f)(12) of this section, a Part D plan
sponsor must ensure that the beneficiary continues to have reasonable
access to frequently abused drugs, taking into account all relevant
factors, including but not limited to: (i) Geographic location; (ii)
Beneficiary preference; (iii) The beneficiary's predominant usage of a
prescriber or pharmacy or both; (iv) The impact on cost-sharing; (v)
Reasonable travel time; (vi) Whether the beneficiary has multiple
residences; (vii) Natural disasters and similar situations; and (viii)
The provision of emergency services.
We are also finalizing with modification for the addition of
language requiring the selection of an out-of-network prescriber or
pharmacy if necessary at Sec. 423.153(f)(12). Paragraphs (f)(12)(i)
and (ii) will specify the following:
A Part D plan sponsor must select, as applicable--
++ 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, or the selection
of an out-of-network provider is necessary; and
++ 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, unless the
selection of an out-of-network pharmacy is necessary.
For purposes of paragraph (f)(12) of Sec. 423.153, 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
++ Group practice, all prescribers of the group practice shall be
treated as one prescriber.
(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 proposed Sec. 423.153(f)(13)
to codify this statutory requirement.
We also proposed that plan sponsors must obtain the network
prescriber's or pharmacy's confirmation that the selection is accepted
before conveying this information to the at-risk beneficiary, unless
the prescriber or pharmacy agreed in advance in its network agreement
to accept all such selections and the agreement specifies how the
prescriber and pharmacy will be notified of its selection. In these
cases, the network provider would agree to forgo specific notification
if selected under a drug management program to serve an at-risk
beneficiary.
We received the following comments and our responses follow:
Comment: We received a comment that CMS should prohibit plan
sponsors from including in their provider agreements any requirement
that would require a prescriber to confirm in advance and forego
specific confirmation, if selected under a drug management program to
serve an at-risk beneficiary.
Response: In light of this comment, and given the fact that we are
finalizing a requirement for prescriber agreement for prescriber lock-
in, as discussed earlier in the preamble, we believe the appropriate
approach is that the required prescriber agreement during case
management satisfies the requirement that the plan sponsor notify the
prescriber that the at-risk beneficiary has been identified for
inclusion in a drug management program and the prescriber has been
selected as a prescriber that the beneficiary will be locked into for
purposes of frequently abused drugs. In our view, the process of
obtaining the prescriber agreement to prescriber lock-in also serves as
the receipt of confirmation from the prescriber, not to mention our
requirement that the sponsor make reasonable efforts to provide the
prescriber with a copy of the beneficiary notices that the sponsor must
provide, discussed earlier. Such an approach reduces unnecessary
repetition of communication with prescribers.
For network pharmacies, this approach means that the notification
that the at-risk beneficiary has been identified for inclusion in a
drug management program and the pharmacy has been selected as a
pharmacy that the beneficiary will be locked into for purposes of
frequently abused drugs and the pharmacy's confirmation can be
negotiated between the plan sponsor and the pharmacy, and if not, the
plan sponsor must do so on a case-by-case basis, which is also the case
for out-of-network prescribers and pharmacies.
Comment: A commenter proposed an additional exception to the
confirmation requirement for plan sponsors that own or operate their
own pharmacies, arguing that such confirmation would be unnecessary
given that the pharmacy would already be confirmed, as part of their
integrated system.
Response: We are not persuaded that an exception is needed in these
situations. If the pharmacy is a separate legal entity from the plan
sponsor, then the contract could contain a blanket agreement stating
that the pharmacy agrees to accept at-risk beneficiaries that the plan
sponsors locks into that pharmacy, as we mentioned in the proposed
rule. If the pharmacy is the same legal entity as the plan sponsor,
then notification is automatic, and no further notification or contract
language would be necessary.
Based on the comments and our responses, we are finalizing this
provision with modifications to state the following regarding
confirmation of selections(s):
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. For prescribers, this notification occurs during case
management as described in

[[Page 16473]]

paragraph (f)(2) or when the prescriber provides agreement pursuant to
paragraph (f)(4)(i)(B).
The sponsor must receive confirmation from the
prescriber(s) or pharmacy(ies) or both, as applicable, that the
selection is accepted before conveying this information to the at-risk
beneficiary, unless the pharmacy has agreed in advance in a network
agreement with the sponsor to accept all such selections and the
agreement specifies how the pharmacy will be notified by the sponsor of
its selection.
A sponsor complies with paragraphs (i) and (ii) as it
pertains to a prescriber by obtaining the prescriber's agreement
pursuant to Sec. 423.153(f)(4)(i)(B).
(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 proposed to integrate the
lock-in provisions with existing Part D Opioid DUR Policy/OMS.
Determinations made in accordance with any of those processes, at Sec.
423.153(f), and discussed previously, are interrelated issues that we
collectively refer to as an ``at-risk determination.'' In this final
rule, we are adding a definition of at-risk determination at Sec.
423.560 to describe a decision made under a plan sponsor's drug
management program in accordance with Sec. 423.153(f) that involves
the identification of an individual as an at-risk beneficiary for
prescription drug abuse; a limitation, or the continuation of a
limitation, on an at-risk beneficiary's access to coverage of
frequently abused drugs (that is, a beneficiary specific point-of-sale
edit the selection of a prescriber and/or pharmacy and implementation
of lock-in); and information sharing for subsequent plan enrollments.
We proposed 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. Consistent with
the existing Part D benefit appeals process, we proposed 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. We also proposed 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 an at-risk determination made under a drug management
program. While we did not propose to adopt auto-escalation, the
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
proposed 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 also proposed 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 Sec. 423.153(f).
In addition to the changes related to the implementation of drug
management program appeals, we also proposed 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).''
We received the following comments and our responses follow:
Comment: A few commenters strongly objected to beneficiaries not
having appeal rights during their designation as ``potential'' at-risk
beneficiaries at the time the initial notice is received from the plan
sponsor.
Response: As we noted in the proposed rule, when a beneficiary is
identified as being potentially at-risk, but has not yet been
definitively identified as at-risk, the plan is not taking any action
to limit such beneficiary's access to frequently abused drugs. Because
the plan sponsor has not taken any action to limit a beneficiary's
access at this point in the process, the situation is not ripe for
appeal. We proposed that a beneficiary will have the right to appeal a
determination made under a plan sponsor's drug management program when
the beneficiary receives the second notice explaining that access to
coverage for frequently abused drugs will be limited. We believe the
intent of the statute is to confer appeal rights to beneficiaries at
the point in the process at which a beneficiary is notified that access
will be limited and provide an explanation of the restrictions that
will be applied under the drug management program.
As discussed earlier in this preamble, the proposed 90 day maximum
timeframe for the plan sponsor to send the second or alternate second
notice is being reduced to 60 days under this final rule. Specifically,
the second or alternate second notice is to be provided to the
beneficiary no more than the earlier of the date the sponsor makes the
relevant determination or 60 days after the date of the initial notice.
This 60 day period may be used by a plan sponsor to process information
received from beneficiaries or communicate with prescribers who may
have been unresponsive prior to receiving a copy of the initial notice
the plan provided to the beneficiary. As we also previously noted in
this preamble, we do not expect plans to routinely take the maximum
amount of time to issue the second notice, and note that the plan must
send it sooner if they make the relevant determination sooner. Reducing
this period between the initial notice and the second or alternate
second notice to a maximum of 60 days balances plan sponsors' need for
time to process information from beneficiaries and prescribers, if
applicable, with providing timely notice to beneficiaries.
Comment: Several commenters encouraged CMS to make the appeals
process regarding lock-in as simple as possible for beneficiaries to
ensure that those who need particular drugs are able to access them.
These commenters suggested that CMS implement all of the protections of
CARA, including automatic escalation to independent review. Several
commenters do not agree with CMS' interpretation of the CARA language
on appealing lock-in and believe automatic escalation to the IRE would
ensure beneficiary due process and access to needed prescription drugs.
These commenters strongly oppose the use of the existing Part D appeals
process for appeals of at-risk status or other consequences of drug
management, and view the process as a significant barrier that will
increase the timeframe for the lock-in appeals process. Commenters
expressed concerns regarding case management and physician agreement as
additional hurdles for beneficiaries who are not at-

[[Page 16474]]

risk, in addition to plan compliance with the current requirements for
timely appeals. A few commenters stated that CARA contemplates a more
streamlined process that is easier for beneficiaries to navigate and
that automatic escalation would allow for improved tracking and
monitoring of the scope and impact of the lock-in program, in addition
to providing more uniform decision making across various plan programs.
A commenter suggested that CMS conduct analysis to determine which
option would prevent or reduce bias against beneficiaries, as well as
minimize the timeframe by which the review process occurs, and upon
implementation closely monitor the decisions of at-risk status to
ensure decisions are made in the best interest of the beneficiary. A
commenter recommended a separate appeals process that is similar to the
grievance process.
Response: We agree with commenters that the appeals process for
enrollees identified as at-risk should be as easy to navigate as
possible. As we noted in the proposed rule, 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 is not only required by statute, but will allow at-risk
beneficiaries to be more familiar with, and more easily access, the
appeals process as opposed to creating a new process specific to
appeals related to a drug management program. Since the statute
specifically refers to section 1860D-4(h) of the Act and the process we
proposed is consistent with the existing appeals process, we disagree
with the comment that further analysis of options is necessary to
``prevent or reduce bias against beneficiaries.'' As we noted in the
proposed rule, affording a plan sponsor the opportunity to review its
initial determination may result in resolution of the disputed issues
at a lower level of review and obviate the need for further appeal of
the issues to the Part D IRE which, in turn, will minimize the time for
reviewing and resolving disputes. With respect to the monitoring of
plan sponsors' at-risk decisions, appeal decisions involving at-risk
status will be subject to review under existing plan sponsor audit
processes. We do not believe that a process similar to the existing
grievance process, as recommended by a commenter, would comport with
the statute, which requires the use of the existing appeals process.
However, potential at-risk and at-risk beneficiaries retain their
existing right to file a grievance with the plan if they have
complaints about the prescription drug management program.
With respect to the comment on case management and physician
involvement, these are key components to drug management programs and
we disagree that these components create additional hurdles for
beneficiaries within the appeals process. In fact, we believe that the
extensive case management we expect to be performed under plan
sponsors' drug management programs, including ongoing communications
among the plan sponsor, enrollee, prescriber(s) and pharmacy, will
result in a relatively low volume of appeals under these programs. In
addition, the appeals that are processed will be informed by the case
management conducted by the plan sponsor and the involvement of the
physician.
Comment: Many commenters agreed with the proposal to utilize the
existing Part D appeals process for at-risk beneficiaries, including
not requiring automatic escalation for external review. These
commenters believed that use of the existing process is the simplest
and most administratively efficient approach, as it is familiar to
beneficiaries, plan sponsors, and other stakeholders. These commenters
also believed that plan sponsors should have the opportunity to review
additional information and potentially adjust their initial decision
before the case is reviewed by the IRE.
Response: We thank the commenters for expressing support for use of
the existing Part D benefit appeals process for beneficiaries
identified as at-risk under a plan sponsor's drug management program.
In addition to comporting with the statutory requirement, we agree with
the commenters that use of the existing appeals process is the most
administratively efficient approach and will result in better outcomes
for at-risk beneficiaries. Not only is the existing appeals process
familiar to enrollees, plans, and the IRE, but it allows a plan sponsor
the opportunity to review information it used to make an at-risk
determination under its drug management program (and any additional
relevant information submitted as part of the appeal), promotes the
resolution of issues at a lower level of administrative review and
potentially reduces the need for the beneficiary to further appeal the
issues in dispute. However, if the matter is not resolved by the plan
sponsor at the redetermination level, an at-risk beneficiary will have
the right to seek review by the Part D IRE.
Comment: With respect to the calculation of the amount in
controversy (AIC) for an ALJ hearing or judicial review, a commenter
expressed support for using a formula based on the value of any refills
for frequently abused drugs to calculate the AIC, noting that it will
provide a greater probability for higher review, benefiting both the
plan and the beneficiary.
Response: We thank the commenter for expressing support for the
proposal related to calculation of the AIC at Sec. 423.1970(b)(2) for
disputes related to identification as an at-risk beneficiary under a
plan sponsor's drug management program.
Comment: A few commenters requested clarification as to whether the
beneficiary Notice of Appeal Rights (reject code 569), which triggers a
pharmacy to provide the beneficiary with the standardized pharmacy
notice, Prescription Drug Coverage and Your Rights (CMS-10147), should
accompany any POS claim rejections regarding prescriber or pharmacy
lock-in or beneficiary-specific POS edits. Commenters recommended that
the CMS-10147 not be provided to beneficiaries when a claim rejects at
POS due to issues under a plan sponsor's drug management program.
Response: We agree with the commenters that a POS claim rejection
as a result of a restriction imposed under a plan sponsor's drug
management program should not trigger delivery of the standardized
pharmacy notice (CMS-10147). The pharmacy notice informs a beneficiary
to contact his or her Part D plan to request a coverage determination.
As discussed above in this final rule, a determination under a plan
sponsor's drug management program is not a coverage determination as
defined at Sec. 423.566. Instead, a determination made under a drug
management program is governed by the provisions proposed at Sec.
423.153(f) related to at-risk determinations. If a beneficiary
disagrees with a decision made under Sec. 423.153(f), the beneficiary
has the right to appeal such decision. The at-risk beneficiary will be
notified of this appeal right pursuant to the notice described at Sec.
423.153(f)(6).
Comment: Several commenters requested clarification that when a
beneficiary appeals their coverage limitation under the drug management
program, that the request should be processed as a redetermination and
not as a coverage determination. A few commenters requested
clarification as to whether or not the POS edit or a lock-

[[Page 16475]]

in would be a coverage determination. Commenters asked if Chapter 18 of
the Prescription Drug Benefit Manual would apply, and if so, noted that
CMS should release proposed changes to the guidance for comment.
Commenters inquired about how the CARA provisions would impact the
coverage determination and redetermination processes, including
approval and denial language used by plan sponsors. A commenter stated
that they do not believe that these are coverage determinations because
they involve access issues and being treated as such would pose system,
policy, and process challenges. This commenter also asked for
clarification on how this process would impact the appeals auto-forward
star measure if treated as a coverage determination.
Response: We did not propose to change the current definition of a
coverage determination at Sec. 423.566. As we stated in the proposed
rule, 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. 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 appeals provisions in Subpart M
and Subpart U. The 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)
will be subject to the processes proposed at Sec. 423.153(f).
What we did propose is 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. Thus, we
agree with these commenters that a determination made under a drug
sponsor's drug management program should not be considered a coverage
determination as defined at Sec. 423.566. If a beneficiary has a
dispute related to a determination under the processes set forth at
Sec. 423.153(f), the beneficiary has the right to request a
redetermination and potentially higher levels of appeal. Therefore,
drug management program disputes are subject to the appeals provisions
in Subpart M and Subpart U of the regulations and the guidance in
Chapter 18 of the Prescription Drug Benefit Manual also applies.
Disputes under a plan sponsor's drug management program will be
adjudicated under the existing appeals process and the regulatory
timeframes will apply. The manual guidance will be updated, as
necessary, to reflect any changes relevant to drug management program
disputes. With respect to the redetermination notice, plan sponsors may
use CMS' model redetermination notice (with modifications) or develop
their own notice for informing an enrollee of the outcome of the
appeal.
Comment: A few commenters suggested that these appeals be limited
to the beneficiary-level edit, the selected pharmacy or the prescriber,
and not the underlying criteria for identification and guidance.
Commenters noted that the appeal should be limited to the issue of
whether the beneficiary is an appropriate candidate for lock-in, and
not have any other scope. A commenter stated that the appeal should not
relate to whether the plan may impose prior authorization or other
utilization management restrictions on certain prescriptions. Rather,
according to the commenter, beneficiary appeals should be limited to
compliance with internal program criteria and CMS guidance, rather than
allowing beneficiaries to challenge the underlying criteria. A
commenter asked that CMS clarify how to effectuate a redetermination
that requires the reversal of one limit, but other limits remain (for
example, a formulary restriction and lock-in), and which limit takes
priority. This commenter stated that beneficiaries would have to
receive decision notices explaining that because of the remaining
limits, their drug access will continue to be limited. Another
commenter requested guidance on whether to handle a dispute involving
beneficiary-specific POS claim edit and a dispute about a pharmacy or
prescriber selection under the same appeal, or the POS edit as a
coverage determination and the lock-in as an appeal.
Response: As explained above, the statute explicitly states that
one of the issues that can be appealed is the identification as an at-
risk beneficiary for prescription drug abuse under a Part D drug
management program. With respect to the comment that an enrollee not be
permitted to challenge the ``underlying criteria,'' we interpret this
to mean a plan sponsor's clinical guidelines used to identify potential
at-risk beneficiaries. We believe that a beneficiary disputing his or
her at-risk determination will inherently be arguing that the plan's
criteria for identifying at-risk beneficiaries do not apply to his or
her particular circumstances. In addition to the at-risk determination,
an enrollee has the right under the statute to appeal the selection of
a prescriber or pharmacy as well as a coverage determination made under
a plan sponsor's drug management program. As previously noted,
determinations made under the processes at Sec. 423.153(f) will be
adjudicated under the existing Part D benefit appeals process. Such
determinations include limitation on access to coverage for frequently
abused drugs, including a POS claim edit for frequently abused drugs
that is specific to an at-risk beneficiary and a limit on an at-risk
beneficiary's access to coverage for frequently abused drugs to those
that are prescribed by one or more prescribers or dispensed to the
beneficiary by one or more network pharmacies. As also previously
noted, we did not propose to revise the existing definition of a
coverage determination. In addition to a determination made under the
processes at Sec. 423.153(f), a coverage determination, including an
exception, is also subject to appeal. For example, if an enrollee does
not dispute a POS edit for a quantity limit on a drug within 60 days of
the date of the second notice pursuant to Sec. 423.153(f)(6) but later
requests an exception to the quantity limit and that request is denied
by the plan sponsor, the enrollee has the right to appeal the denial of
the exception request. While the enrollee always has the right to
request a coverage determination, changes to previously imposed
limitations can also be implemented through ongoing case management and
a new determination under the processes at Sec. 423.153(f).
As noted earlier, a commenter asked whether a dispute regarding
pharmacy or prescriber selection for purposes of lock-in and a dispute
related to a beneficiary specific POS claim edit should be processed as
the same appeal. If a beneficiary's request for an appeal raises
multiple issues related to the limitations imposed on the beneficiary
under a drug management program, the plan sponsor must address each
issue as part of the appeal. For example, if the beneficiary's appeal
request includes a dispute related to pharmacy selection and a POS
edit, the adjudication and disposition of the appeal would involve both
issues. All disputes raised in the enrollee's appeal request that arise
under a plan's drug management program will be adjudicated as a single
case. Assuming the request is filed timely, an enrollee could later
appeal another limitation imposed under the drug management program,
such as the selection of a prescriber, and the adjudication and
disposition of that appeal would relate to prescriber selection for
purposes of lock-in and be considered separate and distinct from any
previous or pending appeal

[[Page 16476]]

requests. An appeal request must be filed within 60 calendar days from
the date of the notice that explains the limitations imposed under the
drug management program (unless there is good cause for late filing of
the appeal). In addition to appealing determinations made under the
processes at Sec. 423.153(f) that limit a beneficiary's access, 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.
With respect to effectuation of a redetermination of an at-risk
determination, we agree with the commenter that the redetermination
notice should clearly explain which aspect of the program is changing
(for example, change in pharmacy lock-in) and which restrictions remain
unchanged and will continue to apply to the beneficiary. We would like
to clarify that all changes must be effectuated pursuant to the
effectuation rules at Sec. 423.636 and Sec. 423.638; in other words,
one change does not take ``priority'' over another applicable change
with respect to effectuation. For example, if the outcome of a standard
redetermination related to pharmacy and prescriber lock-in is a change
to the pharmacy and the prescriber(s) an at-risk enrollee must use, the
plan sponsor must implement both of those changes concurrently and as
expeditiously as the enrollee's health condition requires, but no later
than 7 calendar days from the date the plan sponsor receives the
redetermination request.
Comment: A few commenters suggested that CMS confirm that a
beneficiary should not continue to receive inappropriate fills of
opioids during the appeals process.
Response: We thank the commenters for their request for
confirmation that a beneficiary who has been identified as at-risk, has
received the second notice, and has requested an appeal should not
continue to receive ``inappropriate fills'' of opioids during the
appeals process. We are interpreting ``inappropriate fills'' to mean a
fill that does not comport with the specific restrictions placed on the
at-risk beneficiary (for example, pharmacy lock-in). Once the
beneficiary has been notified via the second notice of applicable
restrictions, there should be no additional fills of any of the drug(s)
subject to the drug management program that do not satisfy the
parameters of the program established for the at-risk beneficiary,
unless those restrictions are later modified through the appeals
process.
Comment: A commenter asked that CMS clarify whether these appeals
are required to be handled based on the timeframes for a request for
benefit or a request for payment, and whether or not these are subject
to the expedited timeframes.
Response: As noted in the proposed rule, at-risk determinations
made under the processes at Sec. 423.153(f) would be adjudicated under
the existing Part D benefit appeals process and timeframes set forth in
Subpart M and Subpart U. As such, at-risk determinations will be
subject to the benefit request timeframes set forth at Sec.
423.590(a). We also proposed 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.
Consistent with existing rules, the beneficiary must meet the
requirements set forth in regulation in order to obtain an expedited
review of their at-risk determination.
Comment: In the case of a beneficiary appealing the Part D plan
sponsor's initial selection of a prescriber or pharmacy, a commenter
requested clarification whether the plan sponsor must obtain
confirmation of acceptance from the new prescriber and/or pharmacy the
beneficiary has selected as part of the appeal and whether this
confirmation needs to be made within the appeals timeframes. This
commenter expressed concern with obtaining such confirmation within the
short window for adjudicating the case.
Response: While we appreciate the commenter's concern regarding the
timeframe for making a decision, we believe that the current timeframes
afford the plan sponsor sufficient time to obtain confirmation from a
prescriber and/or pharmacy that they have accepted the beneficiary's
selection for lock-in. Under the current Part D benefit appeals
process, plan sponsors are required to obtain similar information from
prescribers and we believe that appeals of at-risk determinations
should not be materially different from the outreach plans conduct as
part of the coverage determination, exceptions, and benefits appeals
process. Please refer to the discussion regarding confirmation of
pharmacy and prescriber selection earlier in this preamble.
Comment: A few commenters requested clarification as to whether or
not plans would be permitted to terminate exceptions or implement
temporary exceptions, in consultation with the prescriber, prior to the
end of a plan year due to opioid case management and, if so, what prior
notice requirements will apply.
Response: Consistent with existing rules for the exceptions process
at Sec. 423.578(c), if a drug is found to no longer be safe for the
enrollee, then a previously approved exception request could be
terminated prior to the end of the plan year. This would include if the
plan determines that the previously approved exception is no longer
safe as part of an at-risk determination or ongoing case management
under its drug management program. A determination made by a plan
sponsor under the processes at Sec. 423.153(f) is subject to appeal.
For example, if a determination is made under a plan sponsor's drug
management program to implement a beneficiary-specific POS claim edit
for a drug, the beneficiary will be notified of that decision per the
provisions at Sec. 423.153(f)(6) and the decision may be appealed. If
the beneficiary does not appeal the decision within 60 calendar days
from the date of the notice that explains the limitations the plan
sponsor is placing on the beneficiary's access to coverage for
frequently abused drugs, the beneficiary retains the right to request a
coverage determination related to a beneficiary-specific POS edit at
any time. And, as stated above, changes to previously imposed
limitations can also be implemented through ongoing case management and
a new determination under the processes at Sec. 423.153(f).
Comment: A few commenters expressed concern regarding the lack of
any proposed review criteria that would be used by plans to evaluate
these appeals based on the at-risk determination. Commenters stated
that appeal requests for opioid restrictions do not fit in any existing
utilization management criteria (for example formulary and tiering
exceptions criteria) and request additional guidance from CMS. These
commenters are concerned that if the beneficiary appeals the limitation
beyond the plan, the IRE or ALJ/attorney adjudicator will likely review
these restrictions similar to a formulary or tiering exception and not
based on the at-risk determination. A commenter indicated that this
type of review may have an adverse impact on plans' D03 STARS Ratings,
and if approved, an exception must be effectuated through the end of
the plan year, which could remove the enrollee from case management for
the rest of the year even if they meet the criteria for such.
Response: We appreciate the commenters' concerns. If the case goes
to the IRE, or higher levels of appeal, the administrative case file
assembled by

[[Page 16477]]

the plan sponsor will contain the relevant information needed by the
adjudicator to make an informed decision, such as information used by
the plan sponsor to determine at-risk status, a description of the case
management the plan has performed and the beneficiary's preference with
respect to prescriber or pharmacy lock-in. We believe the regulations,
applicable manual guidance, the plan sponsor's review criteria and case
management notes on the access limitations that apply to the enrollee
(which would be included in the administrative case file) will be
sufficient for an adjudicator to review an appeal. With respect to the
comment on an approved exception, please refer to the introductory
section on drug management programs earlier in this preamble for a
discussion of determinations where continuing an approved exception is
no longer appropriate.
Comment: With respect to the handling and reporting of appeals, a
few commenters expressed concerns regarding the negative impact
choosing to implement the lock-in procedures could potentially have on
a plan. A commenter noted that opioid restriction reviews are not
represented in their reporting and there are no allowable values in the
audit universes that would designate a case as an opioid restriction.
As a result, the commenter believes that if an approved exception is
terminated prior to the end of the plan year, this could be detected on
audit and the plan sponsor may be found to be non-compliant with
exception processing requirements.
Response: If a plan sponsor makes a determination under its drug
management program per the processes at Sec. 423.153(f) that results
in a finding that a drug previously approved through the exception
process is found to no longer be safe for treating the beneficiary's
disease or medical condition, the previously approved exception can be
terminated prior to the end of the plan year. With respect to the
commenter's concern about such a case being reviewed on audit, the plan
sponsor would not be subject to a finding of non-compliance for having
terminated a previously authorized exception if such termination is
consistent with a clinically appropriate determination made under the
plan sponsor's drug management program.
Comment: A few commenters encourage CMS to communicate appeal-
related information and requirements in a clear, concise, and
consistent manner to beneficiaries, the IRE, and plan sponsors to
support a uniform understanding of the agency's rules and related
expectations. A commenter stated that beneficiaries are not always
aware of their exceptions and appeal rights and many do not understand
how the process works. This commenter expressed concern that there may
be a lack of transparency in the appeals process or excessive
administrative burden for the beneficiary and provider, which may
extend to those who may be inappropriately identified as at-risk and
subject to unnecessary access restrictions to needed medications.
Response: We agree with the commenters that appeals-related
information and requirements should be communicated in a clear,
concise, and consistent manner to beneficiaries, Part D plan sponsors,
and the IRE. We will continue to update existing materials and develop
new CARA related communications, such as the first and second notices
described elsewhere in this final rule, with these goals in mind.
After consideration of these comments, we are finalizing with
modifications the provisions on CARA appeals with two clarifying
changes. First, in this final rule, we are including a definition of
at-risk determination to Sec. 423.560 to clarify the types of actions
made under the processes at Sec. 423.153(f) that are subject to
appeal. In addition to coverage determinations made under a drug
management program, an enrollee has the right to appeal the
identification as an at-risk beneficiary for prescription drug abuse; a
beneficiary specific point-of-sale (POS) edit; the selection of a
prescriber or pharmacy for purposes of lock-in; and information sharing
for subsequent plan enrollments. Second, proposed new paragraph
(a)(1)(v) at Sec. 423.562 has been revised to clarify that
determinations made in accordance with the processes at Sec.
423.153(f) are collectively referred to as an at-risk determination as
defined at Sec. 423.560.
Finally, we did not receive comments on the technical changes to
Sec. 423.562(a)(1)(ii) and we are finalizing those changes as
proposed.
(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 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.
We proposed 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. However, we also noted that 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 their 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, termination of an at-risk
determination will not prevent an at-risk beneficiary from being
subsequently identified as a potential at-risk beneficiary and an 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.
We received the following comments and our response follows:
Comment: We received widespread comments that suggested that a
maximum 12-month lock-in period was arbitrary, and that automatic
termination of a beneficiary's at-risk status after 12 months threatens
beneficiary safety. Commenters suggested that termination of such
programs should be based on the needs of the beneficiary following a
clinical assessment, and that an arbitrary time limit assumes without
any clinical justification that he or she is no longer at-risk for drug
abuse after 12 months. Following this period, many commenters also
recommended plan sponsors should be permitted to conduct a review of
the beneficiary's at-risk status at the expiration of the first 12
months whether a beneficiary is determined at-risk, and if so,
implement a termination after an additional 12 months, for 24 months
total. While very few commenters supported the 12-month limitation
timeframe, they did not provide rationale for their support.
Response: We disagree with commenters that the 12-month period
lock-in period we proposed is arbitrary. As we noted in the proposed
rule, during the Stakeholder Listening Session on CARA held in November

[[Page 16478]]

2016, most commenters recommended a maximum 12-month period for lock-
in. We also noted that a 12-month lock-in period is common in Medicaid
lock-in programs.\16\ Additionally, Section 1860D-4(c)(5)(F) grants the
Secretary the authority to establish a maximum limitation period, and
we choose to exercise said authority.
---------------------------------------------------------------------------

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

CMS was, however, persuaded that a 12-month limitation maximum
might be too short to ensure for beneficiary safety in some instances,
and a longer limitation on access to coverage for frequently abuse
drugs might be needed in such cases. We also re-reviewed limitation
periods in Medicaid lock-in programs, and found that another very
common lock-in period is 24 months. An additional prevalent trend for
Medicaid lock-in periods is the ability to extend the lock-in period
based on a review of appropriateness of continuance of lock-in.\17\
This trend aligned very closely with the many commenters who suggested
a 24-month limitation period, and/or the ability of the plan sponsor to
extend the limitation as a result of a clinical assessment. As a
compromise between these two options, CMS is finalizing an initial 12-
month limitation period as proposed, but with ability modification
allowing for the sponsor to extend the limitation for up to an
additional 12 months. This extension will be dependent upon a clinical
assessment whether the beneficiary demonstrates that they are no longer
likely, in the absence of the limitation(s) the plan sponsor has placed
on their access to coverage for frequently abused drugs, to be an at-
risk beneficiary for prescription drug abuse at the conclusion of the
initial 12 months of the limitation. Thus, the maximum limitation
period will be 24 months.
---------------------------------------------------------------------------

\17\ Medicaid Drug Utilization Review State Comparison/Summary
Report FFY 2016 Annual Report: Prescription Drug Fee-For Service
Program (October 2017).
---------------------------------------------------------------------------

Based on the provisions discussed earlier regarding when prescriber
agreement is required, we believe the plan sponsor must, as part of the
required clinical assessment, obtain prescriber agreement to extend a
prescriber lock-in beyond the initial 12 months. Prescriber agreement
will also be required with respect to extending beneficiary-specific
POS edits. However, as with the initial POS edit, one can be extended
without prescriber agreement if no prescriber is responsive. Also, the
plan sponsor will be required to send the at-risk beneficiary another
second notice, indicating that the limitation is being extended, and
that they continue to be considered as an at-risk beneficiary. Aside
from the required prescriber agreement just described, a plan sponsor
will have discretion as to how they clinically assess whether an at-
risk beneficiary's demonstrates whether they are no longer likely to be
an at-risk beneficiary for prescription drug abuse in the absence of
limitation at the conclusion of the initial 12 months of the
limitation. This assessment might include a review of medical records
or prescription drug monitoring program data, if available to the
sponsor. Given that the plan sponsor will not be required to obtain
prescriber agreement to extend pharmacy lock-in past the initial 12
month period, we expect the plan sponsor to have a clinical basis to
extend the limitation, such as, the plan sponsor has recently rejected
claims for frequently abused drugs from non-selected pharmacies to an
extent that indicates the beneficiary may abuse frequently abused drugs
without the limitation.
Comment: A handful of commenters suggested that a limitation to
coverage for frequently abused drugs only be terminated as a result of
a clinical assessment by the at-risk beneficiary's prescriber with no
maximum limitation period.
Response: CMS believes it advisable to place a time limit on the
duration of a limitation on access to coverage for frequently abused
drugs that a plan sponsor can place on an at-risk beneficiary in order
to balance the beneficiary's right to utilize their Part D benefit
without encumbrance against with the sponsor's responsibility to manage
the Part D benefit and promote the safety of its enrollees.
Comment: A commenter suggested that CMS could consider requiring
Part D sponsors to send annual notifications to beneficiaries who are
subjected to a lock-in and their approving prescribers to let them know
the lock-in will be extended another 12 months. This would afford
beneficiaries and prescribers an annual opportunity to request that the
lock-in be reconsidered or raise any concerns.
Response: We decline to adopt this suggestion, as it does not
suggest a basis upon which the limitation would be extended. Under the
provision we are finalizing, a clinical assessment is required and, if
the limitation on access to coverage is extended beyond the initial 12
month period, the plan sponsor would be required to send the at-risk
beneficiary an additional second notice pursuant to Sec. 423.153(f)(6)
explaining that the limitation is being extended and for how long.
Also, a beneficiary, their representative, or their prescriber on
behalf of the beneficiary, is not precluded from requesting that the
plan revisit its determination that the beneficiary is an at-risk
beneficiary as defined at Sec. 423.100, or the terms of any limitation
imposed on the beneficiary under the plan's drug management program.
Based on these comments and our responses, we are therefore
finalizing additional language at Sec. 423.153(f)(14). The revised
language will specify that the identification of an at-risk beneficiary
as such must terminate as of the earlier of the following:
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 limitation
under this paragraph, to be an at-risk beneficiary; or
The end of a--
++ One year period calculated from the effective date of the
limitation, as specified in the notice provided under paragraph (f)(6)
of this section, unless the limitation was extended pursuant to
paragraph (f)(14)(ii)(B) of this section.
++ Two year period calculated from the effective date of the
limitation, as specified in a notice provided under paragraph (f)(6) of
this section, subject to the following requirements:

--The plan sponsor determines at the end of the one year period that
there is a clinical basis to extend the limitation.
--Except in the case of a pharmacy limitation imposed pursuant to
paragraph (f)(3)(ii)(B) of this section, the plan sponsor has obtained
the agreement of a prescriber of frequently abused drugs for the
beneficiary that the limitation should be extended.
--The plan sponsor has provided another notice to the beneficiary in
compliance with paragraph (f)(6) of this section.
--If the prescribers were not responsive after 3 attempts by the
sponsor to contact them within 10 business days, then the sponsor has
met the requirement of paragraph (f)(14)((ii)(B)(2) of this section.
--The sponsor may not extend a prescriber limitation implemented
pursuant to paragraph (f)(3)(ii)(A) of this section if no prescriber
was responsive.

[[Page 16479]]

(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 pursuant to Sec.
423.153(f)(2), certain data disclosure and sharing of information must
happen. First, CMS must identify potential at-risk beneficiaries to
sponsors who are in the sponsors' Part D prescription drug benefit
plans. In addition, a new sponsor 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 (that is, applying the
minimum clinical guidelines more frequently or in applying the
supplemental clinical guidelines). 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.
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.
We plan to expand and modify the scope of OMS and the MARx system as
appropriate to accommodate the data disclosures necessary to oversee
and facilitate Part D drug management programs.
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 proposed to codify the data disclosure and information sharing
process under the current policy, with the expansion just described, by
adding data disclosure requirements in Sec. 423.153.
We received the following comments and our response follows:
Comment: We received comments supportive of our proposal regarding
data disclosures and sharing of information. We did not receive
comments opposed to our proposal.
Response: We thank the commenters for their support.
Comment: A commenter recommended that we clarify sponsors must
conduct case management with respect to potential at-risk beneficiaries
who are current utilizers under the Part D sponsor and not such
beneficiaries who are identified by the prior sponsor. This commenter
stated further that if sponsors are required to conduct case management
on potential at-risk beneficiaries identified by the prior sponsor,
then the response due date should be extended for such cases (that is,
to next OMS quarter), as sponsors may need to contact the prior sponsor
for case details to conduct case management for the prior claims data.
In extending the outlier response due date, this commenter urged us to
consider that the volume of such cases may differ based on the size of
the prior sponsor.
Response: Pursuant to Sec. 423.153(f)(2)(i), sponsors are required
to conduct case management with respect to all potential at-risk
beneficiaries who are identified by CMS or the sponsor applying the
clinical guidelines, regardless of whether the beneficiary meets the
clinical guidelines based on PDE data from the beneficiary's current
Part D contract alone or across multiple contracts (including contracts
the beneficiary was previously enrolled in during the measurement
period).
Sec. 423.153(f)(2)(ii) does provide an exception to the case
management requirements with respect to potential at-risk beneficiaries
identified as such by their most recent prior plan, if the
identification has not been terminated and the sponsor obtains case
management information from the previous sponsor, which is clinically
adequate and up to date. Under the current policy, a sponsor may report
in OMS that a beneficiary's case is under review. We plan to keep this
response. However, because of this comment, we realize that there may
be some instances in which a sponsor receives notice about a potential
at-risk beneficiary who has just enrolled in its plan, but the deadline
to provide information to CMS within 30 days from the date of the most
recent prior CMS report identifying potential at-risk beneficiaries
pursuant to proposed Sec. 423.153(f)(15) might be very short.
Therefore, we are modifying Sec. 423.153(f)(15) such that the sponsor
would have to provide the information within 30 days from the date of
the most recent CMS report received after receiving such a notice.
Comment: We received a comment requesting clarity on the issue of
patient consent in the sharing of the patient personal health
information related to implementation of these finalized provisions.
Response: While the commenter's concerns about sharing personal
health information are not entirely clear, we note that Part D plan
sponsors are required under Sec. 423.136 to establish procedures for
maintenance and sharing of medical records and other health information
about enrollees in accordance with all applicable Federal and State
confidentiality laws.
Comment: We received a question asking what data sources we will
use to identify LIS beneficiaries who are potentially at-risk.
Response: We plan to use OMS to identify all potential at-risk
beneficiaries who meet the minimum criteria of the clinical guidelines,
discussed earlier, to report to Part D plan sponsors. We will modify
the OMS as appropriate to implement the Part drug management program
requirements. We will issue guidance and updated OMS technical user
guides to plan sponsors at a later time, including data sources used in
OMS reporting.
Comment: We received a question whether the original plan that
identified the beneficiary's at-risk status has a duty to inform the
new plan of individual's status.
Response: Plan sponsors will be required to communicate
beneficiaries' potential and at-risk statuses to each other through the
data disclosures and information sharing we are finalizing in this
section.
Comment: We received a question whether we will be providing new
response codes for pharmacy and prescriber lock-in in OMS, specifically
whether we will eliminate the response code ``BSC'' which stands for
``Beneficiary did not meet sponsor's internal criteria.'' We also
received some specific suggestions to: (1) Include responses to OMS
that differentiate between lock-in and a claim edit at POS;

[[Page 16480]]

(2) add a sponsor summary page to OMS; (3) make enhancements to MARx to
recognize internal and external contract changes; and (4) allow for
more complete case management information to be shared to obviate the
needs for sponsors to contact each other.
Response: We appreciate these suggestions. We plan to expand and
modify the scope of OMS and MARx as appropriate and technically
possible in light of the final requirements in this rule to accommodate
the data disclosures necessary to oversee and facilitate Part D drug
management programs. We plan to issue guidance about this expansion and
details on the modifications. Based on these comments, we are
finalizing Sec. 423.153(f)(15) with modifications to specify the
following regarding data disclosure:
CMS identifies potential at-risk beneficiaries to the
sponsor of the prescription drug plan in which the beneficiary is
enrolled.
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:
++ Provide information to CMS within 30 days of receiving a report
about a potential at-risk beneficiary from CMS.
++ Provide information to CMS about any potential at-risk
beneficiary that meets paragraph (1) of the definition in Sec. 423.100
that a sponsor identifies within 30 days from the date of the most
recent CMS report identifying potential at-risk beneficiaries.
++ Provide information to CMS about any potential at-risk
beneficiary that meets paragraph (2) of the definition in Sec. 423.100
within 30 days of the date after which the sponsor referred to in
paragraph (2).
++ Provide information to CMS as soon as possible but no later than
7 days of the date of the initial notice or second notice that the
sponsor provided to a beneficiary, or as soon as possible but no later
than 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.
++ 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--

--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
--The edit or limitation that the sponsor had implemented for the
beneficiary had not terminated before disenrollment.

We note that this final provision contains a technical correction
to refer to 7 days instead of 7 business days the first instance this
timeframe is used for consistency and added ``as soon as possible'' in
Sec. 423.153(f)(15(D). It also substitutes ``provide information'' for
``respond'' in one place for consistent terminology in this section.
(xii) Out of Scope Comments and Summary
We received comments on the following topics which were out of
scope of our proposal and to which we are therefore not responding: (1)
CMS oversight of Part D drug management programs; (2) Education of Part
D enrollees and providers regarding prescription drug management
programs; (3) A seven day limit on opioids for acute pain; (4)
Additional ideas about how to address the national opioid overuse
crisis; (5) Opioid use standards in Medicare Set Aside arrangement
(MSAs).
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 are 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). We solicited comments on this reinterpretation in the
proposed rule. In response to those comments and our further
consideration of this issue, we are providing guidance here to MA
organizations. As discussed in more detail below, the Bipartisan Budget
Act of 2018 (Pub. L. 115-123) amends section 1853 of the Act to
authorize waiver of the uniformity requirement beginning in 2020 for MA
plans that provide additional supplemental benefits (which are not
required to be health care benefits) to chronically ill enrollees. It
also amends section 1859 of the Act to require a nationwide revision of
the Medicare Advantage Value-Based Insurance Design test model
currently administered by the Center for Medicare and Medicaid
Innovation, which provides similar flexibility to participating MA
plans to offer targeted supplemental benefits. Our reinterpretation of
the uniformity requirements is not identical to these statutory
changes, but does provide a comparable flexibility for MA plans that is
consistent with the requirement that MA plans offer uniform benefits,
with uniform premium and uniform cost-sharing to all enrollees.
This regulatory requirement that MA plans provide uniform benefits
implements both section 1852(d) of the Act, which requires that
benefits under the MA plan are 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 medical criteria identified by the MA plan
for the benefits) are treated the same. In addition, there must be some
nexus between the health status or disease state and the specific
benefit package designed for enrollees meeting that health status or
disease state. As examples, uniformity flexibility will allow an MA
plan to offer an enrollee with diabetes any or all of the following:
Reduced cost sharing for endocrinologist visits;
More frequent foot exams as a tailored, supplemental
benefit;
A lower deductible.
In these examples, non-diabetic enrollees will not have access to
these tailored cost sharing or supplemental benefits; however, any
enrollee that develops diabetes will then have access to these
benefits.
We believe that our reinterpretation of the uniformity requirement
is consistent with the underlying Part C statutory requirements because
targeted supplemental benefits and cost sharing reductions must be
offered uniformly to all enrollees with a specified health status or
disease state. By tying specific supplemental benefits to specific
medical conditions, MA plans would be building upon the concept of
medical necessity and developing targeted benefits designed to treat
the illnesses of enrollees who meet specific medical criteria. Further,
treating similarly situated enrollees equally preserves the uniformity
of the benefits package. This

[[Page 16481]]

flexibility is similar to our policy over the past several years of
permitting MA plans to adopt tiered cost-sharing, that is, allowing
plans to have different cost sharing for contracted providers of the
same type (for example, hospitals) provided that enrollees are equally
able to access the lower cost-sharing providers.
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.\18\ 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, potentially 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.
---------------------------------------------------------------------------

\18\ 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, section 1557 of the
Affordable Care Act, and conscience and religious freedom laws.
---------------------------------------------------------------------------

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
criteria. Objective criteria that are contained in written policies and
that are clearly and adequately communicated to enrollees (such as in
the EOC and other plan documents) are necessary to ensure that these
tailored benefits are not provided in a discriminatory fashion and that
the overall package of benefits is uniform among similarly situated
individuals. We view this flexibility as an extension of the concept
that as an enrollee in good health without cardiac problems would not
receive cardiac rehabilitation services, an enrollee who does not meet
the medical criteria would not receive the targeted benefits offered by
an MA plan.
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), and we note that Bipartisan Budget Act of 2018 expands the
testing of the model under section 1115A(b) to all 50 states by 2020.
This demonstration includes some of the elements that are a part of our
reinterpretation of the uniformity requirements. However, there are
also features of the VBID demonstration that are unique to the
demonstration test, such as the ability for participating plans to
target Part D benefits, the restriction to certain medical conditions,
and the requirement that plans apply to participate. We expect the VBID
demonstration to provide CMS with insights into future VBID innovations
for the MA program.
After the publication of the proposed rule, Congress passed the
Bipartisan Budget Act of 2018 (Pub. L. 115-123). Section 50322 of the
law expanded supplemental benefits in Section 1852(a)(3) of the Act and
also authorized waiver of the uniformity requirements to permit MA
plans to offer targeted supplemental benefits for the chronically ill
through new provisions, effective in plan year 2020.
Specifically, the Bipartisan Budget Act of 2018 expands
supplemental benefits available to chronically ill enrollees by adding
a new subparagraph (D) to Section 1852(a)(3). This subparagraph expands
supplemental benefits for the chronically ill to include benefits that
``have a reasonable expectation of improving or maintaining the health
or overall function of the chronically ill enrollee and may not be
limited to being primarily health related benefits.'' These additional
supplemental benefits will be qualitatively different than the
supplemental health care benefits that MA plans may currently offer and
may continue to offer to enrollees who are not chronically ill. In
addition, it provides authority for the waiver of uniformity
requirements ``only with respect to supplemental benefits provided to a
chronically ill enrollee.''
We have evaluated how this new authority for the Secretary to waive
uniformity requirements relates to our concurrent reinterpretation of
uniformity requirements. We believe that a waiver of uniformity
requirements was authorized in this new provision to allow for the
delivery of different, non-uniform benefits to a subset of enrollees
that meet a specific definition: Chronically ill enrollee.\19\ We do
not believe that our reinterpretation, which also allows for targeted
benefits based on the disease state or health status, can only be
accomplished through a waiver of uniformity requirements.
---------------------------------------------------------------------------

\19\ The Bipartisan Budget Act specifically identifies the
chronically ill as individuals with (1) one or more morbidities that
is life threatening and limits overall function (2) has a high risk
of hospitalization and adverse outcomes, and (3) requires intensive
care coordination.
---------------------------------------------------------------------------

We believe that the waiver authorized under the Bipartisan Budget
Act is necessary in order to allow MA plans the flexibility to offer
chronically ill enrollees supplemental benefits that are not uniform
across the entire population of the chronically ill. The Bipartisan
Budget Act states that supplemental benefits must ``have a reasonable
expectation of improving or maintaining the health or overall function
of the chronically ill enrollee.'' This means that MA plans do not have
to offer uniform supplemental benefits to all chronically ill
enrollees, and instead, may vary supplemental benefits offered to the
chronically ill as it relates to the individual enrollee's specific
medical condition and needs. In other words, a supplemental benefit
adopted under the new statutory provision may not be provided to a
chronically ill enrollee if that benefit does not have a reasonable
likelihood of improving that enrollee's health condition. Therefore, we
have determined that the waiver of uniformity requirements and the
enactment of section 1852(a)(3)(D) of the Act does not limit our
authority to interpret sections 1851(d) and 1854(c) of the Act as
permitting uniform benefits to include specific services targeted for
groups of similarly situated specific enrollees based on medical
criteria.
Our reinterpretation of uniformity requirements maintains the
spirit of the MA regulations at Sec. 422.100(d), which aims for equal
treatment across all similarly situated enrollees. A specific health
status or disease state--or meeting a specific group of medical
criteria--is merely a means of ``grouping'' similarly situated
enrollees for equal access to and treatment in connection with coverage
of benefits.

[[Page 16482]]

All enrollees in that group must have access to the same targeted
benefits. The new expansion of supplemental benefits for the
chronically ill breaks that construct because the needs of one
chronically enrollee may be very different from those of another within
the same health status or disease state. As such, a waiver was
authorized to provide for differences in supplemental benefits across
chronically ill enrollees in order for MA organization to craft
specific supplemental benefit offerings for each vulnerable plan member
so that individual needs are met.
Further, our reinterpretation of uniformity requirements is
compatible with the new legislation in Bipartisan Budget Act. Beginning
in 2020, MA plans may offer three forms of supplemental benefits:
``standard'' supplemental benefits offered to all enrollees;
``targeted'' supplemental benefits offered to qualifying enrollees by
health status or disease state; and ``chronic'' supplemental benefits
offered to the chronically ill. The first two (standard and targeted)
will be allowable in 2019. Only ``chronic'' supplemental benefits will
be evaluated under the new expansive definition in the Bipartisan
Budget Act and be eligible for a waiver of the uniformity requirements.
Standard and targeted supplemental benefits will be evaluated under our
existing interpretation of whether the benefit is ``primarily health
related.'' It is possible that an enrollee qualifies for a ``targeted''
supplemental benefits as well as ``chronic'' supplemental benefits. In
that circumstance, the MA plan must provide the targeted supplemental
benefits as long as the enrollee establishes the required health status
or disease state and the benefits are medically appropriate. However,
the MA plan must only provide ``chronic'' supplemental benefits if the
benefit has a reasonable expectation of improving or maintaining the
health or overall function of the chronically ill enrollee.
Based on these differences, it will be important for MA plans to
identify in their bids and in their Evidence of Coverage documents
which supplemental benefits are offered as ``standard'', ``targeted'',
or ``chronic'' benefits. CMS will evaluate the acceptability of the
supplemental benefit offering based on this designation and the
standards identified in section 1852(a)(3) of the Act. We believe that
both the new uniformity interpretation and the new statutory provision
will succeed in increasing MA plans' flexibility and plan options and
ultimately allow for better health outcomes.
We received the following comments, and our response follows:
Comment: A number of commenters supported CMS' implementation of
this reinterpretation. These commenters stated that their ability to
lower cost sharing will help beneficiaries seek high value and
effective care.
Response: We thank commentators for their support of this
reinterpretation.
Comment: Commenters suggested that CMS include regulatory text in
the final rule that confirms that the flexibility that will be allowed
in the MA uniformity requirements.
Response: In this final rule, we are reinterpreting existing
statutory and regulatory authority to allow MA organizations the
ability to reduce cost sharing for certain covered benefits, offer
specific tailored supplemental benefits, and offer different lower
deductibles for enrollees that meet specific medical criteria. Thus, it
is unnecessary to provide additional regulation language.
Comment: A number of commenters requested that CMS provide
additional sub-regulatory guidance surrounding this policy.
Response: We will provide additional guidance and update all
corresponding guidance documents (that is, bid guidance and operational
guidance) to reflect the new interpretation. This guidance will be
available before contract year 2019 bids are due.
Comment: We received a number of comments asking that CMS issue
sub-regulatory guidance with examples for permissible and impermissible
actions, as well as examples of what would be considered
discriminatory. In addition, others suggested that CMS specify the
medical criteria that MA plans should use to determine enrollee
eligibility as well as clear guidelines for eligible tailored
supplemental benefits and/or reduced cost sharing.
Response: CMS will provide additional operational guidance before
CY 2019 bids are due.
Comment: A commenter recommended that CMS open its implementing
guidance to public comment prior to issuance.
Response: We appreciate this comment. We will not be able to
solicit industry comment in time for CY 2019 bids. However, we will
take this suggestion under consideration as we develop future guidance
and will reach out for input as needed.
Comment: A number of commenters requested that CMS to provide
certain technical clarifications. For instance, commenters questioned
whether the plan-level deductible could be eliminated, or just reduced,
and if lower cost sharing means a zero-dollar copay.
Response: Yes, under this reinterpretation, a plan may reduce or
eliminate a deductible, co-pay, or cost sharing for Part C services. We
remind all organizations that this is reinterpretation is about MA
benefits only and does not permit changes in Part D cost sharing or
Part D benefits, which must be consistent with Part D applicable law
and CMS policy. In addition, additional operational guidance will be
provided before CY 2019 bids are due.
Comment: We also received comments asking CMS to clarify whether a
plan may reduce or eliminate certain cost sharing based on
participation in a disease management program.
Response: Yes, under this reinterpretation, a plan may restrict
cost sharing reductions based on participation in a disease management
program so long as there is equal access to the disease management
program based on objective criteria related to a health status or
disease state.
Comment: We received comments asking CMS to clarify whether a plan
may offer different co-pays to a subset of the population for some
visits, but not all.
Response: We appreciate the comment and are still considering how
our new interpretation of the uniformity requirement would apply to
such situations. We intend to provide clarifying guidance on this issue
through HPMS memoranda and updates to the Medicare Managed Care Manual.
Comment: A commenter requested that CMS clarify whether reduced
cost sharing can be extended to premiums.
Response: No, this flexibility does not extend to premiums;
beneficiaries in the same plan must have the same premium. Allowing
different premiums would violate section 1854(c) of the Act, which
explicitly requires uniform premiums. Our reinterpretation of section
1854(c), section 1852(d) regarding access to benefits for all
enrollees, and the regulations implementing those statutes permits only
reductions in Part C cost sharing and deductibles, and in targeting
Part C supplemental benefits. As noted elsewhere, these specific
benefits must be tied to health status or disease state and must be
applied to health care services that are medically related to each
disease condition. Additionally, targeted benefits and reduced cost
sharing must be offered in a manner that ensures that similarly
situated individuals are treated uniformly is consistent with the
uniformity

[[Page 16483]]

requirement in the Medicare Advantage (MA) regulations at Sec.
422.100(d).
Comment: We received a comment asking CMS to confirm if MA plans
may choose to apply these flexibilities to out-of-network benefits.
Response: CMS will provide additional guidance and update all
corresponding guidance documents to reflect the new interpretation.
This guidance will be available before CY 2019 bids are due.
Comment: We received comments requesting that CMS encourage plans
to offer such flexibilities to beneficiaries with specific conditions
(for example, dementia), stating that such flexibilities could help the
ongoing treatment.
Response: In the proposed rule, we stated that an MA plan may offer
reduced cost sharing, deductibles, and or targeted supplemental
benefits to enrollees diagnosed with specific diseases. 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.
We do not have the authority to restrict or mandate which diagnoses or
health conditions a plan chooses for this flexibility. Plans may
determine which diagnoses or health conditions they choose to offer
these flexibilities. CMS encourages plans to consider the population of
their plan when making these decisions.
Comment: We received a number of comments requesting that CMS allow
reduced cost sharing and targeting supplemental benefits based on
conditions unrelated to medical conditions, such as living situation
and income. A commenter suggested CMS allow plans to reduced premiums
for beneficiaries who sign up for automated premium payments.
Response: The revised uniformity interpretation does not allow
plans to reduce cost sharing and offer targeted supplemental benefits
based on criteria unrelated to a diagnosis or health condition. We have
determined that a plan may only provide access to targeted supplemental
benefits (or specific cost sharing for certain services or items) based
on health status or disease state. In identifying eligible enrollees,
the MA plan must use medical criteria that are objective and
measurable. In addition, 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 diagnosis or health condition. Note that, effective CY 2020, the
Bipartisan Budget Act of 2018 calls for a new category of supplemental
benefits to be made available to chronically ill enrollees that are not
limited to being primarily health related. Because the new benefits
will not be limited to the primarily health related standard, it is
possible for certain offerings to address issues beyond a specific
medical condition, such as social supports. However, the basis for
offering the new benefits will be based solely on an enrollees'
qualification as ``chronically ill'' and may not be based on conditions
unrelated to medical conditions, such as living situation and income.
Comment: We received a comment urging CMS to include an affirmation
that C-SNPs would automatically be permitted to adjust benefits and
cost sharing based on the eligibility groupings that CMS has approved
for each C-SNP.
Response: CMS will update sub-regulatory guidance to clarify the
impact of both this reinterpretation and the Bipartisan Budget Act on
SNP policy.
Comment: A commenter suggested that CMS should also provide
clarification on how the additional benefit flexibility for highly
integrated dual eligible special needs plans (D-SNPs), as outlined in
Chapter 16b of the Medicare Managed Care Manual, is retained and/or
modified under these provisions.
Response: Chapter 16b and any corresponding guidance will be
updated to clarify any impact this reinterpretation has on D-SNP
policy.
Comment: A commenter asked CMS to allow plans to provide certain
supplemental benefits only to fully integrated D-SNP (FIDE SNP)
enrollees who do not meet nursing home level of care requirements that
would otherwise make them eligible for home and community-based
services under an Elderly Waiver.
Response: CMS will update sub-regulatory guidance to clarify the
impact of both this reinterpretation and the Bipartisan Budget Act on
D-SNP policy.
Comment: We received some comments suggesting that CMS allow plans
to reduce cost sharing and offer targeting supplemental benefits based
on functional status, in addition to a medical condition.
Response: There must be an underlying disease condition that is
diagnosed, such as Alzheimer's disease or Parkinson's disease, in order
for the plan to reduce cost sharing and offer targeted supplemental
benefits. As stated in the proposed rule, 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.
Specifically, MA plans offering targeted benefits will be responsible
for developing the criteria to identify enrollees who fall within each
of the clinical categories selected by an organization. Furthermore,
cost sharing reductions and targeted supplemental benefits must be for
health care services that are medically related to each disease
condition.
Note that, effective CY 2020, the Bipartisan Budget Act of 2018
calls for a new category of supplemental benefits to be made available
to chronically ill enrollees that are not limited to being primarily
health related. Because the new benefits will not be limited to the
primarily health related standard, it is possible for certain offerings
to address issues beyond a specific medical condition, such as social
supports. However, the basis for offering the new benefits will be
based solely on an enrollees' qualification as ``chronically ill'' and
may not be based on conditions unrelated to medical conditions, such as
living situation and income.
Comment: We received a comment asking CMS to expand our definition
of health status or disease state to include ``medically complex
patients.''
Response: We have determined that a plan may only provide access to
targeted supplemental benefits (or specific cost sharing for certain
services or items) based on health status or disease state. In
identifying eligible enrollees, the MA plan must use medical criteria
that are objective and measurable. MA plans offering targeted benefits
are responsible for developing the criteria to identify enrollees who
fall within each of the clinical categories selected by an
organization.
Comment: We received comments requesting that CMS clarify whether a
plan may reduce cost sharing only for a subset of high-quality network
providers as long as all members with the same health status or disease
state receive the same lower cost sharing for using these providers.
Response: Yes, under this flexibility, a plan may reduce cost
sharing for certain high-quality providers to members with a specified
health status or disease state. MA plans may identify high-value
providers across all Medicare provider types. This can include
physicians and practices, hospitals,

[[Page 16484]]

skilled-nursing facilities, home health agencies, ambulatory surgical
centers, etc.
Comment: Some commenters suggested CMS delay implementation,
stating that plans need time to enhance their existing internal tools
and systems to accommodate varying benefit structures for different
sub-populations within a single plan. Some commented that this may be
administratively burdensome to implement, and therefore, may not be
equal adoption across all MA organizations.
Response: CMS will permit this flexibility beginning in CY 2019. MA
organizations that need additional time to consider whether and how to
take advantage of this new flexibility are not required to offer
targeted supplemental benefits or reductions in cost sharing or
deductibles. We believe it is important to allow plans the flexibility
to target and better provide for the needs of their enrollees. Our
reinterpretation of the uniformity requirements offers flexibility to
MA organizations in designing their coverage and is not a mandate.
Comment: Some commenters recommended that only high-performing
plans be permitted to provide flexibility in the MA Uniformity
Requirements.
Response: CMS appreciates these comments and believes this
flexibility will help enrollees seek higher value care. Therefore, CMS
will permit all plans to use this flexibility beginning in CY 2019. CMS
appreciates these comments and believes this flexibility will help
enrollees seek higher value care. This flexibility is not a change to
the regulation; it is a reinterpretation of an existing regulation.
Therefore, all MAOs must comply with uniformity requirements regardless
of individual plan performance. CMS will permit all plans to use this
flexibility beginning in CY 2019.
Comment: We received a number of comments suggesting that this
reinterpretation is premature. Some commenters suggested that CMS wait
until the VBID demonstration has concluded.
Response: The existing VBID demonstration will continue.
Information regarding this demonstration can be found at https://innovation.cms.gov/initiatives/vbid/. While we have adopted features of
the VBID demonstration, the VBID demonstration and the new uniformity
flexibilities are distinct. CMS will permit this flexibility beginning
in CY 2019, as we believe it is important to allow plans the
flexibility to target and better provide for the needs of their
enrollees. We hope that the VBID demonstration will provide CMS with
insights into future innovations for the MA program.
Comment: Some commenters suggested that CMS take a measured
approach by setting initial limits on the number of targeted conditions
and tailored benefit packages that an MA plan can offer.
Response: The existing uniformity flexibility regulatory authority
does not allow CMS to limit the number of targeted conditions without
additional rulemaking.
Comment: Some suggested that CMS adopt the oversight requirements
in the VBID demonstration in allowing plans to use this flexibility
under the new reinterpretation.
Response: Currently, the VBID demonstration has a number of
oversight requirements, including some marketing restrictions,
monitoring to ensure compliance with demonstration rules, data
reporting to help CMS evaluate outcomes, and restricting low performing
plans from participation. CMS has no plans to adopt these additional
demonstration requirements. First, CMS has a robust compliance and
auditing program to oversee MA plans and all benefit packages are
reviewed by CMS. Therefore, we do not believe any additional monitoring
or compliance is needed. Second, MA rules require that this benefit be
available in marketing materials and transparent to enrollees.
Therefore, we cannot restrict marketing this benefit. Third, we believe
we do not need to introduce any additional uniformity reporting as the
VBID reporting is designed to aide demonstration evaluation. However,
CMS will monitor the implementation of this flexibility and make
appropriate adjustments as needed.
Comment: Commenters asked that CMS clarify how this flexibility
impacts the VBID demonstration.
Response: The existing VBID demonstration will continue. We note
that Bipartisan Budget Act of 2018 expands the testing authority under
section 1115A(b) to all 50 states. This flexibility will not impact the
VBID demonstration, which is separate from this rulemaking. The new
flexibilities discussed here will have no impact on current VBID
operations. Information regarding this demonstration can be found at
https://innovation.cms.gov/initiatives/vbid/. The VBID demonstration
will provide CMS with insights into future innovations for the MA
program.
Comment: A commenter asked if CMS planned to implement reporting
requirements related to this flexibility, noting that such requirements
are in the VBID demonstration.
Response: CMS has no plans to add any reporting requirements
related to uniformity flexibility at this time. We do note that MA
plans must explain the targeted supplemental benefits and reductions in
cost sharing and deductibles in their bids (OMB 0938-0763), including
information necessary for CMS to evaluate if there is any
discrimination involved. In addition, MA plans must include
descriptions of these benefits in benefit disclosures required under
Sec. 422.111.
Comment: We received a number of comments expressing concern that
this policy could increase beneficiary confusion, particularly as it
relates to marketing materials provided during the annual election
process.
Response: To mitigate beneficiary confusion, CMS will require MA
plans that take advantage of this flexibility to include benefit
flexibility information in their CY 2019 EOC. Also, indication of
additional benefits and/or reduced cost sharing for enrollees with
certain health conditions will be displayed in Medicare Plan Finder.
Comment: We received several comments asking CMS to clarify whether
plans will be permitted to market this flexibility to potential
enrollees. Some suggested CMS permit marketing. Others suggested CMS
prohibit marketing.
Response: Plans will be allowed to market the additional benefits
and/or reduced cost sharing to potential enrollees to give
beneficiaries the information necessary to choose the best plan for
their health care needs. Plans will be required to follow the same CMS
marketing rules for this benefit, as they are required to follow when
marketing any other benefit. This includes ensuring that materials are
not materially inaccurate or misleading or otherwise make material
misrepresentations. Specifically, CMS will require that plans include
comprehensive benefit flexibility information in their CY 2019 EOC and
indicate the additional benefits and/or reduced cost sharing in
Medicare Plan Finder.
Comment: A number of commenters expressed concern that this policy
may lead to discrimination. For example, some commenters expressed
concern that a plan may balance the reduction of cost sharing for one
group by increasing cost sharing for others. Further, some commenters
expressed concern that this could lead to lead to ``cherry-picking'' by
plans for beneficiaries with low-cost conditions while discriminating
against

[[Page 16485]]

those with higher-cost chronic conditions.
Response: As noted in the preamble language, the implementation of
this flexibility must not violate existing anti-discrimination rules
(for example, service category cost sharing and per member per month
actuarial equivalence standards communicated by CMS annually in the
Call Letter). Organizations that exercise this flexibility must ensure
that the cost sharing reductions and targeted supplemental benefits
only apply to healthcare services that are medically related to each
health status or disease state. CMS will not permit cost sharing
reductions across all benefits for an enrollee; cost sharing reductions
must be for specific benefits related to a specific health status or
disease state. Specifically, plans must not target cost sharing
reductions and additional supplemental benefits for a large number of
disease conditions, while excluding other higher-cost conditions. CMS
will review benefit designs to make sure that targeted disease state(s)
and/or clinical condition(s) included in the benefit design are non-
discriminatory and that higher acuity, higher cost enrollees are not
being excluded in favor of healthier populations.
Comment: A commenter recommended that plan members should have full
appeal rights with respect to denial of access to supplemental
benefits.
Response: All negative coverage decisions are subject to appeal
rights. CMS is reinterpreting existing statutory language at section
1854(c) and 1852(d) of the Act, and the implementing regulation at
Sec. 422.100(d), to allow 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. We have reviewed and considered all
comments on this clarification and will begin implementing this
additional flexibility in CY 2019. In addition, we will provide
additional operational guidance before CY 2019 bids are due.
3. Segment Benefits Flexibility
In reviewing section 1854(h) of the 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 so long as the supplemental 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. As county-level
areas, these are separate rating setting areas within the plan's
service area; no further subdivision is permitted. We are proposed to
revise our interpretation of the existing statute and regulations to
allow MA plan segments to vary by supplemental benefits in addition to
premium and cost sharing, consistent with the MA regulatory
requirements defining segments at Sec. 422.262(c)(2).
We received the following comments, and our response follows:
Comment: We received a number of comments supporting the
implementation of this reinterpretation.
Response: We thank commentators for their support of this
reinterpretation.
Comment: Many commenters requested that CMS clarify if this
segmentation can be offered to a sub-set of the network providers.
Response: The MA regulations at Sec. 422.2 define a provider
network as occurring at the MA plan level: ``. . . the providers with
which an MA organization contracts or makes arrangements to furnish to
furnish covered health care services to Medicare enrollees under a MA
coordinated care plan or network PFFS plan''. In implementing its
network adequacy standard CMS allows for networks at the MA plan level
(a provider specific plan) or at the contract level. In addition to
being inconsistent with the regulations we believe that allowing
networks to be established at the MA plan segment level would introduce
an unnecessary level of complexity to the MA program.
Comment: A commenter asked if there are any restrictions to the
benefits that may vary and if all supplemental benefits and services
are eligible, or is this specific to a set of supplemental benefits?
Response: Plans may vary supplemental benefits by plan segment
consistent with the bid submitted for the segment. All basic benefits
(that is, Part A and B benefits) must be offered by all MA plans in all
segments.
Comment: A commenter asked if the maximum out-of-pocket (MOOP)
amount was one of the elements that may vary.
Response: Yes, because the MOOP is an element of the cost-sharing
structure of the plan, each segment may have its own MOOP. This
flexibility already exists in MA.
Comment: Commenters asked CMS to clarify if in sub-regulatory
guidance that plans are allowed to display multiple segments in the
Evidence of Coverage (EOC), Summary of Benefits, and other coverage
documents.
Response: Plans will be required to follow the same CMS
communication, disclosure and marketing guidelines for each segment In
addition, as noted in section II.B, CMS will require plans to include
comprehensive benefit flexibility information in their CY 2019 (EOC).
Comment: A commenter noted that CMS uses both ``supplemental
benefits'' and ``benefits'' in the preamble language and asked CMS
explicitly clarify if this new segment benefit flexibility applies only
to supplemental benefits and not to the core MA benefit package to
which beneficiaries are entitled.
Response: Thank you for the comment. All MA plans must provide
basic benefits--meaning Part A and Part B benefits consistent with the
cost-sharing limits identified in section 1854(e)(4)(A) \20\ and Sec.
422.100(j) and (k)--in all 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. Supplemental
benefits include cost-sharing reductions from the actuarial equivalent
on average of original Medicare for basic benefits and coverage of
additional services and items not covered by original Medicare.
---------------------------------------------------------------------------

\20\ Beginning in 2006, an MA plan may reduce cost sharing below
the actuarial value specified in section 1854(e)(4)(A) of the Act
only as a mandatory supplemental benefit. The actuarial value of the
deductibles, coinsurance, and copayments applicable to the basic
benefits on average to enrollees in an MA plan must be equal to the
actuarial value of the deductibles, coinsurance, and copayments that
would be applicable with respect to such benefits on average to
individuals enrolled in original Medicare.
---------------------------------------------------------------------------

Comment: Some commenters expressed concern that CMS is moving too
quickly in implementing this reinterpretation and that such flexibility
should be tested on a small scale first.
Response: We believe this flexibility will allow plans to better
target and provide for the needs of their populations. CMS will monitor
the implementation of this flexibility and make appropriate adjustments
as needed. In addition, we note that MA organizations are not required
to use this flexibility to vary benefits, cost-sharing and premium at
the segment level.

[[Page 16486]]

Comment: We received many comments related to concern about benefit
transparency and that this flexibility to offer segments with varied
benefits, cost-sharing, or premiums, may lead to beneficiary confusion.
Commenters expressed concern that this flexibility will result in
beneficiary confusion regarding the differences between plans, which
may create a confusing environment for Medicare beneficiaries trying to
make informed decisions when choosing plans.
Response: Plans will be required to follow existing rules governing
mandatory disclosures (for example, Sec. 422.111), communications and
marketing. In addition, CMS will require plans to include comprehensive
benefit flexibility information in their CY 2019 EOC.
In this final rule, CMS is adopting a reinterpretation of section
1854(h) of the Act and Sec. Sec. 422.100(d)(2) and 422.262 to allow MA
organizations the ability 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. We have reviewed comments on our proposal and have
considered these comments as we finalize the policy. Plans will be
permitted to begin implementing this flexibility in CY 2019.
4. Maximum Out-of-Pocket Limit for Medicare Parts A and B Services
(Sec. Sec. 422.100(f)(4) and (5) and 422.101(d))
As provided at Sec. Sec. 422.100(f)(4) and (5) and 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 basic benefits
(meaning Parts A and B services) that do not exceed the annual limits
established by CMS. CMS added Sec. 422.100(f)(4) and (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 stated in the CY 2018
final Call Letter \21\ 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.
---------------------------------------------------------------------------

\21\ The CY 2018 final Call Letter may be accessed at https://www.cms.gov/Medicare/Health-Plans/MedicareAdvtgSpecRateStats/Announcements-and-Documents.html.
---------------------------------------------------------------------------

CMS proposed to amend Sec. Sec. 422.100(f)(4) and (5) and
422.101(d)(2) and (3) to clarify that CMS may use Medicare FFS data to
establish the annual MOOP limits, which have historically been linked
to values that approximate the 85th and 95th percentile of out-of-
pocket expenditures for beneficiaries in original Medicare. The
proposal included that CMS 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. CMS also proposed that it have authority to increase the
number of service categories that have higher cost sharing in return
for offering a lower (voluntary) MOOP amount. To codify these various
authorities, CMS proposed regulation text permitting CMS to set the
annual MOOP limits 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. CMS intends to
use the annual Call Letter process to communicate its application of
the regulation and to transition changes to MOOP limits over time,
beginning no earlier than in CY 2020, to avoid disruption to benefit
designs and minimize potential beneficiary confusion.
As noted in the proposed rule, CMS discussed in the 2010 rulemaking
(75 FR 19709) that it provides greater flexibility in establishing cost
sharing for basic benefits to MA plans that adopt a lower, voluntary
MOOP limit than is available to plans that adopt the higher, mandatory
MOOP limit. The number of beneficiaries with access to a voluntary MOOP
limit plan and the proportion of total enrollees in a voluntary MOOP
limit plan has decreased significantly from CY 2011 to CY 2017.
Currently, CMS sets the mandatory MOOP amount at 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. CMS sets the voluntary MOOP amount of
$3,400 to represent 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 these MOOP limits. Since the MOOP
requirements for local and regional MA plans were finalized in
regulation, a strict application of the 95th and 85th percentiles would
have resulted in MOOP limits for local and regional MA plans
fluctuating from year-to-year. To avoid enrollee confusion, allow plans
to provide stable benefit packages year over year, and minimize
disincentives to the adoption of the lower voluntary MOOP amount
because of fluctuations in the amount, CMS has exercised discretion in
order to maintain stable MOOP limits from year-to-year that approximate
but are not exactly at the 85th and 95th percentile of, beneficiary
cost sharing in Medicare FFS.
In the proposed rule, CMS explained that it would want to change
the MOOP limits if a consistent pattern of increasing or decreasing
costs emerges over time. CMS also summarized how stakeholders have
suggested changes to how CMS establishes MOOP limits, including
suggestions to use the most appropriate data to inform its decision-
making, increase the MOOP limits and the number of service categories
that have higher cost sharing in return for a plan offering a lower
MOOP limit, and implement different levels of MOOP and service category
cost sharing standards to encourage plan offerings with lower MOOP
limits.
CMS explained in the proposed rule its goal 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 MA benefit stability over time. Medicare FFS
data currently represents the most relevant and available data at this
time so the proposal included codifying use of Medicare FFS data in
Sec. Sec. 422.100(f)(4) and (5) and 422.101(d)(2) and (3).
CMS also explained in the proposed rule that it wished to have
flexibility to

[[Page 16487]]

change its existing methodology (of using the 85th and 95th percentiles
of projected beneficiary out-of-pocket Medicare FFS spending) in the
future. The proposed rule was explicitly based on a policy objective of
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, the proposed amendments to
Sec. Sec. 422.100(f)(4) and (5) and 422.101(d)(2) and (3) were to
incorporate authority to balance these factors to set the MOOPs. The
flexibility contemplated by the proposed rule would 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 rule also explained how CMS would, in advance of each
plan year, use the annual Call Letter and other guidance documents to
explain its application of the regulations and the data used to
identify MOOP limits. In addition, CMS committed to transitioning any
significant changes adopted using the new proposed authority over time
to avoid disruption to benefit designs and minimize potential
beneficiary confusion.
In conclusion, CMS proposed to amend Sec. Sec. 422.100(f)(4) and
(5) and 422.101(d)(2) and (3) to clarify that CMS may use Medicare FFS
data to establish annual MOOP limits and to adopt a flexible standard
for setting the MOOPs. This flexible standard would authorize CMS to
increase the voluntary MOOP limit to another percentile level of
Medicare FFS beneficiary spending; 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 (as a means to encourage plan offerings with lower MOOP
limits).
We received the following comments on this proposal, and our
response follows,
Nearly all commenters who provided feedback on this provision
(Maximum Out-of-Pocket Limit for Medicare Parts A and B Services
(Sec. Sec. 422.100(f)(4) and (5) and 422.101(d))) also provided
feedback on the proposal at section II.B.5 (Cost Sharing Limits for
Medicare Parts A and B Services (Sec. 422.100(f)(6))). In this
section, we address comments that focus on either this section or both
sections, while we address comments that focus on cost sharing limits
in section II.B.5.
Comment: The majority of commenters supported this proposal,
stating that CMS should primarily use Medicare FFS and MA encounter
data to inform its decision-making, and that CMS should consider
authorizing more than two levels of MOOP and associated cost sharing
standards to encourage plan offerings with lower MOOP limits. Some
commenters also made suggestions for levels of MOOP limits and cost
sharing service category adjustments that could be especially
beneficial.
Response: We thank commenters for their support. 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. This
final rule limits that data to the FFS Medicare data, but as other data
sources become accessible, relevant, and of the quality necessary to
make these determinations, we will engage in rulemaking to change the
rule.
Comment: Many commenters expressed concern with MA encounter data
being used at this time to establish MOOP levels based on data quality
issues. Commenters also encouraged CMS to continue working with MA
organizations to improve the validity and reliability of MA encounter
data. A commenter suggested CMS consider other data such as of
Marketplace Qualified Health Plan review data.
Response: Medicare FFS data is the most relevant and available data
at this time. CMS will consider future rulemaking to use MA encounter
cost data as well as Medicare FFS data to establish MOOP limits. In
determining completeness and accuracy of MA encounter data CMS does
consider the various managed care payment arrangements and payment
policies that may exist between organizations, as compared to Medicare
FFS data (which are based on relatively consistent payment schedules
and payment policies). At this time we cannot commit to a timeline for
use of MA encounter data or other data sources to establish MOOP
limits. As we learn more and are able to establish standards for the
completeness and sufficiency of alternate data sources, we will revisit
this issue.
Comment: Some commenters noted concern with the specific
methodology that CMS would use other than the 85th or 95th percentile
of Medicare FFS beneficiary costs to establish MOOP limits and how
abrupt changes may impact cost sharing and the levels of MOOP limits. A
commenter also stated concern about what level of change to MOOP limits
would be considered ``significant'' and necessitate a multi-year
transition. Some commenters suggested CMS maintain the current
voluntary and mandatory MOOP limits (that is, $3,400 and $6,700) and
establish additional MOOP limits between these levels with prorated
cost sharing standards to minimize any impact to benefit design and
beneficiaries. Some commenters suggested CMS further change the
regulatory cost sharing standards for inpatient, skilled nursing
facility, emergency care, and other professional services as an
incentive for plans to adopt lower MOOP limits, while other commenters
cautioned CMS to limit changes to these categories to prevent
discrimination.
Response: We appreciate the feedback and will take these
suggestions and concerns under consideration. CMS plans to transition
changes under the finalized regulations over time, beginning no earlier
than CY 2020, to avoid disruption to benefit designs and minimize
potential beneficiary confusion. The regulation standard adopted in
this final rule for Sec. Sec. 422.100(f)(4) and (5) and 422.101(d)(2)
and (3) (that the MOOP be set 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) will
apply to determinations regarding a transition period from one
particular MOOP to another MOOP. We anticipate that sudden and
significant shifts in the MOOP would cause sudden changes in premiums,
benefits and cost sharing, which are identified under the new
regulation text as something to be minimized. Consistent with past
practice, CMS will continue to publish the expected changes for the
next year and a description of how the regulation standard is applied
(that is, the methodology used) in the annual Call Letter prior to bid
submission so that MA plans can submit bids consistent with MA
standards. CMS has historically provided prior notice and an
opportunity to comment on the Call Letter guidance document and does
not expect that to change. This will provide MA organizations adequate
time to comment and prepare for changes. We anticipate potential
changes in MOOP limits or cost sharing based on MA benefit design
strategies will be

[[Page 16488]]

conveyed through existing enrollee communication materials.
Comment: Several commenters were concerned about CMS's strategy to
promote plan adoption of lower MOOP limits by increasing the cost
sharing flexibility for those plans. They suggested that allowing this
flexibility may result in discriminatory benefit designs as plans may
raise cost sharing limits for certain service categories more likely to
be utilized by vulnerable beneficiaries, and that such beneficiaries
would be especially disadvantaged if they do not reach the lower,
voluntary MOOP limit. Some commenters identified concern for specific
service categories if their cost sharing limits were raised (for
example, inpatient and professional services) and requested CMS be
especially thoughtful when considering changes to these categories. A
few commenters proposed that CMS consider lowering cost sharing limits
for mandatory MOOP plans as another method to encourage adoption of a
lower MOOP limit.
Response: CMS agrees that while increasing flexibility for MA plans
that voluntarily offer lower MOOP limits can allow for improved plan
design, it will be important to make sure that vulnerable patient
populations are not discriminated against and that plan designs are not
confusing to beneficiaries. Other existing regulations governing cost
sharing designs of MA plans--such as the prohibition on discrimination
(Sec. 422.100(f)(2)), requirement that certain services have cost
sharing that is no higher than FFS Medicare limits (Sec. 422.100(j)),
and requirement that overall plan cost-sharing for coverage of basic
benefits must be actuarially equivalent to the level of cost sharing
(deductible, copayments, or coinsurance) charged to beneficiaries under
the original Medicare program option (Sec. 422.254(b)(4))--remain in
place and are unchanged by this final rule. CMS will manage the
flexibility plans have in setting cost sharing limits to make sure that
plan designs are not discriminatory. For example, CMS does not intend
to significantly increase cost sharing limits as a percentage of
Medicare FFS above current levels for inpatient, primary, and specialty
care based on cost sharing standards that CMS publishes in its annual
Call Letter. 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.
Comment: Some commenters reported concern with the proposal to
amend Sec. 422.100(f)(6) and implement it as described in the proposed
rule strategy because of unintended consequences, such as beneficiaries
having to choose between plans offering different levels of MOOP limits
and variability in cost sharing across services. A commenter suggested
that CMS update plan selection resources such as Medicare Plan Finder
(MPF) to simplify the plan selection process and assist beneficiaries
choose the plan that best fits their unique health care needs.
Response: We agree that cost sharing must not be discriminatory and
that it is important to make sure that beneficiaries have adequate
information to support their plan enrollment decision-making.
Beneficiaries typically make decisions based on plan characteristics
that are important to their needs (for example, benefits, cost sharing,
MOOP limit, plan premium, and providers) and are not familiar with the
complexities associated with bidding guidance and cost sharing
standards that plans use to prepare bids. To minimize beneficiary
confusion, CMS will continue evaluations and enforcement of the current
authority prohibiting plans from misleading beneficiaries in their
communication materials. In addition, we will disapprove a plan bid if
its proposed benefit design substantially discourages enrollment in
that plan by certain Medicare-eligible individuals. In addition, CMS
will continue efforts to improve plan offerings and plan comparison
tools and resources (for example, MPF and 1-800-MEDICARE).
Comment: We received a comment that noted the importance of MOOP
limits as part of a benefit offering for beneficiary protection and
that there are MA plans being marketed that do not have a MOOP for out-
of-network services.
Response: CMS notes that all Medicare LPPOs and RPPOs are required
to have a combined in- and out-of-network MOOP limit. HMO-POS plans may
offer out-of-network benefits as supplemental benefits, but are not
required to have these services contribute to the in-network MOOP limit
or a combined in- and out-of-network MOOP limit.
We received over 40 comments pertaining to the proposal, with the
majority reflecting support to amend Sec. Sec. 422.100(f)(4) and (5)
and 422.101(d)(2) and (3) to clarify that CMS may use Medicare FFS data
to establish annual MOOP limits. The majority of comments also
supported the regulation amendment to add a standard governing CMS
establishment of MOOP limits (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). As
noted in the proposed rule, CMS will interpret and implement these
amendment to give CMS the authority to change MOOP limits; increase the
number of service categories that have higher cost sharing in return
for offering lower MOOP limits; and implement more than two levels of
MOOP limits. Consistent with past practice, CMS will continue to
publish the expected changes for the next year and a description of how
the regulation standard is applied in the annual Call Letter prior to
bid submission so that MA plans can submit bids consistent with MA
standards. CMS plans to transition changes under the finalized
regulations over time, beginning no earlier than CY 2020, to avoid
disruption to benefit designs and minimize potential beneficiary
confusion. After careful consideration of all of the comments we
received, we are finalizing the proposal to amend Sec. Sec.
422.100(f)(4) and (5) and Sec. 422.101(d)(2) and (3) as described with
an applicability date of January 1, 2020; this applicability date is
consistent with our intent that these new standards apply to cost
sharing limits set for plans years after 2019. We are also finalizing
minor revisions as follows:
(1) In Sec. 422.100(f)(5), we are finalizing the regulation text
without the phrase ``annually determined by CMS using Medicare Fee for
Service and to establish appropriate'' in the introductory text; we
believe that the regulation text finalized in the paragraph (f)(5)(ii)
is sufficiently clear on this point.
(2) In Sec. 422.100(f)(5)(ii), we will finalize the text with
``CMS sets'' in place of ``CMS will set'' for clarity.
5. Cost Sharing Limits for Medicare Parts A and B Services (Sec.
422.100(f)(6))
In addition to MOOP Limits, MA plan cost sharing for Parts A and B
services is subject to additional regulatory requirements and limits in
Sec. Sec. 417.454(e), 422.100(f)(6), and 422.100(j). 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) are based on how
section 1852(a)(1)(B)(iii) and (iv) of the Act directs that cost

[[Page 16489]]

sharing for certain services may not exceed the cost sharing levels in
Medicare Fee-for-Service (FFS); under the statute and the regulations,
CMS may add to that list of services. CMS identifies Parts A and B
services that are more likely to be used by enrollees in establishing
its cost sharing parameters for review and evaluation. 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 or designing 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 proposed to amend Sec. 422.100(f)(6) to clarify that it may
use Medicare FFS data to establish appropriate cost sharing limits for
certain services that are not discriminatory. In addition, CMS proposed
to amend the regulation to reflect that CMS would use FFS data and MA
encounter data to inform patient utilization scenarios to help identify
MA plan cost sharing standards and thresholds that are not
discriminatory. We specifically solicited comment on whether to codify
that use of MA encounter data for this purpose in Sec. 422.100(f)(6).
In this final rule, we reiterate our intent to use the annual Call
Letter process to communicate its application of the regulation and
announce our intent to transition changes to cost sharing standards
over time, beginning no earlier than in CY 2020, to avoid disruption to
benefit designs and minimize potential beneficiary confusion. This
proposal is not related to a statutory change.
In the proposed rule, CMS explained that it sought to codify
authorization 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. In addition, CMS stated its
intent 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. We referenced soliciting comments
before finalizing guidance as necessary and appropriate. We expect this
process will allow MA organizations to prepare plan bids consistent
with parameters that CMS have determined to be non-discriminatory. In
addition, and as appropriate, CMS noted that we may also issue guidance
using Health Plan Management System (HPMS) memoranda.
CMS noted in the proposed rule that while it 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 (Medicare Managed Care
Manual, Chapter 4, Section 50.1 at https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/internet-Only-Manuals-IOMs-Items/CMS019326.html). We stated our belief 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 an MA 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 without CMS seriously questioning and reviewing the cost-
sharing as discriminatory. CMS does not believe that cost sharing at
such high levels can legitimately serve any purpose other than
discriminating against the enrollees who need and frequently use those
services. Some service categories may identify specific benefits for
which a unique copayment will apply, while others are grouped, such as
durable medical equipment or outpatient diagnostic and radiological
services, which contain a variety of services with different levels of
cost which may reasonably have a range of copayments.
As discussed in section II.A/B.4 in the proposed rule and this
final rule, CMS uses (and will continue to use under revisions
finalized for Sec. Sec. 422.100 and 422.101) Medicare FFS data in
setting limits and thresholds for MA cost sharing for the basic
benefits (that is, the Part A and Part B services that MA plans must
cover). Medicare FFS data currently represents the most relevant and
available data at this time. CMS uses it as well to evaluate the cost
sharing for specific services, apply the anti-discrimination standard
currently at Sec. 422.100(f)(6), and consider whether to exercise
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 may consider future rulemaking regarding the
use of MA encounter data to understand program health care costs and
compare to Medicare FFS data in establishing cost sharing limits.
Therefore, in addition to proposing to codify use of the FFS data, CMS
proposed to include in Sec. 422.100(f)(6) that CMS would use MA
encounter data to inform utilization scenarios used to identify
discriminatory cost sharing.
CMS explained that its proposal to amend Sec. 422.100(f) would
allow use of 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 solicited 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.
We received the following comments on this proposal, and our
response follows,
Nearly all commenters who provided feedback on this provision (Cost
Sharing Limits for Medicare Parts A and B Services (Sec.
422.100(f)(6))) also provided feedback on section II.B. 4 (Maximum Out-
of-Pocket Limit for Medicare Parts A and B Services (Sec. Sec.
422.100(f)(4) and (5) and 422.101(d))). In this section, we address
commenters that primarily focus on cost sharing limits, while section
II.B.4 addresses commenters that focus on MOOP limits or both of these
provisions.
Comment: The majority of commenters supported the proposal, stating
that CMS should use Medicare FFS data to establish non-discriminatory
cost sharing limits as it is currently the most relevant and
appropriate information in determining cost sharing standards and
thresholds. Commenters also supported providing guidance through the
annual Call Letter to achieve CMS's goal of setting and announcing each
year presumptively discriminatory levels of cost sharing that will not
be considered discriminatory or in violation of other applicable
standards.
Response: We thank the commenters for their support. CMS intends to
continue the practice of furnishing

[[Page 16490]]

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. We will also
continue to solicit comments before finalizing guidance as necessary
and appropriate. Addressing changes in these vehicles that solicit
comments provides for more timely and effective changes to protect
beneficiaries. We expect this process will allow MA organizations to
prepare plan bids consistent with parameters that CMS have determined
to be non-discriminatory. In addition, and as appropriate, CMS will
announce and issue guidance using HPMS memoranda.
Comment: Many commenters were concerned about the quality of MA
encounter data and questioned whether such data should be used to
establish cost sharing limits. A few commenters were concerned about
using MA encounter data to inform utilization scenarios, as proposed,
based on data quality issues. A commenter proposed that CMS consider
using a phased in approach over multiple years by blending Medicare FFS
and MA encounter data for utilization analyses to address data quality
concerns.
Response: We understand the concerns expressed by commenters about
using MA encounter data to estimate costs associated with specific
health care services. However, we believe MA encounter data can be used
to understand utilization trends in establishing the utilization
scenarios selected for cost sharing standards (for example, 6-day and
10-day inpatient cost sharing standards). Medicare FFS data currently
represents the most relevant and available data at this time but we
believe adding MA encounter data to FFS data will improve our
utilization scenarios for the MA population. CMS may consider future
rulemaking to incorporate MA encounter data with Medicare FFS data to
establish cost sharing limits as well. Under this final rule, CMS will
use Medicare FFS data along with MA encounter data to help inform
utilization scenarios (for example, inpatient lengths of stay) in
establishing cost sharing standards as we continue to rely on Medicare
FFS data to determine cost sharing dollar limits. We believe the use of
MA encounter data to inform utilization scenarios is reasonable as we
are using it in conjunction with Medicare FFS data, which mitigates
concerns about the completeness and quality of the MA encounter data.
Comment: Several commenters were concerned about CMS's strategy to
promote plan adoption of lower MOOP limits by increasing the cost
sharing flexibility for those plans. Commenters expressed concern that
allowing this flexibility may result in discriminatory benefit designs
as plans may raise cost sharing limits for certain service categories
more likely to be utilized by vulnerable beneficiaries. Some commenters
referenced specific service categories of concern if cost sharing
limits were raised (for example, inpatient and professional services)
and requested CMS be especially thoughtful when considering changes to
these categories.
Response: CMS agrees that while increasing flexibility in cost
sharing standards for plans that voluntarily offer lower MOOP limits
can allow for improved plan design, it will be important to make sure
that vulnerable patient populations are not discriminated against and
that plan designs are not confusing to beneficiaries. CMS will manage
the flexibility plans have in setting cost sharing limits to make sure
that plan designs are not discriminatory.
Comment: Some commenters noted concern with the specific
methodology that CMS would use to establish cost sharing limits and how
abrupt any changes may be from one contract year to the next. A few
commenters requested CMS provide additional guidance on its
implementation of the proposed changes to Sec. 422.100(f)(6).
Response: CMS intends to use the annual Call Letter process to
communicate its application of the regulation and to transition changes
to cost sharing standards over time, beginning no earlier than CY 2020,
to avoid disruption to benefit designs and minimize potential
beneficiary confusion. Consistent with past practice, CMS will continue
to publish annual limits, expected changes for the next year, and a
description of how the regulation standard is applied (that is, the
methodology used) in the annual Call Letter prior to bid submission so
that MA plans can submit bids consistent with CMS standards. This will
provide MA organizations adequate time to comment and prepare for
changes.
We received over 40 comments pertaining to the proposal, with the
majority reflecting support to amend Sec. 422.100(f)(6) to permit use
of Medicare FFS data to establish cost sharing limits that will not be
considered discriminatory for Part A and B services in MA plans.
Commenters also generally supported continued use of the annual Call
Letter process for explaining our application and implementation of the
revised Sec. 422.100(f)(6). After careful consideration of all the
comments, we are finalizing our proposal to use Medicare FFS data along
with MA encounter data to inform utilization scenarios (for example,
inpatient lengths of stay) and rely on Medicare FFS data to determine
cost sharing standards and thresholds. We are finalizing these
amendments with an applicability date of January 1, 2020; this
applicability date is consistent with our intent that these new
standards apply to cost sharing limits set for plans years after 2019.
As MA encounter cost data quality improves, CMS will consider future
rulemaking to incorporate with Medicare FFS data to establish cost
sharing limits. CMS intends to use the annual Call Letter process to
communicate its application of the regulation and plans to transition
changes under the finalized regulations over time, beginning no earlier
than CY 2020, to avoid disruption to benefit designs and minimize
potential beneficiary confusion. We are also finalizing a minor
revision to paragraph (f)(6) to improve the flow of the text.
Specifically, we are separating the last sentence into two sentences
divided by a semicolon with minor grammatical edits.
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 (PBP) is substantially different from those
of other plans offered by the organization in the same 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. CMS proposed to eliminate the
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 was limited to the meaningful
difference provision related to the MA program. A proposal related to
the Part D meaningful difference regulation is addressed at section
III. II.A.16. of this final rule.
In the proposed rule, CMS explained the goal of eliminating the
meaningful difference requirement: To improve competition, innovation,
available

[[Page 16491]]

benefit offerings, and provide beneficiaries with affordable plans that
are tailored for their unique health care needs and financial
situation. Other regulations 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)). Therefore, CMS explained in the proposed rule, MA
organizations could be expected to continue designing PBPs that, within
a service area, are different from one another with respect to key
benefit design characteristics. CMS stated its belief that any
potential beneficiary confusion would be minimized when comparing
multiple plans offered by the MA 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). In addition, CMS stated its
intent to continue the practice of furnishing information to MA
organizations about the 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.
As stated in the proposed rule, 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.\22\ CMS noted that more sophisticated approaches to consumer
engagement and decision-making should help beneficiaries, caregivers,
and family members make informed plan choices. CMS cited supporting 1-
800-MEDICARE and enhancements to MPF that have improved the customer
experience, such as including MA and Part D benefits and a new consumer
friendly tool for the CY 2018 Medicare open enrollment period. This new
tool assists beneficiaries in choosing a plan that meets their unique
health and financial needs based on a set of 10 quick questions.
---------------------------------------------------------------------------

\22\ Jacobson, G. Swoope, C., Perry, M. Slosar, M. How are
seniors choosing and changing health insurance plans? Kaiser Family
Foundation. 2014
---------------------------------------------------------------------------

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 (OOPC) and other factors
currently integrated in the evaluation's methodology. 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. 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 align with beneficiary decision-making. As noted in
the proposed rule, premiums, risk scores, actual plan utilization, and
enrollment are not included in the evaluation because these factors
will introduce risk selection, costs, and margin into the evaluation,
resulting in a negation of the evaluation's objectivity. CMS clarified
that the 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.
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
status or disease state 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 the PBP.
CMS restated its commitment to ensuring transparency in plan
offerings so that beneficiaries can make informed decisions about their
health care plan choices while also noting the importance of
encouraging competition, innovation, and providing access to affordable
health care approaches that address individual needs. CMS recognized
that 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, CMS noted the meaningful
difference evaluation will 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. CMS noted the challenges with trying to
capture differences in provider network, more tailored benefit and cost
sharing designs, or other innovations. In addition, we are concerned
that plans may be forced to potentially develop more complicated and
confusing benefit designs to achieve differences between plans.
CMS recognized 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 stated concern that the meaningful difference
requirement

[[Page 16492]]

results in organizations potentially reducing the value of benefit
offerings. These are unintended consequences of the existing meaningful
difference evaluation and may restrict innovative benefit designs that
address individual beneficiary needs and affordability.
As discussed in the proposed rule, 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. Annual
guidance and model materials are provided to MA organizations to assist
them in providing resources, such as the plan's Annual Notice of Change
(ANOC) and Evidence of Coverage (EOC), which contain valuable
information for the enrollee to evaluate and select the best plan for
their needs. 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 noted that MA organizations may be able to offer a portfolio of
plan options with clear differences between benefits, providers, and
premiums which will 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 also noted additional beneficiary protections
including: Plans are required to not mislead beneficiaries in
communication materials; CMS may disapprove a bid if CMS finds that a
plan's proposed benefit design substantially discourages enrollment in
that plan by certain Medicare-eligible individuals; and CMS may
terminate 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)). For these reasons, CMS
proposed to remove Sec. Sec. 422.254(a)(4) and 422.256(b)(4) to
eliminate the meaningful difference requirement for MA bid submissions.
CMS also solicited comments and suggestions on making sure
beneficiaries have access to innovative plans that meet their unique
needs.
We received the following comments on this proposal, and our
response follows:
Comment: Some commenters fully supported the proposal, stating that
eliminating the meaningful difference requirement will support plan
innovation and provide Medicare beneficiaries access to plans that meet
their unique needs. Several commenters noted that eliminating the
current meaningful difference requirement that established arbitrary
differences between plans will allow MA organizations to put the
beneficiary at the center of benefit design. This will result in MA
organizations being able to offer a portfolio of plan options with
clear differences between benefits, providers, and premiums that are
easily understood by beneficiaries. Commenters also noted that CMS's
efforts to support beneficiaries make informed choices by maintaining
existing requirements for marketing materials and nondiscriminatory
benefit designs will sufficiently safeguard beneficiaries if the
meaningful difference requirement is eliminated.
Response: We thank the commenters for supporting the proposal. We
believe this proposed change could result in more innovative products
that are more competitive and market-driven within a less restrictive
regulatory framework.
Comment: A commenter supported the proposal and questioned how the
agency will ensure potential savings from eliminating the meaningful
difference requirement will be passed on to beneficiaries in the form
of lower premiums, while also maintaining coverage of essential and
appropriate benefits.
Response: CMS expects that the elimination of the meaningful
difference evaluation, in conjunction with the expansion of benefit
flexibilities, will allow organizations to provide benefit offerings
that satisfy the unique needs of beneficiaries, increase enrollee
satisfaction, reduce overall plan expenditures, and result in more
affordable plans. All MA plans must provide enrollees in that plan with
all Parts A and B services so beneficiaries are assured a minimum
package of covered services; many plans also provide supplemental
benefits, at the MA organization's option. While CMS reviews and
approves MA PBPs and premiums for actuarial soundness and satisfying
CMS standards, we do not have the legal authority to dictate MA
organizations' business decisions to establish premiums at a specific
level. MA organizations can adjust their plan offerings to reflect
annual changes in medical costs and payment rates and may do so in a
variety of ways, such as adjustments to cost sharing amounts, adding or
subtracting supplemental benefits, or making changes to the monthly
premium(s). Plans face competition in their defined market areas and
must also comply with Part C standards related to changes in benefits,
cost sharing, and premium. In addition, all beneficiaries are made
aware of plan changes including premium for the upcoming year and can
choose to switch plans during the annual election period.
Comment: Several commenters disagreed with the proposal to
eliminate the meaningful difference requirement because they believe it
is a beneficiary protection. Reasons for maintaining the meaningful
difference requirement included: Concerns about the ability of Medicare
beneficiaries to make the nuanced comparisons among various plan types
and benefit packages, limited resources to assist beneficiaries with
complicated decisions, expectation that older people and people with
disabilities do not use technology to the same extent as non-Medicare
beneficiary populations (thereby limiting the usefulness of MPF, a
primary means of CMS assistance to beneficiaries in comparing plans),
and unknown resource availability to support call centers to assist
beneficiaries who do not have access to or use the internet. Several
comments were concerned that narrower networks could be potentially
discriminatory or a means of limiting benefit access for enrollees.
Another commenter had concerns that eliminating the meaningful
difference requirement may encourage plan risk segmentation based on
benefit design but did not include any rationale for their concern.
Some commenters referenced plan selection research, such as National
Institutes of Health, and Brookings studies,\23\ noting Consumers Union
findings that indicate beneficiaries face challenges in navigating the
Medicare market due to not using available tools (such as MPF),

[[Page 16493]]

confusion when using MPF, and high rates of individuals not making an
active health plan selection because of choice anxiety. Several
commenters also noted their general concern that the net effect of
eliminating the meaningful difference requirement and other proposals
pursued in the proposed rule may have unintended consequences regarding
beneficiary confusion that will negate the value of market innovation,
especially for people with lower income and educational levels.
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\23\ Bertko J, Ginsburg PB, Lieberman S, Trish E, Antos J.
Medicare Advantage: Better information tools, better beneficiary
choices, better competition. U.S.C.-Brookings Schaeffer Initiative
for Health Policy. Nov. 2017. Retrieved from https://www.brookings.edu/wp-content/uploads/2017/11/ma-consumer-reforms.pdf.
Cognitive Functioning and Choice between Traditional Medicare
and Medicare Advantage; J. Michael McWilliams, Christopher C.
Afendulis, Thomas G. McGuire, and Bruce E. Landon; Health Affairs,
September 2011 (http://www.ncbi.nlm.nih.gov/pmc/articles/PMC3513347/
).
The Evidence is Clear: Too Many Health Insurance Choices Can
Impair, Not Help Consumer Decision Making; Lynn Quincy and Julie
Silas; Consumers Union, November 2012 (http://consumersunion.org/pdf/Too_Much_Choice_Nov_2012.pdf).
---------------------------------------------------------------------------

Response: We acknowledge the commenters' concerns about beneficiary
confusion. We believe that the tools CMS provides for beneficiaries to
make decisions and our enforcement of communication and marketing
requirements (such as the prohibition on misleading beneficiaries)
mitigate and address these concerns. Under our existing authority at
Sec. 422.110, CMS will monitor to ensure organizations are not
engaging in activities that are discriminatory or potentially
misleading or confusing to Medicare beneficiaries. We note that CMS has
authority, clarified in this final rule, to review marketing (review in
advance of use) and communication (review after use) materials to
ensure compliance with MA program requirements. CMS will conduct
outreach with organizations that appear to offer a large number of
similar plans in the same county following bid submissions and
communicate any general concerns through the annual Call Letter process
and/or HPMS memoranda. CMS network adequacy requirements apply to all
Part C provider networks to ensure adequate network provider access for
enrollees. With regard to concerns about risk segmentation, CMS
believes risk segmentation is not beneficial to MA organizations or
enrollees who want to maintain stable benefits and premiums, but if an
organization wanted to purposely create risk segmentation within its
plan offerings, it could do so with or without the meaningful
difference evaluation. The agency will continue to monitor and address
potential concerns as part of our existing authority to review and
approve bids. We expect eliminating the meaningful difference
requirement will improve plan choices for beneficiaries by driving
provider network and benefit package innovation and affordable health
care coverage. MA organizations also consider beneficiary choice
anxiety when developing their own portfolio of plan offerings, so that
sales and broker personnel and marketing materials can highlight key
differences between plan offerings and support informed choice.
Beneficiaries also rely on established health plan characteristics to
guide their decision making, such as preferences for plan type (for
example, HMO or PPO), providers (for example, established primary care
physician being in network), presence of Part D benefits, cost sharing,
plan premium, and brand.\24\ In addition, dually eligible beneficiaries
may choose D-SNPs that provide more standardized plan options with
little or no cost sharing responsibilities instead of a non-D-SNP plan
without these benefits. This allows beneficiaries to reduce the number
of health plan options of interest (for example, focus on MA
organizations offering SNP options) and simplify the process to choose
their health plan. After taking into account specific preferences, such
as plan type, beneficiaries may choose from a limited subset of
available plan options with the assistance of plan communication
materials and existing CMS resources such as MPF and 1-800-MEDICARE. In
addition, CMS will continue to prohibit plans from misleading
beneficiaries in their communication materials, disapprove a plan's bid
if its proposed benefit design substantially discourages enrollment in
that plan by certain Medicare-eligible individuals, and allow CMS to
terminate a plan that fails to attract a sufficient number of enrollees
over a sustained period of time so that any potential beneficiary
confusion is minimized when comparing multiple plans offered by the
organization (Sec. Sec. 422.100(f)(2), 422.510(a)(4)(xiv), 422.2264,
and 422.2260(e)).
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\24\ Jacobson, G., Swoope, C., Perry, M., Slosar, M. How are
seniors choosing and changing health insurance plans? Kaiser Family
Foundation. 2014.
Atherly, A., Dowd, B., Feldman, R. The Effect of Benefits,
Premiums, and Health Risk on Health Plan Choice in the Medicare
Program. Health Services Research. 2004. Retrieved from https://onlinelibrary.wiley.com/doi/full/10.1111/j.1475-6773.2004.00261.x.
McCormack LA, Garfinkel SA, Hibbard JH, Norton EC, Bayen UJ.
Health plan decision making with new medicare information materials.
Health Services Research. 2001;36(3):531-554.
Abaluck, Jason, and Jonathan Gruber. 2011. ``Choice
Inconsistencies among the Elderly: Evidence from Plan Choice in the
Medicare Part D Program.'' American Economic Review, 101(4): 1180-
1210.
Uhrig, J., Harris-Kojetin, L., Bann, C., Kuo, T. Do Content and
Format Affect Older Consumers' Use of Comparative Information in a
Medicare Health Plan Choice? Results from a Controlled Experiment.
2006. Retrieved from http://journals.sagepub.com/doi/pdf/10.1177/1077558706293636.
---------------------------------------------------------------------------

Comment: Several commenters had concern that eliminating the
meaningful difference requirement would promote ``gaming'' among plan
sponsors (for example, offering a large number of plan options in a
service area) which may challenge or complicate beneficiary decision-
making because of the potential increase in plan options; these
commenters questioned if elimination of the requirement provides enough
benefits to outweigh the risks. A few commenters questioned whether
there is evidence that innovation is or will be inhibited by the
meaningful difference evaluation. A commenter recommended CMS formally
survey MA organizations about the impact of meaningful difference
standards as well as survey beneficiaries regarding their satisfaction
with MA plan offerings. Some commenters suggested CMS first pursue
adjusting the meaningful difference requirement before eliminating it
by either waiving the requirement if MA organizations can provide
alternative evidence to CMS that their plan offerings are substantively
different, significantly reducing the current $20 meaningful difference
threshold between similar plans to provide more flexibility, accounting
for differences in premiums, and providing broader consideration of
provider network differences in the evaluation. A commenter requested
that instead of eliminating the meaningful difference requirement, CMS
revise the evaluation and require plan actuaries to attest to actuarial
value differences among plans using a utilization profile that is
representative of the plan population. A few comments stated that if
CMS was to place a limit on the number of plans an organization could
offer that CMS take into consideration the appropriate level within an
organizational structure to establish the limit (for example, parent,
legal entity, or contract organization), mergers and acquisitions, and
that CMS treat full-provider networks separately from more limited
provider networks.
Response: As discussed in the proposed rule, CMS is concerned the
meaningful difference requirement may force MA organizations to design
benefit packages to meet CMS standards rather than address beneficiary
needs. CMS has been made aware of these concerns through comments
submitted in response to recent Call Letters and the Request for
Information (April 2017), that highlighted how MA organizations may be
forced to meet arbitrary limits between their plans to comply with CMS
meaningful difference standards. Based on this information CMS does not
believe formal surveys are necessary to determine the unintended
consequences of the meaningful difference evaluation. Our proposal to
eliminate the meaningful difference requirement aimed to improve
competition, innovation, available benefit offerings, and provide
beneficiaries with

[[Page 16494]]

affordable plans that are tailored for their unique health care needs
and financial situation. The number of MA plan bids may increase
because of a variety of factors, that are not related to the
elimination of the meaningful difference requirement, 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
plan choice for beneficiaries by driving provider network and benefit
package innovation and affordable health care coverage. CMS believes
that eliminating the current meaningful difference requirement will
allow MA organizations to put the beneficiary at the center of benefit
design as MA organizations will not be pressured to make benefit
changes to comply with an arbitrary requirement that may ultimately
result in higher premiums and/or cost sharing for beneficiaries. This
will result in MA organizations being able to offer a portfolio of plan
options with clear differences between benefits, providers, and
premiums that are more easily understood by beneficiaries. In order to
capture differences in provider networks, 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 and would require investment of greater
administrative resources for MA organizations and CMS, while not
producing results that are useful to beneficiaries. CMS expects that
eliminating the meaningful difference requirement will improve the plan
options available for beneficiaries. As it is unknown how many
organizations will choose to add plan options as a result of this
provision, we are unable to estimate the impact to beneficiaries should
this lead to more competition. CMS expects increased competition will
lead to potentially lower premiums and/or cost-sharing for Medicare
beneficiaries. CMS does not anticipate beneficiaries will need
additional time to compare differences between plans related to the
elimination of the meaningful difference requirement. This particular
change is expected to help MA organizations differentiate plan
offerings more effectively so that beneficiaries can make decisions
more efficiently. We believe that the tools and information CMS
provides for beneficiaries to make decisions (for example, Medicare
Plan Finder, Medicare and You Handbook, 1-800-MEDICARE), in addition to
our enforcement of communication and marketing requirements, aim to
mitigate any potential choice overload. We are not pursuing adjustments
to the meaningful difference requirement (for example, waivers) because
the use of a waiver or justification process introduces subjectivity
into the benefit review and we believe the goal of increasing
flexibility is better served by eliminating the requirement. With this
final rule, organizations will have more flexibility to design MA plans
in a manner that is more focused on beneficiary needs. Finally, we do
not intend to establish a specific number of plans that any one
organization could offer. The MA program has a different market
structure than standalone PDPs, that is, PDPs serve entire regions
while MA organizations may serve different service areas based on
county. The same MA organization may have multiple plans but those
plans may only overlap in a limited number of counties. Depending on
the market structure (for example, makeup of providers and consumers)
it may be helpful for MA organizations to provide offerings from
multiple plan types so that beneficiaries have valuable options. In
addition, it may be helpful for MA organizations to offer SNP plans to
meet the needs of different beneficiary populations. CMS will monitor
and address potential concerns as part of our existing authority to
review and approve bids.
Comment: A few commenters requested that CMS conduct an evaluation
to estimate whether eliminating the meaningful difference requirement
would create choice anxiety among beneficiaries and its potential
effect on future enrollment. A few commenters also questioned if CMS
had presented sufficient reasons to justify eliminating the meaningful
difference requirement.
Response: In the proposed rule (82 FR 56363 through 56365) and in
the responses in this section, we have discussed our supporting
rationale to eliminate the meaningful difference requirement. After
carefully considering the commenters' concerns, we believe our proposal
will result in improved options--both in terms of innovative plans and
affordability--for beneficiaries and that existing safeguards, along
with beneficiary decision making education and tools, will be
successful in managing beneficiary choice anxiety concerns.
Comment: A commenter requested clarification on how this proposal,
in conjunction with others, affects expectations for state Medicaid
agencies and SNPs.
Response: CMS does not anticipate that eliminating the meaningful
difference requirement, in conjunction with other proposals, would
affect state Medicaid agencies. To the extent that clarification of
state Medicaid or SNP issues is required as a result of the regulation
changes in this final rule, CMS would communicate this guidance through
the annual Call Letter process, HPMS memoranda, and Medicare Managed
Care Manual updates. In addition, the CMS Medicare-Medicaid
Coordination Office (MMCO) may provide assistance for states and D-
SNPs. The Center for Medicare is working collaboratively with MMCO in
the regulations drafting process and implementation steps related to
this rule. Separately, MMCO is re-examining the potential need for
resources related to implementing the provisions of section 50311 of
the Bipartisan Budget Act of 2018.
Comment: Several commenters requested that CMS issue guidance
regarding the distinctions in plan options that would be permissible
and operational guidance on the implementation of this proposal in the
annual Call Letter to support CY 2019 bid development and submission.
Response: MA organizations can use the information contained in
this final rule about the elimination of the meaningful difference
requirements and CMS expectations to prepare CY 2019 bid submissions.
CMS intends to continue using the annual Call Letter process in future
years for releasing draft versions of bid-related guidance for comment
and to provide additional guidance regarding general concerns we may
have with organizations' portfolio of plan offerings. In addition, we
will provide information about potential concerns regarding activities
that are potentially discriminatory or potentially misleading or
confusing to Medicare beneficiaries.
Comment: Several commenters noted concern about resources to
support beneficiaries choose a health plan and navigate their benefits
(for example, 1-800-MEDICARE, MPF, SHIP counselors, and the Medicare
Ombudsman program) and supported improvements to MPF that allow
beneficiaries to more easily narrow down their choices based on
personalized information (for example, more filters and pre-selection
criteria to identify important plan characteristics that limit plan
options to evaluate). Several commenters offered to provide

[[Page 16495]]

input to MPF changes, while others encouraged CMS to establish a group
of representatives (for example, MA organizations, advocacy
organizations, provider groups, and other stakeholders) to help develop
MPF improvements, health plan decision-making education materials, and
other information to improve the health plan selection process and
overall experience for beneficiaries. Some comments indicated that
changes to the MPF should occur prior to eliminating the meaningful
difference evaluation. Commenters also had an interest in CMS
establishing communications and marketing guidance so that MA
organizations can describe how an organization's plan offerings are
different in situations where multiple plan options are compared (for
example, providing additional information in the Summary of Benefits).
In addition, other comments noted the need for CMS to solicit input
from multiple stakeholders to improve communication materials (for
example, ANOC and EOC).
Response: These recommendations are not strictly within the scope
of this final rule provision. We do however appreciate the many
comments and suggestions related to improving the health plan decision
making process and overall experience for beneficiaries. We agree with
the need for clear and complete information and intend to continue
improving the MPF to make it as user friendly as possible. We are
sharing these comments and suggestions with the CMS Office of
Communications. Additionally, we would encourage third party
organizations that support beneficiaries in their decision-making to
take advantage of existing resources 1-800-MEDICARE, MPF, SHIP
counselors, and the Medicare Ombudsman program. CMS will take commenter
suggestions under careful consideration and will continue to include
stakeholders and beneficiaries in the planning, preparation, testing,
and execution process for MPF; CMS subjects some model enrollee
communication materials to periodic consumer testing and also considers
comments submitted from MA organizations and stakeholders on an ongoing
basis. In addition, CMS will look for ways to incorporate the
suggestions from commenters about how the health plan selection process
can be simplified for beneficiaries through existing and possibly new
Medicare materials. MA organizations have and are encouraged to use
existing flexibilities to highlight differences between their own plan
offerings for beneficiaries in marketing and communications materials
(for example, summary of benefits).
We received over 65 comments pertaining to the proposal; the great
majority reflected mixed support for eliminating the meaningful
difference requirement. After careful consideration of all of the
comments we received, we are finalizing the elimination of the
meaningful difference requirement from Sec. Sec. 422.254 and 422.256
as proposed. Under our existing authority at Sec. 422.2268, CMS will
monitor to ensure organizations are not engaging in activities that are
discriminatory or potentially misleading or confusing to Medicare
beneficiaries. CMS will communicate and work with organizations that
appear to offer a large number of similar plans in the same county,
raising and discussing with such MA organizations any concerns. CMS
plan checks would include plans offered under each contract, unique
plan type, and county. Plan types currently include: (1) HMO and HMO-
POS not offering all Parts A and B services out-of-network, (2) HMO POS
offering all Parts A and B services out-of-network, (3) LPPO, (4) RPPO,
(5) PFFS, and (6) unique SNP types (that is, different chronic
diseases, institutional categories, and dual-eligible sub-types). From
a beneficiary's perspective, CMS would expect plans within the same
contract, plan type, and county to be distinguishable by beneficiaries
using such factors as the inclusion or exclusion of Part D coverage,
provider network, plan premium, Part B premium buy-down, estimated out-
of-pocket costs, and benefit design so that MA organizations can market
their plans clearly. CMS intends to issue guidance through the annual
Call Letter process and HPMS memoranda to help organizations design
plan options that avoid potential beneficiary confusion prior to bid
submission.
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)
In addition to general authority for the Secretary to establish the
process through which MA plan election is made by Medicare
beneficiaries, section 1851(c)(3)(A)(ii) of the Act authorizes the
Secretary to implement default enrollment rules for the Medicare
Advantage (MA) program. This default enrollment is in addition to the
statutory direction that beneficiaries who do not elect an MA plan are
defaulted to original (fee-for-service) Medicare. Section
1851(c)(3)(A)(ii) 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 proposed new regulation text to establish
limits and requirements for these types of default enrollments to
address our administrative experience with and concerns raised about
these types of default enrollments under our existing practice. Based
on our experience with the seamless conversion process thus far, we
proposed to codify at Sec. 422.66(c)(2) requirements for seamless
default enrollments upon initial eligibility for Medicare. As proposed,
such default enrollments would be into dual eligible special needs
plans (D-SNPs) and would be subject to five substantive conditions: (1)
The state has approved use of this default enrollment process and
provided Medicare eligibility information to the MA organization; (2)
CMS has approved the MA organization to use the default enrollment
process before any enrollments are processed; (3) the individual is
enrolled in an affiliated Medicaid managed care plan and is dually
eligible for Medicare and Medicaid; (4) the MA organization provides a
notice that meets CMS requirements to the individual; and (5) the
individual does not opt out of the default enrollment. We proposed 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 also proposed changes to Sec. Sec. 422.66(d)(1) and
(d)(5) and 422.68 that coordinate with the proposal for Sec. 422.66.
As noted in the proposed rule, we initially addressed default
enrollment upon conversion to Medicare in a 2005 rulemaking (70 FR 4606
through 4607) and released subregulatory guidance \25\ to provide an
optional enrollment mechanism in 2006. This mechanism permitted MA
organizations to 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

[[Page 16496]]

that approved MA organizations not limit seamless continuation of
coverage to situations in which an enrollee becomes eligible for
Medicare by virtue of age, and directed MA organizations to implement
seamless conversions to include all newly eligible Medicare
beneficiaries, including those whose Medicare eligibility is based on
disability. From its inception, the guidance 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, but we encountered complaints and heard concerns about the
practice.
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\25\ https://www.cms.gov/Medicare/Eligibility-and-Enrollment/MedicareMangCareEligEnrol/Downloads/CY_2018_MA_Enrollment_and_Disenrollment_Guidance_6-15-17.pdf.
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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 discussed the opportunity to
integrate Medicare and Medicaid benefits via seamless continuation of
coverage into D-SNPs, and we received positive comments from state
Medicaid agencies supporting this enrollment mechanism and requesting
clarification of the approval process. We also received comments from
beneficiary advocates asking for additional consumer protections (for
example, requiring written beneficiary confirmation and a special
enrollment period for those enrolled using this optional mechanism).
On October 21, 2016,\26\ 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. We
discovered, based on our subsequent discussions with beneficiary
advocates and MA organizations approved for this enrollment mechanism,
that MA organizations find it difficult to comply with our current
guidance and approval parameters, especially the requirement to
identify commercial members who are approaching Medicare eligibility
based on disability when the other plan offered by the MA organization
is a commercial insurance plan. MA organizations also outlined
challenges in confirming entitlement to Medicare Parts A and B within
necessary timeframes and obtaining the individual's Medicare number--
which in 2018 will become a random and unique number instead of the
Social Security Number-based identifier used today. As discussed in
more detail below, we anticipate that the switch from the SSN-based
identifier will exacerbate this difficulty.
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\26\ https://www.cms.gov/Medicare/Eligibility-and-Enrollment/MedicareMangCareEligEnrol/Downloads/HPMS_Memo_Seamless_Moratorium.pdf.
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We noted in the proposed rule how organizations operating Medicaid
managed care plans are better able to meet these requirements when
states provide data, including the individual's Medicare number, to
identify individuals about to become Medicare eligible; MA
organizations with state contracts to offer D-SNPs will be able to
obtain (under their agreements with state Medicaid agencies) the data
necessary to process and submit default enrollments to CMS without
needing to collect information from the Medicare beneficiaries.
Therefore, we proposed 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 with the same parent organization as the
organization that operates the Medicaid managed care plan in which the
individual remains enrolled. At Sec. 422.66(c)(2)(i)(B), we also
proposed 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 and by providing necessary
identifying information to the MA organization.
The proposal was designed to support state efforts to increase
enrollment of dually eligible individuals into fully integrated systems
of care There is evidence \27\ that such systems improve health
outcomes so supporting efforts to increase use those systems is
consistent with overall CMS policy. Further, we believe then, and now,
that the proposal provided states with additional flexibility and
control.
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\27\ 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.
---------------------------------------------------------------------------

To ensure individuals are aware of the default MA enrollment and of
the changes to their Medicare and Medicaid coverage, we also proposed,
at Sec. 422.66(c)(2)(i)(C) and (c)(2)(iv), a requirement for MA
organizations to issue a notice no fewer than 60 days before the
default enrollment effective date to the enrollee. The notice \28\ 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.
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\28\ Enrollment requirements and burden are currently approved
by OMB under control number 0938-0753 (CMS-R-267). Since this rule
will not impose any new or revised requirements/burden, we are not
making any changes to that control number.
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We also proposed, in paragraph (c)(2)(i)(E) and (2)(ii), that MA
organizations must obtain approval from CMS before implementing default
enrollment. We explained that 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. We also noted that 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 members of the
affiliated Medicaid plan who were identified as eligible for default
enrollment. Lastly, we proposed authority for CMS to suspend or rescind
approval at any time it determined that the MA organization is not in
compliance with the requirements. We requested comment on whether this
authority to rescind approval should be broader. We also explained that
we continued to consider 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 in order to
assure that the regulation requirements are still being followed. We
were particularly interested in comment on this point in conjunction
with our alternative proposal (discussed later in this section) 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.

[[Page 16497]]

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 also proposed 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. We further
proposed 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 their commercial, Medicaid or other non-Medicare plan members. To
reflect this proposal for a simplified election process, we proposed to
add text in Sec. 422.66(d)(5) authorizing a simplified election for
purposes of converting existing non-Medicare coverage to MA coverage
offered by the same organization. This new simplified enrollment
process aimed to lessen burden for MA organizations, make enrollment
easier for the newly-eligible beneficiary to complete, and provide
opportunity for beneficiary choice, so that beneficiaries could remain
with the organization that offers their non-Medicare coverage or select
another MA plan that meets their individual needs with respect to
provider network, prescription drug formularies, and cost and benefit
structures. We explained that our 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 simplified enrollments throughout the individual's
Initial Coverage Election Period (ICEP), provided he or she enrolled in
both Medicare Parts A and B when first eligible. We proposed to use
existing authority to create this new enrollment mechanism, which would
be available to MA organizations in the 2019 contract year. We
solicited comments on the proposed changes to Sec. 422.66(d)(5) and
the form and manner of the simplified enrollments.
In addition to these proposals and solicitations for comment
related to default and seamless enrollments for newly eligible Medicare
beneficiaries, we proposed 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 enrollment requests from an
individual who is enrolled in a non-Medicare health plan offered by the
MA organization during the month immediately preceding the month in
which he or she is entitled to both Part A and Part B and who meets MA
eligibility requirements. We are concerned that in some instances, this
regulation has been interpreted as meaning that the enrollment request
must be filed during the month before Medicare entitlement occurs. To
clarify the requirement and be more consistent with section
1851(c)(3)(A)(ii), we proposed to amend Sec. 422.66(d)(1) to add text
clarifying that seamless continuation of coverage is available to an
individual who requests enrollment during his or her Initial Coverage
Election Period. We also proposed 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 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
solicited comment on these related proposals.
In conclusion, we proposed 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 proposed 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 will be available
to all MA organizations and their members who enroll in an MA plan
offered by the same entity that offers the individual's pre-Medicare
coverage. Lastly, we proposed 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 solicited
comments on all these proposals.
In addition, we presented an alternative for consideration and
comment. Because we recognized that our proposal narrowed the scope of
default enrollments compared to what CMS approved under section
1851(c)(3)(A) of the Act in the past, we discussed in the proposed rule
that we continued to consider retaining processes similar to the pre-
moratorium seamless conversion process. That 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. As an alternative 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 additional
beneficiary protections, including the issuance of an additional notice
to ensure that individuals understood the implication of taking no
action when notified of the default enrollment. While this alternative
would lead to increased use of the seamless conversion enrollment
mechanism than what had been used in the past, we expressed concern
that the operational challenges, particularly in relation to the new
Medicare Beneficiary Identification number, could be significant for MA
organizations to overcome at this time.
We also explained how we considered proposing regulations to limit
the use of default enrollment to only beneficiaries who are eligible
for Medicare based on age. While this alternative would simplify an MA
organization's ability to identify eligible individuals, we noted
concerns about disparate treatment among newly eligible beneficiaries
based on their reason for obtaining Medicare entitlement.
We invited comments on our proposal and the alternate approaches we
identified, 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 already covered by 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 to be limited to only the aged population.
We also asked for solutions to address the concerns we identified
in the proposed rule, particularly related to

[[Page 16498]]

how MA organizations could 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.
We received the following comments and our responses follow:
Comment: We received significant support for our proposal to permit
default MA enrollments, especially for dually-eligible beneficiaries
who are newly eligible for Medicare. Most commenters supported the
proposal to permit only D-SNPs to receive defaulted enrollments for
dually-eligible beneficiaries. Some commenters who supported our
proposal also supported the alternative we noted for consideration that
would permit default enrollment of newly Medicare-eligible individuals
enrolled in a non-Medicare health plan offered by the same
organization.
Response: We appreciate the widespread support we received for the
proposal. In our view, this proposal and our final rule support state
efforts to increase enrollment of dually eligible individuals in fully
integrated systems of care.
We appreciate the responses to our solicitation of feedback on
expanding default enrollment to include individuals enrolled in
commercial health plans offered by an MA organization. As noted in the
proposed rule (82 FR 56366) and above, our experience with the current
seamless conversion enrollment mechanism makes it clear that
organizations attempting to seamlessly convert individuals from
commercial coverage (that is, private coverage and Marketplace
coverage) are, for the most part, unable to comply with our current
guidance and approval parameters, especially the expectation that
organizations have the means to identify their commercial members who
are approaching Medicare eligibility based on disability. Given these
challenges, we did not specifically propose to codify default
enrollment from commercial coverage. We also solicited feedback on how
MA organizations might overcome the challenges in confirming
entitlement to Medicare Parts A and B within necessary timeframes and
obtaining the individual's Medicare number, given that in 2018 this
will become a random and unique number instead of a Social Security
Number-based identifier. We received only a few responses to our
solicitation of ideas on how to resolve these issues; commenters
generally deferred to CMS to find a way to identify non-MA members when
those members approach Medicare eligibility and for CMS to convey this
information to plans well in advance of the Medicare eligibility date.
In light of these comments, CMS may consider expanding default
enrollment to occur from commercial or other coverage arrangements in
future rulemaking. We are not finalizing the alternate proposal on
which we solicited comment.
Comment: A commenter asked that we expand default enrollment to
those enrolled in other ``state innovated models'' and delivery systems
other than Medicaid managed care, such as ACOs. The same commenter
asked that we allow the default enrollment provisions to be applied to
individuals enrolled in coverage other than comprehensive Medicaid
managed care, including prepaid inpatient health plans, prepaid
ambulatory health plans, and primary care case management. Another
commenter asked that we consider expanding our proposal for default
enrollment and/or changing the current parameters for passive
enrollment to allow a State to enroll any dually-eligible individual
(whether in a Medicaid managed care plan or in a Medicaid Fee-for-
Service program) into a D-SNP at any time.
Response: We appreciate the comments. As proposed, default
enrollment would be subject to several substantive conditions, one of
which required that anyone being considered for default enrollment be
enrolled in a Medicaid managed care plan affiliated with the MA
organization. Our proposal was specific to allowing default enrollment
of individuals enrolled in comprehensive Medicaid managed care plans--
rather than limited-benefit plans or case management arrangements--into
D-SNPs when these Medicaid managed care plan enrollees first become
eligible for Medicare. We believe that our overall goals of encouraging
integrated care are best met by limiting the default enrollment to the
context of comprehensive Medicaid managed care plans at this point and
may revisit an expansion of this regulation in future rulemaking. We
plan to further clarify allowable scenarios in subsequent guidance.
However, given the parameters of section 1851(c)(3)(A)(ii) of the Act,
we are unable to finalize a regulation that so substantially expands
the population of beneficiaries subject to this default enrollment to
include Medicaid beneficiaries who are not enrolled in a health plan
offered by an MA organization.
Comment: Several commenters who support our proposal for default
enrollment recommend that, if finalized, we ensure that beneficiaries
who do not speak English as a primary language receive outreach in
their language, preferably by both mail and telephone.
Response: We appreciate these comments and agree that clear
communication with individuals identified for default enrollment is an
important protection, especially with regard to the potential impact of
MA plan enrollment on an individual's access to care. We note that
existing law, such as Title VI of the Civil Rights Act of 1964
(applicable to MA organizations in connection with Medicare coverage)
and 42 CFR 438.10 (applicable to Medicaid managed care plans) address
requirements for providing access to enrollees who have limited English
proficiency (LEP). Guidance on the Civil Rights Act of 1964 and
authorities that are not limited to Medicare or Medicare is issued by
the HHS Office for Civil Rights (OCR). We refer the commenter to
section II.B.5 of this final rule on marketing and communications
requirements. We believe, therefore, that revisions to our proposed
rule are not necessary.
Comment: Several commenters stated that the network for the MA plan
should be substantially identical and should not be substantially
narrower than the network of the Medicaid plan from which default
enrollment would occur.
Response: Although we did not include specific provider network
criteria in our proposal for default MA enrollment, we note that CMS
currently has in place network adequacy requirements that would apply
to any MA plan into which default enrollment occurs. States also have
the opportunity to use their State Medicaid agency contracts with D-
SNPs to create additional provider network continuity requirements.
Therefore, we do not believe that additional criteria are warranted.
Comment: Several of the commenters who opposed our proposal for
default enrollment asked that in the event that our proposal for
default enrollment is finalized, we consider additional beneficiary
protections, such as a minimum star rating for the MA plan into which
default enrollment would occur and the exclusion of MA plans that have
been assessed a civil monetary penalty or have been sanctioned within
the previous 18 months. Another commenter expressed concern about the
potential for individuals to be default enrolled into an MA plan with a
low star rating when there are MA plans with higher star ratings
offered by other organizations in the same area. These commenters note
that organizations with high star ratings that do not offer

[[Page 16499]]

a Medicaid plan would not be permitted to conduct default enrollment.
Response: We appreciate the comments we received regarding the
significance of the compliance history of an MA organization that
wishes to conduct default MA enrollment and the suggestion of a minimum
star rating. We agree with these commenters that standards governing
the quality of the MA D-SNP are appropriate to adopt as well. We
believe that default enrollment should not be permitted into an MA plan
offered by an MA organization with a low star rating and/or recent
issues of significant noncompliance with our regulatory requirements
such that CMS has imposed a suspension on new enrollments. Since
default MA enrollment is based on an opt-out, rather than opt-in,
approach, we believe it is important to ensure that individuals are not
enrolled by default into MA plans offered by poor performing
organizations. Therefore, we are finalizing the regulation with
additional paragraphs ((c)(2)(i)(F) and (G)) that limit default
enrollment authority to MA plans that have an overall rating of 3 Stars
(or are low enrollment or new contracts) and that are not under a
prohibition on new enrollments.
Comment: Most commenters expressed support for limiting CMS
approval of an organization's request to conduct default enrollment to
a specific time frame. Those who mentioned a specific time frame
suggested a period of 2 to 5 years. A commenter suggested that CMS
conduct a review after initial approval only if there is an indication
of disruption in care.
Response: CMS oversight of plans' implementation of the default
enrollment process is an important beneficiary protection. We agree
with the suggestions of a 5 year timeframe, as it provides a reasonable
amount of time for MA organizations to implement and then assess the
approved process, limits administrative burden for MA organizations to
request continued approval, and provides them the opportunity to update
their processes as operational enhancement or new technologies emerge.
However, in our view, should beneficiary complaints or allegations of
noncompliance come to our attention, we need to be able to conduct a
review of an organization's default enrollment process prior to the
expiration of the five year period. Therefore, we will include in the
final rule an approval time period of 5 years with a provision that
permits CMS to suspend or rescind approval if CMS determines that the
MA organization is not in compliance with the requirements or Sec.
422.66(c)(2) or other MA program standards.
Comment: A commenter suggested that we share with states the
criteria we will use to review plan proposals to offer default
enrollment, adding that this may promote uniformity with implementation
across the various states.
Response: The requirements for default enrollment are outlined in
this regulation. In addition, we will consider additional guidance,
which is available to states, industry, advocates, and the general
public, as necessary.
Comment: Most commenters expressed support for our proposal to
permit simplified elections for seamless continuation of commercial
coverage into a MA plan offered by the same organization. A commenter
expressed opposition to the offering of a simplified (opt-in)
enrollment mechanism to anyone enrolled in a Medicaid managed care
plan. Another commenter asked that we consider making the simplified
(opt-in) enrollment mechanism available to all beneficiaries, including
those who are not in their ICEP and those who are not enrolled in a
non-Medicare plan offered by the same organization.
Response: We appreciate the support for our proposal to promote
beneficiary choice and simplify the enrollment process for all MA
organizations that offer non-Medicare coverage. However, we disagree
with the suggestion to prohibit use of the simplified enrollment
mechanism by those enrolled in Medicaid managed care plans. In our
view, an eligible individual always has the option to make an active
choice into an MA plan that meets their needs when in an election
period. Further, as not all individuals in Medicaid managed care plans
will be automatically enrolled into a D-SNP (such as those individuals
enrolled in Medicaid managed care plans whose parent organizations have
opted not to use the default enrollment mechanism or those individuals
whose Medicaid managed care enrollment is in a Medicaid prepaid health
plan that covers a limited scope of benefits), the simplified
enrollment mechanism will lessen burdens on the enrollee and MA
organizations that offer such plans. We believe that a simplified
election process for beneficiaries who wish to convert from their non-
Medicare coverage to MA coverage offered by the same entity will
facilitate a more efficient enrollment process overall.
As described in the proposed rule, this mechanism will be available
to any MA organization that chooses to offer it. It will be potentially
available to any beneficiary who wishes to join an MA plan offered by
the same MA organization that offers his or her non-Medicare coverage
at the time of his or her initial Medicare eligibility. The simplified
enrollment mechanism aims to lessen the amount of information that an
MA organization needs to collect from the beneficiary and to use
information the MA organization already has. MA organizations that do
not already have an existing relationship with an individual must
collect all the necessary information in which to determine eligibility
and process the enrollment request under Sec. 422.60.
We appreciate the feedback to finalize use of a simplified
enrollment mechanism authorized under Sec. 422.66(d)(5) as amended in
this final rule. We will permit individuals who are in their ICEP and
enrolled in any type of non-Medicare plan to use the simplified (opt-
in) enrollment mechanism to request enrollment in any type of MA plan
offered by the same MA organization that offers the non-Medicare
coverage.
Comment: A few commenters responded to our solicitation of feedback
on limiting default enrollment to only the aged. Most of these
commenters opposed this limitation; a commenter supported it. Those who
oppose limiting default enrollment to only the aged believe that
allowing default enrollment to be offered only to those whose Medicare
eligibility is based on age, instead of to all beneficiaries, would be
discriminatory on its face because the exclusion is based on having a
disability or ESRD. Another commenter believes that states and plans
should be allowed to determine whether including all individuals
approaching Medicare eligibility is feasible and, if not feasible,
include only those whose Medicare eligibility is based on age.
Response: We thank the commenters and agree that it would be
inappropriate to exclude individuals whose Medicare eligibility is
based on disability from default enrollment. We believe that an
individual's eligibility to be included in default enrollment should be
based on his or her projected Medicare eligibility in general and not
on the specific reason for Medicare eligibility. We are, therefore,
finalizing this aspect of our proposal as described in the notice of
proposed rulemaking and are not including any authority to limit
default enrollment (under paragraph (c)) or seamless conversions (under
paragraph (d)) to beneficiaries whose eligibility is based on age.

[[Page 16500]]

Comment: In the event that our proposal for default enrollment is
finalized, several commenters who opposed our proposal for default
enrollment ask that default-enrolled beneficiaries be provided
transition coverage, allowing use of an off-formulary drug, and
allowing a beneficiary to maintain an out-of-network provider for 12
months, similar to the Medicare-Medicaid financial alignment
demonstration.
Response: We appreciate these comments and note that several of the
concerns expressed are addressed in other areas of current regulation
and guidance. With regard to formulary concerns, we note that all plans
offering Part D coverage must meet CMS' formulary adequacy requirements
and, in addition, must offer a transition period upon a member's
enrollment in a new plan. Specifically, under Sec. 423.120(b)(3), new
enrollees must be provided a temporary supply of non-formulary Part D
drugs, as well as Part D drugs with utilization management
restrictions, and can work with their new plan and provider to switch
to a different formulary drug or request an exception during their
first 90 days of enrollment in the new MA plan. States may also use
their State Medicaid Agency contracts with D-SNPs to create additional
continuity requirements. With regard to the commenters' suggestion that
we require MA organizations to allow new members to receive care from
out-of-network providers for 12 months, similar to the Medicare-
Medicaid financial alignment demonstration, we note that a 6 month
continuity of care period is more common for demonstration plans. In
addition, we note that this period can be offered by demonstration
plans due to the demonstration authority itself; we do not have similar
authority to impose a similar requirement on MA organizations that
choose to implement the default enrollment process.
Comment: The few commenters who opposed default enrollment cite as
the basis for their position the lack of beneficiary choice and the
potential for disruption in care resulting from default enrollment into
a plan with different benefits, cost-sharing, provider network and
formulary.
Response: In response to these comments, we note that an important
feature of this enrollment process is clear and timely advance notice
to the individual regarding default MA enrollment and the opportunity
to decline the enrollment up to and including the day prior to the
enrollment effective date. We, therefore, disagree with these
commenters that the default MA enrollment process, as proposed and as
finalized in this rule, does not involve beneficiary choice. The notice
requirements in the final rule will provide the beneficiary a least a 2
month period in which to review his or her Medicare options and make an
informed choice. Further, the new MA Open Enrollment Period, discussed
at section II.B.1 of this final rule, would be available to any
beneficiary who was default enrolled in an MA plan pursuant to Sec.
422.66(c)(2). Upon an individual's new enrollment in an MA plan during
the individual's ICEP, he or she would have 3 months, under the MA Open
Enrollment Period discussed in Sec. 422.62(a)(5), to make a change to
another MA plan or select Original Medicare for health coverage.
Additionally, as individuals eligible for default enrollment would only
be those dually-eligible, they would also be eligible to use their
quarterly opportunity under the duals SEP, as outlined in II.A.10 of
this final rule, to make a Part D election, as well as any other
election periods for which they may qualify, to make a change. In this
context, a Part D election would include enrollment into an MA plan
that includes a Part D benefit. We believe that there are adequate
protections in place, as finalized with these amendments to Sec.
422.66(c)(2) and elsewhere in this final rule, for beneficiary choice
in connection with the initial election period when someone is first
entitled to or eligible for Medicare.
The regulation we proposed requires the MA organization conducting
default enrollment to provide notice that describes the costs and
benefits of the MA plan into which the default enrollment would occur,
as well as the process for accessing care under the plan. We agree with
the commenters that information on the differences between an
individual's current non-Medicare coverage and the new MA plan,
including a statement as to whether the individual's current primary
care provider will continue to be available to the individual upon
enrollment in the MA plan, should be included in the advance
notification of default enrollment. We also agree that information on
other types of Medicare plans should be included in the notice to
ensure an individual who is notified of default enrollment has
sufficient information and can make an informed choice with regard to
the coverage option that best meets his or her needs. Therefore, we are
finalizing additional paragraphs, at (c)(2)(iv), that specific
information be included in the notice describing the default enrollment
and the ability to opt-out:
(A) Information on the differences in premium, benefits and cost
sharing between the individual's current Medicaid managed care plan and
the dual eligible MA special needs plan and the process for accessing
care under the MA plan;
(B) 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 MA plan; and
(C) A general description of alternative Medicare health and drug
coverage options available to an individual in his or her Initial
Coverage Election Period.
In addition, we are including in the regulation that this
information and the notice about the default enrollment is in addition
to any mandatory disclosures required under Sec. 422.111.
Comment: Several commenters who opposed our proposal for default
enrollment expressed support for our proposal to develop a simplified
(opt-in) enrollment mechanism, as long as differences between an
individual's current and new plan are clearly communicated and that he
or she is made aware of all options available to newly Medicare-
eligible individuals. These commenters note that an individual's
initial eligibility for Medicare is a critical decision point and that
information on the full range of Medicare coverage options is important
to help ensure that those approaching Medicare eligibility are aware of
the resources available to them and of any time-limited enrollment
opportunities, such as the option to obtain Medigap on a guaranteed
issue basis.
Response: With respect to the new simplified (opt-in) election
mechanism that would be available to all MA organizations for MA
enrollments of their commercial, Medicaid or other non-Medicare
members, we note that MA organizations that choose to implement this
optional election mechanism will be required to follow existing rules
governing mandatory disclosures (for example, Sec. 422.111),
communications and marketing that are applicable to other beneficiary-
initiated enrollment requests. Required disclosures include a
description of the MA plan benefits, including applicable conditions
and limitations, premiums and cost-sharing (such as copayments,
deductibles, and coinsurance), any other conditions associated with
accessing benefits and for purposes of comparison, a description of the
benefits offered under original

[[Page 16501]]

Medicare. Also included under Sec. 422.111 is the requirement to
disclose the number, mix, and distribution (addresses) of providers
from whom enrollees may reasonably be expected to obtain services. We
will provide additional information on this optional enrollment
mechanism in subregulatory guidance.
Given these substantial existing disclosure requirements that will
be applicable to the new simplified (opt-in) election mechanism, as
well as our ongoing public outreach and education activities for
individuals new to Medicare, we do not believe that additional notice
or disclosure requirements are warranted.
Comment: A few commenters asked that we reduce the requirement to
identify newly-eligible Medicare beneficiaries from 90 to 60 days.
Response: We believe the commenters' reference to a 90 day
requirement for advance notification of newly-eligible Medicare
beneficiaries is based on the current subregulatory guidance applicable
to the seamless conversion enrollment mechanism. This guidance will be
revised as a result of this final rule to account for default
enrollment and the new simplified (opt-in) enrollment mechanism. The
rule we are finalizing requires notice to the affected beneficiary at
least 60 days in advance of the enrollment effective date (the month in
which the individual is first entitled to both Part A and Part B). This
reflects a change from the current seamless conversion process, which
requires identification of beneficiaries that will be seamlessly
enrolled 90 days in advance. While we believe that timely
identification of individuals approaching Medicare eligibility is an
important beneficiary protection that helps to ensure that plans are
able to provide timely advance notification and submission of
enrollment transactions to CMS, we also believe that for default
enrollment this shorter timeframe does not have an adverse beneficiary
impact. MA plans that are authorized to use this default enrollment
process must identify all eligible enrollees in time to provide the
required advance notification to individuals eligible for default
enrollment no fewer than 60 days before the default enrollment
effective date.
Comment: Several commenters suggested that CMS consider allowing
default enrollment from Medicaid managed care plans into fully
integrated dual eligible special needs plans (FIDE SNPs), which are a
type of special needs plan designed to promote the full integration and
coordination of Medicaid and Medicare benefits for dual eligible
beneficiaries by a single managed care organization.
Response: We thank the commenters for their feedback and agree that
allowing default enrollment from Medicaid managed care plans into FIDE
SNPs is consistent with the proposed rule. FIDE SNPs are a specific
type of approved MA-PD dual eligible special needs plan. We will
finalize revised text to clarify that FIDE SNPs are permitted to use
the default enrollment mechanism, subject to the other requirements in
the rule.
Comment: A commenter stated that Congress should revisit default
enrollment in traditional Medicare. This commenter believes that to the
extent that MA quality is superior, enrollment should default to the
highest quality option, rather than to traditional Medicare.
Response: As acknowledged by the commenter, this comment is outside
of the scope of this regulation and our authority under section 1851.
CMS's authority is circumscribed by the Medicare statute, particularly
section 1851(c)(3)(A)(ii) of the Act with regard to default
enrollments.
Comment: A commenter suggests that plans conducting default
enrollment be allowed to send the notification of default enrollment up
to 90 days after an individual's initial Medicare eligibility, adding
that this would increase enrollment into integrated plans.
Response: We appreciate the suggestion; however we disagree with
permitting notification of default enrollment after enrollment or, as
implied by the commenter, effectuating the default enrollment up to 90
days after the initial date of Medicare eligibility. As described in
our proposal, states have the information to identify newly eligible
Medicare beneficiaries before the actual first date of Medicare
eligibility; therefore, they have the information necessary to provide
to their contracted MA organizations so that the integrated coverage
can begin at the earliest possible date--the date the individual first
has both Medicare Parts A and B. As such, the effective date for
default enrollment will always coincide with the date of an
individual's entitlement to and eligibility for Medicare Parts A and B,
which would not allow the commenter's suggested change. We note as well
that the commenter's suggestion would result in notification of the
default enrollment well after the enrollment effective date, resulting
in a period of time during which the individual is not aware of his or
her enrollment in an MA plan, does not have the information necessary
to access benefits and would be financially liable for healthcare
services received from providers not contracted with the MA plan. To
ensure that individuals receive timely advance notification of the
default enrollment, we are declining the commenter's suggestion. We
note that individuals who are enrolled into a MA plan through default
enrollment continue to have a three-month opportunity to change their
enrollment using the MA Open Enrollment Period, as outlined in Sec.
422.62(a)(5). Further, an individual who chooses to opt out of default
enrollment into an MA plan is still able to make an election during his
or her Initial Coverage Election Period, which begins 3 months before
and lasts 3 months after the month of initial Medicare eligibility.
Comment: A commenter suggested that default enrollment not be
allowed where Medicare-Medicaid financial alignment demonstration plans
are available.
Response: We are committed to partnership with state Medicaid
agencies to pursue integrated care approaches that work for each state.
We believe that the proposed regulatory language requiring state
approval for default enrollment into D-SNPs provides an appropriate
safeguard that ensures any default enrollments are consistent with the
state's Medicare-Medicaid integration goals.
Comment: A commenter who opposes default enrollment into D-SNPs
stated that it will lead to reduced competition and fewer D-SNP
offerings for beneficiaries, resulting in higher costs and fewer
benefits over time.
Response: We appreciate the comment but disagree with the
commenter's assessment and conclusion regarding the impact of default
MA enrollment on competition in the market and the number of D-SNP
offerings. As default enrollment accounts only for those newly eligible
for Medicare, it is our view that D-SNPs provide a valuable service to
all beneficiaries--those currently and newly in the Medicare program.
After review of the comments, and as discussed earlier, we are
finalizing the proposed changes to Sec. Sec. 422.66(c) and
422.68(d)(1) and (5) with the following modifications:
Paragraph 422.66(c)(2)(i) will be revised to clarify that
we will allow default enrollment into a FIDE-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.
Paragraph 422.66(c)(2)(i) will be revised to require a
minimum star rating

[[Page 16502]]

on the contract receiving default enrollments for an MA organization to
be approved for default enrollment. We are revising the paragraph to
require that, for an organization to be approved for default
enrollment, it must have an overall quality rating, from the most
recently issued ratings, under the rating system described in
Sec. Sec. 422.160 through 422.166, of at least 3 stars or is a low
enrollment contract or new MA plan as defined in Sec. 422.252. In
addition, the MA organization must not be under an enrollment
suspension.
Paragraph 422.66(c)(2)(ii) will be revised to include an
approval period not to exceed 5 years, subject to CMS authority to
rescind or suspend approval if the plan is non-compliant.
Paragraph 422.66(c)(2)(iv) will be revised to require that
the notice issued by the MA organization include information on the
differences in premium, benefits and cost sharing between the
individual's current Medicaid managed care plan and the dual eligible
MA special needs plan and the process for accessing care under the MA
plan; an explanation of 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 MA plan; and a general description of alternative Medicare
health and drug coverage options available to an individual in his or
her Initial Coverage Election Period.
Paragraph 422.66(c)(2)(iv) will be revised to clarify that
the mandatory notice is in addition to the information and documents
required to be provided to new enrollees under Sec. 422.111.
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, and care coordination, and reducing administrative
burden.
In the proposed rule, we proposed a limited expansion of CMS'
regulatory authority to initiate passive enrollment for certain dually
eligible beneficiaries who are currently enrolled in an integrated D-
SNP into another integrated D-SNP in instances where integrated care
coverage would otherwise be disrupted, such as during a state re-
procurement of Medicaid managed care contracts that results in current
Medicaid managed care plans not being renewed, or when beneficiaries
are enrolled in an integrated D-SNP that non-renews its MA contract at
the end of the contract year. The intent of CMS' proposal was to
improve care coordination and minimize disruption in care by promoting
enrollment in integrated care arrangements for dually eligible
beneficiaries currently enrolled in an integrated D-SNP.
Specifically, we proposed authorizing 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, when CMS determines that the passive enrollment will
promote continuity of care and integrated care under Sec.
422.60(g)(1)(iii). We also proposed, under Sec. 422.60(g)(2), a number
of requirements an MA plan would have to meet in order to qualify to
receive passive enrollments under paragraph (g)(1)(iii). These proposed
requirements are detailed below.
MA plans receiving the passive enrollments must be highly
integrated D-SNPs, 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 promote continuity of care, receiving MA
plans must 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.
D-SNP contracts must have a minimum overall MA Star Rating
of at least 3 stars for the year prior to receipt of passive enrollment
or be a low enrollment or new MA contract (which do not have a Star
Rating because of the insufficient data available).
Receiving MA plans must not have any prohibition on new
enrollment imposed by CMS.
Receiving MA plans must have appropriate limits on premium
and cost-sharing for beneficiaries.
We solicited comments on our proposal to identify plans for
receiving passive enrollments, particularly on the minimum quality
standards relevant to dually eligible beneficiaries. We also solicited
comments on whether to limit passive enrollment authority to
circumstances that would not raise total cost to the Medicare and
Medicaid programs. Additionally, we requested feedback on how to
calculate the projected impact on Medicare and Medicaid costs from
exercise of this authority.
In the proposed rule, we noted that we had also considered
proposing new (or additional) beneficiary notification requirements for
passive enrollments that occur under proposed paragraph (g)(1)(iii),
including the provision of two notifications to enrollees prior to the
effective date. Citing the existing beneficiary notifications that are
currently required under Medicare regulations and concerns regarding
the quantity of notifications sent to beneficiaries, we did not propose
to modify the existing notification requirements under paragraph (g)(4)
of the proposed rule. However, we solicited comment on alternatives
regarding beneficiary notices, including comments about the content and
timing of such notices.
We received the following comments and our responses follow.
Comment: Many commenters expressed support for CMS' proposal for a
limited expansion of the current passive enrollment authority in order
to promote continued enrollment of dually eligible beneficiaries in
integrated D-SNPs, preserve and promote care integration, and limit
disruptions in care under certain circumstances. Several commenters
supported CMS' goal of care continuity while expressing their belief
that the best way to empower beneficiaries is through mechanisms where
beneficiaries opt in to integrated care. A commenter requested that CMS
consider how passive enrollment of beneficiaries from an existing
integrated D-SNP into another integrated D-SNP could create disruptions
in care. A few commenters opposed our passive enrollment proposal due
to concerns that passive enrollment limits beneficiary choice and
erodes the role of competition in the marketplace. A commenter
suggested that a better alternative for beneficiaries in integrated D-
SNPs that are non-renewing is for them to revert to FFS Medicare.
Another commenter noted that passive enrollment in other

[[Page 16503]]

circumstances has proven to be too confusing for dually eligible
beneficiaries.
Response: We appreciate the support by most commenters of our goals
of promoting continuity and quality of care for dually eligible
beneficiaries currently enrolled in integrated D-SNPs in situations
where they would otherwise experience an involuntary disruption in
either Medicare or Medicaid coverage. As we stated in the proposed rule
(82 FR 56369-56370), we anticipate using this new authority exclusively
in limited situations related to market disruptions related to D-SNP
non-renewal or changes in state Medicaid managed care organization
procurements; therefore, we anticipate that this authority, as
finalized, will have no significant impact on competition in the
Medicare Advantage marketplace. We also proposed that D-SNPs meet
certain requirements related to integration, quality, performance, and
provider network and benefits comparability relative to the enrollees'
previous coverage. We believe these safeguards will ensure continuity
of care and limit any disruption associated with a plan change for
affected enrollees. In addition, we believe the beneficiary notice
requirements for passively enrolled individuals described in Sec.
422.60(g)(4) ensure that beneficiaries will receive appropriate advance
notice regarding the costs and benefits of their new coverage, the
process for accessing care under the new plan, and an explanation of
the beneficiary's ability to decline the enrollment or choose another
plan. As described elsewhere in this final rule, we are strengthening
the notice requirements associated with passive enrollment under this
new limited expansion of CMS' passive enrollment authority. Finally, we
note that all individuals enrolled into an integrated D-SNP under CMS'
passive enrollment authority will have a special election period (SEP)
under Sec. 422.60(g)(5), which as finalized in this rule refers to the
new SEP established in this final rule at Sec. 423.38(c)(10). This SEP
will allow individuals to opt out of the passive enrollment within 3
months of notification of a CMS or state-initiated enrollment action or
that enrollment action's effective date (whichever is later). This SEP
is in addition to any other election periods for which they qualify.
During the SEP, a beneficiary would be able choose FFS Medicare or
other coverage based on their personal preferences. Therefore, we are
finalizing the proposed limited expansion of CMS' passive enrollment
authority at Sec. 422.60(g)(1)(iii). However, we note that we are
making a technical revision to paragraph (g)(1)(iii) to clarify that a
plan must meet all the requirements under paragraph (g)(2) to be
eligible to receive passive enrollment.
Comment: A commenter stated that any beneficiary who has chosen FFS
Medicare should not be passively enrolled. Several commenters suggested
that passive enrollment be extended to existing and new dually eligible
beneficiaries in FFS Medicare and stand-alone Part D plans. A few
commenters recommended passively enrolling dually eligible
beneficiaries into a D-SNP when states enroll beneficiaries into a
mandatory Medicaid long-term services and supports (LTSS) program.
Response: While we appreciate commenters' support for coordinated
care options for individuals who are not currently enrolled in an MA
plan, we note that our intent in proposing an expansion of CMS' passive
enrollment authority was to promote continuity of integrated care for
those beneficiaries enrolled in an integrated D-SNP but who would
experience an involuntary disruption in their Medicare or Medicaid
coverage in the absence of passive enrollment into a comparable
integrated D-SNP. This authority could not be used to transition
enrollees currently in FFS Medicare to an MA plan.
Comment: Some commenters agreed that passive enrollment eligibility
should be limited to highly integrated D-SNPs. A commenter recommended
limiting eligibility for passive enrollment to integrated D-SNPs with
the experience and size to meet the unique needs of the dual eligible
population. A few commenters expressed concern that the scope of our
proposal was too limited because only Fully Integrated Dual Eligible
(FIDE) SNPs and other MA plans that meet the integration standard for a
highly-integrated D-SNP, as defined in Sec. 422.2 and described in
Sec. 422.102(e), respectively, would be qualified to receive the
passive enrollments. These commenters noted the limited number of
highly integrated D-SNPs and FIDE SNPs currently in the market. A few
commenters recommended extending eligibility to include all D-SNPs that
meet minimum quality standards and can demonstrate appropriate levels
of integrated benefits. Another commenter recommended that CMS allow
states the flexibility to determine which D-SNPs are eligible to
participate in passive enrollment.
Response: We appreciate the commenters' perspectives on this issue.
We may re-examine this issue as we gain experience, but we have
concluded that it is more prudent to focus this form of passive
enrollment on a narrow set of circumstances that offer the highest
levels of integration between Medicare and Medicaid. This will allow us
to better monitor implementation and will promote integration, which
has been associated with better outcomes.\29\ We also note that our
proposed criteria are minimum standards only; states can establish
additional criteria to determine which D-SNPs may be eligible for
passive enrollment. As such, we are finalizing the scope of the
proposed passive enrollment authority for dually eligible beneficiaries
enrolled in an integrated D-SNP, without modification.
---------------------------------------------------------------------------

\29\ 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.
---------------------------------------------------------------------------

Comment: Several commenters encouraged CMS to consider further
expanding our proposed passive enrollment authority to transition
enrollees of non-renewing Medicare-Medicaid Plans (MMPs) into an
integrated D-SNP.
Response: We clarify that under the Financial Alignment Initiative
capitated model demonstrations, MA regulations--including those
governing passive enrollments--apply to MMPs unless waived. As has been
the case to date under the demonstrations, we will continue to use our
demonstration authority to waive applicable MA regulatory requirements
in three-way contracts as necessary, and in partnership with each
state, to achieve each individual demonstration's objectives.
Comment: Several commenters supported the requirement for
consultation with the state Medicaid agency that contracts with an
eligible D-SNP, as proposed in Sec. 422.60(g)(1)(iii). Some commenters
noted that this consultation would ensure both the proper utilization
of CMS' passive enrollment authority and consistency

[[Page 16504]]

with states' integration goals and priorities. A commenter noted that
this consultation would result in a more seamless process for states,
integrated D-SNPs, and dually eligible beneficiaries. A few commenters
noted that passive enrollment should occur at state discretion and
pursuant to the State Medicaid Agency Contract with the D-SNP required
under Sec. 422.107.
Response: We appreciate the support for the proposed requirement
that CMS consult with state Medicaid agencies to make a determination
that D-SNPs meet the passive enrollment eligibility criteria and that
the use of passive enrollment will promote integrated care and
continuity of care for full-benefit dual eligible beneficiaries
currently enrolled in an integrated D-SNP. We are committed to working
with states to ensure that any passive enrollments under this authority
meet CMS requirements as well as state priorities.
Comment: A commenter requested that CMS clearly communicate the
criteria for an integrated D-SNP to be eligible to accept passive
enrollees in subregulatory guidance.
Response: We anticipate issuing subregulatory guidance about the
criteria for the passive enrollment authority finalized in this rule.
We believe that the amendments to Sec. 422.60(g) as finalized here are
sufficiently clear, particularly in light of the detailed discussion in
the proposed rule and these various responses to comment, that
implementation in CY2019 will not be confusing for D-SNPs that are
qualified to receive enrollments.
Comment: A commenter expressed concern that passive enrollment
authority would be delegated to states. Another commenter recommended
that CMS provide more clarification on whether CMS or state Medicaid
agencies would be managing passive enrollment into integrated D-SNPs
under our proposal, as well as on the implementation process for such
passive enrollments.
Response: When circumstances arise in which passive enrollment into
an integrated D-SNP could potentially be applied, CMS will consult with
the applicable state Medicaid agency, consistent with Sec.
422.60(g)(1)(iii) as finalized. We anticipate that such consultation
would include collaboration between CMS and the state Medicaid agency
on issues such as identifying plans that meet the requirements in Sec.
422.60(g)(2), decisions about enrollee assignment, and communications
with impacted plans. We clarify that, as is the case today with respect
to other passive enrollments into MA plans, affected D-SNPs will submit
enrollment transactions to CMS' MARx system.
Comment: Several commenters supported our proposed requirement in
Sec. 422.60(g)(2)(ii) that a receiving integrated D-SNP have
substantially similar provider and facility networks to the other MA
integrated D-SNP plan (or plans) from which the passively enrolled
beneficiaries are enrolled. A few commenters suggested that CMS limit
the application of provider network and benefit similarity in order not
to further narrow the scope of permissible passive enrollments into D-
SNPs.
Response: We appreciate the support of our proposed requirement for
provider network comparability as a minimum requirement for an
integrated D-SNP's eligibility for passive enrollment. We disagree with
the commenters' suggestion that we limit our eligibility analysis on
provider network comparability given our emphasis on continuity of care
in the application of this limited expansion of CMS' passive enrollment
authority. We believe that this comparability analysis will minimize
the number of enrollees whose provider relationships are disrupted as a
result of passive enrollment and will encourage retention following
enrollees' transition to a new integrated D-SNP. We are therefore
finalizing the requirements for assessing network comparability as a
condition for eligibility for passive enrollment under Sec.
422.60(g)(1)(iii) as proposed.
Comment: Several commenters requested clarification on how CMS will
determine that the receiving integrated D-SNP has substantially similar
provider and facility networks and Medicare- and Medicaid-covered
benefits as the D-SNP from which the beneficiaries were passively
enrolled.
Response: We appreciate the commenters' request for clarification
and anticipate issuing clarifications through subregulatory guidance.
The subregulatory guidance will articulate the process and timing for
the losing and receiving D-SNPs to submit networks through the CMS
Health Plan Management System. CMS will also review plan benefit
packages submitted by the impacted D-SNPs as well as engage the State
Medicaid agency to ensure covered services are similar to services
currently being received by impacted dual eligible beneficiaries.
Comment: In addition to our proposed network comparability
requirement, several commenters recommended the use of an ``intelligent
assignment'' process for passively enrolling beneficiaries into a D-SNP
based on the providers and prescription drugs associated with each
individual beneficiary. Several commenters also recommended that, in
our analysis of benefits comparability, CMS consider the comparability
of the receiving D-SNP's formulary.
Response: We agree that intelligent assignment processes would be
helpful for ensuring care continuity and minimizing enrollee
disruption. We will consider the availability of intelligent assignment
processes when effectuating passive enrollments under this authority
and will also consider intelligent assignment options in the future.
However, we note that all plans offering Part D coverage must meet CMS'
formulary adequacy requirements and, in addition, must offer a
transition period upon a member's enrollment in a new plan.
Specifically, under Sec. 423.120(b)(3), new enrollees must be provided
a temporary supply of non-formulary Part D drugs, as well as Part D
drugs with utilization management restrictions, and can work with their
new plan and provider to switch to a different formulary drug or
request an exception during their first 90 days of enrollment in their
new plan.
Comment: A commenter expressed concern that passive enrollment
could further limit enrollee choice in states in which biologic
medications are reimbursed at low rates under Medicaid.
Response: We appreciate the commenter's concern about access to
medically necessary drugs. We note that Medicare covers nearly all
prescription drugs for dually eligible individuals under Parts A, B,
and D. Medicaid coverage of drugs for dually eligible individuals is
generally limited to over-the-counter drugs and products and
prescription drugs that are otherwise excluded from the definition of a
Part D drug. For dually eligible beneficiaries, the drugs referenced by
this commenter would be covered under Medicare Part B rather than
Medicaid.
Comment: Several commenters recommended a transition period during
which passively enrolled beneficiaries can see current providers that
are not in their new plan's network. A few commenters also suggested
that care plans and authorized services be continued for a period of
time following passive enrollment.
Response: We appreciate the commenters' suggestion that we
incorporate continuity of care requirements into our proposed passive
enrollment processes. We believe our finalization of the requirement
for substantially similar provider and facility networks under Sec.
422.60(g)(2)(ii) will facilitate continuity of care in most

[[Page 16505]]

cases. In addition, as previously discussed, the Part D transition
requirements provide continuity of prescription drug benefits during a
beneficiary's first 90 days of coverage in a new plan, including in
cases where passive enrollment has been effectuated. We encourage
states to consider using their State Medicaid Agency Contracts with D-
SNPs as a vehicle for requiring that any passive enrollments into
integrated D-SNPs apply transition rules that align with those
applicable to Medicaid managed care organizations under Sec.
438.62(b). As previously noted, we are finalizing our provider and
benefits comparability requirements at Sec. 422.60(g)(2)(ii) without
further modification.
Comment: Several commenters responded to our request for comment on
CMS' proposal that an integrated D-SNP meet certain quality criteria to
qualify for passive enrollment, particularly with respect to the
proposed requirement that a D-SNP have an overall quality rating of at
least 3 stars based on the MA Star Ratings system. Several commenters
expressed support for our proposed application of a minimum overall MA
Star Rating of at least 3 stars. A commenter noted that CMS'
consultation with the state Medicaid agency would ensure that an
integrated D-SNP's Medicaid performance is considered in addition to
the Medicare performance captured by the MA Star Ratings. Several
commenters recommended raising the minimum required MA Star Rating
level. A commenter noted concerns with the MA Star Ratings as a basis
for our proposed quality requirement because star ratings may be
affected more by the percentage of dually eligible members enrolled in
an MA plan than other factors and suggested requiring state approval
instead of a minimum MA Star Rating. Some commenters expressed concern
that use of MA Star Ratings does not capture plans' performance related
to services covered under Medicaid or other factors affecting plan
capacity to ensure access to care for passively enrolled individuals.
Response: We appreciate commenters' support for establishing
minimum quality criteria as part of our assessment of an integrated D-
SNP's eligibility for passive enrollment under this provision. We call
attention to our revision to Sec. 422.60(g)(2)(iii), clarifying that
the minimum star rating of at least 3 stars for a D-SNP to be eligible
to receive passive enrollment from the most recently issued MA Star
Rating for the D-SNP under the rating system described in Sec. Sec.
422.160 through 422.166. While we acknowledge the limitations
commenters identified with the MA Star Ratings, especially with respect
to assessing the quality of Medicaid services provided under an
integrated D-SNP, we believe the MA Star Ratings system is CMS' most
effective and methodologically sound tool for measuring plan
performance and quality and ensuring that passive enrollments are
limited to MA plans that have demonstrated a commitment to quality.
With regard to the methodological concerns related to the impact of
enrollees' socioeconomic status on MA contract performance, we direct
the commenter's attention to the discussion in this final rule about
the MA and Part D Quality Rating System about adjustments to the
ratings to address those and similar concerns in section II.A.11.t. We
note that the additional required consultation with states in Sec.
422.60(g)(1)(iii) as part of the process of determining that an
integrated D-SNP meets the criteria for receipt of passive enrollment
will provide valuable information regarding the performance and quality
of the organization's Medicaid product. We are therefore finalizing the
quality requirements under Sec. 422.60(g)(2)(iii) with a clarification
that the most recently issued overall MA Star Rating is the applicable
rating for determining eligibility to receive passive enrollment. We
note as well that new and low enrollment plans are generally not
assigned an overall Star Rating because of the lack of data from a
prior performance period (new plans) or insufficient number of
enrollees for reliable sampling (low enrollment); therefore, the
regulation text as proposed and as finalized, permits new and low
enrollment plans that meet the other requirements to also receive these
passive enrollments. However, we will consider revisiting the minimum
MA Star Rating level in future rulemaking once we gain additional
experience with implementing passive enrollments into integrated D-
SNPs.
Comment: Several commenters made additional recommendations for
specific minimum quality measures and other criteria relevant to dually
eligible beneficiaries that CMS should consider as part of our
determination of integrated D-SNPs' eligibility for passive enrollment
under proposed Sec. 422.60(g)(1)(iii). A few commenters recommended
that CMS require integrated D-SNPs to have additional accreditation,
such as the National Committee for Quality Assurance (NCQA) Medicaid
plan accreditation and long-term services and supports (LTSS)
accreditation. A commenter recommended using measures developed by the
multi-stakeholder Core Quality Measures Collaborative. Another
commenter suggested evaluating an integrated D-SNP's behavioral health
services by number of days on waiting list and availability of a
behavioral health expert. This commenter also suggested several methods
for assessing LTSS.
Response: We appreciate the additional information these commenters
provided regarding accreditation and measures relevant to dually
eligible beneficiaries. Since the number of plans eligible to receive
passive enrollment under our proposed limited expansion of passive
enrollment authority is projected to be small, we believe it is
important to consider minimizing burden to eligible plans and ensuring
that there are an adequate number of plans to receive enrollments. MA
Star Ratings are based on currently reported plan data and do not
impose additional reporting or specific accreditation requirements on
integrated D-SNPs. As stated previously, we are finalizing the quality
requirements for receipt of passive enrollment under Sec.
422.60(g)(1)(iii) as proposed.
Comment: We received no comments supporting a limitation of our
proposed expansion of CMS' passive enrollment authority to
circumstances that would not raise total cost to the Medicare and
Medicaid programs. A few commenters stated they would not support a
cost-effectiveness test as a standalone requirement for determining a
D-SNP's eligibility to receive passive enrollments under our proposed
rule. In addition, several commenters expressed concerns about
establishing such a limitation for a variety of reasons. A commenter
stated that a cost-effectiveness test would limit CMS' ability to align
enrollment and preserve continuity of care. Another commenter believed
that this approach did not consider long-term savings resulting from
better integration. A few commenters also noted that the added cost and
administrative burden involved in identifying these circumstances and
measuring the cost-effectiveness of passive enrollment would
potentially offset any cost-savings. Another commenter believed that
choosing integrated D-SNPs for passive enrollment based on an
artificial cost estimate would be inconsistent with the MA bid process
and good faith contracting efforts.
Response: We thank commenters for their comments on this issue. We
are not adding a cost-effectiveness test for passive enrollments under
paragraph (g)(1)(iii) in this final rule.

[[Page 16506]]

Comment: In response to our request for comments on beneficiary
notices for passive enrollments that would occur under proposed
paragraph (g)(1)(iii), a few commenters supported maintaining the
current requirement that receiving plans send one enrollee notice
requirement when passive enrollment is applied, arguing that states or
receiving plans could voluntarily choose to add more notifications as
necessary, and that additional notices added to plan burden. A
commenter noted that, because the Medicaid Managed Care Rule under
Sec. 438.54(c)(3) requires the State to notice beneficiaries regarding
passive enrollment into a Medicaid managed care plan but does not
specify the number of notices required, a requirement of one notice
under our proposed passive authority resulted in better alignment
between Medicare and Medicaid requirements. However, many commenters
recommended a more robust noticing process, including increasing the
number of required notices to two for these passive enrollments. Some
commenters also recommended that impacted plans provide the notices in
beneficiaries' primary language and identify for each enrollee any
providers or prescription drugs not included under their new plan. A
few commenters recommended additional telephonic outreach for
beneficiaries whose notices are returned by the postal service as
undeliverable and for those whose primary language is not English.
Response: We agree with most commenters on this issue that, on
balance, two notices may be more beneficial than one notice when
enrollees are being passively enrolled from one integrated D-SNP into
another under paragraph (g)(1)(iii). A second notice provides an
additional opportunity for the receiving D-SNP to connect with new
members and to ensure they receive information about their benefits,
rights, and options. We believe the benefits from an additional notice
outweigh the additional burden. In contrast, passive enrollments
effectuated under paragraphs (g)(1)(i) and (ii)--in other words, when
an immediate termination as provided in Sec. 422.510(b)(2)(i)(B)
occurs or when CMS determines a plan poses a potential risk of harm to
enrollees--are typically performed under time constraints which may
make the provision of two notices impracticable.
We are therefore finalizing the notice requirements associated with
passive enrollments under paragraph (g)(1)(iii) to require two notices
and to establish parameters around the timing of such notices.
Accordingly, we are adding new paragraph (g)(4)(ii) to require that
plans receiving passive enrollments under paragraph (g)(1)(iii) send
two notices to enrollees that describe the costs and benefits of the
plan and the process for accessing care under the plan and clearly
explain the beneficiary's ability to decline the enrollment or choose
another plan. In addition, we are adding new paragraph (ii)(A) to
specify that the first notice provided under paragraph (ii) must be
provided, in a form and manner determined by CMS, no fewer than 60 days
prior to the enrollment effective date. We are also adding a new
paragraph (ii)(B) to specify that the second notice must be provided--
again, in a form and manner determined by CMS--no fewer than 30 days
prior to the enrollment effective date.
We clarify that for passive enrollments under paragraphs (g)(1)(i)
and (ii), only one notice will be required. This requirement is now
reflected in new paragraph (4)(i), which also specifies that the notice
must describe the costs and benefits of the plan and the process for
accessing care under the plan, as well as the beneficiary's ability to
decline enrollment or choose another plan, and be provided prior to the
enrollment effective date (or as soon as possible after the effective
date if prior notice is not practical).
We appreciate commenters' suggestions about the importance of
telephonic outreach and will encourage affected plans to conduct this
additional telephonic outreach. We will also encourage the D-SNPs
losing members to passive enrollment into another plan to share
information about their enrollees' language preferences to facilitate
the provision of information in non-English languages and alternate
formats as applicable. As we gain additional experience using this
passive enrollment authority, we will consider the development of
additional guidance or further rulemaking about beneficiary notice
requirements as necessary.
Comment: We received a number of comments about the content of
beneficiary notices sent to passively enrolled individuals. Some
commenters recommended that notices used as part of this process be
consumer tested. Several commenters recommended that notices include
alternative options for Medicare coverage, such as available PACE
organizations. A few commenters suggested that the notices include
information on the Special Election Period (SEP) and opt-out process. A
few commenters also recommended that beneficiaries have access to
individual counseling regarding their benefit options. A commenter
recommended that notices be designed to ensure informed consent by
affected enrollees.
Response: We appreciate the suggestions commenters provided about
the content of beneficiary notices for passive enrollment under
paragraph (g)(1)(iii). We note that CMS currently requires notices sent
to passively enrolled individuals to clearly explain the beneficiary's
ability to decline the enrollment or choose another plan. We are
therefore finalizing the requirements related to notice content without
modification at Sec. 422.60(g)(4)(i) and (ii), as described elsewhere
in this preamble. We agree with commenters who emphasized the
importance of providing additional information and counseling to inform
beneficiary choice. As we move forward with implementation of this
limited expansion of CMS' passive enrollment authority, we will
consider developing a notice template that includes information about
the availability of resources for additional information and choice
counseling in the impacted service area, including SHIP programs, as
well as 1-800-Medicare and Medicare Plan Finder. We will consider
opportunities for consumer testing notice language, though we note that
each instance of passive enrollment under this authority will be unique
and require tailoring to the specific circumstances. As noted
previously, we believe that the addition of a second notice will help
increase beneficiaries' awareness of the change to their coverage and
ensure individuals have the information to make decisions about whether
to remain in the new integrated D-SNP or select other coverage that
better serves their needs.
Comment: A few commenters recommended any beneficiary who is unable
to be contacted should not be passively enrolled and should instead be
defaulted into FFS Medicare.
Response: We do not agree with these commenters. The individuals
impacted by our proposal are those already enrolled in an integrated D-
SNP and who, absent our application of CMS' passive enrollment
authority, would lose access to their current integrated care. Dually
eligible individuals will have various SEPs available, including the
Part D SEP for dual and other LIS-eligible beneficiaries discussed in
section II.A.10 of this final rule and the new SEP at Sec.
423.38(c)(10) discussed in section II.A.10 of this final rule that
allows individuals who have been auto-enrolled, facilitated enrolled,
passively enrolled, or reassigned into a plan by CMS an opportunity to
change plans. These SEPs will allow any individual who does not wish to
retain coverage

[[Page 16507]]

under his or her new integrated D-SNP to make a different election,
including opting for coverage in FFS Medicare. We also note that the
addition of the SEP at Sec. 423.38(c)(10) to this final rule renders
the SEP described in current Sec. 422.60(g)(5) duplicative because it
applies to all individuals who have been enrolled in a plan as a result
of a CMS- or state-initiated enrollment action, including passive
enrollment under Sec. 422.60(g). To avoid operational complexity, we
are therefore finalizing this provision by replacing the language
describing the SEP for passively enrolled individuals at Sec.
422.60(g)(5) with a cross-reference to the new SEP described at Sec.
423.38(c)(10).
Comment: A commenter suggested that CMS provide additional
opportunities for states to fully integrate Medicaid and Medicare
noticing and beneficiary communications materials for integrated
products.
Response: We appreciate the support for further integration of
Medicare and Medicaid benefits information for integrated D-SNPs and
note that CMS has made progress toward this goal in collaboration with
some state partners. However, this comment is outside the scope of this
regulation.
Comment: Several commenters requested clarification on how the SEP
related to our proposed passive enrollment provision would be impacted
by, or would interact with, the proposal to limit the Part D SEP for
dual and other LIS-eligible beneficiaries.
Response: As previously discussed, dually eligible beneficiaries
will have access to other SEPs, including the Part D SEP for dual and
other LIS-eligible beneficiaries and the new SEP finalized in this rule
at Sec. 423.38(c)(10) that allows individuals who have been auto-
enrolled, facilitated enrolled, passively enrolled, or reassigned into
a plan by CMS or a state an opportunity to change plans.
Comment: A couple of commenters noted a lack of alignment between
the length of the SEP for passive enrollees under Sec. 422.62(b)(4)--
that is, 60 days--and the 90-day disenrollment period afforded to
enrollees passively enrolled into a Medicaid managed care organization
under Sec. 438.56.
Response: The commenters are correct that the length of the SEP for
passive enrollees, as described in the proposal, and that of the
Medicaid managed care disenrollment period are not the same. In certain
integrated care programs, the combination of changes to the SEP for
dual eligible beneficiaries (discussed in section II.A.10.of this final
rule) and the 2-month period for the SEP in proposed Sec. 422.60(g)(5)
could lead to beneficiary confusion and unintended misalignments
between Medicare and Medicaid. As noted previously in this preamble, we
are finalizing Sec. 422.60(g)(5) with modifications to replace the
language describing the SEP for passively enrolled individuals with a
cross-reference to the new SEP described at Sec. 423.38(c)(10). This
SEP will allow individuals to opt out of the passive enrollment within
3 months of notification of a CMS or state-initiated enrollment action
or that enrollment action's effective date (whichever is later). We
believe this change will better align the length of the SEP for
individuals who are passively enrolled under Sec. 422.60(g) with the
Medicaid managed care disenrollment period under Sec. 438.56.
Comment: A commenter encouraged CMS to monitor any negative and
unintended consequences of our use of passive enrollment after
implementation of our proposed expanded authority.
Response: We appreciate the commenters' concerns and clarify that
we intend to use all currently available mechanisms to monitor any
passive enrollments into integrated D-SNPs, including grievances and
complaints reported to impacted plans and to 1-800-Medicare. We are
committed to making all necessary adjustments as we gain experience
with the application of passive enrollment in the circumstances
provided for in this final rule, including future rulemaking as
necessary.
After consideration of the comments we received, we are finalizing
our proposal regarding the expansion of CMS' regulatory authority to
initiate passive enrollment for certain dually eligible beneficiaries
who are currently enrolled in an integrated D-SNP into another
integrated D-SNP at Sec. 422.60(g) with some modifications.
Specifically, we are making the following modifications:
We are making a technical revision to paragraph
(g)(1)(iii) to clarify that a plan must meet all the requirements
established in paragraph (g)(2) to be eligible to receive passive
enrollment.
We are revising paragraph (g)(2)(iii) to require a minimum
Star Rating that applies for a plan to be eligible to receive passive
enrollment. For a plan to be eligible to receive passive enrollment, it
must have an overall quality rating, from the most recently issued
ratings, under the rating system described in Sec. Sec. 422.160
through 422.166, of at least 3 stars or is a low enrollment contract or
new MA plan as defined in Sec. 422.252.
We are adding new paragraph (g)(4)(ii) to require that
plans receiving passive enrollments under paragraph (g)(1)(iii) send
two notices to enrollees that describe the costs and benefits of the
plan and the process for accessing care under the plan and clearly
explain the beneficiary's ability to decline the enrollment or choose
another plan. In addition, we are adding new paragraph (ii)(A) to
specify that the first notice provided under paragraph (ii) must be
provided, in a form and manner determined by CMS, no fewer than 60 days
prior to the enrollment effective date. We are also adding a new
paragraph (ii)(B) to specify that the second notice must be provided,
in a form and manner determined by CMS, no fewer than 30 days prior to
the enrollment effective date. New paragraph (g)(4)(i) will retain the
original requirement that one notice be provided to passively enrolled
individuals under paragraphs (g)(1)(i) and (ii).
We are modifying Sec. 422.60(g)(5) by replacing the
current language describing the SEP for passively enrolled individuals
at Sec. 422.60(g)(5) with a cross-reference to the new SEP described
at Sec. 423.38(c)(10), which provides a 3-month SEP when an enrollee
has been auto-enrolled, facilitated enrolled, passively enrolled, or
reassigned into a Part D plan as a result of a CMS or state-initiated
enrollment action. We note that all D-SNPs are also Part D plans as
they are required to provide the Part D prescription drug benefit
pursuant to Sec. 422.2 (definition of specialized MA plans for special
needs individuals).
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. The requirements for tiering exceptions, set forth at
Sec. 423.578(a), require plan sponsors to establish and maintain
reasonable and complete exceptions procedures that 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-

[[Page 16508]]

preferred drug is medically necessary based on the prescriber's
supporting statement.
As we stated in the proposed rule, we believe that changes in the
prescription drug marketplace necessitate revisions to existing
regulations to ensure that tiering exceptions are adjudicated by plan
sponsors in the manner the statute contemplates, and are understood by
beneficiaries. Therefore, we proposed various changes to 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 (82 FR
56371).
We received the following general comments on this proposal and our
responses follow:
Comment: We received many comments on the proposal. While most
comments received were generally supportive of our efforts to update
and improve tiering exceptions policy, there was mixed support for and
opposition to specific aspects of what we proposed. Many commenters who
supported our overall proposal noted that beneficiaries have difficulty
understanding the existing policy, and stated that there is a need for
a more simplified process. A commenter who opposed revising our
existing policy for tiering exceptions stated that plans and enrollees
already understand the current policy and there will be little positive
outcome. Another commenter agreed that tiering exceptions are an
important beneficiary protection, but stated a belief that they
undermine plan sponsors' ability to manage their formularies, which are
already reviewed by CMS for clinical accuracy. This commenter also
stated that tiering exceptions provide no incentive for an enrollee to
try a less expensive drug found on a lower tier if they are able to get
a more expensive drug at a lower cost.
Response: We thank the commenters who supported our proposal for
their support. We agree that this policy area has been confusing for
beneficiaries and one of our goals in making changes is to make it more
understandable. We believe that the proposed revisions will streamline
and clarify the requirements for tiering exceptions, as well as help
ensure that enrollees have appropriate access to medically necessary
drugs.
We disagree with the comment that tiering exceptions provide no
incentive for enrollees to try lower-cost drugs. On the contrary, Sec.
1860D-4(g)(2) stipulates that, in order for a tiering exception to be
approved, the enrollee's prescriber must determine that the preferred
drug for treatment of the same condition has been or would be less
effective or have adverse effects for that individual. If the enrollee
cannot demonstrate that the requested drug is medically necessary, a
tiering exception cannot be obtained.
We address comments about specific aspects of the tiering
exceptions proposal in relevant sections below.
Comment: Several commenters requested that CMS ensure beneficiaries
are educated about the availability of tiering exceptions. Some
commenters expressed a belief that there is little information
available to beneficiaries about tiering exceptions, and that it is
difficult to apply to individual situations. Comments offered several
suggestions, including improving existing educational publications and
information provided through 1-800-MEDICARE, providing information in
plain language, and developing notices that provide information at the
pharmacy counter. Some commenters stated that CMS should require plan
sponsors to improve information provided in their member materials, and
noted that plans and pharmacies have a responsibility for educating
beneficiaries about the availability of tiering exceptions.
Response: We agree that information about the availability of
tiering exceptions must be provided to beneficiaries by CMS and their
Part D plan sponsor. We note that such information is already contained
in several CMS publications, including Medicare & You (CMS pub. 10050),
Medicare Appeals (CMS pub. 11525), Your Guide to Medicare Prescription
Drug Coverage (CMS pub. 11109) and Medicare Rights and Protections (CMS
pub. 11534), as well as documents that plans are required to provide to
enrollees, including the Evidence of Coverage, Part D formulary, and
Annual Notice of Change. Information about the availability of tiering
exceptions is also included in the standardized pharmacy notice (CMS-
10147) provided to affected enrollees at the point of sale when a claim
is rejected by their Part D plan sponsor, and in the standardized Part
D denial notice (CMS-10146), which is provided to enrollees when their
plan makes an adverse coverage determination. Such information is also
found on Medicare.gov. CMS will continue to review plan documents and
beneficiary publications to identify potential areas for improvement,
and update the documents mentioned above as needed based on this final
rule, including consideration of how to clarify when a tiering
exception may be available.
Comment: Several commenters recommended that CMS ensure consistent
understanding of tiering exceptions policy by providing specific
guidance to plan sponsors related to the review of tiering exception
requests, including examples using various formulary structures that
illustrate the steps of the process, and guidance to determine the
lowest applicable tier and appropriate alternative drugs. A commenter
expressed concern that the proposed rule conflicts with current
guidance in Chapter 18 of the Medicare Prescription Drug Benefit
Manual.
Response: We appreciate the commenters' suggestions for additional
guidance to ensure that plan sponsors understand the revised policy and
properly process tiering exception requests. CMS manual guidance will
be updated to reflect the changes made through this final rule. With
respect to the comment about the existing version of Chapter 18, we
note that existing guidance reflects existing regulations and policy.
Comment: A commenter asserted that utilization management tools,
such as the use of tiered cost-sharing to encourage use of lower-cost
drugs, put unnecessary burden on prescribers and cause access delays
for beneficiaries. The commenter stated that exception requests usually
require prescribers to submit a written statement supporting the
exception request, and noted that prescribers are not compensated for
time spent preparing these statements or obtaining utilization
management information for the specific plans used by their patients.
This commenter also suggested that if there was greater transparency on
which medications are subject to utilization management tools, it would
reduce the administrative burden placed on physicians.
Response: We thank the commenter for sharing their concerns.
Because section 1860D-4(g)(2) of the Act specifies that a tiering
exception could be granted ``if the prescribing physician determines
that the preferred drug for treatment of the same condition either
would not be as effective for the individual or would have adverse
effects for the individual or both,'' we do not believe CMS has
authority to require plans to provide tiering exceptions in the absence
of such a statement from the prescriber. Under existing Sec.
423.568(a), plans are required to accept oral requests for benefits at
the coverage determination level, including exception requests, and CMS
encourages plans to accept oral prescriber supporting statements for
exception requests when appropriate.
Comment: A commenter recommended that SNPs, MMPs, and defined
standard benefit plans be exempt from the tiering exceptions process.
This commenter also asked that

[[Page 16509]]

CMS explain how tiering exceptions are applied to Low Income Subsidy
(LIS) beneficiaries.
Response: We appreciate the commenter's recommendation. In
accordance with Sec. 423.578(a), the exceptions process applies to
Part D plans that provide prescription drug benefits through the use of
a tiered formulary. Given the fixed copays for LIS beneficiaries, that
are based on whether the drug is a brand or generic product pursuant to
Sec. 423.782(a)(2)(iii)(A), tiering exceptions do not apply.
Regardless of whether the beneficiary meets the medical necessity
criteria for the drug in the higher tier, it would not change the brand
vs. generic nature of the requested drug, so the cost-sharing would
remain fixed.
b. Limitations on Tiering Exceptions
We proposed 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.'' This adds a cross-reference to
revised paragraph (a)(6), which revises allowable limitations plan
sponsors are permitted to establish in their tiering exceptions
procedures.
At Sec. 423.578(a)(6), we proposed to revise the regulations to
specify how a Part D plan sponsor may limit tiering exceptions. The
proposed revision strikes the existing regulation text which permits
plans to disallow tiering exceptions for any non-preferred drug to
cost-sharing associated with a dedicated generic tier. We proposed to
replace it with new regulation text at Sec. 423.578(a)(6) specifying
that a Part D plan sponsor will not be required to offer a tiering
exception for a brand name drug or biological product to a preferred
cost-sharing level that applies only to generic alternatives. Under our
proposal, plans would be required to approve tiering exceptions for
non-preferred generic drugs when the plan determines that the enrollee
cannot take the preferred generic alternative(s), including when the
preferred generic alternative(s) are on dedicated generic tier(s) and
when the lower tier(s) contain a mix of brand and generic alternatives.
In other words, plans would no longer 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 includes only generic drugs.
We proposed to revise existing tiering exceptions policy for brand
name and generic drugs, and proposed a new policy for requests
involving biological products. First, we proposed to revise Sec.
423.578(a)(6) by adding 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 biosimilar and
interchangeable biological products, licensed under section 351 the
Public Health Service Act.
With the proposed revisions, 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.
As discussed above, cost sharing for approved tiering exceptions for
non-preferred generic drugs would be assigned to the lowest applicable
cost-sharing associated with alternative drug(s) that could be either
brand name or generic drugs.
We proposed 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 a 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)).
We proposed to codify existing CMS policy treating authorized
generics as generics for purposes of tiering exceptions because the
process used by CMS to collect Part D plan formulary data does not
allow us to clearly identify whether a plan sponsor includes coverage
of authorized generic National Drug Codes (NDCs). 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; rather, the plan sponsor would be permitted to
limit tiering exceptions for a particular brand drug or biological
product to the lowest cost sharing tier containing alternatives of the
same drug type. Plans will 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 are met.
Finally, we proposed to revise and redesignate existing Sec.
423.578(a)(7) as new Sec. 423.578(a)(6)(iii), to 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 proposed 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.
The proposed changes retain the existing regulatory policy that
permits Part D plan sponsors to disallow tiering exceptions for any
drug that is on the plan's specialty tier. While we did not propose to
specify it in regulation text, we stated in the preamble to the
proposed rule (82 FR 56372) 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 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 received the following comments and our responses follow:
Comment: We received many comments on this aspect of our proposal.
Most commenters were supportive of the proposal to remove the generic
tier exclusion and replace it with limitations that apply to brand name
drugs and biological products. Some commenters opposed our proposal to
remove the generic tier exclusion, stating that this would discourage
plans from offering $0 copayment tiers and increase costs for
enrollees. Others opposed the proposal to allow plans to limit tiering
exceptions for brand name drugs only when brand alternatives are on a
lower tier, noting that allowing plans to limit tiering exceptions for
brand drugs to the lowest

[[Page 16510]]

cost-sharing associated with brand alternatives does not provide
sufficient relief for enrollees with a medical need for a brand drug
because they cannot take a lower cost generic. Commenters expressed
concern that this would eliminate beneficiaries' ability to seek
tiering exceptions in many cases, and also stated that nothing in the
statute permits these limitations.
Response: We thank commenters who supported the proposed changes
for their support. As we stated in the proposed rule, we believe a
policy that allows beneficiaries with a medical need for a non-
preferred product to seek and obtain more favorable cost-sharing
through the tiering exceptions process must be balanced by reasonable
limitations to ensure that all enrollees have access to medically
necessary drugs at the most favorable cost-sharing terms possible.
We disagree with the commenters opposed to our proposal to require
plans to include dedicated generic tiers in their tiering exceptions
procedures. As we discussed in the preamble to the proposed rule (82 FR
56371), most Part D formularies now include multiple generic tiers, as
well as multiple higher-cost tiers that contain a mix of brand and
generic drugs. To encourage the use of generic drugs, we proposed to
revise the existing regulatory policy to permit tiering exceptions into
dedicated generic tiers, but allow plans to limit those exceptions to
requests involving non-preferred generic drugs. Because approval of a
tiering exception continues to require that the enrollee demonstrate a
medical need for the non-preferred drug, and because plans will not be
required to permit exceptions for brand name drugs or biological
products to the cost-sharing associated with dedicated generic tiers,
we do not believe this change will result in changes to plan benefit
design.
We disagree with the comments asserting that the statute does not
permit tiering exceptions for non-preferred brand name drugs to be
limited to the cost sharing associated with preferred brand name drugs.
Section 1860D-4(g)(2) of the Act specifies that Part D plan sponsors
offering a tiered drug benefit must have a process for tiering
exceptions, consistent with guidelines established by the Secretary for
making such determinations, where ``a nonpreferred drug could be
covered under the terms applicable for preferred drugs'' (emphasis
added). While we agree that the statutory language does not
specifically refer to brand name and generic drugs, it clearly gives
CMS authority to establish guidelines for plan procedures, and does not
require that such exceptions be available in all circumstances.
Comment: Several commenters supported our proposal to treat
authorized generic drugs in the same manner as generic drugs for
tiering exceptions.
Response: We thank the commenters for their support.
Comment: We received some comments requesting that CMS specify that
multi-source drugs and other drugs that do not meet the definition of a
generic or authorized generic drug, but that a plan may place on a
generic-labeled tier, also be treated as generic drugs for purposes of
tiering exceptions.
Response: We disagree with these comments. As discussed above, we
are revising the tiering exceptions regulations to specify that
authorized generic drugs be treated as generic drugs. We recognize that
other drugs may be treated in a similar manner to generic drugs,
including being placed on generic-labeled drug tiers; however, we
believe further expansion of what drugs are treated as generics would
introduce additional complexity to a process that beneficiaries and
plans already have difficulty understanding. For example, whether a
brand drug is a ``multi-source'' drug is dependent on multiple factors
and may change over time. An authorized generic is determined at the
time of FDA approval and does not change as long as the drug is
marketed under that approval, regardless of how many other
interchangeable drugs may be introduced to or leave the market. Because
tier placement of the same drug can vary widely across Part D plans, we
believe that applying rules based on FDA approval type is the best way
to limit confusion and create a consistent policy. Additionally, we
believe that an enrollee who cannot take a brand drug on a lower-cost
tier, regardless of the tier label, should be able to obtain the brand
drug on a higher-cost tier at the more favorable cost-sharing of the
brand drug on the lower-cost tier.
Comment: We received many comments related to our proposal to
retain the current regulatory policy allowing plans to exclude
specialty tier drugs from their tiering exceptions process. Commenters
were divided on whether they supported or opposed this proposal. Some
commenters asked CMS to confirm that drugs on the specialty tier will
continue to be exempt from tiering exceptions.
Commenters who supported our proposal stated that tiering
exceptions should not be allowed for specialty tier drugs because
alternative drugs on lower tiers are not typically appropriate or
therapeutically equivalent, even though they may treat the same
condition.
Commenters who opposed this limitation on tiering exceptions noted
that vulnerable beneficiaries who need to access specialty tier drugs
often do not have alternative options on more preferred tiers and can
accrue very high out of pocket costs. A few noted that cost-prohibitive
out of pocket expenses can lead to decreased adherence to drug
therapies and put patients at risk. Some commenters questioned CMS'
authority to allow plans to exclude specialty tier drugs from the
tiering exceptions process because the statute gives beneficiaries the
right to request a tiering exception for any non-preferred drug when
the formulary contains a preferred drug for the same condition that has
lower cost sharing. A commenter stated that prohibiting tiering
exceptions for specialty tier drugs discriminates against beneficiaries
who need them.
Response: We appreciate the comments expressing concern about
beneficiary access to very high cost drugs. While CMS is aware that
access to needed drug therapies can be impacted by the out of pocket
expenses associated with these drugs, we do not believe that requiring
plans to offer tiering exceptions for specialty tier drugs will result
in the desired effect. In order for a drug to be placed on the
specialty tier, the plan's negotiated price for the drug must exceed a
monthly threshold established by the Secretary ($670 for 2018). Along
with the protection against tiering exceptions for specialty tier drugs
that is afforded to plans, CMS also requires plans to limit enrollee
cost sharing for the specialty tier to 25 percent coinsurance (up to 33
percent if the plan waives all or part of the Part D deductible), which
aligns with the statutorily defined maximum cost sharing for the
defined standard benefit at section 1860D-2(b)(2)(A). When high cost
drugs are placed on the specialty tier instead of a Non-Preferred Brand
or Non-Preferred Drug tier, which can have up to 50 percent
coinsurance, the cost to enrollees who would not qualify for a tiering
exception is often considerably lower than if the same drug were placed
on one of these other non-preferred tiers. Additionally, many specialty
tier drugs, particularly biological products, often do not have viable
alternatives on lower-cost tiers. The statutory basis for approval of a
tiering exception request is the presence of an alternative drug(s) on
a lower cost-sharing tier of the plan's formulary; therefore, even if a
plan sponsor permitted tiering exceptions for

[[Page 16511]]

specialty tier drugs, such requests would not be approvable if the
plan's formulary did not include any alternative drugs on a lower tier.
We disagree with the comments positing that allowing plans to
exclude the specialty tier from their tiering exceptions procedures is
inconsistent with the statute. As discussed above in this section,
section 1860D-4(g)(2) of the Act gives CMS authority to establish
guidelines for Part D plan sponsors' tiering exceptions procedures, and
does not require such exceptions to be available in all circumstances.
For the reasons stated earlier, we believe that our current policy of
allowing plans to exclude specialty tier drugs from their tiering
exceptions procedures, coupled with the maximum allowable coinsurance
of 25 percent to 33 percent for the specialty tier, affords the most
beneficiaries the most protection from high out-of-pocket expenses
associated with very high cost drugs.
Comment: A few commenters suggested that CMS permit plan sponsors
to designate two specialty tiers on their formularies--a non-preferred
specialty tier, as well as a preferred specialty tier that would have
lower cost sharing. These commenters expressed a belief that permitting
plans to have two specialty tiers would encourage increased competition
among specialty drugs, giving plans greater leverage in price
negotiations, resulting in more affordable access for Part D enrollees
and lower costs for the program. The commenters also noted that
permitting two specialty tiers could encourage enrollees to try
preferred specialty products and could reduce the need for enrollees to
seek coverage through the non-formulary exceptions process.
Response: While we appreciate these comments, we disagree with the
suggestion to permit Part D plans to have a preferred and a non-
preferred specialty tier. As discussed above, CMS limits specialty tier
cost sharing to the statutorily mandated amount for the defined
standard Part D benefit. While we did not propose to allow plans to
establish multiple specialty tiers, we are making significant changes
to existing tiering exceptions policy through this final rule,
including removal of the generic tier exclusion and addition of the
brand-to-brand limitation discussed above in subsection b.
Additionally, while the plan's cost for a drug must exceed a CMS-
specified monthly cost threshold in order to be placed on the specialty
tier, CMS does not require all drugs exceeding that threshold be placed
on the specialty tier. In other words, if plans wish to encourage the
use of certain specialty drugs over others, they can do so within
existing formulary benefit designs. As such, we are not making
additional changes in this policy area before having an opportunity to
consider the effects of the changes in this rule. CMS will continue to
disallow plan benefit packages with more than one specialty tier.
Comment: We received some comments requesting that CMS clarify
whether select care/select diabetic or other $0 copayment tiers can be
excluded from a plan's tiering exceptions procedures. These commenters
supported a policy that would permit such an exclusion, stating that
requiring tiering exceptions to $0 or very low cost tiers would
discourage plans from offering them and increase overall beneficiary
out of pocket costs.
Response: We appreciate the commenter's requests for clarification.
As discussed above, we proposed to revise the existing regulatory text
that permits plans to exclude generic tiers from their tiering
exceptions procedures. We did not propose to permit plans to exclude
any formulary tiers other than the specialty tier, and do not agree
that such an exclusion is advisable. As we stated in the proposed rule,
we believe that tiering exceptions are an important enrollee protection
and must not be restricted to such a degree. Under the proposed rule,
which we are finalizing without modification, plans can establish
tiering exceptions procedures where they do not have to offer such
exceptions for brand name drugs or biological products to more
preferred cost-sharing tiers that do not contain an alternative brand
name or biological product, respectively. We believe that permitting
additional restrictions that make certain low-cost tiers wholly
inaccessible to beneficiaries with a medical need for a non-preferred
drug would be inappropriate.
Comment: A commenter urged CMS to monitor Part D plan formularies
to ensure that plans do not change their formularies in an effort to
decrease opportunities for tiering exceptions. Another commenter
suggested that CMS consider requiring plan sponsors to establish
evidence-based formularies that tie enrollee cost-sharing to the
appropriateness of medications based on safety and efficacy.
Response: All Part D plan formularies must be approved by CMS as
part of the bid review process described at Sec. 423.272. Under Sec.
423.120(b)(1), formularies must be developed and reviewed by a pharmacy
and therapeutic committee that makes clinical decisions based on
scientific evidence and standards of practice and considers safety and
efficacy when determining inclusion of a drug on a formulary, including
tier placement.
Comment: We received a comment requesting that CMS clarify non-
formulary drugs approved for a formulary exception continue to be
ineligible for tiering exceptions. Another commenter suggested that CMS
consider ways to make it easier for individuals applying for a
formulary exception to also apply for a tiering exception, if
applicable.
Response: We appreciate the commenter's request for clarification.
We did not propose to revise the existing requirement set forth at
Sec. 423.578(c)(4)(iii) which establishes that an enrollee may not
request a tiering exception for a non-formulary drug approved under the
formulary exceptions rules at Sec. 423.578(b). Under the proposed
changes to tiering exceptions rules, which we are finalizing as
proposed, an enrollee may not obtain a tiering exception for an
approved non-formulary drug. We note that, if an enrollee obtains an
exception to a utilization management requirement such as step therapy
or a quantity limit, such enrollee may also request a tiering
exception, pursuant to Sec. 423.578(a) and (c). The model Part D
coverage determination request form, developed by CMS with stakeholder
feedback, permits an enrollee or their prescriber, on the enrollee's
behalf, to request a tiering exception along with, for example, prior
authorization. The form includes check boxes for various types of
requests, including an exception to cost-sharing.
Comment: We received some comments opposed to requiring plans to
consider tiering exceptions for non-preferred drugs to specialty tier
cost-sharing when the specialty tier cost-sharing is more favorable for
the enrollee. Some of these commenters stated that such a policy would
be confusing for enrollees because the specialty tier is often a
higher-numbered tier (for example, tier 5 on a 5-tier formulary).
Commenters also stated that it would be overly burdensome for plans to
administer such a policy, particularly if the exception request is for
a drug on a copayment tier to a coinsurance tier (for example, tier 4--
Non Preferred Drug has a $100 copayment and tier 5--Specialty has a 25
percent coinsurance). These commenters opined that allowing a drug with
a copayment to be approved to a coinsurance tier would bypass formulary
design and require extensive price review and calculation to determine
which tier is more favorable. A commenter asked CMS to clarify whether
plans would be permitted to

[[Page 16512]]

retain specialty tier supply limits such as a 30 day supply, even if
the enrollee wishes to obtain a 90 day supply and a tiering exception
is approved.
Response: We appreciate the comments received on this aspect of the
proposal. We are persuaded by the comments received that requiring
plans to consider tiering exceptions into the specialty tier would be
confusing and difficult for plans to implement, and are not finalizing
this aspect of the proposal. While we believe many of the concerns
expressed by commenters would be addressed by clarifying that such a
policy would only apply if the requested drug meets the specialty tier
cost threshold, we recognize it would still be difficult to explain to
enrollees, who probably would have no knowledge as to whether any given
drug would meet the specialty tier cost threshold and would be very
unlikely to request such an exception. As noted above, we did not
propose regulation text for such a requirement, and therefore, while we
are not finalizing it, we are also not making any changes to the
proposed regulation text.
Comment: A few commenters stated that CMS should conduct an
analysis of Part D plan formularies to ensure plans are not
discriminating against beneficiaries by always placing certain classes
of drugs on specialty tiers. A commenter asserted that, without
standardized tiering in Part D, nothing prevents plans from putting
high cost brand name drugs on specialty tiers to avoid having to offer
tiering exceptions. The commenter stated that CMS should establish
additional requirements for tiered formularies, such as requiring that
all generic drugs be placed on tier 1 or tier 2. Another commenter
recommended that CMS continue to explore improvements to benefit design
and meaningful exceptions to high cost-sharing.
Response: Pursuant to existing Part D policy and the proposed
definition of specialty tier, it is a tier dedicated to very high cost
drugs, which are often brand name drugs or biological products. As
noted in a previous response, pursuant to Sec. 423.120(b)(1),
formularies must be developed and reviewed by a pharmacy and
therapeutic committee that makes clinical decisions based on scientific
evidence and standards of practice, and considers safety and efficacy
when determining inclusion of a drug on a formulary, including that
drug's tier placement. While CMS does not prohibit plan sponsors from
having a mix of both brand and generic drugs on each tier, it is our
expectation that a tier label be representative of the drugs that make
up that tier. Additionally, consistent with Sec. 30.2.7 of Chapter 6
of the Medicare Prescription Drug Benefit Manual, CMS reviews
formularies for the placement of drugs in non-preferred tiers in the
absence of therapeutically similar drugs in preferred tiers.
Comment: A few commenters stated that CMS should increase the $670
specialty tier cost threshold to reduce the number of drugs that
qualify and, therefore, reduce out of pocket spending for
beneficiaries.
Response: As we did not propose to change the specialty tier
threshold in this rule, we decline to adopt this recommendation.
After consideration of the comments received, we believe our
proposed revisions to Sec. 423.578(a)(6) regarding the limitations
plans are permitted to establish for tiering exceptions strike an
appropriate balance between allowing plans to manage their formularies
and ensuring enrollee access to this statutory protection. These
revisions prohibit plans from excluding generic drug tiers from their
tiering exceptions procedures, and permit plans to limit tiering
exceptions for brand name drugs to the lowest applicable cost sharing
associated with preferred brand name alternatives, and tiering
exceptions for biological products to the lowest applicable cost
sharing associated with preferred biological product alternatives. We
are finalizing the proposed revisions to Sec. 423.578(a)(6) and the
proposed definition of specialty tier at Sec. 423.560 without
modification, noting the clarification discussed above that plans are
not required to treat the specialty tier as a preferred cost-sharing
tier for purposes of tiering exceptions. CMS continues to explore ways
to ensure Part D enrollees are able to access very high cost, medically
necessary prescription drugs.
d. Alternative Drugs for Treatment of the Enrollee's Condition
We noted in the proposed rule that we have 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.''
While our proposal did not include regulation text specific to the
meaning of an alternative drug, we clarified in the preamble that we
interpret this language to refer to the condition as it affects the
enrollee--that is, taking into consideration the individual's overall
clinical condition, 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.
We received the following comments on this section and our
responses follow:
Comment: We received several comments related to how to determine
which drugs should be considered alternatives for treating the
enrollee's health condition. Some of these commenters were supportive
of the additional information we provided in the preamble to the
proposed rule about how to determine alternative drugs. Most of the
commenters stated that a more specific regulatory definition of
alternative drug is needed. Some commenters recommended that the
definition specify that alternative drugs must be one or more of the
following: supported in drug compendia or treatment guidelines for use
in the same place in therapy, FDA-approved for the same indication as
the requested drug, in the same therapeutic class and/or category as
the requested drug, use the same route of administration as the
requested drug, and/or have the same mechanism of action as the
requested drug.
Several commenters provided various hypothetical scenarios using
specific diagnoses and drugs and asked that CMS clarify whether a
tiering exception would be allowed under our interpretation. A
commenter asked CMS to provide examples that include how to determine
what an appropriate alternative drug is. Another commenter stated that
plan sponsors will continue to inaccurately apply rules for tiering
exceptions because CMS does not define what a preferred alternative
drug is. A few commenters stated that CMS' proposed interpretation of
``same condition'' will limit exception requests and negatively impact
beneficiaries. A few commenters stated that this interpretation has no
statutory basis, and one of the commenters asserted that our
clarification basing what constitutes an alternative drug on the
individual characteristics and condition of the enrollee would make it
easy for plans to claim there are no alternatives for treating that
enrollee and therefore no tiering exception would be allowed.
Response: The statutory language noted above related to approval of
a tiering exception request broadly refers to preferred drugs ``for
treatment of the

[[Page 16513]]

same condition.'' We believe that most of the criteria suggested by
commenters would be more restrictive than the statute allows if plans
were required to apply such criteria to all tiering exception
situations, and we therefore disagree that such criteria should be
specified in regulation. For example, if the mechanism of action or
route of administration of a plan's preferred alternative drug would
cause adverse effects for a particular enrollee versus the non-
preferred drug for treating the same condition, this could be the basis
for that enrollee to seek a tiering exception for the non-preferred
drug. Also, CMS does not specify the classification system that must be
used on Part D plan formularies; therefore, establishing a requirement
that alternative drugs must be in the same therapeutic class would
introduce inconsistency because what one plan considers the same drug
class may be different than another plan for the same drugs. The
changes to the tiering exception regulations that we are finalizing in
this rule do not require plans to consider a drug for which the
enrollee's condition is not a medically accepted indication to be an
alternative drug for purposes of a tiering exception request. Because
payment under Part D cannot be made for any drug that does not meet the
definition of a Part D drug for the prescribed indication, such drug
could not reasonably be considered an alternative drug for treatment of
the enrollee's condition.
In response to comments suggesting that our interpretation of ``for
treatment of the same condition'' is inconsistent with the statute, we
disagree. As we noted in the proposed rule, we interpret this language
to refer to the condition as it affects the enrollee. Given the
language in section 1860D-4(g)(2) of the Act states that an exception
could be covered if the prescribing physician determines that the
preferred drug would not be as effective ``for the individual'' or
would have adverse effects ``for the individual,'' we believe it is
appropriate to interpret the standard for the ``same condition'' to be
referring to the individual.
While we are not making any changes to the regulations with respect
to defining alternative drugs, we wish to note that plan medical
directors are required to be involved in the development and oversight
of policies and procedures for processing exception requests, including
criteria for determining alternative drugs, as part of their
responsibility under Sec. 423.562(a)(5) to ensure the clinical
accuracy of all coverage determinations and redeterminations involving
medical necessity. Additionally, Sec. 423.566(d) requires that, before
issuing an adverse coverage determination based on lack of medical
necessity, including exception requests, it must be reviewed by a
physician or appropriate health care professional. These policies
requiring clinician involvement in the establishment and application of
plan coverage rules contemplate that those individuals apply reasonable
clinical judgment, based on sound medical and scientific evidence and
acceptable standards of practice, in adjudicating exception requests,
including consideration of alternative drugs on the plan's formulary.
While we agree that in certain situations and with certain medical
conditions, what is reasonably considered an alternative drug may be
limited in ways suggested by commenters, we disagree that such
designations should be codified in regulation to apply to all tiering
exceptions for the reasons previously stated, and because we do not see
a good reason to codify these types of clinical considerations only for
tiering exceptions, when we have not proposed to do so for other types
of coverage determinations. We also believe these clarifications
provide sufficient guidance for plans to determine what drugs should be
considered alternatives for treating the enrollee's condition, and will
ensure that plans do not apply unreasonable clinical or policy
standards to their interpretation of the meaning of alternative drug so
as to inappropriately refuse to allow tiering exceptions. Therefore, we
are not adding a definition of alternative drug in this final rule.
As discussed earlier in this preamble, CMS will update any existing
agency guidance related to tiering exceptions as needed to ensure that
it comports with the requirements of this final rule.
Comment: A commenter asked CMS to clarify whether a tiering
exception should be approved when the requested drug is not being
prescribed for a medically accepted indication, or does not otherwise
meet the definition of a Part D drug.
Response: Pursuant to the existing regulation at Sec. 423.578(e),
which we did not propose to revise, enrollees are not permitted to use
the exceptions process to obtain coverage for a drug that is not being
prescribed to treat a medically accepted indication as defined in
section 1860D-2(e)(4) of the Act, or does not otherwise meet the
definition of a Part D drug at Sec. 423.100. Thus, a plan cannot
approve a tiering exception request if the requested drug is not being
used to treat a medically accepted indication or does not meet the
definition of a Part D drug.
After consideration of the comments received on this section, we
are finalizing our proposal without modification, and have chosen not
to further specify how to determine what an alternative drug for
treating the enrollee's condition is.
e. Approval of Tiering Exception Requests
We proposed 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 our 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 received the following comments and our responses follow:
Comment: We received several comments related to this aspect of our
proposal. Commenters were divided, with some supporting our proposal
and others opposed. Commenters in support of the proposal to require
approval at the lowest applicable tier stated that this policy allows
beneficiaries who cannot take less expensive drugs to obtain needed
drugs at an affordable price. Some commenters noted that they supported
this aspect of the proposal because we also proposed to allow plans to
limit tiering exceptions for brand name drugs to the lowest tier
containing alternative brand name drugs. A few commenters expressed a
belief that this policy would be easy for beneficiaries to understand.
Commenters who opposed our proposal stated that requiring approval
to the lowest applicable tier interferes with plans' ability to manage
their formularies. A few commenters expressed a belief that our
proposal is not consistent with the statute, which states that the
requested drug could be covered at terms applicable to preferred drugs
but does not specify that it be the terms applicable to the most
preferred alternatives. A commenter stated that Sec. 1860D-4(g)(2)
does not specifically refer to a right to obtain a drug at the lowest
cost-sharing tier. Another commenter stated that requiring plans to
provide high cost drugs at the lowest tier instead of the next lower
tier increases premiums for all beneficiaries and provides only
slightly lower cost-sharing for a few individuals.

[[Page 16514]]

Response: We thank commenters who were supportive of our proposal
for their support. We agree that our policy of approval to the lowest
applicable tier containing alternatives provides the most relief for
beneficiaries with a medical need for a non-preferred drug.
We disagree that our proposal is inconsistent with the statute.
Section 1860D-4(g)(2) provides that if a plan sponsor uses formulary
tiers and offers lower cost sharing for ``preferred drugs'' (plural)
included in the formulary, an enrollee may request an exception to the
tiered cost-sharing structure, and under such an exception, a non-
preferred drug could be covered ``under the terms applicable for
preferred drugs'' (plural) if the prescriber determines that ``the
preferred drug'' (singular) for the same condition would not be as
effective or would have adverse effects, or both. The statute clearly
contemplates that while there can be multiple drugs that are preferred
drugs relative to the requested drug, and the prescribing physician can
determine that ``the'' preferred drug would not be as effective or
would have adverse effects. We believe it is reasonable to interpret
this provision to permit an enrollee to seek a tiering exception under
which he or she would pay the cost sharing applicable to the most
preferred drug among one or more preferred drugs.
After consideration of the comments received, we are finalizing
without modification our proposal at Sec. 423.578(c)(3), which
specifies that cost-sharing for approved tiering exceptions is assigned
at the lowest applicable tier when preferred alternatives sit on
multiple lower tiers.
f. Additional Technical Changes and Corrections
Finally, we proposed various technical changes and corrections to
improve the clarity of the tiering exceptions regulations and
consistency with the regulations for formulary exceptions.
Specifically, we proposed 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 will improve consistency between the
regulation text for tiering and formulary exceptions.
We received no comments on the proposed technical changes and
corrections and are finalizing them without modification.
After consideration of all comments received on the tiering
exceptions proposal, we are finalizing the proposed regulation text
without modification. As discussed above, CMS will review agency
guidance and beneficiary communications and revise as needed to be
consistent with this final rule.
10. Establishing Limitations for the Part D Special Election Period
(SEP) for Dually Eligible Beneficiaries (Sec. 423.38)
As discussed in section II.A.1 of this final 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) once a month
throughout the year, unlike other Part D enrollees who generally may
switch plans only during the annual enrollment period (AEP) each fall.
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.
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.
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.
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
\30\), opportunities for marketing abuses.
---------------------------------------------------------------------------

\30\ Medicare Payment Advisory Commission, ``Report to Congress:
Medicare Payment Policy,'' March 2008.
---------------------------------------------------------------------------

Among the key obstacles the continuous 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;
Inefficient use of 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 coordinated
treatment of chronic conditions; and
Diminishing incentives for plans to innovate and invest in
serving potentially high-cost members.
To support plan sponsors' efforts to administer benefits to
beneficiaries, including coordination of Medicare and Medicaid
benefits, and maximize care management and positive health outcomes, we
proposed to amend Sec. 423.38(c)(4) to make the SEP for FBDE and other
subsidy-eligible individuals available only in certain circumstances.
Specifically, we proposed 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 do not 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

[[Page 16515]]

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 also proposed to remove the phrase ``at
any time'' in the introductory language of Sec. 423.38(c) for the sake
of clarity.
We considered multiple alternatives related to the SEP proposal. In
the proposed rule, we described and asked for comments on two
alternatives:
Limit of two or three uses of the SEP per year. 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.
Limits on midyear MA-PD plan switching. We also considered an
option that would prohibit SEP use into non-integrated MA-PD plans, but
allow continuous use of the dual SEP to allow eligible beneficiaries to
enroll into FIDE SNPs or comparably integrated products for dually
eligible beneficiaries or standalone PDPs.
We received the following comments and our responses follow:
Comment: Some commenters supported the proposal and agreed that
continuity of enrollment could maximize coordination of care and
positive health outcomes. However, the majority of commenters opposed
the proposal based on a variety of factors. Most of these commenters
expressed concerns about the impact on the dual-eligible population
which, they noted, not only has limited financial resources, but also
higher rates of disability, higher rates of cognitive impairment, and
lower health literacy. These circumstances, commenters noted, often
contribute to more complex and changing health needs and difficulties
with medication adherence. Citing these circumstances, many commenters
believed these beneficiaries needed the flexibility to change their
healthcare coverage at any time during the year.
Commenters also believed that the proposal was too complex and
would be difficult for beneficiaries to understand and for plans to
administer. They noted that limited and, in some cases, multi-layered
SEPs were unnecessary when the existing ongoing SEP has worked well and
has proved to be simpler to communicate and understand.
Many commenters also said that the proposal would have an even
greater impact given the proposed changes related to midyear formulary
changes. Commenters noted that since plans have the ability to change
formularies or provider networks during the year, the ongoing dual SEP
is a vital beneficiary protection.
Lastly, commenters said that the proposed dual SEP limitation
could, in actuality, hamper CMS' stated goal of bringing Medicare and
Medicaid into better alignment because it could inadvertently
discourage dual eligible beneficiaries from enrolling in integrated
products. Commenters noted that because beneficiaries are often
hesitant to change plans, they may opt to stay in their current plan
instead of trying an integrated option. In other cases, commenters
expressed concern that beneficiaries who are assigned into a plan by
CMS or a State may panic and disenroll immediately if they believe
pressured to make an immediate decision. Commenters said that the
ongoing SEP gives beneficiaries the comfort and time to make a
deliberate and educated choice.
Response: We thank the commenters for their thoughtful feedback. We
are mindful of the unique health care challenges that dual and other
LIS-eligible beneficiaries may face. The goals of the proposal were to
improve administration of benefits and coordination of care and we
believed that this could best be accomplished through continuity of
enrollment. While we acknowledge that many commenters prefer the
ongoing nature of the existing dual SEP, we still believe that adopting
some limitations is an appropriate step toward encouraging care
coordination, achieving positive health outcomes, and discouraging
extraneous beneficiary movement during the plan year.
In response to comments, we are modifying our approach. In lieu of
the proposed dual SEP limitation that would only allow a onetime use
per year with certain exceptions, we are instead revising the dual SEP
so that it is similar to the ``two or three uses per year'' alternative
discussed in the proposed rule. Specifically, the dual SEP is being
amended so that it can be used once per calendar quarter during the
first nine months of the year (that is, one election during each of the
following time periods: January-March, April-June, July-September).
During the last quarter of the year, a beneficiary can use the AEP to
make an election that would be effective on January 1. In addition to
this change, the exception outlined at Sec. 423.38(c)(4)(ii) related
to CMS and State-initiated elections will not be finalized as proposed.
(Instead, as discussed below, CMS will be using its authority under
Sec. 423.38(c)(8)(ii) to establish a coordinating SEP for those who
are enrolled into a plan by CMS or a State at new Sec. 423.38(c)(10).
We believe that limiting use of the dual SEP, but in a less
restrictive manner, strikes the appropriate balance of our stated goals
and the concerns raised by commenters, for the reasons that follow. We
consider this approach to be less confusing for both plan sponsors and
beneficiaries than our proposal because it provides a date-based
parameter that is easier to comprehend without the additional layers of
exceptions. By still allowing multiple changes throughout the year,
dual and other LIS-eligible beneficiaries will maintain additional
flexibilities not afforded to other Part D-eligible beneficiaries, but
there may be times when these individuals cannot change plans and have
that choice effective the next month either because they already made
an election during that calendar quarter (during the first nine months
of the year) or because they are making an election during the AEP. We
believe that having certain periods when individuals must maintain
enrollment in a particular plan will increase opportunities for
coordination of care and case management. Even though these periods of
required continuity of enrollment will be shorter than what was
proposed, we believe it still matches our stated goals and addresses
the concerns expressed by commenters.
While we believe this limitation is an appropriate control to put
in place, we also believe that it will not impact the vast majority of
individuals eligible for the dual SEP. As discussed in the proposed
rule, 2016 data demonstrated that most beneficiaries do not use the
dual SEP and, of those who do use it, the majority (74.5 percent) only
used it once. Analysis of 2017 data continues to show that
beneficiaries who use the SEP use it only one time (85.5 percent). Of
those who use it two times, the average time between elections is 3.4
months, which is roughly the duration of a calendar quarter.
Given this flexibility, we believe that dual and other LIS-eligible
beneficiaries will have the freedom to choose a plan that works for
their evolving health care needs during the year. For those that have
an opportunity to enroll in an integrated product, they will be able to
do so and know that if it does not suit their needs, they can choose
another

[[Page 16516]]

plan in the near future. The same logic can be applied to those who
want to explore other plan options during the year due to formulary,
provider network, or health status changes. We note, though, that as
discussed earlier, individuals who have been identified as an at-risk
beneficiary or potential at-risk beneficiary under Sec. 423.100 will
not be able to use the dual SEP. As discussed in section II.A.1, we are
specifying at Sec. 423.38(c)(4) that this particular limitation
applies once the beneficiary has been notified that he or she has been
identified as a potential at-risk beneficiary or at-risk beneficiary,
and the limitation will continue until such identification has been
terminated consistent with Sec. 423.153(f).
Comment: Many commenters recommended a wide range of modifications
or alternatives to the dual SEP limitation outlined in the proposed
rule. Suggestions included the following:
Allow beneficiaries to disenroll to FFS at any time.
Instead of limiting the use of the dual SEP, require a
minimum enrollment duration in a plan.
Limit to onetime use per year, without exceptions, to
mitigate administrative burden.
Delay any sort of SEP limitation and, instead, contemplate
for future rulemaking.
Some commenters--both those who supported and opposed the concept
of a limitation to the dual SEP--expressed a preference for one of the
two alternatives discussed in the proposed rule. There were some who
supported the concept of expanding the onetime annual election to 2-3
uses per year because it provided more flexibility. Some commenters
expressed support for the more complex approach that would have allowed
limited use of the dual SEP for enrollment in integrated products,
standalone PDPs, and FFS, but not any non-integrated MA plans.
Along these lines, there was varied feedback for dual SEP use for
enrollment into integrated products. Some said that it should be
allowed as a onetime exception, some said that it should be an ongoing
opportunity, while others said that it should be the only allowable use
of the dual SEP. A commenter encouraged CMS to work with States to
define which plans would be considered ``integrated'' and another
commenter suggested that CMS maintain and publicize a list of
integrated plans.
Response: We believe that the wide array of feedback that
commenters provided on the proposal represents the complexity and
varying interests of those who would be impacted by a change to the
dual SEP. Given that the majority of commenters preferred more
flexibility than what we proposed, we are opting to finalize a
limitation that is along the lines of the ``two or three uses per
year'' alternative described in the proposed rule.
We contemplated allowing multiple uses per year at any time, but
thought that an approach that allowed for quarterly elections (that is,
the dual SEP in coordination with the AEP) was preferable because it
would be easier to keep track of and for beneficiaries to understand.
With a multiple-use-per-year-at-any-time policy, if a beneficiary makes
several elections in the beginning of the year, as they approach the
end of the year it may be hard to remember how many elections they have
made or whether any more are available. With an approach that allows
for quarterly elections, however, they only need to remember if they
made an election in the last few months. If they have not, it is likely
that they are eligible for a quarterly dual SEP use or the AEP. A
quarterly approach also mitigates scenarios where a beneficiary makes
multiple elections in the first half of the year and is then locked
into a plan for the latter half of the year.
Comment: In addition to the modifications/alternatives discussed
above, a number of commenters believed that if limitations were
established for the dual SEP, CMS should consider additional exceptions
for certain beneficiary groups or conditions. Specifically, commenters
believed exceptions would serve as important beneficiary protections
for the following individuals/circumstances:
Those who have a new or existing disability.
Those with a new or altered disease state or diagnosis.
American Indians and Alaska Natives who also receive
services through the Indian Health Service.
Enrollees whose prescription drugs are not covered under
their plan's formulary or whose providers change during the year.
Individuals whose caregiver arrangements change during the
year.
Individuals who must comply with Medicaid open enrollment
periods or those who meet the ``for cause'' standards established for
enrollees in Medicaid managed care plans.
Those whose providers request an SEP on their behalf.
Response: We believe that by allowing the dual SEP to be used
quarterly during the first nine months of the year in conjunction with
the AEP at the end of the year, we are mitigating the need for the
exceptions suggested by the commenters. Dual or other LIS-eligible
beneficiaries who fall into any of these categories would still be able
to use the dual SEP. The only way that they may be limited is if they
had already made a recent election into a plan. If that were the case,
they may have to wait several months to make another change. (A more
detailed discussion of different election periods and when they are
considered ``used'' and effective can be found below.) Again, we do not
see the frequency of movement that would lead us to believe that this
will be an issue for the vast majority of LIS-eligible beneficiaries.
We would note that in addition to the dual SEP, there are already a
number of protections in place for all beneficiaries who have Part D
coverage and are unable to change plans. For example, beneficiaries can
request transition fills--prescription drugs that are not on a plan's
formulary or that are on a plan's formulary but require prior
authorization or step therapy under a plan's utilization management
rules--during the first 90 days of enrollment in a new plan as provided
under Sec. 423.120(b)(3). In addition, beneficiaries can request a
formulary or tiering exception to obtain a drug that is not on their
plan's formulary or to obtain a drug at a lower cost-sharing tier.
While we understand that commenters believe that the ability to
change plans at any time is an important beneficiary protection, we
believe it is worth re-stating that the changes finalized at Sec.
423.38(c)(4) will still provide for multiple uses of the dual SEP
throughout the year and this is a flexibility that is not afforded to
all Part D enrollees. During other parts of the year, dual and other
LIS-eligible individuals will still have access to the AEP in the fall
or, if applicable, the initial enrollment period (IEP) or the new MA
open enrollment period (OEP) discussed in section II.B.1. Beneficiaries
may also continue to be eligible for other SEPs outlined in Sec.
422.62(b) and Sec. 423.38(c), which includes circumstances like a
change or residence or other exceptional circumstances as determined by
CMS.
In addition, we will be finalizing the SEP opportunity that was
contemplated in the proposed rule for beneficiaries assigned to a plan
by CMS or a State. While this was proposed at new Sec.
423.38(c)(4)(iii) as an additional use of the dual SEP, and would have
been available before that election became effective or within 2 months
of enrollment in the plan, we will be finalizing this as a new and
separate

[[Page 16517]]

SEP at Sec. 423.38(c)(10). We believe that establishing this as a
separate SEP is more straightforward because it makes clear that this
opportunity is separate and in addition to the elections allowable
under the revised dual SEP.
This new SEP will allow individuals who have been auto-enrolled,
facilitated enrolled, or reassigned into a plan by CMS, as well as
those who have been subject to passive enrollment processes discussed
in section II.A.8, an opportunity to change plans. Unlike the proposed
SEP, this new SEP will be available even if a beneficiary meets the
definition of an at-risk beneficiary or potential at-risk beneficiary.
Beneficiaries would be able to use this new CMS/State assignment SEP
before that enrollment becomes effective (that is, opt out and enroll
in a different plan) or within 3 months of the assignment effective
date, whichever is later. (Note that this SEP will not apply to
individuals who have been subject to default enrollment processes
discussed in section II.A.7, as they will be able to use the new Open
Enrollment Period (OEP) to make an election.)
Comment: A commenter requested a mechanism for plan sponsors to
determine if the enrollment prior to the enrollee's SEP request was
assigned by the CMS or the State. Another commenter requested
clarification that States may make passive enrollment decisions where
otherwise permitted, such as in Medicare-Medicaid Plans (MMPs),
regardless of whether an individual has exhausted his or her SEP
options for the year.
Response: CMS is exploring possible mechanisms that would allow
plan sponsors to determine if the enrollee's most recent enrollment
transaction was one that was initiated by CMS or the State. In the
interim, plan sponsors should ask the enrollee if they received a
notice that indicates that they have been assigned to a plan and have
certain SEP opportunities.
If a beneficiary is assigned to a plan by CMS or a State, the
enrollment change does not count against any of their SEP
opportunities. That is, if a State passively enrolls a dual-eligible
beneficiary in April, the beneficiary would still have their second
quarter dual SEP, as well as the SEP associated specifically with the
passive enrollment.
Comment: Several commenters sought clarification on how the dual
SEP limitation would affect and interact with other election periods.
Commenters stated that it was unclear how the SEP changes in Sec.
423.38 would relate to the AEP and OEP. A few commenters sought
verification that the SEPs for Program of All-inclusive Care for the
Elderly (PACE) eligible beneficiaries, institutionalized individuals,
and enrollments into 5-star plans would be unaffected. A commenter
requested clarification whether the once-per-year SEP falls outside of
the AEP, or whether the SEP also applies during this same AEP
timeframe.
Response: As noted in the proposed rule and above, other election
periods, including the AEP and the new OEP, are still available to
eligible individuals. The established SEPs that allow beneficiaries to
enroll in 5-star plans and PACE, as well as the SEP that allows
elections for those who move into, reside in, or move out of an
institution, are unaffected. If used, they would not count as use of
the dual SEP. If the beneficiary is eligible for multiple election
periods, plan sponsors (or other enrollment facilitators) may need to
determine which election period the beneficiary would like to use,
especially if the election periods would result in different enrollment
effective dates. This is consistent with subregulatory guidance in
Chapter 2 of the Medicare Managed Care Manual (section 30.6), Chapter 3
of the Medicare Prescription Drug Manual (section 30.4), and current
enrollment processing procedures for any enrollment request received
when the individual is eligible for more than one election period.
The dual SEP will be considered ``used'' based on the application
date. If, for example, an election is made in March and effective in
April, we would consider the beneficiary as having used their first
quarter (Q1) dual SEP, even though coverage would not be effective
until the second quarter of the calendar year. If a dual or other LIS-
eligible beneficiary makes an election during the AEP (October 15th
through December 7th), coverage would be effective January 1.
If, for example, a beneficiary is reassigned into a new plan in the
fall for coverage effective January 1, they would be able to make an
election under the AEP or the new CMS/State assignment SEP. If they opt
out of the reassignment before it becomes effective and choose to stay
in their current plan, this would be considered a cancellation and no
election period is required.
We recognize that when looking at all of the election periods and
associated timeframes in whole, there are multiple opportunities both
within this SEP and other election periods for an individual to make a
choice that best meets their needs. We believe that enrollment is an
individual-based exercise, and 1-800-MEDICARE, SHIPs, advocacy
helplines, plans, and enrollment brokers, already have processes in
place to work with individual beneficiaries and determine the election
periods for which they may be eligible. Ultimately, as already outlined
in Chapter 3 of the Prescription Drug Benefit Manual (section 30), it
is the plan sponsor's responsibility to determine the enrollment period
for each enrollment/disenrollment request. In some cases, plan sponsors
may need to contact the beneficiary directly to confirm the election
period.
Table 2 summarizes the election periods discussed above and the
suggested hierarchy of election periods (highest to lowest). Readers
should note that it is not a comprehensive list of all election periods
and does not negate a plan sponsor's responsibility to contact a
beneficiary if they believe that multiple election periods may be
available. More detailed information will be provided in subregulatory
guidance.

Table 2--Election Periods
------------------------------------------------------------------------
Considered
Election period Available ``Used''
------------------------------------------------------------------------
Part D IEP...................... Based on when Upon effective
first eligible date.
for Part D.
MA OEP (must meet OEP Annually.......... Upon application
requirements). date.
SEP--5-Star plans............... Ongoing........... Available as long
as election is in
5-Star plan.
SEP--PACE....................... Ongoing for Available as long
enrollment into as election is in
PACE; two month PACE plan; upon
window after application date
disenrollment for election
from PACE. subsequent to
PACE
disenrollment.
SEP--Institutionalized.......... Ongoing if moving Available while in
into/residing in facility; upon
facility; two application date
month window for election
after moving out subsequent to
of facility. moving out of
facility.

[[Page 16518]]

SEP--CMS/State Assignment....... Within 3 months * Upon application
of assignment or date.
notification of
assignment,
whichever is
later.
SEP--Change in Dual/LIS Status.. Within 3 months * Upon application
of status change date.
or notification
of change,
whichever is
later.
Dual SEP........................ Ongoing--One use Upon application
per calendar date.
quarter during
the first nine
months of the
year.
AEP............................. Annually.......... Multiple elections
can be submitted
during AEP, last
rec'd will be
considered the
choice.
------------------------------------------------------------------------
* As discussed below, the finalized SEPs will allow for a 3-month
opportunity to change plans, not the 2-month window noted in the
proposed rule.

Comment: A few commenters requested clarification on how plan
sponsors would be able to determine if a beneficiary has used their
allowable dual SEP election. Commenters asked whether this information
would be available in MARx or as a batch enrollment query (BEQ).
Commenters also asked who is responsible for validating the SEP and
noted that beneficiaries may be frustrated if they are unaware that
they have exhausted their allowable use of the dual SEP and their
enrollment is denied. A commenter asked that plans not be penalized for
rejections related to the dual SEP.
Response: Plan sponsors continue to be responsible for determining
the eligibility and enrollment period for enrollment/disenrollment
requests. As noted earlier, plan sponsors and other enrollment
facilitators may need to ask questions of the beneficiary to determine
if they are eligible for the dual SEP or another election period. As a
part of this process, we assume that beneficiaries are informed about
the enrollment process and told that a submitted enrollment form does
not always guarantee enrollment in a plan. Further, the enrollment
module in MARx will be updated to no longer allow use of the dual SEP
more than once per calendar quarter during the first nine months of the
year. Enrollment transactions submitted for an individual who has
already used their quarterly opportunity will be rejected, and sponsors
would notify the individual of the denial, as they do today. While the
commenter did not specify which penalties they wanted waived, as stated
earlier, the vast majority of beneficiaries do not use the dual SEP
multiple times, let alone within a 3-month period, so any rejected
transactions should be minimal.
Comment: A commenter asked that we confirm that the dual SEP
applies to individuals considered full-benefit dual eligible
beneficiaries under Sec. 423.773(c)(1).
Response: The dual SEP, with the parameters established in this
rule, is available for full benefit dual eligible individuals and other
subsidy-eligible beneficiaries as defined at Sec. 423.772.
Comment: A few commenters recommended that we modify the proposed
SEP at Sec. 423.38(c)(9) to allow for a three-month or unlimited
window post LIS-change, not a 2-month window. These commenters said
that the outreach and education time can be lengthy and two months does
not provide the beneficiary with enough time to make a fully-informed
choice. In addition, a commenter requested that we clarify whether a
change in co-pay level only is considered a change in LIS-eligible
status and would prompt eligibility for the dual SEP. Another commenter
asked how the change in status SEP would affect those going through the
deeming process.
Response: We appreciate this insight from commenters and believe
that a three-month window should give the beneficiary adequate time to
understand their coverage changes and determine if it is in their best
interest to change plans. Accordingly, we are revising Sec.
423.38(c)(9) to allow individuals to make an election within 3 months
of a gain, loss, or change to Medicaid or LIS eligibility, or
notification of such a change, whichever is later. A change in co-pay
level, or any change, resulting from the deeming process, would be
considered a change in LIS eligibility.
As discussed previously, the SEP for dual/LIS status change is
separate from the dual SEP. If, for example, a Medicare beneficiary
becomes eligible for Medicaid during the year, they would be able to
use the dual/LIS status change SEP to change plans. In addition,
because they are now a dually-eligible beneficiary, they would also be
able to make their allowable quarterly dual SEP election during the
first nine months of the year.
Comment: A commenter noted that the Medicaid managed care rule at
42 CFR 438.56(c)(2)(i) includes a 90-day period for plan changes
following enrollment, and that dual/LIS SEPs should align so as to
avoid conflicts between Medicare and Medicaid rules.
Response: We appreciate the identification of the potential
conflict. We believe that because of the various election periods that
are available, including the new SEPs that are being finalized in this
rule, there should not be a coordination issue with Medicaid managed
care rules. Specifically, a beneficiary can still use the dual SEP
quarterly during the first nine months of the year, the new three-month
SEP for change in Medicaid status, the new three-month CMS/State
assignment SEP, and the AEP.
Comments: A commenter recommended that if the proposal was
finalized, CMS should allow beneficiaries the right to file an appeal
to switch plans in instances where their Part D plan has made a
material change (such as to its formulary or to its pharmacy network)
during the plan year.
Response: Enrollment decisions are not appealable and we do not
believe it would be prudent to set up an enrollment appeals process at
this time. Given that dual and other LIS-eligible beneficiaries will
still be able to use the dual SEP on a quarterly basis during the first
nine months of the year, we believe that there is a readily accessible
remedy for this enrollment issue. The beneficiary will still be able to
change plans, but in the event that they have already used up their
dual SEP election, they may have to wait to make another change, unless
they are eligible for one of the many other SEPs. Again, we expect this
circumstance to be extremely rare.
Comment: A few commenters recommended that in addition to MA and
Part D plans, CMS apply the SEP limitations to Medicare-Medicaid Plans

[[Page 16519]]

(MMPs) as part of the Financial Alignment Initiative demonstration.
Response: We clarify that under the Financial Alignment Initiative
capitated model demonstrations, MA regulations--including those
governing SEPs--apply to MMPs unless waived. As has been the case to
date under the demonstrations, we will continue to use our
demonstration authority to waive applicable MA regulatory requirements
in three-way contracts as necessary, and in partnership with each
state, to achieve each individual demonstration's objectives.
Comment: A commenter requested clarification regarding the federal
vs. state authority over the dual SEP.
Response: Other than state laws relating to state licensure and
plan solvency the standards established under Part D supersede any
state law or regulation with respect to Part D plans.
Comment: Many commenters provided valuable feedback related to our
request for suggestions on how to educate the affected population and
other stakeholders of changes to the dual SEP. Suggestions included the
following:
Development of more outreach materials, including non-
English materials.
Direct notification to affected individuals.
Increased resources for SHIPs.
Coordination with the Administration for Community Living
and State ombudsmen.
Television advertisements.
Educational opportunities sales agents, providers and
community partners.
Broader education about the dual SEP in general.
Response: We appreciate the feedback provided by commenters and
will keep these suggestions in mind as we proceed with implementation
of the dual SEP limitation beginning in plan year 2019.
Comment: A commenter recommended changes to Medicaid managed care
disenrollment rules outlined at 42 CFR 438.56.
Response: Medicaid disenrollment rules are outside the scope of
proposals set forth in the proposed rule and, as such, will not be
considered for this rulemaking.
After review of the comments, and as discussed above, we are
finalizing the proposed changes to Sec. 423.38 with the following
modifications:
Paragraph (c)(4) is revised to allow eligible
beneficiaries (that is, those who are dual or other LIS-eligible) use
of the dual SEP once per calendar quarter during the first nine months
of the year. We are further specifying that the limitation applicable
to at-risk beneficiaries and potential at-risk beneficiaries (as
defined under Sec. 423.100 and discussed in section II.A.1) is
effective upon notification of that status and ends upon termination of
that status consistent with Sec. 423.153(f).
New paragraph (c)(9), which provides dual and other LIS-
eligible beneficiaries who have a change in their Medicaid or LIS-
eligible status an SEP, is modified to allow a 3-month window to make a
change.
Proposed paragraph (c)(4)(iii) allowing eligible
beneficiaries who have been assigned to a plan by CMS or a State use of
the dual SEP before that election becomes effective or within 2 months
of their enrollment in that plan will not be finalized. Instead, a new
CMS/State assignment SEP is established at Sec. 423.38(c)(10) to allow
individuals in a similar circumstance (that is, auto- or facilitated
enrolled, reassigned, default or passively enrolled by CMS or a state)
an opportunity to change plans upon notification or within 3 months of
the assignment effective date, whichever is later.
Further detail on the SEP changes will be provided in subregulatory
guidance. As suggested by a commenter, we will monitor the impact of
this change and consider future modifications if there is evidence that
beneficiaries are being harmed.
11. Medicare Advantage and Part D Prescription Drug Plan 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 ratings for domains, ratings for individual measures, and
underlying performance data. We also post additional measures on the
display page \31\ at www.cms.gov for informational purposes. The goals
of the Star Ratings are to display quality information on Medicare Plan
Finder to help beneficiaries, families, and caregivers make informed
choices by being able to consider a plan's quality, cost, and coverage;
to provide information for public accountability; 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 made strides in
recognizing the challenges of serving high risk, high needs populations
while continuing the focus on improving health care for these important
groups.
---------------------------------------------------------------------------

\31\ http://go.cms.gov/partcanddstarratings (under the
downloads).
---------------------------------------------------------------------------

In this final rule, as part of the Administration's efforts to
improve transparency, we are codifying 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 changes we proposed and are finalizing
include more clearly delineating the rules for adding, updating, and
removing measures and modifying how we calculate Star Ratings for
contracts that consolidate. As we explained in the proposed rule,
codifying the Star Ratings methodology will provide plans with more
stability to plan multi-year initiatives, because the rulemaking
process will create a longer lead time for changes and MA organizations
and Part D sponsors 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 II.A.11.c. of this
final rule (regarding plans for the transition period before the
codified rules are used) how section 1853(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 believe 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

[[Page 16520]]

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 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 (b)(3) and
423.153(c)(5)). 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 proposed 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 proposed specific text, to be codified at Sec. 417.472(k),
requiring that 1876 cost contracts to agree to be rated under the
quality rating system specified at subpart D of part 422. Cost
contracts are also required by regulation (Sec. 417.472(j)) to make
CAHPS survey data available to CMS. As is the case today, no Quality
Bonus Payments (QBP) will 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 the ratings can meet the needs of
beneficiaries using them 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 primary
goals of the ratings, they also provide feedback on specific aspects of
care and performance that directly impact outcomes, such as process
measures and the beneficiary's perspective. The ratings focus on
aspects of care and performance 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 were added
and amended to 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).\32\ 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 regulations 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

[[Page 16521]]

respective program requirements and the provision of quality care and
health coverage to Medicare beneficiaries.
---------------------------------------------------------------------------

\32\ The ratings were first used as part of the QBP
Demonstration for 2012 through 2014 and then used for payment
purposes as specified in sections 1853(o) and 1854(b)(1)(C) of the
Act 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, plans, and advocates. The following guiding
principles have been used historically in making enhancements and
updates 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 used these goals to guide our proposal and intend to use them to
guide how we interpret and apply the final regulations. For each
provision we proposed, we solicited comment on whether our specific
proposed regulation text best serves these guiding principles. We also
solicited 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 also solicited feedback from stakeholders on
how well the existing stars measures create meaningful quality
improvement incentives and differentiate plans based on quality. We
solicited comments on those topics, and have considered them in
adopting this final rule, as noted in the responses below, and will
consider them for future rulemaking. We specifically asked for 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 methodology to establish cut
points accurately reflects plan quality.
How CMS should measure overall improvement across the Star
Ratings measures. In the proposed rule, we specifically requested input
on additional improvement adjustments that could be implemented, and
the effect that these adjustment could have on new entrants (here
meaning 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 increasing implementation of 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
noted in the proposed rule that we are considering developing a survey
tool for collecting standardized information on physicians' experiences
with health and drug plans and their services.
CMS appreciates the feedback we received on our proposals and on
the solicitations for comment on the various topics. In the sections
that follow, which are arranged by topic area, we summarize the
comments we received on the background section and policies, proposals
and solicitations summarized there and provide our responses to the
comments. (In each section in II.B.11.c through w, we summarize the
proposals from the corresponding section of the proposed rule, the
applicable comments, and our responses.)
Comment: Most commenters supported both the principles and the
decision to codify the methodology for the Part C and D Star Ratings.
Of the commenters who supported those aspects of our overall proposal,
a few suggested adding principles, such as the measure data should be
timely and that distinctions between measure-level Star Ratings (cut
points) should be meaningful.
Response: CMS appreciates the support to codify the methodology for
the Part C and D Star Ratings. We will codify the methodology in this
final rule as outlined in this preamble, and will consider the
additional principles raised by the commenters for adoption in the
future as we continue to refine the principles in consultation with
experts and stakeholders through the regulatory process.
Comment: Several commenters requested CMS to continue updating the
methodology though the Call Letter instead though regulation.
Commenters were concerned that the regulatory process would lead to CMS
not being able to act quickly when there are public health or patient
safety concerns or when treatment guidelines are changed. Commenters
also cited other concerns, including introducing a burdensome
regulatory process that delays the implementation of essential measures
which can improve the quality of care for patients with chronic
illness, as reasons to not to finalize this proposal but to continue
using the Call Letter process to modify the Star Ratings methodology.
They also noted that there are already multiple opportunities for
comment on new measures; thus, the regulatory process does not create
additional transparency. A few commenters supported the general effort
to put the Star Ratings principles and process into regulation, but
encouraged CMS to adopt a few exceptions (such as allowing new measures
(but not measures with substantive changes) to enter Star Ratings
through the Call Letter process).
Response: CMS understands the commenters' concerns about how the
regulatory process may, in some cases, prevent CMS from quickly
changing or adopting measures. However, given the

[[Page 16522]]

level of support for the proposal and the need to provide the industry
with longer lead times for new measures, we will finalize the proposal
to implement substantive changes through regulation and use the Call
Letter to make non-substantive changes, suggest and solicit feedback on
new measures that will be proposed in regulation, and address emergent
public health or patient safety concerns by retiring existing measures
as needed or introducing new measures for the display page that will be
proposed for Star Ratings as appropriate. We also address comments on
our proposals related to the type of updates and changes that we
proposed to adopt without rulemaking, pursuant to specific rules
proposed for Sec. Sec. 422.164 and 423.184, in section II.A.11.h.
Comment: A commenter requested that measure changes take 3 years to
implement in the Star Ratings and that five years should elapse before
those changes could impact payment.
Response: We thank the commenter for the suggestion, but are
finalizing the timeframes proposed in the proposed rule because the
majority of commenters supported the proposed timeframes. Some of the
commenters did raise concerns about extending the timeframes for
implementing and updating measures. Changing the timeframes for
measures updates to at least 3 years will significantly slow the
implementation of substantive and non-substantive changes, in
particular, when the changes are non-substantive.
Comment: A commenter encouraged CMS to adopt financial incentives
for stand-alone prescription drug plans based on Part D Star Ratings.
Response: CMS thanks the commenter for the suggestion, but CMS
cannot adopt such financial incentives without statutory authority. The
Quality Bonus Payment (QBP) program for MA plans is statutory and the
statute does not allow CMS to pay QBPs to stand-alone prescription drug
plans.
Comment: We solicited comments on potentially adding measures in
the future that evaluate quality from the perspective of adopting new
technology. Many commenters supported adding a measure related to the
use of technology, but multiple commenters cautioned that CMS rely on
and use evidence that technology impacts health outcomes or improves
the experiences of beneficiaries in order to adopt specific measures of
that type. A number of commenters cautioned CMS to move carefully and
slowly on promoting technology due to the potential for unintended
consequences. A few commenters did not support measuring the adoption
of technology, because such adoption may not always be in the best
interest of the patient or enrollee. A few commenters did not support
such measurement because adoption of technology is hard to measure well
and may not lead to greater member satisfaction or correlate with other
measures of plan performance. Those commenters discouraged such a
focus, believing that beneficiaries will vary in their interest in
whether plans and providers adopt new technologies, so measures of such
adoption many not inform plan choice. A few commenters also feared that
measures of adoption of technology may end up reflecting geographic
differences and the socioeconomic status of members enrolled in the
plan rather than the quality or performance of the plan itself. With
respect to CMS' proposal to possibly add new measures that address the
issue of new technology in the future, such as telemedicine, a
commenter pointed out that ``Use of new technologies'' is not clearly
defined and can span a number of technologies implemented across plans
but not in a uniform manner or across all service areas. A commenter
recommended that CMS continue to look at the incorporation of new
technologies into Star Ratings measures but withhold any proposals for
CY 2019 and CY 2020 until more formal proposals can be put forth for
notice and comment prior to adoption. A commenter specifically urged
measures of e-prescribing and e-prior authorization in Star Ratings.
Another commenter urged CMS to explicitly capture in CAHPS composites
(that is, the combination of two or more survey items into a measure)
the use of telemedicine, as current survey wording may not do so.
Response: CMS appreciates comments received on adding measures that
evaluate quality from the perspective of adopting new technology and
will continue to monitor developments in this area for future
consideration. Although we are not finalizing the adoption of such a
measure in this rule, we will continue to investigate how best to
address incorporating new technologies into the Star Ratings measures.
We note that for HEDIS 2019, NCQA is examining the addition of
telehealth services in existing HEDIS measures where appropriate.
NCQA's proposed method would use specific codes and code modifiers to
clearly define which telehealth services would be allowed for each
specific measure. Proposed changes to incorporate telehealth services
will be posted for the HEDIS 2019 public comment period in February. We
appreciate receiving the comment about telemedicine and CAHPS; we
recognize telemedicine is an evolving area and may propose changes to
CAHPS survey questions in the future after discussions with the Agency
for Healthcare Research and Quality.
Comment: A commenter specifically requested CMS provide certified
software for measures not developed by external stewards, such as the
Medication Therapy Management (MTM) and SNP Care Management measures.
Response: These measures are based on data reported to CMS through
the Part C and D Reporting Requirements. CMS is not clear how providing
certified software for these measures will facilitate the submission of
these measures. CMS also notes that the MTM measure is developed by an
external steward (PQA).
Comments: Many commenters indicated the need for greater alignment
with providers (physicians, hospitals, medical groups, accountable care
organizations, and plans) to make the quality measures more consistent,
both to reduce burden and duplication and to more effectively
incentivize behavior. For example, a few commenters urged use of
measures aligned with the Merit-based Incentive Payment System (MIPS)
program.
Response: CMS thanks the multiple commenters for these suggestions
and appreciate the concern about burden and duplication, as well as the
potential value of consistently reinforcing the same message. CMS is
continuing to work with measure developers to increase consistency in
measurement across settings.
Comment: Several commenters encouraged CMS to develop measures
related to how well the care that is received by beneficiaries reflects
the beneficiaries' concerns, values, and goals.
Response: CMS is tracking work by measure developers in this area
and thanks the commenters for the suggestion.
Comment: Many commenters supported CMS continuing to develop and
implement new measure concepts beyond those in current or currently
anticipated measure sets. Among the most common suggestions were
outcome measures, especially new patient-reported outcome measures,
quality of life, and functional status measures (including Healthy Days
at Home). Several commenters also encouraged measuring care for cancer,
prevention of diabetes and other chronic conditions, long-term
management of chronic obstructive pulmonary disease (COPD), as well as
advanced care

[[Page 16523]]

planning, advanced directives and palliative care. A few other
commenters highlighted concerns about measure gaps, such as for pain
management, autoimmune disorders, mental illness, dementia/cognitive
impairment, anticoagulation drug safety, and measures specific to
patients with multiple co-morbidities, especially co-morbid diabetes
and cardiovascular disease. A few commenters referred to NQF-endorsed
measures used in other programs, such as change in functional status
after spine or hip replacement surgery. A commenter encouraged CMS to
utilize a comprehensive measure of adult vaccination, while another
encouraged adoption of a vaccine cost-sharing measure. A commenter
urged CMS to develop more medication adherence and appropriate use
measures and to assign a high weight in the Star Ratings program.
Another commenter suggested that any future transition of care measures
include detailed information on all drug therapies prescribed and
broader sharing of discharge information.
In addition, a few commenters urged CMS to provide quality and
performance information about physicians within plans or to measure
plans on the engagement of their network of physicians in value-based
purchasing designs (that is, payment designs that reward or increase
payments based on quality or capitated payments to physicians/
practitioners, medical groups and ACOs).
Several comments highlighted promoting and measuring network
adequacy and potential delays in care or medication related to this,
and a few encouraged CMS to reward plans that maintain adequate
networks with increased Star Ratings. A number of commenters urged CMS
to measure access to medical specialists and subspecialists, such as
Mohs surgeons, cataract surgeons, and ophthalmologists, while a couple
of commenters supported the assessment of pharmacy networks broken down
by specialty drug access. The two comments about networks of physician
and surgeon specialists urged CMS to leverage extant measurement with
the MIPS and Quality Payment Program (QPP) to also help measure plan
network adequacy. A commenter urged CMS to look beyond simple numbers
of physicians and specialists, since contracting and affiliation in
medical groups and ACOs may effectively limit the access patients have
to the full network.
Response: CMS appreciates the breadth of suggestions for new
measures and will take these under consideration, including internal
discussion and sharing them with the measure developers. We will also
study the value and feasibility of deriving additional metrics (such as
additional patient-reported outcome measures) from existing data
collection efforts, like HOS.
Comment: Several commenters urged the development of geographic
and/or provider market characteristic adjusters in order to normalize
variations outside plans' control. Some stated such adjustments would
specifically prevent measure bias against state-contracted SNPs.
Response: CMS appreciates this comment and will take it into
consideration. As we consider adjustments to the Star Ratings measures,
we need to ensure that the adjustments do not mask true differences in
the quality of care across the country.
Comment: A few commenters requested information about a Star
Ratings policy for natural disasters.
Response: CMS provided a detailed proposal concerning treatment of
Star Ratings measures for contracts affected by disasters in the 2019
draft Call Letter that would apply to the 2019 and 2020 Star Ratings.
We plan to propose codifying this policy through future rulemaking for
performance periods after 2019 and ratings after the 2021 Star Ratings.
Comment: Several commenters questioned whether the Star Ratings
regulations apply to PACE organizations.
Response: The MA Star Ratings regulations do not apply to PACE
organizations but to the extent that a PACE organization offers a plan
including qualified prescription drug coverage, it is a Part D sponsor
and therefore subject to the Part D regulations. This would include the
Part D Star Ratings regulations adopted in this final rule as 42 CFR
423.182-423.186. We have not produced Star Ratings for PACE
organizations to date and are exploring the PACE waiver authority to
continue to exclude PACE organizations from this requirement.
Comment: Several commenters made suggestions for possible Medicare
Plan Finder enhancements, including adding the capability to compare
plans by population type as well as mobile enhancements. A commenter
suggested including the overall Star Ratings in the Medicare & You
handbook.
Response: We appreciate these comments, but believe they are
outside the scope of the proposed rule. However, we note that CMS is
currently exploring options for improving the Plan Finder experience
for Medicare beneficiaries, and that, although the timelines for
publishing the Medicare & You handbook do not allow for including the
overall Star Rating in the initial release that occurs in the fall, the
overall Star Ratings are included in updated versions of the handbook
that are released after the initial release and publication.
Comment: We received one comment that PBMs and Part D plan sponsors
have delegated their responsibilities for the Star Ratings program to
network pharmacies without providing the pharmacies with additional
compensation.
Response: CMS appreciates these comments, but due to the non-
interference clause, CMS is prevented from interfering in contract
arrangements between sponsors, pharmacies and other providers. CMS has
indicated to measure stewards and other stakeholders that if such
pharmacy performance metrics are used as a condition of pharmacy
network status, measure specifications should be appropriately scaled,
for example, ensure adequate sample size, and that incentives to
achieve performance should be appropriately allocated.
Comment: We received several comments recommending beneficiaries
designated for lock-in be excluded from certain Star Ratings measures.
Response: Thank you for the comment. Our Star Ratings proposal did
not address this topic, and we plan to take these comments under
advisement. For more information about CARA, please see section B.
Comment: CMS had solicited feedback on the potential development of
a physician survey to gather information for Star Ratings measures. The
majority of commenters opposed the development of a physician survey
due to the increased financial and administrative burden it would
entail for both plans and health care providers/physicians who would be
surveyed. Other commenters raised concerns about the ability of
physicians to differentiate across plans when physicians interact with
multiple plans. Multiple commenters were concerned that a physician
could not accurately complete a survey on this topic since physicians
often do not personally know the plan in which a beneficiary is
enrolled. Some commenters noted that it may be difficult to determine
who within a provider's practice should complete the survey. Other
concerns raised include small sample sizes, subjectivity of responses,
and potential for incomplete data.
Response: CMS appreciates the input provided by commenters
regarding the

[[Page 16524]]

burden and multiple challenges in developing a survey to evaluate
physician experience interacting with both Medicare health and drug
plans. We are not finalizing any aspect of the physician survey in this
rule, but will take these comments into consideration as we continue to
explore the feasibility and the value to the Star Ratings program in
collecting feedback through a physician survey.
Comment: A handful of commenters were concerned about the
administration of a physician survey in integrated plans where the
physician is employed by the plan which may bias the survey results.
Response: We acknowledge that responses may not be unbiased in
situations when the physician is employed by the plan. CMS will take
this into account as we consider whether to develop a physician/
clinician survey in the future.
Comment: Among the commenters supporting the development of a
physician survey, commenters noted that the physician is in close
contact with plans on behalf of their patients so this would complement
the existing CAHPS survey for enrollees. A couple of commenters noted
that a physician survey would be a way to measure network adequacy,
appeals, benefit limit exceptions, and grievances. A few commenters
recommended that CMS consider a broader survey of clinician
experiences, including nurses, therapists, care coordinators, and
pharmacists from a variety of settings. A commenter requested that a
physician survey be voluntary.
Response: CMS appreciates the support for the development of a
physician survey and will solicit feedback from the industry on
additional topics to be included on the survey if we move forward with
the development in the future. We believe obtaining feedback from
physicians is important; however, we will consider all of the comments
provided before we make a determination about proceeding with
developmental work.
Comment: A commenter suggested the development of a general
physician survey regarding experiences with managed care compared to
fee-for-service to understand the larger healthcare landscape, while
another commenter suggested obtaining feedback through other avenues
outside of the Star Ratings program.
Response: CMS appreciates these suggestions but they are out of
scope for the potential development of surveys for the purpose of Star
Ratings.
We specifically address adoption of the Star Ratings System
regulations for the MA and Part D programs in sections II.B.11.c
through w.
c. Basis, Purpose and Applicability of the Medicare Advantage and
Prescription Drug Plan Quality Rating System
We proposed 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 that we proposed
to add under part 422 subpart D and part 423 subpart D. Under our
proposal, we are continuing to apply the existing purposes of the
quality rating system, which are to provide comparative information to
Medicare beneficiaries pursuant to sections 1851(d) and 1860D-1(c) of
the Act, identify and apply the payment consequences for MA plans under
sections 1853(o) and 1854(b)(1)(C) of the Act, and evaluate and oversee
overall and specific performance by MA and Part D plans. To reflect how
the Part D ratings are used for MA-PD plan QBP status and rebate
retention allowances, we also proposed 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 proposed, 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
proposed some changes, such as how we handle consolidations from the
current Star Ratings program, but overall the proposal was to continue
the Star Ratings system as it has been developed and has stabilized.
Under the proposal, data would be collected and performance 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
election period held in late 2020 for the 2021 contract year. Because
of the timing of the release and use in conjunction with the annual
coordinated election period, these would be the ``2021 Star Ratings.''
We proposed that the current quality Star Ratings system and
procedures for revising it remain in place for the 2019 and 2020 Star
Ratings. Section 1853(b) of the Act authorizes an advance notice and
rate announcement to announce and solicit comment for proposed changes
to the MA payment methodology, which CMS has interpreted to include the
Part C and D Star Ratings program because of the payment consequences
of Star Ratings under section 1853(o) of the Act. 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,\33\ 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 21487 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 of the Act, and the process for
announcing changes to the Star Ratings system falls within the scope of
section 1853(b) of the Act. Although not expressly required by section
1853(b) of the Act, 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 \34\ 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 proposed as
the first measurement period under these new regulations, but we may
discontinue that process at a later date as the Advance Notice/Call
Letter process and rulemaking process may provide sufficient
opportunity for public input. In addition, CMS issues annually the
Technical Notes \35\ 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. Our proposed
rule included continued use of the draft and final Call Letters as a
means to provide subregulatory application),

[[Page 16525]]

interpretation, and guidance of the final version of these proposed
regulations where necessary. Our proposed regulation text does not
detail these plans for the RFC and Technical Notes because we believe
such regulation text will be unnecessary. We proposed to codify the
first performance period (2019) and first payment year (2022) to which
our proposed regulations will apply at Sec. 422.160(c) and Sec.
423.180(c).
---------------------------------------------------------------------------

\33\ Advance Notices and Rate Announcements are posted each year
on the CMS website at: https://www.cms.gov/Medicare/Health-Plans/MedicareAdvtgSpecRateStats/Announcements-and-Documents.html.
\34\ Requests for Comment are posted at http://go.cms.gov/partcanddstarratings under the downloads.
\35\ http://go.cms.gov/partcanddstarratings (under the
downloads) for the Technical Notes.
---------------------------------------------------------------------------

We received no comments on our proposed basis, purpose, and
applicability regulations. For the reasons outlined in the proposed
rule and summarized here, we are finalizing the regulation text
proposed at Sec. Sec. 422.160 and 423.180 with one significant
modification regarding the applicability of the regulations governing
the Star Ratings of a surviving contract in a contract consolidation.
In light of the passage of section 53112 of the Bipartisan Budget Act
of 2018 (Pub. L. 115-123), the consolidation policy described at
Sec. Sec. 422.162(b)(3) and 423.182(b)(3) will be implemented for the
2020 QBP ratings and 2020 Star Ratings. We will finalize additional
text at Sec. Sec. 422.160(c), 422.162(b)(3)(v), 423.180(c) and
423.182(b)(3)(iii) to apply the regulations that govern the calculation
of Star Ratings for surviving contracts when the contract consolidation
is approved on or after January 1, 2019, consistent with the ACCESS Act
provision.
d. Definitions
We proposed 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.
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 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 website 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,

[[Page 16526]]

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.
We received no comments on the proposed definitions in paragraph
(a) of Sec. Sec. 422.162 and 423.182 and are therefore finalizing
without modification.
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 plan benefit packages (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. Although we discussed and solicited comment
on the feasibility and burden of collecting data at the PBP (plan)
level and the reliability of ratings at the plan level, we proposed to
continue the practice of calculating the Star Ratings at the contract
level and that all PBPs under the contract would have the same overall
and/or summary ratings at paragraph (b)(1) of Sec. Sec. 422.162 and
423.182.
However, beneficiaries select a plan, rather than a contract, so we
discussed in the proposed rule how we 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. In the
proposed rule, we summarized our findings. 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 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 will not be rated and in lieu of a Star Rating, Medicare
Plan Finder will display that the plan is ``too small to be rated.''
However, when enough data are available, plan level quality reporting
will reflect the quality of care provided to enrollees in that plan.
Plan-level quality reporting will 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 will significantly increase plan burden for
data reporting and will have to be balanced against the availability of
additional clinical information available at the plan level. Plan-level
ratings will 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 will 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 will also decrease our
ability to measure true performance at the plan level and add
complexities to the rating system. We solicited 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 asked 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 solicited 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 also indicated that we were exploring whether some measure data
could be reported at a higher level (parent organization versus
contract) to ease and simplify reporting while continuing to remain
useful (for example, call center measures as we anticipate that parent
organizations use a consolidated call center to serve all contracts and
plans) for the Star Ratings. Further, we said 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.\36\ 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 solicited comments and
suggestions about requiring reporting at different levels (for example,
parent organization, contract, plan, or geographic area) by measure. In
addition, section 50311(d) of the Bipartisan Budget Act of 2018 after
publication of the proposed rule, amended section 1853 to require the
Secretary to determine the feasibility of quality measurement at the
plan level for all MA plans. CMS will use the feedback received from
the proposed rule as we consider reporting options in the future and
continue to evaluate this issue consistent with the Bipartisan Budget
Act provision.
---------------------------------------------------------------------------

\36\ The following states were divided into multiple market
areas: CA, FL, NY, OH, and TX.
---------------------------------------------------------------------------

We proposed to continue calculating the same overall and/or summary
Star Ratings for all PBPs offered under an MA-only, MA-PD, or PDP
contract and

[[Page 16527]]

to codify this policy in regulation text at Sec. Sec. 422.162(b) and
423.182(b). We also proposed 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. Specifically, we proposed, at paragraph (b)(1) that CMS will
calculate overall and summary ratings at the contract level and
proposed regulation text that cross-references other proposed
regulations regarding the calculation of measure scoring and rating,
and domain, summary and overall ratings. Further, we proposed 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
proposed that the contract level score will 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.
We received the following comments related to our proposals, and
our responses follow:
Comment: Most commenters opposed moving to plan-level reporting and
expressed overwhelming support for retaining the current contact-level
measurement. Commenters raised concerns about the additional
complexity, administrative burden and reporting requirements of plan-
level reporting. Additionally, commenters reiterated our concerns
regarding the reliability of the scores at the plan level, as well as
the inability to report some measure due to inadequate sample sizes. A
commenter urged CMS to continue reporting Star Ratings at the contract
level for PDPs.
Response: CMS appreciates commenters' support for contract-level
reporting and acknowledge the complexities of moving to plan-level
reporting given the challenges of accurately measuring quality with
smaller groups and sample sizes and the additional administrative
burden that would be placed on contracts.
Comment: A handful of commenters supported plan-level reporting
also recognized it may not be practical for all quality measures. Some
of the commenters noted the utility for beneficiaries who choose among
plans. A commenter suggested CMS require Part D plans to report certain
medication-related measures at the Formulary ID level.
Response: We agree that ideally for consumer choice, plan-level
reporting or Formulary ID level reporting for Part D plans would be
preferable, because it provides more detailed and targeted data.
However, we need to consider the operational and methodological
challenges of reporting at the plan level, including the ability to
accurately measure performance at that level.
Comment: A commenter stated that plan-level reporting would be open
to potential gaming by contracts constructing the plan-level geographic
areas to maximize Star Ratings for the greatest number of enrollees.
The commenter suggested that contracts would consider how well each
plan was performing in the Star Ratings program to determine the
geographic area of each plan.
Response: We appreciate this comment and will take it into account
as we consider this issue in the future.
Comment: A commenter noted that plan-level reporting would stifle
innovation and discourage plans from serving difficult areas. This
would limit the ability of contracts to implement innovative models in
one plan prior to expanding.
Response: We appreciate this comment since we clearly do not want
our Star Ratings policies to stifle innovation. We will take this
comment into consideration as we continue to consider options for
different levels of reporting.
Comment: A handful of commenters expressed interest in measurement
at the local health services area, including by state. Many of these
commenters noted that it will be challenging to move to reporting at
the local geographic area. Issues to be considered include how to
handle contracts that serve major metropolitan areas that cross state
lines. A couple of commenters suggested that CMS consider creating
additional contract numbers or market-level designations for a
contract. A commenter recommended that CMS discontinue the moratorium
that does not allow for existing H numbers to be split to allow more
meaningful measurement.
Response: CMS is committed to examining the feasibility of
alternative levels of reporting, including by geographic area. The
suggestions provided by commenters through the proposed rule will be
taken into consideration as alternatives are explored. Additionally,
section 50311(d) of the Bipartisan Budget Act of 2018 (P.L. 115-123)
enacted after publication of the proposed rule, amended section 1853 to
require the Secretary to determine the feasibility of quality
measurement at the plan level for all MA plans. CMS plans to obtain
additional feedback from stakeholders on this issue given the
challenges of developing options that would be feasible for both the
industry and CMS. CMS' contractor for the Star Ratings program is
planning to convene a Technical Expert Panel following the publication
of the final rule and this is one of the issues the panel will address.
This panel will periodically meet to provide feedback on different
critical Star Ratings issues. Information from the Technical Expert
Panel will be publicly shared.
Comment: A commenter expressed concern about pursuing market area
reporting as such reporting could result in limiting the health care
options for higher-need populations.
Response: CMS appreciates this comment and does not want to limit
options for higher-need populations. We will take the comment into
consideration as we continue to consider options for different levels
of reporting.
Comment: A handful of commenters recommended adjusting the Star
Ratings to account for variables that contribute to underperformance in
certain geographic areas, network characteristics and patient
characteristics by applying, for example, the case-mix adjustment
process currently used for the CAHPS measures.
Response: CMS appreciates this comment and will take it into
account as we continue to consider options for different levels of
reporting. As we contemplate case-mix adjustment, we need to ensure
that we are not adjusting away true differences in the quality of care
across contracts in different geographic areas or with different
network structures.
Comment: A commenter raised concerns of the possibility for gaming
in connection with separate ratings for new contracts. If CMS is to
proceed, the commenter would like to see simulations of the ratings.
Response: CMS appreciates this comment and clearly does not want to
implement changes that would encourage gaming of the Star Ratings
system. We will take this comment into consideration as we continue to
analyze different ways to rate contracts.
Comment: A commenter raised a question about a potential error on
page 82 FR 56380 in the sentence that reads ``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

[[Page 16528]]

scores using enrollment in each PBP as reported as part of the measure
specification, which is consistent with current practice.'' The
commenter noted that the current practice weights the PBP scores by
eligible population.
Response: The text from the proposed rule is correct. The eligible
population and the enrollment reported as part of the measure
specification are the same.
Comment: A handful of commenters from sponsoring organizations
suggested separate reporting by Dual SNPs and non-Dual SNPs, and
rolling up all Dual SNP PBPs and non-Dual SNP PBPs separately within a
contract. A couple of commenters noted that moving to plan level
reporting for all SNPs is complex with many pros and cons so they
recommended that CMS continue contract-level reporting until all of the
consequences can be fully evaluated.
Response: CMS appreciates these comments, including the issues
raised by commenters regarding the complexities of moving to plan/PBP-
level reporting by SNPs and non-SNPs. Given that some contracts just
have SNP PBPs and other contracts offer both SNP and non-SNP plans, CMS
needs to evaluate how this would impact reporting of measures and
calculations. We agree that all of the benefits and disadvantages need
to be weighed before a final decision is made about how to proceed and
CMS is committed to continuing to obtain feedback from the industry on
changes to the level of reporting. CMS continues to evaluate this
issue. Additionally, in light of the passage of the Bipartisan Budget
Act of 2018, CMS is required to examine the feasibility of plan-level
reporting for both SNP and non-SNP plans. Any related changes would be
proposed through future rulemaking.
Comment: A couple of commenters supported the idea of reporting the
call center and appeals measures at the parent organization level since
in most cases these functions are organized at the parent organization
level, while a couple of commenters did not like having different
levels of reporting for different measures, arguing that it would
create more complexity in the Star Rating program.
Response: CMS appreciates the suggestions received from commenters
and will continue to look at the advantages of moving to a different
level of reporting for these and other measures. Any related changes
would be proposed through future rulemaking.
Comment: A commenter supports CMS' current process for rolling up
SNP plan-benefit package level information to the contract level.
Response: CMS thanks this commenter for their support for our
current policy of calculating SNP measures.
Comment: A handful of commenters recommended that CMS not make any
changes in the unit for reporting until additional analyses are
completed that ensures that any changes are fair and equitable to all
sponsors. A commenter suggests an industry-wide workgroup to discuss
potential changes to reporting levels and operational challenges.
Response: We acknowledge these comments and agree that we need to
do more analysis and obtain additional feedback from sponsors before we
make any changes in the level of reporting. We support the desire to
make sure that any changes are fair and equitable to all sponsoring
organizations. As noted in a previous response, CMS' contractor for the
Star Ratings program is planning to convene a Technical Expert Panel
following the publication of the final rule and this is one of the
issues the panel will address.
For the reasons indicated in the proposed rule and our responses to
the related comments, we are finalizing the provisions as proposed in
paragraphs (b)(1) and (2) of Sec. Sec. 422.162 and 423.182 and Sec.
417.472(k) without substantive modification. However, we realized that
paragraphs (b)(1) as proposed did not specify that summary ratings also
include the reward factor and the Categorical Adjustment Index as
described in Sec. Sec. 422.166(f) and 423.186(f); we are finalizing
additional text to clarify that in paragraphs (b)(1). In addition, we
are slightly revising the last two sentences of paragraphs (b)(2) of
the same regulation sections to clarify that the rule for including
plan-level only measures is applicable to the SNP-specific measures
that are reported only at the plan level.
f. Contract Consolidations
We proposed a change in how contract-level Star Ratings are
assigned in the case of contract consolidations. We noted in the
proposed rule how we have historically permitted MAOs and Part D
sponsors to consolidate contracts when a contract novation occurs to
better align business practices. As noted in MedPAC's March 2016 Report
to Congress (http://www.medpac.gov/docs/default-source/reports/march-2016-report-to-the-congress-medicare-payment-policy.pdf), 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 proposed to modify the calculation of Star Ratings for
surviving contracts that have consolidated to address these concerns.
Instead of assigning the surviving contract the Star Rating that the
contract would have earned without regard to whether a consolidation
took place, we proposed to assign and display on MPF 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 our proposal, the calculation of the measure, domain, summary,
and overall ratings will be based on these enrollment-weighted mean
scores. We estimated that the number of contracts impacted by the
proposal would be 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 proposed,
however, that the process of weighting the enrollment of each contract
and applying this general rule will vary depending on the specific
types of measures involved in order to take into account the
measurement period and data collection processes of certain measures.
Our proposal was to 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.

[[Page 16529]]

We proposed to codify our new policy at Sec. Sec. 422.162(b)(3)
and 423.182(b)(3). First, we proposed 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 proposed in
Sec. 422.162(b)(3) both a specific rule to address the QBP rating for
the first year after the consolidation and a rule for subsequent years.
As Part D plan sponsors are not eligible for QBPs, Sec. 423.182(b)(3)
was proposed without the QBP aspect. We proposed 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, we proposed
to use the enrollment-weighted means as calculated below to set Star
Ratings for MPF publication:
The Star Ratings measure scores for the consolidated
entity's first plan year will 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 surveys) will 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
will be pulled in January 2020 so enrollment in January 2020 will be
used. The call center measures will use mean enrollment during the
study period. We stated that we believed that these proposals for
survey-based measures are more nuanced and account for how the data
underlying those measures are gathered and that the enrollment-weighted
means better reflect 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, we proposed to calculate the Star Ratings will be
calculated as follows:
The enrollment-weighted measure scores using the July
enrollment of the measurement period of the consumed and surviving
contracts will be used for all measures except HEDIS, CAHPS, and HOS.
We proposed that HEDIS and HOS measure data will be used
as reported in the second year after consolidation. The current
reporting requirements for HEDIS and HOS already combine data from the
surviving and consumed contract(s) following the consolidation, so we
did not propose 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.
We proposed to require that the CAHPS survey sample (that
would be selected following the consolidation) would 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 will be selected will be 6,000.
CMS proposed that these rules would be used to calculate the
measure scores in the first and second year after consolidation;
following those two years, CMS proposed to 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 will be after the consolidation, so our
proposal limited the special rules for calculating post-consolidation
the Star Ratings to the 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
proposed 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, if the first year the consolidated entity is in operation is
plan year 2020, the 2020 QBP rating displayed in HPMS in November 2018
will 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 will have been their QBP ratings accurately
reflects their performance for payment purposes. In subsequent years
after the first year following the consolidation, QBPs status will be
determined based on the consolidated entity's Star Rating posted on
MPF. 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, we stated that we believed the
ratings used for QBP status determinations would reflect the care
provided by both the surviving and consumed contracts.
In conclusion, we proposed a new set of rules regarding the
calculation of Star Ratings for consolidated contracts to be codified
at paragraphs (b)(3) of Sec. Sec. 422.162 and 423.182. We solicited
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 periods. We also solicited feedback
on 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 requested 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.
Following publication of our proposed rule, Congress enacted the
Bipartisan Budget Act of 2018. Section 53112 of the Act amended section
1853(o) to require an adjustment to the Star Ratings, quality bonus
under

[[Page 16530]]

section 1853(o) and rebate allocation under section 1854 based on the
quality rating to ``prevent the artificial inflation'' of Star Ratings
after consolidation. That required adjustment applies for
consolidations approved on or after January 1, 2019. The statutory
change requires the adjustment be applied when a single MA organization
consolidates contracts and reflect an enrollment-weighted average of
scores or ratings for the underlying contracts. We believe that our
proposal is generally consistent with the new statutory requirement,
with minor exceptions. The proposal would not have applied until a
later period, but, as noted in section II.A.11.c of this final rule, we
will finalize these provisions to be applicable beginning with the 2020
QBPs and 2020 Star Ratings produced in fall 2019 to be consistent with
the statute. Our proposal was for consolidations involving a single
parent organization while the statute focused on consolidations
involving a single MA organization; applying the proposed policy to
consolidations at the level of the parent organization instead of the
specific MA organization captures more consolidations. We read the
Bipartisan Budget Act as setting a floor rather than a ceiling on our
authority to establish and set the rules governing the Stars Rating
system. In addition, our proposal also was more specific as to how
enrollment-weighted ratings at the measure and contract level would be
used following the consolidation. We believe the additional detail in
our proposal is explicitly authorized as the statutory change leaves it
to the Secretary to identify the specific appropriate adjustments.
We received the following comments on our proposals and
solicitations for feedback, and our responses follow:
Comment: Commenters expressed overwhelming support for our rules
outlined at Sec. Sec. 422.162(b)(3) and 423.182(b)(3) to calculate
contract-level Star Ratings in the case of contract consolidations.
Commenters stated that this would be a more accurate picture of the
performance of the underlying contracts. Commenters noted that this
would help eliminate the gaming that can occur when consolidations of
multiple contracts in distinct geographic areas result in artificial
increases the Star Ratings and Quality Bonus Payment (QBP) ratings. A
number of commenters suggested that this approach was fair and
equitable to all stakeholders. Some commenters supported this change as
a short-term solution, but they wanted CMS to consider how in the
future the ratings could more accurately reflect the care provided at
the local market area. Commenters recognized that quality reporting at
the local market area is a sizeable change and would not be feasible
for a number of years.
Response: CMS appreciates the commenters' support for revising how
Star Ratings and QBP ratings are calculated when two or more contracts
consolidate. We believe that the Bipartisan Budget Act indicates that
Congress is similarly concerned about these issues and our proposal to
address them. We also agree with commenters that local market area
reporting would be preferable in cases when the contracts are
geographically dispersed. Although moving to local market area
reporting has many challenges, CMS is committed to work with
stakeholders to examine the feasibility of local market area reporting.
Any potential changes that would change the consolidation policy in the
direction of local market area reporting would be proposed in future
rulemaking.
Comment: A commenter recommended that CMS issue contract numbers at
the state level and then base Star Ratings at the state level to avoid
consolidations across disperse geographic areas.
Response: State-based contract numbers would be administratively
burdensome for both contracts and CMS, would significantly increase
reporting burden of contracts, and would create measurement challenges
since many contracts at the state level will not have a sufficient
number of enrollees by state to calculate reliably the quality measures
that are part of the Part C and D Star Ratings program. Contracts that
serve disperse geographic areas often have the majority of their
enrollees in one or two states with smaller enrollment in other states.
Comment: A commenter suggested using the unrounded final summary
mean rather than the rounded final Star Rating.
Response: CMS is assuming this commenter is referring to the QBP
rating for the first year of the consolidation. For all other years,
the QBP rating of the contract would be based on the Star Ratings
posted on Medicare Plan Finder; therefore for the second year following
a consolidation, the same rules for calculating the Star Ratings for
QBP and for MPF posting would apply (that is, Sec. Sec.
422.162(b)(3)(iii)). The preliminary QBP rating is produced and posted
in HPMS in November of each year for the bids that will be submitted
the following year. The QBP appeals process is based on these ratings
posted in November. In April prior to the bids being due, CMS would
update the QBP rating using an enrollment-weighted QBP ratings of all
contracts involved in the consolidation which are already rounded.
Comment: A commenter asked CMS to consider a grace period that
would neither reward nor disadvantage the surviving contract as a
result of acquiring a poor performing contract.
Response: Under our current policy, a sponsor can gain financially
by consolidating enrollees from a poor-performing contract into a
contract that receives a QBP and thereby receive bonus payments that it
would not have been entitled to receive had the consolidation not
occurred. The revised methodology for calculating Star Ratings and QBPs
for the surviving contract takes into consideration the performance of
all contracts involved; thus, it is a more accurate measure of
performance. We do not believe that a more accurate reflection of
performance can be fairly termed a ``reward'' or a ``disadvantage'' of
contract consolidation.
Comment: A handful of commenters expressed concern regarding the
consolidation policy stating that they thought the calculations were
too complex. A commenter stated it would limit the beneficiary options
to enroll in plans with richer benefits since there would not be the
same incentives to consolidate lower performing contracts into higher
performing ones receiving QBPs.
Response: Most of the calculations for the revised consolidation
policy will be handled by CMS, though contracts will have an
opportunity to review the calculations as part of the normal Star
Rating review process. The consolidation policy should not make it more
difficult for contracts to produce the data that are needed for the
Star Ratings program. The premise behind all of the calculations is to
combine the already gathered (or currently gathered) data from all
contracts involved in the consolidation using an enrollment-weighted
average. This policy should not create a situation which limits options
for beneficiaries to enroll in plans with richer benefits. As always,
beneficiaries may is able to choose in their service area any plan that
best meets their needs. If a beneficiary decides to remain in a
contract that consolidates, the ratings for that contract will now more
accurately reflect performance of that contract.
Comment: A commenter suggested that CMS post by year end in HPMS a
worksheet with the exact enrollment and overall Star Rating values
which CMS intends to use for determining QBP ratings for consolidated
contracts.

[[Page 16531]]

Response: In November of each year, CMS posts in HPMS the
preliminary QBP ratings for the bids that will be submitted the
following year. This starts the QBP appeals process. In April of each
year prior to bids being submitted, CMS posts in HPMS the final QBP
rating following the appeals process. In November of each year or at
year end, CMS would not be aware of future consolidations that would be
announced near the time of the bid so would be unable to post a
combined rating for the consolidated contracts at this time. As long as
CMS is aware of the consolidation by April at the time of the HPMS
posting, the combined rating for the consolidated contracts would be
posted at that time. A parent organization would have sufficient
information to calculate the enrollment weighted QBP rating of a
consolidated contract using the preliminary QBP ratings posted in HPMS
in November of each year.
Comment: A handful of commenters requested that CMS clarify the
timing of this provision. These commenters expressed a preference for
it not to begin until the 2021 Star Ratings and 2022 QBPs.
Response: The proposed rule stated that all of the changes related
to Star Ratings would go into effect for performance periods in 2019
(thus, for the 2021 Star Ratings and 2022 QBPs). However, in light of
the passage of the Bipartisan Budget Act provision which requires
enrollment-weighted adjustments to the Star Ratings for contract
consolidations approved on or after 1/1/19, we are finalizing the
regulation text on this policy to be applicable to consolidations that
occur on or after the same date. The final regulations at Sec. Sec.
422.162(b)(3) and 423.182(b)(3) will apply to the star ratings of
surviving contracts from contract consolidations that are approved on
or after January 1, 2019. Thus, the policy will be implemented for the
2020 Star Ratings and the 2020 QBPs. We note that while the statute is
specific to MA ratings, we are finalizing the same policy for Part D
Ratings on the same timeframe to have consistent methodology across
Part C and D for beneficiaries choosing a contract.
Comment: A few commenters were interested in a similar policy for
consolidations between different parent organizations.
Response: We treat the purchase of a contract, multiple contracts
or all of the contracts offered by a parent organization by different
parent organization is known as a novation, not a consolidation, even
though the consolidation will generally also require similar contract
documents and approvals from CMS. Where one entity is buying all or
part of the business of another entity, we did not propose and do not
intend to apply the consolidation policy finalized in this rule. In
novations, the structure of each of the individual contracts being
purchased does not change and the contracts still provide the same
services within the same service area before and after the novation is
completed, only the company that owns the business and is the MA
organization under the contract has changed. The Star Rating for each
individual contract transfers with the contract and remains intact
until the next rating cycle. Novations can occur at any point during
the calendar year.
A consolidation by contrast is when two or more contracts owned by
the same parent organization are combined into a single contract. The
overall service area of the two contracts are combined, the contract
number of the consumed contract(s) is retired and the contract number
of the surviving contract now provides all of the services in the
combined service area. To consolidate contracts, all of the contracts
must be owned by the same parent organization. Consolidations can only
occur at the change from one year to another year and must be submitted
and approved by CMS by a specific deadline in the annual contracting
process. If one parent organization buys another contract owned by a
different parent organization, the sponsor could consolidate multiple
contracts using the rules outlined in this rule the year after the
novation takes place. With a consolidation, the rule finalized here for
the calculation of the Star Rating of the surviving contract would
apply.
Comment: A commenter wanted CMS to propose other alternatives and
offer additional opportunities to comment, but no additional detail was
provided on suggested alternatives.
Response: CMS appreciates the request for other alternatives.
Commenters to the proposed rule did not suggest other ways to handle
contracts that consolidate and expressed overwhelming support for this
policy. CMS will continue to consider if there is a better way to
account for differences in performance across geographic areas and will
provide opportunities to engage stakeholders and obtain additional
input.
For the reasons set forth in the proposed rule and our responses to
the related comments summarized earlier, we are finalizing the
provisions as proposed at Sec. Sec. 422.162(b)(3) and 423.182(b)(3),
except for modifying the timeframe applying these new rules. The
revised consolidation policy would be applicable for the Rating for any
surviving contract after a consolidation that is approved on or after
January 1, 2019. Although the statute related to consolidations is
specific to MA ratings, we are finalizing the same policy for Part D
ratings on the same timeframe to have consistent methodology across
Part C and D for beneficiaries choosing a contract.
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. 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 so they are not information collections governed by

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section 1852(e). 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 use the same
Part D measures focusing on administration of the drug benefit as is
used for stand-alone PDPs. 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 proposed
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 proposed 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 proposed, 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 proposed 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 regulation text will clearly establish the sponsoring
organization's responsibility to submit data that can be reliably used
to calculate ratings and measure plan performance.
We received the following comments on this proposal, and our
responses follow:
Comment: A few commenters supported codifying language to clearly
establish the sponsoring organization's responsibility to submit data
that can be reliably used to calculate ratings and measure plan
performance.
Response: CMS appreciates stakeholders' support of our effort to
codify language to ensure that that the data submitted are accurate and
reliable. We are finalizing the language as proposed.
Comment: Responses were mixed on whether audit data should be used
in the Star Ratings. A couple of commenters opposed including measures
in the Star Ratings program that rely on audit findings as a data
source. Other commenters stated given the Beneficiary Access and
Performance Problems measure that previously included enforcement
actions was moved out of the 2019 Star Ratings and to the display page,
they strongly urged CMS to re-incorporate audit information, including
information about enforcement actions, in Star Ratings. Those in favor
of using audit information noted that the key purposes of Quality
Rating System are to provide comparative information to Medicare
beneficiaries, to base payment on quality, and to oversee the overall
performance of plans. These commenters opposed CMS removal of audit
findings and enforcement actions from the Star Ratings since
deficiencies, in particular repeat deficiencies, may impact beneficiary
access to drugs and services and the Star Ratings will not reflect
these issues.
Response: We appreciate the commenters' feedback and concerns
received on the use of audits, compliance actions, and enforcement
actions in the Star Ratings. In the proposed rule, the Beneficiary
Access and Performance Problems measure was not proposed for the 2021
Star Ratings even though some stakeholders strongly support including
some recognition in the Star Ratings program when serious or repeat
deficiencies are uncovered in audits or other means. These stakeholders
argue that such deficiencies directly impact beneficiary access to
needed services and drugs and therefore should be part of the Star
Ratings program. We will continue to consider the comments as we
continue our dialogue with stakeholders on this issue and any future
changes will be proposed in future rulemaking.
For the reasons set forth in the proposed rule and our responses to
the related comments, we are finalizing the provisions regarding the
data sources for measures and ratings as proposed in Sec. Sec.
422.162(c) and 423.182(c) with two modifications. In Sec.
422.162(c)(1), we are finalizing additional text to clarify that CMS
administrative data will be used in the scoring for measures; the new
text aligns the Part C regulation with the parallel Part D regulation.
As noted in the proposed rule (82 FR 56382), some measures are based on
data that CMS (or a contractor) has related to performance by
sponsoring organizations and we are including a reference to CMS
administrative data consistent with that longstanding policy. In
addition, in Sec. 423.182(c)(2), we are finalizing additional text to
clarify that the reported data permit measurement of health outcomes
and other indices of quality, consistent with the scope of the measures
in the Star Ratings program.
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 proposed in Sec. Sec.
422.164 and 423.184 specific rules to govern the addition, update, and
removal of measures. We also proposed to apply these rules to the
measure set proposed

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in this rulemaking, to the extent that there are changes to the measure
set between the effective date of this final rule and the Star Ratings
based on this final rule (that is the ratings based on the performance
periods beginning on or after January 1, 2019).
As discussed in more detail in the following paragraphs, we
proposed 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 proposed to continue our
current practice of 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
(without rulemaking) 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 proposed specific rules for updating and removal that would be
implemented through subregulatory action, so that rulemaking would not
be necessary for certain updates or removals. CMS proposed to announce
application of the regulation standards in the Call Letter attachment
to the Advance Notice and Rate Announcement process issued under
section 1853(b) of the Act.
First, we proposed 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 proposed to make certain of these changes without
future rulemaking by applying the standards and authority in the
regulation text. CMS proposed to solicit feedback of its application of
such rules using the draft and final Call Letter each year. In
addition, CMS proposed in paragraph (a) of each section to issue a
complete list of the measure set for each year in the Technical Notes
or similar guidance document.
Second, we proposed, 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 proposed 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. We explained that this rule
was designed 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, paragraph (b) would
authorize CMS to remove the measure from that year's rating.
Third, we proposed to address the addition of new measures in
paragraph (c).
In the proposed rule, we explained that our proposal regarding the
addition of measures was guided by the principles we reiterated in this
final rule in section II.A.11.b. 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, that are 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 proposed to codify that CMS would
continue to review measures of this type for adoption 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 proposed that CMS would develop its own
measures as well when appropriate to measure and reflect performance in
the Medicare program. For the 2021 Star Ratings, we proposed 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 would be added and measures would be removed
from the Star Ratings program to meet our policy goals. As new measures
are added, we noted in the proposed rule that our general guidelines
for deciding whether to propose new measures through future rulemaking
would 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.
As explained in the proposed rule, CMS 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

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to identify and adopt new measures for the Star Ratings, which would be
done through future rulemaking and include explanations for how and why
we propose to add new measures. We also proposed to follow the process
in our proposed paragraphs (c)(2) through (4) of Sec. Sec. 422.164 and
423.184 when a new measure has been identified for inclusion in the
Star Ratings. We proposed to initially solicit feedback on any
potential new measures through the Call Letter and to codify that as a
requirement at paragraph (c)(2) of each section.
As new performance measures are developed and adopted, we proposed,
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 Introduction, the rulemaking process
creates 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 in the draft 2020 Call
Letter on whether to add the new measure.
April 2019: Summarize feedback in the 2020 Call Letter on
adding the new measure.
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 proposed 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 proposed 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 or
specifications) to existing measures would be proposed and finalized
through rulemaking. In paragraphs (d)(2) of Sec. Sec. 422.164 and
423.184, we proposed 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 noted in our proposal that
this process for substantive updates would be similar to the process
proposed 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 remains relevant and measures a critical topic for the Star
Ratings. Adding the substantively updated measure to the Star Ratings
would be proposed through rulemaking.
We proposed 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 would be incorporated into the
measure and announced using the Call Letter. We proposed to use such
updated measures to calculate and assign Star Ratings without the
updated measure being placed on the display page. Our proposal was
explained as consistent with current practice.
In paragraphs (d)(1)(i)-(v) of Sec. Sec. 422.164 and (d)(1)(i)-(v)
of 423.184, we proposed to codify a non-exhaustive list of non-
substantive updates announced during or prior to the measurement period
and how we will 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 will be considered non-
substantive and will 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 is not considered
substantive because the sponsoring organization generally benefits from
that change. This type of administrative change has no impact on the
current clinical practices of the plan or its providers, and thus will
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

[[Page 16535]]

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 it does not change the intent of the
measure but provides more information about how to meet the measure
specifications:
++ Adding additional tests that will meet the numerator
requirements.
++ Clarifying documentation requirements (for example, medical
record documentation).
++ 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 solicited 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 noted our
interest 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 solicited 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 proposed 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 proposed the two circumstances under which a measure will
be removed entirely from the calculation of the Star Ratings. The first
circumstance we identified was a change or changes in clinical
guidelines that mean that the measure specifications are no longer
believed to align with or promote positive health outcomes. We
explained that as clinical guidelines change, we would need the
flexibility to remove measures from the Star Ratings that are not
consistent with current guidelines. We proposed 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 noted 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 the proposed rule, we also explained how 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 proposed, at paragraph (e)(1)(ii), 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 explained that we would
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 decision that the measure has low
reliability. Although some measures may show uniform high performance
across contracts and little variation between them, we noted we seek
evidence of the stability of such high performance, and we noted 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 with 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. Below, we summarize the comments we received on
adding, updating, and removing measures, and provide our responses and
final decisions.
Comment: Commenters agreed with the criteria CMS proposed to select
new measures for the Star Ratings program. Commenters also agreed with
the proposed measure categories (the measure categories used to assign
weights to measures as noted in Sec. Sec. 422.166(e) and 423.186(e)),
though a few commenters asked CMS to include more outcome measures. A
few commenters also requested that measures be claims-based and not
based on medical chart review.
Response: CMS appreciates the support for our criteria for
selecting new measures. CMS agrees with the desire to add more outcome
measures to the Star Ratings program and welcomes all suggestions
(submitted through the annual Call Letter process) for outcome measures
to include in the Star Ratings program. We realize that medical chart
review is burdensome and we are continuing to look at ways to minimize
chart review measures. For example, CMS is exploring whether using
encounter data for quality measurement would minimize burden for plans
while resulting in equally accurate and appropriate reflections of
performance and quality.
Comment: The majority of commenters agreed with CMS' proposal for
selecting new measures, announcing and soliciting feedback on new
measures, finalizing new measures through rulemaking, reporting new
measures on the display page for a minimum of 2 years prior to becoming
a Star Rating measure, and keeping new measures on the display page if
CMS finds reliability or validity issues with the measure
specifications. Supporters of these proposals noted that the
introduction of new measures through rulemaking allows greater lead
time for plans to incorporate new measures, supports stability in the
Star Rating program, maximizes stakeholder input, and provides
additional transparency in the Star Ratings selection process.
Commenters mentioned that increased lead time for the introduction of
new measures is important especially in any payment program. Commenters
noted the need for plans to have sufficient time to allocate resources,
make changes to operations, adjust supporting information systems, and
plan any specialized educational materials and events. A commenter
suggested that new measures remain on the display page for 3 years
which would allow plans to develop internal processes for quality
measurement and improvement, which the commenter suggests would lead to
improved health outcomes for beneficiaries; another commenter expressed
the opinion that reporting a new measure on the display page for 2
years is too long. Commenters who expressed concern that the time on

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display was too long or suggested exceptions to allow for shorter times
on display both referred to the need to reflect changes in clinical
standards and to respond to public health urgencies.
Response: CMS appreciates receiving feedback on the proposed policy
to introduce new measures into the Star Ratings program through
rulemaking. We acknowledge that there is some desire and policy
rationale to keep measures on the display page for longer than 2 years,
but CMS is trying to balance the need to introduce new measures in a
timely manner with giving sponsors sufficient lead time for the
introduction of new measures. We believe that a 2 year period provides
the appropriate balance.
Comment: Some commenters opposed the requirement to propose new
measures through rulemaking rather than continuing to announce new
measures through the Call Letter process. The commenters cited the long
lag between the time measures are developed/approved and the time they
are included in the Star Ratings, and requested a more expedited
approach for the inclusion of new measures. Commenters noted that
adding more lead time would stifle the adoption of new quality measures
aligned with the latest innovative advances in medicine and technology
and, thus, prevent Star Rating measures from reflecting the latest
treatment guidelines and current standards of care. Further, commenters
mentioned introducing new measures through rulemaking could
unnecessarily delay implementation of measures needed to address
clinical area gaps, preventable safety issues, emerging public health
concerns, and the adoption of evidence-based measures. As a result,
commenters believed CMS' ability to incentivize improvements in the
quality of care for Medicare beneficiaries would decrease. A few
commenters suggested that, if CMS does implement the rulemaking process
for the introduction of new measures, CMS should consider granting
exceptions in circumstances in which there are urgent public health and
patient safety issues to be addressed through quality measures.
Response: CMS recognizes that introducing new measures through
rulemaking will make the process longer than CMS' former process of
introducing new measures through the Call Letter, but we believe doing
so balances the need for expediency with the need for greater
transparency and stability for the ratings program. CMS also believes
the rulemaking process adds an additional opportunity to fine tune
measures and thus ensure greater measurement accuracy and enhanced
stability in the Star Ratings program. We note that using rulemaking to
adopt measures will bring the MA and Part D quality ratings system in
line with other quality ratings systems and quality data collection
programs that are used for Medicare payment. We understand the desire
to have measures that address public health concerns adopted quickly in
the Star Ratings program. CMS is committed to implementing these types
of measures as quickly as possible so they can at least be publicly
reported on the display page prior to being a Star Ratings measure.
Comment: A few commenters requested that new measures be fully
defined, tested, and validated by measure stewards prior to being
considered for Star Ratings, even for CMS developed measures. A
commenter requested that CMS adopt only measures which have been NQF
endorsed, publicly reported by NCQA (or the measure steward) for at
least one measurement period, and reported on the CMS display page for
at least one measurement period. The commenter also recommended that
CMS not report new (first year) measures on the display page.
Response: CMS agrees that measures need to be fully defined, tested
and validated by measure stewards before used as the basis for Medicare
payment. Placing new measures on the display page provides transparency
about CMS' intention to use the measure in the future as part of Star
Ratings and an opportunity for sponsors to see their scores and
performance before the measure is used in the Star Ratings. The display
measures are not assigned Star Ratings or used in the development of
measure, domain, summary, or overall Star Ratings, so there are no
payment consequences. Retaining new measures on the display for two
years gives CMS additional opportunities to identify any data issues
prior to the measures being included in the Star Ratings program. CMS
will use endorsed measures as they are available. For some areas which
CMS judges to be important for the Star Ratings program, endorsed
measures may not be available. CMS emphasizes that if reliability
issues with a display measure are identified, the regulations proposed
and finalized in this rule at Sec. Sec. 422.164(c)(4) and
423.184(c)(4) prevent the measure from moving to a Star Ratings
measure. Although a number of commenters to the proposed rule were
concerned about the rulemaking process preventing CMS from quickly
responding to public health and patient safety issues, CMS believes
that reporting new measures as soon as possible on the display page
will addresses these concerns.
Comment: The majority of commenters agreed with the process for
updating existing measures.
Response: We appreciate the support for the process for updating
existing measures.
Comment: Some commenters objected to the proposal for updating
measures through rulemaking because of the delay between the time
measures are updated/approved and the time they are re-introduced into
the Star Ratings program. These commenters requested a more expedited
approach for updating measures. Most commenters supported CMS in its
proposal to codify a non-exhaustive list for identifying non-
substantive measure updates. Some commenters requested additional
information on how the determination is made as to whether a change is
substantive versus non-substantive. A few commenters wanted a more
exhaustive list of what are considered non-substantive changes.
Some commenters expressed the opinion that all measure updates,
even non-substantive changes, should be announced in advance of the
measurement period. In addition, a few commenters expressed the opinion
that all measure updates, whether substantive or non-substantive,
should be subject to rulemaking. These commenters noted some of the
same concerns expressed for supporting the addition of new measures
through rulemaking rather than through the Call Letter process. These
concerns included allowing plans greater lead time to incorporate
updates, have sufficient time to allocate resources to incorporate
updates, make changes to operations, adjust supporting information
systems, and plan any specialized educational materials and events. A
commenter, however, expressed the opinion that no measure updates,
substantive or non-substantive, should be required to go through
rulemaking, because this would lead to unnecessary gaps in measurement
for critically important issues.
Response: CMS appreciates the comments we received on our proposal
for updating measures. Although there is some disagreement among
commenters on whether and which updates should go through rulemaking,
we believe our proposal balances the commenters' concerns by only
requiring substantive measure updates to go through the rulemaking
process. Non-substantive updates, such as coding updates, which are not
significant changes to the measure specifications would continue to be
announced

[[Page 16537]]

through the Call Letter process. CMS does not have authority to
determine or direct when measure stewards update measure
specifications. If non-substantive measure specifications are made
during the measurement period, CMS believes it is of value to
incorporate those measure specification updates in that year's Star
Ratings measures. Non-substantive updates are most often minor code
updates and are not significant changes to the measure specifications.
CMS proposed and is finalizing in this rule a comprehensive list of
measure changes it considers non-substantive in Sec. Sec.
422.164(d)(1) and 423.184(d)(1); we explained (above and in the
proposed rule) the basis for our determination that these changes and
others like them should be implemented without delay or additional
rulemaking. The list is not exhaustive because additional situations or
types of changes may also result in little or no change to the results
of measurement (or generally benefit sponsoring organizations) in a
similar way. We believe that the standard adopted here--that of non-
substantive changes--is adequately clear to provide notice to
stakeholders and balance the competing policies identified by
commenters. CMS encourages plans and other stakeholders to provide
suggestions for additional non-substantive measure updates to add to
the current list through future rulemaking.
Comment: A few commenters expressed disagreement with the proposal
to continue collecting a legacy measure until an updated measure has
been on display for 2 years.
Response: CMS appreciates comments on its proposal to keep legacy
measures in the Star Ratings during the period when the related updated
measure goes through rulemaking and is placed on the display page for 2
years. We intend that a legacy measure may remain in the Star Ratings
until the updated measure is ready to move into Star Ratings only when
the area covered by the measure is critical to reflecting whether plans
are providing appropriate care or for a similar reason that the
information provided by the legacy measure is important to the Star
Ratings.
Comment: There was general agreement among commenters with CMS'
proposed process for removing measures from the Star Ratings program
and for announcing the removal in advance of the measurement period.
However, some commenters did question the criteria for how CMS judges
measures to be `topped out' or have low statistical reliability.
Response: CMS appreciates the overall support for its proposal for
removing measures from the Star Ratings program. Measure scores are
determined to be `topped out' when they show high performance and
little variability across contracts, making the measure statistically
unreliable. However, although some measures may show uniform high
performance across contracts and little variation between them, CMS
needs to balance these concerns with 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 which address the
specific clinical concerns.
For the reasons set forth in the proposed rule and our responses to
the related comments summarized earlier, we are finalizing the
provisions related to the adoption, update, and removal of measures as
proposed at paragraphs (c), (d), and (e) of Sec. Sec. 422.164 and
423.184 with a minor modification to add the phrase ``nationally
endorsed'' to Sec. 422.164(c)(1) so that the regulation text is
identical to the parallel Part D provision at Sec. 423.184(c)(1).
i. Measure Set for Performance Periods Beginning on or After January 1,
2019
We proposed 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.
As indicated in the proposed rule, CMS will not codify a list of
measures and specifications in regulation text in light of the regular
updates and revisions contemplated by the rules we have finalized at
paragraphs (c), (d) and (e) of Sec. Sec. 422.164 and 423.184. We
would, as finalized in Sec. Sec. 422.164(a) and 423.184(a), issue
annually the full list of measures in the Technical Notes for each
year's Star Ratings.
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BILLING CODE 4120-01-C
We summarize the comments received on the proposed measures and
respond to them by measure in Table 3C for the Part C measures, for
performance

[[Page 16547]]

periods beginning on or after January 1, 2019.

Table 3C--Part C Measures
------------------------------------------------------------------------
Measure
------------------------------------------------------------------------
Breast Cancer Screening (BCS)..... Comment: A commenter expressed
concerns that due to physical and
mental limitations, all permanently
institutionalized beneficiaries,
including those under age 65,
should be excluded from the Breast
Cancer Screening measure. This
commenter suggested that rather
than undergo a mammogram, an
alternative screening option would
be an Automated Breast Ultrasound
(ABUS).
Response: CMS appreciates this
feedback. CMS has shared comments
received on this measure with NCQA,
the measure steward, for
consideration when their advisory
panels re-evaluate this measures,
as part of the standard HEDIS
process.
Colorectal Cancer Screening (COL). Comment: CMS received no comments on
this measure.
Annual Flu Vaccine................ Comment: CMS received a number of
general comments on CAHPS measures.
Response: CMS appreciates the
feedback on the CAHPS measures.
Since the comments on CAHPS
measures were mostly not measure
specific, please see the CAHPS
summary of comments received as
well as CMS responses following the
Parts C and D Measure Tables.
Comment: CMS received one comment
that the annual flu vaccine measure
should use claims data as they are
more reliable. Another commenter
stated that beneficiaries in Puerto
Rico are reluctant to vaccinate
against the flu which unfairly
impacts plans in Puerto Rico, and
that asking beneficiaries to
remember when they received a flu
shot is a burden on them.
Response: The flu item is a HEDIS
measure collected through the CAHPS
survey. Flu shot information is
collected through a survey since
there are a variety of places where
people can get flu shots and the
plan may not have a record of a flu
shot in their administrative data
depending on where the flu shot was
received. We note that CMS applies
standards of reliability to CAHPS
results, directly and through
significance testing. The item asks
whether respondents received a flu
shot since July in order to reflect
the timeframe when beneficiaries
typically receive flu shots. This
is a process measure, and CMS does
not adjust process measures for
beneficiary refusals to avoid
biasing the data.
HOS Measures:
Improving or Maintaining Comment: CMS received a number of
Physical Health. general comments on HOS measures.
Response: CMS appreciates the
feedback on the HOS measures. Since
the comments on HOS measures were
mostly not measure specific, please
see the HOS summary of comments
received as well as CMS responses
following the Parts C and D Measure
Tables.
Improving or Maintaining Mental Comment: Several commenters
Health. suggested the HOS measures
Improving or Maintaining Physical
Health and Improving or Maintaining
Mental Health fail to consider the
natural aging process or
accommodate vulnerable
beneficiaries and those with
degenerative or progressive
diseases. They pointed out that as
time passes, patients are more
prone to experience certain health
deterioration and argued that
changes in status--positive or
negative--should not be attributed
to the actions of the health plan.
They again suggested that CMS drop
the two year look-back design of
the survey.
Response: HOS yields two patient-
reported outcome measures of change
in global functioning, by using 2-
year change in scores on the
Physical Component Score (PCS) and
the Mental Component Score (MCS),
both of which come from the
Veterans RAND 12-Item Health Survey
(VR-12) portion of the larger
survey. HOS assesses health
outcomes for randomly selected
beneficiaries from each health plan
over a two-year period by using
baseline measurement and a two-year
follow up. In general, functional
health status is expected to
decline over time in older age
groups, mental health status is
not, and the presence of chronic
conditions is associated with
declines in both *.\37\
Longitudinal HOS outcomes
(including death) are adjusted for
baseline age and other well studied
risk factors, including chronic
conditions, baseline health status,
and socio-demographic
characteristics that include
gender, race, ethnicity, income,
education, marital status, Medicaid
status, SSI eligibility, and
homeowner status. Because each
beneficiary's follow up score is
compared to their baseline score
and adjusted for these risk
factors, each beneficiary serves as
his/her own control. CMS recognizes
that Physical Component Summary
(PCS) and Mental Component Summary
(MCS) may decline over time and
that health maintenance, rather
than improvement, is a more
realistic clinical goal for many
older adults. Therefore, MA
Organizations are asked to improve
or maintain the physical and mental
health of their members. Change
scores are constructed and the
results compare actual to expected
changes in physical and mental
health.
Monitoring Physical Activity (PAO) Comment: CMS received no comments on
this measure.
Adult BMI Assessment (ABA)........ Comment: CMS received one comment
suggesting the BMI measure be
removed from the Star Ratings
program due to the commenter
believing the measure to be `topped
out.' A measure is considered
`topped out' when it shows high
performance across all contracts
decreasing the variability across
contracts and making the measure
unreliable.
Response: CMS appreciates the
feedback; however, from a review of
the Star Ratings data for this
measure, there are many contracts
rated below 4 stars. There have
been significant increases in
ratings for this measure in recent
years so CMS is carefully
monitoring this measure to see if
it should be proposed for
retirement from the Star Ratings in
the future.
Special Needs Plan (SNP) Care Comment: A commenter recommended
Management. that the SNP Care Management
measure be retired until clear
technical guidance on the measure
specifications can be issued by the
agency and if the measure is
reintroduced, the cut points should
be stratified based on SNP type
(for example, C-SNP, D-SNP), since
the commenter believes various SNP
types have different outcomes on
this measure.

[[Page 16548]]

Response: There are no upcoming
clarifications or changes to this
measure specifications for the 2021
Star Ratings. Note that the SNP
care management measure is
collected at the PBP level and the
requirement to complete a timely
HRA for every plan member (which is
the performance metric measured)
applies to all SNP types. Sponsors
are reminded that as part of the
data validation process of plan-
reported data, a reviewer must
submit and review draft findings to
the sponsor prior to submission via
HPMS. Once data validation findings
are submitted to HPMS, sponsors may
formally submit their disagreement
to CMS if necessary.
Comment: A commenter suggested that
some Star Rating measures are
driven primarily by member
outreach. As such, some plans with
large dual-eligible populations are
disproportionately negatively
impacted by members who are more
transient and with frequent address
and phone number changes that
directly result in fewer successful
contacts and lower engagement. For
outreach-driven measures, the
commenter urges CMS to exclude
members who were unreachable after
a justifiable number of documented
good faith attempts.
Response: The requirement to
complete a timely HRA for every
plan member (which is the
performance metric measured)
applies to all SNP types and is
regulatory. There are no upcoming
specification changes that will
affect this measure for the 2021
Star Ratings. Note that plans may
report when members are unreachable
after documented attempts and when
members refuse to complete the HRA,
but those data are not used in
calculating this measure.
SNP measures:
Care for Older Adults (COA)-- Comment: A commenter expressed
Medication Review, Care for concerns about the varying
Older Adults (COA)-- performance on SNP measures based
Functional Status Assessment, on the SNP type stating that the
Care for Older Adults (COA)-- performance on these measures is
Pain Assessment. heavily biased related to type of
SNP plan, rather than indicative of
plan quality.
Response: These measures are
indicators of high quality care for
all plans that focus on special
needs populations. However, for
HEDIS 2019, NCQA is considering
modifications to these measures, to
broaden the denominators to all
patients with multiple chronic
conditions. CMS will keep
considerations in mind that
measures not be primarily driven by
plan type, rather than differences
in quality of care.
Osteoporosis Management in Women Comment: CMS received comments that
who had a Fracture (OMW). there should be different
exclusions for some health
conditions including osteoporosis
because, for some patients, the
treatments identified in the
measure specification (that is for
compliance) are not medically
appropriate. Commenters noted that
many challenges exist in treating
and screening certain health
conditions for patients with
advanced illness. A commenter
suggested that the Star Ratings
clinical metrics may not be sound
for frail patients with advanced
illness.
Response: CMS appreciates receiving
feedback on this measure. For HEDIS
2019, NCQA is examining potential
cross-cutting exclusions for those
with advanced illness from selected
HEDIS[supreg] measures, including
the Osteoporosis Management in
Women Who Had a Fracture measure.
Proposed changes to implement
advanced illness exclusions will be
posted for the HEDIS 2019 public
comment period in February 2018.
Please see additional comments
related to Patients with Advanced
Illness below.
Diabetes Care (CDC)--Eye Exam..... Comment: CMS received no comments on
this measure.
Diabetes Care (CDC)-- Kidney Comment: CMS received a few comments
Disease Monitoring. suggesting the Diabetes Care--
Kidney Disease Monitoring measure
be removed from the Star Ratings
program due to the commenters
belief the measure is `topped out.'
A measure is considered `topped
out' when it shows high performance
across all contracts decreasing the
variability across contracts and
making the measure unreliable.
Response: CMS appreciates the
feedback, however, from a review of
the Star Ratings for this measure,
there are many plans rated below 4
stars. A. As noted above in this
preamble, among other
considerations, CMS wants to
balance how critical measures are
to improving care and the
availability of alternative related
measures. If, for example, no other
measures captures a key focus in
Star Ratings, a `topped out'
measure with lower reliability may
be retained in Star Ratings.
Currently, there are no alternative
kidney disease monitoring measures
appropriate for MA Star Ratings.
Diabetes Care (CDC)--Blood Sugar Comment: CMS received no comments on
Controlled. this measure.
Controlling Blood Pressure (CBP).. Comment: CMS received a
recommendation that in alignment
with current clinical practice
guidelines, ambulatory and home
blood pressure readings that are
documented in the treating
provider's medical record be
considered acceptable for the
purposes of assessing the efficacy
and appropriateness of a
clinician's treatment plan.
Response: CMS appreciates feedback
on this measure. NCQA is currently
reevaluating the Controlling High
Blood Pressure measure and
proposing to allow for readings
taken from remote monitoring
devices that transmit results
directly to the provider. Details
on this potential change will be
posted for the HEDIS 2019 public
comment period in February 2018.
Rheumatoid Arthritis Management Comment: CMS received comments that
(ART). evidence of treatment for
rheumatoid arthritis not limited to
disease-modifying anti-rheumatic
drugs (DMARD) should be considered
for compliance (that is, added to
the numerator for the measure).
Commenters noted that some patients
have limited tolerance for DMARDs
along with a much higher rate of
serious adverse medication effects,
particularly serious infections.

[[Page 16549]]

Response: CMS appreciates receiving
feedback on this measure. For HEDIS
2019, NCQA is examining potential
cross-cutting exclusions for those
with advanced illness from selected
HEDIS[supreg] measures, including
the Disease-Modifying Anti-
Rheumatic Drug Therapy for
Rheumatoid Arthritis measures.
Proposed changes to implement
advanced illness exclusions will be
posted for the HEDIS 2019 public
comment period in February 2018.
Please see additional comments
related to Patients with Advanced
Illness below. We understand from
public statements that NCQA plans
to reevaluate the Rheumatoid
Arthritis Management measure and
review the evidence for rheumatoid
arthritis treatment with their
advisory panels.
Reducing the Risk of Falling (FRM) Comment: CMS received no comments on
this measure.
Improving Bladder Control (MUI)... Comment: CMS received no comments on
this measure.
Medication Reconciliation Post- Comment: CMS received no comments on
Discharge (MRP). this measure.
Plan All-Cause Readmissions (PCR). Comment: A commenter suggested that
in order to provide MA
organizations with greater
visibility into plan performance,
CMS should work with the NCQA to
eliminate the calculation whereby a
national average observed rate is
multiplied by the observed to
expected ratio of readmissions for
Plan All-Cause Readmissions. A
commenter noted that NCQA has
announced in early 2018 substantive
changes in the Plan All-Cause
Readmissions measure.
Response: CMS appreciated feedback
on this measure. The calculation
mentioned that uses the observed
readmission rate divided by the
expected readmission rate for a
contract multiplied by the national
average is the process to calculate
the case-mix adjusted contract
rate. A case-mix adjusted rate is
used to ensure that the comparisons
between contracts is fair and
meaningful. It takes into account
how sick patients were when they
went into the hospital the first
time. CMS will discuss with NCQA
the need to better explain the
calculations involved in the
reporting of the measure.
CMS decision: In that NCQA is
planning to make significant
changes to the Plan All-Cause
Readmissions measure (changes to be
published in 2018 and applied in
measurement year 2019) CMS is not
finalizing this as part of the
measure set for the 2019
performance period and the 2021
Ratings. CMS is finalizing this as
a display measure and consistent
with Sec. 422.164(d)(2) will
include this measure on the display
page for 2 years.
Getting Needed Care............... Comment: CMS received a number of
general comments on CAHPS measures.
Response: CMS appreciates the
feedback on the CAHPS measures.
Since the comments on CAHPS
measures were mostly not measure
specific, please see the CAHPS
summary of comments received as
well as CMS responses following the
Parts C and D Measure Tables.
Getting Appointments and Care Comment: CMS received many general
Quickly. and specific comments on CAHPS
measures.
Response: CMS appreciates the
feedback on the CAHPS measures.
Since the comments on CAHPS
measures were not always measure
specific, please see the CAHPS
summary of comments received as
well as CMS responses following the
Parts C and D Measure Tables.
Comment: CMS received one comment
that this composite is unfair to
plans in Puerto Rico because
beneficiaries in Puerto Rico are
not necessarily used to having a
specific appointment time.
Response: We thank the commenter for
this comment. We have conducted
some exploratory work related to
this topic and may propose changes
in the future after consulting with
AHRQ.
Customer Service.................. Comment: CMS received a number of
general comments on CAHPS measures.
Response: CMS appreciates the
feedback on the CAHPS measures.
Since the comments on CAHPS
measures were mostly not measure
specific, please see the CAHPS
summary of comments received as
well as CMS responses following the
Parts C and D Measure Tables.
Rating of Health Care Quality..... Comment: CMS received a number of
general comments on CAHPS measures.
Response: CMS appreciates the
feedback on the CAHPS measures.
Since the comments on CAHPS
measures were mostly not measure
specific, please see the CAHPS
summary of comments received as
well as CMS responses following the
Parts C and D Measure Tables.
Rating of Health Plan............. Comment: CMS received a number of
general comments on CAHPS measures.
Response: CMS appreciates the
feedback on the CAHPS measures.
Since the comments on CAHPS
measures were mostly not measure
specific, please see the CAHPS
summary of comments received as
well as CMS responses following the
Parts C and D Measure Tables.
Care Coordination................. Comment: CMS received many general
and specific comments on CAHPS
measures.
Response: CMS appreciates the
feedback on the CAHPS measures.
Since the comments on CAHPS
measures were not always measure
specific, please see the CAHPS
summary of comments received as
well as CMS responses following the
Parts C and D Measure Tables.
Complaints about the Health Plan.. Comment: A commenter recommended
creating an excluded category/sub-
category for complaints related to
CMS/SSA system/enrollment issues or
limitations which would effectively
remove complaints of that type from
this measure.
Response: Data exchanges between CMS
and SSA occur regularly and mostly
without incident. When issues
occur, CMS often looks to plan
sponsors to communicate accordingly
to their members and utilize CMS
resources, such as the MA-PD help
desk, to help address their matter
without referral to CMS and
generation of complaints. CMS is
not instituting such a category/sub-
category at this time. Plan
Sponsors should continue to work
alongside their CMS caseworker as
appropriate to provide assistance.
Comment: A few commenters requested
updates to the CMS CTM standard
operating procedures (SOP). There
was a request to provide
instructions for plans to return
issues (either as a CMS issue or as
a closed complaint) determined by 1-
800-Medicare to be errors. Another
request was that complaints found
to not be the fault of the plan be
considered CMS issues, or
reassigned to another entity.

[[Page 16550]]

Response: CMS regularly utilizes
feedback from plans and other
stakeholders to identify
opportunities for continuous
improvement of CMS resources such
as 1-800-Medicare. Due to the
volume of CTM complaints received
annually, CMS cannot investigate
for individual errors. CMS expects
such matters to be rare, and any
impact on plans to be evenly
distributed. Plan Sponsors should
not seek recategorization of
marketing complaints because, as a
result of plan investigation, they
have determined the allegation is
unfounded. However, if a marketing
complaint has been misclassified,
and the narrative reflects that the
alleged misrepresentation occurred
by a Call Center representative,
SHIP, etc., then a Plan Request to
make the complaint a ``CMS Issue''
is appropriate. CMS appreciates the
feedback and will include
additional language in the next
version of the CTM Plan SOP.
Comment: A commenter suggested that
CMS create an excluded category
intended for cases that are
educational and/or are referrals to
the contract.
Response: It is not CMS' intention
for the CTM to communicate plan
information or simply provide
education.
Comment: A commenter stated concerns
that duplicate complaints count
against plan sponsors.
Response: CMS' CTM SOP includes
procedures for the removal of
duplicate complaints with the same
complaint identification numbers,
so there is no impact on plan
sponsors. CMS has taken numerous
steps over the years to reduce the
instances of this occurring and
expect that plan sponsors have
noticed significant improvement in
this area. If a beneficiary's issue
persists or is not be resolved by a
plan, multiple complaints may be
entered into the CTM. These
complaints are not duplicative, but
reflect unresolved or similar
issues. CMS does not support
removing such complaints. Inclusion
of these complaints effectively
rewards plan sponsors who are
prompt with acknowledging and
resolving complaints, and provide
excellent customer service to
beneficiaries.
Comment: A commenter requested clear
processes for when the assignment/
reassignment date should be reset
by CMS caseworkers, so that plan
sponsors can better strategize
their actions.
Response: Assignment/reassignment
date by CMS caseworkers is a topic
outside the scope of this rule.
Members Choosing to Leave the Plan Comment: A couple of commenters
suggested that the disenrollment
rate does not reflect the plan's
quality and the beneficiary
experience. They note that the
disenrollment rate is impacted by
the pricing and coverage strategies
of the contract. Among those
commenters dissatisfied with what
the disenrollment rate reflects and
does not reflect, a commenter
suggested that this measure be
moved to the display page.
Response: CMS is statutorily
required to report voluntary
disenrollment rates as part of the
Balanced Budget Act of 1997.
Disenrollment rates are a strong
measure of a beneficiary's
satisfaction with a contract.
Beneficiaries who are interested in
seeing why enrollees voluntarily
leave a contract can obtain this
information as a drill down to the
disenrollment rates on Medicare
Plan Finder. CMS respectfully
disagrees that pricing strategies
and the coverage provided by the
contract should not be considered
in assessing the quality and
performance of contracts since they
have a direct impact on access to
services.
Comment: A commenter suggests that
CMS conduct additional analyses to
see if the disenrollment rates
should be adjusted by the
proportion of SNP members.
Response: CMS appreciates this
comment and will analyze the data
to see if any future changes are
needed. Any potential changes would
be subject to future rulemaking.
The current Star Ratings
adjustments for dual status are
incorporated as part of the CAI.
Health Plan Quality Improvement... For the summary of comments received
and CMS' responses for this
measure, please see section `j.
Improvement Measures' of the
Preamble.
Plan Makes Timely Decisions about Comment: CMS received a comment
Appeals. opposing the inclusion of
dismissals in the Plan Makes Timely
Decisions about Appeals measure.
The commenter expressed concern
that if the inclusion of dismissals
is a positive factor in the
measure, it would create incentives
for the MA organization to increase
the opportunities to enter
dismissals.
Response: CMS appreciates the
comment about dismissals. To
clarify, the measure for the 2021
Star Ratings includes cases
dismissed by the IRE because the
plan has subsequently approved
coverage/payment. In prior years,
we excluded all cases dismissed/
withdrawn by the IRE from this
measure. The inclusion of
dismissals would only apply to
cases dismissed by the IRE because
the plan issued an untimely but
favorable decision. In other words,
plans may send late Part C appeals
to the IRE while simultaneously (or
shortly thereafter) approving the
late cases which results in the
case being dismissed by the IRE,
thus masking that the plans'
decisions were untimely. Inclusion
of cases where the plan has
subsequently approved for coverage/
payment that are dismissed or
withdrawn at the IRE level could
provide a more accurate assessment
of plans' timeliness in their Part
C appeals processing. Without
excluding this group of dismissals,
a plans' performance may be
artificially improved as a result,
especially if dismissals were
directly related to the plans'
(untimely) approvals.
If an MA plan fails to provide the
appellant with a reconsidered
determination within the required
timeframes, this failure
constitutes an affirmation of its
adverse organization determination,
and the plan must submit the case
file to the IRE for review. This
new measure would more accurately
reflect that MA plans are not
making timely decisions. CMS does
not believe this would create the
incentive described by the
commenter.
CMS acknowledges these comments and
is actively evaluating these
measures and the use of the IRE
data as their data source for
future enhancements.
Comment: CMS received a comment
recommending that this measure be
weighted by membership by
calculating the measure similarly
to the Part D Auto-Forward measure
to ensure plans of all sizes are
measured equally.
Response: The Part C and Part D
appeals systems are different, they
have different rules for how
appeals are handled. There are no
auto-forwards in Part C and the
number of late appeals examines how
well the contract is processing the
appeals in a timely manner.
Additionally each measure has
different specifications.

[[Page 16551]]

Reviewing Appeals Decisions....... Please see response for Part D
Appeals Upheld measure.
Call Center--Foreign Language Comment: A few commenters
Interpreter and TTY Availability. recommended that CMS revise the
measure's sampling methodology for
volume and for volume by language
(including consideration of plans
with larger enrollment sizes), or
revise the foreign languages and
testing frequency. An additional
commenter recommended that CMS
adjust the foreign languages tested
to the languages actually spoken in
that plan's area, and mentioned
that 99 percent of local residents
speak Spanish in Puerto Rico. The
commenter also suggested using a
single, combined measure (or rate)
for both Part C and D.
Response: The Accuracy and
Accessibility Study is performed to
(1) ascertain the accuracy of
responses to plan benefit questions
provided by customer service
representatives when calling the
call center in addition to (2)
testing the availability of
interpreters for Limited English
Proficient callers and (3) testing
TTY functionality. A simple random
sample method is used. To reduce
the burden on a call center with
multiple phone lines, we select
samples across the call centers
instead of the phone lines. The
precision requirement of the sample
size is calculated at the call
center level and is based on the
question response accuracy rates
obtained from the accuracy survey,
and the rate of completed calls
made through Limited English
Proficiency (LEP) accommodations
and TTY services. This methodology
was chosen by CMS, in part, because
the accuracy of the information
provided to a caller in response to
specific benefits questions should
not be impacted by enrollment size
or physical call center location.
If contract enrollment size is
positively correlated with higher
variability and wider margins of
error in these key metrics of this
study, CMS would expect to see
contracts with higher enrollments
having the key metrics closer to 50
percent than the contracts with
lower enrollments. We have not
observed that in the data and will
therefore continue to use the
methodology as designed. Call
centers using more or fewer
representatives are held to the
same expectation that the
information provided to callers is
accurate.
Foreign language testing was never
intended to be proportionate to the
demographics of any contract. Plan
sponsors are required to provide an
interpreter for any caller speaking
a foreign language, and CMS seeks
to ensure that more vulnerable
populations have equal access to
interpreters. Rather than test all
foreign languages which would be
overly burdensome and costly, CMS
selects 6 foreign languages from
among the top 10 most frequently
spoken languages in the U.S.,
according to the Office for Civil
Rights (which makes its selections
from U.S. Census Data). The number
of calls by foreign language is
equally divided and randomly
assigned to each call center across
the biweekly calling schedule. The
number received by the call center
is dependent upon each call
successfully reaching the call
center (for example, disconnects in
an IVR or other factors will impact
the ability of the call to reach a
representative). Internal analysis
across all plans shows that the
methodology is sound and CMS has
confidence in the data.
When testing in Puerto Rico, Spanish
is the native language and English
is treated as a foreign language.
Because some of the accuracy calls
are placed in the native language
in addition to foreign language
testing, Spanish calls are placed
at a higher volume for plans in
Puerto Rico.
By design, the Accuracy and
Accessibility Study schedules and
places calls to phone numbers that
may or may not be the same for Part
C and Part D. Also, the study is
conducted at the call center level
(not the phone number level), and
not all plans use the same call
center for Part C as for Part D.
Finally, the accuracy questions
used in this study either relate to
Part C benefit questions or to Part
D benefit questions. Because the
questions are different for each,
CMS believes performance should be
measured separately for the Part C
and Part D programs.
Statin Therapy for Patients with Comment: CMS received two comments
Cardiovascular Disease (SPC). seeking clarification regarding the
categorization and weighting
discrepancies between the Part C
and Part D statin measures. Two
organizations recommended
classifying both SPC and SUPD as
process measures with a weight of
one.
Response: CMS appreciates the
feedback. The Part C Statin Therapy
for Patients with Cardiovascular
Disease (SPC) measure is the
percent of plan members (males 21-
75 years of age and females 40-75
years of age) who were identified
as having clinical atherosclerotic
cardiovascular disease (ASCVD) and
were dispensed at least one high or
moderate-intensity statin
medication. This Part C measure
focuses on patients who were
dispensed one prescription and
whether the patient filled the
medication at least once.
Therefore, it is a process measure.
The Part D measure is the percent
of the number of plan members 40-75
years old who were dispensed at
least two diabetes medication fills
and received a statin medication
fill. Receiving multiple fills
indicates the patient continues to
take the medication and therefore
suggests adherence. Continuing to
take the prescribed medication is
necessary to reach clinical/
therapeutic goals. Thus, the Part D
measure is an intermediate outcome
measure. We believe that for these
measures as proposed (and finalized
in this rule) are properly
categorized.
------------------------------------------------------------------------

We summarize the comments received on the proposed measures and
respond to them by measure in Table 3D for the Part C measures, for
performance periods beginning on or after January 1, 2019.
---------------------------------------------------------------------------

\37\ Ware JE, Kosinski M. SF-36 Physical and Mental Health
Summary Scales: A Manual for Users of Version 1, Second Edition.
Lincoln, RI: QualityMetric, Incorporated, 2001.

Table 3D--Part D Measures
------------------------------------------------------------------------
Measure
------------------------------------------------------------------------
Call Center--Foreign Language Please see comments received and
Interpreter and TTY Availability. CMS' responses for this measure in
the above Part C Measures table for
the measure Call Center--Foreign
Language Interpreter and TTY
Availability.

[[Page 16552]]

Appeals Auto-Forward.............. Comment: CMS received one comment
suggesting that CMS align the Part
D Appeals Auto-Forward measure with
the Part C Plan Makes Timely
Decisions about Appeals measure.
The commenter also complained that
cases that can be approved, but
because the approvals are untimely,
the cases are forwarded to the IRE;
the commenter said this can cause
delays in patient care as the
member, provider, and plan await
the IRE's decision.
Response: CMS appreciates receiving
comments on this measure. However,
the Part C and Part D appeals
systems are not interchangeable.
Each appeal system has its own set
of rules and procedures which mean
that combining or aligning these
measures is not appropriate. We
direct the commenter to the appeal
regulations at Sec. Sec. 422.590
and 422.592 as compared to Sec.
Sec. 423.568(h). Further, we note
that the MA and Part D plans have
full control of the appeal prior to
it having been sent to the IRE. In
the example cited, if the plan had
approved the original request from
the member, the appeal would not
have needed to be raised to the IRE
level or incurred the additional
waiting time.
Appeals Upheld.................... Comment: CMS received a comment
requesting that CMS adjust the
Reviewing Appeals Decisions measure
to remove from the measure denials
due to lack of response from
providers from the denominator and
the numerator. The commenter also
requested to align timeframes for
the plan with the IRE stating that
the IRE is generally held to the
same adjudication timeframes as the
plan but if additional information
is needed from a prescriber, the
IRE is allowed to extend the
adjudication timeframe to obtain
this information. The commenter
further said that a plan is not
afforded this time and must deny
based on the information provided
in order to prevent cases from
being auto-forwarded to the IRE.
Therefore, the commenter requested
to measure fairness based on the
information the plan had at the
time of the plan's decision. Plans
should also not be penalized for
appeals that were overturned when
providers provided ``new''
information to the IRE, which was
not originally submitted by the
provider at the time of the plan's
original coverage determination or
redetermination. A commenter from a
plan noted that this measure did
not reflect the commenter's true
plan performance.
Additionally, this commenter noted
several instances where cases were
overturned by the IRE due to
allowing non-Part D supported
indications to be considered and
disregarding the commenter's CMS
approved clinical policies. Due to
these issues, the commenter
proposed an alternative formula to
capture Appeals Upheld data and
measure plan performance in this
area.
Response: CMS appreciates the
comment. Plans and sponsors must
have procedures in place for
requesting and obtaining
information necessary for making
timely and appropriate decisions.
The IRE's decision is based on the
information gathered during its
review process. Adjusting appeal
timeframes is not within the scope
of this proposal, however, we note
that the IRE must issue a decision
within the same appeals timeframe
as the plan. Please refer to 42 CFR
423.600(d). The timeframes for the
plan and the IRE are aligned. At
this time, CMS will continue to
include this measure in the Star
Ratings CMS acknowledges these
comments, and is actively
evaluating these measures, and the
use of the IRE data as their data
source. For future enhancements.
Complaints about the Drug Plan.... Please see comments received and
CMS' responses for this measure in
the above Part C Measures table for
the measure Complaints about the
Health Plan.
Members Choosing to Leave the Plan Please see comments received and
CMS' responses for this measure in
the above Part C Measures table for
the measure Members Choosing to
Leave the Plan.
Drug Plan Quality Improvement..... For the summary of comments received
and CMS' responses for this
measure, please see section `j.
Improvement Measures' of the
Preamble.
Rating of Drug Plan............... Comment: CMS received a number of
general comments on CAHPS measures.
Response: CMS appreciates the
feedback on the CAHPS measures.
Since the comments on CAHPS
measures were mostly not measure
specific, please see the CAHPS
summary of comments received as
well as CMS responses following the
Parts C and D Measure Tables.
Comment: A commenter suggested we
consider this measure `topped out.'
Response: We do not agree this
measure is `topped out'' since many
contracts receive less than 4
stars. Previous analyses of CAHPS
scores have suggested that
seemingly small differences of 1
point on a 0-100 scale are
meaningful; differences of 3 points
can be considered medium, and
differences of 5 points can be
considered large.\38\ For instance,
a 3-point increase in some CAHPS
measures has been associated with a
30 percent reduction in
disenrollment from health plans,
which suggests that even ``medium''
differences in CAHPS scores may
indicate substantially different
care experiences.\39\
Getting Needed Prescription Drugs. Comment: CMS received a number of
general comments on CAHPS measures.
Response: CMS appreciates the
feedback on the CAHPS measures.
Since the comments on CAHPS
measures were mostly not measure
specific, please see the CAHPS
summary of comments received as
well as CMS responses following the
Parts C and D Measure Tables.
Comment: CMS received one comment
that this composite penalizes Part
D plans where patients do not
prefer to fill prescriptions by
mail.
Response: CMS disagrees that this
composite penalizes plans based on
how beneficiaries choose to fill
prescriptions; rather, the item
focuses on ease of getting
prescriptions filled when using the
plan. The composite covers two
topics: How often it was easy to
use your plan to get the medicines
your doctor prescribed (assessed by
one item) and ease of filling
prescriptions (assessed by
combining two items about how often
it was easy to use your plan to
fill a prescription at your local
pharmacy, and how often it was easy
to use your plan to fill a
prescription by mail). The combined
pharmacy/mail score is averaged
with the first item's score to
produce the composite score. This
averaging weights mail and pharmacy
according to how many respondents
say they use each method, so mail
would not count at all if no one in
the plan uses mail.
Comment: A commenter suggested we
consider this measure `topped out.'

[[Page 16553]]

Response: We do not agree this
measure is `topped out' since many
contracts receive less than 4
stars. Previous analyses of CAHPS
scores have suggested that
seemingly small differences of 1
point on a 0-100 scale are
meaningful; differences of 3 points
can be considered medium, and
differences of 5 points can be
considered large.\40\ For instance,
a 3-point increase in some CAHPS
measures has been associated with a
30 percent reduction in
disenrollment from health plans,
which suggests that even ``medium''
differences in CAHPS scores may
indicate substantially different
care experiences.\41\
MPF Price Accuracy................ Comment: A commenter asked CMS to
identify which of the two possible
calculations will be included in
the MPF Accuracy measure. The
commenter noted that CMS had
previously proposed to update the
measure to include frequency and
magnitude of prescription drug
event (PDE) prices that exceed MPF
information beginning with the 2016
data but reverted to the old
measurement (only magnitude) with
the 2018 Star Rating release.
Response: The MPF Accuracy measure
will only measure the magnitude of
difference, as has been done in the
past. CMS will continue to
calculate each contract's accuracy
index which measures the amount
that the PDE price is higher than
the MPF price. CMS will consider
for future rule-making, with
stakeholder input, to include both
frequency and magnitude of PDE
prices that exceed MPF information
in the Accuracy measure.
Comment: A commenter suggested that
this measure is `topped out'. A
measure is considered `topped out'
when it shows high performance
across all contracts decreasing the
variability across contracts and
making the measure unreliable.
Response: As announced through the
2019 Call Letter, CMS is proposing
enhancements to this measure for
the CY2022 Ratings. The enhanced
measure will first be put on
display before being added into the
Star Ratings program pursuant to
the rules in Sec. 423.184.
Adherence Measures:
Medication Adherence for Comment: A few commenters requested
Diabetes Medications, that CMS consider excluding
Medication Adherence for beneficiary prescriptions from
Hypertension, Medication these measures or create a
Adherence for Cholesterol reporting mechanism that allows
(Statins). plans to identify prescriptions for
removal that are documented as
``discontinued'' or prescriptions
with therapy changes; the commenter
stated that these changes would
avoid the appearance that
beneficiaries with discontinued
medications are non-adherent. A
commenter expressed concerns about
the thresholds for the medication
adherence for diabetes and
cholesterol measures citing that
they are reaching unsafe levels and
do not reflect individual needs
such as in the aging elderly
population. They described several
circumstances that can adversely
affect adherence measures and
suggest noncompliance, such as
prescription data entry errors and
changes in therapy due to clinical
indicators.
A commenter commended CMS on
including adherence measures in the
Star Ratings. Another commenter
recommended that CMS weight MA-PD
and PDP measures differently based
on the plan's ability to influence
outcomes on a measure. It was
recommended that CMS require
beneficiaries to provide a contact
phone number at the time of
enrollment in order to assist plans
in reaching members to impact
adherence. Another commenter was
concerned about the significant
negative impact by LIS members on
adherence measures.
Response: We appreciate the
feedback. CMS' mission is to
promote quality care for our
beneficiaries. In our May 11, 2012
HPMS memo entitled `Prohibition on
Submitting PDEs for non-Part D
prescriptions', we outlined our
concerns related to beneficiary
privacy protections and data
validation for the submissions of
non-Part D data. If Part D sponsors
were to attempt to collect the data
it is unclear how sponsors could
implement sufficient internal
controls to meet audit standards
necessary to ensure the quality of
the data. In addition, requiring
physicians to attest to therapy
changes or discontinuation of a
prior prescription would be an
added burden and counterproductive
to CMS' Patients over Paperwork
initiative. In the case of changes
in therapy (such as holding or
discontinuing medication), we
believe that the 80 percent
compliance threshold incorporates
these circumstances as the ideal
compliance expectation is 100
percent. We will pass along these
comments to the measure steward
(PQA) but we are unable to use
supplemental data to calculate the
measures.
Data entry error is also a concern
of CMS. We believe that Part D
sponsors have the ability to
identify and correct many data
errors at the point-of-sale and
afterward. Similar to the CMS Part
D Potential Exclusion Warning
Report that identifies PDEs for
adjustment or deletion, plan
sponsors could use their POS edits
systems to screen for data entry
errors. For example, screening
criteria based on a maximum or
minimum daily dose or units per day
could identify outliers. In the
example above, if the term ``3
days'' was accidently entered
instead of ``30 days,'' this could
result in a daily dose that is
significantly higher than the
expected maximum daily dose and
would be an outlier. The claim
could be denied at the POS with a
message of `potential data entry
error' notifying the pharmacist or
technician the need to review and
make a correction. In addition, CMS
provides monthly lists to each plan
sponsor of their members who are
identified as non-compliant
starting in April of each year,
this procedure provides Part D
plans ample time to review their
data and submit corrections.
Also, we disagree that stand-alone
PDPs have very little influence on
beneficiaries' medication
adherence. There are many
strategies that can be used to
improve a beneficiary's medication
adherence in addition to prescriber
interventions, such as refill
reminders, formulary and benefits
design, and medication therapy
management programs. Plan sponsors
can also leverage network pharmacy
relationships to address medication
adherence issues, facilitate
medication synchronization, or
provide education and counseling.
In the absence of a contact phone
number for the beneficiary, it may
be beneficial to use these
interventions to reach the
beneficiary at the place of
dispensing. Furthermore, MA-PDs and
PDPs are rated separately to
account for delivery system
differences. Lastly, as finalized
in the 2019 Call Letter, adherence
measures will now be included in
the CAI to account for LIS
beneficiaries.

[[Page 16554]]

MTM Program Completion Rate for Comment: A commented requested CMS
CMR. move away from MTM process measures
and include outcomes-based MTM
measures in the Star Ratings
program in the future. In the
interim, it was recommended that
CMS evaluate changes to the MTM
Comprehensive Medication Review
Completion Rate (CMR) measure
methodology and that CMS partner
with PQA to develop and understand
the feasibility of implementing
outcome and/or patient-experience
based MTM measures.
Response: The CMR completion rate
measure is an initial measure of
the delivery of MTM services, and
we continue to look forward to the
development and endorsement of
outcomes-based MTM measures as
potential companion measures to the
current MTM Completion Rate CMR
measure. We will consider new MTM
measures when available. Past
analyses did not find a correlation
between a sponsor's rate of MTM
program eligibility and the CMR
completion rate, but we will
continue to monitor and work with
the PQA to consider if any
adjustments are needed to this
measure's specifications.
Comment: A commenter opposed
inclusion of the MTM CMR completion
rate measure in the Star Ratings
due to compliance issues. The
commenter suggested allowing
completion of CMRs with the
beneficiary's prescriber when
unable to contact the beneficiary.
Response: As outlined in 42 CFR
423.153(d)(vii)(B)(2), if a
beneficiary is offered the annual
comprehensive medication review and
is unable to accept the offer to
participate, the pharmacist or
other qualified provider may
perform the comprehensive
medication review with the
beneficiary's prescriber,
caregiver, or other authorized
individual. Current guidance
clarifies that while providers are
required to offer a CMR to all
beneficiaries enrolled in the MTM
program, regardless of setting, in
the event the beneficiary is
cognitively impaired or otherwise
unable to participate, we recommend
that the pharmacist or qualified
provider reach out to the
beneficiary's prescriber,
caregiver, or other authorized
individual, such as the resident's
health care proxy or legal
guardian, to take part in the
beneficiary's CMR. This applies to
beneficiaries in any setting and is
not limited to beneficiaries in
long term care (LTC). This does not
apply to situations where the
sponsor is simply unable to reach
the beneficiary or there is no
evidence of cognitive impairment.
Therefore, we are unable to
consider changes to the measure
absent a change in regulation or
guidance.
Statin Use in Persons With Comment: A few commenters supported
Diabetes (SUPD). CMS in including this SUPD measure
in the Star Ratings. A commenter
noted support of the addition of a
quality metric monitoring the use
of statins in patients with
diabetes, however, feels that CMS
did not provide a thoughtful
explanation for not selecting the
Part C HEDIS measure of Statin
Therapy in Patients with Diabetes
(NCQA measure), which had also been
under consideration. This measure
includes more robust clinical
considerations for patient
eligibility and thus
appropriateness of statin use.
Response: CMS thanks commenters for
feedback on this measure. Both the
NCQA and PQA measures of statin
therapy were proposed for inclusion
in the Star Ratings, one for Part C
and the other for Part D. As the
Pharmacy Quality Alliance (PQA) is
the developer of the Statin Use in
Persons with Diabetes (SUPD)
measure, CMS will share these
comments with the PQA for their
consideration.
Comment: CMS received two comments
seeking clarification regarding the
categorization and weighting
discrepancies between the Part C
and Part D statin measures. Two
organizations recommended
classifying both SPC and SUPD as
process measures with a weight of
one.
Response: Please refer to the Part C
measure response for Statin Use for
Patients with Cardiovascular
Disease (SPC).
------------------------------------------------------------------------

CAHPS: Summary of Additional Comments Received and CMS's Responses
---------------------------------------------------------------------------

\38\ Paddison CAM, Elliott MN, Haviland AM, Farley DO,
Lyratzopoulos G, Hambarsoomian K, Dembosky JW, Roland MO. (2013).
``Experiences of Care among Medicare Beneficiaries with ESRD:
Medicare Consumer Assessment of Healthcare Providers and Systems
(CAHPS) Survey Results.'' American Journal of Kidney Diseases 61(3):
440-449.
\39\ Lied, T.R., S.H. Sheingold, B.E. Landon, J.A. Shaul, and
P.D. Cleary. (2003). ``Beneficiary Reported Experience and Voluntary
Disenrollment in Medicare Managed Care.'' Health Care Financing
Review 25(1): 55-66.
\40\ Paddison CAM, Elliott MN, Haviland AM, Farley DO,
Lyratzopoulos G, Hambarsoomian K, Dembosky JW, Roland MO. (2013).
``Experiences of Care among Medicare Beneficiaries with ESRD:
Medicare Consumer Assessment of Healthcare Providers and Systems
(CAHPS) Survey Results.'' American Journal of Kidney Diseases 61(3):
440-449.
\41\ Lied, T.R., S.H. Sheingold, B.E. Landon, J.A. Shaul, and
P.D. Cleary. (2003). ``Beneficiary Reported Experience and Voluntary
Disenrollment in Medicare Managed Care.'' Health Care Financing
Review 25(1): 55-66.
---------------------------------------------------------------------------

Comment: CMS received a few comments that CAHPS measures are
subjective and not reliable. A few commenters stated the CAHPS survey
responses are not actionable.
Response: CMS strongly disagrees that patient experience of care
survey measures are not reliable. CAHPS and other patient experience
measures have been endorsed as critical aspects of healthcare by the
Institute of Medicine and the World Health Organization.\42\ \43\ CAHPS
surveys focus on aspects of healthcare quality that patients themselves
say are important to them and for which patients are the best and/or
only source of information. Patient experience surveys such as CAHPS
focus on how patients experienced key aspects of their care, not merely
how satisfied they were with their care. Patient experience encompasses
the range of interactions that patients have with the healthcare
system, including their care from health plans, and from doctors,
nurses, and staff in hospitals, physician practices, and other
healthcare facilities.\44\ While patient experience is an inherently
important dimension of healthcare quality, it is also the case that the
preponderance of evidence shows that better patient experience is
associated with better patient adherence to recommended treatment,
better clinical processes, better hospital patient safety culture,
better clinical outcomes, reduced unnecessary healthcare use, and fewer

[[Page 16555]]

inpatient complications.\45\ \46\ Therefore, while we acknowledge that
the CAHPS survey captures individuals' perspectives on their
experiences of care, it is anchored in measureable aspects of care and
so can be measured reliably.
---------------------------------------------------------------------------

\42\ Institute of Medicine. Crossing The Quality Chasm: A New
Health System for the 21st Century. Washington DC: National Academy
Press; 2001.
\43\ Smith, P.C. (Ed.). (2009). Performance measurement for
health system improvement: experiences, challenges and prospects.
Cambridge University Press.
\44\ Agency for Healthcare Research and Quality. What Is Patient
Experience?. Content last reviewed March 2017. Agency for Healthcare
Research and Quality, Rockville, MD. http://www.ahrq.gov/cahps/about-cahps/patient-experience/index.html.
\45\ Price, R.A., Elliott, M.N., Zaslavsky, A.M., Hays, R.D.,
Lehrman, W.G., Rybowski, L., & Cleary, P.D. (2014). Examining the
role of patient experience surveys in measuring health care quality.
Medical Care Research and Review, 71(5), 522-554.
\46\ Price, R.A., Elliott, M.N., Cleary, P.D., Zaslavsky, A.M.,
& Hays, R.D. (2015). Should health care providers be accountable for
patients' care experiences?. Journal of general internal medicine,
30(2), 253-256.
---------------------------------------------------------------------------

Additionally, CAHPS surveys follow scientific principles in survey
design and development and have been rigorously developed and tested to
assess the experiences of Medicare beneficiaries. The surveys are
designed to reliably assess the experiences of a large sample of
patients and use standardized questions and data collection protocols
to ensure that information can be compared across health care settings.
The contract-level reliability of 2017 MA and PDP CAHPS measures meet
high standards, with the median reliability of publicly-reported MA
CAHPS measures exceeding 0.72 for all measures and exceeding 0.90 for a
majority of measures, with 0.70 being a conventional standard for
reliability. Finally, there are criteria for sample size eligibility
that must be met for contracts to be included in data collection, and
CMS also offers contracts the option of augmenting their CAHPS sample
sizes if they wish to obtain more precise overall results and/or
perform subgroup analyses with larger samples.
Comment: Several commenters stated that CAHPS scores may be
influenced by factors outside the plan's control, such as cost and
coverage, provider behavior, cultural differences including language,
and timing of the survey. A few suggested that beneficiaries who are
frail, have cognitive impairments, or who have low socio-economic
status may not be able to respond to survey items accurately. A
commenter requested allowing proxy methods.
Response: For MA and PDP CAHPS, CMS uses mixed-mode data collection
to increase the likelihood of survey participation and
representativeness.\47\ \48\ Survey responses are also case-mix
adjusted to account for certain respondent characteristics not under
the control of the health or drug plan such as age, education, dual
eligible status and other variables. We note that plans do have some
control over plan-design features such as cost and coverage as well as
provider behavior, so it would not be appropriate to adjust for these.
---------------------------------------------------------------------------

\47\ Fowler Jr, F.J., Gallagher, P.M., Stringfellow, V.L.,
Zaslavsky, A.M., Thompson, J.W., & Cleary, P.D. (2002). Using
telephone interviews to reduce nonresponse bias to mail surveys of
health plan members. Medical care, 190-200.
\48\ Elliott, M.N., Zaslavsky, A.M., Goldstein, E., Lehrman, W.,
Hambarsoomians, K., Beckett, M.K., & Giordano, L. (2009). Effects of
survey mode, patient mix, and nonresponse on CAHPS[supreg] hospital
survey scores. Health services research, 44(2p1), 501-518.
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CMS currently provides translations of the MA and PDP CAHPS Survey
in Spanish, Chinese, and Vietnamese, and we are developing a Korean
translation. All translations are the product of translation and review
by native speakers of the target languages and have had multiple rounds
of qualitative testing with Medicare beneficiaries with characteristics
similar to the MA and PDP CAHPS population. By providing survey
translations, CMS promotes standardization by assuring that questions
are presented similarly to beneficiaries across and within languages,
which also promotes comparability of the results across vendors and
contracts. The survey administration protocol for MA and PDP CAHPS does
not permit ``live,'' ``individual,'' or ``real-time'' translation of
the survey by an interpreter, as such an approach does not promote
comparability of data and there is no mechanism for assuring the
accuracy and consistency of the translation. If plans need additional
translations they should contact us at [email protected]. The MA and
PDP CAHPS protocol does allow for the use of proxy respondents in cases
where a respondent is unable to complete the survey.
Comment: A commenter stated that the CAHPS survey is long, and a
couple commenters expressed concern about low response rates.
Response: CMS shortened the MA CAHPS survey in 2017 by removing
questions and measures not used in Star Ratings, and we also improved
phone contact information. As a result of CMS's continuing efforts to
improve response rates, overall MA and PDP CAHPS response rates
increased from 2016 to 2017, despite national trends of declining
response rates for most other surveys. Further, meta-analyses of
surveys that follow the rigorous probability sampling and survey
approaches used by MA and PDP CAHPS find little relationship between
response rates and nonresponse bias.\49\ Moreover, research specific to
patient experience, CAHPS, and MA and PDP CAHPS surveys finds no
evidence nonresponse bias affects comparison of case-mix adjusted
scores between contracts or other similar reporting units.\50\ \51\
\52\ \53\ \54\
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\49\ Groves, R.M., & Peytcheva, E. (2008). The impact of
nonresponse rates on nonresponse bias: a meta-analysis. Public
opinion quarterly, 72(2), 167-189.
\50\ Klein, D.J., Elliott, M.N., Haviland, A.M., Saliba, D.,
Burkhart, Q., Edwards, C., & Zaslavsky, A.M. (2011). Understanding
nonresponse to the 2007 Medicare CAHPS survey. The Gerontologist,
51(6), 843-855.
\51\ Saunders C.L., Elliott M.N., Lyratzopoulos G., Abel G.A.
(2016) ``Do differential response rates to patient surveys between
organisations lead to unfair performance comparisons? Evidence from
the English Cancer Patient Experience Survey'' Medical Care 54(1):
45-54.
\52\ Bone A., McGrath-Lone L., Day S., et al. Inequalities in
the care experiences of patients with cancer: Analysis of data from
the National Cancer Patient Experience Survey 2011-2012. BMJ Open.
2014;4:e004567.
\53\ El Turabi A., Abel G.A., Roland M., et al. Variation in
reported experience of involvement in cancer treatment decision
making: Evidence from the National Cancer Patient Experience Survey.
Br J Cancer. 2013;109:780-787.
\54\ Lyratzopoulos G., Neal R.D., Barbiere J.M., et al.
Variation in number of general practitioner consultations before
hospital referral for cancer: findings from the 2010 National Cancer
Patient Experience Survey in England. Lancet Oncol. 2012;13:353-365.
---------------------------------------------------------------------------

Comment: A commenter requested more insight into statistical
components such as case-mix adjustment, statistical significance, and
reliability, and another requested that CMS provide all case-mix
adjustment flags to the survey vendors to facilitate an additional
validation.
Response: CMS provides a detailed explanation of the CAHPS
methodology including case-mix adjustment in the annual Star Ratings
Technical Notes, in CAHPS plan reports provided to each contract each
year, and on the MA and PDP CAHPS web page (https://www.ma-pdpcahps.org). CMS also provides survey vendors all of the necessary
data to perform case-mix adjustment validation. Plans are welcome to
contact [email protected] with specific questions about MA and PDP
CAHPS.
Comment: A commenter requested that plans be able to add their own
questions to the surveys to validate and clarify responses.
Response: CMS allows plans to add a limited number of items to the
MA and PDP CAHPS survey that do not affect responses to the survey or
pose undue burden to the beneficiary. These rules are to ensure the
highest possible response rate as well as comparability of the data
across contracts.
HOS: Summary of Additional Comments Received and CMS's Responses
Comment: CMS received several comments on the HOS measures. Some
commenters supported patient reported

[[Page 16556]]

outcome measures. Several commenters, however, suggested that the HOS
has drawbacks in design, methodology, administration, and reporting
that disproportionately affect SNP populations and fail to accommodate
diverse populations and the most vulnerable beneficiaries. Some
commenters stated that the longitudinal two year look-back design of
the HOS is especially challenging in populations with high rates of
degenerative or progressive conditions coupled with pervasive low
socioeconomic status and high social risk factors. Commenters suggested
that CMS should change sampling methodology to require larger sample
sizes or allow plans to request oversampling of typically under-
represented groups. In addition, some commenters would like to
discontinue the use of proxies for self-report as, the commenters
argue, there is strong evidence indicating proxies' responses are not
equivalent to beneficiaries' responses.
Response: CMS is supportive of increasing sample sizes and is not
opposed to oversampling to ensure a representative sample but to date
has received no HOS oversampling requests from any plans. We are
currently reexamining the HOS with a focus on diverse, dual-eligible
populations and will explore the feasibility of increasing the required
sample size. CMS already adjusts the HOS data to control for many
beneficiary characteristics not under the control of the plan,
including age, gender, race, ethnicity, income, education, marital
status, Medicaid status, SSI eligibility, homeowner status, chronic
conditions, and baseline health status. CMS does not plan to
discontinue the HOS proxy response option. Because the HOS has both
mail and telephone components, it is likely that some mail
questionnaires would be completed by proxies whether permitted or not.
CMS considers it preferable to collect information about whether the
beneficiary or a proxy answered the survey than to assume the
beneficiary answered the questions. Every attempt is made to obtain a
response from the beneficiary before a proxy response is allowed. Also,
when a proxy was used at baseline and the beneficiary remains unable to
complete the follow up survey, attempts are made to re-contact the same
proxy in order to reduce variability in responses. Finally, frailer
members, including the most vulnerable beneficiaries, who are unable to
complete the survey independently are excluded from the HOS if a proxy
response option is not available.
Comment: Several commenters mentioned the two year look-back period
is challenging to beneficiaries. A commenter suggested that keeping the
identity of sample respondents confidential limits opportunities for
improvement activities, and another suggested the resulting data may be
too old to be actionable. A few commenters recommended the elimination
of HOS measures because the measures are too generic for Star Ratings
and the information from the surveys is not actionable.
Response: The Health Outcome Survey (HOS) yields two patient-
reported outcome measures of change in global functioning, by using 2-
year change in scores on the Physical Component Score (PCS) and the
Mental Component Score (MCS), both of which come from the Veterans RAND
12-Item Health Survey (VR-12) portion of the larger survey. These
measures are of unique and high value, as demonstrated by their higher
weight in calculating the Overall Star Ratings. Critics of the HOS
often point out the 3 years between HOS baseline data collection and
health plans receiving member-level results, which include the
identities of respondents. Contributing to the perceived ``lag'' is the
longitudinal component of the HOS; beneficiaries who complete the
baseline HOS must be resurveyed two years later to generate data for
the HOS ``outcome'' measures. HOS data are hardly ``old.'' In fact, HOS
baseline results are distributed nine months after data collection
ends, and performance measurement reports and beneficiary-level data
are distributed about one year after follow-up data collection ends.
Further, CMS contends that a majority of plans improve or maintain the
physical and/or mental health of their membership over time. That is,
the measure requires time to capture change and in fact does capture
positive change or maintenance of global functioning for the majority
of plans' members. The Physical Component Score (PCS) and the Mental
Component Score (MCS), as derived from the VR-12, have been validated
in multiple studies of VA and elderly populations. The appendix of each
contract's annual performance measurement report explains how the
measures are calculated and adjusted to minimize bias in results. CMS
encourages all plans to familiarize themselves with the methods
described in the reports and to utilize the background materials
available on the HOS website that validate the Improving or Maintaining
Physical Health and Improving or Maintaining Mental Health measures.
Comment: Commenters also suggested that CMS provide HOS translation
and instrument adaptation for languages in addition to English,
Spanish, or Chinese.
Response: CMS responds to requests for translations of the survey
into other languages from vendors, who in turn reflect the requests of
plans. CMS currently provides translations of the HOS in Spanish and
Chinese, and a Russian translation will be available in 2019. All
translated versions are the product of translation and review by native
speakers of these languages and are subject to multiple rounds of
qualitative testing with Medicare beneficiaries with characteristics
similar to the HOS population. As a result, the adoption of a
translated survey tool takes a significant amount of time. By providing
survey translations, CMS promotes standardization and assures that
questions are presented similarly to beneficiaries across and within
languages, which also promotes comparability of the results across
vendors and contracts. The survey administration protocol for HOS does
not permit ``live,'' ``individual,'' or ``real-time'' translation of
the survey by interpreters because such an approach does not promote
comparability of data and there is no mechanism for assuring the
accuracy and consistency of the translation. However, the HOS protocol
does allow for the use of proxy respondents in cases where a
beneficiary is unable to complete the survey.
Comment: A commenter reported that they have observed that plans
with lower membership generally have higher scores on HOS measures than
plans with higher enrollment.
Response: We appreciate the comment. CMS is not aware of any formal
studies that have been done to address the hypothesized link between
contract size and performance on longitudinal measures.
Patients With Advanced Illness: Comments Received and CMS's Responses
Comment: CMS received several comments concerning the exclusion
from measures of patients with advanced illness and in palliative care;
those who have refused treatment, assessment, or recommended
screenings; and those who are unable to achieve the desired clinical
threshold despite having reached the maximum medical therapy and self-
care practices available for the condition. Commenters recommended that
exclusions or adjustments to measures be made for these patients, or
that alternate metrics be developed for these patients, since for many
of them comfort or improving

[[Page 16557]]

quality of life is a greater part of care than curative treatments. In
particular, some commenters identified specific HEDIS and HOS measures
which should be excluded or modified for patients with advanced
illness: Rheumatoid Arthritis, Statin Use, Improving or Maintaining
Physical Health, and Improving or Maintaining Mental Health. Commenters
note that there are many challenges treating and screening certain
health conditions for patients with advanced illness. A commenter
suggested that the seriously ill population be excluded from preventive
and HOS measures, as feasible. While commenters agreed that MA plans
should advance preventive care and maintain or improve physical health
for the majority of their enrollees, they argued that there will always
be a subset of enrollees facing serious illness and continued decline.
Commenters encouraged CMS to work with measure stewards such as NCQA
and explore other options that can exclude the seriously ill population
from such measures. Commenters suggested that the exclusion of the
seriously ill population from these measures will protect against
discriminatory enrollment, and will not unfairly evaluate plans that
support this population in making diagnostic and treatment decisions
based on the patient's preferences. Finally, some commenters suggested
that patients with advanced illness who have refused services and
treatments should also be excluded from measure calculations. They
stated a patient's goal for comfort rather than further treatment
should be primary. A commenter suggested that the under 65 population
residing in nursing homes should be excluded from measures for many of
the same reasons they wanted those with advanced illness excluded--
advanced sickness, nearing the end of life, refusing treatment, and
sometimes a patient's choice on comfort not care.
Response: CMS appreciates feedback on the noted measure adjustments
and exclusions. For HEDIS 2019, NCQA is examining potential cross-
cutting exclusions for those with advanced illness from selected HEDIS
measures that may not be clinically appropriate for these individuals.
NCQA is considering various advanced illness conditions and service use
(for example, indications of frailty, receipt of palliative care or
nursing care services) for potential exclusion. We anticipate that NCQA
will consider these comments as their advisory panels re-evaluate
measures as part of the standard HEDIS process. Proposed changes to
implement advanced illness exclusions will be posted for the HEDIS 2019
public comment period in February 2018. CMS currently has no plans to
exclude members with serious illness from the HOS.
Additional Comments and Responses
Comment: CMS received one suggestion that CMS create a new, fixed
identification code for each measure that would be consistent year-
over-year.
Response: The measure codes are not published publicly for
beneficiaries. CMS publishes a Star Ratings measure history in the
Technical Notes each year that cross references the measure codes.
Plans are welcome to use their own internal coding systems.
Comment: A commenter suggested that CMS make PDEs available for
members in drug assistance programs.
Response: CMS thanks the commenter for this suggestion. However,
this suggestion is outside the scope of the proposed rule. This comment
will be shared with others in CMS who will be interested in the
suggestion.
Comment: A commenter suggested that CMS exclude beneficiaries' Part
D trial medication use from the measures.
Response: CMS believes this request is specific to the adherence
measures. The adherence measures require at least two fills on
different dates for any drug within the drug class for inclusion in the
measure. The two claim requirement essentially excludes many trial
prescription periods where the beneficiary failed the initial drug and
is switched to a different drug class. Since the adherence measures are
for chronic conditions, CMS expects that the beneficiary would continue
on one drug within the drug class in the measure. Identifying trial
periods using PDEs outside this definition would be difficult to
determine and accepting other source data would be prohibited as
previously stated.
Summary of Changes
For the reasons set forth in the proposed rule and our responses to
the related comments summarized earlier, CMS is finalizing the Part C
and Part D performance measures for the performance periods beginning
on or after January 1, 2019 with one modification. In that NCQA is
planning to make substantive changes to the Plan All-Cause Readmissions
measure that would affect measurement year 2019, CMS is not finalizing
this as a measure in the 2021 and 2022 Star Ratings but will move this
measure to the display page for two years. CMS's finalization of the
proposed measures does include the specifications (metric and
performance period), domain assignment, measure category, data source
for the measures, and statistical method for assigning Star Ratings
(based on Sec. Sec. 422.166(a) and 423.186(a)) as listed in the
proposed table. However, we note that our finalization of the proposed
measures does not include the weight of each category as presented in
the proposed table. For discussion of CMS's final decision to change
the weight of measures in the Patients' Experience and Complaints
category and in the Measures Capturing Access category from a weight of
1.5 to a weight of 2, see section `q. Measure Weights' of this
preamble. See also Sec. Sec. 422.166(e) and 423.186(e) of this
regulation for final measure weight assignments. Finally, we note that
the summary of comments received and CMS's responses for the Health
Plan Quality Improvement and the Drug Plan Quality Improvement measures
are presented in the next section (`j. Improvement Measures') of this
preamble.
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 proposed 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 would 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. We proposed to codify these criteria at paragraph (f)(1)(i)
through (iii) of Sec. Sec. 422.164 and 423.184. We proposed to
annually identify the subset of measures to be included in the
improvement measures 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

[[Page 16558]]

measures are identified, CMS would determine which contracts have
sufficient data for purposes of applying and scoring the improvement
measure(s). We again proposed to follow 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 proposed
this standard for determining contracts eligible for an improvement
measure at paragraph (f)(2).
We proposed at 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 performance over the time period.
As proposed, 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) will 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 will 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) will 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 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.
The improvement measure scores will be converted to
measure-level Star Ratings by determining the cut points using
hierarchical clustering algorithms.
We proposed at Sec. Sec. 422.166(a)(2)(iii) and 422.186(a)(2)(iii)
that the improvement measure score cut points would be determined using
two separate clustering algorithms. We explained in the preamble that
improvement measure scores of zero and above will use the clustering
algorithm to determine the cut points for the Star Rating levels of 3
and above. Improvement measure scores below zero will be clustered to
determine the cut points for 1 and 2 stars. Although the preamble of
the proposed rule indicated this level of detail, our proposed
regulation text, at proposed paragraphs (f)(4)(v) and (vi) of
Sec. Sec. 422.164 and 423.184, did not. In paragraph (4)(v), we
referred only to ``hierarchical clustering algorithms'' without
specifying the detailed treatment for scores of greater than, equal to,
or less than zero; in paragraph (4)(vi), we cross-referenced the text
proposed at Sec. Sec. 422.166(a)(2) and 423.186(a)(2), which did
include the specific text specifying the detailed treatment for scores
of greater than, equal to, or less than zero in connection with the
ratings for the improvement measures. While our proposed regulation
text was ultimately consistent, it included cross-references not
explained in the preamble.
We also proposed that the Part D improvement measure cut points for
MA-PDs and PDPs would be determined using separate clustering
algorithms. The Part D improvement measure cut points for MA-PDs and
PDPs would be reported separately. Finally, we proposed 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 would be categorized as having no significant
change. The measure would be included in the count of measures used to
determine eligibility for the improvement measure and in the
denominator of the improvement measure score. We explained in the
proposed rule that 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 proposed in
section II.A.12.r another hold harmless provision to be codified at
Sec. Sec. 422.166(g)(1) and 423.186(g)(1).
We requested 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.
We received the following comments on our proposals, and our
responses follow:
Comment: The overwhelming majority of commenters supported the
concept of the improvement measures.
Response: CMS appreciates the overwhelming support for the
underlying rationale of the improvement measures.
Comment: A commenter opposed the codification of the improvement
measures and urged CMS to discontinue its use in the Star Ratings
program. The commenter believes that the improvement measures are
unnecessary, distort the signal provided by the Star Ratings, blur the
distinction between high performing contracts and other contracts, and
can lead to misclassification.
Response: CMS believes that continuous improvement is an important
component of the Star Ratings program and necessary to achieve the
ultimate goal of providing the best care to beneficiaries and realizing
the most positive outcomes. The improvement measures provide a distinct
aspect of performance and as implemented, provide a true reflection of
this aspect of performance. CMS is cognizant of the challenges of
improvement for contracts that have high performance; thus, CMS
implemented the hold harmless provisions. One hold harmless provision
addresses high performance at the measure level, and the other
addresses high performance at the highest rating level. The hold
harmless provisions coupled with the two-step clustering for converting
the improvement measure scores to measure-level Star Ratings safeguard
against possible misclassification. CMS appreciates the comments and
will continue to look at ways to further enhance the Star Ratings.
Comment: Some commenters suggested excluding CAHPS and HOS measures
from the improvement measure because they believe the measures are
subjective in nature. A commenter further justified the removal of the
survey measures citing the challenges in sample selection that have
occurred in recent years that have led some plans to appeal their
results as not statistically significant.
Response: CMS reviews and selects the improvement measures annually
and publishes the list in the draft Call Letter, we proposed to follow
the same

[[Page 16559]]

process going forward. 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). CAHPS and HOS measures are
patient experience not patient satisfaction surveys. The voice of the
beneficiary is a critical component of the information needed for the
Star Ratings program to realize its goals. If an issue arises with any
aspect of the standard protocol regarding sampling in the Star Ratings
program, CMS carefully reviews any impact of the deviation and assesses
the risk of unintended consequences on the integrity of the ratings.
Further, CMS develops and tests analytical adjustments to mitigate and
address all such concerns. Although there did exist minor deviations in
the protocol for sampling in the Star Ratings in the past, CMS is
confident that the ratings were not affected and the measures possessed
all attributes necessary to preserve and maintain the high standards of
the Star Ratings program.
Comment: Many commenters supported an expansion of the measure-
level hold harmless provision for a contract that receives 4 or more
stars in each of the two-years for a measure. Some commenters noted the
lack of alignment between the highly-rated contracts' hold harmless
provision for the application of the improvement measure(s) for the
identification of a contract's highest rating at Sec. 422.166(g)(1)
and Sec. 423.186(g)(1) and the measure-level hold harmless provision
at (Sec. 422.164(f)(3) and Sec. 423.184(f)(3).
Response: CMS appreciates the thoughtful consideration of the hold
harmless provisions for the improvement measure methodology. As noted,
the hold harmless provision at the measure level applies a different
threshold than the hold harmless provision for a highly-rated
contract's highest rating. A measure, in general, assesses a single,
distinct aspect of care while an overall or summary rating provides a
global indicator of quality of care and performance.
At the basic building block of the rating system, the measure, a
measure-level rating of 4 stars allows opportunity for improvement with
a focus on a singular concept. A measure-level Star Rating of 5 does
not allow the same degree of possible improvement. The measure-level
hold harmless provision was designed to protect a contract from being
adversely impacted by the improvement measure(s) without discouraging
continuous improvement. CMS believes that changing the hold harmless to
measures that receive at least 4 stars each year would serve to hamper
advances and innovation in the care of all populations; in addition, it
could serve to discourage continuous improvement by suggesting that 4
stars--rather than 5--is the highest achievement on the measure.
CMS is cognizant of the additional challenges of improvement for
highly-rated contracts; improvement is more difficult for a contract
with high performance as compared to a lower-rated contract that has
more opportunity for improvement. The hold harmless provision for a
contract's highest rating provides the safeguard for contracts that
receive an overall or summary rating of 4 stars or more without the use
of the improvement measures and with all applicable adjustments (CAI
and the reward factor). A highly-rated contract will have their final
highest rating as the higher of either the rating calculated including
or excluding the improvement measures.
CMS believes there should be a differentiation in the hold harmless
provisions to appropriately address the amount of information each
provides, to incentivize contracts to continuously improve, and to
provide adequate safeguards for high achieving contracts.
Comment: A few commenters expressed explicit support for the
current methodology for determining the improvement rating including
the use of separate clustering algorithms to convert the improvement
measure scores to a measure-level Star Rating and the separate
clustering algorithms for the Part D summary rating for PDPs and MA-
PDs.
Response: CMS appreciates these comments.
Comment: A commenter suggested that CMS develop a measure to assess
a decline in performance.
Response: The current improvement measures capture both improvement
and decline. The calculation for the improvement measure score and the
associated methodology to convert the improvement measures scores to
measure-level Star Ratings are designed such that a contract that has
below average improvement, indicated by an improvement measure score
less than zero, will receive an improvement measure-level Star Rating
less than 3 stars.
Comment: A commenter expressed concern with the improvement
methodology and believes it creates a double-jeopardy situation because
it includes both significance testing and national performance.
Response: The Star Ratings are designed to incentivize contracts to
provide the best quality and care to beneficiaries. The methodology
employed to determine the improvement measure-level Star Ratings is
designed to align with the underlying principles of the Star Ratings
methodology. The use of statistical significance allows the changes of
each individual measure used for the determination of the improvement
measure score to be assessed for meaningful differences. The use of the
clustering algorithm to determine the cut points and ultimately, the
assignment of the measure-level Star Ratings, allows a contract's
performance to be assessed relative to all contracts that are required
to report. The determination of the measure-level Star Ratings is done
in a manner to minimize misclassification. The clustering for the
improvement measures is done twice to ensure that a contract with
average or above average performance, demonstrated by an improvement
measure score of zero or above, will receive a measure-level Star
Ratings of at least 3 stars. A contract whose performance declined,
demonstrated by an improvement measure score of less than zero, will
receive a measure-level Star Rating less than 3 stars. Further, CMS
designed the hold harmless provisions as a safeguard for contracts
maintaining high performance at the measure-level or at the contract's
highest Star Rating to ensure that the improvement measure-level Star
Ratings provide a true signal.
Comment: A commenter suggested reducing the number of improvement
measures with a focus on newer measures.
Response: CMS appreciates this comment. 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). CMS has focused on
all measures that meet these criteria to create incentives to improve
care across a broad spectrum of measures. Limiting the set of measures
used to determine the improvement measure to strictly new measures has
the potential of limiting

[[Page 16560]]

the focus of improvement activities by a contract. CMS is committed to
incentivizing contracts to provide the best quality and care to
beneficiaries. Striving for continuous improvement across all aspects
of care would be compromised if the focus of improvement was restricted
to newer measures only.
Comment: A commenter suggested that CMS ensure that MA contracts
that are subject to the use of the improvement measures realize a
benefit from their inclusion.
Response: CMS has developed a hold harmless provision for a highly-
rated contract's highest rating. All other contracts have the
improvement measure(s) included in their rating. CMS believes the
information provided by the ratings must be a true reflection of the
quality and experience of beneficiaries enrolled in the contract.
Ensuring that MA contracts that are subject to the use of the
improvement measures realize a benefit from their inclusion has the
potential of distorting the signal and does not align with the Star
Ratings program's guiding principles.
Comment: A commenter suggested removing the improvement measure in
the future to streamline and simplify the Star Ratings program.
Response: CMS disagrees with the commenter. CMS recognizes the
importance of acknowledging quality improvement in health and drug
plans. The improvement measures provide an additional dimension to the
Star Ratings program. At this time, there are no plans to remove the
measures from the Star Ratings program as we are committed to improving
the quality of care and experiences for Medicare beneficiaries.
Comment: A commenter questioned whether the measures Getting Needed
Care and Customer Service are included in the improvement measure set.
Response: Annually, CMS reviews the Star Ratings measure set to
identify the improvement measures. Both Getting Needed Care and
Customer Service meet the inclusion criteria for an improvement measure
and will be designated as improvements measures in the 2021 Star
Ratings program. A specification change prompted a temporary exclusion
of these measures from the improvement measure in the 2018 Star
Ratings.
Comment: A commenter believes that there exists a potential
disadvantage for SNPs and Medicare/Medicaid plans due to their
propensity of having lower enrollments which ultimately results in
fewer of these types of plans from meeting the requirements for the
calculation of an improvement measure rating. The issue, the commenter
believes, is attenuated by the sampling requirements for a subset of
the population, like the HOS measures.
Response: CMS appreciates these comments. The contract must have a
minimum number of numeric scores and measures of a certain type to
reliably determine an improvement measure score. To date, we have not
seen an issue with smaller contracts obtaining an improvement measure
score.
Comment: Some commenters suggested increased transparency in the
determination of the improvement measure because of the complexity of
its determination. Other commenters expressed the concern regarding
their ability to predict the improvement measure-level Star Ratings.
Further, commenters requested clearer explanations of the methodology.
Response: The Star Ratings program is designed to incentivize
contracts to provide the best care to their beneficiaries. The
improvement measure employs two consecutive years of data. To realize
the goal of the best care, contracts must continually seek ways to
improve the care they provide. The improvement measures provides a
quantification of the improvement made in the two-year period.
CMS will apply the methodology explained in the preamble and
adopted in the regulations at Sec. Sec. 422.164(f) and 423.184(f). The
improvement methodology is detailed in the annual Technical Notes
available at http://go.cms.gov/partcanddstarratings. CMS is always
willing to answer questions related to the calculation of the Star
Ratings including the improvement measure methodology. Further, upon
request, CMS will provide a detailed calculation worksheet for a
contract's improvement measures. Contracts should contact the Part C &
D Star Ratings Team at [email protected] for answers to
any questions related to the MA Star Ratings.
Comment: A commenter urged CMS to review the rules guiding the
selection of the improvement measures to ensure that each measure is
under the control of the contract and that the measure is not topped
out.
Response: CMS supports the request for reviewing the measures
designated for use in the improvement measures. CMS annually reviews
the measures used in the Star Ratings and releases the measures that
will be used to determine the improvement measures in the draft Call
Letter. Although some measures may show uniform high performance across
contracts suggesting that they are topped out, CMS needs to balance
these concerns with 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 which address the specific
clinical concerns. MAOs and Part D sponsors have control over all
measures included in the Star Ratings' program; thus, the measures
selected for the improvement measure(s) are all under the control of
the contract.
Comment: A commenter suggested several adjustments to address their
belief that the improvements measure is based on the following
perceived flawed assumptions: all plans have the same opportunity to
improve on both mature and new measures year after year; high- and low-
performing plans have equal opportunity for improvement; and the hold
harmless provision protects plans. The suggested adjustments included:
The use of a log scale for evaluating performance instead of a linear
scale; weighting improvement achieved relative to current performance;
and adjusting the threshold for significant improvement. (The commenter
suggested changing the level of significance to 0.025 as opposed to
0.05, or in other words employing the threshold of 1.645 instead of
1.96 in the testing for significance.)
Response: CMS appreciates the comments and the suggested
enhancements for the improvement measure methodology. CMS remains
cognizant of the additional challenges for improvement for contracts
with high performance on their highest rating and at the individual
measure level. CMS does not believe the underlying assumptions for the
methodology for the determination of the improvement measure-level Star
Ratings is flawed. There is less room for improvement for contracts
that are highly-rated, thus there is a hold harmless provision for a
contract's highest rating. In addition, there is less room for
improvement for a measure score if a contract is performing at the
highest rating, 5 stars, for each of the two consecutive years examined
for the improvement score. CMS implemented a hold harmless provision at
the measure level to ensure a contract receiving 5 stars for each year
of the two years examined would not be subject to the possible
categorization of a significant decline for the measure.
At this time, CMS employs a level of significance of 0.05 for all
significance testing across the aspects of the methodology. The use of
a 0.05 level of significance is typical for statistical analyses. CMS
will consider the

[[Page 16561]]

suggestions as we enhance the Star Ratings methodology to best address
the concerns of our stakeholders while maintaining the integrity of the
Star Ratings system.
Comment: Some commenters suggested that the improvement measures
should consider measure-level Star Ratings and the measure score in the
hold harmless provision. Some commenters provided examples of an
increase in a measure-level Star Rating for a specific measure used in
the improvement measure that was accompanied by a significant decrease
in the measure score. Commenters believe that such scenarios should be
part of the hold harmless provision or considered counted as an not
applicable (NA) measure, those not factoring in the determination of
the improvement measure score.
Response: CMS will consider a potential enhancement to the hold
harmless provision that considers both the measure-level Star Rating
and the measure score. Any changes would be proposed through future
rulemaking.
Comment: Some commenters suggested that a measure that receives 5
stars for each of the two years should be a positive influence on the
improvement measure score and counted as a significant improvement.
Response: CMS appreciates this feedback. A measure used for the
determination of the improvement measure score that receives a measure-
level Star Rating of 5 stars in each of the two years examined would be
subject to the 5-star measure hold harmless rule and would benefit from
the 5-star measure-level Star Rating in the calculation of the summary
or overall rating. In addition, contracts do have the opportunity to
earn a reward factor for high and stable relative performance across
measures pursuant to Sec. Sec. 422.166(f)(1) and 423.186(f)(1)
discussed in section II.A.11.s of this final rule.
Comment: Some commenters recommended a predictable gold standard be
established for determining meaningful improvement as a set percentage
reduction of a sub-optimal measure rate. The commenters believe this
approach would result in a more tailored approach of meaningful
improvement per contract and recognize the natural concept of
diminishing returns. For example, if a 5 percent reduction in the sub-
optimal rate was classified as meaningful, an increase of 1 percent for
a contract whose rate was 80 percent in year 1 would be a meaningful
improvement (1/(100 - 80) or 5 percent) while a contract with a rate of
60 percent in year 1 would need an increase in their rate of 2 percent
(an increase to 62 percent) for a 5 percent reduction which would be
classified as a meaningful reduction in their suboptimal rate (2/(100 -
60) or 5 percent).
Response: We will consider these comments for the future as we make
enhancements to this measure.
Comment: A few commenters recommended that CMS either adjust its
methodology and assign ``not applicable'' when determining
``Improvement, Decline, or No Change'' for measures that increased in
measure-level Star Ratings in the year two of the comparison or add
these measures to the ``held harmless'' provision for measures. The
commenters noted that the current methodology for a measure is based on
measure scores as opposed to measure-level Star Ratings.
Response: CMS appreciates this feedback. CMS will further consider
the measure-level hold harmless provisions to examine the influence of
the measure scores and measure-level Star Ratings on the improvement
measures.
Comment: Some commenters supported a revision to the hold harmless
measure provision for an improvement measure when a contract received
5-star ratings for each of the 2 years examined. Although the
commenters believe that the current measure-level hold harmless does
align with its intent to prevent an adverse impact on a contract's
rating, a few commenters suggested modifying the provision to allow a
measure-level Star Rating of 5 stars for each of the 2 years examined
to be counted as a significant improvement in the measure's associated
net improvement category. Other commenters suggested a hold harmless
provision if mathematically it is not possible to have a 5-star measure
score difference that would be classified as significant improvement. A
commenter suggested another version of a measure-level hold harmless in
which an adjustment factor would be employed for contracts that had
incremental improvement at the measure-level score but who could not
attain ``Significant Improvement'' due to performance requirements
above 100 percent (mathematically) and when the current measure-level
hold harmless provision would not be applied. Further, the commenter
believes the adjustment factor would acknowledge the increased
difficulty in moving from 2 to 3 versus 4 to 5.
Response: CMS appreciates this feedback. CMS will further consider
these suggestions for a future enhancement to the hold harmless
provision at the measure-level.
Comment: A commenter suggested using a logarithmic scale instead of
a linear scale in the significance testing for classifying significant
changes to the measure score to address the law of diminishing returns.
Response: CMS appreciates the careful consideration of the
improvement measure methodology. CMS is cognizant of the additional
challenges for both highly-rated contracts and contracts that receive a
5 star measure-level rating for each of the two years examined used
determining the improvement measure. Improvement is easier at the
summary levels for a contract that is not highly-rated. Likewise,
improvement for an individual measure is easier when there is more room
for improvement.
The current hold harmless provisions were designed to address the
concern related to the concept of diminishing returns. The improvement
measure safeguards for contracts at the highest-rating level by
contract-type and at the measure-level determination of the improvement
scores allow a transparent method of addressing the challenges of
improvement for high performing contracts.
The suggested use of a logarithmic scale instead of a linear scale
will be considered during our ongoing review of the methodology. Any
enhancements to the methodology must be balanced by the approachability
of the methodology to our stakeholders including the beneficiaries.
Comment: A commenter suggested creating an improvement score for
measures that could potentially be part of the improvement measures,
but only have one year's worth of data. The commenter noted that
improvement activities begin during the first year of a measure being
included in the Star Ratings program. The focus on a first year measure
coupled with the significant impact of the improvement measure on a
contract's rating according to the commenter justified first year
measures being included in the improvement measure.
Response: CMS has designed the improvement measures to assess the
level of improvement from one year to the next.
Summary of Regulatory Changes
For the reasons set forth in the proposed rule and our responses to
the related comments summarized above, we are finalizing the
improvement measure provisions as proposed in Sec. Sec. 422.164(f) and
423.184(f) with minor modifications. First, in the regulation text at
Sec. Sec. 422.164(f)(4)(vi) and 423.184(f)(4)(vi), we have corrected
the

[[Page 16562]]

cross reference to Sec. Sec. 422.166(a)(2)(i) through (iii) and
422.186(a)(2)(i) through (iii) for the clustering of the improvement
measure to clarify the methodology for converting the improvement
measure scores to measure-level Star Ratings. Second, we are also
finalizing Sec. 422.164(f)(4)(vi) without the sentence that provided
for separate measure thresholds for the Part D improvement score for
MA-PDs and PDPs in favor of revising the first sentence as follows:
``The Part D improvement measure cut points for MA-PDs will be
determined using separate clustering algorithms in accordance with
Sec. Sec. 422.166(a)(2)(i) through (iii) and 423.186(a)(2)(i) through
(iii) of this chapter.''
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 proposed 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 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 proposed, in paragraphs (g)(1)(i) through (iii), rules for
specific circumstances where we believe a specific response is
appropriate. First, we proposed 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
will also apply when a plan chooses not to submit and has an audit
designation of ``non-report'' or NR. Second, we proposed 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. We explained in the preamble that
as the sponsoring organization is responsible for these data and
submits them to CMS, a negative inference is appropriate, to conclude
that performance is likely poor. Third, we proposed a new specific rule
to implement 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 will 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. As stated in the proposed rule, we believe that removal of
the measure from the ratings calculation will 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 proposed to use statistical criteria to determine if and
how a contract's appeals measure-level Star Ratings would be reduced
for missing IRE data. We explained that the proposed 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 past stakeholder concerns about CMS's 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.\55\ 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

[[Page 16563]]

contracts submitting data from a 3-month period, medium-sized contracts
submitting data from a two-month period, and larger contracts
submitting data from a one-month period.\56\
---------------------------------------------------------------------------

\55\ 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.
\56\ 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 proposed to use TMP data and other data sources whenever
possible, such as information from audits, to determine whether the
data at the Independent Review Entity (IRE) are complete and to
evaluate the level of missing data. 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.
We proposed 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
proposed 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 proposed methodology employs 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 will 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 solicited
comment on this proposal and its scope; we were looking in particular
for comments related to how to use the process in this proposal to
account for data integrity issues discovered through means other than
the TMP and audits of sponsoring organizations.
CMS's 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 is 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 receives
a measure-level Star Rating of 1 star for the appeals measure.
Under the proposed methodology, 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 is used
to identify contracts that may be subject to an appeals-related IRE
data completeness reduction. We proposed a minimum error rate to
establish a threshold for the identification of contracts that may be
subject to a reduction. The establishment of the threshold focuses 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 3-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 over a 3-month period 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 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] TR16AP18.010

The calculated error rate formula (Equation 2) for the Part D
measures is 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] TR16AP18.020

Under the proposed methodology, 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 TMP time period.
Contracts with mean annual enrollments greater than 250,000 that
submitted data from a 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.

[[Page 16564]]

We proposed that contract ratings 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 is calculated using a Score Interval
(Wilson Score Interval) at a confidence level of 95 percent.
The midpoint of the score interval will be determined using
Equation 3.
[GRAPHIC] [TIFF OMITTED] TR16AP18.011

The z score that corresponds to a level of statistical significance
of 0.05, commonly denoted as
[GRAPHIC] [TIFF OMITTED] TR16AP18.022

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 is 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 is 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 Equation 3 is the total number of untimely cases for the
Part D appeals measures.
Letting the calculated error rate be represented by p and the total
number of cases represented as n, Equation 3 can be streamlined as
Equation 4:
[GRAPHIC] [TIFF OMITTED] TR16AP18.012

The lower bound of the confidence interval estimate for the error
rate is calculated using Equation 5 below:
[GRAPHIC] [TIFF OMITTED] TR16AP18.021

For each contract subject to a possible reduction, the lower bound
of the interval estimate of the error rate will be compared to each of
the thresholds in Table 4. If the contract's calculated lower bound is
higher than the threshold, the contract will 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 4, and were
proposed in narrative form at paragraph (g)(1)(iii)(D) of both
regulations.
We further proposed that the reductions due to IRE data
completeness issues be applied after the calculation of the measure-
level Star Rating for the appeals measures. The proposed reduction
would be applied to the Part C appeals measures and/or the Part D
appeals measures.
We noted in the proposed rule that a contract's lower bound could
be statistically significantly greater than more than one threshold. We
proposed that the reduction 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.
Therefore, in this example, the contract will be subject to the
reduction that corresponds to the 60 percent threshold, which is three
stars.

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

We proposed 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 noted in the
proposed rule 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 proposed in Sec. Sec. 422.164(g)(2) and
423.184(g)(2) to authorize reductions in a Star Rating for

[[Page 16565]]

a measure when there are other data accuracy concerns (that is, those
not specified in paragraph (g)(1)). We proposed an example in paragraph
(g)(2) of another circumstance where CMS will be authorized to reduce
ratings based on a determination that performance data are incomplete,
inaccurate, or biased: the failure of a contract to adhere to the
HEDIS, CAHPS, or HOS reporting requirements. We also proposed this
other situation would result in a reduction of the measure rating to 1
star.
We noted in the proposed rule that we had taken several steps in
past years to protect the integrity of the data we use to calculate
Star Ratings. We welcomed 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
and 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.
We received the following comments on our proposals and our
responses follow:
Comment: There was overwhelming support for the use of scaled
reductions for the completeness of the IRE data for the appeals
measures. Some commenters explicitly stated that the use of scaled
reductions avoids the one-size-fits-all approach.
Response: CMS appreciates the overwhelming support for the proposed
scaled reduction methodology.
Comment: Some commenters suggested other potential criteria for
consideration for the scaled reductions methodology. A commenter
suggested CMS consider the volume of appeals instead of plan size for
determining the reductions. Other commenters suggested including
enrollment as part of the rules for the allowable excluded number of
cases, using the timely percentages as basis for scaled reduction, or
using the errors relative to enrollment level as the thresholds.
Response: CMS appreciates the careful consideration of alternative
options for the scaled reduction methodology. A thorough examination
and identification of potential unintended consequences must be done
for any possible modification to the Star Ratings methodology.
Additional analysis will be done to further explore relations among
enrollment, appeals volume, untimely, and timely percentages. CMS
believes the proposed methodology provides the best foundation for
scaled reductions and will consider these comments as we contemplate
future enhancements.
Comment: Some commenters expressed support for the data integrity
policies for non-appeals measures. A commenter supported the proposal
to reduce a contract's measure-level Star Rating to 1-star for measures
related to Part C and D reporting requirements measures when the
contract does not meet CMS expectations for data validation. Another
commenter supported the reduction for HEDIS measures that received an
audit designation of ``Biased Rate.'' Another commenter supported the
high standard of 95 percent on validation audits, but believed it is
important to distinguish between generally well-functioning plans that
may have an occasional error versus plans that have significant,
systematic errors.
Response: CMS appreciates the support of the data integrity
policies. The data integrity policies align with our commitment to data
quality and preserves the integrity of the Star Ratings. CMS believes
the data integrity policies are designed to distinguish between
occasional errors and systematic issues. For example, both the
validation audits and scaled reduction methodology allow for the
occasional error and target only those contracts that exceed a
specified error rate.
Comment: A commenter requested clarification on how CMS plans to
use the Data Validation Audit.
Response: The Data Validation Audit is one method to ensure the
data used for Star Ratings are accurate. The two Star Rating measures
(SNP Care Management (Part C) and Medication Therapy Management (MTM)
Program Completion Rate for Comprehensive Medication Reviews (CMR)
(Part D)) are based on Part C and D Reporting Requirements data and
calculated using data reported by plan sponsors and validated via an
independent data validation using CMS standards. Per the Star Ratings
Technical Notes, contracts that did not score at least 95 percent on
data validation for these reporting sections and/or were not compliant
with data validation standards/sub-standards for at least one of the
data elements used to calculate the measures are not rated in this
measure, and the contract's measure score is reduced to 1 star. CMS has
relied on the Data Validation Audit to confirm the integrity of these
plan-reported data since these measures were first added to the Star
Ratings program. In the 2019 draft Call Letter CMS proposed to define a
contract as being non-compliant if it either receives a ``No'' or a 1,
2, or 3 on the 5-point Likert scale in the specific data element's data
validation in order to align with changes in the Data Validation Audit.
If further clarification is needed, please feel free to contact the
Part C&D Data Quality Team at: [email protected]
Comment: Some commenter expressed concern or opposed using audit
findings as a data source to validate the appeals measures.
Response: The Timeliness Monitoring Project (TMP) data will be the
primary data used to validate the completeness for the Part C and D
appeals measures. However, CMS may also use audit data to validate the
appeals measures if additional information is uncovered during the
audit process that demonstrates that the data for the appeals measures
are not complete.
Comment: A commenter requested clarification regarding the use of
TMP data that are submitted at the parent-organization level.
Specifically, the commenter was unsure if the reporting level would be
at contract level or all contracts under the parent organization would
receive the same scaled reduction.
Response: Although the data for the TMP are submitted by the parent
organization, the observations are recorded at the contract level. The
TMP data for each parent organization are disaggregated to contract-
level data. The scaled reduction would be separately and independently
determined for each contract under a parent organization. If a contract
has no untimely cases or no cases that should have been forwarded to
the IRE in the TMP timeframe, the contract would not be subject to a
possible IRE data completeness reduction for the associated appeals
measure. This analysis would be done on a contract-by-contract basis
using only data for the applicable contract.
Comment: A commenter expressed concern about the lack of a data-
driven methodology used to determine data integrity issues. Further the
commenter asked for a data-driven, streamlined approach that does not
use audit data.
Response: The Star Ratings program and its associated methodology
generally employ a comprehensive, scientific, data-driven approach. CMS
has moved away from relying on audit data for determining the
completeness of the appeals measures with the introduction of the TMP
data. However, we are not adopting a rule to prohibit use of audit data
where such data are reliable and relevant to understanding and
determining whether the data used for a particular measure (even
appeals measures) are erroneous, incomplete or biased.
Comment: Some commenters requested additional information on the
timeline for contracts to submit

[[Page 16566]]

information on scaled reductions along with simulations to allow
contracts to better understand the impact of the scaled reduction
methodology. Another commenter requested that CMS share all simulated
data related to scaled reductions.
Response: CMS will issue a memo each year outlining the timeframe
associated with the TMP data collection. The TMP data used for the Star
Ratings program will align with the measurement period of the Star
Ratings year.
The first submission for the TMP focused on the 2016 measurement
year for Part C organization determinations and reconsiderations and
Part D coverage determinations and redeterminations. CMS gained
valuable insight about the audit universes, and the completeness of the
IRE data.
In December 2017, CMS provided each contract with the results of
its TMP analysis. The Part C and D IRE data completeness percentage
provided is equivalent to the calculated error rate discussed in the
scaled reduction methodology section outlined in the NPRM. A contract
can simulate the scaled reduction for the 2018 Star Ratings appeals
measures by following the methodology for scaled reductions. First, a
contract can use the data provided to determine whether it would be
subject to a possible reduction due to lack of IRE data completeness
based on the calculated error rate and projected number of cases not
forwarded to the IRE. (To determine the projected number of cases the
factor based on the enrollment needs to be multiplied by the number of
cases detailed on the December report.) Next, if the contract is
subject to a possible reduction, the lower bound of the Wilson Score
interval is calculated using the formulas in the NPRM along with the
calculated error rate. The lower bound can then be compared to the
thresholds in Table 3 to identify the reduction to the associated
appeals measure-level Star Ratings.
Comment: A commenter did not believe the exclusion of a measure
affected by data integrity issues is sufficient to prevent
gamesmanship. Instead, the commenter suggested a hybrid approach that
the commenter believes is less punitive. This method would exclude
measures that received 4 or 5 stars and would levy an automatic
reduction to 1 star for data integrity issues for measures that
received 3 or less stars.
Response: The accuracy of the measure data is key to the Star
Ratings methodology. Excluding a measure from the Star Ratings due to
data integrity issues instead of using a measure-level Star Rating of 1
distorts the signal of the true quality and performance of a contract
and does not align with the intent of the data integrity policies. We
therefore disagree with the commenter.
Comment: Some commenters supported expanding polices to reduce Star
Ratings when the data are not reported or do not meet validation
requirements. A few commenters suggested the use of scaled reductions
for all measures in the Star Ratings program including HEDIS measures.
Another commenter supported expanding the scaled reductions to other
measures with special consideration of organizations demonstrating
commitment to compliance.
Response: CMS appreciates the support of the data integrity policy
and will consider expanding the policies to be as comprehensive as
feasible. Currently, for most measures, including HEDIS measures, we do
not have enough information to calculate scaled reductions.
Comment: Some commenters expressed concern regarding the possible
use of audit data. The commenters stated that using audit data results
in artificially inflated ratings for contracts that are not audited
compared to contracts that are audited. A commenter stated the goals
and analytic approaches associated with an audit do not align with
those of the Star Ratings program. In addition, a commenter wanted any
findings from enforcement activities excluded from the Star Ratings
since not all contracts are audited each year. A commenter requested
information about how CMS would ensure equity between audited and non-
audited contracts. In addition, another commenter asked for
clarification of the `other data' that may be used for assessing data
completeness. A commenter encouraged CMS immediately remove the impact
of audit findings on the Star Ratings for the determination of 2019
QBPs.
Response: CMS appreciates the comments. All contracts are required
to submit TMP data on an annual basis. The TMP data are typically the
same data used for CMS program audits but are collected from all MA and
Part D sponsoring organizations which shall ensure equity among all
contracts. As part of the 2019 draft Call Letter, CMS proposed to
remove the Beneficiary Access and Performance Problems (BAPP) measure
from the Star Ratings. This proposal was finalized in the 2019 Final
Call Letter to remove the BAPP measure from the Star Ratings program
effective for the 2019 Star Ratings.
Comment: A commenter suggested a hold harmless provision when there
are data issues. The commenter provided the example of the measure of
providing translation services that was removed from the Star Ratings
in the past for contracts that have worked hard to perform well on a
measure.
Response: CMS removes measures from the Star Ratings if a
systematic issues exists with data quality across all (or a majority
of) contracts as described in Sec. Sec. 422.164(b) and 423.184(b). It
is the policy of CMS not to assign measure-level Star Ratings if data
issues are present across the board that suggest that the measure
results are not reliable. When systemic data issues are present for a
measure, it is difficult to accurately determine performance across
contracts. The policy proposed for adding, updating and removing
measures is presented in Sec. Sec. 422.164 and Sec. Sec. 423.184. The
removal of measures from the Star Ratings is detailed in in Sec. Sec.
422.164(b) and Sec. Sec. 423.184(b).
Comment: A few commenters expressed concern that the CMS approach
for data integrity issues for HEDIS measures is duplicative of the
HEDIS audit process.
Response: The data integrity policy for HEDIS measures uses the
information provided by the NCQA compliance auditor, and thus aligns
with their findings.
Comment: A commenter stated that the reductions in the Star Ratings
for integrity blurs the distinction between quality measurement and
compliance and audit activities. Further, the commenter stated that the
focus of the ratings should be clinical quality and beneficiary
satisfaction. Another commenter expressed concern of the continuation
of the downgrade to 1-star for the HEDIS and measures related to the
Part C&D reporting requirements.
Response: CMS considers data quality as paramount to accurate and
reliable measurement. As such, CMS uses multiple sources of information
to assess the multiple facets of data quality. The Star Ratings were
designed to provide a true signal of the quality and performance of a
contract. Star Ratings that are generated from data that lack quality
or, in other words, flawed data--whether because of bias,
incompleteness, or inaccuracy--impact the integrity of the ratings.
Star Ratings that do not provide a true signal of the quality and
performance of the Medicare health and drugs plans offered under a
contract threaten the core of the Star Ratings program. CMS is
committed to maintaining the integrity of the ratings. By taking steps
to downgrade measure ratings when underlying data

[[Page 16567]]

quality issues exists, CMS is preserving the integrity of the Star
Ratings and incentivizing sponsoring organizations to take steps to
improve data integrity and eliminate problems.
Comment: Some commenters suggested modifications to other facets of
the data integrity policy. A commenter suggested that if an identified
data issue did not harm beneficiaries, plans should be able to resubmit
the data with limited penalty. Other commenters stated that CMS should
provide contracts the opportunity to correct data errors without
penalties. A commenter suggested that contracts should be offered a
preliminary review of their data midway through the reporting year to
allow identification of any issues and the chance to correct them
before the end of the year. Another commenter suggested that CMS take
into account the necessary distinction between a deliberate submission
of inaccurate data and the unintentional occurrence of minor errors and
mistakes when addressing data integrity. In addition, the commenter
outlined an approach to penalize plans based on beneficiary impact,
nature of issue, health plan activity, history of data integrity
issues, and timing that would be reviewed by a third party.
Response: CMS appreciates the careful consideration and suggestions
for potential revisions to the data integrity policy. The data
underlying a measure score and rating must be complete, accurate, and
unbiased to allow the Star Ratings to be a true reflection of a
contract's quality and performance. CMS's longstanding policy has been
to reduce a contract's measure rating if a contract's measure data are
incomplete, inaccurate, or biased but, as the proposal of scaled
reductions indicates, CMS will consider and implement alternatives and
improvements. We must, however, remain mindful of the timing and
resource considerations at play with the annual release of Star
Ratings.
Data validation is a shared responsibility among CMS, CMS data
providers, contractors, and Part C and D sponsors. CMS encourages
organizations to routinely monitor their data and immediately alert CMS
if errors or anomalies are identified so CMS can address these errors.
Contracts are afforded opportunities to review their data before the
Star Ratings are calculated, during data collection and during the Plan
Preview periods for the Star Ratings. CMS will continue to review the
policies and solicit feedback from stakeholders.
Comment: A few commenters expressed concern about the perceived
punitive nature of the data integrity policies. A commenter suggested
that contracts should be rewarded if they have near-perfect
performance. For example, the commenter suggested that contracts that
receive a 5-Star Rating on the Part D Appeals Timeliness measure and do
not qualify for the Part D Appeals Upheld measure because they received
less than 10 appeals, should automatically receive a 5-Star Rating on
the Part D Appeals Upheld measure.
Response: CMS believes the integrity of the data is fundamental to
the Star Ratings program. CMS maintains high standards for data quality
to ensure that the Star Ratings are a true reflection of the quality,
performance and experience of the beneficiaries enrolled in MA and Part
D contracts. CMS employs a data-driven approach for determining the
measure-level Star Ratings. The data integrity policies serve to
preserve the integrity of the Star Ratings and encourage contracts and
sponsors to strive for the highest data quality; they are not designed
or intended to be punitive. The measure level reductions for data
integrity concerns are not made to punish a sponsor but rather to
reflect that the data available are incomplete and inaccurate.
In the commenter's example, the contract did not meet the minimum
number of cases reviewed by the IRE to be measured in the Appeals
Upheld measure. This specification is necessary to ensure an adequate
sample of cases for which to evaluate the contract's original
decisions. The contract's TMP results regarding the completeness of the
IRE data has no relevance on whether CMS can evaluate the contract in
this measure. It remains that CMS cannot reliably calculate a percent
of cases upheld by the IRE if there are too few IRE cases reviewed for
the contract.
Comment: A commenter suggested the removal of the Part C and D
appeals measures until CMS can adequately address the underlying data
integrity issues that are associated with the IRE and contracts.
Response: CMS is firmly committed to the integrity of the Star
Ratings systems. CMS believes that the data integrity policy and the
rating reductions are necessary to avoid falsely assigning a high star
to a contract, especially when deficiencies have been identified that
show CMS cannot objectively evaluate a sponsor's performance in an
area. To address challenges in validating the appeals measures, CMS
implemented the collection of the TMP data. Concerns and reviews to
assure data integrity will remain for as long as necessary to collect
data in order to provide reliable Star Ratings and comparable
information about plan quality and performance. CMS believes that our
rule, as proposed and finalized, strikes the right balance in support
of the underlying policies.
For the reasons set forth in the proposed rule and our responses to
the related comments summarized above, we are finalizing data integrity
provisions as proposed at Sec. Sec. 422.164(g) and 423.184(g) without
substantive modification. We are finalizing the following minor
editorial changes to the regulation text: (1) In Sec.
422.164(g)(1)(ii) to add a reference to ``substandards'' as well as
standards that govern data validation; (2) in Sec. 422.164(g)(1)(iii)
to improve the flow of the last sentence in the introductory paragraph
and to correct the verb tenses in paragraphs (A), (C) and (K); (3) in
Sec. 423.184(g)(1)(i) to identify the data that are subject to data
validation; (4) in Sec. 423.184(g)(1)(ii) to add the sentence proposed
as paragraph (ii)(A) to the introductory paragraph and redesignate the
remaining paragraphs; and (5) in redesignated Sec.
423.184(g)(1)(ii)(A), (C), and (F) to correct the verb tenses and
capitalization of ``Star Ratings''. Finally, in Sec. 423.184(g)(1)(ii)
A-L we aligned the regulatory text with Sec. 422.164(g)(1)(ii) A-N
where appropriate. Sec. 422.164(g)(1)(ii) A-N has more provisions to
account for the differences in calculations between Part C and D
appeals measures.
l. Measure-Level Star Ratings
We proposed 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 proposed to continue to determine cut points by applying
either clustering or a relative distribution and significance testing
methodology; we proposed to codify this policy in paragraphs (a)(1) of
each section. We proposed in paragraphs (a)(2) and (a)(3) of each
section that for non-CAHPS measures (including the improvement
measures, which were specifically addressed in paragraphs (a)(2)(iii),
we would use a clustering methodology and that for CAHPS measures, we
would use relative distribution and significance testing. Measure
scores will be converted to a 5-

[[Page 16568]]

star scale ranging from 1 to 5, with whole star increments. A rating of
5 stars will indicate the highest Star Rating possible, while a rating
of 1 star will be the lowest rating on the scale. We proposed to use
the two methodologies described as follows to convert measure scores to
measure-level Star Ratings.
We proposed to use the clustering method for 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 proposed to
determine MA-PD and PDP cut points separately. The scores would 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 stated
that we would continue use of this software, but that improvements in
statistical analysis would not result in rulemaking or changes in these
eventual rules providing for the use of a clustering methodology. We
stated our belief 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. We proposed
that this final range of values and labels would be used to determine
the set of cut points for the Star Ratings as follows: The measure
score that corresponds to the lower bound for the measure-level ratings
of 2 through 5 will 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 will be the same except that the upper bound within each
cluster label will determine the set of cut points; the measure score
that corresponds to the cut point for the ratings of 2 through 5 will
be included in the star-specific rating category; and in cases where
multiple clusters have the same measure score value range, those
clusters will be combined, leading to fewer than 5 clusters. Under our
proposal to use clustering to set cut points, we stated that we would
require the same number of observations (contracts) within each rating
and instead will use a data-driven approach.
As proposed in paragraphs (a)(2)(iii) of each section the
improvement measures for Part C and Part D would be determined using
the hierarchical clustering algorithm twice, once for raw scores of
zero or greater and again for raw scores below for the identification
of the cut points that will allow the conversion of the improvement
measure scores to the star scale. The Part D improvement measure score
clustering for MA-PDs and PDPs will be reported separately. Improvement
scores of zero or greater would be assigned at least 3 stars for the
improvement Star Rating, while improvement scores of less than zero
would be assigned either 1 or 2 stars. For contracts with improvement
scores greater than or equal to zero, the clustering process will
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 will result in two clusters
with measure-level Star Ratings of 1 or 2..
We proposed in paragraphs (a)(3) of each section to use another
method using 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 will 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
are rounded to the nearest integer on the 0-100 reporting scale, and
each base group includes those contracts whose rounded mean score is at
or above the lower limit and below the upper limit. Then, the number of
stars assigned is 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 C4, which
we proposed to codify in narrative form at Sec. Sec. 422.166(a)(3) and
423.186(a)(3), details the CAHPS star assignment rules for each rating.
We proposed that all statistical tests, including comparisons involving
standard error, would be computed using unrounded scores.
We proposed 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 4, at item (c), 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 standard error is
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 will 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.

[[Page 16569]]

Table 5--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.
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 requested comments on our proposed methods to determine cut points.
In the proposed rule, we also acknowledged our past practice of
publishing pre-determined 4-star thresholds for certain measures. We
asked commenters who supported the return of the pre-determined 4-star
thresholds to provide suggestions on how to minimize the risk of
``misclassifying'' a contract's performance. For example,
misclassification occurs when scoring a ``true'' 4-star contract as a
3-star contract, or vice versa. The potential for misclassification is
increased if the cut points result in the creation of ``cliffs''
between adjacent categories within the Star Ratings that could lead to
the potential of different ratings between contracts with nearly
identical Star Ratings that lie on the opposite sides of a fixed
threshold. In addition, we ask commenters that supported pre-determined
thresholds ways in which CMS can continue to create incentives for
quality improvement. We also solicited comments on alternative
recommendations for revising the cut point methodology. We summarized
examples of alternatives we were considering: Methodologies that will
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 2 or 3
most recent years; and setting caps on the degree to which a measure
cut point could change from one year to the next. We solicited comments
on these particular methodologies and recommendations for other ways to
provide stability for cut points from year to year.
We received the following comments on our proposals and our
responses follow:
Comment: There was widespread support for the use of the clustering
algorithm to determine the cut points, although the overwhelming
majority recommended some changes to how CMS determines the cut points.
Response: CMS appreciates the support of the use of the clustering
algorithm for the determination of the cut points. CMS carefully
reviewed the feedback which reflects very diverse and conflicting
opinions on the appropriate way to set cut points. CMS is actively
considering a wide range of options for modifying the approach for
determining cut points and needs to fully simulate alternative options
in order to avoid implementing an option that could have unintended
consequences. Thus, we are finalizing the clustering algorithm for the
determination of cut points (for non-CAHPS measures) as proposed while
we continue to simulate alternative options. CMS will use the feedback
from this NPRM to guide and examine options for an enhanced methodology
for converting the measure scores to measure-level Star Ratings, which
would be proposed in a future regulation.
Comment: The majority of commenters listed or identified several
desirable attributes for the cut points, including having them be
predetermined and released before the beginning of the measurement
period, and increasing the stability and predictability of them. A
handful of commenters noted that the cut points must represent
meaningful differences among the star categories.
Many commenters expressed concern about the influence of outliers
on the cut points. Some of the suggestions for decreasing the influence
of outliers included removing them from the clustering algorithm, using
a trimmed data set, or raising the minimum measure-level denominator
threshold from 30 to 100 to reduce the number of outliers based on
small numbers. In addition, many commenters that expressed a preference
for stability supported a cap, a restriction on the maximum movement
for a measure's cut points from one year to the next, to achieve the
desired characteristic. A commenter suggested employing a cap similar
to NCQA's method which relies on assigning a cap based on the maximum
change in the relative distribution of the measure scores. The
commenter believed this would allow

[[Page 16570]]

CMS's clustering methodology to move cut points (for example, moving
the 4 and 5 star cut points up) without extreme changes based on the
movement of relatively few MA contracts. Another commenter who
supported stability stated that the thresholds from one year to the
next should not be allowed to decrease. The majority of commenters who
supported caps did not provide a specific value or methodology, but
rather the advantages that caps would allow.
Some commenters suggested averaging cut points over multiple years
for stability. Many commenters referenced CMS's previous policy that
identified 4-star predetermined thresholds for specific measures and
supported their return. A few commenters supported a weighted average
based on several years of data to determine the cut points. A few
commenters supported using a multiple-year trend to project measure cut
points in advance of the measurement period.
Response: We appreciate the careful consideration of possible
modifications to the methodology used for determining the cut points
for the conversion of measure scores to the measure-level Star Ratings
scale. CMS is examining a number of potential options for determining
cut points that would capture the greatest number of desirable
attributes that our stakeholder have identified (pre-determined,
stable, predictable cut points with minimal (if any) influence by
outliers, restricted movement across years) while maintaining the
integrity of the Star Ratings in order to propose a new or enhanced
policy for establishing measure-level ratings in the near future. We
believe that the number and scope of alternatives require additional
consideration and testing before we can finalize a different
methodology for setting cut points for non-CAHPS measures. In the
meantime, we believe that the clustering methodology presents a valid
approach to accurately reflect the quality of care for MA and Part D
sponsors, while creating incentives for continued quality improvement.
The goal of clustering is to assign stars that maximize the differences
across star categories and minimize the differences within star
categories to minimize the risk of misclassification. The clustering
methodology also accounts for changes in the distribution of scores
over time. We understand the desire to create more stability in the
assignment of cut points and in performance expectations, but we want
to ensure that any potential alternative methodologies do not create
unintended consequences.
Comment: Some commenters stated their support for transparency.
Some commenters believe that increased transparency can be achieved by
releasing all data for the Star Ratings program. A commenter suggested
that CMS improve transparency in national performance reflected in
display measures by calculating and publishing individual measure cut
points for display measures instead of national averages. Other
commenters believe transparency would be achieved by the implementation
of pre-determined thresholds before the start of the measurement
period.
Response: CMS appreciates these comments. CMS agrees with the
commenters that transparency in the ratings system is important. Each
year CMS releases public use files of the performance data underlying
the Star Ratings, available at http://go.cms.gov/partcanddstarratings.
In addition, the cut points for the specific Star Ratings' year are
available in the annual Technical Notes using the same link used for
the data sets. A Cut Point Trend document is updated and released
annually to provide a single source for multiple years of Star Ratings
cut points. The Cut Point Trend document is organized in a user-
friendly format by measure and is available using the aforementioned
link.
Display measures are collected through data sources such as
Medicare Part C and Part D reporting requirements, Part D Prescription
Drug Event (PDE) data, Healthcare Effectiveness Data and Information
Set (HEDIS) information, and Consumer Assessment of Healthcare
Providers and Systems (CAHPS) surveys. The display measures are not
included in determination of the Star Ratings on Medicare Plan Finder
and thus, are not assigned Star Ratings. Display measures provide
useful information about plan quality that sponsors can take action
upon in order to improve the quality of care provided to their members.
To allow comparisons, national averages of the display measure scores
are available in the annual MA Part C & D Measure Technical Notes. (The
display measure data set and Technical Notes are posted on the same
site as the MA Star Ratings information.)
CMS is examining a number of potential options for determining cut
points that would capture the greatest number of desirable attributes
that the commenters have identified (pre-determined, stable,
predictable cut points with minimal (if any) influence by outliers,
restricted movement across years) while maintaining the integrity of
the Star Ratings. CMS is simulating the alternatives to the current cut
point methodology. Further, CMS is identifying potential unintended
consequences and examining ways to mitigate any identified risk to the
integrity of the Star Ratings program. CMS is finalizing the clustering
algorithm for the determination of cut points as proposed based on the
positive and useful aspects of that methodology and to allow us the
time to fully consider the options suggested by our stakeholders for
enhancements to make it an even stronger methodology for converting the
measure scores to measure-level Star Ratings. Any changes would be
proposed in a future regulation.
Comment: Some commenters suggested alternative methodologies to
determine cut points. A commenter suggested the use of a forced
distribution rather than clustering to capture the true distribution of
plan performance; assigning cut points by applying an adjustment factor
to the prior year's results based on historical performance; or
calculating the average change in the median from the prior 3 years and
apply that to determine the current cut points. A few commenters
suggested using the industry average. A commenter suggested using the
industry average as the basis of a 3-star rating.
Response: CMS appreciates these comments. CMS believes that using a
data driven approach to determine cut points aligns with our policies
and guiding principles. As part of our guiding principles, we want to
develop an enhanced methodology that ensures that the ratings are a
true reflection of plan quality and minimizes the risk of
misclassification. A forced distribution carries a high risk of
misclassification because the cut points would not maximize the
differences of contracts across star categories and minimize the
differences of contracts within the same star category. An average as
the basis of a 3-star rating would not accurately take into account the
skewed distribution of many measures. CMS is examining a number of
potential options for determining cut points while maintaining the
integrity of the Star Ratings, including examining whether we can
adjust prior performance results to determine current cut points. CMS
will propose and solicit comment on an enhanced cut point methodology
in a future regulation.
Comment: Some commenters stated that the current clustering
algorithm to identify the cut points for the Star Ratings' measures
does not always accurately reflect the quality improvement that
contacts have achieved especially for measures scores

[[Page 16571]]

with a limited range in their distribution. Some commenters explicitly
stated their opposition to some of the proposed methodologies. A
commenter was against a moving average approach amid concerns of the
longevity of such a method. Another commenter did not support caps due
to the belief that caps would mask true performance. Another commenter
did not support weighted clustering. A commenter suggested benchmarking
independent of clustering to determine the cut points; the commenter
justified the recommendation based on the belief that increases in the
average measure scores over time leads to decreased variability of plan
performance and tight clustering of plan performance which results in
insignificant percentile scores having large impacts on the Star
Ratings.
Response: CMS appreciates our stakeholder's feedback and will use
it to guide the development of an enhanced methodology. So as not to
implement a methodology that may inordinately increase the risk of
misclassification, CMS will analyze and simulate the options to assess
the impact of the methodology on the Star Ratings. The goal of
clustering and the elimination of pre-determined 4-star thresholds for
the 2016 Star Ratings was to more accurately measure performance.
The current methodology for converting measure scores to measure-
level Star Ratings for non-CAHPS measures identifies the gaps that
exist within the distribution of scores based on the criterion for
assigning the groups. If the distribution is extremely restricted such
that 5 unique groups cannot be formed, the output will result in 5
groups that are not unique. In this rare situation, there would be less
than 5 star categories and the ordered groups will be assigned the
higher ratings on the scale.
Comment: A commenter expressed concern about determining cut points
using all MA data because such an approach fails to take into account
the significant underlying differences in enrollment of plans. The
commenter supported both stratified reporting and the determination of
cut points after grouping plans into relevant cohorts (stratification
at the contract level on key population characteristics, such as
proportion Dual/LIS/Disabled).
Response: CMS appreciates this feedback. The Star Ratings system
does not determine cut points for subsets of the population because it
does not align with its underlying principles. However, CMS has
developed the Categorical Adjustment Index (CAI), which is a factor
that is added to or subtracted from a contract's Overall and/or Summary
Star Ratings to adjust for the average within-contract disparity in
performance associated with a contract's percentages of beneficiaries
with Low Income Subsidy/Dual Eligible (LIS/DE) and disability status.
These adjustments are performed both with and without the improvement
measures included. The value of the CAI varies by a contract's
percentages of beneficiaries with Low Income Subsidy/Dual Eligible
(LIS/DE) and disability status. In addition, CMS displays Part C and D
performance data stratified by race and ethnicity at: https://www.cms.gov/About-CMS/Agency-Information/OMH/research-and-data/statistics-and-data/stratified-reporting.html.
Comment: A commenter expressed support of the identification of cut
points, as they can provide insight into performance throughout the
year, leading to greater quality improvements.
Response: CMS appreciates this support of the identification and
utility of cut points.
Comment: A commenter requested simulations on the proposed cut
point methodologies.
Response: CMS remains committed to transparency. CMS regularly
solicits and values the feedback from our stakeholders. The feedback
received guides the development of the policy options. CMS will
continue to remain transparent in the development process for an
enhanced cut point methodology as we move forward to propose a
modified, new, or different policy for the assignment of measure-level
Star Ratings.
Comment: A commenter urged CMS to re-evaluate the cut points to
ensure the Star Ratings accurately reflect plan quality and are based
on evidence. The commenter expressed concern about the number of
measures within the MA Star Ratings program that are based on physician
action and compliance. In order for plans to comply with and earn
incentives from CMS, the commenter believes that plans must often set
unrealistic targets within their physician contracts in order for the
plan to score well due to the Star Ratings cut points. The commenter
believes that there may be instances when compliance with a measure is
contrary to appropriate care, and contracts may be penalized.
Response: CMS appreciates this comment. Plans should always set
clinically appropriate targets for their physicians. There is no reason
why the current methodology for setting the cut points to assign
ratings to raw performance scores would require a physician to provide
inappropriate care.
Comment: CMS received a handful of comments related to converting
CAHPS scores to stars. There was support for the current methodology
(which was proposed) although several commenters suggested the cut
points are too narrow and a few would like to re-implement pre-
determined cut points for CAHPS. A commenter stated that the relative
distribution and significance testing methodology in CAHPS is biased in
a negative direction and that these adjustments do not appropriately
address the variability in CAHPS survey results.
Response: We appreciate comments received on the CAHPS methodology.
Three factors enter into CAHPS star assignment: The ranking of the
contract in relation to other contracts, a statistical significance
test that takes into consideration the degree of certainty that the
score is above or below the national average, and examination of
measure reliability. The significance test is applied in the same way
in the positive and negative directions and is not biased. CAHPS
measures meet high standards of reliability and thus variability in the
scores reflects variability in performance. This methodology improves
the performance of the star system and ensures that 4 and 5 stars are
reserved for contracts with strong evidence of high performance and
that 1 and 2 stars are reserved for contracts with strong evidence of
low performance. We note that the base group is not an entitlement to a
certain Star Rating.
Previous analyses of CAHPS scores have suggested that seemingly
small differences of 1 point on a 0-100 scale are meaningful;
differences of 3 points can be considered medium, and differences of 5
points can be considered large.\57\ For instance, a 3-point increase in
some CAHPS measures has been associated with a 30 percent reduction in
disenrollment from health plans, which suggests that even ``medium''
differences in CAHPS scores may indicate substantially different care
experiences.\58\
---------------------------------------------------------------------------

\57\ Paddison CAM, Elliott MN, Haviland AM, Farley DO,
Lyratzopoulos G, Hambarsoomian K, Dembosky JW, Roland MO. (2013).
``Experiences of Care among Medicare Beneficiaries with ESRD:
Medicare Consumer Assessment of Healthcare Providers and Systems
(CAHPS) Survey Results.'' American Journal of Kidney Diseases 61(3):
440-449.
\58\ Lied, T.R., S.H. Sheingold, B.E. Landon, J.A. Shaul, and
P.D. Cleary. (2003). ``Beneficiary Reported Experience and Voluntary
Disenrollment in Medicare Managed Care.'' Health Care Financing
Review 25(1): 55-66.

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[[Page 16572]]

Summary of Regulatory Changes
For the reasons set forth in the proposed rule and our responses to
the related comments summarized above, we are finalizing the
methodology to determine cut points as proposed in Sec. Sec.
422.166(a) and 423.186(a). CMS is committed to incorporating the
feedback received from commenters on the methodology for determining
cut points for non-CAHPS measures and will thoroughly analyze other
potential methodologies to ensure that unintended consequences are
avoided and the cut points resulting from any enhancements are
consistent with principles and policy goals for the Star Ratings
system. Changes to the methodology for the determination of cut points
for non-CAHPS measures will be proposed in a future rule.
We are finalizing the methodology to determine cut points for CAHPS
measures in Sec. Sec. 422.166(a)(3) and 423.186(a)(3) substantively as
proposed. We are finalizing the regulation text with minor technical
revisions to improve readability.
m. Hierarchical Structure of the Ratings
We proposed to continue our existing policy to use a hierarchical
structure for the Star Ratings. Currently, and as proposed, the basic
building block of the MA Star Ratings system is the measure. Because
the MA Star Ratings system consists of a large collection of measures
across numerous quality dimensions, the measures will be organized in a
hierarchical structure that provides ratings at the measure, domain,
Part C summary, Part D summary, and overall levels. The proposed
regulations text at Sec. Sec. 422.166 and 423.186 are 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 will indicate the highest Star
Rating possible, while a rating of 1 star will 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 will
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 proposed to codify these policies at paragraphs (b)(2),
(c)(1) and (d)(1) of Sec. Sec. 422.166 and 423.186.
We received the following overall comments on our proposal and our
response follows:
Comment: All commenters supported the existing hierarchical
structure of the Star Ratings program and its associated policies.
Response: CMS appreciates the continued support of the existing
organization of the Star Ratings measures and the policies associated
with it. CMS firmly believes the structure increases the utility and
efficiency of the rating system and appreciates the positive response
to it.
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 proposed 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-PD plans and four for Part D measures for stand-alone
PDP and MA-PD plans. We proposed 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 6--Part C Domains
------------------------------------------------------------------------
Domain
-------------------------------------------------------------------------
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.
Health Plan Customer Service.
------------------------------------------------------------------------

Table 7--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
proposed to continue this policy at paragraph (b)(2)(ii). We also
proposed 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; we explained this was necessary
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 will 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 proposed 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.
We received the following comments on our proposal and our
responses follow:
Comment: Commenters supported the use of the current domains and
the associated policies related to the calculation of the Star Ratings
for domains.
Response: CMS appreciates our stakeholders' support of the use of
the domains and associated policies related to the domains.
Comment: A commenter noted the usefulness of the domains for
displaying the data on Medicare Plan Finder (MPF). In addition, the
commenter believed the domains helped consumers interpret the data on
MPF.
Response: The domains were designed to summarize a plan's
performance on a specific dimension of care. CMS appreciates the
positive feedback related to domains and the agreement that they serve
not only to organize data on MPF, but also serve as an aid to
consumers' interpretation of the data displayed.
Summary of Regulatory Changes
For the reasons set forth in the proposed rule and our responses to
the related comments summarized above,

[[Page 16573]]

we are finalizing the provisions identifying the domains and for rating
at the domain level as proposed at Sec. Sec. 422.166(b) and 423.186(b)
without modification.
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 proposed,
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 stand-alone plan will receive a
summary rating only for, respectively, Part C measures and Part D
measures.
First, in paragraphs (c)(1) of each section, we proposed 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 proposed 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 proposed the specifics for these
adjustments) for Parts C and D, respectively.
Second, and also consistent with current policy, we proposed 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. We proposed to codify the
necessary text as paragraph (c)(2)(i) of Sec. Sec. 422.166 and 423.186
the same rules will be applied to both the Part C and Part D summary
ratings for the minimum number of rated measures. We proposed that
these regulations would also apply to calculating the summary Part C
and Part D ratings of MA-PD plan; the MA-PD plan would have to meet the
minimum number of rated measures for each summary rating type. We also
proposed (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 proposed 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. We explained in connection with this
proposal how the policies proposed in Sec. Sec. 422.166(h) and
423.186(h) regarding posting summary ratings on MPF would apply. The
summary rating would be displayed in HPMS and Medicare Plan Finder to
the nearest half star if a contract had 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 solicited comments on the calculations for the Part C and D
summary ratings. We received the following comments on our proposal and
our responses follow:
Comment: The majority of the commenters supported the policies,
methodology, and display of the summary ratings as proposed.
Response: CMS appreciates the ongoing support of the summary
ratings.
Commenter: A commenter recommended a revision to the rule that
requires a contract to have numeric scores for at least 50 percent of
the required measures for the summary-specific rating to have a summary
rating calculated. The commenter suggested a change to the rule such
that a summary rating would be calculated if a contract had at least
half of the weighted value of the full measure set for the summary-
specific rating.
Response: CMS appreciates the feedback for a possible revision to
the rule that determines whether a summary rating would be calculated.
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. The summary ratings include information from
multiple dimensions of quality and performance. CMS plans to evaluate
the suggestion of using 50 percent of the total weighted value of the
measure set as the threshold for calculating summary ratings to examine
whether such a change would still allow an accurate reflection of the
quality of the health plan or prescription drug plan.
Summary of Regulatory Changes
For the reasons set forth in the proposed rule and our responses to
the related comments summarized above, we are finalizing the provisions
governing summary ratings as proposed at Sec. Sec. 422.162(c) and
423.182(c) without modification.
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 proposed 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 proposed 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 has
scores for at least 50 percent of the required measures for the
contract type. As with the Part C and D summary ratings, the Part C and
D improvement measures will 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, the measures ``Members Choosing to Leave
the Plan'' and ``Complaints about the Plan'' use the same data for both
the Part C and Part D measure for an MA-PD plan and under the proposal,
would be counted only once for the overall rating. As with summary
ratings, we proposed 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).
We also explained in the proposed rule how the overall rating would
be posted in accordance with our general proposed policy at Sec. Sec.
422.166(h) and 423.186(h), including the specific messages for lack of
ratings for certain reasons. Applying that rule, if an MA-

[[Page 16574]]

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 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 an 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 proposed,
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 will be treated as qualifying plans
for the purposes of QBPs as described in Sec. 422.258(d)(7) of this
chapter. The QBP levels for each rating area are announced through the
process described for changes in and adoption of payment and risk
adjustment policies in section 1853(b) of the Act. We noted that this
aspect of the proposal would merely codify existing policy and
practice.
We received the following comments on our proposal and our
responses follow:
Comment: Commenters supported the use of the overall rating as a
global rating that summarizes a contract's quality and performance, as
well as the proposal to use the current policies for calculating and
publishing the overall rating.
Response: CMS values the support of the overall rating and its
associated methodology.
Comment: A commenter suggested a revision to the rule for
calculating the overall rating for an MA-PD contract. As done currently
and proposed, an MA-PD contract must have both (Part C and Part D)
summary ratings and measure scores for at least 50 percent of the
required measures based on contract-type (exclusive of the improvement
measures) to have an overall rating. The commenter suggested that an
overall rating for an MA-PD contract require measure scores that total
at least half of the weighted value of the full measure set.
Response: CMS appreciates the suggestion of alternative
requirements for the calculation of an overall rating. Changing the
requirement for the calculation of an overall rating to be based on the
majority of the total weight of the Star Ratings measures has the
potential of confusing the global nature of the overall rating. There
are substantially more Part C measures in the Star Ratings and the
total weight of the Part C measures exceeds that of the Part D
measures. By requiring a contract to have both a Part C and D summary
rating coupled with the requirement of at least 50 percent of the
measures, CMS has minimized the potential for the overall rating being
determined primarily by dimensions of health plan quality instead of
both health plan and prescription drug plan quality.
Comment: A commenter suggested the use of a percentile rank
threshold for the determination of a 5-star overall rating, thus
allowing the recognition of top performers along with the ability to
enroll members year-round.
Response: While CMS thanks the commenter for its suggestion, CMS
disagrees with using percentile ranking as a threshold for calculating
overall ratings. One of the underlying design principles of the MA and
Part D Star Ratings is to incentivize plans to provide the best health
care possible to our beneficiaries. This underlying principle is
reflected in the manner that measure scores are converted to Star
Ratings, as well as the aggregation of the measure-level Star Ratings
to an overall rating. (Measure-level Star Ratings are the basic
building block, of the overall rating.) A percentile rank threshold
approach for the overall rating does not align with the principles of
the Star Ratings methodology and would arbitrarily apply a threshold
that could be perceived as a subjective value that would ultimately
separate 5-star contracts from all other contracts.
Summary of Regulatory Changes
For the reasons set forth in the proposed rule and our responses to
the related comments summarized above, we are finalizing the provisions
for overall ratings as proposed at Sec. Sec. 422.162(d) and 423.182(d)
without modification.
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,
which is weighted as 1. This weight aligns the Part C and D Star
Ratings program with value-based purchasing programs in Medicare fee-
for-service which take into account improvement.
We proposed 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/

[[Page 16575]]

complaints and access measures (weight of 1.5), and finally process
measures (weight of 1). We also solicited feedback about increasing the
weight of the patient experience/complaints and access measures and
stated our interest 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 asked for feedback
about increasing it from a weight of 1.5 to between 1.5 and 3, similar
to outcome measures. This increased weight would reflect CMS's
commitment to serve Medicare beneficiaries by putting patients first,
including their assessments of the care received by plans. We solicited
comment on this point, particularly the potential change in the weight
of the patient experience/complaints and access measures.
Table C7 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 II.A.11. of the
proposed rule, we proposed (as Table C2) the measure set and included
the category and weight for each measure, consistent with this proposal
for weighting measure by category. We proposed 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. For
the first exception, we proposed to codify current policy in paragraphs
(e)(2) of each section and 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 8--Proposed 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 will 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.
Process..................................... Process measures capture the health care services 1
provided to beneficiaries which can assist in
maintaining, monitoring, or improving their
health status.
----------------------------------------------------------------------------------------------------------------

For the second exception, we proposed (at Sec. Sec. 422.166(e)(3)
and 423.186(e)(3)) again to codify current policy and to apply a
special rule for MA-PD 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 a population of beneficiaries in Puerto Rico. We proposed,
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 with
service areas that are wholly located in Puerto Rico. We requested
comment on our proposed weighting strategy for Measure Weights
generally and for Puerto Rico, including the weighting values
themselves.
We received the following comments on our proposal and our
responses follow:
Comment: Multiple commenters requested CMS not to increase the
weight of patient experience/complaints and access measures from a
weight of 1.5 up to 3. Many of the commenters requested to maintain the
current weight; however, others requested that CMS decrease the weight
of patient experience measures citing survey reliability and sampling
concerns with patient experience surveys. They stated that patient-
reported data are not as reliable as claims, prescription drug event
data, medical charts, and other data sources. They believe that these
measures are unfairly subjective and that more weight should be placed
on more reliable and objective measures like clinical and outcome
measures. Many cited concerns with response rates, sample size of
patient experience surveys, and other factors in which the plan has
less control, as well as industry concerns around accuracy of survey
responses and research suggesting a weak relationship between care
received and survey responses. A commenter supported increasing the
weight of access and patient experience measures that are not based on
survey data. A commenter opposed the weight increase until we have
better measures in these areas.
Response: We refer commenters to section II.A.11.i and Table C2A
and the narrative comment and responses that follow, which give
background and additional justification for CAHPS measures. While we
acknowledge that the CAHPS survey captures individuals' perspectives on
their experiences of care, it is anchored in measureable aspects of
care and so can be measured reliably. In addition, CAHPS surveys were
developed with broad stakeholder input, including a public solicitation
of measures and a Technical Expert Panel, and the opportunity for
anyone to comment on the surveys through multiple public comment
periods through the Federal Register. CMS encourages all plans to
familiarize themselves with the survey methodology and to review the
background materials available on the MA and PDP CAHPS website that
validate the CAHPS measures.
CMS has pledged to put patients first and to empower patients to
work with their doctors to make health care decisions that are best for
them. An increased weight for patient experience/complaints and access
measures reflects

[[Page 16576]]

CMS's commitment to serve Medicare beneficiaries by including their
assessments of the care received by plans. In addition, CAHPS measures
and positive clinical outcomes have been shown to be related. While
patient experience is an inherently important dimension of healthcare
quality, it is also the case that the preponderance of evidence shows
that better patient experience is associated with better patient
adherence to recommended treatment, better clinical processes, better
hospital patient safety culture, better clinical outcomes, reduced
unnecessary healthcare use, and fewer inpatient
complications.^{59 60} A recent study found that higher quality
for patient experience had a statistically significant association with
lower rates of many in-hospital complications and unplanned
readmissions to the hospital within 30 days. In other words, better
patient experience according to the CMS hospital Star Ratings is
associated with favorable clinical outcomes.\61\ An increased weight
also reflects the importance of these beneficiary-centered issues in
plan performance.
---------------------------------------------------------------------------

\59\ Price, R.A., Elliott, M.N., Zaslavsky, A.M., Hays, R.D.,
Lehrman, W.G., Rybowski, L., & Cleary, P.D. (2014). Examining the
role of patient experience surveys in measuring health care quality.
Medical Care Research and Review, 71(5), 522-554.
\60\ Price, R.A., Elliott, M.N., Cleary, P.D., Zaslavsky, A.M.,
& Hays, R.D. (2015). Should health care providers be accountable for
patients' care experiences?. Journal of general internal medicine,
30(2), 253-256.
\61\ Trzeciak, Stephen et al. ``Association Between Medicare
Star Ratings for Patient Experience and Medicare Spending per
Beneficiary for US Hospitals.'' Journal of patient experience 4.1
(2017): 17-21. PMC. Web. 2 Feb. 2018.
---------------------------------------------------------------------------

Further, access to health services is a critical issue in the
healthcare sector and to Medicare beneficiaries. Lack of access can
result in unmet health needs, delays in receiving the appropriate care,
inability to access preventative services, unreasonable financial
burdens, and preventable hospitalizations.\62\ For these reasons,
access measures, such as appeals measures and call center measures, are
crucial in the Star Ratings system. Increasing the weight for these
measures highlights the importance of capturing access to care within
MA and Part D plans.
---------------------------------------------------------------------------

\62\ https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/MMS/Downloads/Access-Measures.pdf.
---------------------------------------------------------------------------

To best meet the needs of our beneficiaries, CMS believes that we
must listen to their perceptions of care, as well as ensure they have
access to needed care. Commenters representing beneficiaries strongly
supported an increase in the weight of the patient experience of care
and access measures. Therefore, we will finalize an increase in the
weight for these two categories of measures from 1.5 to 2. Given the
importance of hearing the voice of patients when evaluating the quality
of care provided, CMS intends to further increase the weight of these
measures in the future, so we welcome stakeholder feedback on how to
improve the CAHPS survey, including the topics it covers, and
suggestions for additional access measures or modifications to existing
ones. We expect this change to increase the highest rating for
approximately 8 percent of contracts and to have no impact on the
majority of other contracts, while also demonstrating CMS's commitment
to evaluate the quality of care provided as experienced by
beneficiaries. Please send feedback about CAHPS to [email protected]
and feedback about access measures to [email protected].
Comment: A handful of commenters strongly supported the proposed
weight increase of patient experience/complaints and access measures.
They emphasized the importance of the beneficiary and caregiver
perspectives and noted that the beneficiary's voice is an important
indicator for plan performance in key areas such as the ease of access
to needed drugs and treatments as well as plan responsiveness to appeal
requests. Commenters said that by increasing the weights of these
measures, CMS ensures that beneficiaries are seeing Star Ratings that
reflect what they are likely to find important about their plan
selections. These commenters also believed that assessments of quality
and value by the patient are currently under-valued in Part C and D.
Therefore, they believed patient experience/complaints and access
measures should receive a higher weight than the current 1.5.
Response: CMS appreciates this feedback and agrees the voice of the
beneficiary must be heard as part of evaluating the quality of health
and drug plans.
Comment: CMS received several comments requesting to decrease and
reclassify HOS measures on Improving or Maintaining Physical and Mental
Health to receive a patient experience weight of 1.5 or process measure
weight of 1, as opposed to their current outcome weight of 3. Some
commenters believed there are methodological limitations to the HOS,
and they stated that it does not provide a reliable evaluation of the
patient experience because it relies on variables such as memory and
the patient's physical and mental status at the time of survey
completion. We also received comments that because the HOS measures are
patient-reported measures (in response to survey questions) they are
not true measures of health outcomes and should be weighted no higher
than 1 or 1.5.
Response: We refer the commenter to Table C2 in section II.A.11.,
which gives background and additional justification for HOS measures.
The HOS assesses health outcomes for randomly selected beneficiaries
from each health plan over a two-year period by using baseline
measurement and a two-year follow up. CMS recognizes that the Physical
Component Score (PCS) and the Mental Component (MCS) may decline over
time and that health maintenance, rather than improvement, is a more
realistic clinical goal for many older adults. MAOs are asked to
improve or maintain the physical and mental health of their members.
Change scores are constructed and the results compare actual to
expected changes in physical and mental health. Therefore, the
Improving or Maintaining Physical and Mental Health measures are not
patient experience measures because they measure whether plan member's
physical and mental health is the same or better than expected after 2
years. While the data come from the HOS, they measure beneficiary
outcomes and therefore are appropriately classified as outcome measures
with a weight of 3.
Additionally, the HOS was developed and continues to be refined
under the guidance of a Technical Expert Panel comprised of individuals
with specific expertise in the health care industry and outcomes
measurement. HOS analysts apply the most recent advances in summarizing
physical and mental health outcomes results and appropriate risk
adjustment techniques. CMS also solicits stakeholder input, including
public solicitation of measures and the opportunity for anyone to
comment on the survey through multiple public comment periods through
the Federal Register.
Comment: A few commenters sought clarification on differences in
the weights between the Part C and Part D Statin measures. Two
organizations recommended classifying both the Part C Statin Therapy
for Patients with Cardiovascular Disease (SPC) and the Part D Statin
Use in Persons with Diabetes (SUPD) measures as process measures with a
weight of 1. A commenter supported the weight for the Statin measure
developed by PQA.
Response: CMS appreciates the feedback and clarifies the weighting
decision for each measure below. The Part C Statin Therapy for Patients
with Cardiovascular Disease (SPC) measure is

[[Page 16577]]

the percent of plan members (males 21-75 years of age and females 40-75
years of age) who were identified as having clinical atherosclerotic
cardiovascular disease (ASCVD) and were dispensed at least one high or
moderate-intensity statin medication. The Part C measure focuses on
patients who were dispensed one prescription and whether the patient
filled the medication at least once. Therefore, it is a process measure
and will receive a weight of 1. The Part D measure is the percent of
the number of plan members 40-75 years old who were dispensed at least
two diabetes medication fills and received a statin medication fill.
Receiving multiple fills indicates the patient continues to take the
medication and therefore suggests adherence. The Part D measure is not
a process measure. Continuing to take the prescribed medication is
necessary to reach clinical/therapeutic goals. Thus, the Part D measure
is an intermediate outcome measure and will receive a weight of 3.
Comment: A couple of commenters requested a decrease in the
improvement measures from the current weight of 5 to a weight of 3
(like outcome measures). They stated the measures diminish the
importance of clinical measures and mislead Medicare beneficiaries
about which are the highest quality health plans.
Response: CMS recognizes the importance of acknowledging quality
improvement in health and drug plans. The decision to assign a weight
of 5 for the improvement measures was originally made to align the Part
C and D Star Ratings program with value-based purchasing programs in
Medicare fee-for-service which heavily weight improvement. As part of
the Part C and D Star Ratings program, we are committed to improving
the quality of care and experiences for Medicare beneficiaries. Through
assigning a weight of 5 to improvement, CMS encourages MA and Part D
contracts to focus on improving the quality of care provided.
With regard to overall ratings, improvement measures contribute
significantly less than outcome measures overall. For example for the
2018 Star Ratings for an MA-PD that does not include a SNP, the overall
contribution of the improvement measures to the overall rating is close
to 14 percent, but the overall contribution of outcome and intermediate
outcome measures is 33 percent.
CMS believes that continuous improvement is necessary to reach the
goal of providing the best care to our beneficiaries. While the
improvement measures are weighted the most of any category in the Star
Ratings, the improvement measure is a single measure that encompasses
care across multiple dimensions.
Comment: A commenter recommended that CMS weight MA-PD and PDP
measures differently based on the plan's ability to influence outcomes
on a measure, for example statin use in persons with diabetes. PDPs
should have less weight placed on measures that largely depend on
provider behavior, which they have very little ability to impact.
Response: Currently the only Part D outcome measures are adherence
measures. CMS disagrees that stand-alone PDPs have very little
influence on beneficiaries' medication adherence. There are many
strategies that can be used to improve a beneficiary's medication
adherence in addition to prescriber interventions, such as refill
reminders, formulary and benefits design, and medication therapy
management programs. Plan sponsors can also leverage network pharmacy
relationships to address medication adherence issues, facilitate
medication synchronization, or provide education and counseling. In the
absence of a contact phone number for the beneficiary, it may be
beneficial to use these interventions to reach the beneficiary at the
place of dispensing. Furthermore, MA-PDs and PDPs are rated separately
to account for delivery system differences. Lastly, adherence measures
will now be included in the CAI to account for LIS beneficiaries which
we discuss in more detail in section II.A.11.t.
Comment: A commenter recommended decreasing the weighting of a
topped out measure rather than discontinuing the measure.
Response: Measure scores are determined to be `topped out' when
they show high performance and little variability across contracts,
making the measure unreliable. CMS removes 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.
However, CMS will retain measures at the same weight 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. CMS will
take this comment into consideration as we make future enhancements in
the Star Ratings program.
Comment: Multiple commenters supported assigning new measures a
weight of 1 for the first year.
Response: CMS appreciates the support of the proposed weighting for
new measures.
Comment: A commenter supported the weighting for the adherence
measures in Puerto Rico.
Response: CMS appreciates the support of the proposed Puerto Rico
weights.
For the reasons set forth in the proposed rule and our responses to
the related comments summarized above, we are finalizing the provisions
governing the weight of measures as proposed in Sec. Sec. 422.166(e)
and 423.186(e) with modification. CMS is finalizing the weight of
patient experience/complaints and access measures at 2 in paragraphs
(e)(iii) and (iv) given the importance of hearing the perspectives and
voice of patients in times of need.
r. Application of the Improvement Measure Scores
Consistent with current policy, we proposed 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 proposed, 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.
Under our proposal, 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 would be 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 MA-PD
contract's 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), we proposed the
overall rating would exclude the improvement measures; for all others,
the overall rating would include the improvement measure.
MA-only and PDPs would have the hold harmless provisions for
highly-

[[Page 16578]]

rated contracts applied for the Part C and D summary ratings,
respectively. For an MA-only or PDP contract that receives a summary
rating (with applicable adjustments) of 4 stars or more without the use
of the improvement measure, a comparison of the rounded summary rating
with and without the improvement measure would be 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 (with
applicable adjustments) of 2 stars or less without the use of the
improvement measure 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 proposed text to clarify
that summary ratings use only the improvement measure associated with
the applicable Part C or D performance.
We solicited comments on the hold harmless improvement provision we
proposed to continue to use, particularly any clarifications in how and
when it should be applied.
We received the following comments on our proposal and our
responses follow:
Comment: A commenter recommended the exclusion of the hold harmless
provision for a highly-rated contract if the contract would realize a
decrease in their overall rating. In addition, the commenter supported
a hold harmless provision for plans that would be at risk of receiving
a low performing icon due to application of the quality improvement
measures.
Response: CMS currently and as proposed, has a safeguard for
highly-rated contracts. CMS applies the hold harmless provision for a
highly-rated contract's highest rating. As proposed, a contract that
receives 4 stars or more without the use of the improvement measures
and with all applicable adjustments (CAI and the reward factor) will
have their final overall rating as the higher of either the rating
calculated including or excluding the improvement measure(s). CMS
believes the hold harmless provision is appropriate to apply for
highly-rated contracts since they have less room for improvement and,
consequently, may have lower scores for the improvement measure(s).
CMS believes that the Star Ratings should signal the true quality
of the contract. A hold harmless provision for contracts that are in
jeopardy of a low performing icon does not align with the intent of the
Star Ratings program and threatens its integrity. Low performing
contracts, including those at risk of receiving a low performing icon,
have plenty of room for improvement and should not need a hold harmless
provision.
Comment: A commenter expressed support for all rules that guide the
application of the improvement measure(s) in calculating overall and
summary ratings.
Response: CMS appreciates the support of the policies that guide
the application of the improvement measure(s) in the Star Ratings.
Comment: Overall, commenters supported the use of the hold harmless
provision for a highly-rated contract's highest rating. However,
several commenters advocated a modification to the hold harmless
provision for highly-rated MA-PDs such that the overall rating would be
determined by the highest rating among the overall rating calculated
with including both improvement measures, excluding both improvement
measures, using only the Part C improvement measure, or using only the
Part D improvement measure.
Response: CMS appreciates the support of a hold harmless provision
for a highly-rated contract's highest rating. CMS is committed to
providing a true signal of the overall quality to beneficiaries who use
Medicare Plan Finder to aid in the selection of a plan that is right
for them. Eliminating the use of one of the improvement measure ratings
in calculating the overall rating has the potential to distort the
signal for beneficiaries. The overall rating is designed as a global
rating of the quality of both the health plan and prescription drug
plan benefits for an MA-PD. While we do agree there is justification
for a hold harmless provision for a highly-rated MA-PD, CMS is
committed to preserving the integrity of the rating system. Removing
one facet of the rating system (Part C or Part D improvement measure)
while not the other, has the potential to undermine the primary
function of the rating system. Therefore, we are not finalizing the
revisions requested by the commenter(s).
Comment: Some commenters did not support excluding the improvement
measure(s) from use in a contract's highest rating (with applicable
adjustments) if the contract received 2 stars or less without the use
of the improvement measure. The commenters believed that limiting the
measure to only plans with at least 2.5 stars goes against the
objective of the improvement measure in encouraging and rewarding
improvements in performance, particularly among lower-rated plans.
Response: CMS appreciates the careful review of the proposed policy
related to the application of the improvement measure(s) for a
contract's highest rating. After thoughtful deliberation of the
recommendation of our commenters, CMS has decided to modify the
proposed methodology for the application of the improvement measures.
The methodology will be changed such that if the highest rating for a
contract is less than 4 stars without the use of the improvement
measure(s) and with all applicable adjustments (CAI and the reward
factor), the rating will be calculated with the improvement measure(s).
The modification of the application of the improvement measure(s)
preserves the safeguard for a highly-rated contract's highest rating,
but removes what could be perceived as a safeguard for contracts with a
highest rating of 2 stars or less. In other words, if an MA-PD has an
overall rating of less than 4 stars without the use of the improvement
measures and with all applicable adjustments, the improvement measures
will be used in the calculation of the overall rating. If an MA-only
contract has a Part C summary rating of less than 4 stars without the
use of the Part C improvement measure and with all applicable
adjustments, the Part C improvement measure will be used in the
determination of the contract's Part C summary rating. If a PDP has a
Part D summary rating of less than 4 stars without the use of the Part
D improvement measure and with all applicable adjustments, the Part D
improvement measure will be used in the determination of the contract's
Part D summary rating. (An MA-PD will have the Part C or Part D
improvement measure included in the calculation of the respective Part
C and Part D summary ratings, because the summary ratings are not the
highest rating for this type of contract.) The only modification will
be for contracts with a highest rating of 2 stars or less. After
consideration of the comments received, we believe it is reasonable to
also include any applicable improvement measure(s) for contracts with a
highest rating of 2 stars or less so that the highest rating reflects
whether the overall quality is improving, staying the same, or
declining.
Summary of Regulatory Changes
For the reasons set forth in the proposed rule and our responses to
the related comments summarized above, we are finalizing the provisions
addressing use of the improvement measure in summary and overall
ratings as proposed at Sec. Sec. 422.162(g) and

[[Page 16579]]

423.182(g) with one substantive modification. We are not finalizing
what was proposed for contracts with a 2-star summary or overall rating
(with applicable adjustments). We are also finalizing a revision to the
rule for summary or overall ratings (with applicable adjustments) of
less than 4 stars to include as well contracts with overall or summary
ratings of 2 stars.
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 is
assessed using its weighted mean relative to all rated contracts
without adjustments.
We proposed to codify the calculation and use of the reward factor
in Sec. Sec. 422.166(f)(1) and 423.186(f)(1); our proposal was to
generally codify the current practice for the reward factor. Under our
proposal, the contract's stability of performance would 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 would be, like current practice
determined independently of the thresholds for PDPs.
We proposed to update annually 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. Under the proposal 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 \63\ 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 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
would be calculated both with and without the improvement measures.
---------------------------------------------------------------------------

\63\ A deviation is the difference between the performance
measure's Star Rating and the weighted mean of all applicable
measures for the contract.
---------------------------------------------------------------------------

Under the methodology CMS proposed for this factor, a contract's
weighted variance would be categorized into one of three mutually
exclusive categories, identified in Table C8A, based upon the weighted
variance of its measure-level Star Ratings. Its ranking would be
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 would be
categorized into one of three mutually exclusive categories, identified
in Table C8B, 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 would be 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 would be
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 would be based on the distribution of all
rated contracts and determined with and without the improvement
measure(s) and exclusive of any adjustments. Table C8A details the
criteria for the categorization of a contract's weighted variance for
the summary and overall ratings. Table C8B details the criteria for the
categorization of a contract's weighted mean (performance) for the
overall and summary ratings. Like current practice, the values that
correspond to the cutoffs would be 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.
--------------------------------------------------------------------------------------------------------------------------------------------------------

[[Page 16580]]

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 were
proposed to 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 C9 shows the
values of the reward factor based on the weighted variance and weighted
mean categorization; we proposed to codify these values (in a narrative
description) in paragraph (f)(1)(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 proposed to continue the use of a reward factor to reward
contracts with consistently high and stable performance over time.
Further, we proposed to continue to employ the same methodology 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.
We received the following comments on our proposal and our
responses follow:
Comment: The majority of commenters were supportive of the
continued use of the reward factor. A commenter expressed support
specifically related to the reward methodology and the codification of
the calculation of the reward factor.
Response: CMS appreciates our stakeholders' support of the reward
factor.
Comment: A commenter expressed support of the use of a reward
factor for the overall rating, but was concerned that the proposed (and
current) methodology for calculating the reward factor did not
consistently award contracts that maintained high performance and
demonstrated incremental improvement at the measure level. Further, the
commenter linked the potential for a high performing contract not
receiving a reward factor to flaws in the assignment of measure cut
points.
Response: CMS appreciates the careful consideration of the reward
factor. Since the reward factor is a rating-specific factor, a contract
can qualify for the reward based on its summary or overall (or both)
rating if a contract has both high and stable relative performance. CMS
believes the reward factor methodology identifies the contracts that
have both high and stable relative performance and recognizes that such
performance may exist overall (Part C and D performance) or in one
particular area (health plan quality and performance domain on Part C
measures or the prescription drug plan quality and performance domain
on Part D measures). Since the reward factor is based on a relative
performance, it serves to incentivize plans and recognize plans that
provide the highest and consistent level of care as reflected in their
ratings. Ratings calculated using a consistent methodology allow to the
identification of top performers based on rankings.
Comment: A commenter suggested that CMS annually publish the list
of reward factor recipients. The commenter referenced the publication
of the Categorical Adjustment Index (CAI) final adjustment categories
for contracts to support the request. Further, the commenter believed
that the publication of the reward factor recipients would maintain the
attributes of fairness and transparency of the Star Ratings system.
Response: CMS appreciates this feedback. As noted in the comment,
the CAI final adjustment categories per contract are available in the
annual public use files available using the following link: http://go.cms.gov/partcanddstarratings. While the thresholds for the reward
factor are published each year in the Technical Notes, the recipients
of the reward factor are not part of the public use files. However, we
are persuaded that this is important information for beneficiaries and
could assist in providing greater transparency into the development and
assignment of the Star Ratings. Therefore, CMS will begin incorporating
information related to the distribution and characteristics of
contracts receiving the reward factor in the annual Fact Sheet for the
2021 Star Ratings.
Summary of Regulatory Changes
For the reasons set forth in the proposed rule and our responses to
the related comments summarized above, we are finalizing the provisions
as proposed at Sec. Sec. 422.162(f1) and 423.182(f)(1) without
modification.
t. Categorical Adjustment Index
As we discussed in the proposed rule, 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

[[Page 16581]]

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.\64\ We 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. More recently, we have been reviewing
reports prepared by the Office of the Assistant Secretary for Planning
and Evaluation (ASPE \65\) and the National Academies of Sciences,
Engineering, and Medicine on the issue of measuring and accounting for
social risk factors in CMS's 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.\66\
---------------------------------------------------------------------------

\64\ The February release can be found at https://www.cms.gov/medicare/prescription-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.
\65\ https://aspe.hhs.gov/pdf-report/report-congress-social-risk-factors-and-performance-under-medicares-value-based-purchasing-programs.
\66\ 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 Part C and Part D 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 the specifications for the
measure are adjusted 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 enrollees 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 enrollees 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 proposed to codify the calculation
and use of the CAI in Sec. Sec. 422.166(f)(2) and 423.186(f)(2), while
we consider other alternatives for the future.
As has been done with the 2017 and 2018 Star Ratings, we proposed
that 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 (A) the measures are already case-mix adjusted for SES (for example,
CAHPS and HOS outcome measures); (B) 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);
(C) the measure is scheduled to be retired or revised during the Star
Rating year in which the CAI is being applied; or (D) the measure is
applicable to only Special Needs Plans (SNPs) (for example, SNP Care
Management, Care for Older Adults measures). We proposed to codify
these paragraphs for determining the measures for CAI values at
paragraph (f)(2)(ii). In addition, the 2017 and 2018 Ratings were based
on a group of measures from within the cohort identified using these
rules.
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 an LIS at any time during the applicable measurement period,
the 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

[[Page 16582]]

counts of beneficiaries for enrollment and categorization of LIS/DE and
disability would be restricted to beneficiaries who 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 proposed to
codify these standards for determining the enrollment counts at
paragraph (f)(2)(i)(B).
Using the subset of the measures that meet the basic inclusion
requirements, we proposed 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 will be independently analyzed. For each
contract, the proportion of enrollees 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 will be calculated. CMS proposed
to 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: (A) A median absolute
difference between LIS/DE and non-LIS/DE beneficiaries for all
contracts analyzed is 5 percentage points or more or \67\ (B) the LIS/
DE subgroup performed better or worse than the non-LIS/DE subgroup in
all contracts. We proposed to codify these paragraphs for the selection
criteria for the adjusted measures for the CAI at paragraph
(f)(2)(iii).
---------------------------------------------------------------------------

\67\ The use of the word `or' in the decision criteria implies
that if one condition or both conditions are met, the measure will
be selected for adjustment.
---------------------------------------------------------------------------

In addition, we proposed that the Part D measures for PDPs would be
analyzed independently at paragraph (f)(2)(iii)(C). 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. We explained that under our proposal 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 proposed 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 solicited comment on the proposed
methodology and criteria for the selection of the measures for
adjustment.
We also addressed how we would release our findings publicly. While
the CAI would be employed, we proposed to 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 posted would include the minimum, median, and maximum values
for the within-contract variation for the LIS/DE differences. We also
proposed that the set of measures for adjustment for the determination
of the CAI would be announced in the draft Call Letter in paragraph
(f)(2)(iii).
We proposed, 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. We proposed an approach to determine the adjusted
measure scores that 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.
We explained that under our proposal, the sole purpose of the
adjusted measure scores would be for the determination of the CAI
values. They 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.
As described in Sec. Sec. 422.166 (f)(2)(v) and 423.186(f)(2)(v)
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 will 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.
We explained in the proposed rule that 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 have 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. That 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 proposed to continue this adjustment at paragraph (f)(2)(vi) 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 the Medicare enrollment data from the same measurement period
used for the Star Ratings year. We proposed that 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

[[Page 16583]]

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.
We explained that 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 would be
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) would be 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 proposed methodology, which is
currently used, 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. We proposed that the maximum value for the modified LIS/
DE indicator value per contract will be capped at 100 percent and that
all estimated modified LIS/DE values for Puerto Rico would be rounded
to 6 decimal places when expressed as a percentage.
We proposed 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 proposed 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 proposed 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.)
In the proposed rule, CMS noted that while recommendations from the
ASPE report, findings from measure developers, and work by NQF on risk
adjustment for quality measures is considered, we are continuing to
collaborate with stakeholders. As noted, we seek 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 solicit
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.
As noted in the proposed rule, 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. We are continuing to consider options on
to how to measure and account for social risk factors in our Star
Ratings program. Although a sponsoring organization's administrative
costs may increase as a result of enrolling significant numbers of
beneficiaries with LIS/DE status or disabilities, our research thus far
has demonstrated that 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. Because CMS will like to better
understand whether, how, and to what extent a sponsoring organization's
administrative costs differ for caring for low-income beneficiaries, we
explicitly solicited 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 stated our belief that
the proposal demonstrated our continued 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.
We received the following comments on our proposal and our
responses follow:
Comment: There was immense support and acclaim for the work that
CMS continues to do related to the impact of sociodemographic factors
on the Star Ratings.
Response: CMS appreciates the continued support of our
stakeholders, government agencies, and the research community.
Comment: Overall, commenters supported the continued use of the
CAI, but the majority of commenters suggested some enhancements to the
current methodology (which we would continue to use under our
proposal). Many commenters believe that the selection rules for
adjusted measures are somewhat arbitrary or restrictive and result in a
small subset of adjusted measures. These commenters suggested expanding
the number of measures for adjustment. The suggested enhancements for
increasing the number of adjusted measures focused on modifying the
selection rules. Commenters suggested revising the second set of
selection criteria that are based on the within-contract disparity
analysis across contracts, which would result in a larger set of
adjusted measures. The suggested modifications included a revision of
the percentage used for the median absolute difference between LIS/DE
and non-LIS/DE beneficiaries for all contracts analyzed. Some
commenters suggested changing the currently employed value of 5
percentage points to a lower values, such as 1 or 2 percentage points.
A commenter suggested that the percentage for the rule vary based on
the measure, such that the number is meaningful for the particular
measure. A commenter suggested modifying the selection rule from the
proposed one that uses the entire range of the within-contract
disparities to instead identify the measures where the LIS/DE subgroup
performed better or worse than the non-LIS/DE subgroup (basing the
second selection rule to the middle 90 percent of the differences in
the distribution of the within-contract disparity analysis).
Response: CMS is grateful for the continued support of our
stakeholders related to the design and development

[[Page 16584]]

of the CAI. CMS developed two sets of rules to determine the adjusted
measure set: First, the rules to determine the measures that comprise
the candidate measure set for adjustment and second, the rules applied
to the candidate set to identify the measures to be adjusted to
determine the values of the CAI. The candidate measure set includes the
measures in the Star Ratings that have varying levels of a LIS/DE/
disabled effect. The second set of rules relies on the analysis of the
variability of the within-contract differences of LIS/DE and non-LIS/DE
beneficiaries. The application of the second set of selection rules
identified the measures in the candidate set that demonstrated an LIS/
DE effect at a level that qualified them for adjustment.
After thoughtful and careful deliberation of the recommendations of
our stakeholders, CMS will finalize modified selection rules for
identifying the adjusted measures: We will not finalize the second set
of rules for determining the adjusted measure set that we proposed at
paragraphs (f)(2)(iii)(A) through (C) that provided for identifying
measures for adjustment based on an analysis of the dispersion of the
LIS/DE within contract differences. Under the rule we are finalizing,
the 2021 CAI values will be determined using all measures in the
candidate measure set for adjustment identified by application of
paragraphs (f)(2)(ii)(A) through (D). A measure will be adjusted if it
remains after applying the following four bases for exclusions as
follows: The measure is already case-mix adjusted for SES (for example,
CAHPS and HOS outcome measures); 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); the
measure is scheduled to be retired or revised during the Star Rating
year in which the CAI is being applied; or the measure is applicable to
only Special Needs Plans (SNPs) (for example, SNP Care Management, Care
for Older Adults measures). With this modification to the CAI
calculations, the ratings will continue to be data driven in order to
be a true reflection of plan quality and enrollee experience, and
continue to treat all contracts fairly and equally. The modification
will only eliminate the selection rule in regards to the size of the
within contact differences. This selection rule was originally
developed based on a goal of adjusting measures only when there are
substantive LIS/DE within contract measure disparities. Commenters
suggested that this selection rule should be relaxed or eliminated. In
cases where there is little or no difference in the LIS/DE within
contract performance, there will be very minimal or no impact on the
calculation of the CAI values. Previously, we have excluded measures
from this calculation when the effects were very small. With this
modification based on the comments received and further analysis, these
measures will be included but will have a very minimal impact on the
CAI values.
Comment: Some commenters suggested including a hold harmless
provision for the application of the CAI for plans with limited LIS/DE
populations. Some commenters believed contracts should not be subject
to negative adjustments because they have a low percentage of LIS/DE or
disabled enrollees. A commenter suggested a hold harmless provision for
contracts that upon the application of the CAI, would have their
ratings fall below a particular threshold.
Response: As summarized in the NPRM, research indicates disparities
exist in performance measures that are influenced by an individual's
sociodemographic factors. The CAI was designed to account for the
disparities that were revealed in our research and to adjust for those
disparities in order to allow fair comparisons among contracts. The CAI
is determined using the data from the Star Ratings program. Instead of
a one-size fits-all approach to address the impact of the socioeconomic
factors on the Star Ratings, the CAI allows a tailored approach by the
categorization of a contract into final adjustment category that is
based on the percentage of LIS/DE and disabled beneficiaries enrolled
in a contract. In addition, the CAI values are a series of values based
on the rating-type (overall, Part C summary, Part D summary). Further,
the CAI values for the Part D summary ratings are contract-type
specific and a different set of values are developed for MA-PDs and
PDPs.
CMS remains committed to our fundamental principles, which includes
incentivizing contracts to provide the best quality of care to all of
their enrollees and providing accurate information to beneficiaries to
allow comparisons among contracts for plan choice. A hold harmless
provision for the CAI that specifically targets contracts with limited
LIS/DE populations or contracts that would realize a negative impact
does not align with the underlying principles of the Star Ratings
program or the fundamental design principles of the CAI. Such a
provision could have the unintended consequence of limiting quality
improvement and innovation for the care of the LIS/DE/disabled
population, as well as distort the signal of the Star Ratings.
Comment: Several commenters were critical of codifying an interim
response and expressed concern that it would impede a long-term
response.
Response: CMS's goal is to develop a long-term solution that
addresses the LIS/DE/disabled effect revealed in our research. Any
response, long- or short-term, must align with our policy and program
goals. CMS is confident that we can maintain our agility and
responsiveness even when codifying the interim solution. The use of the
CAI as an interim response affords CMS the time to carefully consider
each potential solution, to continue our collaboration with
stakeholders, to incorporate the findings of the research community,
and to include the anticipated recommendations in ASPE's second Report
to Congress that will be released in 2019.
Comment: Some commenters encouraged the continued collaboration
with ASPE and measure developers.
Response: CMS remains firmly committed to our continued research
and collaboration with our stakeholders including researchers,
industry, measure stewards, and other governmental agencies. The
development of a long-term solution that best addresses any sensitivity
of the Star Ratings to the beneficiaries enrolled in MA and PDP
contracts is only possible through continued collaboration and feedback
from our stakeholders.
Comment: Some commenters believe that the CAI is an insufficient
adjustment and advocated for a larger adjustment. Further, some of the
commenters justified a larger adjustment due to the higher costs
associated with caring for traditionally underserved vulnerable
populations. A few of the commenters suggested the use of an equity
bonus, as suggested in ASPE's first Report to Congress, to address the
additional costs for serving traditionally underserved populations.
Response: CMS believes that any policy response must delineate the
two distinct aspects of the LIS/DE or disability issue--quality and
payment. The Star Ratings program focuses on accurately measuring the
quality of care provided, so any response must focus on enhancing the
ability to measure actual quality differences among contracts. To
address the LIS/DE and disability issue CMS must accurately address any
sensitivity of the ratings to the composition of the beneficiaries
enrolled in a contract at the basic

[[Page 16585]]

building block of the rating system, the measure. CMS believes the CAI
addresses the quality measurement aspect of the issue at hand. In
addition, CMS has encouraged the measure stewards to examine our
findings and undertake an independent evaluation of the measures'
specifications to determine if measure re-specification is warranted.
Additionally, the payment response which is not the focus of this
regulation focuses on payment accuracy for beneficiaries with different
dual statuses, differentiated by aged or disabled status, by improving
the predictive performance of the CMS-HCC risk-adjustment model to take
into account the unique cost patterns of each of these subgroups of
beneficiaries.
Comment: Some commenters suggested adjusting for both within- and
between-contract differences. The commenters referenced one of the two
findings in ASPE's Report to Congress that found differences in plan
performance between contracts serving primarily LIS/DE and disabled
populations and those who do not even after adjusting for patient-mix.
Response: As summarized in the NPRM, CMS's focus on within-contract
disparities for the development of the CAI aligns with the
recommendations of the research community including the National
Quality Forum (NQF), MedPAC, and ASPE. CMS conducted an in-depth
examination of the possible sensitivity of the Star Ratings to the
composition of a contract's enrollees using a multi-faceted,
comprehensive approach. One analysis permitted the estimation of
within-contract differences associated with LIS/DE or disability to
quantify the LIS/DE/disabled effect. Within-contract differences are
differences that may exist between subgroups of enrollees in the same
contract (for example, if LIS/DE enrollees within a contract have a
different mean or average performance on a measure than non-LIS/DE
enrollees in the same contract). These differences may be favorable or
unfavorable for LIS/DE and/or disabled beneficiaries. Between-contract
differences in performance associated with LIS/DE or disability status
(``between-contract LIS/DE and/or disability disparities'') are the
possible additional differences in performance between contracts
associated with the contract's proportion of LIS/DE and disabled
enrollees that remain after accounting for within-contract disparities
by LIS/DE and disability status. If LIS/DE or disabled beneficiaries
are more or less likely than other beneficiaries to be enrolled in
lower-quality contracts, then between-contract disparities may
represent true differences between contracts in quality. Because of
this possibility, we are concerned that adjustment of between-contract
disparities could mask true differences in quality.
Adjusting for within-contract disparities is an approach aligned
with the consensus reflected in the NQF report on sociodemographic
adjustment, which states that, ``. . . only the within-unit effects are
adjusted for in a risk adjustment procedure because these are the ones
that are related specifically to patient characteristics rather than
differences across units'' (National Quality Forum, 2014). Our research
focused on measuring within-contract differences in performance for
LIS/DE and/or disabled compared to non-LIS/DE and non-disabled
beneficiaries.
The Improving Medicare Post-Acute Care Transformation Act of 2014
(IMPACT Act, Pub. L. 113-185) instructs the Office of the Assistant
Secretary for Planning and Evaluation (ASPE) to conduct a study that
examines the effect of individuals' SES on quality measures, resource
use, and other measures for individuals under the Medicare program.
Because ASPE's research agenda aligns closely with our goals, we have
worked and continue to work collaboratively with ASPE and other
governmental agencies to broaden and expand the focus of the issue. In
December, 2016 ASPE released its findings to Congress using readily
available data which includes data from the Star Ratings program. In
it, ASPE supported the use of the CAI in the Star Ratings program
including our focus on the within-contract disparities.
ASPE will release a second Report to Congress in the fall of 2019
that will focus on the impact of SES on quality and resource use in
Medicare using measures (for example, education and health literacy)
from other data sources. Once the report is released, CMS will
carefully review the report and all recommendations contained within
it.
Comment: A commenter specifically offered to collaborate with CMS.
Response: CMS appreciates the willingness, support, and dedication
of our stakeholders to improve the health of our beneficiaries. We
value the feedback and suggestions provided by our stakeholders.
Comments and suggestions are welcome throughout the year. Outside of
formal comments periods, stakeholders can contact us via email at the
following address: [email protected].
Comment: A commenter suggested comparison of like plans for
adjustment specifically comparing Dual-Special Needs Plans (D-SNPs) to
D-SNPs. The commenter believed this would allow an apples-to-apples
comparison in regards to performance reimbursement.
Response: The CAI adjusts for the average within-contract
disparities across all contracts required to report using the adjusted
measures set as the basis of the adjustment. Contracts, including D-
SNPs, are categorized based on their percentages of LIS/DE and disabled
beneficiaries. The adjustment is designed to be monotonic, or in other
words, contracts with higher percentages of LIS/DE or disabled
beneficiaries will realize a larger adjustment. While the CAI does not
compare D-SNPs to D-SNPs, the adjustment does account for the higher
percentages of LIS/DE and disabled beneficiaries in a contract by
categorizing the contracts in the higher final adjustment categories
and thus, the categories with the higher adjustments.
The CAI is designed to address the sensitivity of the Star Ratings
to the composition of the enrollees in a contract. The Star Ratings are
designed for quality measurement and not for payment purposes. The
design and development of the CAI was done to address measurement and
not payment.
Comment: A commenter suggested increasing the adjustment for the
two highest adjustment categories ) in order to have a more significant
impact on the overall Star Rating The commenter believed the underlying
efforts are significantly different for contracts with high percentages
of LIS/DE/disabled enrollees. Further, the commenter believed there are
administrative challenges and higher costs associated with promoting
beneficiary compliance in servicing vulnerable populations.
Response: The use of a consistent methodology and a data-driven
approach precludes the possibility of an increase in the adjustment in
a subset of the final adjustment categories. The CAI is designed from a
quality measurement perspective and not payment. (The CAI methodology
is detailed in the CAI Supplement available at http://go.cms.gov/partcanddstarratings.)
Comment: A commenter recommended enhancing the categorization of
contracts specifically noting that the number of initial categories for
MA-PDs increased from 50 to 60 categories when comparing the 2017 to
2018 CAI, but the number of initial categories for PDPs categories
remained at 16 categories.
Response: The number of groups in each dimension (LIS/DE and
disabled) are determined after reviewing each of the distributions
using the percentages of LIS/DE and disabled across all contracts (MAs
and PDPs are examined

[[Page 16586]]

separately) using the applicable data. The MA LIS/DE distribution for
the 2018 CAI had shifted slightly as compared to the data for the 2017
CAI development, so the decision was made to increase the number of
initial groups for the LIS/DE dimension and maintain the same number of
groups for the disabled dimension. The number of initial categories for
the 2018 CAI values was increased from 50 (10 LIS/DE groups and 5
groups for disability) to 60 (12 LIS/DE groups and 5 groups for
disability). The use of additional initial categories in 2018 did not
significantly impact the number of final adjustment categories (FAC)
since the collapsing of the initial categories is done to maintain
monotonicity and maintain a minimum number of contracts per FAC, while
striving for a minimum differential between the FACs. After examining
the distributions for PDPs, the use of the same number of initial
groups for each dimensions was determined to be appropriate. Additional
initial categories do not enhance or refine the final adjustment
categories, but rather can cause instability in the CAI values.
Comment: A few commenters suggested stratifying all measures by
LIS/DE and disabled status.
Response: At this time, the National Committee for Quality
Assurance (NCQA) \68\ and the Pharmacy Quality Alliance (PQA) \69\ have
recommended stratification for a subset of their measures that are used
in the Star Ratings program. CMS is waiting for ASPE to complete their
research under the IMPACT Act before developing an Agency-coordinated
approach to the display of measures.
---------------------------------------------------------------------------

\68\ A summary of the NCQA analysis and recommendations can be
accessed at: http://www.ncqa.org/hedis-quality-measurement/research/hedis-and-the-impact-act.
\69\ The PQA summary can be accessed at: SDS Risk Adjustment PQA
PDC CMS Part D Stars.
---------------------------------------------------------------------------

Comment: A commenter suggested the creation of a structural measure
that reflects the support for LIS/DE and disabled beneficiaries
provided by a contract.
Response: CMS appreciates the suggestion. CMS is currently
examining the feasibility of a health equity measure that could be
potentially proposed in the future.
Comment: A few commenters recommended that CMS proceed with
caution, citing concerns with creating a double-standard or tiered
system, or masking disparities. A commenter expressed strong support of
CMS in seeking to utilize the Star Rating system to encourage
continuous quality improvement in the MA and Prescription Drug
programs, providing oversight to ensure accuracy and transparency, and
not accepting any changes to performance measurement that would lead to
masking disparities and harming disadvantaged patients. Another
commenter recommended that CMS monitor how adjustments to the Star
Ratings affect the quality of care received by LIS/DE and disabled
enrollees.
Response: CMS is committed to making informed decisions based on
thoughtful and careful consideration of any unintended consequences of
a particular approach. CMS has focused on the within-contract
disparities, because we do not want to mask true differences in quality
across contracts. CMS is transparent in the development process and
seeks the input of our stakeholders, HHS partners, and other government
agencies. CMS thoroughly examines any proposed modification using a
comprehensive approach which commonly includes multiple rounds of
simulations. Further, CMS strives to identify any potential unintended
consequences of any possible change and to develop strategies to
mitigate any potential risks to the integrity of the Star Ratings
system. Upon implementation, CMS maintains vigilance in its review and
monitoring of the change to ensure that the policy goals that prompted
the modification have been met.
Comment: Several commenters suggested working with measure
developers.
Response: CMS has been working closely with the measure developers
for the measures used in the Star Ratings program and will continue to
do so.
Comment: A commenter suggested that CMS set minimum standards for
measure developers that include testing and considerations for
adjustments. Further, the commenter believes that the research should
be made public to align with the goal of transparency.
Response: While CMS does collaborate with the measure developers of
the measures used in the Star Ratings program, they remain independent
entities that are the stewards and shepherds of their own measures.
Both National Committee for Quality Assurance (NCQA) and Pharmacy
Quality Alliance (PQA) have well-defined processes in place for
revising or updating their measures. Public comment is solicited during
their review process, as well as feedback from their many stakeholders
including the medical community.
Comment: A commenter inquired about the future use of the
stratified measures proposed by PQA and NCQA.
Response: Both NCQA and PQA will be modifying the measure
specifications for a subset of their measures that are used in the Star
Ratings program and will require stratified reporting. A summary of the
NCQA analysis and recommendations can be accessed at: http://www.ncqa.org/hedis-quality-measurement/research/hedis-and-the-impact-act. A summary of the modification of the PQA measures can be accessed
at: SDS Risk Adjustment PQA PDC CMS Part D Stars. CMS will be reviewing
the data submitted as a result of these changes in the measure
specifications which impacts the measures' reporting requirements. CMS
will be developing a proposal for the use of the revised data through
future rulemaking.
Comment: A commenter supported an additional adjustment for all
plans serving vulnerable populations outside of the CAI.
Response: At this time, CMS' response to the LIS/DE/disabled effect
is the CAI. As our research and that of our stakeholders, government
agencies, and measure developers evolves, CMS will be developing a
long-term response and will take the commenters' recommendations into
account as part of that.
Comment: Some commenters suggested incorporating other factors that
are well-known as predictors of medication adherence and other Star
Rating quality outcomes.
Response: CMS continues to conduct research on the underlying
factors driving the LIS/DE/disability effect. In addition, CMS has been
working closely with the measure developers for the measures used in
the Star Ratings program. Further, we continue to collaborate with
stakeholders and other governmental agencies including ASPE. ASPE will
release a second Report to Congress in the fall of 2019 that will focus
on the impact of SES on quality and resource use in Medicare using
measures (for example, education and health literacy) from other data
sources.
Comment: Some commenters stated that geographic and unique
characteristics that could affect Star Ratings performance should also
be assessed and addressed.
Response: CMS continues to conduct research on the underlying
factors driving the LIS/DE/disability effect. CMS has examined the
sociodemographic correlates with a subset of the HEDIS measures used in
the Star Ratings program. CMS is committed to identifying the cause of
any sensitivity of the Star Ratings to the composition of enrollees in
a contract. CMS continues to examine geographic variation, as well as
unique attributes of both beneficiaries and contracts that

[[Page 16587]]

may play a role in the disparity in performance among subpopulations.
Comment: A commenter took the opportunity to note that, as the
Agency moves forward with developing a Quality Rating System (QRS) for
Medicaid managed care organizations, many of the considerations that
apply to the Medicare Star Ratings program will likely have
implications for, and interactions with, this new Medicaid QRS.
Response: Although this comment is outside the scope of this rule,
we note that the MA Star Ratings Team is engaged with the team leading
the development of the QRS for Medicaid.
Comment: Some commenters encouraged CMS to explore adjusting for
social risk factors at the measure-level or for the overall Star Rating
System. A commenter specifically recommended that at minimum, age and
gender should be used for adjusting all measures in the Star Ratings
program.
Response: A measure specification details the adjustments for a
measure. Only a measure steward may make revisions to the measure
specification. CMS continues to engage in conversation with the measure
stewards of the Star Ratings measures.
CMS is continuing research and collaboration with our stakeholders
to develop a long-term response to the sensitivity of the Star Ratings
to the composition of enrollees in a contract.
Comment: A commenter requested additional detail regarding the
selection of the Medication Adherence for Hypertension for adjustment
in the MA-PD and PDP contracts while not providing an adjustment on the
other two medication adherence measures.
Response: As discussed in the proposed rule, CMS initially
developed and used two sets of rules to determine the adjusted measure
set: First, the rules to determine the measures that comprise the
candidate measure set for adjustment and second, the rules applied to
the candidate set to identify the measures to be adjusted to determine
the values of the CAI. The second set of rules relied on the analysis
of the variability of the within-contract differences of LIS/DE and
non-LIS/DE beneficiaries.
After thoughtful and careful deliberation of the recommendations of
our stakeholders, CMS will modify the selection rules for identifying
the adjusted measures by eliminating the second set of rules for
determining the adjusted measure set. The 2021 CAI values will be
determined using all measures in the candidate measure set for
adjustment, thus eliminating the second set of selection rules. A
measure will be adjusted if it remains after applying the exclusions as
follows: The measure is 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).
For the 2021 Star Ratings program, all three medication adherence
measures will be designated as an adjusted measure for the
determination of the CAI.
Comment: A commenter expressed support of the additional adjustment
for contracts operating in Puerto Rico.
Response: CMS appreciates the positive feedback regarding the
additional adjustment for contracts that operate solely in Puerto Rico.
CMS believes the adjustment allows for an equitable application of the
CAI for the subset of contracts for which it applies.
Summary of Regulatory Changes
For the reasons set forth in the proposed rule and our responses to
the related comments summarized above, we are finalizing the provisions
as proposed at Sec. Sec. 422.166(f)(2) and 423.186(f)(2) with
modifications to Sec. Sec. 422.166(f)(2)(iii) and 423.186(f)(2)(iii).
The 2021 CAI values will be determined using all measures in the
candidate measure set for adjustment. A measure will be adjusted if it
remains after applying the exclusions as follows: The measure is
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).
u. High and Low Performing Icons
We proposed regulation text to govern assignment of high and low
performing icons at Sec. Sec. 422.166(h)(1) and 423.186(h)(1). We
proposed to continue current policy that a contract receives a high
performing icon as a result of its performance on the Part C and D
measures. The high performing icon is 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 proposed that 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 will 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 will 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 were proposed for
codification at Sec. Sec. 422.166(h)(1)(i) and (ii)(A) and
423.186(h)(1)(i) and (ii)(A).
We also proposed, at paragraph (h)(1)(ii)(B), 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) would be warned, via explanatory messaging of the plan's poorly-
rated performance, and directed to contact the plan directly to enroll.
We received the following comments to our proposal and our
responses follow:
Comment: Commenters overwhelmingly expressed support for the icons,
as well as our policy of disabling the online enrollment option for
contracts with the low-performing icon. A commenter suggested requiring
3 years of high performance to qualify for a high-performing icon, and
another commenter suggested CMS include a full explanation for
beneficiaries when the low-performing icon is assigned.
Response: We appreciate this support and the suggestions made. We
will take them under consideration.
Comment: We received one comment requesting that CMS create a
separate icon to provide beneficiaries with information about a
contract's audit performance.

[[Page 16588]]

Response: CMS does note on Medicare Plan Finder when contracts are
under sanction. We appreciate this suggestion to share additional
information regarding contract audit scores and Civil Money Penalties
on Plan Finder.
For the reasons set forth in the proposed rule and our responses to
the related comments summarized earlier, we are finalizing the
provisions for high and low performing icons and enrollment process
limitations as proposed at Sec. Sec. 422.166(h)(1) and 423.186(h)(1)
without modification.
v. Plan Preview of Star Ratings
We proposed in Sec. Sec. 422.166(h)(2) and 423.186(h)(2) 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. We
currently use two preview periods. 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
includes 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 are 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. We proposed that CMS continue to
offer plan preview periods before each Star Ratings release (meaning
the display in the MPF), but to not codify the details of each period
because over time the process has evolved to provide more data to
sponsors to help validate their data. We explained in the proposed rule
that we envision the plan preview periods to continue to evolve in the
future and do not believe that codifying specific display content is
necessary.
We also emphasized in the proposed rule how 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 has traditionally been and will
in the future 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 received the following comments on our proposal and our
responses follow:
Comment: Several commenters expressed support for the continuation
of plan preview periods. One specifically mentioned agreeing with CMS'
decision not to codify the details at this time.
Response: CMS appreciates this support.
Comment: Several commenters acknowledged the importance of
reviewing their data throughout the year. A commenter suggested that
CMS release Star Ratings for marketing purposes by August 15 each year;
another suggested that preview periods be at least four weeks long.
Several commenters also suggested additional data they believed would
be helpful for CMS to provide during plan previews. For example, a few
specifically requested that CMS release improvement measure calculation
worksheets for all contracts during the preview. Another commenter
requested more timely and frequent drug list and PDE edit updates to
ensure reporting accuracy, as well as additional reporting on adherence
measures.
Response: CMS strives to allow plans as much time as possible to
preview their data but there are operational constraints that limit how
soon Star Ratings can be made available for plan preview. The data time
frame for several measures currently runs through June of each year,
and CMS does not receive all of the data until the end of July. The
first plan preview currently starts in early August, the second plan
preview starts in September, and the public release on MPF is in
October. In between plan preview periods CMS must make any necessary
corrections to the data, so four-week preview periods are not feasible
operationally. Many datasets and reports are available for ongoing
monitoring purposes prior to Star Rating plan previews. We urge Part C
and D sponsors to regularly review their underlying measure data that
are the basis for the Part C and D Star Ratings and immediately alert
CMS if errors or anomalies are identified so any issues can be resolved
prior to the first plan preview period. For measures that are based on
data reported directly from sponsors, any issues or problems can and
should be raised well in advance of CMS's plan preview periods.
CMS appreciates comments received about additional data that could
be provided during previews. The improvement calculation emulation
worksheets are available to sponsoring organizations to preview their
own improvement scores per contract during the second plan preview;
these can be requested by contacting [email protected].
We note the NDC files are updated three times for a given
measurement year's PDEs. For 2018 PDEs, the PQA, as custodian of a
measure, publishes the NDC lists in both February and July 2018, and
again in February 2019 allowing sponsors multiple opportunities to
identify missing NDCs/drugs prior to the release of the April 2019
report that includes all 2018 to-date processed PDEs and the first Star
Ratings plan preview in August/early September 2019. Furthermore, the
PQA's NDC update schedule does not preclude a Part D sponsor from
internally updating its NDC list more frequently, monitoring its
performance and implementing timely interventions including those that
could occur at the point-of-sale. We believe this implementation
timeframe is reasonable and appropriate, and defer to the measure
custodian for revisions.
For several Patient Safety measures CMS provides each Part D
contract a file containing their beneficiary-level adjusted and
unadjusted rates that can be used by the contract to independently test
their internal reporting processes and assess the impact of adjustment
factors. In particular, the adherence measure report provides up to
70,000 beneficiary enrollment episodes (including begin and end dates)
where the beneficiary was not adherent, along with the adjusted and
unadjusted numerator and denominator days used in the beneficiary's PDC
calculations. The size of the adherence beneficiary sample should be
sufficient to perform the PDC calculation to address systematic issues
as requested.
Comment: Several commenters suggested that CMS post national Star
Ratings data during the plan preview period.
Response: The purpose of the plan previews is for sponsors to
review and raise any questions about their own plan's data prior to the
public release of data for all plans on Medicare.gov. This allows for
any necessary corrections to be made prior to the Star Ratings data
being public. Releasing national Star Ratings data (meaning data about
other plans' ratings) would not serve this purpose. Further, to the
extent that errors are identified and changes need to be made to data,
it would mean that updates to the national data render earlier release
inaccurate and less useful.

[[Page 16589]]

Summary of Regulatory Changes
For the reasons set forth in the proposed rule and our responses to
the related comments summarized above, we are finalizing the provisions
for plan previews as proposed at Sec. Sec. 422.166(h)(2) and
423.186(h)(2) without modification.
w. Technical Changes
We also proposed a number of technical changes to other existing
regulations that refer to the quality ratings of MA and Part D plans;
we proposed to make technical changes to refer to the proposed new
regulation text that provides for the calculation and assignment of
Star Ratings. Specifically, we proposed:
In Sec. 422.258(d)(7), to revise paragraph (d)(7) to
specify that beginning with 2012, the blended benchmark under
paragraphs (a) and (b) 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) must be increased
according to criteria in paragraphs (d)(7)(i) through (v) 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 specify
that 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 and that 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 mean 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
state 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
state maintain a Part D summary plan rating score of at least 3 stars
pursuant to the 5-star rating system specified in part 423 subpart D. A
Part D summary plan rating is calculated as provided in Sec. 423.186.
We welcomed 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.
We did not receive any comments on the proposed technical changes
and therefore are finalizing them. However, we noted in our review that
in several of these technical corrections, the text mistakenly referred
to ``subpart 166'' or ``subpart 186'' which is incorrect. The quality
rating system regulations are finalized in subpart D of part 422 and
part 423, so we are finalizing these technical changes with the correct
reference to ``subpart D''.
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 proposed rule, we intended to clarify that the any willing
pharmacy requirement applies to all pharmacies, regardless of how they
have organized one or more functional lines of pharmacy business.
Second, we proposed to revise the definition of retail pharmacy and
define mail-order pharmacy. Third, we proposed to clarify our
regulatory requirements for what constitutes ``reasonable and
relevant'' standard contract terms and conditions. Finally, we proposed
to codify our existing guidance with respect to when a pharmacy must be
provided with a Part D plan sponsor's standard terms and conditions.
We received the following comments and our response follows:
Comment: A large number of Part D enrollees expressed appreciation
for our series of any willing pharmacy proposals, while other
commenters expressed concerns with our preamble discussion because they
believed that CMS was considering eliminating or otherwise changing the
ability for Part D plan sponsors to develop and maintain preferred
pharmacy networks. Some commenters contended that Part D enrollees are
able to exercise freedom of choice without any willing pharmacy
mandates, and that preferred pharmacy networks are popular among
beneficiaries. A number of other independent pharmacies requested that
we consider extending any willing pharmacy provisions to preferred
pharmacy networks in future rulemaking, and several Part D plan
sponsors thanked us for recognizing that we should not limit the
ability of Part D plan sponsors to develop and maintain preferred
pharmacy networks.
Response: We believe that the commenters who thought our proposal
was intended to restrict Part D plan sponsors' ability to have
preferred pharmacy networks misunderstood the proposal. The proposed
rule's discussion of any willing pharmacy standard terms and conditions
requirements, proposed definitions of retail and mail-order pharmacies,
and accreditation requirements in standard terms and conditions were
not intended to limit Part D plan sponsors' ability to develop and
maintain preferred pharmacy networks. On the contrary, we explicitly
stated in the proposed rule that we were attempting to ensure that Part
D plan sponsors could continue to develop and maintain preferred
networks while complying with the any willing pharmacy requirement,
which applies to standard terms and conditions.
Comment: Some commenters asked us to abandon the any willing
pharmacy construct within the Part D program. A commenter pointed out
that the any willing pharmacy provision would require Part D plan
sponsors to contract with any pharmacy who agrees to meet the terms and
conditions of the organization, whether or not the pharmacy's
participation in the network is necessary for the Part D plan sponsor
to satisfy geographic access needs. This commenter contended that the
any willing pharmacy provision is unnecessary because sponsors are
already motivated to provide access to a broad number of pharmacies
because Part D enrollees select a health or prescription drug plan
based on its ability to provide broad access by having pharmacy
networks in place across many geographic areas. Other commenters stated
that CMS' proposal only addressed pharmacy complaints and was
unnecessary because the proposed rule provided nothing to suggest that
Part D enrollees were dissatisfied with how Part D plan sponsors
develop and maintain their contracted pharmacy networks. Other
commenters believed that our any

[[Page 16590]]

willing pharmacy proposals violate the spirit of the non-interference
clause at Sec. 1860D-11(i) of the Act. Additionally, a number of
pharmacies submitted comments that Part D plan sponsors offer
reimbursement rates below acquisition costs, that CMS should codify its
sub-regulatory guidance regarding unreasonably low reimbursement rates
as a means to subvert the convenient access standards, or that the
extended definition of reasonable and relevant should prevent financial
terms and conditions that result in a negotiated reimbursement rate,
that, inclusive of payment and adjustment, results in a loss to the
provider, as such a term that would not be ``reasonable.''
Response: The any willing pharmacy requirement is statutory and CMS
does not have the discretion to abandon it. CMS has already established
through rulemaking that Part D plan sponsors must contract with any
pharmacy that meets the Part D plan sponsor's standard terms and
conditions for network participation (Sec. 423.120(a)(8)(i)) and offer
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 (Sec. 423.505(b)(18)).
It is within our authority and appropriate for CMS to provide
additional clarification of these regulatory requirements when
necessary to help ensure they are being effectuated in accordance with
the statutory requirement. While we did not propose to further specify
``reasonable and relevant'' standard terms and conditions in this
rulemaking, and generally would prefer not to do so for the reason we
have provided in prior rulemaking (that is, to provide plans with
maximum flexibility to structure standard terms and conditions) (see 70
FR 4254), we will consider it in the future if we find that our current
requirements are no longer sufficient to implement the statutory any
willing pharmacy requirement as a result of the changing pharmaceutical
distribution marketplace.
Additionally, the non-interference clause at section 1860D-11(i) of
the Act does not prohibit us from establishing or clarifying regulatory
requirements to implement the any willing pharmacy requirement. Since
the inception of the Part D program, consistent with the non-
interference clause, CMS has declined to intervene in negotiations or
disputes involving payment-related contractual terms. However, within
the limits of our authority, we also have a duty to implement and
enforce other statutory requirements to promote competition and have
pursued goals such as increasing the transparency of prices and
minimizing barriers to entry to the extent possible while still
ensuring quality. Accordingly, CMS has always interpreted the any
willing pharmacy requirement to require Part D sponsors to offer
reasonable and relevant contract terms and conditions to minimize
barriers to pharmacy network participation and we maintain that
requirement in this rule. Our clarifications are intended to ensure
that such contract terms and conditions offered by Part D sponsors
remain reasonable and relevant in light of the changes and innovations
in pharmacy practice and business models since the beginning of the
Part D program.
Finally, the proposed rule explicitly addressed the any willing
pharmacy requirement in relationship to complaints received from Part D
enrollees (such as, confusion concerning Part D enrollee cost-sharing
expectations). Further, although we believe they misunderstood our
proposal, many of the Part D enrollees that commented on our proposed
rule specifically communicated their dislike of preferred pharmacy
networks.
We believe our clarifications on application of the statutory any
willing pharmacy requirement, address Part D enrollee and marketplace
confusion, maintain Part D plan sponsor flexibility, and address recent
innovations pharmacy business and care delivery models.
Comment: Several commenters expressed concern that our proposals
would lead to more fraud, waste, and abuse in the Part D program. A
commenter provided two examples of fraud, waste, and abuse that
resulted in both pharmacies being terminated and prohibited from
reapplying to be a contracted network pharmacy. Another commenter
expressed concerns that they encountered fraudulent claims in
situations where Part D enrollees received prescriptions by mail that
they never requested from a pharmacy in another state and from a
provider in yet another state. A commenter suggested that CMS should
allow Part D plan sponsors to suspend claims when fraud is suspected.
Response: While we thank the commenters for their views, we fail to
see how our clarifications would have any impact on Part D plan
sponsors' abilities to combat fraud, waste, and abuse. Part D plan
sponsors are required at Sec. 423.504(b)(4)(vi) to take appropriate
steps to combat fraud, waste, and abuse, and such terms and conditions
are in no way prohibited, so long as they are reasonable and relevant.
That is, should a pharmacy violate the relevant terms and conditions,
or have a history of doing so, a Part D plan sponsor would have no
obligation to contract with the pharmacy under the any willing pharmacy
requirement.
Comment: Some commenters suggested that CMS should explore policy
options to encourage Part D plan sponsors to offer medically complex
patients reduced/zero cost sharing when utilizing high-touch pharmacy
models to support both patient-centered care and the goals of
Medication Therapy Management.
Response: We thank the commenters, however these comments are
beyond the scope of this rule.
a. Any Willing Pharmacy Required for All Pharmacy Business Models
With the pharmaceutical distribution and pharmacy practice
landscape evolving rapidly, and because pharmacies' business and
service delivery models now frequently perform multiple pharmacy
practice functions, 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 specialty drugs. 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. In the original
rule that implemented the Part D program (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 received a number of complaints
that some Part D plan sponsors have declined to permit willing
pharmacies to participate in

[[Page 16591]]

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. Therefore, we clarified in the preamble
to the proposed rule that, although Part D plan sponsors may continue
to tailor their standard terms and conditions for 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
Part D plan sponsor's pharmacy type classification.
We received the following comments and our response follows:
Comment: A commenter contended that CMS is reading ``that meets the
terms and conditions under the plan'' out of the statute.
Response: We take this comment to mean that commenter believes that
we are reading ``A prescription drug plan shall permit the
participation of any pharmacy'' at section 1860D-4(b)(1)(A) of the Act
to the exclusion of ``that meets the terms and conditions under the
plan'' in the same paragraph. We disagree. We are concerned that such
an interpretation conflates a Part D plan sponsor's ability to develop
and maintain preferred pharmacy networks with the any willing pharmacy
provision, thereby effectively nullifying the any willing pharmacy
provision. The ``reasonable and relevant'' requirement strikes the
right balance in the inherent tension between the statutory any willing
pharmacy and preferred pharmacy network provisions. We believe it is
necessary to require terms and conditions to be reasonable and relevant
to avoid subverting the any willing pharmacy requirement entirely.
Consequently, CMS requires the standard terms and conditions under the
plan to be reasonable and relevant.
In order to be reasonable and relevant, such terms and conditions
must pertain to the pharmacy's business and services as allowed under
its license(s). While traditionally such terms and conditions could
easily be established based upon classification as a retail or mail-
order pharmacy, our intent is to illustrate that those traditional
labels likely do not sufficiently encompass today's evolving pharmacy
practice. Pharmacies complained to us that they had been excluded from
network participation, not because they were unwilling or unable to
meet the standard contracting terms and conditions, but because their
business and service delivery models represented hybrids that did not
squarely meet any of the definitions by which Part D plan sponsors
typically classify pharmacies. Again, CMS is not prescribing what the
terms and conditions have to be; we were only clarifying that they must
actually be reasonable and relevant to those functions performed, and
not theoretically reasonable and relevant based upon outdated pharmacy
classifications that do not accurately reflect today's pharmacy
business model(s) and practices.
Comment: Some commenters contended that our proposal effectively
classifies all pharmacies as similarly situated and would require Part
D plan sponsors to require a single standard contract for all
pharmacies, regardless of their business models or type of
classification. We received comments from several pharmacies with
innovative pharmacy practice models, including one that possesses
elements of mail-order, retail, and long term care but doesn't squarely
meet any one of those definitions.
Response: We disagree. We explicitly stated in our proposed rule
and reiterate here that Part D plan sponsors may continue to tailor
their standard terms and conditions to various types of pharmacies. We
also said that pharmacies whose pharmacy practice business and service
delivery model crosses multiple functions would be considered to be
similarly situated for each of the pharmacy types they represent. By
referring to pharmacy types, we mean the types of services provided by
the pharmacy. While some pharmacies may still offer exclusively one
type of service, an increasing number of pharmacies are offering
innovative and multiple types of services that do not fit within the
traditional pharmacy classifications. Consequently, we are merely
stating that Part D plan sponsors need to offer standard terms and
conditions that are reasonable and relevant for the types of services
being provided by the pharmacy, which could be accomplished via
multiple contracts or addenda that are specific to types of services.
For example, a pharmacy that predominantly provides retail services but
also provides mail services would presumably be offered terms and
conditions that are reasonable and relevant to both types of services.
It is up to Part D plan sponsors to determine if this is best
accomplished with multiple contracts based upon service type, addenda
to a single contract, or another type of contract that accommodates
unique and innovate pharmacy practice business and care delivery
models.
Comment: Some commenters suggested that best practice requires
pharmacies that perform multiple functions to maintain and use a unique
National Provider Identifier (NPI)/National Council for Prescription
Drug Programs (NCPDP) identification number for each designation/
function. Other commenters added that the NCPDP telecommunication
standards named under HIPAA for pharmacy claim submission allow the
pharmacy to indicate the appropriate pharmacy service type at a claim
level, thus enabling the Part D plan sponsor to determine under which
network the claim is processed for reimbursement and allows pharmacies
to be held accountable at a claim level to the threshold associated
with that designation. A commenter suggested that our proposed changes
would require modification of NCPDP standards, which is a time
intensive process.
Response: CMS thanks the commenters for their perspective. Because
telecommunications standards accommodate a retail pharmacy service type
which pharmacies could continue to use, we do not believe our any
willing pharmacy clarifications will require changes to NCPDP
standards. The industry, through NCPDP, could redefine the retail
pharmacy service type. Nevertheless, claims processing should not be
impacted.
Comment: A number of pharmacies commented that Part D plan sponsors
or PBMs only make standard terms and conditions for a retail network
available to pharmacies that express interest in network participation
and do not advertise the existence of any other ``type'' of network.
Response: Part D plan sponsors must provide the standard terms and
conditions that are requested by the pharmacy. While pharmacies may
request any standard terms and conditions offered by the Part D plan
sponsor, it is incumbent upon the pharmacy to request terms and
conditions that are applicable to the business model(s) and types of
services the pharmacy provides so that the terms and conditions offered
are reasonable and relevant. The pharmacy cannot expect to receive
reasonable and relevant terms and conditions if the Part D plan sponsor
is not made aware of different types of services the pharmacy seeking
network participation provides.
Comment: Several commenters agreed that declining a pharmacy's
request for network participation exclusively on the basis of its
multiple pharmacy service offerings is inappropriate, and that Part D
plan sponsors should be permitted to grant applying pharmacies entry
into the network for services based on the

[[Page 16592]]

pharmacy's ability to comply with the terms and conditions specific to
each service model individually. Commenters urged us to clarify that
nothing precludes a Part D plan sponsor from structuring standard terms
and conditions addressing a particular pharmacy practice model or
models and applying those terms and conditions to pharmacies providing
multiple pharmacy services. Other commenters urged us to clarify
whether CMS is stating that a pharmacy can participate under multiple
contracts with a Part D plan sponsor and/or whether a pharmacy can
choose which terms and conditions under which it wants to participate
with that Part D plan sponsor. Additionally, other commenters urged us
to clarify whether Part D plan sponsors should develop standard terms
and conditions applicable to unique and innovative pharmacy business
models as they arise, or, if they should engage in individual
negotiations to determine mutually acceptable reasonable and relevant
terms with such pharmacies. Another commenter suggested CMS should
acknowledge that contractual terms and conditions that do not directly
address unique pharmacy and business and service models would likely
not be reasonable and relevant. Finally, another commented asked, if
pharmacies are counted in multiple categories, what is the impact on
inclusion in access standards?
Response: We thank the commenters for their support and for
requesting these clarifications. We have recognized since our January
2005 final rule that pharmacies may have multiple functional lines of
business, including retail pharmacies that may offer home delivery
services (see 70 FR 4235 and 4255). Additionally, existing operational
guidance states ``[Part D] Plan sponsors may submit data for pharmacies
that serve multiple roles as retail or mail order and LTC, HI, or LA
pharmacies'' (see our Pricing Data Requirements and Submission Calendar
guidance, available at https://www.cms.gov/Medicare/Prescription-Drug-Coverage/PrescriptionDrugCovContra/RxContracting_FormularyGuidance.html). To the extent a pharmacy serves
multiple roles, that pharmacy may be counted toward multiple access
standards.
We agree with the commenters' assessments of our intent. While Part
D plan sponsors should develop standard terms and conditions applicable
to unique and innovative pharmacy business models, we can envision
circumstances where individual negotiations to determine mutually
acceptable reasonable and relevant terms with such pharmacies could
also apply. Later in this section of this final rule, we discuss in
greater detail situations where individual negotiations may be
appropriate. For example, if a pharmacy offers retail and home infusion
services, the Part D plan sponsor must offer that pharmacy its standard
terms and conditions for both the retail and home infusion pharmacy
functions. If the pharmacy is able to agree to and demonstrate
compliance with the Part D plan sponsor's standard retail terms and
conditions, but not the Part D plan sponsor's standard home infusion
terms and conditions, the pharmacy should be granted access to the Part
D plan sponsor's contracted retail pharmacy network, and not the Part D
plan sponsor's contracted home infusion network (until such time that
the pharmacy is willing and able to comply with the Part D plan
sponsor's standard home infusion terms and conditions). When the
pharmacy is willing and able to comply with both the Part D plan
sponsor's retail and home infusion terms and conditions, that pharmacy
may be counted for purposes of both retail convenient access standards
and home infusion network adequacy standards.
As discussed previously, Part D plan sponsors must provide standard
terms and conditions that are applicable to the pharmacy requesting the
terms and conditions. Conversely, we would not expect Part D plan
sponsors to provide standard terms and conditions that are not
applicable to the pharmacy requesting the terms and conditions. We
agree with the commenter that standard contracting terms and conditions
that do not directly address unique pharmacy and business and service
models would likely not be reasonable and relevant.
Comment: A number of commenters urged CMS to routinely review Part
D plan sponsors' terms and conditions and require complete transparency
as to what constitutes ``reasonable and relevant'' by disclosing
standard contracting terms and conditions to the public. Other
commenters urged that CMS should create an independent audit and review
process, perhaps by a third party, by which a pharmacy can challenge
and/or appeal specific standard terms and conditions that it believes
do not meet the any willing pharmacy reasonable and relevant standard.
Another commenter recommended that CMS should allow Part D plan
sponsors the flexibility to develop standard terms and conditions as
they deem appropriate, but require them to submit a justification for
reasonableness and relevance.
Response: We did not propose the changes that the commenters
recommend, and for reasons noted elsewhere in this preamble, we decline
to adopt them now. However, we reserve the right to review all
contracting terms and conditions and investigate complaints regarding
compliance with our rules.
b. Revise the Definition of Retail Pharmacy and Add a Definition of
Mail-Order Pharmacy
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 provision, as codified at
Sec. 423.120(a)(1)-(7), requires 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 benefits (which may include a 90-day supply of drugs or
biologicals), including extended days' supplies, through a pharmacy
(other than a mail-order 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

[[Page 16593]]

pharmacies that serve only plan members'' (see 70 FR 4249). We also
stated in that rule that ``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'' and assumed
most specialty pharmacies to be a specialized subset of home infusion
pharmacies, such that access to specialty pharmacies that did not
provide home infusion services could be adequately addressed by out-of-
network rules at Sec. 423.124 (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 non-retail pharmacies like home infusion and LTC pharmacies do
not count toward the retail pharmacy access requirements, we allow Part
D plan sponsors to count certain non-retail pharmacies, specifically I/
T/U, FQHC, and RHC pharmacies toward the retail pharmacy access
requirements (see 70 FR 4248). Consequently, in light of the rapidly
evolving pharmacy practice landscape, and given that it expressly
excludes only one type of non-retail pharmacy, that is, mail-order
pharmacies, without a corresponding definition of that term, we believe
that our definition of retail pharmacy has been a source of confusion.
Therefore, to clarify what a retail pharmacy is, we proposed to
revise the definition of retail pharmacy at Sec. 423.100. First, we
noted that the existing definition of ``retail pharmacy'' is not in
alphabetical order, and we proposed a technical change to move it such
that it will appear in alphabetical order. Second, we proposed 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 be ``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.''
As mentioned previously, 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.'' While mail-order pharmacies could be considered 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. 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 Part D enrollees regarding how Part D
plan sponsors classify pharmacies for network participation, the Plan
Finder, and Part D enrollee cost-sharing expectations. Additionally, we
received complaints from pharmacies that may offer home delivery
services by mail among other services offered by their overall
operation, but that are not mail-order pharmacies as Part D plan
sponsors have traditionally defined the term. These pharmacies have
complained because Part D plan sponsors singularly classified them as
mail-order pharmacies for network participation despite their other
non-mail-order services 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 the Part D plan
sponsor's mail-order benefit at mail-order cost sharing. Therefore, to
clarify what a mail-order pharmacy is, we proposed 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.
We solicited comment on our proposed modification to the definition
of retail pharmacy and our proposed definition of mail-order pharmacy.
Specifically, we solicited 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.
We received the following comments and our response follows:
Comment: A number of commenters expressed strong support for our
definitions of retail pharmacy, mail-order pharmacy, and for declining
to further define specialty pharmacy and non-retail pharmacy.
Response: We thank the commenters for their support.
Comment: A commenter asked why the definition of retail pharmacy
excluded physician- and hospital-owned pharmacies.
Response: We thank the commenter for the question and assume the
commenter is referring to the phrase ``without being required to
receive medical services from a provider or institution affiliation
with that pharmacy.'' This language exists in our current definition at
Sec. 423.100. However, this language does not refer to pharmacy
ownership and instead has to do with being closed to the walk-in
general public. To the extent that a physician, physician group,
hospital, or health system owns and operates a retail pharmacy that
accepts and dispenses prescriptions that are not limited to its own
prescriber network, such a pharmacy could be counted toward the
convenient access standards.
Comment: Several commenters requested that we expand our definition
of ``network pharmacy'' and interpretation of ``any willing pharmacy''
to include dispensing physicians. Alternatively, other commenters
suggested that CMS should reiterate that accreditation provisions do
not apply to dispensing physicians as physicians are not pharmacies,
and urged us not to impede any provisions that impede physician
dispensing.
Response: We thank the commenters but these comments are outside
the scope of this rule.
Comment: A number of commenters suggested that we should add
``primarily,'' ``predominantly,'' ``routinely,'' or other similar terms
to the definitions of retail and mail-order pharmacy, similar to
Medicaid's definition. Some commenters suggested that we adopt
Medicaid's definition. Some commenters suggested that we should specify
a threshold for these terms or by which a pharmacy could be considered
one type of pharmacy or another, such as 50 or 95 percent of the
pharmacy's prescription volume. A commenter added that there is a
fundamental difference between a retail pharmacy that provides some
home delivery by mail and a mail-order pharmacy that provides some
retail services. Another commenter urged us to specify that a retail
pharmacy cannot simultaneously be a mail-order pharmacy, or vice-versa.
Response: We thank the commenters for their perspectives. As
discussed in the preamble to the proposed rule, the pharmacy types we
defined and proposed to modify and define in regulation describe
pharmacy practice business and service delivery functions that an
individual pharmacy may perform, solely, or in combination. We are
clarifying the definition of retail pharmacy for purposes of
establishing which pharmacies in a Part D plan sponsor's contracted
pharmacy network can count toward Part D convenient access standards
under Sec. 423.120(a)(1). The purpose of these definitions is not
related to contracting terms between the Part D plan sponsor and
pharmacy, or any willing pharmacy. We understand that our proposed
definitions of retail

[[Page 16594]]

and mail-order pharmacy could be narrower, but we do not believe that
we need to establish a threshold for purposes of evaluating convenient
access standards and are not otherwise defining it for purposes of
establishing which terms and conditions are reasonable and relevant.
Similarly, we proposed a definition of mail-order pharmacy for the
very specific reason of clarifying Part D enrollee cost-sharing
expectations and differentiating national mail-order pharmacies that
contract with Part D plan sponsors to provide the Part D plan sponsors'
mail-order benefits from pharmacies that otherwise deliver some or all
of their business through mail service without providing the Part D
plan sponsors' mail order benefits. It was not intended to preclude
terms and conditions that are reasonable and relevant to mail-service
delivery by all pharmacies.
Comment: Some commenters requested that we should define a
threshold for ``extended days' supply'' since retail pharmacies also
dispense extended days' supplies.
Response: The level playing field provision of the statute (section
1860D-4(b)(1)(D) of the Act) provides parity for retail pharmacies to
provided extended days' supplies like mail-order pharmacies. While the
statute refers to 90-days' supplies, we are aware that, based on
package sizes, extended days' supplies span a range, for example,
between 63 and 100 days, and that Part D plan sponsors have
operationalized parity with retail pharmacies for these quantities, in
part, to reduce waste. We therefore believe it would be inappropriate
for us to proscribe a threshold that could unintentionally restrict the
arrangements for extended days' supplies that Part D plan sponsors have
made with retail pharmacies or generate dispensing waste.
Comment: A number of commenters objected to our use of the phrase
``to the walk-in general public'' in our proposed definition of retail
pharmacy, and some asked us to expressly state that mail-order
pharmacies are closed to the walk-in general public. Other commenters
felt that the definition of mail-order pharmacy was overly restrictive
and only applied to closed-door mail-order pharmacies.
Some commenters expressed concern about traditional mail-order
pharmacies that have constructed the appearance of an open-door
pharmacy in an effort to participate in a retail network even though
such pharmacy conducts virtually all of their business by mail and has
no or very few patients that walk in for prescriptions. Additionally,
some commenters expressed concern that while such pharmacies may
technically be open to the walk-in general public, they are located in
obscure locations, such as in industrial parks, or have minimal
signage. Commenters added that when such pharmacies appear in the
directory as ``retail'' pharmacies, it creates beneficiary confusion.
In that vein, a commenter provided an extensive list of standards they
believed should be required to determine if a pharmacy maintains a
legitimate retail pharmacy presence. Some commenters believed they
would not be able to classify such pharmacies as mail-order pharmacies
because technically having a public-facing door, they met the
definition of retail.
Other commenters expressed concern that the idea of retail as a
``walk-in'' enterprise is outdated because patients increasingly expect
to receive their medications delivered even by their local community
retail pharmacies. Similarly, a commenter ask that we replace the word
``to'' with ``for.''
Response: We thank the commenters for these perspectives. Our
definition of retail pharmacy is necessary for purposes of applying the
convenient access standards and does not address whether terms and
conditions of a standard network contract are reasonable and relevant.
Only the actual business being performed by the pharmacy can dictate
what terms and conditions may be reasonable and relevant. Additionally,
we note that our definition of retail pharmacy does not specify that
the pharmacy operates exclusively to the walk-in general public, nor
did our proposed definition of mail-order pharmacy specify that the
pharmacy operate exclusively by mail. Because the statutory convenient
access provision explicitly discusses the dispensing of drugs directly
to patients, we will maintain the word ``to'' in lieu of ``for.''
In these examples, assuming there is legitimate pharmacy practice
activity, such pharmacies maintain a substantial mail-order line of
business, and a minimal retail line of business, but nonetheless, both.
We reiterate that it is incumbent upon the pharmacy to inform Part D
plan sponsors of all the types of services they provide so that the
Part D plan sponsor may provide applicable reasonable and relevant
standard terms and conditions. Moreover, while the standard terms and
conditions for the retail function could reasonably incorporate the
elements the commenter listed, we do not believe it is appropriate for
CMS to specify such granular requirements in our definition of retail
pharmacy.
CMS is also aware that some state pharmacy practice acts do not
distinguish mail-order pharmacies from other types of pharmacies, and
may have a requirement for all pharmacies to offer general public
access. Therefore, specifying that a mail-order pharmacy be closed to
the general walk-in public may unintentionally create a conflict with
some state pharmacy practice acts.
Comment: Several commenters suggested that dispensing and
delivering drugs to an individual's home gives rise to unique quality,
safety, privacy, and timeliness considerations as compared to retail
dispensing, which CMS explicitly recognized when it considered its own
timely delivery standard on mail-order pharmacies. Another commenter
added that if distinctions in terms and conditions relevant to mail-
order, specialty, and compounding pharmacies are not allowed to be used
for standard networks, Part D enrollee safety may be jeopardized.
Another commenter suggested that the definition of mail-order pharmacy
should ensure that pharmacies are licensed in all of the states in
which they are practicing. Several commenters contended that they have
trusted relationships with their patients and, because some of their
patients are Part D enrollees who have dual residences during various
parts of the year, that their patients prefer to continue to work with
their pharmacy instead of a mail-order pharmacy that would mail
prescriptions to them at their other residence.
Response: We thank the commenters for their perspectives. We
believe that the commenter who thought our proposal was intended to
restrict Part D plan sponsors' ability to make distinctions in standard
terms and conditions relevant to mail-order, specialty, and compounding
pharmacies misunderstood the proposal. We agree that mailing
prescriptions involves unique considerations, for which reasonable and
relevant standard terms and conditions may be required for retail
pharmacies or other unique pharmacy practice business and service
delivery models that include a mail component. Reasonable and relevant
standard terms and conditions applicable to the functions a particular
pharmacy practice business or service delivery model performs may be
required, even if those functions cross multiple traditional pharmacy
type classifications.
Existing quality assurance regulations at Sec. 423.153(c)(1)
require that Part D plan sponsors have representation that

[[Page 16595]]

network providers are required to comply with minimum standards for
pharmacy practice as established by the states. Every state, and the
District of Columbia (state) requires pharmacies to be licensed in the
state in which they are located.\70\ However, CMS recognizes that there
are differential licensure requirements for prescriptions mailed across
state lines. Some states require out-of-state pharmacies to be licensed
in their state, by nature of mailing prescriptions to Part D enrollees
located in their state, but others do not. Additionally, to the extent
a state does not require a pharmacy mailing prescriptions into it to be
licensed in such state, it would be unreasonable for a Part D plan
sponsor to require that a pharmacy be licensed in such state,
particularly if licensure in such state requires an address, physical
or otherwise, in such state. Therefore, CMS does not believe that the
commenters' additional licensure language is necessary for the
definition of mail-order pharmacy and additionally has concerns about
the imposition of such a standard term or condition for pharmacies,
retail or otherwise, which perform a mail function.
---------------------------------------------------------------------------

\70\ This also applies to the U.S. territories of Puerto Rico,
Guam, and the U.S. Virgin Islands, which have their own boards of
pharmacy. Other U.S. territories may not have designated boards of
pharmacy. For the few pharmacies located there, pharmacies are
licensed through the territory's all-inclusive department of health
or require and subsequently reciprocate licensure from another U.S.
state or territory.
---------------------------------------------------------------------------

Comment: A commenter contended that our proposal appeared to be
based on the assumption that Part D plan sponsors prohibit pharmacies
from participating in their networks because they provide drugs through
home delivery, adding that this is not generally an accurate
understanding of pharmacy contracting practices. The commenter added
that it was more likely that a Part D plan sponsor would require a
pharmacy that wants to receive payment for drugs delivered to a Part D
enrollee's home to meet certain terms and conditions relating to the
quality, safety, and timeliness of such drug delivery as a condition of
coverage of such drugs. Some commenters referred us to some Part D plan
sponsors' standard terms and conditions. Another commenter opined that
pharmacies that complained to us may not have adequately understood
their contracting terms and conditions secondary to participation in a
pharmacy services administrative organization (PSAO), citing anecdotes
that PSAOs do not adequately communicate terms and conditions to the
pharmacies they represent.
Response: We thank the commenter for this perspective, but we
disagree. Pharmacies referred us to standard contracting terms and
conditions that explicitly prohibited pharmacies in retail networks
from mailing any prescriptions, with network termination as the
consequence, and not case-by-case nonpayment of covered Part D drugs
mailed by that pharmacy. In addition to the areas addressed in the
proposed rule, we were particularly concerned by requirements in
standard terms and conditions that stipulated thresholds for obtaining
patient assistance, prescription dispensing capacity, or personnel and
equipment requirements that are not commensurate with or reasonable to
the size and prescription volume of the pharmacy. The comment related
to whether a pharmacy participated in a PSAO is outside the scope of
this rule.
Comment: A number of commenters were opposed to our incorporation
of the concept of cost sharing into our proposed definitions of retail
and mail order pharmacy. Some commenters believed this would also
require us to define retail cost sharing and mail-order cost sharing as
terms in regulation. Others suggested that because we did not also
propose to define these terms in regulation, our proposed definitions
were effectively meaningless, and we would not have solved the problem
we were trying to address.
Other commenters opposed the incorporation of cost sharing in the
definitions or retail and mail-order pharmacy, contending that the
proposal instituted a price structure in violation of section 1860D-
11(i)(2) of the Act. Another commenter believed that inclusion of cost
sharing in the definitions of retail and mail-order pharmacy would
force Part D plan sponsors to offer higher payments to all network
pharmacies when most pharmacies have agreed to receive lower payment
rates. Another commenter offered that because Part D plan sponsors are
not required to have a mail-order benefit, and thus would not have
preferential mail-order cost-sharing, such a plan could not
operationalize our proposed definition of mail-order pharmacy and would
risk beneficiary confusion.
Response: As discussed in the proposed rule, because the statute
itself discusses retail and mail-order pharmacy in terms of
differential cost sharing between the two, it is not unreasonable that
we would incorporate those concepts into a regulatory definition. CMS
has always left the definition and fee structure of the mail-order
benefit and mail-order cost sharing to Part D plan sponsors. Therefore,
we disagree that our proposal sought to impose a price structure.
Rather, we wanted to align the definitions of retail and mail-order
pharmacy with Part D plan sponsors' own operational definitions of
mail-order benefit and mail-order cost sharing.
Comment: A number of commenters, both in favor and opposed,
similarly interpreted our proposed definition of mail-order pharmacy in
such a way that would restrict Part D plan sponsors' ability to impose
standard terms and conditions regarding the provision of mail services.
Response: It has become clear from these comments that commenters,
both in favor and opposed, misinterpreted our proposed definition of
mail-order pharmacy well beyond our intended purposes for defining it
(that is, for purposes of Part D enrollee cost-sharing expectations,
the Plan Finder, and how Part D plan sponsors classify pharmacies for
network participation). We consider the key feature of the mail-order
benefit to be extended days' supplies at preferential cost sharing (see
the 2014 Final Call Letter available at (see the 2014 Final Call Letter
available at https://www.cms.gov/Medicare/Health-Plans/MedicareAdvtgSpecRateStats/downloads/Announcement2014.pdf). CMS has
always left the definition of the mail-order benefit to Part D plan
sponsors. Insofar as a Part D plan sponsor defines their mail-order
benefit to provide services to an expanded geographic service area (for
example, all 50 United States, departments, territories, and the
District of Columbia), standard terms and conditions that require
pharmacies who contract to provide the mail-order benefit to provide
services to those areas could be reasonable and relevant. We make a
distinction, however, between service level requirements applicable to
mailing prescriptions, and those that pertain to providing the Part D
plan sponsor's mail-order benefit. While standard terms and conditions
imposing service level requirements applicable to mailing prescriptions
may be reasonable and relevant, we would not expect a Part D plan
sponsor to require a pharmacy that provides home delivery service by
mail to also require such pharmacy to contract to provide the Part D
plan's mail-order benefit in order to do so.
Because our proposed definition of mail-order pharmacy was
fundamentally unlike our other pharmacy type definitions which are

[[Page 16596]]

necessary to establish access standards, we no longer find it would be
beneficial to have a defined term. Additionally, we will rely on Part D
plan sponsors to make sure their Part D enrollees understand which
pharmacies are contracted to provide their mail-order benefit (if they
have one), and to ensure they have reasonable and relevant terms and
conditions for all pharmacies that deliver by mail that take into
consideration the difference between traditional mail order that
services the entire country from those that operate in more targeted
geographic areas. Consequently, we are not finalizing our proposed
definition of mail-order pharmacy, and will not define mail-order
pharmacy in regulation at this time.
Comment: A number of commenters expressed concern that it is not
clear how non-PBM-owned specialty pharmacies or other innovative
business models fit into the proposed definitions of retail and mail-
order pharmacy. Various commenters urged us to adopt a definition of
specialty pharmacy, including network adequacy standards for specialty
pharmacies, specialty drugs, or both. However, commenters were divided
on the critical elements that should comprise such a definition or set
of standards. Commenters variably considered accreditation, other
quality standards and service level expectations, drug cost, certain
drugs, and certain disease states, or suggested the adoption of
existing definitions from various trade associations. A commenter
suggested that a regulatory definition is needed because specialty
pharmacies may try to hold themselves out to be retail pharmacies in an
attempt to avoid accreditation or skimp on the level of services
required for specialty drugs. Conversely, a commenter believed our
proposal to define mail-order pharmacy and clarify the definition of
retail pharmacy without defining specialty pharmacy might create a
perverse incentive for medications normally dispensed in less expensive
dispensing channels (for example, retail pharmacies) to be diverted to
more expensive dispensing channels (for example, specialty pharmacies).
A commenter asked how Part D plan sponsors and PBMs could be expected
to follow regulations if terms are not defined, as this leads to a
subjective definition on a plan-by-plan basis and could lead to
confusion. Finally, absent a definition or access standards, some
commenters urged us to monitor whether Part D enrollees have
appropriate access to products that are distributed through specialty
pharmacies, and a commenter provided a study methodology.
Response: Because specialty pharmacies' pharmacy practice business
and service delivery models are so varied, we hesitate to say they are
a particular ``type'' of pharmacy. As discussed in the proposed rule,
because the pharmacy practice landscape is changing so rapidly, and
because the considerations are so varied, we continue to believe any
attempt by us to define specialty pharmacy could prematurely and
inappropriately interfere with the marketplace. Consequently, although
we will continue to consider it for future policy-making, we continue
to decline to propose a definition of specialty pharmacy at this time.
Unless they perform a retail function, specialty pharmacies would be
classified as non-retail pharmacies. Additionally, as we discuss later
in this section of this final rule, CMS supports Part D plan sponsors
that want to negotiate additional terms and conditions in exchange for,
for example, designating a pharmacy with a special label such as a
``specialty'' pharmacy in the Part D plan sponsor's contracted pharmacy
network. Although we appreciate the commenter's concerns, we are
concerned about circulating definitions of specialty pharmacy that
limit high-touch clinical services to high-cost, high-risk medications
when such services for inexpensive, yet high-risk, medications may also
be warranted, particularly in frail or fragile Part D enrollees who are
still in the community. Nonetheless, we reiterate here that Part D plan
sponsors must offer specialty pharmacies standard terms and conditions
that are reasonable and relevant to the specialty pharmacy's pharmacy
practice business or service delivery model.
We thank the commenters for their suggestions on methodologies, and
may consider this for future analysis or policy making.
Comment: Some pharmacies commented that Part D plan sponsors are
fulfilling pharmacy network requirements for home infusion pharmacies
by reporting retail pharmacies that do not meet the guidelines
discussed in Chapter 5 of the Medicare Prescription Drug Benefit
Manual, Section 50.4. Other commenters added that retail and mail-order
pharmacies should not be included in the home infusion network adequacy
calculation. Some commenters offered that CMS should develop an
expanded set of any willing pharmacy regulations specific to long term
care pharmacy, and that CMS should revisit its definition of long term
care pharmacy, including basing its definition of long term care
pharmacy services more on patient care characteristics rather than
particular settings of care. A commenter objected to CMS' prohibition
on using active pharmaceutical ingredients (APIs) to compound
prescription drugs instead of those produced by manufacturers. Another
commenter alleged that our use of compounding pharmacy as an example,
despite existing policies regarding compounded prescriptions, seemed to
indicate that we were encouraging the participation of more compound
pharmacies in the Part D program.
Response: We thank the commenters for this perspective. While we
may consider these items for future policy making, they are outside the
scope of this rule. However, we reiterate, to the extent a pharmacy
serves multiple roles, they must be offered reasonable and relevant
standard terms and conditions applicable to the pharmacy practice
functions they perform, and they may be counted toward multiple access
standards.
In summary, we have removed the concept of retail cost sharing from
our definition of retail pharmacy, and we are not adopting a definition
of mail-order pharmacy. The definition of retail pharmacy at Sec.
423.100 will be ``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 without being required
to receive medical services from a provider or institution affiliated
with that pharmacy.''
c. Treatment of Accreditation and Other Similar Any Willing Pharmacy
Requirements in Standard Terms and Conditions
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 obtain preferred status or to belong to a specially
labeled subset (for example, because we have not defined the term,
``specialty pharmacies''). Therefore, we implemented the requirements
of section 1860D-4(b)(1)(A) of the Act by requiring that standard terms
and conditions must be ``reasonable and relevant,'' but declined to
further define

[[Page 16597]]

``reasonable and relevant'' in order to provide Part D plan sponsors
with maximum flexibility to structure their standard terms and
conditions.
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 or other network
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. However, we raised the
concern that inconsistent and/or duplicative application of such
requirements held out to promote quality may be circumventing the any
willing pharmacy requirements and does not, in fact, represent the
``floor.''
We solicited comment on the role of pharmacy accreditation in the
Part D program. We received the following comments and our response
follows:
Comment: A number of commenters suggested CMS should codify its
existing guidance regarding specialty drugs.
Response: We thank the commenters and will consider this for future
rulemaking.
Comment: A number of commenters representing Part D plan sponsors,
PBMs, and independent specialty pharmacies believed that we were
conflating preferred pharmacy networks with specialty pharmacies.
Response: We thank the commenters for this perspective. We clarify
that we did not intend for these terms to be interpreted as
interchangeable. Section 1860D-4(b)(1)(B), as codified at Sec.
423.120(a)(9), allows Part D plan sponsors to establish preferred
pharmacy networks. Additionally, the term ``preferred pharmacy'' is
defined at Sec. 423.100. However, because CMS does not define
``specialty pharmacy,'' we have left the definition and fee structure
of ``specialty pharmacies'' and ``specialty networks'' to Part D plan
sponsors. Part D plan sponsors may create a specially labeled subset of
``specialty pharmacies'' for their pharmacy network called a
``specialty network.'' Such specially labeled pharmacies could be
further differentiated as standard/non-preferred or preferred.
Comment: Several commenters thanked us, while a number of
commenters were concerned, that we were altogether eliminating the
ability of Part D plan sponsors to impose accreditation requirements. A
commenter suggested that CMS was backtracking from our previous
guidance that accreditation can serve as part of the ``floor'' for
standard contracting. A commenter urged us to allow accreditation that
supports access needs. Several commenters urged us to affirmatively
prohibit accreditation.
Response: As discussed previously, 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 with a special label such as a ``specialty''
pharmacy or as a preferred pharmacy in the Part D plan sponsor's
contracted pharmacy network.
However, CMS remains concerned that, in some cases, Part D plan
sponsors may be requiring accreditation or ``quality assurance''
standard terms and conditions that may unnecessarily preclude pharmacy
network participation or limit the availability of certain drugs to
certain pharmacies, especially if such terms and conditions are not
being required consistently among similarly situated pharmacies. While
we recognize that allowances must be made for waiving standard terms
and conditions in certain situations to accommodate unique geographic
issues or ensure access to specific drugs, we generally believe
``quality assurance'' requirements, more so than other terms and
conditions, that are meant to establish a ``floor'' in any willing
pharmacy standard terms and conditions, would be consistently required
and less varied across the plan network. To the extent the exception
becomes the rule, it is questionable that such quality assurance or
accreditation terms and conditions reflect standard terms and
conditions.
In situations where it is necessary for terms and conditions to be
altered, CMS believes it may be more appropriate for Part D plan
sponsors to explore reasonable alternatives with such pharmacies, in
lieu of waiving such requirements outright if they are truly necessary
for ensuring a minimum quality standard. This may involve negotiations
to determine mutually acceptable reasonable and relevant terms and
conditions that could also be offered to other pharmacies that have not
yet achieved such quality standards as a means to establish a more
achievable de facto ``floor.'' Insofar as standard terms and conditions
contain any such requirement, it must be reasonable and relevant to the
pharmacy practice functions performed by the pharmacy's business and
service delivery model, and particularly with regard to a standard held
out to promote quality, as the ``floor,'' we would expect it to be
applied consistently.
Comment: Several commenters provided that accreditation is best
performed by an independent, third-party actor, and that accreditation
serves as an independent validation of excellence. A commenter
contended that hundreds of pharmacies that have obtained their pharmacy
accreditation certifications are small, community, and regional
pharmacies, however, a number of pharmacies commented that they have
achieved accreditation, but have done so through other accrediting
bodies that Part D plan sponsors would not recognize or because they
were forced to do so. A number of commenters contended that if
accreditation is to be required, the accreditation standards must be
public, transparent, and/or consensus based. Several commenters
believed that CMS should establish accreditation standards, and that
CMS approval should be the only requirement for acceptance of
accreditation, similar to LTC pharmacies and DMEPOS providers. Some
commenters contended that our allowance of pharmacy accreditation in
the Part D program requires CMS to communicate standard criteria to
Part D plan sponsors and PBMs. Many commenters contended neither Part D
plan sponsors nor PBMs may arbitrarily exclude pharmacies utilizing
other nationally recognized accreditation organizations, and that Part
D plan sponsors/PBMs should not be able to mandate the use of
particular accreditation organizations. A commenter offered an
extensive edit to Sec. 423.505 to this effect.
Response: Small, community and regional pharmacies have complained
to us about excessive barriers to entry, and

[[Page 16598]]

alleged that they only underwent accreditation because they were forced
to do so. Otherwise, they would have been cut out of approximately 75
to 80 percent of the market. While we support the use of third party
accreditation, we are concerned that Part D plan sponsors may require
or do not recognize one accreditation certification versus another when
pharmacies have already obtained an accreditation certification from a
different organization, voluntarily or as a requirement from another
plan sponsor or PBM. We believe it is unrealistic to expect pharmacies
to obtain multiple accreditation certifications, which would be
required if multiple Part D sponsors require accreditation by a
specific accrediting organization.
We expressed concern in the proposed rule that inconsistent and/or
duplicative application of such requirements held out to promote
quality may be circumventing the any willing pharmacy requirements and
does not, in fact, represent the ``floor.'' However, we reiterate here
that we support Part D plan sponsors that want to negotiate an
accreditation requirement in exchange for, for example, designating a
pharmacy with a special label such as a ``specialty'' pharmacy or as a
preferred pharmacy in the Part D plan sponsor's contracted pharmacy
network. While we did not propose specific accreditation standards, we
will consider it in the future if we find that our current requirements
are no longer sufficient to implement the statutory any willing
pharmacy requirement as a result of accreditation requirements imposed
by Part D plan sponsors. Similar to our work with the Pharmacy Quality
Alliance, CMS generally supports the adoption of quality standards that
are public, transparent, and consensus-based. While CMS appreciates the
commenters' concerns that accreditation is best performed by an
independent, third-party actor, we did not consider such a policy
change in the proposed rule and would need to consider the issue
further.
We also thank the commenter for their suggested edits to Sec.
423.505 and may consider them for future policy making.
Comment: Some commenters objected to our use of the term
``credentialing,'' contending that credentialing and accreditation are
different things and accreditation picks up where credentialing leaves
off. Some commenters provided that, as a tool of quality assurance,
PBMs look to accreditation as a validation of excellence to ensure that
their network has the capacity to fully provide highly specialized
services, and rejected any suggestions that the value or impact of
accreditation in promoting quality assurance is mitigated by the manner
of a network agreement deployed by a Part D plan sponsor.
Response: While some Part D plan sponsors or PBMs may use alternate
terminology, we have seen documents that label such additional Part D
plan sponsor- or PBM-specific criteria as ``credentialing.''
Nonetheless, we have attempted to clarify the terminology in this final
rule by also incorporating ``other network criteria.'' We reiterate
that while the Part D program does not define ``specialty pharmacy'' or
``specialty network,'' any such requirements in Part D plan sponsors'
standard terms and conditions must be reasonable and relevant to the
pharmacy practice functions performed by the specific pharmacy's
business and service delivery model, and particularly with regard to
standard terms and conditions held out to promote quality, which, as
the ``floor,'' must be applied consistently.
Comment: A commenter provided that North Dakota and New Hampshire
have enacted laws prohibiting PBMs from requiring additional
accreditation other than the requirement of the applicable state board
of pharmacy. Another commenter offered that they have seen situations
where state standards are insufficient, unenforced, or unmonitored.
Response: CMS thanks the stakeholder for this information, and
encourages commenters to keep us apprised of such examples. However, at
present, we continue to believe state pharmacy practice acts represent
a reasonably consistent minimum standard of practice.
Comment: Some commenters believed that our rule would limit the
dispensing of specialty drugs only to drugs for which there are FDA-
mandated REMS processes, which is such a small proportion of drugs that
it is insufficient as a quality standard for the growing number of Part
D enrollees treated by specialty drugs.
Response: This was not our intent. As we discussed in the proposed
rule, because a pharmacy's ability to dispense certain drugs is not
dependent on it having the ability to dispense other drugs, it is not
relevant for Part D plan 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. Beyond drugs whose dispensing is limited by FDA-mandated REMS
processes or applicable state law(s), Part D plan sponsors may limit,
on a drug-by-drug basis, the dispensing of additional Part D drugs
which require extraordinary special handling, provider coordination, or
patient education, when appropriate dispensing cannot be performed by a
network pharmacy (that is, a contracted network pharmacy that has not
agreed, is not capable, or is not appropriately licensed to provide
this level of service for such drugs, individually, or in combination).
(For operational guidance on this policy, see Section 50.3 of Chapter 5
of the Medicare Prescription Drug Benefit available at https://www.cms.gov/Medicare/Prescription-Drug-Coverage/PrescriptionDrugCovContra/Downloads/MemoPDBManualChapter5_093011.pdf) A
Part D plan sponsor may, however, require pharmacies to dispense a
roster of certain drugs or drugs for certain disease states in order to
participate in the Part D plan sponsor's preferred pharmacy network or
be designated as belonging to a specially-labeled subset of the Part D
plan sponsor's contracted pharmacy network (for example, the Part D
plan sponsor's ``specialty network'').
As an example, a pharmacy which identifies as a ``specialty
pharmacy'' approaches a Part D plan sponsor to participate in the Part
D plan sponsor's contracted pharmacy network. The Part D plan sponsor
must provide the pharmacy with standard terms and conditions that are
reasonable and relevant to the pharmacy practice functions performed by
the specific pharmacy's business and service delivery model (including
consistently applied terms and conditions held out to promote quality).
The Part D plan sponsor may have additional terms and conditions for
that pharmacy to secondarily participate in either the Part D plan
sponsor's preferred pharmacy network or ``specialty network.'' Even if
the pharmacy holds itself out as a ``specialty pharmacy,'' if the
pharmacy is not capable or does not agree to meet such additional terms
and conditions, the Part D plan sponsor may preclude that pharmacy from
participating in the Part D plan sponsor's preferred pharmacy network
or ``specialty network.'' However, the Part D plan sponsor may not
preclude the pharmacy from participating in the broader contracted
pharmacy network, so long as it is willing and able to meet reasonable
and relevant standard terms and conditions. Additionally, consistent
with our longstanding policy, we would not expect Part D plan sponsors
to limit the dispensing of certain drugs

[[Page 16599]]

(including, but not limited to, drugs on the ``specialty/high cost
tier'') or drugs for certain disease states, individually, or in
combination, to a subset of network pharmacies if a contracted network
pharmacy not belonging to such subset: (1) Is capable of and
appropriately licensed under applicable state and Federal law(s),
including FDA-mandated REMS processes, for doing so, and (2) agrees to
meet the Part D plan sponsor's reasonable and relevant extraordinary
special handling, provider coordination, or patient education
requirements in standard terms and conditions.
Comment: A commenter contended that, since there is no entity that
accredits LTC pharmacies specifically, Part D plan sponsor/PBM
accreditation requirements are particularly onerous for LTC pharmacies.
Response: CMS thanks the commenter. In 2005, CMS published Long
Term Care guidance, which included Long Term Care Pharmacy Performance
and Service Criteria (available at https://www.cms.gov/Medicare/Prescription-Drug-Coverage/PrescriptionDrugCovContra/downloads/LTCGuidance.pdf). As discussed previously, CMS would not expect Part D
plan sponsors or PBMs to impose accreditation requirements beyond CMS
Long Term Care Pharmacy Performance and Service Criteria.
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 Part D plan 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 Part D plan 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 proposed to establish deadlines by which Part D
plan sponsors must furnish their standard terms and conditions to
requesting pharmacies. The first deadline we proposed 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
website. 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 proposed 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 proposed concerns the promptness of Part D
plan sponsors' responses to pharmacy requests for standard terms and
conditions. As discussed previously, we proposed to require all Part D
plan sponsors to have standard terms and conditions developed and ready
for distribution by September 15. Therefore, we proposed 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 will
be required to clearly identify for interested pharmacies the avenue
(for example, phone number, email address, website) 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 will 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 will be required to provide the pharmacy
with a copy of the contract terms for its review within the two-day
timeframe. This requirement will 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 solicited 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.
We received the following comments and our response follows:
Comment: Many commenters expressed support for our proposal to
establish timeframes for the delivery of standard contracting terms and
conditions to requesting pharmacies.
Response: CMS appreciates the supportive comments.
Comment: Some commenters recommended changes to the date we
proposed as the deadline by which all Part D plan sponsors would be
required to have standard terms and conditions available for requesting
pharmacies. We proposed a September 15 deadline for making available
contracts with an effective date of the following January 1. Some
commenters recommended earlier deadlines of July 15 or September 1,
maintaining that such dates would afford more time for pharmacies to
review and execute contracts and have their network participation
reflected in the Medicare Plan Finder (MPF) display of the sponsor's
plan information for the upcoming year. This information is posted on
October 1 to support the annual election period (AEP), which begins on
October 15. The commenters noted that sponsors must submit their Part D
bids by early June each year, which they claim includes a certification
of their networks, and therefore they should be in a position after
that date to develop standard terms and conditions that support the
benefit plans they proposed to CMS. Another commenter suggested that
the deadline be set at 30 days prior to the start of the upcoming plan
year (for example, approximately December 1 of each year).
Response: In setting the deadline by which Part D plan sponsors
must have standard terms and conditions available for requesting
pharmacies, we must strike a balance between a date by which Part D
plan sponsors can be reasonably certain of their plan pricing for the
coming year and a date by which pharmacies must start the contracting
process so that they can participate meaningfully in a sponsor's Part D
network, including the beneficiary election process, for a particular
plan year. To do that, we selected September 15 because it was a date
by which we could be certain that the annual bid

[[Page 16600]]

review process would be completed. It was also a date that would afford
pharmacies seeking standard contracts the opportunity to have their
participation in a Part D plan sponsor's network made public during the
annual election period since sponsors can make five MPF data
submissions after September 15 that will be reflected in the five MPF
display updates CMS makes during the AEP.
We believe the proposed July 15 and September 1 deadlines are too
early. The bid review and negotiation process following the bid
submission deadline in early June usually does not conclude until the
end of August. Before this date, the pricing and formularies associated
with a Part D plan sponsor's Part D bids may vary, and it would be a
burden on Part D plan sponsors to require them to develop standard
terms and conditions in an uncertain pricing environment. Also, Part D
plan sponsors are not required to certify their pharmacy network as
part of their bid submission, and it is common for sponsors to continue
to build their pharmacy networks after the bid deadline. The suggested
December 1 deadline would tilt too far in the other direction, giving
Part D plan sponsors more time to develop standard terms and conditions
but effectively locking pharmacies seeking such contracts out of the
AEP, to the detriment of the pharmacies as well as their potential Part
D customers.
Based on our review of the many comments in support of the
September 15 deadline we proposed and our consideration of the
alternative dates suggested by some commenters, we believe September 15
effectively allows us to administer the any willing pharmacy
requirement in a way that best balances the needs of Part D plan
sponsors and pharmacies. Therefore, we will finalize the date as
proposed.
Comment: Several commenters addressed our proposal to establish a
requirement that Part D plan sponsors respond within 2 business days to
a pharmacy's request for standard terms and conditions. Many agreed
with our proposed deadline, while others recommended longer time
frames, ranging from 5 to as many as 15 business days. Most commenters
recommending a deadline of more than 2 days noted that we had proposed
a particularly tight timeframe which left little time to accommodate
unforeseen or extenuating circumstances that might arise related to
responding to a pharmacy's request. These included difficulties in
verifying contact information and in determining the type of contract
(for example, retail, mail order) a requesting pharmacy should be
provided.
Response: CMS originally proposed the 2-day response deadline in an
effort to ensure that Part D plan sponsor's responses to requests from
pharmacies for standard terms and conditions are not met with undue
delays, so that the pharmacies can begin their review of the terms at
the same time sponsors are conducting their due diligence on the
requesting pharmacies. We appreciate that many commenters with
significant experience in building contracted Part D pharmacy networks
have explained how the 2-day timeframe leaves little room for any
foreseeable communication or processing glitches and how a longer
timeframe would be more practical to implement. While we see the need
for a longer timeframe, we also do not want to establish a new deadline
that reduces the sense of urgency that sponsors should bring to their
compliance with their obligations under the any willing pharmacy
requirement. After considering the range of recommended response
deadlines, we believe that 7 business days are sufficient to allow Part
D plan sponsors time to address any extenuating circumstances that may
arise from a contract request and is a reasonable maximum period for
pharmacies to have to wait to receive the contracting documents they
requested. The 7-day timeframe provides a more forgiving margin within
which a sponsor can resolve its own or a pharmacy's error related to a
request for standard terms and conditions. Such errors could include a
lack of clarity in a pharmacy's initial request or the submission of a
request to a part of the sponsor's organization unrelated to its Part D
administration, making it necessary to re-assign the request to the
correct department for response. Any of these issues would likely take
additional days to address, placing the sponsor out of compliance with
the stricter 2-day timeframe. Given the range of potential missteps in
the contracting process, it is important to establish a timeframe broad
enough to accommodate the resolution of most types of issues. We
believe that 7 business days, a period of a little more than a calendar
week, is a long enough period for sponsors to respond to all forms of
pharmacy requests for standard terms and conditions. Any longer
timeframe would diminish requesting pharmacies' opportunity to have
contracts in place during the AEP. Under the 7-day timeframe, a
pharmacy requesting standard terms and conditions in mid-September
should expect to receive the documents by late September or early
October, assuming that the sponsor requires takes the maximum 7
business days to provide both a non-disclosure agreement and the actual
contracting terms. This timeframe could permit a pharmacy to enter into
a contract by the start of the AEP on October 15 and have information
about its participation in the sponsor's Part D network made public
through its own notices to its customers as well as through sponsor
marketing materials and the MPF. A timeframe longer than 7 business
days would likely push pharmacies' opportunity to contract into
November, thus excluding them from the critical early weeks of the AEP.
Comment: Some commenters noted that they recommended a required
response time of more than two days to allow time for sponsors to
determine the type of contract for which the requesting pharmacy
qualifies. For some commenters, this process involves requiring a
pharmacy to complete a questionnaire before the requested terms and
conditions are provided. Commenters also expressed concern that a
required response time would compromise Part D plan sponsors' ability
to conduct background checks on requesting pharmacies as part of
necessary fraud prevention efforts.
Response: In our proposal, we made a distinction between sponsors
providing requested copies of standard terms and conditions and
sponsors executing such agreements. We noted that Part D plan sponsors
could ask pharmacies to demonstrate that they are qualified to enter
into a particular contract before executing the contract. Our goal in
proposing required timeframes for responses to requests for standard
terms and conditions was to ensure that pharmacies have the same
opportunity that Part D plan sponsors have to conduct due diligence
prior to entering into a contractual relationship. We took this step in
an effort to remove the roadblock that some requesting pharmacies have
faced when sponsors have required pharmacies to apply for a contract
before they are even permitted to see the terms. We do not propose to
mandate that Part D plan sponsors contract with pharmacies that do not
meet reasonable and relevant requirements.
In particular, we emphasize that the requirements related to the
deadline for responding to contract requests do not in any way preclude
sponsors from applying to pharmacies requesting standard terms and
conditions the same fraud prevention review protocols that they already
use to evaluate other pharmacies seeking a Part D contract. As noted
above, Part D plan sponsors may

[[Page 16601]]

conduct their regular fraud prevention review of a pharmacy prior to
executing a standard contract and may decline to enter into the
contract if the review indicates that the pharmacy poses a legitimate
fraud risk.
Comment: Some commenters expressed concern that if Part D plan
sponsors are not permitted to evaluate whether a pharmacy qualifies for
a certain type of standard terms and conditions, sponsors may be
required in some instances to disclose proprietary information to
parties to whom it should not be shown. The commenters fear that some
pharmacies might abuse this process by requesting sets of standard
terms and conditions for which they know they are not qualified just to
collect sets of such documents to share with other sponsors or
pharmacies.
Response: We note in our proposed rule that Part D plan sponsors
could require requesting pharmacies to enter into non-disclosure
agreements prior to the delivery of standard terms and conditions. In
that situation, the deadline for responding to the pharmacy would first
apply to the delivery of the non-disclosure agreement. Once the
pharmacy returned the executed agreement, the clock on the deadline
would re-set, and the Part D plan sponsor would be required to deliver
the terms and conditions to the pharmacy within the required timeframe.
The use of appropriate non-disclosure agreements by sponsors should
substantially reduce the risk that pharmacies would request contract
terms just to develop a ``contract library'' to share with others.
As we noted above, Part D plan sponsors' use of questionnaires or
other methods to evaluate a pharmacy's eligibility for a particular
type of contract before the Part D plan sponsor provides the requested
document is one of the specific issues we intended to address with this
proposal. Therefore, to comply with this proposed timing requirement,
Part D plan sponsors will be required to provide pharmacies with any
set of standard terms and conditions a pharmacy requests. As we noted
above, Part D plan sponsors may evaluate a pharmacy's eligibility for a
particular contract during the period after the delivery of the
requested document but before executing the contract. We expect both
parties, Part D plan sponsors and pharmacies, to operate in good faith
in carrying out the contracting process under the any willing pharmacy
provisions. Therefore, pharmacies should only request contracts for the
types of services they truly believe they are qualified to offer and to
be forthcoming in describing their range of operations as part of their
request. In turn, Part D plan sponsors will be expected to work
cooperatively with pharmacies in identifying the types of Part D
services the pharmacies can effectively provide to their plan
enrollees.
Comment: A commenter noted that CMS was not proposing to establish
a deadline by which a pharmacy and a Part D plan sponsor would need to
execute a contract containing standard terms and conditions but that
CMS's expectation is that Part D plan sponsors should not cause undue
delay to completion of the contracting process.
Response: The commenter is correct. We did not propose to establish
a deadline for the execution of a contract containing a set of standard
terms and conditions. The appropriate timing in each instance would be
influenced by the facts surrounding each request, including the type of
requesting pharmacy, the complexity of its operations, and the regular
process for conducting due diligence adopted by the relevant Part D
plan sponsor.
After consideration of the public comments received, we are
finalizing Sec. 423.505(b)(18)(i) as proposed and finalizing a change
to Sec. 423.505(b)(18)(ii) by deleting ``2 business days'' and
replacing it with ``7 business days.''
13. Changes to the Days' Supply Required by the Part D Transition
Process (Sec. 423.120)
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). Section 423.120(b)(3) requires that a Part D sponsor provide
certain enrollees access to a temporary supply of drugs within the
first 90 days of a new plan enrollment 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. In the long-term care (LTC) setting, this supply
must be for at least 91 days and may be up to 98 days, consistent with
the 14-day-or-less dispensing increment for brand drugs required by our
April 15, 2011 final rule (76 FR 21460 and 21526).
We proposed to make two changes to these regulations. First, we
proposed to shorten the required transition days' supply in the long-
term care (LTC) setting to the same supply currently required in the
outpatient setting. Second, we proposed a technical change to the
current required days' transition supply in the outpatient setting to
be a month's supply.
In discussing previous revisions to our transition regulations, we
noted that in requiring multiple fills for the entire length of the 90-
day transition period in our April 15, 2010 final rule, we had pointed
out that the often complex needs of LTC residents frequently involved
multiple drugs and necessitated longer periods in order to successfully
transition to new drug regimens. (CMS-4085-F, 75 FR 19678).
However, in proposing to revise the transition days' supply in the
LTC setting to be the same as for outpatient setting, we observed that,
after more than 10 years of experience with Part D in LTC facilities,
we had not seen the concerns that we expressed in the 2010 final rule
materialize, and were 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 also observed
that LTC facilities often contract with a single LTC pharmacy, as well
staff or visiting physicians, and they would be readily available to
address transition drug needs. Further, we noted that LTC facilities
had many years' experience with the Medicare Part D program generally
and transition specifically. Lastly, we stated that we had continuing
concerns about drug waste and the costs associated with such waste in
the LTC setting.
We also proposed to change the current requirement for a 30 days'
transition supply to a ``month's supply'', currently codified for
outpatient supply at Sec. 423.120(b)(3)(iii)(A). We observed that we
had 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, for drugs that typically are
dispensed in 28-day packages, we noted that we historically required
plans to dispense more than one package to comply with the 30 day
requirement in the text of the regulation.) We noted that, if
finalized, this change would mean that the regulation would require
that a transition fill be for a supply of at least a month of
medication, unless the prescription is written by the prescriber for
less. We further noted the supply would be for at least the days'
supply that the applicable Part D prescription drug plans has approved
in its plan

[[Page 16602]]

benefit package submitted to CMS for the relevant plan year, unless the
prescription was written by the prescriber for less.
We stated that 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. When the
prescription is written by a prescriber for less than a month's supply
the Part D sponsor must 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.
We received the following comments and our response follows:
Comment: Commenters offered support for the transition proposal on
the basis that it would eliminate additional drug waste and costs,
require minimal information technology effort, and make operations more
efficient by providing uniformity across settings. A commenter
suggested the impact on beneficiaries would be minimal. Another
commenter noted that setting the LTC supply to the same required in
outpatient and changing the supply to be a month's supply would provide
easier explanations of rejected claims on CMS auditing and monitoring
projects. A commenter suggested the extended LTC days supply was no
longer necessary because CMS had additional beneficiary protections in
place to handle the coverage of non-formulary drugs. A commenter
requested that we include information about this change in the
transition fill letter and Annual Notice of Change (ANOC) document, and
another commenter encouraged CMS to conduct educational outreach to
ensure successful implementation.
Response: We appreciate the commenters' support. We will update our
model ANOC, Evidence of Coverage (EOC), formulary, and model transition
letters to reflect that fact that Part D sponsors are now required to
provide as a minimum (unless prescriptions are written for fewer days)
an approved month's supply for enrollees in both the outpatient and LTC
settings. We will also consider other ways to educate LTC facilities on
the policy change.
Comment: Commenters opposed the proposal to reduce the transition
supply for the LTC setting from 90 days to conform to the supply
offered in the outpatient setting. Pointing to the complex needs of LTC
beneficiaries who often have concurrent chronic diseases and take many
drugs (10 or more), commenters expressed concern that changing
formulary prescriptions for medical conditions could potentially harm
LTC beneficiaries who are some of the most vulnerable patients in the
Part D program. Other commenters pointed out that a month was not long
enough because providers and pharmacists need to transition multiple
formulary alternatives in a sequence rather than all at once in order
to pinpoint which drugs caused adverse reactions. Commenters pointed to
specific drug challenges, such as overdoses or the fact that changes to
hypertension medications could lead to falls, as the cause for
necessity of more gradual transitions for certain drugs or therapeutic
drug classes. A commenter recommended that CMS require a 90 day supply
of certain therapeutic drug classes (for instance, antidepressants,
beta-blockers for cardiovascular disease; and Parkinson's disease) to
reduce the risk of adverse events.
Another commenter stated a month's supply was not adequate because
Part A nursing facility (NF) regulations on physician services at 42
CFR 483.30(b) require a physician to visit residents only a minimum of
once every 60 to 70 days after the first 90 days of admission, while
another commenter stated that LTC facilities needed to reach the same
professionals who wrote the prescription for the medication no longer
on formulary rather than any other prescriber. Some commenters provided
specific examples and anecdotal experience with the LTC transition
policy. A commenter stated that it took longer than 30 days to arrange
for transition changes of beneficiaries typically on large numbers of
drugs at times, such as when dual eligibles were reassigned to new
zero-premium plans. Commenters expressed concern that delays in
acquiring medications could result in increased healthcare expenses,
such as emergency room visits, hospitalizations, or readmissions, and
several commenters requested that we limit the transition supply to 60
days rather than a month's supply.
Response: We appreciate the commenters' concerns on ensuring and
promoting health, but believe that a month's supply is adequate to
achieve this goal. As to the comments that sequential introduction of
medications would be necessary, we appreciate that beneficiaries in LTC
facilities often take large numbers of drugs. However, we do not
believe that beneficiaries would often require transition supplies for
all the drugs they are taking. Rather, we believe that our robust
formulary requirements make it unlikely that, for instance, a
beneficiary taking 10 drugs who transitions to a new Part D plan would
find all 10 of those drugs are now non-formulary drugs which would
require a transition supply. We decline to carve out exceptions for
drug classes to avoid creating further complications.
In addition, we also do not believe that only the prescriber who
originates a prescription can address drug changes. And while Part A
regulations only require physician visits every 60 to 70 days, we do
not believe this would result in an inability to arrange for
alternative prescriptions when necessary during a 30 day transition
time frame. It is our understanding that LTC facilities frequently call
physician offices to update prescriptions. And the regulation itself is
not limited to specifying the frequency of physician visits, but
requires that individuals admitted to facilities remain under the care
of a physician. There is no time limit on 42 CFR 483.30(a), which
requires NFs to ensure that the medical care of each resident is
supervised by a physician--a service we believe would include
prescribing drugs. Further, under Sec. 483.30(d), facilities must
provide physician services 24 hours a day in case of emergency. In the
event that a beneficiary needed medication on an emergency basis, we
believe these rules would require the physician to be available to
prescribe it.
In response to comments on operational challenges, we note that in
some cases LTC facilities will have the information to anticipate and
plan for some transition changes ahead of time--for instance,
beneficiaries are informed about prospective plan changes well in the
advance of effective dates. Additionally, beneficiaries concerned about
losing access to drugs formerly on their formularies may request
coverage through the exception and appeals process. For these reasons,
we decline to adopt the commenters' recommendations.
Comment: Several commenters suggested that the reason CMS had not
seen evidence of problems in LTC facilities was partly because CMS had
the appropriate longer transition fill policy in place. Commenters
urged CMS not to finalize the proposal in the absence of new
information indicating concerns CMS noted in 2010 no longer exist. A
commenter noted it was likely

[[Page 16603]]

polypharmacy (which we interpret to mean the concurrent use of multiple
medications) had increased among LTC beneficiaries over the last
decade.
Response: Based on the maturity of the Part D program and increase
in the knowledge and experience that health care professionals have
gained over the decade managing medication prescribing with formulary
adherence has led us to believe this change will not harm
beneficiaries. Additionally, through our audit and monitoring processes
CMS continues to oversee Part D sponsors adherence to the coverage
determination process requirements for timeliness.
Comment: Some commenters suggested that changing the LTC transition
fill to a month's supply would have a minimal impact on reducing drug
cost and waste. A commenter noted that Part D sponsors do not receive
the 90 day supply at once and are limited to dispensing 14 day (or
less) increments in the LTC setting. Another commenter suggested there
was no reason the current policy would create waste because
substitutions typically occurred when the transition supply of the non-
formulary drug was exhausted, with LTC beneficiaries' physicians
generally substituting a new on-formulary drug for the non-formulary
drug at the end of the transition period. Another commenter suggested
that limiting the 90 day supply to three 30 day supplies could
eliminate potential waste.
Response: We agree that Part D sponsors cannot dispense more than a
14 day supply at a time. However, we remain concerned that LTC
facilities are relying on the provision of 90 day supplies rather than
transitioning Part D beneficiaries to their new plan formularies
sooner. This delay may lead to prolonged use of less cost effective
formulary alternatives which may lead to an overall increase to program
expenditures.
Comment: A commenter suggested that LTC pharmacies that bill on a
``post consumption'' method (in which the claims are submitted at the
end of the month to reflect drugs actually taken by beneficiaries)
would as a practical matter often receive much less than a month's
notice that the transition supply was exhausted.
Response: The current transition period for new enrollees and
continuing enrollees affected by negative new benefit year changes is
90 days post enrollment or the start of a new year. CMS expects that
LTC pharmacies utilize processes currently in place for formulary and
benefit adherence when medications are prescribed and provided outside
of the transition period.
Comment: Commenters, including many who otherwise supported the
proposal, suggested that referring to a ``month'' was vague and could
create uncertainty for Part D sponsors and confuse beneficiaries--
possibly leading to interruptions in coverage. To address their
concerns, some commenters requested that CMS set a minimum number of
days' supply that would constitute a month's transition supply. Other
commenters requested that CMS add language to the regulatory text to
clarify that a month's transition supply corresponds to the number of
days the Part D sponsor designated as its applicable month's supply in
its plan benefit package submitted to CMS for the relevant plan year. A
commenter asserted that the policy to state that the month's supply
will be what was submitted in the PBP or what the provider prescribes,
whichever is less, is confusing.
Response: We agree with the commenters' suggestion that we clarify
in the regulatory text at Sec. 423.120(b)(3)(iii) that a month's
supply means the month's supply approved in a plan's bid. Specifically,
we refer to an ``approved month's supply'' at Sec. 423.120(b)(3)(iii),
which is the terminology also used in the daily cost sharing regulatory
text at Sec. 423.153 and the definition of daily cost sharing rate
found in Sec. 423.100.
This change to the regulatory text defines that a month's supply is
what the Part D plan sponsor designates as the applicable month's
supply in its plan benefit package (PBP) submitted to CMS for the
relevant plan year. For example, if the Part D sponsor submitted ``30
days'' in the PBP as its month's supply at retail, and the transition
supply is dispensed at retail, then 30 days is also considered the
applicable month's supply for the transition supply. If the Part D
sponsor had designated 31 days as its month supply at retail in the
PBP, then the applicable month's supply for the retail transition
supply would be 31 days. Similarly, if the Part D sponsor had
designated 31 (or 32) days as its LTC month's supply in the PBP, then
the applicable month's supply for the LTC transition supply would be 31
(or 32) days. We do not believe this will cause confusion. We note that
this is how a month's supply is applied for Part D plans outside of the
transition supply requirement; meaning, the days in a month's supply
can vary from plan to plan and are included in plan documents that
beneficiaries receive. (We additionally are conforming the requirements
related to formulary changes to reflect an approved month's supply in
Sec. 423.120(b)(5). See Section II.A.14, Expedited Substitutions of
Certain Generics and Other Midyear Formulary Changes.)
In addition, transition policy currently found in Sec.
423.120(b)(3)(iii)(A) provides that, among other things, the transition
supply ``must be for at least 30 days of medication, unless the
prescription is written by a prescriber for less than 30 days''. We so
limit this supply because pharmacies cannot dispense more medication
than the amount specified in the prescription by the prescriber. A
pharmacy could not dispense more than a 10 day transition supply to an
enrollee whose prescriber only writes a prescription for a 10 day
supply of medication. The enrollee could only receive more medication
if he or she received another prescription from a prescriber. Under the
finalized regulation, the Part D sponsor would be required to provide
at a minimum a total transition supply equal to the month's supply
specified in the PBP.
Comment: Commenters submitted a number of questions about
prepackaging, for example, a commenter suggested that CMS clarify that
a month's supply would be considered 30 days unless packaging dictated.
In another example, a commenter recommended that CMS confirm that a
drug package in an unbreakable 28 day supply would meet the one month
supply requirement for transition fill. Other commenters requested that
CMS provide specific examples of how the transition policy would apply
or confirm their understanding of the policy as set forth in the
examples the commenters provided with different quantities (such as 17
or 21 day supplies) and types of drugs (such as insulin or creams).
Response: We appreciate the requests for more direction; however,
the very nature of these disparate inquiries and suggestions has lead
us to conclude that we cannot provide bright line guidance at this
level of detail that could address all the different scenarios. Part D
plans have been administering prepackaged drug supplies since 2006
outside of transition, and we believe they have established policies
and procedures to determine what constitutes at least a month's supply
of prepackaged drugs to be dispensed as a transition supply. For this
reason, we believe the requested clarification is unnecessary.
Comment: A commenter suggested CMS permit the proposed changes to
the transition policy only if patient costs would remain the same or
less than previously. Another asserted that the

[[Page 16604]]

change to a month's supply would save money for Part D sponsors at the
expense of beneficiaries.
Response: The proposal would not increase beneficiary costs because
it provides a sufficient supply for beneficiaries and prescribers to
transition to formulary alternatives or to request a formulary
exception.
Comment: A commenter noted that the transition from the home to an
LTC facility can be extremely stressful for elderly patients, which
presents a risk to patient safety, for example due to the risk of falls
from hypertension medication changes. This commenter asserted that
rushing to change their drug regimens would heighten these concerns.
Another commenter noted the need to wholesale switch multiple
medications simultaneously to meet a new Part D formulary requirements
when beneficiaries are transitioned into a nursing home or other LTC
facility is fraught with danger, and risks overdosing of patients,
which poses a significant health risk. A commenter urged CMS to instead
increase the transition days' supply of medication from 90 to 120 days
when an LTC patient's payer status transfers from Medicare Part A to
Medicare Part D.
Response: CMS acknowledges the concerns of the commenters.
Understanding these risks before the implementation of the Medicare
Part D program led CMS to require that each Part D sponsor maintain a
uniform formulary regardless of the treatment setting, for example,
outpatient or LTC. Therefore, beneficiaries stabilized on certain
medication regimens at home would be able to continue on the same
regimen, without disruption, when admitted to an LTC facility. This
proposal pertains to our transition policy which, as always, applies to
situations involving either a new plan enrollee or continuing enrollee
of a Part D plan affected by a negative formulary change in a new
benefit year. Our specific proposal with regard to Part D beneficiaries
in LTC facilities who qualify for a transition supply (that we did not
propose to and are not changing) was to change the supply that Part D
sponsors are required to dispense from 91-98 days' supply to a month's
supply. We note that no change is being proposed to current policy
addressing the need for at least a 31-day emergency supply for current
enrollees in the LTC setting found in the Medicare Prescription Drug
Benefit Manual, Chapter 6, Sec. 30.4.6, as we believe that many of the
commenters are referring to medication change issues in an LTC facility
when a Part D beneficiary is discharged from a hospital or other
skilled setting that was not dispensing medications under the
beneficiary's Part D benefit.
Comment: A commenter suggested that there was no justification to
require multiple fills to provide for up to a total month's supply of
medication and that CMS use this opportunity to restate its proposed
change to require that a transition fill in the outpatient setting be a
one-time, temporary supply of a least a month of medication, unless the
prescription is written by a prescriber for less than a month's supply.
Response: We did not propose to change our existing policy that
requires multiple fills to provide for up to a full transition supply,
and we therefore decline to adopt such a change in this final rule.
After consideration of the public comments received, we are
finalizing our transition proposal with the modifications to the
regulation text discussed below.
In Sec. 423.120(b)(3)(iii), we are inserting reference to an
``approved month's supply'' to replace a ``month's supply'' in three
places.
The transition fill policy is being finalized with modifications.
To summarize, the final transition fill supply policy effective for
plan year 2019 is to require Part D sponsors to provide as a minimum
(unless prescriptions are written for fewer days) an approved month's
supply for enrollees in both the outpatient and LTC settings. Please
note that we also are finalizing a revision to 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). See II.A.14 Expedited Substitutions of Certain
Generics and Other Midyear Formulary Changes.
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. Under Sec.
423.128(d)(2)(iii), Part D sponsors must also have an internet website
that provides 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).
In our proposed rule, we noted that while MedPAC had 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, the
commission had also pointed out in the same report that, among other
things, 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 (hereafter June 2106 MedPAC Report).)
We stated in our preamble that this proposed rule would implement
MedPAC's recommendation by permitting generic substitutions without
advance approval and discussed other ways we could better facilitate
midyear changes. We described the specific changes listed below and
explained how they would work with current requirements (in related
areas such as beneficiary communications and the exceptions and appeals
process) to maintain beneficiary protections.
Specifically, we proposed:
(1) Adding new paragraph (b)(5)(iv) to Sec. 423.120 to 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) newly approved generics rated
therapeutically equivalent by the Food and Drug Administration (FDA) to
the brand name drug--rather than having to wait until the direct notice
and formulary change request requirements have been met.
(2) Revising Sec. 423.120(b)(6) to allow sponsors to make those
specified generic substitutions at any time of the year rather than
waiting for them to take effect two months after the start of the plan
year.
(3) Adding Sec. 423.120(b)(5)(iv)(C) through (E) to require
advance general and retrospective direct notice to enrollees and notice
to entities.

[[Page 16605]]

(4) Revising Sec. 423.128(d)(2)(iii) to clarify the timing of
online notice requirements.
(5) Revising Sec. 423.120(b)(3)(i)(B) to except specified generic
substitutions from our transition policy.
(6) Revising Sec. 423.100 to clarify that our definition of
``affected enrollees'' applies to changes affecting enrollee access in
the current plan year.
We further stated that we were addressing stakeholder requests for
greater flexibility to make midyear formulary changes in general by
proposing to change the Sec. 423.120(b)(5)(i) notice requirement when
(aside from expedited generic substitutions and drugs deemed unsafe or
withdrawn from the market) drug removal or changes in cost-sharing
would affect enrollees. Specifically, we proposed to change the minimum
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, to at least 30 days'
notice to all entities prior to the effective date of changes and at
least 30 days' direct notice to affected enrollees or a one month
refill upon the request of an affected enrollee.
(We also noted that we were 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 II.A.13 of
this proposed rule, Changes to the Days' Supply Required by the Part D
Transition Process (Sec. 423.120) (hereafter referred to as section
II.A.13. Transition Process).
We received the following comments and our responses follow:
a. Issues Related to Expediting Certain Generic Substitutions and Other
Midyear Formulary Changes
Comment: Commenters voiced general support for the entire proposal
and its flexibilities. Many commenters supported--often strongly--the
proposal to permit certain immediate generic substitutions for a
variety of reasons. They stated that increasing and accelerating access
to generic medications could lead to greater competition, more options,
and lower costs for Medicare beneficiaries and the program. They
favored the proposal for aligning Part D policy to Medicaid and
commercial insurance practices, and noted that the majority of State
pharmacy boards supported mandatory generic substitution when
available. Several observed that the proposal would decrease inventory
carrying costs of brand name drugs for retail pharmacies.
While many commenters underscored their support for the general
concept of generic substitutions, some provided support at a more
granular level. We received specific support for permitting certain
generic substitutions any time during the plan year; conforming the
definition of an affected enrollee to mean enrollees taking the drug
who will be affected during the current plan year; not requiring a
transition for immediate generic substitutions; requiring advance
general notice followed by retrospective direct notice; and
encouraging, but not requiring, Part D sponsors to provide
retrospective notice no later than by the end of the month after which
the change becomes effective. A commenter recommended that we continue
not to require Part D sponsors to implement generic substitutions in
order to provide them flexibility so they can administer brand name
drugs to patients who may medically require them.
A commenter specifically concurred that robust CMS requirements
provided the necessary beneficiary protections and that 30 days
provided enough time for the time for an enrollee to change to an
alternative drug or obtain a formulary exception.
Response: We thank those commenters for their support of both our
proposed policies.
Comment: While often stating that they supported the concept of
providing Part D sponsors with more formulary flexibilities many
commenters opposed--often strongly--the specifics of our proposal for
various reasons bulleted below. The bulk of specific comments focused
on the proposal to permit immediate generic substitutions under Sec.
423.120(b)(5)(iv) and related proposals. However, many of the same--as
applicable--points were directed towards our proposal to reduce the
advance notice and refill supply for other midyear formulary changes
required under Sec. 423(b)(5)(i) from 60 to 30 days and from 60 days
to a month. (For purposes of this preamble, we will refer to these
changes as ``other midyear formulary changes''. This section a. of
comments and responses discusses comments covering other midyear
formulary changes in addition to comments focusing on immediate generic
substitutions. Section b. covers comments that only discussed immediate
generic substitutions and section c. covers an issue specific to other
midyear formulary changes.)
Commenters voiced concerns that beneficiaries with no (or
less) advance notice would have no opportunity to discuss the
transition and therapeutic options with their providers before taking a
new medication. Commenters suggested that patients require quality
information and that without such knowledge, beneficiaries might be
confused to receive drugs at point of sale that did not have the same
brand name, shape, or color as their earlier drug and possibly decide
not to take them.
Many observed that failure to adhere to a prescribed drug
could adversely affect beneficiary health, and stated that this could
also lead to increased costs elsewhere in the health care system.
Some commenters professed concern that the changes would
promote ``bait and switch'' situations in which beneficiaries enrolled
in plans believing they would have access to certain medications only
to find out midyear (with no or little notice) that the plan no longer
covers those medications.
Commenters contended that removing advance notice for
generic substitutions (and reducing notice of other midyear formulary
changes) eliminated an important beneficiary protection. They stated
that advance general notice in the Evidence of Coverage (EOC) did not
offer sufficient information to determine whether a change in medicine
was appropriate and was ineffective given the increasingly complex and
confusing nature of plan benefit designs and drug formularies.
Commenters also opined that direct notice after the fact would be
inadequate to satisfy the intent of the Part D statutory provisions
concerning beneficiary access to medically necessary medications.
Many commenters contended that generic drugs could not
always substitute for brand name drugs because not all drugs are
bioequivalent, and recommended that we provide beneficiaries with more
time to speak to health care providers before switching certain
medications to avoid adverse results including death. Commenters
suggested that we except specific drugs or classes or types of drugs
such as drugs treating hematologic diseases and disorders, epilepsy,
and cancer and drugs with a narrow therapeutic range. Others noted that
inactive ingredients could be harmful for patients with allergies or
conditions such as certain autoimmune diseases and that switching
medications could be antithetical to the overall treatment regimen for
people taking a variety of drugs. A commenter requested that we
acknowledge the unique differences of complex generic drugs as compared
to simple generics as recognized under

[[Page 16606]]

existing FDA guidance, while another urged us not only to ensure that
experts reviewing midyear changes for Part D sponsors had the expertise
to understand molecular and genetic diagnostics and targeted precision
medicine therapeutics but also to require that their credentials be
provided to the public. Others generally objected to midyear formulary
changes that, for instance, were not medically necessary.
Response: We appreciate concerns about beneficiary health and the
importance of continuity of care. However, we believe that the policy
as proposed strikes the right balance between providing beneficiaries
with access to needed drugs and Part D sponsors with flexibility to
administer their formularies. Given the context of strong Medicare
beneficiary protections--including the availability of the formulary
exceptions process--and the workings of the pharmacy market, we believe
beneficiaries will not be harmed by these changes and possibly might
benefit if the added formulary flexibility permits their plans to
maintain high quality formularies with lower costs.
The policies we are finalizing in this rule provide more
flexibility with respect to when certain formulary changes, including
generic substitutions, can be made but do not change what formulary
changes we permit. As noted in the information collection requirements
section of this rule, our long-standing practice has been to approve
all generic substitutions that would meet the requirements of this
proposed provision--which again means that the proposed provisions will
just permit the same allowable substitutions to take place sooner. And,
rather than try to parse out the equivalency of specific drugs, as was
discussed in the preamble to the proposed rule, we rely on Food and
Drug Administration (FDA) determinations that the generic equivalents
are interchangeable. Our proposal also does not change the types of
other midyear formulary changes that we permit.
We also believe that consumers have a general familiarity with
generic drugs that further mitigates against possible confusion. At
this time, many people understand that generics are commonly
substituted for brand name drugs and that they may look different from
the drugs they are replacing. We do not believe that Medicare
beneficiaries would be any more surprised by their different appearance
or name or likely to stop taking the drug as a result than enrollees in
commercial drug plans. We believe that Medicare beneficiaries generally
would understand they could contact their pharmacists (who are trained
to answer such questions) or their providers for assistance.
Beneficiaries who have more recently transitioned from employer plans
may, in fact, already be familiar with automatic generic substitutions,
which may have occurred under their prior plans with no advance notice.
Under our proposal, which we are finalizing in this final rule, all
beneficiaries would receive advance general notice that such certain
generic substitutions could take place immediately. Section
423.120(b)(5)(iv) requires the notice to appear in the formulary and
other applicable beneficiary communication materials, which as
discussed in the proposed rule, would include the EOC. Beneficiaries
currently taking the drug would receive direct notice afterward.
Enrollees who are affected by other midyear formulary changes would
receive 30 days' advance notice before the change takes effect, or as
applicable, notice of the change and an approved month's refill. They
could use that time before the change takes effect to contact their
providers or request an exception.
Lastly, as we discussed in the proposed rule, we believe
beneficiaries affected by either proposal will be sufficiently
protected by the robust coverage determination and appeal process,
including the right of an enrollee or his or her prescriber to request
an exception to their plan's utilization management (UM) criteria,
tiered cost-sharing structure, or formulary. We are not proposing to
change our exceptions and appeals processes. Beneficiaries who, for
instance, try a generic drug or other drug added as a result of other
midyear formulary changes and find out the drug is less effective or
causes adverse effects, have the right to request an exception to
obtain coverage of another drug based on medical necessity.
Comment: Some commenters suggested that if we were to finalize the
proposed changes, that we require at least some more notice--for
instance, 45 or 30 days' notice before permitting generic
substitutions. Commenters pointed out that the National Association of
Insurance Commissioners (NAIC) model guidelines on Prescription Drug
Benefit Management Model Act (#22) required a minimum 60-day advance
notice for both generic and non-generic substitutions. (A commenter
pointed out that an NAIC subgroup recently recommending revisions to
the section did not change the 60 day notice.) Others noted that the
June 2016 MedPAC report, which we cited for support in our preamble,
did not recommend that we remove the advance notice for generic
substitutions, but rather envisioned that the 60-day advance written
notice to beneficiaries would stay in place along with any formulary
flexibilities. (June 2016 MedPAC Report, page 195).
Response: We appreciate that the June 2016 MedPAC report assumed we
would not change our beneficiary advance notice. And, we acknowledge
that when we first finalized the 60 days advance notice in our January
2005 preamble, we referenced the NAIC model guidelines (January 28,
2005, 70 FR 4265). However, the fact that the NAIC subgroup did not
recently recommend a change does not mean that a change is
inappropriate. Not only has the pharmaceutical marketplace changed
since 2005, but also our experience with the Part D program since then
indicates that other beneficiary protections to address formulary
changes including the exceptions process are sufficient.
Under the generic substitutions policies that we are finalizing,
beneficiaries will receive advance general notice that certain generic
substitutions may occur immediately, as well as direct notice
thereafter. We released our proposed rule after the NAIC and MedPAC
materials were published, which means that at the time they recommended
60 days' advance notice these entities could not have taken into
account that we would require the additional beneficiary protection of
advance general notice. We believe that this advance general notice for
generic substitutions, for reasons stated elsewhere in this preamble,
sufficiently balances beneficiaries' needs with the need for additional
formulary flexibility. Regardless of when they receive their notices of
formulary changes, beneficiaries have the right to request an
exception. Again, we are mindful of beneficiary impact and take this
step only with the knowledge that we would permit Part D sponsors to
only substitute equivalent generic drug products that the FDA has
determined to be interchangeable; that our program provides strong
beneficiary protections; and we are not aware that this longstanding
commercial practice has harmed patients.
We also believe that 30 days' notice, and an approved month's
supply as required, are sufficient for other midyear formulary changes.
In generally recommending a 60 day advance notice period, MedPAC and
NAIC did not specifically analyze whether 30 days might provide enough
notice for the

[[Page 16607]]

limited number of particular changes falling under the notice
provisions of Sec. 423.120(b)(5)(i). Furthermore, the same beneficiary
protections that apply for permitted generic substitutions would apply
in the case of other midyear formulary changes. As we noted in our
proposed rule, the reduction to 30 days and an approved month's supply
would align these requirements with the timeframes for transition
fills, and we have seen no evidence to suggest that 30 days has been an
insufficient days' supply for transition fills.
Comment: Several commenters requested that we consider more ways to
provide formulary flexibility by, for instance, looking to employer
practices or developing more midyear changes to prevent fraud, waste,
and abuse. Another commenter suggested that requiring enrollee
notifications when a drug becomes generically available could defeat
the cost-savings potential.
Response: We believe that the flexibilities currently available
(such as utilization management (UM) criteria) along with both our
proposals (to permit immediate generic substitutions and expedite
notice of other midyear formulary changes) include those flexibilities
that would work best within the requirements of the current Part D
program. To the extent not prohibited, Part D sponsors may also use
strategies implemented by employers in the commercial world. As to
fraud, waste, and abuse, we believe that permitting immediate generic
substitutions as specified would assist Part D sponsors to preventing
waste of unnecessary expenditures by allowing them to substitute less
expensive generics for brand name drugs sooner. We did not intend to
address fraud or abuse concerns with our proposal to expedite midyear
formulary changes. Given that Part D sponsors are statutorily required
to provide appropriate notice before removing a drug from its formulary
or making any change in a drug's preferred or tiered cost-sharing
status, we decline to dispense entirely with notice requirements for
generic substitutions. Instead, the revised notice requirements that we
are finalizing in this rule are intended to reduce burden and increase
formulary flexibility within the confines of the statutory
requirements.
Comment: Several commenters sought clarification regarding the
relationship between our regulatory proposal and maintenance and non-
maintenance formulary changes outlined in our guidance. A commenter
requested that we identify the specific maintenance and non-maintenance
other midyear formulary changes that do not fall within the
requirements for immediate generic substitutions and that would require
a 30 day prospective notice and a month's fill, as applicable, while
another queried whether current timing limitations still applied to the
other midyear formulary changes that did not fall within the
requirements for immediate generic substitutions or if they could be
implemented at any time of the year. A commenter encouraged us to
consider modifying notice requirements depending on the application of
our proposal to non-maintenance changes.
Response: Section 423.120(b)(5) did not, and with the changes we
are finalizing in this rule, does not, differentiate between
maintenance or non-maintenance formulary changes; rather, those terms
are used in our formulary guidance to describe different types of
midyear formulary changes. With our proposed revisions, the regulation
establishes different notice requirements for three types of midyear
changes: (i) Substitutions of newer generics that meet the requirements
of Sec. 423.120(b)(5)(iv) as proposed; (ii) drugs removed from
formularies on the basis that they are deemed unsafe by the FDA or
withdrawn by their manufacturer consistent with current Sec.
423.120(b)(5)(iii); and (iii) all other midyear formulary changes that
do not fall into one of the first two types, which are governed by
Sec. 423.120(b)(5)(i) and, as finalized, would require 30 days advance
notice to affected enrollees (as defined in Sec. 423.100) and, as
applicable, an approved month's fill for affected enrollees (as defined
in Sec. 423.100).
While the changes we are finalizing to Sec. 423.120(b)(5) reduce
the number of days' direct advance notice required for other midyear
formulary changes from 60 to 30 days, they do not otherwise change
requirements or guidance applicable to these other midyear formulary
changes. Thus, consistent with the changes we are finalizing in this
rule, Part D sponsors are required, for example, to provide current and
prospective Part D enrollees with at least 30 days' prior notice on
their websites of other midyear formulary changes (Sec.
423.128(d)(2)(iii)).
Comment: Commenters expressed concerns that lack of advance direct
notice for certain generic substitutions would harm pharmacies because,
without sufficient opportunity to stock the new generics, they could be
obligated to dispense brand name drugs without reimbursement from Part
D sponsors. Some commenters expressed particular concerns about home
infusion and LTC pharmacies by, for instance, pointing out that LTC
pharmacies might not have access to wholesalers at night and during the
weekend, and asking that we require Part D sponsors to notify network
LTC pharmacies before implementing formulary changes. A commenter also
pointed out that reducing the notice from 60 to 30 days for other
midyear formulary changes would provide problems unique to LTC
facilities. Because they do not always have immediate access to
guardians or the ability to open resident mail, the time frame for
making decisions about drugs or moving from plans would be very
compressed.
Response: While we understand the commenters' concerns, we do not
believe immediate generic substitution is unique to Medicare policy,
and so therefore are not persuaded that we need special rules for Part
D. Many commercial insurers and states require immediate generic
substitutions, and we are not aware that this has posed significant
problems for pharmacies serving commercial or Medicaid enrollees, and
so we have no reason to believe the problems the commenters identify
would be any more prevalent in Medicare. We assume manufacturers want
to move their drugs to pharmacies as soon as possible. It is also our
understanding that wholesalers send out alerts and literature about new
generics to alert pharmacies that they are about to enter the market--
which means it is less likely they will be caught unawares. As such, we
do not see any reason that LTC pharmacies would merit a different
approach. For the above reasons, we decline to adopt the commenters'
suggestions. We encourage Part D sponsors to be mindful of drug
availability when setting effective dates for generic substitutions.
As for other midyear formulary changes, we currently do not find it
is necessary to carve out an exception for LTC facilities. Pharmacies--
including LTC pharmacies-presumably will still receive notice timely
and have the opportunity to reach out to beneficiaries, providers, and
LTC facilities regarding those midyear formulary changes.
Comment: A commenter requested that we clarify that online postings
would be considered sufficient notice for SPAPs, entities providing
other coverage, authorized prescribers, network pharmacies, and
pharmacists for all types of midyear negative formulary changes.
Response: Online postings that are otherwise consistent with our
requirements for notice to specified entities may constitute sufficient
notice of both immediate generic substitutions and other midyear
formulary changes.

[[Page 16608]]

Comment: A commenter suggested that requiring errata sheets for
generic substitutions could defeat the cost-savings potential, while
another requested that we generally change the timing of errata sheet
distributions.
Response: We did not make any proposals with respect to errata
sheets, and therefore decline to make any policy changes with respect
to them at this time.
b. Comments Specific to Immediate Generic Substitutions
Comment: A number of commenters urged us not to limit immediate
substitutions of certain generics to those new to the market. They
noted that Part D sponsors may not immediately place new drugs on
formularies for a variety of reasons. For instance, there might only be
a limited supply of drugs or the drug might not yet be available in all
markets, such as in United States territories. A few noted that generic
drugs may not initially be priced much lower than brand name drugs.
Commenters suggested we permit immediate generic substitutions to occur
any time within a year after a generic is available on the market or
until the first day of the month following the end of patent challenge
exclusivity. Another commenter stated it would be reasonable to require
Part D sponsors to provide CMS with the reasons for the delay.
Conversely, other commenters supported the proposal to permit Part D
sponsors only to immediately substitute newly marketed generics.
Response: We are persuaded that we should not limit immediate
substitutions to generic drugs based upon the availability of limited
formulary update windows after initial formulary submission because
there are many reasons that Part D sponsors might not make (or in some
cases not be able to make) substitutions as soon as a generic drug is
released. We appreciated and considered the different suggestions
offered. However, we believe an approach that relies on tracking a
generic approval or marketing date to this extent could be overly
burdensome for us and plans, and confusing for beneficiaries.
Additionally, implementing a policy that parses out detailed scenarios
in which we would permit immediate generic substitutions would seem to
defeat our goal of creating easier formulary flexibility, and requiring
Part D sponsors to explain reasons for each delay they might make would
increase burden.
Rather, to simplify policy and to encourage Part D sponsors to
substitute generic drugs more often, we plan to limit market
availability to the time of the initial formulary submission.
Specifically, we are revising Sec. 423.120(b)(5)(iv)(B) to provide
that: A Part D sponsor that otherwise meets our requirements may
immediately remove a brand name drug if it previously could not have
included the brand name drug's therapeutically equivalent generic
because the generic drug was not available on the market at the time
the Part D sponsor submitted its initial formulary for approval. Part D
sponsors that otherwise meet our requirements at Sec.
423.120(b)(5)(iv) do not need to submit their formulary changes to CMS
before they make a generic substitution. Part D sponsors can
immediately substitute generic drugs for brand name drugs at the time
that they submit their formulary changes to CMS, or alternatively,
substitute generic drugs on their formularies and submit their changes
to CMS during the next available update window that occurs after they
have made any changes. Consistent with the policy we are finalizing in
this rule, Part D sponsors that follow our requirements can substitute
generic drugs released to market after their initial formulary
submissions for the next year.
Comment: A few commenters suggested that failure to provide advance
notice of generic drug substitutions might mean an unexpected change in
copay or coinsurance could stress beneficiaries or cause them not to
take their drugs. Noting that generics could have higher cost-sharing
than brand products during the coverage gap, a commenter recommended
that we amend the policy to ensure a beneficiary in the coverage gap
who is prescribed a generic drug would not pay more than he or she
would for the brand name drug.
Response: As we discussed earlier in these responses, this
regulation is not changing the standards applied regarding generic
substitutions, but rather changing notice requirements in order to
permit the those substitutions to take place sooner. That said, we
acknowledge that there could be an unexpected increase in cost sharing,
but believe that such an occurrence generally would be limited to the
coverage gap in 2019. Our intent was that Part D sponsors only be
permitted to immediately substitute generic drugs if in addition to all
other requirements (including application of the same or less
restrictive UM criteria), the more recently released therapeutically
equivalent generic drug is on the same or lower cost-sharing tier--not
simply the same or lower cost-sharing. To make this clearer, are
revising Sec. 423.120(b)(5)(iv)(A) to require that Part D sponsors add
a therapeutically equivalent generic drug to its formulary ``on the
same or lower cost-sharing tier'' rather than ``with the same or lower
cost-sharing''.
Beneficiaries will pay the same or less out of pocket in instances
in which enrollees pay a set copay because Sec. 423.120(b)(5)(iv)(A)
would require that a generic drug appear on the same or a less costly
tier than the brand name drug it replaces. In contrast, in cases of
coinsurance, the amount paid out of pocket by an enrollee for a generic
drug theoretically could increase if the negotiated price for the
generic drug is more than the brand name drug. But, although generics
might initially have negotiated prices that are not much lower than the
brand name drug, we are not aware of situations in which such generic
drugs actually have higher negotiated prices. Therefore, with the
exception of the defined standard cost sharing in the coverage gap in
2019, we do not believe beneficiaries will pay higher cost sharing for
these generic substitutions.
We acknowledge that because beneficiaries currently pay a larger
percentage for generics than for brand name drugs during the coverage
gap under the defined standard benefit, (up until 2020), the cost
sharing for generics could be higher than that of brand name drugs
during that benefit phase. However, this dynamic has existed since the
beginning of the coverage gap closing in 2011 when beneficiaries began
paying 50 percent for brand name drugs and 93 percent for generic drugs
in the gap. The generic cost sharing percentage has been decreasing
each year and will be the same 25 percent cost sharing as brand name
drugs beginning in 2020.
Comment: A commenter requested that we confirm that the proposal to
permit specified immediate generic substitutions would also apply to
protected class generics, while another contended that because we did
not consider the six protected classes, our proposal was contrary to
the statutory requirement of section 1860D-4(b)(3)(G) of the Act
requiring Part D sponsors to offer access to ``all'' drugs in those
specified categories.
Response: We disagree that our proposal is contrary to section
1860D-4(b)(3)(G) of the Act, which expressly permits the Secretary to
establish exceptions to permit Part D sponsors to exclude from their
formularies, or otherwise limit access to, Part D drugs that are
otherwise required to be included in the formulary as drugs of clinical
concern. We established an

[[Page 16609]]

exception through rulemaking at Sec. 423.120(b)(2)(vi)(A), which
specifies that drug products rated as therapeutically equivalent by the
FDA are excepted from the six classes of clinical concern specified in
section 1860D-4(b)(3)(G)(iv) of the Act. Therefore, if a new generic in
one of the protected classes enters the market, plan sponsors would be
able to make an immediate generic substitution, consistent with the
requirements we are finalizing at Sec. 423.120(b)(5)(iv).
Comment: Noting, for instance, that it would create significant
savings, commenters urged us to allow in the future, or even clarify
that we currently meant to allow, Part D sponsors to substitute new to
market biosimilars or at least interchangeable biological products.
Conversely, others stated that they supported the fact that our
proposal currently did not apply to biosimilar biologics. Several
commenters, including one who was concerned that our provision would
pave the way for such an expansion, requested that we ensure that
biosimilars be excluded from future generic substitutions. They
suggested, for instance, that they were not therapeutically equivalent
and that applying this policy would result in third parties other than
physicians taking beneficiaries off of stable medications. A number of
commenters urged CMS to revisit treatment of biosimilar and
interchangeable biological products with regard to mid-year formulary
changes at such time as the FDA approves the first interchangeable
biological product.
Response: Our proposal to permit certain immediate generic
substitutions did not apply to biological products. Rather, Sec.
423.120(b)(5)(iv)(A) permits these substitutions only when the new
generic drug is therapeutically equivalent (as defined in Sec.
423.100). That said, as interchangeable biological products become
available, we would consider whether additional regulatory changes
would be warranted.
Comment: Noting that we stated we did not believe that the
transition policy is appropriate for immediate generic substitutions, a
commenter requested that we clarify whether it would apply for generic
substitutions that do not meet the requirements of Sec.
423.120(b)(5)(iv). A commenter queried as to whether the exemption of
immediate generic substitutions from the transition fill policy would
only apply to those drugs removed based on this process, and whether
new enrollees joining a plan during the plan year would be subject to
the same requirement.
Response: We proposed to revise only the transition policy as
regards immediate generic substitutions: under Sec.
423.120(b)(3)(i)(B), the transition requirements do not apply for Part
D sponsors that make such substitutions consistent with Sec.
423.120(b)(5)(iv). The proposed regulation would not otherwise change
the application of transition policy to other instances.
Comment: Commenters pointed out that there was no need to permit
immediate generic substitutions because Part D sponsors had numerous
other UM controls such as step therapy and prior authorization, which
they had successfully used to influence beneficiary choices. A
commenter also opined that there was no reason to eliminate advance
notice aside from reducing plan administrative tasks because Part D
sponsors know about the timing of generic releases well in advance.
Response: We agree that Part D sponsors currently have other UM
controls that provide some flexibility; however, our goal is to provide
even more flexibility in addition to those tools to promote and permit
Part D sponsors to switch to generic drugs even sooner after their
release date than we currently permit. And a central goal of this
proposal is to reduce plan administrative tasks--albeit while still
maintaining beneficiary protections.
Comment: A commenter recommended that CMS codify the requirement
that plans must give direct notice to affected beneficiaries by the end
of the month in which the changes take place. Another commenter
recommended that we require Part D sponsors to notify enrollees of
generic substitutions as soon as they occur including providing notice
at the point of sale (POS) before prescriptions are filled if that is
the earliest opportunity for notice.
Response: While we appreciate the idea, we do not currently have in
place the means to provide this POS notice and believe implementing
such a system would create a burden at odds with our goal of promoting
more flexible formulary administration because of the resources and
time required to build such a system. We also decline at this time to
set hard deadlines because we believe that Part D sponsors have an
incentive to provide beneficiaries with information on specific changes
timely and, as noted earlier may, for generic substitutions that take
place before the start of the next plan year, be able to provide notice
before the change takes effect.
Comment: A few commenters suggested that if we were to still
require direct notice, that we remove information from the direct
notice about how to request exceptions to avoid creating the
expectation that enrollees could qualify for exceptions without trying
generics. Another commenter voiced concern about the fact that our
preamble stated that enrollees could not be certain that they ``would
be better served by taking no medication'' unless they first tried the
generic equivalent. Noting that there could be sound medical reasons to
believe alternatives could cause particular beneficiaries harm, the
commenter requested that we clarify that no appeals standard applied to
require an enrollee to try an alternative drug before an exception can
or must be provided.
Response: We disagree that retaining information in the direct
notice about the availability of the exceptions process would create
undue expectations, particularly given that this information already is
required at Sec. 423.120(b)(5)(i)(E), which we did not propose to
change. In discussing our reasoning for proposing to permit immediate
generic substitutions without requiring that the plan provide a
transition fill, we did not intend to suggest that the standards for
exceptions (which are described in the statute) would change.
Exceptions will remain subject to the standards set forth in Sec.
423.578.
Comment: Suggesting that the direct notice repeats information
already included in the EOB, a few commenters recommended that we
remove the direct notice requirement for immediate generic
substitutions. Another commenter requested that we confirm that we
meant to apply the EOB timeframe when we encouraged Part D sponsors to
provide retrospective direct notice of immediate generic substitutions
``no later than by the end of the month after which the change becomes
effective'' such that a Part D sponsor making a generic substitution
effective in April would have until the end of May to notify affected
members.
Response: We did not propose to remove the direct notice
requirements for specified generic substitutions but rather to remove
the requirement that they be provided in advance of the permitted
substitutions, and we therefore decline to eliminate them now. We did
not intend to apply the EOB timeframe specified at Sec. 423.128(e)(6)
to the requirement to provide direct retrospective notice of immediate
generic substitutions, but if Part D sponsors wish to include the
direct retrospective notice in their EOBs, they could do so. Those so
choosing must make sure the EOB

[[Page 16610]]

contents comply with the notice requirements of Sec.
423.120(b)(5)(iv). (We intend to update our model EOB in this regard.)
And while we currently intend to permit this flexibility, we continue
to encourage Part D sponsors to provide direct and other notice as soon
as possible. For instance, we see no impediments to providing online
notice of changes if not before or on the effective date of a generic
substitution, at least shortly thereafter.
Comment: A commenter noted that we had not proposed any
requirements for Part D sponsors to update the content of formularies
available to beneficiaries after making immediate generic
substitutions.
Response: While we did not propose new beneficiary communications
requirements specific to the content of formularies posted online or
provided on paper, current regulations continue to apply. However, as
noted in our proposed rule, we decided not to require a regulatory
deadline because we anticipate that Part D sponsors will be promptly
updating the formularies posted online. At a minimum, Part D sponsors
must comply with Sec. 423.128(d)(2)(ii) which still requires Part D
sponsors to update their websites to reflect their current formularies
at least monthly. Additionally, we are finalizing revisions to Sec.
423.128(d)(2)(iii), which currently requires Part D sponsors to provide
notice online to current and prospective enrollees regarding midyear
formulary changes, to require that the notice be provided timely under
Sec. 423.120(b)(5).We further believe that Part D sponsors would have
the incentive to update their formularies timely to encourage
beneficiaries to move to the newly substituted drugs and to avoid
beneficiary confusion.
Comment: A commenter queried: if a generic is released in October
and the brand is on both the current year and the next year's
formulary, could the sponsor remove the brand from following year's
formulary, but leave the current year formulary unchanged?
Response: A Part D sponsor that met all requirements of Sec.
423.120(b)(5)(iv) would be able to substitute the generic for the brand
drug in the following year's formulary, but leave the brand drug on the
current year's formulary. Alternatively, the Part D sponsor could
substitute the generic for the brand name drug on both formularies at
the same time, consistent with the requirements we are finalizing in
this rule for immediate generic substitutions.
Comment: Characterizing the proposal as a major policy change, a
commenter recommended that we test its implementation before shortening
the notice provisions. Another commenter requested that we monitor the
rate at which formularies are updated to reflect changes in coverage.
Response: We do not believe it is necessary for us to test
implementation of this provision. We do not view it as a major policy
change because, as discussed above, we have permitted Part D sponsors
to make midyear formulary changes for some time and are merely changing
the timing of implementation and notice rather than the kinds of
changes that can be made. Lastly, given that we currently audit
formulary administration and maintain a robust formulary monitoring
program, we do not see the need to implement a model test.
Comment: A few commenters were concerned that generic drugs would
not be timely added to our Formulary Reference File (FRF). We also
received detailed questions regarding how the proposed change would
affect operations related to matters such as pharmacy information
systems, HPMS negative change requests, and FRF release dates and UM
criteria.
Response: Part D sponsors are permitted to cover drugs that are not
on the FRF, so long as they have determined that the drug product meets
the definition of a Part D drug. We appreciated the operational
inquiries and plan to update guidance as appropriate.
c. Issue Related to Other Midyear Formulary Changes
Comment: Commenters responding to another section of the proposed
rule, II.A.13 Changes to the Days' Supply Required by the Part D
Transition Process, suggested that referring to a ``month's'' supply
rather than a ``30 day'' transition supply was vague and could create
uncertainty for Part D sponsors and confuse beneficiaries--possibly
leading to interruptions in coverage.
Response: To address the concerns, in finalizing the change to our
transition requirements, we plan to revise Sec. 423.120(b)(3)(iii) to
refer to ``an approved month's supply'' rather than ``a month's
supply'' so that it would be clear that we mean a month's supply in
accordance with the month's supply approved in a plan's bid. (See
section II.A.13 Transition Process for more discussion of that issue.)
In our provision on notice of formulary changes, we originally proposed
to revise the days' supply referenced in formulary changes to conform
to that of the proposed transition provision, from a 30 day supply to a
month's supply in Sec. 423.120(b)(5)(i)(B). However, for the same
reasons we noted with respect to the transition requirements, we
believe it is appropriate to conform the reference to supply for notice
of formulary changes to that used for transition supply. Therefore, in
Sec. 423.120(b)(5)(i)(B) rather than requiring ``a month's supply'' at
the time an affected enrollee requests a refill of the Part D drug, we
will require ``an approved month's supply''.
After consideration of the public comments received, we are
finalizing our proposal on expedited substitutions of certain generics
and other midyear formulary changes with the following modification as
discussed and as follows:
In Sec. 423.120(b)(3)(i)(B), we are removing an extraneous
reference to ``and (b)(6)''.
In Sec. 423.120(b)(5)(i)(B), we are removing the phrase ``a
month's supply'' and adding in its place the phrase ``an approved
month's supply''.
In Sec. 423.120(b)(5)(iv)(A), we are removing the phrase
``formulary with the same or lower cost-sharing'' and adding in its
place the phrase ``formulary on the same or lower-cost-sharing tier''.
In Sec. 423.120(b)(5)(iv)(B), we are removing the phrase
``requested CMS formulary approval'' and replacing it with ``submitted
its initial formulary for CMS approval''.
15. Similar Treatment of Biosimilar and Interchangeable Biological
Products and Generic Drugs for Purposes of LIS Cost Sharing
Similar to the introduction of an abbreviated approval pathway for
generic drugs provided by the Hatch-Waxman Amendments 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
PPACA amended section 351 of the Public Health Service Act (PHSA) (42
U.S.C. 262), adding a subsection (k) to create an abbreviated licensure
pathway for 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 16611]]

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/) Biological products
approved under section 351 of the PHSA (42 U.S.C. 262) 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 website for new biologics license application (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 individuals who do not
receive the low-income subsidy (LIS) and are in the catastrophic phase
of the benefit and for LIS-eligible individuals, respectively, 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. Because 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, biosimilar and interchangeable biological products are subject
to the higher Part D maximum copayments for non-LIS Part D enrollees in
the catastrophic portion of the benefit and for LIS eligible
individuals in any phase of the benefit applicable to all other Part D
drugs. Consequently, treatment of biosimilar and interchangeable
biological products, which are generally high-cost, specialty drugs, as
brands for the purposes of LIS cost sharing and non-LIS catastrophic
cost sharing generated a great deal confusion and concern for Part D
plan sponsors 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.
Consequently, we proposed to revise the definition of generic drug
at Sec. 423.4 to include biosimilar and interchangeable biological
products approved under section 351(k) of the PHSA solely for purposes
of cost-sharing under sections 1860D-2(b)(4) and 1860D-14(a)(1)(D)(ii-
iii) of the Act by:
(1) Redesignating the existing definition as paragraph (i), and
(2) Adding 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 solicited comment on this proposed change to the definition of
generic drug at Sec. 423.4.
We received the following comments and our response follows:
Comment: A number of commenters expressed strong support for CMS'
proposed change to the definition of generic drug, noting that it would
spur greater price competition, expand access for Part D enrollees,
help restrain growth in Part D program spending, reduce costs when
medically appropriate, and improve the overall biologic marketplace.
Some commenters expressed support of this proposal, contending that it
would help non-LIS Part D enrollees in the coverage gap.
Response: We thank the commenters for their support. With regard to
commenters who suggested the proposal would be beneficial to non-LIS
Part D enrollees in the coverage gap since, we believe these commenters
may have misunderstood our proposal. Our proposal would affect non-LIS
cost sharing for enrollees who are in the catastrophic portion of the
benefit. Further discussion of CMS treatment of biosimilar and
interchangeable biological products during the coverage gap is
discussed later in this comment and response.
Comment: A commenter requested clarification on whether CMS' usage
of the term ``biosimilar'' means ``non-interchangeable biosimilar.''
Response: When CMS uses the term ``biosimilar'' or ``biosimilar
biological product,'' we mean a biological product licensed under
section 351(k) of the PHSA that has not been determined by the FDA to
be ``interchangeable'' to the reference biological product. However,
biological products licensed under section 351(k) of the PHSA are
inclusive of biosimilar and interchangeable biological products.
Consequently, because we proposed to apply our policy with regard to
cost-sharing to biological products licensed under section 351(k) of
the PHSA, it would apply equally to biosimilar and interchangeable
biological products.
Comment: A commenter contended that CMS' proposal would require
Part D plan sponsors to place biosimilar and interchangeable biological
products within their generic tier. In contrast, other commenters
suggested that because biosimilar biological products are usually
specialty drugs, the proposal was not necessary because most Part D
plan sponsors' formularies include a specialty tier. Other commenters
suggested that CMS should work with Part D plan sponsors to address
cost-sharing issues through their benefit design and cost-sharing
structure. Finally, another commenter suggested that our policy would
diminish the ability of Part D plans and manufacturers to negotiate.
Response: We disagree with commenters that the proposal would
require plan sponsors to place biosimilar or interchangeable biological
products on certain tiers. While biosimilar biological products are
likely to be placed on a Part D plan sponsor's specialty tier, we
explicitly stated in our proposed regulatory language that this change
only applies to statutory cost-sharing for certain Part D enrollees and
would not impact which tier Part D plan sponsors place a particular
biosimilar biological product. Moreover, since the start of the Part D
program, with few exceptions, CMS has generally left tiering
assignments to Part D plan sponsors. Consequently, because the
provision applies to statutory cost-sharing and not tier placement, we
do not believe that Part D plan sponsors' or manufacturers' ability to
negotiate preferable terms for formulary placement will be impacted.
Comment: A commenter suggested CMS exceeded its statutory authority
to redefine generic drug in the manner we proposed, adding that the
terms ``multiple source drug'' and ``generic

[[Page 16612]]

drug'' have specific meanings in the Part D statute that do not
encompass biosimilar biological products.
Response: We disagree with the commenter. While the statute defines
multiple-source drug at section 1927(k)(7) of the Act, the statute does
not include a definition of generic drug for purposes of the Part D
program. Consequently, through notice and comment rulemaking, CMS
finalized the definition of generic drug at Sec. 423.4 in the January
2005 final rule (70 FR 4194).
Comment: Although a number of commenters thanked us for resolving
confusion relative to all LIS Part D enrollee cost-sharing and non-LIS
catastrophic cost sharing, commenters opposed to our proposal uniformly
contended that our policy would create confusion in the marketplace on
a number of grounds, which they added could ultimately jeopardize Part
D enrollee safety.
Commenters contended that our proposal inappropriately equates
biosimilar biological products with generic drugs for purposes of their
scientific and clinical applications. Commenters stated that biosimilar
biological products are not interchangeable like therapeutically
equivalent generic drugs, and that CMS should make clear that generic
drugs are different from biosimilar biological products. A commenter
requested clarification on how our proposal affects formulary
requirements, specifically with regard to the requirement at Sec.
423.120(b)(2)(i) that each formulary have at least two Part D drugs for
each category and class submitted on the formulary file (except as
noted in Sec. 423.120(b)(2)(ii)).
In addition, commenters contended that it would contribute to
confusion regarding variable rules for treatment of biosimilar
biological products across CMS programs, including case-by-case
determinations for formulary requirements, treatment as branded
products for the Medicaid Drug Rebate program, treatment as multi-
source generic drugs for purposes of Medicare Part B, and similar to
generic drugs, treatment as non-applicable drugs for purposes of the
Coverage Gap Discount Program (Discount Program). Similarly, a number
of commenters urged CMS to categorize biosimilar and interchangeable
biological products approved under section 351(k) of the PHSA as
applicable drugs for purposes of the Discount Program. Some commenters
suggested that CMS could accomplish this by using waiver authority
under section 1860D-14A(g)(2)(A) to exempt biosimilar and
interchangeable biological products from their statutory treatment as
non-applicable drugs under the Discount Program.
Response: We stated in the proposed rule that this change would
only apply to cost-sharing for certain Part D enrollees. This policy
does not change or supersede our existing formulary requirements for
biosimilar biological products that we addressed in the March 30, 2015
Health Plan Management (HPMS) memorandum entitled ``Part D Requirements
for Biosimilar Follow-On Biological Products'' which is available on
the CMS website at https://www.cms.gov/Research-Statistics-Data-and-Systems/Computer-Data-and-Systems/HPMS/HPMS-Memos-Archive-Annual-Items/SysHPMS-Memo-Archive-%E2%80%93-2015-Qtr1.html.
We appreciate the concerns about biosimilar and interchangeable
biological products being treated differently under different CMS
programs. However, to serve different purposes, CMS' statutory
authority treats biosimilar and interchangeable biological products
differently across CMS programs. Since the proposed rule was published,
CMS notes that section 53113 of the Bipartisan Budget Act of 2018 (Pub.
L. 115-123) amended section 1860D-14A(g)(2)(A) of the Act to sunset the
exclusion of biological products approved under section 351(k) of the
PHSA from the Discount Program. We further note that since the proposed
rule was published, Medicare Part B policy changes for biosimilar
biological products that were discussed in the CY 2018 PFS final rule
(see CMS-1676-F, 82 FR 52976) took effect January 1, 2018. As a result,
newly approved biosimilar biological products with a common reference
product will no longer be grouped into the same Medicare Part B billing
code. These two policy changes, when taken together with the policy we
are finalizing now provide for greater alignment of biological products
approved under section 351(k) of the PHSA across CMS programs and
encourage the use and development of these products.
Although we attempted to clarify that we were not equating
biosimilar and interchangeable biological products to generic drugs for
any other purpose than cost sharing intended to encourage utilization
of lower-cost alternatives, we are persuaded by comments that our
proposed approach to include biosimilar and interchangeable biological
products in our definition of generic drug still could be
misinterpreted and create further confusion about the broader treatment
of biosimilar and interchangeable biological products under the Part D
program. In consideration of comments regarding the definition of
generic drug, we are not finalizing our proposal at Sec. 423.4 to
revise the definition of generic drug.
Section 1860D-14(a)(1)(D)(ii)-(iii) of the Act establishes that the
copayment amount cannot exceed the higher statutory threshold ($3 in
2006 as increased by Consumer Price Index percentage increase) for
drugs other than generic drugs or preferred drugs that are multiple
source (as defined in 1927(k)(7)(A)(i) of the Act). However, the
statute does not prohibit CMS from establishing a lower maximum copay
amount for other drugs since, by definition, such copay would not
exceed the statutory maximum. By establishing a lower maximum copay for
biosimilar and interchangeable biological products that is equivalent
to the lower copay required for generic and preferred multiple source
drugs, CMS achieves the same goal intended by our original proposal,
but now does so without the confusion that would result from defining
biosimilar and interchangeable biological products as generic drugs for
this limited purpose. We believe this approach should avoid any
confusion that would cause stakeholders to misinterpret this policy as
applying more broadly.
While the statutory authority under section 1860D-14(a)(1)(D)(ii)-
(iii) of the Act establishes a maximum statutory copay for LIS
enrollees, thereby providing us with the flexibility to establish a
lower copay amount for biosimilar and interchangeable biological
products, section 1860D-2(b)(4) of the Act specifies a copayment
threshold that is ``equal to'' the higher amount for any other drug
that is not a generic drug or preferred drug that is a multiple source
drug (as defined under section 1927(k)(7)(A)(i) of the Act). Therefore,
CMS does not have the flexibility to establish a lower copay amount for
biosimilar and interchangeable biological products for non-LIS
enrollees that have reached the catastrophic phase of the benefit.
Nevertheless, as illustrated by some comments below, we do not
anticipate this will have any practical effect on non-LIS cost sharing
in the catastrophic phase because such enrollees are required to pay
cost sharing that is equal to the greater of the applicable copay
amount ($3.35/$8.35 in 2018) or 5 percent. Given the high cost of
biological products in general, the non-LIS catastrophic cost sharing
will almost certainly be 5 percent.
In light of the comments, we now believe the better approach to
encourage

[[Page 16613]]

utilization of biosimilar and interchangeable biological products via
LIS cost sharing is to include them in Sec. 423.782(a)(2)(iii)(A) and
Sec. 423.782(b)(3). The revised paragraphs will specify the following:
A copayment amount of not more than $1 for a generic drug,
biological product for which an application under section 351(k) of the
Public Health Service Act (42 U.S.C. 262(k)) is approved, or preferred
drugs that are multiple source (as defined under section
1927(k)(7)(A)(i) of the Act) or $3 for any other drug in 2006, or for
years after 2006 the amounts specified in this paragraph (a)(2)(iii)(A)
for the percentage increase in the Consumer Price Index, rounded to the
nearest multiple of 5 cents or 10 cents, respectively; or''
For covered Part D drugs above the out-of-pocket limit
(under Sec. 423.104(d)(5)(iii)) in 2006, copayments not to exceed $2
for a generic drug, biological product for which an application under
section 351(k) of the Public Health Service Act (42 U.S.C. 262(k)) is
approved, or preferred drugs that are multiple source drugs (as defined
under section 1927(k)(7)(A)(i) of the Act) and $5 for any other drug.
For years beginning in 2007, the amounts specified in section (b)(3)
for the previous years increased by the annual percentage increase in
average per capita aggregate expenditures for covered Part D drugs,
rounded to the nearest multiple of 5 cents, respectively.
Comment: Some commenters suggested that the cost-sharing reduction
for LIS Part D enrollees ($1.25 versus $3.35 for dually eligible
enrollees and $3.70 versus $8.35 for non-dually eligible enrollees) is
insignificant and does not warrant the change.
Response: We disagree. While differences in cost-sharing of $1.10,
and $4.65 may be inconsequential to many Part D enrollees, we believe
this change promotes medication adherence in the LIS enrollee
population, in addition to encouraging the use of biosimilar and
interchangeable biological products in the market.
Comment: A commenter urged CMS to work with the FDA to create
different approval pathways for biosimilar and interchangeable
biological products. The commenter added approval of biosimilar and
interchangeable biological products is fundamentally different from the
FDA's distinct approval pathways for other types of drugs and
biological products which address only one category of follow-on
product compared to the reference product (for example, section
505(b)(1) versus section 505(b)(2) of the Federal Food, Drug, and
Cosmetic Act (FDCA), New Drug Application (NDA) versus Abbreviated New
Drug Application (ANDA), whereas the approval pathway under section
351(k) of the PHSA addresses two different categories of biological
products (that is, biosimilar and interchangeable biological products)
when compared to a reference biological product approved under section
351(a) of the PHSA, and all three categories of biological products
receive a Biologics License Application (BLA) approval.
Commenters stated that biological products currently approved
through the pathway described by section 505(b)(2) of the FDCA are
currently treated as applicable drugs for purposes of the Discount
Program. In March 2020, an approved application for a biological
product under section 505 of the FDCA will be deemed to be a license
for the biological product under section 351 of the PHSA. FDA has not
yet described whether an approved application for a biological product
under section 505 of the FDCA will be deemed to be a license for the
biological product under section 351(a) or 351(k) of the PHSA. As such,
some commenters urged CMS to preemptively classify biological products
approved under section 505(b)(2) of the FDCA as non-applicable drugs
for the Discount Program, while other commenters urged CMS to take the
position that they will remain classified as applicable drugs for
purposes of the Discount Program.
Finally, some commenters suggested that, similar to generic
utilization rate, CMS should begin to actively monitor usage of follow-
on biological products across CMS programs by setting up appropriate
infrastructure as a policy priority for the Agency.
Response: We thank the commenters. While we may consider them for
future policy making, these comments are beyond the scope of this rule.
However, CMS notes that since the proposed rule was published, section
53113 of the Bipartisan Budget Act of 2018 (Pub. L. 115-123) amended
section 1860D-14A(g)(2)(A) of the Act to sunset the exclusion of
biological products licensed under section 351(k) of the PHSA from the
Discount Program.
In summary, in consideration of the comments received, we are not
finalizing our proposal to revise the definition of generic drug.
Instead, in this final rule, we are revising Sec.
423.782(a)(2)(iii)(A) and Sec. 423.782(b)(3) by adding ``, biological
products for which an application under section 351(k) of the Public
Health Service Act (42 U.S.C. 262(k)) is approved,''.
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 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.
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 will result in the offering of a broad array of cost effective
prescription drug coverage options for Medicare beneficiaries. 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. To that end, we have reconsidered the position 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 do however continue to believe 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
Contract Year (CY) 2019, we proposed 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

[[Page 16614]]

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.
We also announced 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 solicited 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.
We received the following comments and our responses follow:
Comment: Commenters opposed to this proposal expressed concerns
that Medicare beneficiaries will be faced with even more plans to
choose from, resulting in ``choice overload'' and beneficiary confusion
when trying to distinguish between plan options. Several of these
commenters were at least encouraged to see that CMS intends to maintain
the meaningful difference requirement between basic and enhanced PDP
offerings.
Response: We appreciate the concerns raised about potential
beneficiary confusion. We believe that the tools CMS provides for
beneficiaries to make decisions (for example, Medicare Plan Finder,
Medicare and You Handbook, 1-800-MEDICARE) and our enforcement of
communication and marketing requirements address these concerns. The
current approach to define meaningful difference is based on a model
tool that takes into account a cohort of Medicare beneficiaries in
aggregate and is intended to identify a meaningful value between plan
comparisons based on that cohort's utilization run through a plan's
benefit design and formulary. An individual beneficiary's utilization
may not mirror that of the model cohort, so we continue to strongly
encourage individual beneficiaries to use the Medicare Plan Finder tool
and the many other resources that CMS makes available to assist them in
finding the plan that best meets their unique needs. In proposing to
maintain the meaningful difference requirement between basic and
enhanced plans, our intent is to ensure that a meaningful value
continues to exist for those beneficiaries choosing an enhanced plan
that has an associated supplemental Part D premium. We anticipate
another positive outcome of this proposed change will be a potential
reduction in Part D supplemental premiums, as sponsors will not be
forced to make benefit changes to comply with a requirement that
ultimately results in higher supplemental premiums for beneficiaries.
Comment: A subset of commenters who opposed this proposal stated
that a quantifiable measure provides valuable information to
beneficiaries and ensures substantial differences between plans. While
the commenters believe using the OOPC model as the only measure of
meaningful difference is a flawed approach, they believe CMS should
maintain the requirement between enhanced plans but allow plan sponsors
to seek waivers by providing alternate evidence of meaningful
difference if the meaningful difference threshold is not met.
Response: We disagree with the commenter's suggested approach to
maintain the PDP EA to EA meaningful difference requirement but allow
sponsors to seek waivers if the meaningful difference threshold(s) are
not met. The use of a waiver or justification process introduces
additional subjectivity into the benefit review.
Comment: A commenter stated that it is crucial that CMS continue to
limit plan sponsors to offering no more than two EA plans in each
region.
Response: We agree and wish to clarify that the proposed changes to
the meaningful difference requirement for PDP plan offerings does not
change CMS's intention to use our bid negotiation authority to limit to
three, the number of plans approved within a PDP region by a parent
organization (one required basic plan and no more than two enhanced
plans). The potential increase in plan offerings that we discuss takes
into account only the addition of a second enhanced plan by any parent
organization that currently offers a single enhanced plan within a PDP
region. It is CMS's intent to maintain a balance with respect to
encouraging competition and plan flexibilities while still providing
PDP choices to beneficiaries that represent meaningful choices in
benefit packages. To the extent that CMS finds the elimination of the
EA to EA meaningful difference requirement results in potential
beneficiary confusion or harm, CMS will consider reinstating the
requirement between EA plans through future rulemaking or consider
taking some other action.
Comment: A commenter urged CMS to share data that suggests the
meaningful difference requirement is in fact preventing innovation by
plans.
Response: We do not have data that this requirement specifically
hinders innovation. However, for a number of years we have heard from
plan sponsors their belief that this requirement is arbitrary,
potentially harmful to the competitive Part D market, and results in
plans that are becoming increasingly unaffordable for many
beneficiaries. This proposal aims to combat these concerns, with the
added benefit of allowing for flexibility in benefit design.
Comment: Several commenters supported the proposal to eliminate the
PDP EA to EA meaningful difference requirement, applauding CMS efforts
to increase innovation and plan flexibilities. In addition to those
flexibilities, a few commenters noted the potential this proposal has
to decrease total Part D premiums, due to lower supplemental Part D
premiums associated with enhanced plans not needing to meet this
requirement, and to increase beneficiaries' choice of coverage options.
Comments supportive of the proposed change suggested it will eliminate
unneeded disruption and provide more plan stability to beneficiaries
currently enrolled in second EA plans, as sponsors will not be forced
to adjust benefits to comply with changing requirements.
Response: We appreciate the comments received in support of this
proposal to eliminate the PDP EA to EA meaningful difference
requirement. The closure of the coverage gap has introduced challenges
for plan sponsors to meet the EA to EA meaningful difference
requirement, as the provision of additional coverage in the gap has
been a key approach sponsors have used to meet the meaningful
difference requirement. We agree with the concern that continued
enforcement of this requirement could result in disruption and
instability for beneficiaries as it may necessitate Part D sponsors to
significantly modify their benefit structure from year-to-year or even
require them to non-renew a plan if unable to attain the out-of-pocket
threshold that has been set annually. The proposal could also result in
plan offerings that are more competitive and market-driven within a
less restrictive regulatory framework. We agree that

[[Page 16615]]

elimination of this requirement may offer plan sponsors additional
flexibilities in terms of their plan benefit designs. As previously
noted in the NPRM, we agree that it is possible for plan sponsors to
offer unique benefit designs that attract different subsets of Medicare
beneficiaries but have similar estimated out-of-pocket costs. Arguably,
an EA plan that completely waives the deductible could be attractive to
one subset of enrollees, while another EA plan that instead offers
reduced cost-sharing or provides supplemental coverage of drugs that
are excluded under Part D might attract a different subset of
enrollees. While providing for different benefit designs, these two
plans could have similar estimated out-of-pocket costs.
Comment: Some commenters urged the agency to eliminate the
meaningful difference test in all instances for PDPs (that is, also
between basic to EA plans), and pursue a suitable replacement that
would provide more meaningful decision support for beneficiaries during
open enrollment. A commenter claimed that the meaningful difference
requirement may stifle innovation, reduce consumer choice, and impose
additional costs on plans. The commenter further asserted that the
current OOPC difference between basic and EA PDP offerings remains too
high, which may make enhanced plans very expensive and cost prohibitive
for many beneficiaries, further limiting consumer choice.
Response: We disagree with completely eliminating the meaningful
difference requirement across all PDP offerings. While we support the
flexibility and competition that this proposal to eliminate the
meaningful difference requirement between enhanced plans will
stimulate, we believe it is important to balance this with a need to
ensure beneficiaries have a meaningful choice between plans, especially
when some of those plans include an additional supplemental Part D
premium. Eliminating the meaningful difference requirements between the
basic and enhanced plan offerings could result in sponsor behaviors
that adversely affect the program, such as the creation of enhanced
plan options designed solely to engage in risk segmentation. Healthier
beneficiaries may be increasingly incentivized to enroll in enhanced
plans, leading to a higher risk pool in the basic plans. This could
ultimately result in increasing bids and premiums for basic plans,
given that LIS auto-enrollment is limited to basic plans. The fact that
CMS pays most of the premium for LIS beneficiaries means that total
government cost would likely increase.
Comment: A commenter suggested that the meaningful difference rules
also be relaxed in the case of acquisitions/mergers so that multiple
plan options can exist between the two merged entities for multiple
years.
Response: Current regulations at Sec. 423.272(b)(3)(ii) offer this
flexibility, providing a two-year transition period following a new
acquisition before a PDP plan sponsor will be held to the requirement
that its bids be substantially different. Revisions to Sec.
423.272(b)(3)(ii) will be made to better align the requirements with
the proposed change for Sec. 423.265(b)(2), specifically to remove the
reference that benefit package or plan costs being substantially
different from ANY (emphasis added) other bid submitted by the same
Part D sponsor and to refer the reader to Sec. 423.265(b)(2) that will
reflect the provision change which identifies which plan benefit types
are expected to be substantially different.
Comment: A commenter interpreted the proposal as rescinding CMS's
policy that a second EA plan provide brand gap coverage, and noted that
removing this policy also has the capability to increase plan
flexibilities and increase beneficiary plan choice.
Response: As part of our application of the meaningful difference
requirement to stand-alone PDPs, CMS reviewed additional enhanced PDPs
within a service area with the expectation that they represent a higher
value than the first enhanced plan and as such would include additional
gap cost-sharing reductions for at least 10 percent of their formulary
brand drugs. We confirm that elimination of the meaningful difference
requirement between PDP enhanced plans would also eliminate this
expectation.
Comment: With respect to our request for stakeholder input on how
to redefine the meaningful difference requirement between basic and
enhanced PDP offerings, we received very few detailed proposals, but
many responses encouraged transparency and stakeholder input on any
contemplated changes. With respect to potential modifications to the
current OOPC model, two suggestions were received. One recommendation
is for CMS to reconsider the approach to have non-formulary drugs be
priced at the cost-sharing of the Part D sponsor's formulary exceptions
tier rather than priced at the retail cash price. The other recommended
that CMS set a consistent and reasonable OOPC differential that does
not change from year to year, suggesting that this approach would
afford sponsors more predictability and could reduce unnecessary
changes, while still ensuring beneficiaries receive meaningful value.
With respect to potential alternatives to the OOPC model, two
suggestions were received. One recommendation was for CMS to establish
a minimum actuarial difference between basic and enhanced plans (for
example, 20 percent average member cost-sharing for an enhanced plan
vs. 25 percent average member cost-sharing for a basic plan). Another
commenter suggested that CMS allow plans to demonstrate a meaningful
difference between plan offerings by providing an actuarial attestation
as to their actuarial value differences, while allowing actuaries to
use a utilization profile that is representative of their population
for quantifying differences in actuarial value (without the impact of
selection effect or risk score differential).
Response: We appreciate the thoughtful input on how to redefine
what constitutes a meaningful difference between basic and enhanced PDP
offerings. Both the recommendations to improve upon the OOPC model and
the alternative approaches will be carefully considered by CMS as we
evaluate options moving forward. For CY 2019, CMS intends to maintain
the current methodology to set a basic to enhanced OOPC differential
threshold.
Comment: A significant number of commenters strongly believe that
significant efforts need to be made to ensure beneficiary information
tools are enhanced to improve upon the plan election experience. Some
commenters recommended research focusing on understanding beneficiary
perceptions of value and meaningful difference. Several commenters
provided specific recommendations to enhance the Medicare Plan Finder
(MPF); one such suggestion is to add flags within the system to
highlight benefit enhancements, such as reduced cost sharing,
additional coverage in the gap, reduced deductible or coverage of
excluded Part D drugs. Another commenter suggested CMS modify the MPF
to allow beneficiaries to filter and/or sort plans by enhanced features
(for example, ``Show me plans in my area that offer no deductible'').
Some commenters suggested that if CMS intends to finalize this
proposal, it be postponed until those enhancements to beneficiary tools
have been implemented.
Response: These recommendations are outside of the scope of this
final rule provision. We do however agree with the need for clear and
complete

[[Page 16616]]

information and intend to continue improving the MPF to make it as user
friendly as possible. We encourage third party organizations that
support beneficiaries in their decision-making to take advantage of
existing resources (for example, public use files (PUF) available for
the Part D program).
After consideration of all of the comments received, we are
finalizing our proposal to revise 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 are also
modifying the language of Sec. 423.272(b)(3)(ii) to make the
provisions governing the meaningful difference transition period
following a plan sponsor acquisition consistent with the new
requirements stated at Sec. 423.265(b)(2).
17. Request for Information Regarding the Application of Manufacturer
Rebates and Pharmacy Price Concessions to Drug Prices at the Point of
Sale
In this proposed rule, we solicited comment on potential policy
approaches for applying some manufacturer rebates and all pharmacy
price concessions to drug prices at point of sale under Part D. We
received over 1,400 responses to this request for information. We thank
the commenters for the thought, time, and effort that went into
developing these detailed responses. We will carefully review all input
received from stakeholders as we continue our efforts to meaningfully
address rising prescription drug costs for beneficiaries.
We further note that the President's Fiscal Year 2019 Budget
included a proposal similar to the point-of-sale rebate policy
considered in this request for information. As explained in the request
for information, we believe the statute provides us with discretion to
require that Part D sponsors apply at least a portion of the
manufacturer rebates and all pharmacy price concessions they receive to
the price of a Part D drug at the point of sale. Any new requirements
regarding the application of rebates at the point of sale would be
proposed through notice and comment rulemaking, in the future.

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 17005 of the 21st Century Cures Act (the Cures Act)
modified section 1851(e)(2) of the Act to eliminate the Medicare
Advantage Disenrollment Period (MADP) and to establish, beginning in
2019, a new open enrollment period (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), the 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.
Pursuant to the statute, newly eligible MA individuals can only use
the OEP during the first 3 months in which they have both Part A and
Part B. Under existing regulation (Sec. 422.68(c)), enrollments made
using the OEP are effective the first of the month following the month
in which the enrollment is made. 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.
The OEP, as enacted, permits changes to Part D coverage for
individuals who, prior to the change in election during the OEP, were
enrolled in an MA plan. As eligibility to use the 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 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
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 OEP to switch to: (1) Another MA-PD plan; (2)
an MA-only plan; or (3) Original Medicare with or without a PDP. The
OEP will 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 OEP to enroll in an MA plan, regardless of whether or not they have
Part D. Furthermore, unsolicited marketing is prohibited by statute
during this period, and is discussed in section II.B.5.c of this final
rule.
To implement the changes required by the Cures Act, we proposed 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 are no longer in effect and
renumber the enrollment periods which follow them. As such, we proposed
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 discussed in section II.B.5.c, Sec. Sec. 422.2268 and
423.2268 will 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).
We received the following comments and our response follows:
Comment: We received a number of comments supporting the
restoration of the Medicare Advantage OEP. Commenters noted that the
OEP reflects the Administration's focus on consumer choice and
competition, provides additional time for beneficiaries to make health
plan decisions and ensures beneficiaries are enrolled in plans that
best suits their needs and budgets, by affording an opportunity to make
a change from the MA plan previously

[[Page 16617]]

chosen during the Annual Election Period (AEP).
Response: We thank commentators for their support of this proposal.
Comment: A couple of commenters requested clarification on the
ability to use other election periods such as the 5-Star special
enrollment period (SEP) or the SEP for individuals in the Program of
All-inclusive Care for the Elderly (PACE) to make changes outside the
OEP.
Response: We note that the OEP has no effect on other valid
election periods, except that the Cures Act eliminates the Medicare
Advantage Disenrollment Period (MADP) after 2018. The OEP is an
additional statutory enrollment period that allows individuals enrolled
in an MA plan to make a one-time election during the first 3 months of
the calendar year.
Comment: A commenter asked whether the OEP was applicable to cost
plans. The commenter further questioned if CMS intends to revise the
current SEP to enroll in a PDP, or provide a corresponding SEP for cost
plans with Part D to accept new enrollees.
Response: An individual enrolled in a cost plan may not use the OEP
to make a change. Additionally, an individual cannot use the OEP to
disenroll from an MA plan and enroll in a cost plan. As noted in
statute, an individual is solely able to switch from one MA plan to
another MA plan or from an MA plan to Original Medicare. As part of
that enrollment change, the individual may add, drop, or keep Part D
coverage; those enrolling in Original Medicare may enroll in a stand-
alone Part D plan. If an individual makes a change from an MA plan to
Original Medicare during the OEP, he or she can enroll in a cost plan
if the cost plan is open for enrollment. They would not, however, be
able to enroll in Part D without another valid enrollment period. Open
enrollment periods for cost plans are outlined in Sec. 417.426.
Comment: A commenter wanted to understand whether the OEP allowed
only for changes from one contract to another, or if it allowed for
changes within a contract (that is, from one Plan Benefit Package (PBP)
to another PBP).
Response: The OEP permits individuals to switch to any MA plan in
which they are eligible to join (that is, lives in service area, etc.).
This includes switches from PBP to PBP, contract to contract under a MA
organization, or from one MA organization to another.
Comment: We received a comment suggesting CMS exercise
discretionary authority and expand the MA OEP to all beneficiaries.
Response: While the MA OEP, as enacted, provides a 3-month window
for beneficiaries in an MA plan to make a change in their enrollment if
they are dissatisfied with their choice during the AEP, we do not have
the discretionary authority of expanding the scope to all
beneficiaries. In our view, broadening the scope of this election
period would contradict the intent of the statute.
Comment: A few commenters recommended CMS conduct robust
beneficiary outreach and education on the OEP to ensure beneficiaries
are aware of the enrollment changes, including their rights and
responsibilities, in order to mitigate confusion and potential
disruption.
Response: We appreciate the comments. We will take the necessary
steps to ensure that beneficiaries are made aware of the new OEP and
its timeframe. We believe that through education efforts directed to
beneficiaries by CMS and plans (that is, 2019 Medicare & You handbook,
Medicare.gov, member materials), beneficiaries will have sufficient
notification to make their health plan decisions.
Comment: A couple commenters requested CMS issue clear expectations
and guidance as soon as possible to detail the changes afforded by the
MA OEP, including the ability to make changes to Part D coverage, and
the effective dates for OEP elections to adequately prepare MA
organizations for enrollees.
Response: CMS will issue guidance in a timely manner to provide
plans time to implement. However, the discussion and regulation changes
in this final rule should provide plans the information and guidance
necessary to proceed and implement changes during the OEP.
Comment: Several commenters opposed the establishment of the OEP
and requested narrowing those eligible to use it. A commenter indicated
narrowing the eligibility requirements would prevent ``gaming'' (that
is, allowing MA beneficiaries, already enrolled in an MA plan for the
previous year, to use a secondary open enrollment period). Many
commenters suggested limiting its use to only permit individuals to
return to their prior plan or Original Medicare. They indicate such
change would allow enrollees to ``correct'' coverage decisions with
which the beneficiary may not be satisfied and would reduce the
opportunity for agents to market coverage that may not meet the needs
of the beneficiary. The commenters believe that allowing beneficiaries
who are already enrolled in an MA plan for the entire previous year to
use a secondary open enrollment period could result in inappropriate
``gaming''; the commenters urged CMS to consider a more narrow
interpretation of the eligibility and/or mechanisms to monitor abuse of
this provision.
Response: We thank the commenters for their suggestions. We
disagree with narrowing the scope of those eligible or limiting the MA
choices in the OEP to only the previous MA plan in which the
beneficiary was enrolled, as the individual may have different needs
than the previous year. In our view, Congress intended for enrollees to
be able to select any MA plan that best meets their needs or select
Original Medicare, if they prefer that healthcare option. Further, we
believe the statute is clear on the scope of choices permitted to
enrollees during the OEP.
Comment: A commenter opposed the restoration of the MA OEP to all
MA enrollees. The commenter believed it would create a new special
enrollment period for all MA-PD beneficiaries and offer an unlimited
ability to switch MA plans or disenroll from MA, which conflicts with
the proposed changes to limit SEP enrollments for those dually-eligible
for Medicare and Medicaid. The commenter recommended CMS consider
retaining the current MADP and offer the OEP through March 31 of each
year solely for dually eligible individuals in conjunction with the
proposed rule to limit Part D SEP for the remainder of the year.
Response: Under the new statutory provisions in section 1851(e)(2),
individuals enrolled in MA plans may make one change during the first 3
months of the plan year to switch to another MA plan or select Original
Medicare coverage. Individuals that use the OEP to make a change would
generally retain that coverage for the remainder of the coverage year
unless they qualify for another SEP. While we appreciate the
commenter's suggestions, the statute mandates the establishment of the
OEP and the discontinuation of the MADP.
Comment: Another commenter opposed the law change from the MADP to
the OEP but acknowledged the requirements are set forth by Congress.
The commenter asked for clarification on who is eligible for the new
OEP and how this change affects a new enrollment in Part D if the
beneficiary returns to FFS. The commenter further requested CMS clarify
whether the OEP is open to all MA enrollees, including those who had an
opportunity to make changes during the previous AEP and elected not to.
Response: The OEP is open to all MA enrollees, even if they chose
to remain

[[Page 16618]]

in their current MA plan during the previous AEP. As noted earlier,
during the OEP, individuals who disenroll from an MA plan and obtain
coverage through Original Medicare may also enroll in stand-alone Part
D coverage.
Comment: A few commenters stated that the OEP could inadvertently
degrade the value of MA plans with 5-Star ratings as high-quality MA
organizations are granted year-round enrollment. A commenter asked CMS
to identify a comparable opportunity for plans achieving 5-Star status
in order to maintain incentives for these plans.
Response: While the new MA OEP provides individuals with an
opportunity to switch to another MA plan, it is limited to, the first 3
months of the year (or of the enrollment for newly eligible
beneficiaries), unlike the year-round special enrollment period
available to enroll in a 5-Star MA plan. As discussed in section
II.B.5.c, plans may not conduct targeted marketing to those in the OEP.
We believe that the benefit provided to a 5-Star MA plan--that they may
market and enroll the rest of the year--is a valuable incentive to
achieve a high quality rating. We note that the MA OEP provides an
opportunity for individuals who may not be satisfied with their plan
choice for the new year, regardless of the plan's rating, to find
another MA plan that meets their needs or to select original Medicare.
CMS continues to encourage plans to strive for the highest quality.
Comment: We received numerous comments related to the ability to
conduct marketing during the OEP.
Response: We appreciate and acknowledge all comments. A discussion
related to marketing during the OEP and responses to those specific
comments can be found in section II.B.5.c.
We thank all the commenters for their feedback and suggestions. We
note that there was a technical error in the language proposed in Sec.
423.40(e). This new section should have been titled ``PDP enrollment
period to coordinate with the MA open enrollment period.'' We have made
this correction in this final rule.
After review and consideration of all comments on the restoration
of the OEP, we are finalizing the revisions to Sec. Sec. 422.60(a),
422.62(a), 422.68, 423.38(d) and (e), and 423.40(d) and (e) as
proposed, with the technical modification noted above.
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 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
sponsoring 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 sponsoring
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. Current
regulations require compliance programs for Part C and Part D
sponsoring organizations that 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. In the
May 23, 2014 final rule (79 FR 29853 and 29855)), we attempted to
resolve this burden by developing our own web-based standardized
compliance program training modules and establishing, that FDRs were
required to complete the CMS training to satisfy the compliance
training requirement. This requirement was applicable beginning January
1, 2016. The mandatory use of the CMS training by FDRs was designed to
ensure that FDRs will 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 sponsoring organizations they
served, hence, eliminating the prior duplication of effort that so many
FDRs stated was creating a huge burden on their operation.
However, after implementation of the new CMS training, we continued
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
sponsoring organizations required their own plan specific training, as
part of their contract with their FDRs, in addition to the CMS
training. Also, sponsoring organizations were unwilling to identify
which critical positions within the FDR were subject to the training
requirement. As a result, FDRs were still being subjected to multiple
sponsors' specific training programs. Furthermore, stakeholders have
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 efficiencies intended, we
proposed to delete the provisions from the Part C and Part D
regulations that require use of the CMS-developed compliance training.
In addition, we believe that the broader requirement that
sponsoring organizations 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. Pursuant to Sec.
422.504(i)(1) and Sec. 423.505(i)(1), sponsoring organizations

[[Page 16619]]

maintain ultimate responsibility for adhering to and otherwise fully
complying with all terms and conditions of its contract with CMS. 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 of 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 sponsoring organizations 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
sponsoring organization's contract must specify that FDRs must comply
with all applicable federal laws, regulations and CMS instructions.
Additionally, we audit sponsoring organizations' 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 sponsoring organizations, so if they are non-compliant,
it will come to light during the program audit and the sponsoring
organization will ultimately be 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
stakeholders' desire to perform well on audit, the 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 stakeholders' compliance
operations, as well as our continuing requirements on sponsoring
organizations for oversight and monitoring of FDRs, we no longer
believe requiring sponsoring organizations to impose the compliance
training requirements on their FDRs is the best way to achieve
compliance. Specifically, we proposed 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). Those proposed changes include restructuring 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 proposed 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 were
designed to 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 also believe these technical
changes make the requirements easier to understand.
Compliance training will still be required of MA and Part D
sponsoring organizations, their employees, chief executives or senior
administrators, managers, and governing body members. The primary goal
of deleting the compliance training requirement for FDRs is to reduce
administrative burden on both sponsors and FDRs, but also allow MA and
Part D sponsoring organizations the flexibility to oversee FDR
compliance with Medicare Part C and D requirements in a way that is
tailored to its organization, operations, resources and risks. We
believe sponsoring organizations are in the best position to determine
the most effective way to monitor and track compliance and fraud, waste
and abuse (FWA) responsibilities and contractual obligations amongst
their FDRs. We requested comments concerning these proposals and
suggestions on other options we could implement to accomplish the
desired outcome.
We received the following comments and our response follows:
Comment: A few commenters stated the current training requirements
and process meet their needs because they had already invested
resources to develop efficient systems for ensuring their FDRs
satisfied the general compliance requirement. They expressed that
eliminating the CMS compliance training for FDRs will add new
administrative burden on sponsors to ensure CMS standards are met and
holding FDRs accountable will be more challenging.
Response: While we recognize some sponsors were able to utilize our
training requirements as a means to ensure FDRs at least completed
compliance training, we believe by deleting this requirement we are
affording sponsors much greater flexibility in designing an FDR
oversight structure that best suits the needs of each sponsors'
organization. Sponsoring organizations are free to choose the most
effective and efficient method for ensuring that all their FDRs are in
compliance with all applicable laws, rules, and regulations, and
Medicare requirements (for example, training, attestations, reports,
routine monitoring and auditing, and/or corrective actions).
Additionally, sponsoring organizations should continue to evaluate
their contractual arrangements with their FDRs to ensure appropriate
levels of accountability for compliance are in place.
Comment: Several commenters suggested that FDRs should be held to
the same compliance program training requirements as sponsoring
organizations.
Response: CMS does not interfere in private contractual matters or
written arrangements between sponsoring organizations and their FDRs.
CMS' contract is with the sponsoring organization and sponsoring
organizations are ultimately accountable for the performance of their
FDRs compliance with applicable statutes, regulations and standards.
Sponsoring organizations are required to develop an effective oversight
structure for their FDRs. As part of routine monitoring activities,
sponsoring organizations should evaluate whether regulatory
requirements and accountability measures are included in contractual
agreements. The burden of monitoring and documenting an FDR's
compliance with applicable standards ultimately rests with the
sponsoring organization.
Comment: A few commenters stated that sponsoring organizations and
FDRs may incorrectly interpret the new proposed rule to mean compliance
training is not required. A commenter suggested that not requiring
training will lead to confusion, reduce provider compliance and
increase compliance risks across the Medicare program.
Response: This change eliminates the CMS requirement for FDRs to
complete compliance program training. However, FDRs are still required
to comply with all statutes, regulations, and CMS program specific
requirements. CMS recognizes that sponsoring organizations may continue
to have requirements in

[[Page 16620]]

their contracts setting out their expectations with respect to
oversight of FDRs' compliance with statutes, regulations, and CMS
program specific requirements. If sponsors choose to include a
compliance program training requirement as part of their contract with
FDRs that is a private contractual matter between the FDR and
sponsoring organization. Such training would not be prohibited by these
rules as amended.
Comment: A commenter suggested that CMS create user-friendly
compliance training content for FDRs.
Response: CMS did develop a generalized training that was available
24/7 on the CMS Medicare Learning Network Learning Management System.
The overwhelming feedback we received was that the training content did
not alleviate the large administrative burden associated with
compliance training and, that the training was too generic to be
helpful to most FDRs.
Comment: A commenter requested clarification on whether FDRs who
are enrolled in Medicare will continue to receive the ``deemed'' status
for FWA training. Commenters also requested clarification on who was
deemed for purposes of the FWA training requirement (for example,
whether deeming was limited to just the hospital participating in
Medicare FFS or extends to their hospital's employees)?
Response: This provision eliminates Parts C and D compliance
program and FWA training for FDRs. Therefore, deeming of these training
requirements is no longer relevant for the Part C and D program.
Comment: A commenter questioned how this provision affects PACE
organizations.
Response: This provision does not directly apply to all PACE
organizations. However, PACE organizations that offer qualified
prescription benefits are Part D plan sponsors that must comply Part D
requirements and regulations in part 423 unless they are waived.
Comment: A commenter questioned how this provision affects agents
and brokers.
Response: If FDRs, agents and brokers would be subject to the
contract requirements sponsoring organizations have for FDRs. As this
final rule would remove a specific CMS compliance training requirement
for FDRs, agents and brokers would not be required to take this
specific CMS compliance training either. Other regulations and
requirements applicable to agents and brokers are outside of the scope
of this proposal.
Comment: Several commenters inquired if FDR oversight requirements
and expectations will be updated in Chapter 9 of Pub. 100-18, Medicare
Prescription Drug Manual, and Chapter 21 of Pub. 100-16 of the Medicare
Advantage Manual immediately following the implementation of the final
rule. The commenters suggested that feedback should be solicited from
sponsoring organizations to assist with providing industry best
practices for communicating and monitoring FDR compliance.
Response: We always welcome feedback from sponsoring organizations
and FDRs with respect to improving our sub-regulatory guidance and
communicating expectations. We acknowledge that policy, technology and
Medicare business practices continue to evolve. We intend to update
Chapters 9 and 21, respectively and issue a draft to obtain public
comment.
Comment: Multiple commenters recommended that CMS continue to
maintain the CMS standardized training modules and make them available
on the CMS Medicare Learning Network (MLN) as an acceptable form of
training for situations where sponsoring organizations choose to
require FDRs to complete compliance training or where FDRs found the
CMS training to be more convenient to complete. Additionally,
commenters stated that CMS should increase the MLN's tracking and
reporting capabilities (that is to create a searchable database to
confirm who has taken the training and reports that could be issued to
sponsoring organizations) for compliance training requirements.
Response: CMS is unable, at this time, to provide the capacity for
a searchable database of users who have completed training or a system
that would allow reports to be sent to sponsoring organizations
regarding the training status of various FDR organizations. We also
believe that leaving the compliance training on the MLN website could
create confusion among sponsoring organizations and FDRs. Therefore,
this training course may be removed from the Medicare Learning Network
website.
Comment: Sponsoring organizations, FDRs (that is, hospitals,
physicians, pharmacies and health care providers) and other
stakeholders wrote in support of the provision, agreeing that it would
significantly reduce burden on FDRs.
Response: We thank the commenters for their support.
After careful consideration of all the comments received, we are
finalizing this proposal without modification.
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 an 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
previously 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. 63 FR 35099, June 26, 1998,
as amended at 65 FR 40328, June 29, 2000. We proposed 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 request for
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

[[Page 16621]]

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).
We proposed to 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 proposed 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 proposed to delete all
references to ``MA organizations'' in paragraph (b) to reflect our
proposal that we will only review and approve waiver requests during
the contract application process.
We also proposed 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 included
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.
We received the following comments, and our response follows:
Comment: We received several comments, primarily from plans,
expressing support for the proposal to remove the requirement for MA
organizations to resubmit the minimum enrollment waiver requests during
the second and third year of a contract. These commenters also support
the proposal to approve the minimum enrollment waiver for 3 years in
year 1 of the contract as part of the initial application process.
Several commenters noted that the requirement to resubmit the waiver in
the second and third year of the contract created unnecessary burden on
organizations, with a commenter noting that organizations already
demonstrate their capacity to bear risk during the waiver submission
for the first year in the application process. A commenter expressed
support for this proposal because an approved 3-year minimum enrollment
waiver encourages entry into the MA-PD market from smaller
organizations that require more time to ramp up their operations.
Response: We appreciate the commenters' support for the proposal
and agree that removing the resubmission of the minimum enrollment
waiver in the second and third year of the contract eliminates an
unnecessary burden for organizations. We also agree that approving the
minimum enrollment waiver for organizations for a 3-year period
supports market entry for smaller organizations.
Comment: A commenter expressed concern that the proposal to remove
the requirement to resubmit the minimum enrollment waiver in the second
and third years of the contract would discourage MA organizations from
engaging in market strategies to increase their enrollment.
Response: We disagree that removing our requirement to re-submit
the minimum enrollment waiver in the second and third year of the
contract would discourage organizations from increasing their market
share in the MA-PD program. As stated in our proposal, CMS monitors low
enrollment at the plan benefit package (PBP) level. After the third
contract year, the provision at Sec. 422.506(b)(1)(iv) allows 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. We believe that our ability to terminate the contract or
plan for low enrollment after the third year provides sufficient
incentive for new organizations to market and grow their enrollment
during years 2 and 3 of the contract.
Comment: A commenter expressed concern that low contract enrollment
can impact an organization's financial capability and that financial
problems could result in disruption of services to their enrollees. The
commenter recommended that CMS retain the existing policy to review
waiver requests on an annual basis to protect beneficiaries from
disruptions in their care.
Response: We disagree that the review of waiver requests on an
basis is necessary to monitor the financial stability of organizations
or compliance with other MA requirements (such as benefit
administration). CMS requires that organizations meet all applicable
state licensure and fiscal soundness requirements or compliance with
other MA requirements (such as benefit administration). According to
Sec. Sec. 422.504(a)(14) and 422.516(a)(5), CMS monitors an
organization's compliance with fiscal soundness requirements, primarily
through independently audited annual financial statements and other
required documentation for the legal entity. All organizations must
submit audited annual financial statements and some organizations may
also be required or notified by CMS to submit quarterly financial
statements in certain situations. CMS believes that these requirements
provide adequate assurance that organizations contracting with CMS are
financially viable while protecting Medicare beneficiaries from
disrupted access to care.
After considering these comments, we are finalizing the revisions
to Sec. 422.514 as proposed.
4. Revisions to Timing and Method of Disclosure Requirements
(Sec. Sec. 417.427, 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.'' The Act
specifies this detailed information in section 1852(c)(1), and also
requires additional information specific to the Part D benefit under
section 1860D-4(a)(1)(B). 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
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.

[[Page 16622]]

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 an MA
plan's Evidence of Coverage (EOC) and provider directory. The content
listed in Sec. 422.111(b) is found in an MA plan's Evidence of
Coverage (EOC), summary of benefits, and provider directory. The
content listed in Sec. 423.128(b) is found in a Part D Sponsor's EOC,
summary of benefits, formulary, and pharmacy directory. Section
422.111(h)(2)(i) requires that plans must maintain an internet website
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 website ``does not relieve the MA
organization of its responsibility under Sec. 422.111(a) to provide
hard copies to enrollees.''
We initially proposed, and will finalize, two changes to the
disclosure requirements, but will also finalize a third change in
response to comments received. First, we proposed to revise Sec. Sec.
422.111(a)(3) and 423.128(a)(3) to require MA organizations 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. Second, we proposed to add the phrase ``in the
manner specified by CMS'' to Sec. 422.111(a) and to modify the
sentence in Sec. 422.111(h)(2)(ii) which states that posting documents
on the plan's website does not relieve the plan of responsibility to
provide hard copies to enrollees in order to provide authority for CMS
to permit MA plans to provide these documents by directing enrollees to
the website posting of the documents. We proposed to revise the
sentence to 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 website (whether that document is
the EOC, directory information or other materials) does not relieve the
MA organization of the responsibility to deliver hard copies upon
request. Finally, in response to a comment we received with which we
agreed, we intend to further revise Sec. 422.111(h)(2)(ii) and to add
new Sec. 422.111(h)(2)(iii) to make explicit that the Summary of
Benefits be provided in hard copy when directed to do so by CMS. We
intend the final rule to authorize CMS to direct the manner in which
plans provide the documents and information subject to paragraph (a) to
enrollees; as discussed in the proposed rule, we intend to use that
authority to provide MAOs the flexibility to deliver certain required
documents--such as the EOC and provider directory but not the Summary
of Benefits--through electronic delivery or posting on the website in
conjunction with delivery of a hard copy notice (describing how the
information and materials are available) and provision of a hard copy
upon request. We believe this final rule will allow 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 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.
Current 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 did not propose 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 proposed 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 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 must be adequately described in
the ANOC (per Sec. 422.111(d)), which is provided at least 15 days
before the AEP.
This change will 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 of errors that plans self-identify in
the document through errata sheets they submit to CMS and mail to
beneficiaries. In late-2016 and early-2017 for the 2017 plan year, MA
and Part D plans overall submitted 166 ANOC/EOC errata, which
identified 221 ANOC errors and 553 EOC errors in the 2017 plan
materials. 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 proposed that we would use the authority to
direct the manner of delivery under paragraph (a) to give plans more
flexibility to provide certain 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)(2). At that time, MA
plans were not required to maintain a website, but if they chose to
they were required to include the EOC, Summary of Benefits, and
provider network information on the website. 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 website at Sec. 422.111(h)(2) and moved the requirement that
posting documents on the plan website did not substitute for

[[Page 16623]]

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
website 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 proposed regulatory text for Sec.
422.111(a) will permit delivery by notifying enrollees of the internet
posting of the documents, subject to the right to request hard
copies.\71\ As explained in the proposed rule regarding the changes to
Sec. 422.111, we intend to use the authority provided by this rule to
give plans the flexibility to provide certain documents such as the EOC
and the provider network information in an electronic manner and
format. We intend to change the relevant sub-regulatory guidance to
coincide with this as well.
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\71\ 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.
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In the preamble to the 2005 final rule, we noted that the
prohibition on 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
believe 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.\72\ 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.
---------------------------------------------------------------------------

\72\ 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, online 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.\73\ 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, we believe allowing plans the option to use a similar strategy
for additional materials is appropriate. In addition, we believe that
it is appropriate to codify the authority to permit this flexibility in
the applicable regulation.
---------------------------------------------------------------------------

\73\ 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.
---------------------------------------------------------------------------

We intend to issue sub-regulatory guidance to identify permissible
manners of disclosure under this final rule; we expect such guidance
will be similar to the current guidance for the provider directory,
pharmacy directory, and formulary regarding dissemination of the EOC.
Importantly, neither the proposal nor this final rule 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 Section 1557, 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 and Section 1557.
To create the flexibility for delivery of required materials, CMS
proposed to modify Sec. 422.111(h)(2)(ii) and to revise Sec.
422.111(a). The proposed 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.
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.
We received the following comments on our proposals regarding the
time and manner of delivery of required materials to MA and Part D plan
enrollees, and our response follows:
Comment: Many commenters indicated unequivocal support for the
provision as proposed.
Response: We appreciate the support of the proposed change.
Comment: Many commenters indicated that they did not support the
proposal to allow plans to deliver certain required documents
electronically and only provide hard copy versions of those required
documents upon request. These commenters expressed concern that there
are still many beneficiaries who do not have easy access to electronic
documents, especially those in rural areas and those who are of
advanced age.
Response: We appreciate the concern that these commenters have
about Medicare beneficiaries' ability to access electronic documents.
We believe that the hard copy notification of the ability to request a
hard copy as well as the

[[Page 16624]]

electronic status and availability of the documents should mitigate
this as enrollees who want or need hard copies will be able to call the
plan to request them. Additionally, we know from our experience
administering the program that many of these beneficiaries rely on
family members and friends to review important documents for them, and
that these family members and friends will be more likely to have
access to electronic versions of the required documents. As an
additional measure, we intend to suggest in our subregulatory guidance
regarding use of electronic delivery, that when a beneficiary requests
hard copy delivery of a required document in place of electronic
delivery, the plan may wish to continue to provide hard copies to that
beneficiary on an ongoing basis, so that the beneficiary does not have
to request hard copy format again. Finally, as we indicated earlier,
the number of beneficiaries who have access to electronic mediums such
as broadband internet access is growing every year. We believe we have
placed sufficient protections in place and have addressed the growing
desire for electronic versions of required documents.
Comment: A commenter requested that we exclude the Summary of
Benefits from electronic delivery citing the importance of hard copy
for this document in the beneficiary's process of choosing to remain in
a current plan or choose a new plan.
Response: We agree with this comment and are finalizing additional
revisions to Sec. 422.111(h)(2)(ii) and new text in Sec.
422.111(h)(2)(iii). The new paragraph (h)(2)(iii) provides that posting
the Summary of Benefits does not relieve the obligation to provide hard
copies of the document to enrollees when CMS determines that it is in
the best interest of the beneficiary. CMS considers the Summary of
Benefits, unlike the EOC, to be a marketing material because its
primary purpose is to influence a prospective enrollee's decision to
enroll in a plan. For example, agents use the Summary of Benefits as a
tool to help sell plans to prospective enrollees. It indicates key
benefits in a standardized arrangement, providing the beneficiary with
a safeguard to confirm what the agent has presented. On the other hand,
the EOC is a document delivered after a beneficiary has made an
enrollment decision and is, in essence, a contract between a current
enrollee and the plan, articulating rights and responsibilities, as
well as detailed guidance on how to interact with the plan. CMS
believes that enrollees should not have to take an extra step to find
the Summary of Benefits when enrolling in a plan. Because plans provide
the Summary of Benefits with an enrollment mechanism, to avoid an extra
step, the Summary of Benefits must be available in the same format as
the enrollment mechanism. To that end, when plans provide a paper
application to a prospective enrollee, CMS instructs the plan to also
provide a paper Summary of Benefits along with the paper application.
Comment: Many commenters indicated support for the proposed
changes, but also requested additional considerations that mainly fell
into two areas: (1) A request to allow plans the option to include the
hard copy notification about electronic posting of the EOC and provider
directories along with the ANOC; and (2) a request to allow plans the
option to include other information with the ANOC, especially
additional benefit information (for example, supplemental benefits) as,
while CMS requires plans to provide this information, CMS currently
prohibits plans from providing this information with the ANOC.
Response: We also agree with both suggestions regarding the ANOC.
We are revisiting our prior guidance (section 60.6 in the 2018 Medicare
Marketing Guidelines document) prohibiting plans from providing other
materials along with the ANOC as we make the changes to align our
subregulatory guidance with this final rule.
As discussed earlier, we are finalizing as proposed revisions to
Sec. 422.111(a)(3) and Sec. 423.128(a)(3) to require delivery by the
beginning of the Annual Coordinated Election Period of the Evidence of
Coverage and other materials and information described in paragraph (b)
of each regulation. In addition, we are finalizing revisions to the
regulation text as follows:

--In Sec. 422.111(a), the proposed revision to add ``in the manner
specified by CMS'' at the end of the introductory sentence;
--in Sec. 422.111(h)(2)(ii), the proposed revision to specify that
posting of the EOC and provider directory--but not the summary of
benefits--on the plan's website does not relieve the plan of the
obligation to provide hard copies of those materials upon request under
paragraph (a) when requested by the beneficiary;
--in Sec. 422.111(h)(2)(iii), new text to move the requirement to post
the Summary of Benefits on the plan's website from paragraph (h)(2)(ii)
to this new paragraph and a provision clarifying that posting does not
relieve the plan of the obligation to deliver hard copies of the
Summary of Benefits when CMS determines that it is in the best interest
of beneficiaries.

These revisions authorize CMS to specify the manner of delivery of
materials described in paragraph (b) of both Sec. Sec. 422.111 and
423.128, and to clarify that posting of certain information or
materials on the MA organization's website does not relieve the
organization of the obligation to provide information in hard copy when
beneficiaries request hard copy.
5. Revisions to Parts 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 will qualify
as marketing or promotional information and materials. As part of the
implementation of section 1876(c)(3)(C) of the Act, the regulation
governing cost plans at Sec. 417.428(a)

[[Page 16625]]

refers to Subpart V of part 422 for marketing prohibitions and
requirements. Throughout this proposal, the changes discussed for MA
organizations/MA plans and prescription drug plan (PDP) sponsors/Part D
plans apply 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 proposed 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: (a) Including ``communication
requirements'' in the scope of Subpart V or parts 422 and 423, which
will include new definitions for ``communications'' and ``communication
materials'' in Sec. Sec. 422.2260 and 423.2260; (b) amending
Sec. Sec. 422.2260 and 423.2260 to add a definition of ``marketing''
in place of the current definition of ``marketing materials'' and to
provide lists identifying marketing materials and non-marketing
materials; (c) adding new regulation text to prohibit marketing during
the Open Enrollment Period proposed in section II.B.1 of this proposed
rule; (d) 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. In addition, section 1876(c)(3)(C) authorizes CMS to adopt
conditions and procedures under which a cost plan informs potential
enrollees about the cost plan, which would clearly cover the scope of
regulations proposed in this section that will be applicable to cost
plans. 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 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 proposed changing the title of each Subpart V
by replacing the term ``Marketing'' with ``Communication.'' We proposed
to define in Sec. Sec. 422.2260 and 423.2260 the terms
``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 enrollees). We proposed that marketing
materials (discussed later in this section) will 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 will
include both mandatory disclosures that are primarily informative and
materials that are primarily geared to encourage enrollment.
In addition to these proposals related to defined terms and
revising the scope of Subparts V in parts 422 and 423, we proposed
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.
CMS proposed, 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 will be subject to the
more stringent requirements, including the need for submission to and
review by CMS. Under this proposal, we stated in the proposed rule,
those materials that are not considered marketing, per the proposed
definition of marketing, will fall under the less stringent
communication requirements.
With regard to Sec. Sec. 422.2264 and 423.2264, we specifically
proposed 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 will 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

[[Page 16626]]

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 proposed 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 proposed 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 also proposed revisions.
First, we proposed to revise the text so that it is stated as a
prohibition on sponsoring organizations: Sponsoring organizations may
not, for markets with a significant non-English speaking population,
provide materials, as defined by CMS, unless in the language of these
individuals. We proposed adding the statement of ``as defined by CMS''
to allow the agency the ability to define the significant materials
that will require translation. We proposed 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 proposed 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 proposed 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 will 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 did not propose to expand the list of
prohibitions, but proposed to notate which prohibitions are applicable
to which category. The only substantive change proposed is in
connection with paragraph (a)(7), which we discuss earlier in this
section. We solicited 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 proposed a definition of ``marketing'' to be codified in
Sec. Sec. 422.2260 and 423.2260. We proposed to 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'' was
proposed 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 for prior CMS review and approval 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
and are 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 scope of materials that
fall under the scope of marketing, we stated that the proposal would
allow us to better focus review on those materials that present the
greatest likelihood for a negative beneficiary experience.
We proposed 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 providing factual 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 will no longer fall within the
definition of marketing under the 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

[[Page 16627]]

safeguards potential and current enrollees while not placing an undue
burden on sponsoring organizations. Moreover, those materials that will
be excluded from the marketing definition will fall under the proposed
definition of communication materials, with what we believe are more
appropriate requirements. 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 proposed 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 and 423.2260. The
current list of examples includes: Brochures; advertisements in
newspapers and magazines, and on television, billboards, radio, or the
internet; 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 proposed 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 did not 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 will be considered marketing.
Third, we proposed 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
and 423.2260 to identify the types of materials that will 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, will also be excluded from marketing. We
also proposed, in the preamble, that required materials in Sec.
422.111 and Sec. 423.128 not be considered marketing, unless otherwise
specified, and, separately, materials specifically designated by us as
not meeting the definition of the proposed marketing definition based
on their use or purpose; however, the proposed regulation text (82 FR
56505-06 and 52525) combined these categories inadvertently so that the
proposed regulation text excluded from the definition of marketing
materials those that are required by Sec. Sec. 422.111 or 423.128
unless CMS specified otherwise because of the use or purpose of the
materials. We proposed to revise the list of exclusions from marketing
materials to maintain the current beneficiary protections that apply to
marketing materials but to narrow the scope of CMS's review and
approval responsibilities to exclude materials that are unlikely to
lead to or influence an enrollment decision.
Our proposal was intended to exclude from marketing any 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 will not be used to make an enrollment
decision in a specific Medicare plan, rather they will be used to drive
beneficiaries to request additional information that will 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; we therefore proposed to exclude materials that do
not have such rankings or measurements from marketing. In addition, we
proposed to exclude materials that mention benefits or cost sharing but
do not otherwise 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, proposed to exclude 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 proposed 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. Elsewhere in
this final rule (section II.B.1 (Restoration of the Medicare Advantage
Open Enrollment Period (Sec. Sec. 422.60, 422.62, 422.68, 423.38 and
423.40)), we finalize that revision to the MA regulations. 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 proposed to add a new paragraph (b)(10) \74\ to both
proposed Sec. Sec. 422.2268 and 423.2268 to apply this prohibition on
marketing. We also requested comment on how the agency could implement
the statutory requirement. The new OEP is not available for enrollees
in Medicare cost plans; therefore, these limitations apply to MA
enrollees and to any PDP enrollee who was enrolled in an MA plan the
prior year. CMS expressed concern in the proposed rule 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.
We noted that one mechanism could be to limit marketing entirely during
that period, but were concerned that such a prohibition would be too
broad. We proposed a ``knowing'' standard instead, believing that it
would both effectuate the statutory provision and avoid against overly
broad

[[Page 16628]]

implementation. We solicited 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.
---------------------------------------------------------------------------

\74\ The proposed rule, at 82 FR 56436, mistakenly referred to
paragraph (b)(9) as the location of this new proposed text.
---------------------------------------------------------------------------

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 became synonymous with communications
from the plan to enrollees or potential enrollees. As a result of our
proposal to define both ``marketing'' and ``communications,'' we
proposed a number of technical changes that we believe are necessary to
update regulation text that uses the term marketing throughout parts
422 and 423. Accordingly, we proposed the following technical changes
in Part C:
In Sec. 422.54, we proposed to update paragraphs
(c)(1)(i) and (d)(4)(ii) to replace ``marketing materials'' with
``communication materials.''
In Sec. 422.62, we proposed 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 proposed to use ``supplemental
benefits packaging'' instead of ``marketing of supplemental benefits.''
In Sec. 422.206(b)(2)(i), we proposed 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 proposed to replace the
term ``marketing'' with the term ``communication.''
In Sec. 422.510(a)(4)(iii), we proposed 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
proposed to replace the term ``marketing'' with ``communications'' in
Sec. 422.750 and 422.752 to reflect its proposal for Subpart V. The
proposal to change the terminology was not intended or designed to
expand the scope of CMS's authority with respect to sanction
regulations. Rather, CMS sought to preserve the existing reach of the
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 proposed the following changes to
Sec. Sec. 422.750 and 422.752:
In Sec. 422.750, we proposed to revise paragraph (a)(3)
to refer to suspension of ``communication activities.''
In Sec. 422.752, we proposed to replace the term
``marketing'' in paragraph (a)(11) and the heading for paragraph (b)
with the term ``communications.''
We did not propose 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 proposed the following technical changes in Part D:
In Sec. 423.38(c)(8)(i)(C), we proposed 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 proposed to replace
``marketing'' with ``communications'' to reflect the change to Subpart
V.
In Sec. 423.505(b)(25), we proposed to replace
``marketing'' with ``communications'' to reflect the change to Subpart
V.
In Sec. 423.509(a)(4)(V)(A), we proposed to delete the
word ``marketing'' and instead simply refer to Subpart V.
For the reasons explained in connection with our proposal to revise
the Part C sanction regulations, we also proposed the following
changes: \75\
---------------------------------------------------------------------------

\75\ We note that the proposed rule preamble (82 FR 56437)
mistakenly did not include a discussion of the specific Part D
regulation sections that we proposed to revise in connection with
CMS sanction authority; however, the proposed regulation text (82 FR
56524) did include the proposed change.
---------------------------------------------------------------------------

In Sec. 423.750, we proposed to revise paragraph (a)(3)
to refer to suspension of ``communication activities.''
In Sec. 423.752, we proposed to replace the term
``marketing'' in paragraph (a)(9) and the heading for paragraph (b)
with the term ``communications.''
We did not propose 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 solicited comment on the proposed technical changes,
particularly whether a proposed revision 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 stated our belief that our proposals would
maintain the appropriate level of beneficiary protection and 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 would
allow CMS 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 solicited comment on these proposals and whether the appropriate
balance is achieved with the proposed regulation text.
e. Comments and Reponses on Proposals Related to Communications and
Marketing
CMS was pleased to see a large number of comments in support of
using the narrower definition for ``marketing,'' and the new term
``communications'' in Subpart V. Commenters in favor of the proposed
changes indicated that the proposed new definitions appropriately
safeguard prospective and current enrollees, while not placing an undue
burden on MA plans and Part D plan sponsors. In that same vein,
commenters expressed that the proposed changes allow for a less
burdensome approach to communicating with beneficiaries. Other
commenters said that the new definition of marketing was logical and
aligns with the layman's definition of ``marketing.''
We received the following comments, and our response follows:
Comment: Many commenters in favor of the proposed changes to
Subpart V asked CMS to provide more information on what materials would
fall under the definition of marketing and what materials would fall
under the definition of communications, but not marketing. Moreover,
commenters requested additional information on

[[Page 16629]]

whether or not communication materials that are not marketing materials
would still be submitted to CMS for review. Several commenters
suggested materials, such as standardized models, be considered
communications, but not marketing. Many of these comments acknowledged
that they expected such detail to be captured in sub-regulatory
guidance, such as the MMG. Additionally, a subset of commenters
reiterated the importance of CMS working with industry to develop
updated sub-regulatory guidance for marketing and communications.
Response: CMS agrees that sub-regulatory guidance is the more
appropriate vehicle for applying the definitions and identifying what
types of materials are marketing and what types are communications. As
such, we intend to develop a successor to the current MMG that will
include guidance for both communications and marketing. CMS will seek
comment as a part of the development of the new guidelines.
Comment: A commenter who supported the updates to Subpart V urged
CMS to further refine the definition of marketing to include materials
or activities targeting ``prospects'' and not current enrollees.
Response: CMS disagrees with this suggestion and believes that the
definition of marketing, as proposed and finalized, correctly focuses
on all beneficiaries, including existing, new and potential enrollees
of a plan, when the intent is to draw attention to the plan and
influence the individual's plan selection. Plans market to their
current members for the purposes of ``upselling'' or retention and such
efforts are appropriately subject to our marketing oversight and
regulations. Additionally, we note that this final rule includes a
provision (in finalized Sec. 422.2260 and Sec. 423.2260) that
authorizes CMS to characterize materials that fall under Sec. 422.111
and Sec. 423.128 as not marketing materials based on their use and
purpose; therefore, many required materials will fall under the broad
communication definition.
We generally agree with the commenter(s) that required and
standardized materials, such as the EOC, directories, and materials
required under Sec. Sec. 422.111 and 423.128, should generally fall
under communications rather than marketing materials under the
definition we proposed and are finalizing here. We are finalizing an
exclusion from marketing materials that provides that unless CMS
provides otherwise, materials required under Sec. Sec. 422.111 and
423.128 are not marketing materials. To the extent that a document (or
materials) required by those regulations appears to serve a marketing
purpose, meaning that it is promotional materials or designed to
influence an enrollment decision instead of providing factual
information that is required to be disclosed under the Medicare
program, we believe it is important that the regulation text provide
CMS the authority to designate the document as a marketing material
subject to the higher level of scrutiny.
Comment: Several commenters were not in favor of the changes to
Subpart V and expressed concern that CMS is reducing oversight of
important plan materials while proposing to give plans more flexibility
on plan design and in the types of benefits that can be offered. The
majority of these comments focused on concerns regarding CMS's proposal
to no longer designate and review the EOC as a marketing material.
These commenters believed this proposal suggested CMS was stepping back
from its oversight responsibilities.
Response: CMS understands the concern and assures the commenters
that our oversight of the EOC will not change for a few reasons. First,
the EOC is based on a model material created by CMS and therefore is a
document over which CMS already has a high level of oversight and
monitoring. Second, the benefits information used to populate the EOC
is derived from the plan's bid submission, which goes through its own
CMS-based review.
Third, for over 10 years, EOCs have been submitted to CMS as a
marketing material under ``File and Use.'' As a result, the EOCs have
not been prospectively reviewed upon submission but CMS has
historically exercised oversight of the accuracy of EOCs through
retrospective reviews, timeliness monitoring studies, and by collecting
and analyzing EOC-based errata reported by the plans. The vast majority
of EOC errors have been identified through these retrospective
processes. We do not expect these oversight and enforcement processes
to change with the regulation changes in this final rule. In addition,
with this regulatory change, CMS will retain oversight authority over
any current marketing material that will become a communication
material as a result of the changes to Subpart V, principally the
changes to Sec. Sec. 422.2262, 422.2264, 422.2268, 423.2262, 423.2264
and 423.2268. In particular, we proposed and are finalizing, with
slight grammatical revisions, text to Sec. Sec. 422.2262(d) and
423.2262(d) to provide authority for CMS to review materials--whether
communications or marketing--after release and use of the materials by
the sponsoring organization. The regulation authorizes CMS to direct
modification or stopped use of the materials to clarify that CMS's
ability to oversee and enforce compliance with the limits on
communications and marketing is not limited to the pre-use review and
approval required for marketing materials.
Comment: Some commenters expressing concern with the changes to
Subpart V asked that CMS monitor the impact of this change and revisit
or reverse course if there is clear evidence that beneficiaries are
receiving inaccurate or incomplete plan materials.
Response: CMS agrees that monitoring and evaluation are critical
parts of the oversight process and that protection of beneficiaries is
a primary goal. The authority outlined earlier will keep CMS well-
equipped to monitor any communication issues and to act as needed
without additional regulatory changes. In addition to the more formal
processes, CMS may act on any information received from Medicare
beneficiaries, typically through our Complaints Tracking Module (CTM),
as well as complaints received from competing plans.
Comment: CMS received several comments asking how the changes to
Subpart V will impact D-SNPs whose materials are also reviewed by the
state. A reviewer suggested that CMS work with the states to develop
joint guidance.
Response: In general, CMS does not believe that the changes to
Subpart V will have an impact on D-SNPs that is different from the
impact on other MA plans and Part D plan sponsors. Currently, most
marketing reviews are conducted separately by both CMS and the states
for materials used by D-SNPs. The changes to Subpart V will result in
some materials currently defined as marketing not being subject to
prior review and approval by CMS. This, however, should have no bearing
on any state requirements that may necessitate state review.
Additionally, states retain authority to control and supervise Medicaid
managed care plans, even if those plans also have Part C or Part D
contracts. State Medicaid agencies also may establish or modify
requirements with respect to review of D-SNP materials as part of the
contract required under Sec. 422.107.
Comment: CMS also received several provider-focused comments
expressing an overarching concern with how the restriction of marketing
in the health care setting impacts a provider's ability

[[Page 16630]]

to counsel patients about coverage options, particularly if a patient
can benefit from coordinated, accountable care in MA. A commenter
suggested that CMS exclude from the definition of marketing materials
under section 422.2260 any communications from providers or MAOs to
their patients regarding their care, including communications regarding
cost-sharing responsibilities or listing the plans in which a provider
participates. The same commenter noted that CMS does not generally
require providers to seek CMS's approval for communications with
patients who are enrolled in traditional Medicare. Further, they
expressed that as long as the provider-patient or MAO-patient
communication does not serve to ``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,'' then such
communications regarding cost-sharing obligations should not be subject
to CMS review simply because the patient receives Medicare benefits
through an MAO.
Response: CMS's restrictions on sales and marketing in the health
care setting, which are required by section 1851(j)(1)(D) of the Act,
were never intended to preclude a doctor from discussing MA with
patients. Rather, the requirements prohibit a sponsoring organization
(including its officials, employees, contractors, participating
providers, the agents, brokers, and other third parties representing
such organization) from marketing to a Medicare beneficiary in the
health care setting. Based on the examples provided, combined with the
changes made to Subpart V, CMS does not believe that discussions about
cost-sharing responsibilities of a patient, identifying the plans with
which a provider participates, or about patient care are considered
marketing. As the commenter points out, such discussions are intended
to educate a beneficiary about the merits of the MA program and the
respective responsibilities of the patient and the provider under MA
coverage, not to influence a beneficiary's decision-making process.
However, certain activities or discussions undertaken by a provider
could be marketing, such as distribution of brochures or appointment
forms for specific plans or attempting to persuade a beneficiary to
select a specific plan. Based on the comments received, we will clarify
this distinction in sub-regulatory guidance.
Comment: Another commenter stated that any attempts to use
information to intentionally mislead beneficiaries when selecting a
plan or choosing to utilize a specific pharmacy (including the use of
the term ``preferred'') should be expressly prohibited. The commenter
continued that all information provided to beneficiaries should be
inclusive, complete, and accurate to allow the beneficiary to make
their own decisions regarding which plan to select and which pharmacy
to use.
Response: CMS agrees with the commenter that all information
provided to beneficiaries should be inclusive, complete, and accurate
to allow the beneficiary to make their own decisions regarding which
plan to select and which pharmacy to use. The regulations finalized
today, as do the current regulations, explicitly prohibit the provision
or information or other activities that mislead beneficiaries at
paragraphs (a)(1) and (2) of Sec. Sec. 422.2268 and 423.2268. However,
we disagree with the commenter's suggestion that the use of the term
``preferred'' should not be allowed. CMS allows for preferred
pharmacies where the copay may be lower for the beneficiary (Sec.
423.120(a)(9)) and we believe that conveying this potential cost
savings to enrollees is important.
Comment: CMS received a comment outlining the unique challenges of
ESRD beneficiaries and that treatment area is an ideal location for
clinical and non-clinical staff to help beneficiaries assess their
coverage choices.
Response: CMS appreciates the real-world insight that this example
provides. However, the restriction on marketing in the health care
setting is statutory. By contrast, any activities that would fall under
the new definition of communications, but not marketing, are allowed in
the health care setting, so long as the communication activity complies
with new Sec. Sec. 422.2268(a) and 423.2268(a). Plan-specific
materials that are still considered marketing may not be distributed in
areas where care is delivered. But a provider may discuss the MA
program with the patient and make the plan's marketing materials
available in common areas.
CMS received overwhelming support for extending the translation
requirement proposed at Sec. Sec. 422.2268(a)(7) and 423.2268(a)(7).
Comment: Several commenters expressed that they were pleased that
CMS proposed to extend its current document translation requirement to
``communications'' designated by CMS rather than limiting it to certain
marketing documents. The commenters asked that CMS adopt this change
and, in implementation, expand the list of specific documents that are
subject to translation rules. The commenters continued that, currently,
many important documents are not translated, such as notices that
beneficiaries are being denied services or will be disenrolled for
failure to pay premiums.
Response: CMS appreciates the supportive feedback. We are
finalizing the regulatory language at Sec. 422.2268(a)(7) and Sec.
423.2268(a)(7) to require translation of ``vital materials'' as opposed
to materials ``as defined by CMS''. We believe that this standard will
provide sufficient flexibility to sponsoring organizations in
connection with mere marketing materials as well as provide
beneficiaries with access to the information and materials that are
vital to coverage. In conjunction with the final regulation, CMS
intends to develop a successor to the current MMG that will include
guidance for both communications and marketing. In this sub-regulatory
guidance, we intend to provide additional guidance explaining which
documents and materials are vital materials that must be translated. We
also remind commenters and plans that this regulation is not the only
legal obligation for MA organizations and Part D sponsors with regard
to Medicare beneficiaries who have limited English proficiencies. 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 Section 1557, 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 and Section 1557. Guidance about obligations under these other
statutes is available from the Office for Civil Rights. Further, we
note that Sec. 422.111(h)(1)(iii) and Sec. 423.128(d)(1)(iii) require
the call centers of sponsoring organizations to provide interpreters to
enrollees who are LEP or do not speak English, without limitation based
on the number of enrollees in a service area that are LEP or do not
speak English.
Comment: Several commenters asked that CMS change the current
translation standard, which only covers languages spoken by five
percent or more of the population in the service area. The commenters
expressed concern that the current rule means that, except for a couple
small pockets, the only required language for translation is Spanish.
Response: CMS uses U.S. Census Bureau's American Community Survey
data to determine which PBPs must provide translated materials and has
determined that five percent of a language spoken in service area is an

[[Page 16631]]

appropriate threshold for translation requirements. We reiterate that
other laws also apply to sponsoring organizations and this marketing
and communication regulation is not the only applicable provision for
ensuring access for beneficiaries with limited English proficiency. For
example, as recipients of federal financial assistance, MA plans and
Part D prescription drug plans are subject to the nondiscrimination
requirements under Title VI of the Civil Rights Act of 1964 and Section
1557 and their implementing regulations (45 CFR parts 80 and 92).
Comment: A commenter asked if the language used in Sec. Sec.
422.2268(a)(7) and 423.2268(a)(7) was error in the wording, as the
commenter found it unclear.
Response: The language is correct. It is written in the context of
what plans cannot do. Paragraph (a)(7), as proposed and finalized,
prohibits plans from providing materials in markets with significant
non-English speaking populations unless the communications are in the
language of the non-English speaking populations. We believe that this
is a clear statement of the intended prohibition.
We received a number of comments based on the updates to Sec. Sec.
422.2268 and 423.2268 to address section 1851(e)(2) of The 21st Century
Cures Act (the Cures Act). Overall, comments were evenly split among
those in favor of CMS's proposed language and those commenters who
suggested alternative methods of addressing the Cures Act prohibition
on marketing during the new OEP. There were no commenters in favor of a
broader prohibition on marketing during the OEP.
Comment: Several commenters were in favor of CMS's use of the term
``knowingly'' stating that it would protect a plan from the marketing
prohibition when the plan does not know that the beneficiary is
enrolled in an MA plan at the time.
Response: CMS appreciates feedback and concurrence.
Comment: Some commenters suggested that, during the OEP, marketing
could be acceptable if it did not include any reference to the OEP.
Response: CMS appreciates the suggestion; however, using the term
``knowingly'' takes into account the recipient as well as the content
of the message so we believe that a prohibition that only addressed the
term ``OEP'' would be too narrow to satisfy the statute. For example,
if a plan were to send messaging specifically calling out the OEP, that
would be knowingly targeting. Likewise, if a plan was aware that an
individual had already made an enrollment decision during the AEP,
sending unsolicited marketing materials to that individual, even if the
OEP was not mentioned, would be considered ``knowingly targeting''. To
that point, as finalized, the regulation accomplishes what the
commenters have suggested, as well as addresses marketing to specific
individuals that are able to make a plan selection during the OEP.
Comment: Another commenter stated that marketing often takes the
form of educating beneficiaries about their options and their rights to
change plans, or remain in their plan if they are satisfied.
Restricting such marketing will effectively undo much of the ``good''
that was established under OEP, discouraging beneficiaries from
exploring various plan options and selecting the plan that is best for
them, and their families. The commenter supported a policy which would
allow marketing to all beneficiaries during OEP, including those
beneficiaries eligible for OEP. In particular, the commenter asserted
that it would be largely unworkable to limit marketing only to a subset
of individuals who have not yet enrolled in a plan during OEP. The
commenter offered that one potential option is to only prohibit direct
marketing communications to OEP beneficiaries, but permit broader
communications including: Television ads, general mailing campaigns,
internet marketing, and radio ads during the OEP.
Response: The statute prohibits unsolicited marketing and the final
regulation has been updated to reflect this. Neither the statute nor
regulation restricts a plan from providing educational materials or
marketing materials if and when the beneficiary proactively reach out
looking for OEP help. To that end, CMS supports each plan's ability to
reactively respond to beneficiaries when it comes to the OEP. CMS
disagrees that plans should be able to market its coverage under the
guise of help.
CMS believes that the intent of Congress was to allow beneficiaries
to make an enrollment decision during the OEP, but not for it to be a
second opportunity for plans to proactively persuade or attempt to
persuade beneficiaries to switch plans. Prohibiting plans from
knowingly targeting beneficiaries during the OEP addresses Congress's
intent while affording plans with the flexibility to still conduct
marketing to other potential enrollees, such as age-ins. Upon review of
the proposed rule, in light of these comments, we are finalizing the
proposed regulation text with the addition of the word ``unsolicited''
to modify ``marketing materials'' to be consistent with the statute and
to clarify that responses to inquiries from beneficiaries is not
prohibited.
Comment: A commenter suggested the ``knowing'' standard would
unfairly disadvantage MA plans where a beneficiary might already be
enrolled, since that plan would be more likely to know that the
enrollee was enrolled in an MA plan during the previous year. If
another MA plan does not know that enrollees are already enrolled, that
MA plan could market to those enrollees, potentially influencing
enrollees to switch plans. This standard would not be in the best
interest of beneficiaries and could cause market disruption. The
commenter recommended that CMS create a standard where marketing during
OEP is not targeted to specific enrollees, thus plans would be
permitted to run general marketing campaigns (plan-specific or on the
MA and/or Part D program). This type of standard would satisfy
statutory requirements, would reduce beneficiary confusion, and would
ensure that plans are on a level playing field.
Response: CMS appreciates the commenter sharing this concern. Our
goal is to implement the Congressional intent without creating an
additional undue burden to plans. In addition, the OEP does not impact
those beneficiaries who are aging into the Medicare program and have
not yet made an enrollment decision, as they are still in their the
Initial Coverage Election Period (ICEP). We believe that tying the
marketing prohibition to a ``knowingly'' standard implements the
statute while avoiding an unnecessary burden on plans and sponsoring
organizations. It is true that a plan that just processed an enrollment
may have more knowledge of the status of a beneficiary, yet we believe
that ``knowingly'' also address the content of the message, which
should mitigate the concern by not permitting other organizations to
specifically target such individuals with marketing that touts the
ability to make another plan choice via the OEP.
Comment: A commenter stated that implementing these marketing
limitations could prevent a plan from sending marketing mailings to
individuals who are not enrolled in a plan, but would otherwise be
eligible (for example, age-ins). The commenter states that it is
important to note that a purchased mail list could not accurately
exclude individuals already enrolled in a Medicare Advantage plan. The
commenter also asked if there could be exceptions to such a prohibition
for marketing mailings intended to reach

[[Page 16632]]

individuals eligible to enroll in an MA plan outside of using the OEP
election period (for example, a targeted age-in mailing).
Response: The intent of the guidance is not to restrict plans'
ability to use mailings or other marketing aimed at individuals aging
into the Medicare program who have not yet made an enrollment decision.
Such marketing would focused on the fact that these age-ins are a
entering (or have entered) the Initial Coverage Election Period. In
this instance, if a plan buys a list of age-ins and sends general
marketing mailers to all on the list, but some of those on the list
have already selected an MA plan during their Initial Coverage Election
Period, CMS would not consider it knowingly targeting based on the
content of the message combined with the fact that the plan would have
no way of knowing that an enrollment decision had already been made. In
this instance, the content of the marketing must not address or include
a reference to the OEP or the opportunity to make an additional
enrollment change during their first 3 months of coverage.
Comment: A commenter asked how OEP marketing restrictions will
impact access for dually-eligible members who want to move during that
time to a FIDE or other highly integrated D-SNP. The commenter stated
that CMS should also allow marketing to dually eligible beneficiaries
for integrated FIDE and D-SNPs during the OEP.
Response: CMS does not intend the restriction of OEP marketing to
impact any D-SNP marketing. Barring information to the contrary, such
marketing appears aimed at dually eligible individuals who are using
the Part D SEP that is available to dually-eligible beneficiaries other
LIS eligible individuals, rather than use of the OEP, for changing
enrollment. This would indicate that the plan is not knowingly
targeting those in the OEP, which is what the rule, as proposed and
finalized, prohibits.
Comment: A commenter expressed concern that an organization could
use their Medigap line of business using a generic marketing line of,
``not happy with your plan, change now'' to generate leads. This would
generate inquiries from those in a MA plan, at which point the company
can steer the conversation to their MA products. The commenter
suggested that, if CMS is going to offer the open enrollment window,
CMS should allow marketing in order to keep the playing field equal.
Response: While veiled by the use of Medigap, CMS would still
consider the situation described by the commenter as targeted marketing
performed by the MA organization, if the intent is to get those in the
OEP to switch MA plans rather than actually marketing a Medigap plan.
CMS does not believe the answer is to allow marketing across the board,
as that would only exacerbate the concern and conflict with the
statute.
Comment: A commenter asked if it is possible that during the Open
Enrollment Period a beneficiary may request marketing materials from
different plans if they were unhappy with their plan and wanted to
switch. This information would inform them about their choices.
Response: The statute clearly prohibits unsolicited marketing. CMS
agrees that providing marketing materials and other information in
response to a request from a beneficiary is allowed under this final
rule as it is at the beneficiary's request and hence not unsolicited.
To address this, we have updated the regulatory language in the final
rule to specifically state unsolicited.
Comment: A commenter requested a clarification if this also
includes marketing to beneficiaries aging into Medicare.
Response: The exclusion is directed to those eligible for the OEP,
including newly eligible enrollees. For more information about the OEP,
we direct readers to section II.B.1 of this final rule.
Comment: A commenter asked if Medicare Advantage plans that have
achieved a 5-Star plan rating are allowed to market to beneficiaries
all year round. The commenter also asked if CMS will be allowing an
exception to the statutory requirements of The 21st Century Cures Act
to allow 5-Star plans year round marketing.
Response: With the exception of targeted marketing to those in the
OEP and marketing prior to October 1 for the next contract year, all
plans may market year round. What distinguishes 5-Star plans is that
they may also enroll year round pursuant to the SEP we have adopted
under our authority at Sec. Sec. 422.64(b)(4) and 423.38(c), which
could make marketing year round more advantageous and effective.
However, 5-Star plans may not target those in the OEP; we believe that
5-star plans would not need to target enrollees in the OEP, however,
because the beneficiary could enroll in a 5-star plan at any time
during the year as a result of the plan's 5-Star status. To that point,
CMS believes that a 5-Star plan marketing its 5-Star status and the
ability to enroll year round does not prove that the MA organization is
knowingly targeting those who may also be eligible for the OEP.
Comment: Several commenters expressed concern with brokers'
activities, with a commenter stating the OEP should not be a time for
aggressive marketing tactics or a time in which brokers are
incentivized to promote beneficiaries to switch plans. Several
commenters suggested that CMS should consider monitoring for churn of
beneficiaries among multiple plans and possible beneficiary confusion
during the OEP. Similarly, another commenter asked how this will be
enforced and where a beneficiary should report marketing abuse.
Response: CMS agrees with the commenter that the OEP should not be
a time for plans and brokers to aggressively market. Further, CMS
believes this very concern is what prompted Congress to include the OEP
marketing restrictions in the statute. CMS will monitor for violations
of the prohibition of knowingly marketing to beneficiaries in the OEP
and take appropriate compliance or enforcement action. CMS encourages
beneficiaries to report any abusive, confusing or misleading marketing
practices by plans, agents and brokers by contacting contact 1-800-
Medicare. In addition, we encourage reports of potential violations of
this requirement.
Comment: A commenter asked that education about this prohibition to
be targeted to all related industries and interest groups so that all
entities that may target this vulnerable population will understand the
law and the consequences for knowing violations.
Response: CMS agrees that compliance with this provision is the
responsibility of plans and their first tier, related and downstream
entities, including agents and brokers. CMS will include additional
sub-regulatory guidance on this change in the law and reminds plans
that they are responsible for the activities of their downstream
entities, including agents and brokers.
Comment: CMS received a number of comments requesting the agency to
define ``unsolicited marketing'' as it appears in the statute.
Response: We do not believe that is necessary and do not adopt a
definition of the phrase in this final rule. CMS believes the intent of
Congress was for plain and ordinary meaning of those words to apply,
consistent with CMS's existing guidance on the prohibition on
unsolicited direct contact required by section 1851(j)(1)(A) of the
Act.
After considering these comments, we are finalizing the proposed
changes related to marketing and communications requirements as
proposed with some modifications:

[[Page 16633]]

We are finalizing the new definitions proposed at Sec. Sec.
422.2260 and 423.2260 with corrections to the list of exclusions from
marketing materials (as noted in section II.B.5.b) to exclude
disclosures required by Sec. Sec. 422.111 and 423.128 unless CMS
directs otherwise and to exclude materials specifically designated by
CMS as not meeting the definition of the proposed marketing definition
based on their use or purpose. We are also finalizing technical and
editorial corrections to the text, including the removal of the
incorrect paragraph designations in Sec. 423.2260 and alignment of the
text in Sec. Sec. 422.2260 and 423.2260.
We are finalizing the amendment to Sec. Sec. 422.2262(d) and
423.2262(d), the revisions to Sec. Sec. 422.2264 and 423.2264, and the
revisions to Sec. Sec. 422.2268 and 423.2268 as substantially as
proposed, with modifications in paragraph (a)(7) that the translation
provision is applicable to ``vital documents'' instead of to documents
specified by CMS and in paragraph (b)(10) to add the modifier
``unsolicited'' before the phrase ``marketing materials.''
We are finalizing as proposed the technical amendments described in
section II.B.5.d of this final rule with modifications in Sec. Sec.
422.62(b)(3)(B)(ii) and Sec. 423.38(c)(8)(i)(C) to clarify that the
special enrollment period is available when the sponsoring organization
``(or its agent, representative, or plan provider) materially
misrepresented the plan's provisions in communications as outlined in
subpart V of this part.'' These technical amendments are necessary
because after we published the proposed rule, we discovered that our
proposed change limited this authority to only written communications.
This was not our intent. In addition, among the minor edits to improve
the regulation text in subpart V of parts 422 and 423, we are
finalizing a correction to the internal cross-reference in Sec. Sec.
422.2274 and 423.2274 to cite to paragraph ``(b)(2)(iii)'' instead of
``(b)(3)(iii)'' in newly redesignated paragraph (b)(2)(ii)(A).
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 proposed 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 proposed 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 will also apply to the IRE
reconsideration pursuant to Sec. 423.600(d). We did not propose 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 for redetermination, or the IRE
reconsideration notice, respectively.
We received the following comments and our responses follow:
Comment: We received many comments, primarily from plans,
expressing support for the proposed change to the payment adjudication
timeframe from 7 to 14 calendar days at the redetermination and
reconsideration levels. Commenters noted that, because payment requests
involve an enrollee who has already received the medication, allowing
the plan 14 calendar days (instead of 7 calendar days) to process the
payment request would allow the plan to prioritize requests for
coverage where the enrollee has not yet accessed the prescription drug,
particularly during times when the plan sponsor is experiencing a high
volume of requests. Commenters noted that this would ensure adequate
resources are directed to processing more time-sensitive pre-service
requests where the beneficiary has not yet obtained the drug.
Commenters also expressed support for this proposal for the reason that
it could reduce the number of unfavorable decisions made due to
insufficient information to support the request. Some of these
commenters requested that CMS consider lengthening the timeframe for
other decisions, such as coverage determinations.
Response: We appreciate the commenters' support for the proposal
and agree that allowing an additional 7 calendar days to process
payment requests will result in a more thorough review of the payment
request which may lead to fewer unfavorable decisions due to
insufficient information to support the request. We also agree that
affording more time for payment requests will permit plan sponsors to
better prioritize requests for coverage; this will help plan sponsors
efficiently allocate resources to more time-sensitive pre-service
requests where the beneficiary has not yet obtained the drug.
Comment: Several commenters expressed concern about the effect of
this proposed change on beneficiaries and encouraged CMS to keep the
existing adjudication deadline for plan sponsors and the IRE. Some
commenters noted concern about the increased financial burden this
proposal would place on enrollees given that many Medicare
beneficiaries are on limited budgets. A commenter noted that enrollees
who wait up to a month to learn that their case has been decided
against them would have to either pay for the drug out of pocket again
or get a prescription for an alternative drug within a short time
period. Commenters believed these options jeopardize enrollees' access
to needed drugs. A commenter asked for clarification on when payment
must be made to an enrollee if a favorable decision is issued.
Response: We'd like to clarify that, contrary to the statement of a
commenter, enrollees will not have to wait ``up to a month'' to receive
a plan sponsor's redetermination decision on a request for payment. Our
proposal was to extend the adjudication timeframe for payment cases
from 7 to 14 calendar days. While we acknowledge that extending the
adjudication timeframe for 7 calendar days at the redetermination and
IRE level increases the length of time the enrollee will wait for a
decision, we do not believe that an additional 7 calendar days to
receive notice on a payment request will create access issues for
enrollees, given that the enrollee has already received the drug. We
believe the additional 7 calendar days plan sponsors and the IRE will
have to gather information and process these requests could be
beneficial to enrollees because decisions are likely to be informed
which, in turn, will potentially result in fewer payment decisions
being denied and subject to further appeal.
The change we proposed is limited to payment requests where the
enrollee has already received the drug, so we believe there is minimal
to no risk that an additional 7 calendar days to process these requests
will adversely affect the health of an enrollee who has requested

[[Page 16634]]

reimbursement. As we noted in the proposed rule, when coverage is
approved, the plan must make payment to the affected enrollee no later
than 30 calendar days after the date the plan sponsor receives the
redetermination request. In other words, the change to a 14 calendar
day adjudication timeframe will not change the time in which the plan
sponsor has to issue payment to the enrollee.
We believe the proposed change to a 14 calendar day timeframe is an
appropriate balance between plan sponsors' need to obtain information
to thoroughly evaluate a payment request and the interest of enrollees
in receiving prompt notice on a payment request. We believe the
proposed change will enhance efficiency in the adjudication of these
types of cases, reduce adverse payment decisions, and reduce the number
of late cases that have to be auto-forwarded to the IRE. As previously
noted, the proposed change to a 14-calendar day adjudication timeframe
will also apply to payment requests processed by the Part D IRE.
Because the enrollee has received the prescription drug that is subject
to the payment request, we disagree with commenters who believe the
additional time will needlessly delay access to treatment. We believe
that allowing plan sponsors and the IRE additional time to obtain
necessary documentation and thoroughly review the case will be
beneficial overall and that the advantages offset the additional 7
calendar days an enrollee may have to wait for a decision on a payment
request.
Comment: A commenter noted that there's no evidence to support the
proposed change and that, instead of increasing the timeframe, CMS
should enforce current timeframes and delay implementation of this
change until the extended timeframe can be tied to specific enhanced
performance standards, with substandard performance resulting in
financial consequences for plans. Another commenter noted that new
protocols will need to be issued and that timeliness calculations for
data universe fields will need to be adjusted.
Response: CMS has received significant feedback from plan sponsors
regarding the difficulties encountered with receiving information
necessary to process requests in a timely manner. CMS has also received
feedback that there should be greater consistency in the appeals
process. As noted in the proposed rule, implementing a 14 calendar day
timeframe for redeterminations and IRE reconsiderations involving
payment requests will establish consistency with the timeframe for
coverage determinations that involve a request for payment. Since these
are cases where the enrollee has already obtained the drug, we believe
it's reasonable to afford plan sponsors and the IRE additional time to
obtain the documentation necessary to support a favorable decision on
the request. We acknowledge that audit protocols and related materials
will need to be modified to comport with the new 14 calendar day
payment timeframe for redeterminations in order to measure plan
performance in meeting this timeframe. We agree with the commenter that
plan sponsors' performance in meeting this new timeframe for payment
redeterminations should be evaluated, but disagree that implementation
of the new timeframe should be delayed.
Comment: A commenter that expressed support for the proposal noted
that CMS should align the coverage determination payment timeline with
the existing redetermination timeline of 30 calendar days.
Response: We appreciate the commenter's support for the proposal,
but wish to clarify that the existing redetermination timeframe is 72
hours for expedited requests and 7 calendar days for standard
redetermination requests.
After consideration of the public comments received, we are
finalizing this provision as proposed.
7. Elimination of Medicare Advantage Plan Notice for Cases Sent to the
IRE (Sec. 422.590)
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) contracted with CMS to review plan-level appeals. Pursuant
to Sec. 422.590(f), MA plans must notify enrollees upon forwarding
cases to the IRE.
We proposed to revise Sec. 422.590 to remove paragraph (f) to
delete the requirement for plans to notify enrollees upon forwarding
cases to the IRE. The Part C IRE will continue to be contractually
responsible for notifying enrollees upon receipt of cases from MA
plans. We proposed this change to ease burden on MA plans without
compromising notice to the enrollee (or other party) of the progress of
the appeal and to allow MA plans to redirect resources to time-
sensitive activities, such as review of coverage requests and improved
efficiency in appeals processing and provision of health benefits.
We received the following comments and our responses follow:
Comment: We received many comments expressing strong support for
our proposal to eliminate the MA notice when plans forward cases to the
Part C IRE. A majority of commenters agreed that the current MA plan
notice requirement is duplicative and unnecessary, as the Part C IRE
also is responsible for notifying an enrollee that it has received the
case. These commenters indicated that the redundant notice is costly,
elimination of this unnecessary notice will reduce beneficiary
confusion, and the proposed change is in line with current paperwork
reduction initiatives.
Response: We agree with the commenters that this proposal will ease
unnecessary administrative burden on MA plans while favorably impacting
enrollees. We expect this change to increase beneficiary understanding
and allow plans to redirect resources previously allocated to issuing
this notice to more patient-care related, time-sensitive activities. We
appreciate the comment that this proposal is consistent with the
agency's Patients Over Paperwork initiative to reduce paperwork and
agree the change will benefit beneficiaries, plans and providers.
Comment: A few commenters suggested CMS implement additional
measures related to the proposal--such as setting a timeframe by which
the IRE must acknowledge receipt of a member's case (for example,
within 5 days).
Response: CMS agrees an enrollee must receive timely notice when
his or her case is forwarded to the Part C IRE. We will continue
analyzing notification timeframes as we endeavor to ensure the IRE's
notification process is timely and efficient. We note that a regulatory
change would not be necessary as CMS contracts with the Part C IRE and
may implement changes to certain parts of the IRE's workload and
deadlines through that contract.
Comment: Some commenters recommended other programmatic
improvements--including issuance of new protocols used during program
audits or the timeliness monitoring project to delete the applicable
timeliness calculations for this notice. Other commenters recommended
we consider electronic issuance of IRE notifications to enrollees.

[[Page 16635]]

Response: While the commenter's suggestions are outside the scope
of this rule, we appreciate these comments and will ensure the
suggestions are appropriately conveyed.
Comment: Some commenters generally support this change, but
requested additional clarification. For example, a few commenters
inquired whether MA plans may voluntarily continue the current practice
of notifying their members upon forwarding cases to the IRE. These
commenters indicated providing notices to members on an optional basis
could prevent increased member inquiries. Another commenter sought
clarification regarding Appendix 10 of Chapter 13 of the Medicare
Managed Care manual--a sample (model) notice (``Notice of Appeal
Status'') provided to plans for the purpose of informing enrollees
whose cases are forwarded to the IRE for review. Another commenter
indicated Appendix 10 includes redundant information the IRE is
expected to provide. While another commenter inquired whether MA plans
would continue to have the full adjudication timeframe to forward the
denied case to the IRE or if the MAO's processing timeframe would be
reduced.
Response: We would like to clarify that this change does not
preclude plans from continuing to notify enrollees upon forwarding
cases to the IRE; plans are permitted to continue the current practice
of notifying members upon forwarding case files to the IRE if they
choose to do so. We will no longer expect plans to use CMS' Model
Notice of Appeal Status (Appendix 10 of Chapter 13 of the Medicare
Managed Care manual) after the end of the 2018 plan year. By removing
the requirement that MA plans must notify beneficiaries upon forwarding
cases to the Part C IRE, we no longer expect plans to use CMS' Model
Notice of Appeal Status; thus, inclusion of duplicative language on the
model notice is unnecessary as well as moot. While plans opting to
notify members upon forwarding cases to the IRE may continue using CMS'
model notice, CMS will no longer expect MA plans to utilize the current
model notice. Changes to processing timeframes are outside the scope of
this rule but we note that Sec. 422.590(a), (b) and (d), which control
the timeframe for service, payment and expedited reconsiderations, are
not being amended in this rule; those provisions require that an MA
plan prepare a written explanation and send the case file to the
independent entity contracted by CMS as expeditiously as the enrollee's
health condition requires, but no later than the timeframe specific to
the type of reconsideration.
Comment: A few commenters objected to this proposal, indicating
that MA enrollees expect to receive notices from their plans and would
find notices from the IRE confusing. Another commenter asserted the
provision of this notice is not a burden on MA plans. A commenter
anticipated the Part C IRE's notification would not be as timely as
plan notification and some asked CMS to eliminate IRE notice instead of
eliminating MA plan notice.
Response: We disagree with the commenters. While MA enrollees
expect to receive material from their plans, we believe that enrollees
who are awaiting appeals decisions anticipate notification from the
Medicare IRE to confirm the IRE has actually received the case and what
the beneficiary can expect next. Mandatory materials sent by MA plans
to enrollees, such as Medicare's integrated denial notice, describe the
IRE-level of review following denial at the MA plan reconsideration
stage. Additionally, even before this change was proposed, the IRE was
required to provide a notice to enrollees. We also believe
beneficiaries welcome knowing an independent, outside entity, under
contract with Medicare, is reviewing their health plan's initial
coverage denial. As set forth in our regulatory impact analysis, we
believe that providing this notice is a burden for MA plans and an
unnecessary one at that. Eliminating this duplicative notice will
relieve an unnecessary burden on MA plans. We will continue to work
closely with the IRE--through CMS' contract oversight and evaluation
efforts and by promulgating additional contractor guidance, as needed--
to ensure Medicare beneficiaries nationwide receive timely notice in a
consistent form and manner.
After consideration of the public comments received, we are
finalizing this amendment to delete paragraph (f) and redesignate the
subsequent paragraphs of Sec. 422.590 as proposed.
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 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
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, it noted that notice and
comment rulemaking could be waived, and 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

[[Page 16636]]

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 18,918) 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 Sec. 423.160, and Correction of a Historic Typographical Error in
the Regulatory Text Which Occurred When NCPDP SCRIPT 10.6 Was Initially
Adopted
We proposed to adopt the NCPDP SCRIPT 2017071 as the official Part
D e-prescribing standard for certain specified transactions, and to
retire the current standard (NCPDP SCRIPT version 10.6). Unlike past
updates to the part D e-prescribing standards, as version 2017071 is
not fully backward compatible with version 10.6, we were unable to
propose a transition period in which 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. While moving directly from one version to another may
present challenges, we believe that the new version provides the
opportunity to standardize additional transactions over what was
possible with the current version, and, as noted in our proposed rule,
we believe that those added transactions and the improvements to the
existing transactions would, among other things, improve communications
between the prescriber and dispensers.
Specifically, 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 proposed to require use of NCPDP SCRIPT
2017071 for the following new 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.
To implement these proposed policies, we proposed 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). As amended, the
requirement at Sec. 423.160(b)(1)(v) would identify the standards that
will be in effect for the named transactions on or after January 1,
2019.
We also proposed adoption of NCPDP SCRIPT 2017071 as the official
Part D e-prescribing standard for the medication history transaction at
Sec. 423.160(b)(4) and proposed to retire NCPDP SCRIPT versions 8.1
and 10.6 for medication history transactions transmitted on or after
January 1, 2019. Furthermore, we proposed 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, and proposed to
add Sec. 423.160(b)(1)(v) to require use of NCPDP SCRIPT Version
2017071 on or after January 1, 2019. Furthermore, we proposed 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
proposed to incorporate NCPDP SCRIPT version 2017071 by reference in
our regulations at 42 CFR 423.160(c)(1)(vii).
We also solicited comments regarding the impact of these proposed
effective dates on industry and other interested stakeholders, and
proposed a technical correction of a prior regulation. On July 30,
2012, we published a regulation (CMS-1590-P), which established version
10.6 as the Part D e prescribing standard effective March 1, 2015 for
the electronic transactions listed in Sec. 423.160(b)(2)(iii).
However, despite the preamble discussion's clear 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) of
the regulation text erroneously cross-referenced the standard named in
(b)(2)(ii) (NCPDP SCRIPT 8.1), rather than that named in (b)(2)(iii)
(NCPDP SCRIPT 10.6). We proposed 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).
We received the following comments and our response follows:
Comment: Many commenters urged CMS to adopt the NCPDP SCRIPT
electronic Prior Authorization (ePA) transaction for the Part D
program. They note that ePA is more efficient for prescribers,
pharmacies, plans, and patients.
Response: We understand that Part D plans are anxious to adopt the
NCPDP SCRIPT ePA standard. However, the HIPAA standard transaction for
prior authorization does not accept the NCPDP SCRIPT ePA standard. In
order for CMS to adopt the 2017071 for use in the Part D e-prescribing
program, the HIPAA standard transaction would need to be modified to
allow for use of an NCPDP SCRIPT ePA standard. Such HIPAA changes will
need to occur in a Departmental regulation, and cannot be effectuated
in a CMS regulation. If the HIPAA regulations are modified, CMS will be
able to propose adoption of the NCPDP SCRIPT ePA for use in the Part D
e-prescribing program.
Comment: We received a variety of comments concerning the amount of
lead time needed to adopt a new standard. Some commenters requested
that CMS' proposed time frame for implementing the new NCPDP SCRIPT
version be extended. Several commenters expressed the desire to begin
using the new standard immediately after the rule is finalized but
wanted to accommodate other plans who were not ready to adopt the
standard. These commenters favored a gradual transition whereby plans
could opt to adopt Version 2017017 voluntarily when the final rule is
published or be permitted to use Version 10.6 for 18 to 24 months
thereafter. A commenter asked CMS not to require implementation of the
new NCPDP SCRIPT version on a Federal holiday or in January, since
plans would be in the midst of open season.
Response: Comments have persuaded us that it will take some plans
more time to update the standard than we had previously anticipated. We
also appreciate that many plans would like to begin using the new
standard immediately. Given these two viewpoints we would have liked to
have proposed a phased-in transition for plans to use when implementing
the new NCPDP SCRIPT version. However, because we understand that
Version 2017017 is not backwards compatible to Version 10.6, this is
not a feasible option, necessitating a hard cut off point. We also
understand that some industry partners would prefer not to

[[Page 16637]]

implement the new NCPDP SCRIPT version on January 1 however, Section
1860D-12(f)(2) prohibits the implementation of ``significant''
regulatory requirements on a prescription drug plan other than at the
beginning of the year. Therefore, in order to ensure that all Part D
plans, prescribers and dispensers are able to make a successful
transition to the new part D e-prescribing standard, and that the
transition is compliant with statutory requirements, we are delaying
the implementation date until January 1, 2020 subject to the additional
conditions regarding certain ONC standards discussed infra. This will
provide affected organizations additional time to develop and test the
new requirements.
Comment: A few commenters noted that the use of medication history
transactions would help the industry address opioid overuse and asked
that CMS add them to the list of named transactions.
Response: The adoption of the 2017071 version of the NCPDP SCRIPT
medication history transaction was proposed in the final rule, but, as
was done historically, we proposed to codify it separately from the
other transactions at Sec. 423.160(c)(1)(vii). Furthermore, we
proposed to incorporate the 2017071 proposed transactions at Sec.
423.160(b)(4)(ii), which we believe would include RxHistory Request and
RxHistory Response. As a result of positive feedback to these
proposals, subject to the additional conditions regarding certain ONC
standards discussed infra, we do intend to finalize these proposals
effective January 1, 2020.
Comment: A commenter stated that although the Password Change
Transaction remains in the 2017017 NCPDP SCRIPT Standard, its use is
not universally supported and that some payers have replaced these
transactions with alternative enhanced security authentication
measures. The commenter asked CMS to remove the Password Change
Transaction from the final rule.
Response: We appreciate the comment, and understand that some
industry partners are exploring different procedures for processing
password resets which may obviate the need for the NCPDP SCRIPT
standard Password Change Transaction. Given the evolution of these
processes and the importance of ensuring up-to-date security processes
for sensitive health information, we have removed the Password Change
Transaction from the final rule pending further review.
Comment: A commenter correctly noted that the proposed rule
mentions some of the changes in the new standard, but it doesn't
mention all of them. Specifically, the commenter asked whether a new
field for language access is included in the transactions we are
adopting from version 2017071.
Response: The language field was added to a prior NCPDP SCRIPT
standard, Version 10.11, and has not been removed in any subsequent
updates. Therefore the language field continues to be included in all
versions after 10.11 including Version 2017017. That said, we did not
propose to adopt NCPDP SCRIPT 2017071 for that transaction in the
context of the part D e-prescribing program, so the public is free
absent other program standards to the contrary to convey such content
using whatever standard or means they wish to use.
Comment: A few commenters noted that this NPRM proposed use of a
different version of the NCPDP SCRIPT standard in Part D than is used
in other programs managed by HHS. These commenters expressed concern
that this may create confusion in the industry. Specifically,
commenters noted ONC's Electronic Health Record Certification Program
which currently utilizes the NCPDP SCRIPT Version 10.6.
Response: HHS has a history of harmonizing NCPDP SCRIPT versions
across the various programs which it manages. For example, please see
the final rule titled, ``Health Information Technology: Standards,
Implementation Specifications, and Certification Criteria for
Electronic Health Record Technology, 2014 Edition; Revisions to the
Permanent Certification Program for Health Information Technology'' (77
FR 54163, 54198-54200), in which HHS aligned its programs to prior
versions of the part D e-prescribing standard. We anticipate similar
action in this context, and are confident that the necessary proposals
are currently under development. Each Agency and Office within the
Department adheres to a different regulatory schedule so that
regulations are published at different intervals. Nevertheless, with
the adoption of this version of the NCPDP SCRIPT standard for Part D
prescribing, HHS remains committed to continued agency coordination to
ensure alignment, interoperability, and the adoption of the most
appropriate standard and version for each use case. We are therefore
modifying our proposal to adopt NCPDP SCRIPT 20170171 by conditioning
the effective date of our adoption of the proposed on corresponding
regulatory action being taken to update the Health IT Certification
Criteria to NCPDP SCRIPT 2017071 for the named transactions effective
the January 1, 2020 implementation date.
Comment: A commenter asked whether stakeholders are required to
adopt all transactions within the NCPDP SCRIPT standard or only those
which are applicable to their business purpose.
Response: PDP sponsors and MA organizations offering MA-PD are
required to establish electronic prescription drug programs that comply
with adopted e-prescribing standards. Other organizations such as
prescribers or dispensers only need to implement the adopted
transactions under that standard that they use in their part D e-
prescribing operations. If there are any questions on which
transactions apply to a business case, organizations should consult the
Business process descriptions documented within the version 2017071
NCPDP SCRIPT standard implementation guide.
Comment: A commenter pointed out that the named transactions are
inconsistent with the current implementation guide Version 20170171.
The commenter asked that CMS reflect the updated nomenclature and
transaction types throughout.
Response: We appreciate this comment, and acknowledge that NCPDP
made what we understand to be non-substantive changes to their
nomenclature. The final regulatory text therefore reflects those non-
substantive changes to the names of the transactions from those which
appeared in our proposed regulation. We have amended the regulatory
text in the final rule to adopt the updated names.
Comment: A commenter suggested that we defer naming the REMS-
related transactions until the Risk Evaluation and Mitigation
Strategies (REMS) program transactions are proven compared to other
standards before mandating the 2017071 version of the NCPDP SCRIPT
standard for REMS usage.
Response: We disagree, and have included the REMS-related
transactions in our final rule. The FDA designed the REMS program to
mitigate serious drug-related risks associated with the some
medications, a goal which CMS whole heartedly supports. Use of the REMS
transactions will allow REMS requirements to be completed within
existing healthcare workflows, which will be critical as the REMS
program includes more medications. Absent these transactions the
successful management of the REMS would require manual intervention for
pharmacists and prescribers. Manual maintenance of REMS program data
would be

[[Page 16638]]

particularly difficult because each REMS has specific safety measures
unique to the risks associated with a particular drug. For these
reasons CMS strongly supports using electronic processes to support
this important drug safety initiative.
Comment: A commenter recommended that CMS immediately adopt the
updated NCPDP Telecommunication Standard D.0 which allows the
conditional use of the field ``Quantity Prescribed'' to communicate the
actual quantity prescribed by the provider. The commenter stated that
adoption of the field would promote more appropriate beneficiary access
to controlled substances, reduce the industry's administrative burden,
and eliminate the misidentification of partially-filled prescriptions
as refills.
Response: CMS is aware of the concerns noted. The NCPDP
Telecommunications Standard D.0 was adopted to include specific
implementation guides, and it is a HIPAA standard, so we'd need to
await the HIPAA standard changing. As noted above, proposals to modify
HIPAA transactions are promulgated by the Department, not CMS, under a
different rule-making authority. This suggestion is therefore outside
the scope of this rule.
We received broad support for updating the NCPDP SCRIPT standard to
Version 2017071, along with concerns about the implementation date and
technical concerns about the transactions named. Based on comments
received we are finalizing this provision with modifications and have
conditionally moved the effective date to January 1, 2020, to give ONC
time to update its Electronic Health Record certification program to
the NCPDP SCRIPT 2017071 standard.
Summary and Availability of Incorporation by Reference Material
The Office of the Federal Register (OFR) has regulations concerning
incorporation by reference. 1 CFR part 51. For a final 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 final 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 updates 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.
This regulation codifies 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.
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 updated NCPDP SCRIPT standards have been
requested by the industry and include electronic standards for
transactions that are commonly used such as the transmittal of new
prescriptions, changes to existing prescriptions, requests for
renewals, and transfers of prescriptions between pharmacies. These
enhancements will provide a number of efficiencies which the industry
and CMS supports.
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. 75 FR 19677. As part of that rulemaking, we established,
at Sec. 422.502(b)(1) and Sec. 423.503(b)(1), that we will 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; \76\ to the methodology scores each applicant's
performance by assigning weights based on the severity of its non-
compliance in several performance categories. Under the annual contract
qualification application submission and review process we conduct,
applicants and renewing organizations must submit the application by a
date, usually in mid-February, announced by us. We proposed to reduce
the past performance review period from 14 months to 12 months after
consideration of our experience.
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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 its 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. When we established the 14-month review
period, we did so based in part on the belief that it was necessary to
include in the period a full contract year (that is, January through
December) of performance to be certain that our review captured an
applicant's most recent full cycle of performance in order to capture
all relevant aspects of an organization's performance. As we have
implemented the 14-month review

[[Page 16639]]

period, we have learned that the contract year, as a unit of measure,
adds little value to our annual analysis. The January-through-December
period is most significant because it covers the period during which
the organization must provide approved benefits to its enrollees, but
it does not truly reflect the schedule under which we make the contract
compliance and performance determinations that we have adopted as
factors in the past performance methodology. For example, compliance
notices, audit reports and star ratings are often by necessity issued
following the conclusion of a particular contract year. Therefore, an
accurate review of a contract's past performance, conducted as part of
the annual application review cycle, does not depend on our being
certain that the review period covers a full contract year that begins
two Januarys before an application deadline. As part of an annual
process, the period need cover only 12 months.
We continue to believe that an applicant's most recent contract
performance is important to consider in each review cycle. Therefore,
we proposed to revise Sec. 422.502(b)(1) and Sec. 423.503(b)(1) to
reduce the review period from 14 to 12 months. This will 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 will eliminate the counting of
instances of non-compliance in January and February of each year in 2
separate application cycles. We also proposed to have this review
period change reflected consistently in the Part C and D regulation by
revising both 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
clarified in the proposed rule that our proposal would not change any
other aspect of our consideration of past performance in the
application process.
We received the following comments and our response follows:
Comment: All commenters expressed support for the reduction of the
past performance review period from 14 to 12 months.
Response: We appreciate the statements of support for our proposal.
Comment: Some commenters urged that the proposed 12-month period
cover a calendar year (that is, January through December) rather than
the March through February period that immediately precedes the
application. These commenters noted that the calendar year review
period would allow CMS to let potential contract applicants know
whether CMS would deny their applications based on poor past
performance before they committed resources to preparing and submitting
applications.
Response: As we discussed when we proposed this change, we believe
it is critical that CMS consider an applicant's most recent record of
contract performance at the time of the submission of the application
to CMS in February. The adoption of a calendar year past performance
period would create an unacceptable gap between the end of the review
period and the application deadline. Therefore, we will not accept this
recommendation.
While we cannot accommodate the recommendation that we adopt a
calendar year review period, we note that CMS makes past performance
resources available to organizations that they can use in making the
decision to invest resources in preparing an application. Each year,
CMS conducts mid-year performance reviews of contracting organizations
and share those results with the organizations. While the results of
such reviews are not final, they give organizations a real sense of how
CMS views their contract performance to that point in the year. We also
draft the annual past performance methodology in a way that allows
organizations to track their own past performance scores throughout the
year, allowing the organizations to determine, as the year goes on, the
likelihood that CMS will deny their planned application.
Comment: A commenter provided a series of recommendations for
modifications to the methodology CMS adopts each year to evaluate
applicants' past performance record (for example, changes in weights
assigned to certain areas of performance, evaluation of performance at
the contract, rather than organization, level).
Response: Since these comments do not address the duration of the
past performance review period, they are outside the scope of our
proposal. We will take the comments under consideration for review of
the methodology in the future.
Based on our review of comments expressing broad support for the
reduction of the past performance review period, we are finalizing the
amendments to Sec. Sec. 422.502(b)(1) and (2) and 423.503(b)(1) and
(2) as proposed.
10. Preclusion List Requirements for Prescribers in Part D and
Individuals and Entities in MA, Cost Plans, and PACE
a. Part D Provisions
(1) Background
(a) 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

[[Page 16640]]

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.
(b) 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.
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.
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 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.
(c) 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. Numerous
prescribers have, in preparation for the enforcement of Sec.
423.120(c)(6), enrolled in or opted out of Medicare. However, we noted
in the November 28, 2017 proposed rule that 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. Several provider
organizations, moreover, expressed concerns about the enrollment
requirements. They 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, was 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. However, the concerns of these
provider organizations remained.
Recognizing these concerns, and wanting to reduce as much burden as
possible for providers without compromising our program integrity
objectives, we proposed in the November 28, 2017 proposed rule several
changes to Sec. 423.120(c)(6) as well as to several other provisions,
which we describe below.
(2) 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 were to finalize the
proposals described in the November 28, 2017 proposed rule, we would
not finalize the provisions of the IFC. Instead, the regulations
contained in this final rule would supersede our earlier rulemaking.
We proposed an effective date for our proposed provisions in Sec.
423.120(c)(5) of 60 days after the publication of a final rule. We
proposed an effective date of our proposed revisions to Sec.
423.120(c)(6) of January 1, 2019.
(a) Prescriber NPI Validation on Part D Claims
In the May 6, 2015 IFC, we revised Sec. 423.120(c)(5), which
addresses the submission and validation of National Provider
Identifiers (NPIs) of Part D prescribers, to state that before January
1, 2016, the following are applicable:
In paragraph (c)(5)(i), we stated 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 stated 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 stated 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 stated 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.

[[Page 16641]]

++ In paragraph (c)(5)(iii)(B), we stated 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 stated 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;
++ 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 stated 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.
We noted in the November 28, 2017 proposed rule that these
provisions, which focused on NPI submission and validation, were no
longer effective because the January 1, 2016 end-date for their
applicability had passed. We further explained that prior to the
January 1, 2016 date, the Medicare Access and CHIP Reauthorization Act
of 2015 (MACRA) was signed into law on April 16, 2015 (shortly before
the IFC was finalized). Section 507 of MACRA amended 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, we issued a guidance memo on
June 1, 2015 titled, ``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
published, but that its several of its provisions reflected certain
existing Part D claims procedures established by the Secretary that
would comply with section 507 of MACRA. The provisions in Sec.
423.120(c)(5) that reflected the procedures that would comply with
section 507 were the following:
Paragraph (c)(5)(iii).
Paragraph (c)(5)(iii)(A).
Paragraph (c)(5)(iii)(B)(1). (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 proposed in the November 28, 2017 proposed rule to
include these provisions in new paragraph (c)(5). They were to be
enumerated as, respectively, new paragraphs (c)(5)(ii), (c)(5)(ii)(A),
(c)(5)(ii)(B), (c)(5)(iii), and (c)(5)(iv). Paragraphs (c)(5)(i),
(c)(5)(ii), and (c)(5)(iii)(B)(2) were not to be included in new
paragraph (c)(5). We also noted in the November 28, 2017 proposed rule
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 contained the NPI of the prescriber who prescribed the
drug. This provision, too, reflected existing Part D claims procedures
and policies that comply with section 507 of MACRA. We therefore
proposed to retain this provision and sought comment on associated
burdens or unintended consequences and alternative approaches. However,
we proposed to move it from paragraph (c)(6) to paragraph (c)(5) so
that most of the NPI provisions in Sec. 423.120 were included in one
paragraph. We stated in the proposed rule that these new provisions
would not only effectively implement section 507 of MACRA but also
enhance Part D program integrity by streamlining and strengthening
procedures for ensuring the identity of prescribers of Part D drugs.
(b) Targeted Approach to Part D Prescribers and Provisional Supply
We outlined in the proposed rule our belief 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
taxpayer-funded Trust Funds. In other words, rather than require the
enrollment of Part D prescribers regardless of the possible level of
risk posed, we proposed to focus on preventing payment for Part D drugs
prescribed by demonstrably problematic prescribers. We therefore
proposed to establish a ``preclusion list'' that would include such
individuals and would deny payment for Part D drugs they prescribe.
That is, we proposed to replace the prescriber enrollment requirement
outlined in Sec. 423.120(c)(6) with a claims payment-oriented
approach. The specific provisions we proposed are as follows:
In Sec. 423.100, we proposed to delete the definition of
``other authorized prescriber'' and add the following:
++ Preclusion List means a CMS compiled list of prescribers who:
++ Meet all of the following requirements:
++ The prescriber is currently revoked from the Medicare program
under Sec. 424.535.
++ The prescriber is currently under a reenrollment bar under Sec.
424.535(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: (1) The seriousness of the conduct
underlying the prescriber's revocation; (2) the degree to which the
prescriber's conduct could affect the integrity of the Part D program;
and (3) any other evidence that CMS deems relevant to its
determination; or
++ Meet both of the following requirements:
++ 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.
++ CMS determines that the underlying conduct that would have 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: (1) The seriousness of the conduct
involved; (2) the degree to which the prescriber's conduct could affect
the integrity of the Part D program; and (3) any other evidence that
CMS deems relevant to its determination
In paragraph (c)(6)(i), we proposed 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 will ensure that Part
D

[[Page 16642]]

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 proposed 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 will 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 proposed 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 proposed to address the
provisional coverage period and notice provisions, which we previously
referred to, as follows:
++ A Part D sponsor or its PBM must not reject a pharmacy claim for
a Part D drug under paragraph (c)(6)(i) or deny a request for
reimbursement under paragraph (c)(6)(ii) unless the sponsor has
provided the provisional coverage of the drug and written notice to the
beneficiary required by paragraph (c)(6)(iv)(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), a Part D sponsor or its PBM must do the following:

--Provide the beneficiary with the following, subject to all other Part
D rules and plan coverage requirements:
--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.
--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.
--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).

In new Sec. 423.120(c)(6)(v), we proposed 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 proposed 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 will 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.
We also stated in the proposed rule the following:
We proposed 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.
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 also solicited comment on the following:
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 that are not prescribing to Part D
beneficiaries. We anticipated that this could create delays in our
ability to screen providers due to data lags and may introduce some
program integrity risks. We were 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.
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.
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.
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.
(c) Appeals
In our revisions to Sec. 423.120(c)(6), we proposed to permit
prescribers who are on the preclusion list to appeal their inclusion on
this list in accordance with 42 CFR part 498. We believed that given
the aforementioned pharmacy claim rejections that would be associated
with a prescriber's appearance on the preclusion list, due process
warranted 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

[[Page 16643]]

appeals of payment denials or enrollment revocations, for there are
separate appeals processes for these actions. In addition, we would
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 was
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 proposed to update several other regulatory
provisions regarding appeals:
We proposed 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 proposed to add a new paragraph (n)
that would state as follows:
++ In paragraph (n)(1), we proposed 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 proposed 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 proposed 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.
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.
We also solicited comment on whether a different appeals process is
warranted and, if so, what its components should be.
b. Part C/Medicare Advantage Cost Plan and PACE Provisions
(1) Background
(a) 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, foremost of which was the
addition of new Sec. 422.222 to require providers and suppliers that
furnish health care items or services to 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 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. Other provisions were also
added or revised to reflect the requirements in Sec. 422.222.
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 they would, as
with the previously mentioned Part D requirement, 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) required 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 will 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.
(b) 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, as of April 2017, roughly 120,000 MA-
only providers and suppliers remain unenrolled in Medicare. This is
approximately 11% of all MA providers and suppliers. While there may be
overlap between the Part C and D provider and prescriber populations,
it is minor at approximately 25,000 providers. 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 recognized and shared these concerns. We believed that the
Medicare enrollment requirement could result in a duplication of effort
and, consequently, impose a burden on MA providers and suppliers. While
we maintained 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 proposed in the November 28, 2017,
to utilize the same ``preclusion list'' concept in MA that we are
proposing for Part D and to eliminate the current enrollment

[[Page 16644]]

requirement in Sec. 422.222. We believe this approach will 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.
To this end, we proposed the following provisions, which included
those permitting provider and beneficiary appeals similar those we
previously mentioned for Part D.
(2) Specific Regulatory Changes
Given the foregoing discussion, we proposed the following
regulatory changes. We note that many of the revisions below merely
involved changing references to ``enrollment'' to ``preclusion list''
to reflect the proposed replacement of the former requirement with the
latter. We also proposed the deletion of several sections that we
believed were no longer needed because of our proposed preclusion list
policy.
In Sec. 417.478, we proposed to revise paragraph (e) as
follows:
++ In new paragraph (e)(1), we proposed 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 proposed 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 proposed 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 proposed to add a definition of
``preclusion list'' that reads as follows:
++ Preclusion list means a CMS compiled list of individuals and
entities that:
++ Meet all of the following requirements:
++ The individual or entity is currently revoked from Medicare
under Sec. 424.535.
++ The individual or entity is currently under a reenrollment bar
under Sec. 424.535(c).
++ 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 will
consider the following factors: (1) The seriousness of the conduct
underlying the individual's or entity's revocation; (2) the degree to
which the individual's or entity's conduct could affect the integrity
of the Medicare program; (3) any other evidence that CMS deems relevant
to its determination; or
++ Meet both of the following requirements:
++ 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.
++ 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: (1) The seriousness of the conduct
involved; (2) the degree to which the individual's or entity's conduct
could affect the integrity of the Medicare program; and (3) any other
evidence that CMS deems relevant to its determination.
We proposed to delete Sec. 422.204(b)(5).
We proposed to establish a new Sec. 422.204(c) that will
require MA organizations to follow a documented process that ensures
compliance with the preclusion list provisions in Sec. 422.222.
We proposed to delete the existing version of Sec.
422.222(a) and replace it with the following:
++ In Sec. 422.222, we proposed to change the title thereof to
``Preclusion list''.
++ In paragraph (a)(1), we proposed 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 proposed to replace the existing
language therein with a provision stating that CMS will send written
notice to the individual or entity via letter of their inclusion on the
preclusion list. The notice will contain the reason for the inclusion
and will 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 proposed to state that an MA organization
that does 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 proposed 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 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 included on
the preclusion list, defined in Sec. 422.2''.
++ Revise paragraph (b) to state that 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 Sec. 422.501(c), we proposed to do the following:
++ 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 Sec. 422.504, we proposed to do the following:
++ 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 proposed 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 proposed to revise paragraph (a)(13)
to read: ``Fails to comply with Sec. Sec. 422.222 and 422.224,

[[Page 16645]]

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 proposed 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 proposed 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 proposed to delete Sec. 460.68(a)(4).
We proposed to delete Sec. 460.70(b)(1)(iv).
We proposed to delete Sec. 460.71(b)(7).
In Sec. 460.86, we proposed to revise paragraphs (a) and
(b) to state as follows:
++ Paragraph (a) would specify 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 OIG or is included on the preclusion list, defined in
Sec. 422.2.
++ Paragraph (b) will specify that if a PACE organization receives
a request for payment by, or on behalf of, an individual or entity
excluded by the OIG or on the preclusion list, the organization must
notify the enrollee that is included on the preclusion list in writing,
that payments will not be made. Payment may not be made to, or on
behalf of, an individual or entity excluded by the OIG or is included
on the preclusion list.
++ We also proposed 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 proposed 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 proposed to add a new paragraph (n)
that would state as follows:
++ In paragraph (n)(1), we proposed 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 proposed 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 would be entitled
to a hearing before an ALJ.
++ In paragraph (n)(3), we proposed 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.
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 believed the
beneficiary should be permitted to appeal alleged errors in applying
the preclusion list. We solicited 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.
We proposed 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. 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
also proposed 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.
We also proposed that both basic and supplemental benefits
should be subject to the payment prohibition that is tied to the
preclusion list. We believed that restricting the payment prohibition
to only one of these two categories will undercut the effectiveness of
our preclusion list proposal.
We noted 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 included all affected
individuals and entities. Having one joint list, we believed, will make
the preclusion list process easier to administer.
We also solicited comment on the following matters:
An alternative by which CMS would first identify through
encounter data those providers or suppliers furnishing services or
items to Medicare beneficiaries.
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.
c. Comments Received
We received 74 comments and our responses follows. We note that
many comments concerning the overall preclusion list did not clearly
distinguish between the Part D and MA provisions of the proposed rule.
We are therefore grouping these comments together without delineating
between the two programs. Comments concerning other topics, however,
such as provisional supply and appeals, are clearly denoted as such.
(1) General Comments Concerning the Preclusion List Concept
Comment: A number of commenters expressed support for our
preclusion list proposal. Some commenters stated that the proposal will
accomplish CMS' objective of ensuring that only qualified providers and
suppliers provide services to Medicare beneficiaries, but in a
significantly less burdensome way. Other commenters stated that basing
prescription coverage on Medicare enrollment added duplicative and
burdensome requirements on physicians and providers, leading to more
waste and cost.
Response: We appreciate the commenters' support.
Comment: A number of commenters opposed our proposed preclusion
list requirement. A commenter stated that while the proposed rule
described the preclusion list as an effort to reduce the

[[Page 16646]]

burden on providers, the commenter believed it would actually be more
inefficient to maintain two systems--specifically, the preclusion list
and the traditional Medicare enrollment system--than to simply require
all providers that seek to serve Medicare beneficiaries to enroll in
traditional Medicare. The commenter believed this would be particularly
onerous on CMS and providers given that nearly half of providers who
serve MA enrollees are already enrolled in traditional Medicare. The
commenter, as well as others, urged CMS to retain the current
enrollment requirement, believing it to be, as stated in the proposed
rule, 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. Commenters added that
Medicare enrollment remains the most effective way to protect all
Medicare beneficiaries.
Response: We recognize the commenters' concerns about the removal
of the Part D and MA enrollment requirements and whether CMS would,
consequently, remain able to confirm a prescriber's or provider's
compliance with Medicare requirements. However, we respectfully decline
to adopt the commenters' recommendation that we retain these enrollment
requirements. We continue to believe that the most effective means of
reducing the burden of the Part D and MA enrollment requirement on
prescribers and providers 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,
and preventing MA payment for items and services furnished by providers
and suppliers who pose an elevated risk to Medicare beneficiaries and
the Trust Funds. Such an approach enables CMS to focus on prescribers
and providers who pose threats to the Medicare program and its
beneficiaries, while minimizing the burden on those who do not. We
believe the criteria warranting a prescriber's or provider's addition
to the preclusion list are sufficiently comprehensive such that this
approach will effectively protect Medicare from making payments
associated with Part D drugs prescribed by, or MA services provided by,
problematic parties and prohibit such problematic parties from
directing the care of program beneficiaries.
While enrolling such prescribers and providers gives Medicare a
greater degree of scrutiny in determining a prescriber's or provider's
qualifications, we note that the perceived burden associated with this
process could cause some prescribers and providers not to enroll in
Medicare, thus possibly leading to access to care issues. For instance,
according to a CMS analysis of prescriber enrollment trends, as of
January 2017 there are close to 340,000 active Part D prescribers based
on 2016 PDE data who are not enrolled in or opted-out of Medicare. The
number of prescribers who are unenrolled constitutes an estimated 25
percent of all identified Medicare prescribers nationwide in 2016.
Further data suggests that an additional 18,000 new non-enrolled
prescribers are identified each month. This amount of incoming
prescribers, coupled with the 120,000 unenrolled MA providers
referenced above, creates operational challenges that have led to
delays in CMS' implementation of such an enrollment requirement.
Also, we are unclear as to what the commenter means by provider
burden. There is no provider burden associated with the preclusion
list, except to the extent that we place a prescriber or provider on
the preclusion list and the provider wishes to challenge that
designation.
Comment: A commenter noted that, according to a Government
Accountability Office (GAO) study published in 2015, CMS currently
furnishes insufficient oversight of MA provider networks. The commenter
stated that there is no mechanism in place to assess the accuracy of
the information submitted by or about MA plans to CMS and that CMS does
not require MA plans to routinely submit updated network information
for review. The commenter stated that FFS provider enrollment may
provide a mechanism to assist CMS with ensuring the important
beneficiary protection of network adequacy.
Response: We appreciate the commenter's feedback. We clarify,
however, that the MA program does have network adequacy requirements to
ensure that network based MA plans have adequate providers under
contract to furnish Part A and B services. Detailed information on the
MA network adequacy requirements can be found in the health service
delivery reference file located at the bottom of the CMS web page at
the web link below: https://www.cms.gov/Medicare/Medicare-dvantage/MedicareAdvantageApps/index.html. We do not believe it would be
appropriate to add an enrollment requirement for network providers
merely for CMS to oversee the accuracy of network directories or to
monitor network adequacy. CMS has developed other systems for those
purposes.
Comment: A commenter stated that based on CMS's estimates,
approximately 10 percent of MA providers would be negatively impacted
by a requirement to be enrolled in FFS Medicare. The commenter
contended that CMS in the proposed rule did not (1) disclose in the
proposed rule if losing 10 percent of providers would cause an access
issue for Medicare beneficiaries, or (2) include additional rationale
and justification for eliminating the requirement for enrollment.
Without such additional justification, the commenter stated, it would
be inappropriate to remove the enrollment requirement at this time.
Response: We appreciate the commenter's feedback on the
clarification needed in the final rule. With an estimated 1,053,000
providers currently furnishing services and items to beneficiaries
through MA plans, we currently estimate that at least 120,000 remain
unenrolled in Medicare. While this may not seem significant on a
national scale, it could negatively impact areas where the current
provider-to-beneficiary ratio is disproportionate, especially noting
the results of CMS' Part D enrollment efforts, as mentioned earlier. We
would expect similar results if we were to undertake efforts to enroll
Part C providers and suppliers. Considering the number of prescribers
and providers that have not yet enrolled across both Part C and D and
our concerns regarding the potential for access to care issues, we
disagree with the commenter's suggestion that we continue the
enrollment requirement and we decline to adopt changes to the proposal
based on this feedback.
Comment: A commenter stated that requiring providers to enroll in
Medicare in order to serve MA plan enrollees ensures that all Medicare
beneficiaries are served by providers that satisfy CMS's rigorous
criteria. The commenter stated that removing the requirement that
providers enroll in traditional Medicare in order to serve MA plan
enrollees would eliminate a strong incentive for providers that serve
MA enrollees to indeed enroll in traditional Medicare. The commenter
believed that enrolling in traditional Medicare is an effective tool
for protecting Medicare beneficiaries and saw no reason for CMS to
abandon it. If, the commenter added, CMS decides to finalize the
preclusion list requirement, the commenter urged that CMS make clear
that any provider that is currently enrolled in traditional Medicare
could not be placed on the

[[Page 16647]]

preclusion list. This guarantee, the commenter explained, would not
apply to any providers that are revoked from Medicare or under a
reenrollment bar; rather, it would simply establish that participation
in traditional Medicare is sufficient for a provider to serve MA plan
enrollees.
Response: While we appreciate the commenter's concern, we reiterate
our view that the criteria warranting a prescriber's or provider's
addition to the preclusion list are comprehensive enough that this
approach will provide sufficient program safeguards.
Prescribers and providers currently enrolled in Medicare (and,
therefore, not revoked) cannot also be included on the preclusion list
because they would not meet the applicable criteria under,
respectively, Sec. Sec. 423.100 and 422.2.
Comment: Several commenters stated that the preclusion list would
not protect beneficiaries to the extent that the current enrollment
requirement would. The commenters explained that the enrollment
process, through investigating applicants and preventing problems
before they occur, ensures that Part D drugs are prescribed only by
qualified prescribers. With the preclusion list, however, CMS would be
relying on a retroactive approach such that it is only after a
prescriber has already engaged in inappropriate activities that he or
she would be put on the preclusion list. Reactive provisions such as
the preclusion list, the commenters contended, must by their very
nature lag behind proactive provisions such as enrollment requirements.
The preclusion list proposal, therefore, may put beneficiaries at risk
for inappropriate prescribing practices from physicians and eligible
professionals who would not have successfully completed the enrollment
process. Another commenter expressed serious concerns about
implementing the preclusion list proposal in lieu of the current
enrollment requirement. The commenter believed that the careful
screening involved with the enrollment process is the best means of:
(1) Ensuring that providers and suppliers are qualified to furnish
services and are fully compliant with Medicare rules; and (2)
preventing fraud, waste, and abuse.
Response: We appreciate the commenters' concerns. While enrollment
may provide more robust data we believe the preclusion list approach
provides sufficient program safeguards to balance program integrity
initiatives, provider burden, and our concerns regarding a potential
access to care issue. Specifically, we will not limit our review or
screening to only those prescribers present on PDE data but will also
include those who potentially could prescribe based on other data in
our internal systems. Therefore, we are not restricting our ability to
preclude only those parties that are currently furnishing items and
services for program beneficiaries. Under Sec. 423.120(c)(6), for
instance, we will have the ability to preclude any prescriber, even
prior to the prescriber showing up on PDE data, who meets the criteria
for being placed on the preclusion list.
Comment: A commenter stated that, according to the proposed rule,
approximately 65 percent of those who were required to enroll or opt-
out under the May 23, 2014 final rule have done so. The commenter
believed that this is an impressive figure and that, rather than
eliminating the enrollment requirement altogether and relying on the
complaints of those prescribers who found the process burdensome, CMS
should proceed with the enrollment requirements and provide additional
outreach regarding the enrollment process.
Response: We appreciate the commenter's recommendation. As
mentioned previously, however, and even after CMS undertook vigorous
outreach activities after the May 23, 2014 final rule regarding the
need to enroll, approximately 340,000 active Part D prescribers have
neither enrolled in nor opted-out of Medicare. The loss of 340,000
prescribers could potentially prove troublesome in areas where the
prescriber population is already low and access to care is a serious
concern. More specifically, even with a provisional fill option
approximately 2.5 million Part D beneficiaries (based on analysis
performed on 2015 and 2016 PDE data) could lose access to needed
prescriptions if full enforcement of the enrollment requirement were to
take effect on the scheduled date. Based on these figures, and our
concerns for potential access issues we believe the preclusion approach
would be more appropriate. We note again that an additional 18,000 new
prescribers are identified each month. These incoming prescribers,
coupled with the previously mentioned 340,000 unenrolled prescribers
and 120,000 unenrolled MA providers, creates a significant workload.
Comment: A commenter stated that in proposing to eliminate the
enrollment requirement, CMS failed to consider or address continuity of
and access to care issues. The commenter stated that the choice of
Medicare options has serious consequences for access to services and
physicians, and it is important that the impact on beneficiaries be
considered. Not requiring MA providers to be enrolled in Medicare is
particularly problematic for MA enrolled beneficiaries who are patients
of a provider not enrolled in Medicare and who disenroll from the MA
plan and elect traditional Medicare. Those beneficiaries, the commenter
stated, would no longer be able to receive services from their regular
physician and have them billed to fee-for-service Medicare. Another
commenter, too, stated that not requiring MA providers to enroll in
Medicare can create problems for beneficiaries who disenroll from a MA
plan and elect traditional FFS Medicare.
Response: We appreciate the commenter's feedback. In regard to
beneficiaries leaving the MA program and defaulting to traditional
Medicare, we are not aware of this as a significant issue nor was it a
part of our rationale for the enrollment requirement. MA enrollees in
particular are aware of the need to assess whether their health care
providers are in a network of available providers when selecting among
Medicare coverage options and therefore we expect them to able to ask
the necessary questions of a treating provider when contemplating
whether to switch to original FFS Medicare for coverage. In addition,
we have already expressed our concerns regarding the number of
unenrolled prescribers and providers and the access to care issues that
could result if the Part D and MA enrollment requirements remain. We do
not agree with the commenters that this issue arises with the frequency
or scope to outweigh the policies we have articulated for our proposal
and decision in this final rule about the enrollment requirement and
preclusion list.
Comment: Several commenters stated that while CMS gave adequate
justification for why all applicable Part D prescribers and MA
providers and suppliers should be enrolled in Medicare, CMS failed in
the proposed rule to explain why earlier justifications are now wrong;
specifically, that enrollment: (1) Ensures that Medicare enrollees
receive items or services from providers and suppliers that are fully
compliant with the requirements for Medicare enrollment; (2) assists in
efforts to prevent fraud, waste, and abuse and to protect Medicare
enrollees by allowing CMS to carefully screen all providers and
suppliers to confirm that they were qualified to furnish Medicare items
and services; (3) in addition to the existing MA credentialing
requirements, permits ``a closer review'' of MA

[[Page 16648]]

providers and suppliers; and (4) is necessary due to the fact that CMS
has access to information and data not available to MA organizations.
Commenters also requested that CMS articulate meaningful arguments in
favor of overturning the current enrollment policies.
Response: The agency is updating its policy to reflect its
experiences meeting the requirement of the aforementioned final rules,
updated data analysis, and continued stakeholder engagement. CMS has
worked diligently to enroll providers and suppliers in order to meet
the requirements of the May 23, 2014 and November 15, 2016 final rules.
As mentioned previously, enrollment can permit a greater degree of
scrutiny in determining a prescriber or provider's qualifications.
However, we are concerned that the perceived burden associated with
enrollment may cause some providers to not enroll for purposes of
furnishing items and services under Part C or to prescribe Part D
drugs, which could potentially lead to access to care issues. Indeed,
the significant number of prescribers and providers that remain
unenrolled bear this out. Such a serious loss of prescribers and
providers, should the enrollment requirements be enforced, could
potentially impact patient care, especially for beneficiaries located
in areas already experiencing access to care issues. Also, we reiterate
our belief that the criteria warranting a prescriber's or provider's
addition to the preclusion list are comprehensive enough to prohibit
problematic prescribers and providers from receiving program dollars or
directing the care of Medicare beneficiaries. In short, given the data
analysis CMS has conducted regarding the number of prescribers and
providers that remain unenrolled even after a vigorous outreach
campaign, coupled with potential access to care concerns, we believe
the preclusion list approach is a sufficient alternative to screening
prescribers and providers given the concerns regarding a lack of
providers enrolling to meet the enrollment requirement.
Comment: Noting our concerns in the proposed rule about the
potential burden of the enrollment process, a commenter stated that
elimination of the enrollment requirement will merely transfer, rather
than eliminate, this burden. The commenter explained that removing the
enrollment requirement will deny MAOs a valuable and reliable data
source when considering provider credentialing and network
participation, meaning that MAOs may need to invest additional
resources in developing fraud, waste, and abuse (FWA) investigations.
The loss of prospective MA plan review of providers will only make the
nature of credentialing and FWA programs even more cumbersome, and will
create new incentives for plans to fill the oversight void left by the
loss of MA program enrollment. As a result, the commenter stated, the
MA program is likely to see little or no reduction in total
administrative burden; to the contrary, a diversity of efforts among
plans seeking to compensate for the loss of enrollment data may make
program participation more burdensome for providers, who could be
subject to new and unique review or verification requirements by plans.
The commenter (1) concluded that the risks associated with elimination
of current enrollment requirements outweigh any modest reduction to
provider burden that may result and (2) urged CMS to retain the
enrollment requirement.
Response: We appreciate the commenter's feedback. However, we do
not believe the preclusion list approach will require the plans to
invest more heavily in developing resources to combat fraud, waste, and
abuse, as the plans would continue utilizing their current resources
and processes for credentialing network providers and fighting fraud,
waste and abuse. We note that the MA and Part D programs have
compliance and fraud, waste and abuse monitoring requirements that
exist separate from the preclusion list (and provider enrollment)
policy; those requirements are not being increased under this final
rule. Nor does this final rule increase the burdens on MA plans related
to provider credentialing. If the requirement to enroll were to remain,
Medicare health and drug plans would adjudicate claims based on review
of Medicare's enrollment data. Under the preclusion list approach,
plans are completing the same task using preclusion data in place of
enrollment data. The plans are not subject to any more burden than they
would have been under the previous rule. CMS will maintain the
responsibility of reviewing each provider and making the determination
to place them on the list or not. Upon implementation of the preclusion
list, there may be an increase in notification by plans to
beneficiaries regarding the preclusion status of a provider they have
received prescriptions or services from within the past 12-months.
However, we believe this is only minimally more than the burden plans
would have been subject to under the previous rule.
Further, the preclusion list approach will place no burden on
providers or prescribers as they will not need to take any action,
unless they choose to appeal being added to the preclusion list. If any
provider is concerned about burden for themselves or beneficiaries,
they retain the option to enroll, and CMS is continuing to allow plans
to require enrollment if they so choose. As long as the provider's
enrollment is in good standing, he or she will not appear on the
preclusion list.
Comment: A commenter expressed concern that the proposed rule
would, in actuality, result in increased regulation contrary to (1)
Presidential Executive Order 13771 on Reducing Regulation and
Controlling Regulatory Costs and (2) Presidential Executive Order 13777
on Enforcing the Regulatory Reform Agenda. The commenter asked CMS to
reconsider the preclusion list provisions in light of these executive
orders.
Response: We believe that the preclusion list concept complies with
these Executive Orders because it reduces the burden on prescribers,
providers, and plans.
Comment: A commenter stated that CMS did not consider the effect of
its preclusion list proposal on the protection of Qualified Medicare
Beneficiaries (QMBs) from improper billing by in-network providers. The
commenter stated that a provider's enrollment in Medicare gives CMS a
direct path to enforcement against a provider that improperly bills a
QMB. While recognizing that, by regulation, CMS requires plans to
include billing protections in a provider contract, the commenter
stated that this provision does not afford the beneficiary the same
level of protection that is afforded by CMS's ability to enforce the
Medicare provider's contract with the agency.
Response We believe the contract provisions required between the MA
plan and a network provider pursuant to Sec. 422.504(g)(1)(iii) are
binding on providers; such agreements specify that QMBs must not be
charged cost sharing when the state is responsible for paying such
amounts under the Medicaid program. Further, the regulation at Sec.
422.504(g) contains broader beneficiary protection requirements for MA
organizations, including a requirement that the plan must indemnify the
beneficiary from any fees that are the legal obligation of the MA
organization for services furnished by providers that do not contract,
or that have not otherwise entered into an agreement with the MA
organization, to provide services to the organization's enrollees.
Comment: A commenter recommended that CMS not eliminate its
enrollment requirement but instead ascertain and attempt to address any

[[Page 16649]]

problems with the enrollment process. As an illustration, the commenter
suggested that CMS inquire more deeply into the facts behind the
120,000 MA providers that are not enrolled, such as determining whether
non-enrollment is concentrated among particular provider types or
specialties, particular geographic regions, or particular plan
sponsors. If such concentrations exist, the commenter stated, CMS could
consider extending the 2019 deadline and undertaking a more targeted
outreach. Another commenter stated that in eliminating the proactive
enrollment process that best protects beneficiaries and the Medicare
program from fraud and abuse, CMS is proposing to take a step back in
time, rather than a step forward. The commenter urged CMS to keep the
enrollment requirements in place and to step up outreach to those who
could have enrolled but have not.
Response: We appreciate the commenters' recommendations. However,
we disagree that more targeted outreach would further reduce the number
of prescribers and providers not yet enrolled. This is because CMS, as
previously stated, has already completed a vigorous Part D and MA
enrollment campaign (including targeted outreach), yet the number of
unenrolled prescribers and providers remains comparatively high, thus
potentially creating significant access to care issues. Moreover, it
would be inefficient to continue to pursue the enrollment approach
given the current data and results from our Part D outreach efforts.
Comment: A commenter urged CMS to examine whether the enrollment
requirement has any substantial effect on a plan's ability to develop
adequate provider networks. The commenter's experience is that plans
are narrowing their networks as part of delivery strategies and not
because there are not enough providers available. The commenter stated
that the trend toward narrower networks increases the importance of
having participating providers in those networks subject to the
Medicare enrollment process. The commenter envisioned circumstances
where highly specialized providers are needed and few within a
specialty choose to enroll in Medicare, and stated that there may be
other unique circumstances that would merit an exception to the general
rule of Medicare enrollment. The commenter contended that CMS could
develop an authorization process that allows for those special
circumstances and permits plans to bring providers into their networks
so that beneficiaries have adequate access. This narrower approach, the
commenter believed, would be preferable to the preclusion list
proposal.
Response: We disagree with the commenter that the problems and
concerns we articulated about implementation of the provider enrollment
requirements are incorrect. It is our hope that by adopting a
replacement for the provider enrollment requirements, a broader
population of highly specialized providers will be able to provide
services to MA beneficiaries, while prohibiting payment to providers
that would typically be revoked from the program based on our
authorities at Sec. 424.535. We believe the preclusion list approach
broadens the provider population as we are no longer limiting
beneficiaries to providers who would be Medicare enrolled and either in
or out of network, but are limiting the population to only those who
are not precluded.
Further, with 120,000 MA network providers not currently enrolled,
we feel the trend to narrower networks is not so prevalent that such a
high volume could be explained as ``network attrition.''
Comment: A commenter stated that CMS should take into account, in
further consultation with states, how its proposed change from the
enrollment requirement to a preclusion list may impact states given
that: (1) State Medicaid programs use Medicare provider registration
data as part of their respective Medicaid provider database and
registration requirements; (2) various agencies in the states use
Medicare certification of particular provider types as part of their
respective provider licensure and registration requirements (for
example, home health agencies, hospices); (3) states do not
provisionally address provider circumstances of behavior that could
result in revocations (as stated in proposed Sec. 423.100) and how
such circumstances may be addressed differently by provider type; and
(4) provider registration with state Medicaid agencies may be
considered to be sufficient in representing effective and valid
Medicare program registration by proxy, outside of any additional CMS
provider preclusion list development, which also may be coordinated
with the states.
Response: We appreciate this recommendation and note that the
impact on state Medicaid programs was contemplated when we formulated
our preclusion list proposal. Concerning those providers that would no
longer be required to enroll if the proposal is finalized--
specifically, those that are not currently enrolled in Medicare fee-
for-service--we believe that not requiring enrollment will have little
to no impact on state Medicaid programs that require Medicare
enrollment as a prerequisite to Medicaid enrollment because their
reluctance to enroll in Medicare would extend to Medicaid as well based
on our experience. Regarding providers that obtain Medicare
certification, they typically do so in order to provide services in the
Medicare fee for service program; thus, not requiring enrollment will
have minimal impact on those providers that furnish covered services in
states that require Medicare certification in their licensure or
registration process. Finally, reliance on Medicaid registration would
most likely pose a similar issue given that, in CMS' experience,
providers who do not enroll with Medicare are most likely not enrolled
or willing to enroll with Medicaid.
(2) Operational Matters Pertaining to the Preclusion List
Comment: Many commenters expressed concern about the operational
complexities of the preclusion list proposals and the lack of details
thus far given. They urged CMS to provide as many operational details
about how the preclusion list will be tested, accessed, updated,
formatted, downloaded, etc., as early as possible to give all affected
parties sufficient time to implement new processes.
Response: We appreciate the commenter's concern. However, we
believe these details would be best addressed outside of rulemaking,
though we note our view that the preclusion list will be simpler to
operationalize than an enrollment requirement because far fewer service
and prescription claims will be impacted under Parts C and D. The list
will be available via a secure server from which plans will be able to
download the file.
Comment: A commenter stated that it is not clear whether CMS
proposed to create two preclusions lists, one for Part C and one for
Part D. If CMS intends to create two preclusion lists, the commenter
asked CMS (1) how it will reconcile the appearance of a provider on one
list and not the other, and (2) whether one list will take precedence
over the other.
Response: There will be only one preclusion list, which both the
Part D and MA programs will utilize.
Comment: A number of commenters sought clarification on the
relationship between the OIG exclusion list and the CMS preclusion
list. The principal issues raised were as follows: (1)

[[Page 16650]]

Whether all parties on the OIG list would be included on the preclusion
list; (2) coordination between the preclusion list, the OIG list, and
other lists similar to the OIG exclusion list, such as the System for
Award Management (SAM); (3) how plans should address situations where a
prescriber or provider is on one list but not the other; (4) the
hierarchical order of processing when a prescriber or provider appears
on multiple lists (for example, whether the preclusion list or the OIG
list takes precedence if a provider appears on both lists); and (5)
whether the preclusion list criteria will differ from the OIG exclusion
list criteria so as to ensure that prescribers and providers are not
included on both lists.
In addition, several commenters recommended that the preclusion
list be combined with the OIG exclusion list so as to enhance
efficiency and simplicity. A commenter stated that combining the lists
would streamline implementation of the preclusion list requirement by
allowing plans to leverage the current OIG exclusion list process,
while another commenter expressed concern that two different notices
would have to be sent to the beneficiary if the provider appeared on
the preclusion and OIG lists, thus likely causing beneficiary
confusion. Another commenter stated that if a provider were on both the
preclusion list and the OIG exclusion list, this would present
difficulties from a plan sponsor's operational standpoint, for provider
remittances and beneficiary explanations of benefits can only report a
single denial reason; this commenter recommended that CMS consider not
including OIG excluded providers on the CMS preclusion list so that
providers and beneficiaries have a singular reason for claims payment
denial. Another commenter, however, recommended that the preclusion and
OIG exclusion lists remain separate and distinct from one another with
no overlap; if this recommendation cannot be realized, the commenter
suggested that the OIG exclusion list take precedence over the
preclusion list.
Response: As stated in the proposed rule, the preclusion list will
include those prescribers and providers that have engaged in behavior
for which CMS could have revoked the prescriber or provider to the
extent applicable if they had been enrolled in Medicare. A CMS
revocation is based on Sec. 424.535, which includes the authority at
Sec. 424.535(a)(2)(i) to revoke an enrolled party that is excluded or
debarred (per the SAM) from the Medicare program. Therefore, if a
prescriber or provider is placed on the OIG exclusion list or the SAM
list, they will also be placed on the preclusion list. The only
circumstance in which a prescriber or provider would show up on either
one of the above-mentioned lists and not the preclusion list is if a
delay occurs in including that prescriber or provider on the preclusion
list after the party was added to the OIG list or SAM; in that
instance, the plan should process in accordance with existing
procedures.
With respect to the commenter's concerns regarding notices, plans
would only need to send one notice to beneficiaries notifying them of
the prescriber's or provider's exclusion or preclusion.
In determining which list will take precedence for the purpose of
notifying the beneficiary and/or provider/supplier in the event of a
payment denial, we will address this issue in guidance outside of
rulemaking; in this guidance, we will take into account the fact that
the plans do not currently check the SAM list. CMS is unable to combine
both lists as they are implemented under different statutory and
regulatory authorities. Plans will continue to check the OIG list as
they have done in the past as the rule proposed no changes to that
process. A provider or prescriber could be either excluded, precluded,
or both. In any event, the claim must deny according to the procedures
for each list.
Comment: While expressing concerns regarding the operational
challenges of enrolling prescribers that are not ``typical'' Medicare
providers, a commenter expressed even greater concern about the
preclusion list concept. The commenter believed that the preclusion
list would overlap and include additional providers not on the OIG
exclusion or SAM lists, thus creating additional operational and
administrative challenges. The commenter added that most beneficiaries
understand that if a provider or supplier has been excluded from
receiving payment from all federal programs, their services cannot be
covered by Medicare. Explaining to a beneficiary that a case-by-case
determination has been made that his or her provider is not eligible
for Medicare payment, the commenter contended, is very confusing and
more likely to result in a beneficiary not receiving necessary
treatment than to result in the prevention of fraud.
Response: While we appreciate the commenter's concerns, we do not
believe that administering the preclusion list would be any more
difficult than the process currently used in rejecting claims for
services from providers that are on the OIG exclusion list. Further, we
do not believe that payment denials due to a party's inclusion on the
preclusion list will cause confusion among beneficiaries; beneficiaries
are currently aware that excluded provider claims will be denied, and
the preclusion list is a similar concept.
Comment: In raising the question of whether the preclusion list
will be independent of the OIG exclusion list or if the OIG exclusion
list will be incorporated by reference, a commenter also asked CMS to
clarify whether the process for reinstatement and waiver applications
will be identical for the two lists.
Response: As already mentioned: (1) If a prescriber or provider is
placed on the OIG exclusion list, they will also be placed on the
preclusion list; and (2) we will address which list will take
precedence for the purpose of notifying the beneficiary and/or
provider/supplier in the event of a payment denial in guidance outside
of rulemaking. CMS is unable to combine both lists as they are
implemented under different statutory and regulatory authorities.
The preclusion list will not employ a waiver process in contrast to
the OIG list. In the case a provider or supplier that was excluded and
is subsequently reinstated, unless enrolled in Medicare and
concurrently revoked for the exclusion, the provider or supplier would
remain on the preclusion list until the end of the enrollment bar
period or until they enroll with Medicare. Medicare would not be made
aware of the reinstatement until the provider attempted to enroll, at
which point, if successfully enrolled, would be removed from the
preclusion list.
Comment: A commenter urged that CMS include precluded and excluded
prescribers in a single file that is made available to the industry on
a regular basis, rather than maintain a two-file approach.
Response: We appreciate the commenter's recommendation. From an
operational perspective, however, we are unable to combine the two
files, for both are maintained under different regulatory authorities.
We will address which list will take precedence for the purpose of
notifying the beneficiary and/or provider/supplier in the event of a
payment denial in guidance outside of rulemaking.
Comment: A commenter asked whether the proposed preclusion list
would eliminate the requirement to review the regional Medicare opt-out
lists for practitioners.
Response: The preclusion list concept will not alter this
requirement.

[[Page 16651]]

Comment: A commenter asked whether the proposed preclusion list
will include the entire country.
Response: We believe the commenter is seeking clarification as to
the population of prescribers and providers that will be subject to the
screening that would determine if a provider is placed on the
preclusion list. Using CMS' internal data and systems, which includes
but is not limited to, PECOS and National Plan and Provider Enumeration
System (NPPES), we will screen any prescriber or provider that may or
could potentially prescribe Part D drugs or furnish MA services or
items to a Medicare beneficiary, through the fee-for-service program or
a Medicare Advantage plan. The screening process will include providers
and suppliers from the entire country.
Comment: A commenter stated that while the preclusion list could
help CMS combat fraud, waste, and abuse, the Part D preclusion list
appears to only apply to prescribers, not to pharmacists or pharmacies.
The commenter added that some pharmacies have been involved in fraud
schemes and that, in the current opioid epidemic, pharmacies have
occasionally been integral to many schemes where these medications are
prescribed without legitimate medical use. Similar to the MA preclusion
list provisions, the commenter recommended that the Part D preclusion
list provisions apply to both individuals and entities (such as
pharmacies).
Response: We appreciate this recommendation and clarify that this
is our intent. The preclusion list will prevent any individual or
entity that is able to prescribe or provide services under the Medicare
Part C and D programs from prescribing or providing those services,
assuming they meet the criteria for inclusion on the preclusion list.
Comment: A commenter asked whether (1) the preclusion list file
will include termination dates as well as effective reinstatement
dates, and (2) the prescriber will be removed from the file upon
reinstatement.
Response: The preclusion list will be updated once every 30 days.
It is not necessary for the update to include the removal of any
prescriber or provider's NPI whose reenrollment bar has expired, for
the file will contain time periods for which each prescriber provider
is precluded (an expiration date per se), similar to the OIG exclusion
list. The time period for preclusion will be determined by CMS' current
reenrollment bar criteria and will be applied to currently enrolled
revoked providers and those providers who would have been revoked had
they been enrolled in Medicare. Further, prescriptions ordered, or
claims for reimbursement submitted, by a precluded provider will be
denied based upon the effective date indicated in the list.
Comment: With respect to PDE editing, a commenter asked whether CMS
will use the creation date of the preclusion file or whether it will be
based on the active preclusion file when the PDE is processed.
Response: We believe these dates are insignificant given that
claims will be edited based on the time period for which a provider is
precluded as indicated in the preclusion list file.
Comment: A commenter stated that CMS must ensure that the
preclusion list is updated frequently and on a regular basis to
minimize the lag time between when a provider is placed on said list to
the time that information is available to health plans and other
providers; the greater the lag time between preclusion and disclosure,
the greater the potential of unknowingly filling a prescription written
by such a provider. The commenter added that CMS must also ensure the
preclusion list contains the vital information needed to properly
identify a precluded prescriber, such as an NPI and the current
practice address of the provider; the commenter stated that lack of a
current address increases the difficulty in finding a provider on the
preclusion list, especially when a provider has a common name that
yields many search results.
Response: As already mentioned, the preclusion list will be updated
once every 30 days, and prescriptions ordered, or claims for
reimbursement submitted, by a precluded provider will be denied
according to the date specified on the preclusion list. The list will
indicate the period for which the provider is precluded. Additionally,
CMS will include the address data it has available from its internal
data sources. We will also include the prescriber's or provider's NPI,
name, and tax identification number, which will be sufficient to
confirm that a particular prescriber or provider is on the preclusion
list.
Comment: Several commenters sought clarification on how the
preclusion list information would be shared with health plans. A
commenter asked whether the preclusion list will be published on a
public site or a restricted site that only plan sponsors can access.
Another commenter requested that CMS clarify when the file layout and
location of the preclusion list of prescribers will be available.
Response: The preclusion list will be available on a monthly basis
via a secure website. As for making the file publicly available, CMS
does not intend to make this information available to the public except
as required by law. CMS notes that if the file were made public, the
information in it could be used in an inappropriate manner and not for
its intended purpose. Plans will be expected to download the monthly
file, which we intend to make available to the plans by January 1,
2019. We will address further operational details concerning the
preclusion list in sub-regulatory guidance.
Comment: Several commenters asked whether beneficiary notices would
be required if the beneficiary's provider ended up on the preclusion
list shortly after the beneficiary had been assigned or received care
from the provider. If beneficiary notice is required, commenters asked
whether distribution of the notice is the responsibility of the health
plan or CMS.
Response: Notice will be provided to beneficiaries at least 60 days
prior to the prescriber or provider being added to the list. Whether
the notice originates from CMS or plans will be addressed in guidance
outside of rulemaking.
Comment: A commenter asked whether a prescriber will be precluded
immediately after it is included on the preclusion list or if CMS will
permit different dates of preclusion effectiveness on a case-by-case
basis.
Response: As stated in the proposed rule, a prescriber's or
provider's claims will be denied based on the effective date indicated
in the preclusion list file.
Comment: A commenter asked whether the preclusion list can be
integrated into pharmacy software systems to ensure that medications
are not dispensed if the prescriber is on the list.
Response: We believe plans will integrate the list into their
claims adjudication process in order to appropriately adjudicate
pharmacy claims in real-time at the point of sale. We foresee this
process as being similar to how plans currently use the OIG exclusion
list.
Comment: A commenter asked that CMS have specific administrative
procedures in place to ensure that prescriptions dispensed without the
pharmacy knowing a prescriber is on the preclusion list are adjudicated
appropriately.
Response: If a sponsor pays a pharmacy claim involving a
prescription written by a precluded prescriber in error, we would
expect that the sponsor would not recoup the payment from the pharmacy
since the

[[Page 16652]]

pharmacy will not have access to the preclusion list.
Comment: A commenter urged CMS to consider updating the preclusion
list more frequently than monthly. The commenter expressed concern that
only updating the preclusion list monthly could lead to situations
where CMS may be aware that an individual should be removed from the
preclusion list (such as the revocation ends on a day at the beginning
of the month but they will not get off the preclusion list for an
additional month, therefore essentially prolonging the revocation for
longer than permitted by current regulation), but Part D sponsors have
not yet been notified and, as a result, claims will reject and
beneficiaries may not have access to their Part D prescriptions.
Response: While we appreciate the commenter's recommendation, we
note, for the purpose of comparison, that any enrolled provider revoked
from Medicare does not have their billing privileges automatically
restored upon the expiration of their enrollment bar; reinstated
providers are required to submit an application for initial enrollment
and are subject to the enrollment and screening requirements in 42 CFR
part 424, subpart P as if they were initially enrolling. If the
provider was not previously enrolled and does not wish to enroll, the
time period the provider would have to wait for the list to be
updated--30 days or less--is comparable to the time it may take a
previously enrolled but revoked provider to re-enroll. Further, the OIG
exclusion list works in a similar manner and is only updated once every
30 days. If an excluded provider were reinstated on the first of the
month, the provider would have to wait until the updated OIG list is
released. Ultimately, our intent is to operationalize the preclusion
list similar to how the OIG exclusion list is operationalized
currently. We also note the notification to providers that they are on
the preclusion list will communicate the date on which the provider's
reenrollment bar will end and he or she will be eligible to begin
prescribing or furnishing services.
Comment: A commenter recommended that CMS publish the preclusion
list in the same format and record layout as the current OIG exclusion
list and, more specifically, to include the prescriber's NPI number on
the preclusion list file so that the individual prescriber is
accurately identified and appropriately included in the claims
adjudication systems. The commenter also suggested the following: (1)
The file should include the file extension (in other words, .csv); (2)
the file should be placed on a public domain for download capability;
and (3) CMS should maintain a file that tracks the history for those
individuals and entities that are reinstated on the cumulative file,
for this facilitates a more efficient process for updating provider
records and processing claims.
Response: We appreciate this feedback and will take it into
consideration. We will provide a file extension upon making the file
available. As for making the file publicly available, CMS does not
intend to make this information available to the public except as
required by law. CMS notes that if the file were made public, the
information in it could be used in an inappropriate manner and not for
its intended purpose.
Further, we do not believe it will be necessary to create a
historic tracking file as the preclusion list will be cumulative and as
such will contain the time period for which a provider is precluded.
Comment: A commenter recommended that each updated preclusion list
file be effective at least five (5) business days after Part D sponsors
receive it to allow them time to configure their claims adjudication
systems with the most current version.
Response: We appreciate the commenter's feedback and are finalizing
the rule to include a period of at least 30 calendar days with which
the plan will have to intake into their system the most current
preclusion data.
Comment: A commenter asked whether, if a claim for reimbursement is
received several months after the date of service, CMS will require
Part D sponsors to go back and review the preclusion list in effect at
the time of the date of service. Another commenter sought clarification
as to whether CMS will maintain an archive of the preclusion list files
with the dates of enforcement.
Response: We plan to make the preclusion list a cumulative file
that will contain periods for which claims should be denied, meaning
the list will contain start and end dates for preclusion periods.
Accordingly, we believe that referring back to archived files will not
be necessary.
Comment: A commenter supported CMS' recommendation to leverage the
PDE data as the initial data source for precluded provider analysis.
The commenter stated, however, that any changes to the PDE layout to
support these efforts will need to be outlined in technical guidance to
ensure efficient and effective data exchanges.
Response: We appreciate the commenter's support and agree any
changes to PDE layout will need to be outlined in technical guidance
issued outside of this rule.
Comment: A commenter requested that all technical guidance related
to ``other authorized prescribers'' be removed.
Response: We appreciate the commenter's feedback. All provider
types, including those that are not eligible to enroll but who are
eligible to prescribe, will be subject to screening for placement on
the preclusion list.
Comment: A number of commenters sought clarification as to who
notifies the beneficiary that their provider is on the preclusion list.
Response: Plans will be responsible for notifying beneficiaries of
their prescribers being placed on the preclusion list as stated at
Sec. 423.120(c)(6). As for Part C beneficiaries whose provider is
precluded, whether the notice originates from CMS or plans will be
addressed in guidance outside of rulemaking.
Comment: Several commenters asked for clarification on how to
handle situations where a claim for a dual-eligible beneficiary comes
from a prescriber who is on the preclusion list but is not excluded by
Medicaid. Other commenters also requested that CMS explain how claims
for dual-eligible beneficiaries should be handled.
Response: If a Part D drug claim is rejected by the Part D plan
because the prescriber is included on the preclusion list, the drug
cannot be covered by Medicaid and eligible for federal financial
participation (FFP) under Medicaid for dual eligible beneficiaries.
Comment: A commenter stated that with new admissions, long-term
care pharmacies often dispense the medication(s) without entering a
claim in real-time because the relevant information received from the
long-term care facility on the patient is incomplete. Should this occur
with a provider on the preclusion list, a long-term care pharmacy would
either have to spend resources to contest the denial of payment or bear
the cost. To avoid undue costs and to prevent the pharmacy in this
situation from inadvertently filling such prescriptions, the commenter
requested that there be a standard process by which the plans or CMS
inform long-term care pharmacies of providers included on the
preclusion list.
Response: We believe this is best addressed by the contract between
the plan and the pharmacy.
Comment: A commenter recommended that the final rule maintain the
proposed language that payment denials would apply only to health care
items or services furnished

[[Page 16653]]

on or after the date the individual or entity was added to the
preclusion list.
Response: We appreciate the commenter's recommendation and agree.
We are maintaining the language in the proposed rule that payment
denials or claim rejections occur only after the date on which a
provider is placed on the preclusion list and are effective the date
indicated on the preclusion list file. To clarify, the preclusion list
will include the prospective specified time period for which the
provider is precluded.
Comment: With regard to beneficiary notification, a commenter urged
CMS to consider permitting MA plans to follow existing processes,
including, but not limited to, the termination of a contracted MA plan
provider and subsequent notification to the beneficiary. Upon
submission of a claim from an individual or entity that is on the
preclusion list, the commenter explained, the claim would be denied and
the beneficiary would not have any liability for the claim, yet the
beneficiary would receive an explanation of benefits notifying the
beneficiary of the claim denial and reason; if the claim is related to
a contracted provider who was then terminated from a MA plan's network,
the beneficiary would be notified of that status and the reason.
Response: With respect to the process that occurs upon a claim
being submitted for services furnished by a contracting provider, if
the MA plan determines through its periodic review of provider
credentialing that a contracting provider is no longer eligible to
treat Medicare beneficiaries the MA plan will ensure that the provider
does not furnish services for plan enrollees until such time as the
provider is either terminated by the plan or the provider resolves the
reason for being on the preclusion list. If a contracted precluded
provider has treated plan enrollees, the enrollee will only be
responsible for the plan allowed cost sharing and will be notified that
the contracted provider is no longer available.
Comment: A commenter requested that CMS clarify how ``entities''
would be identified on the preclusion list file and whether individual
providers furnishing services under that entity would also be precluded
(for example, if the individual providers under the entity are also
precluded, the affiliated Type 1 NPIs will also be listed on precluded
provider file).
Response: Entities that provide health care services will be
eligible to be placed on the preclusion list. Whether or not the
individuals providing services under the entity depends on if the
individual met the criteria for being placed on the list. Individuals
under precluded entities will not automatically be precluded based on
their association with a precluded entity.
Comment: A commenter stated that, regardless of who furnishes
notice to the beneficiary, CMS will need procedures in place to address
beneficiary questions. If plan sponsors must notify the beneficiary,
the commenter explained, the plan sponsor will have no access to the
reason for the preclusion to be able to answer beneficiary questions.
Response: We appreciate the commenter's feedback and will take into
consideration that the plan will not have the specific reason. However,
we believe this is an operational detail best addressed outside of
rulemaking.
Comment: A commenter stated that CMS should clarify whether the
preclusion list will be shared with state Medicaid programs for
inclusion in the state's Medicaid exclusion list. Another commenter
stated that the preclusion list policies should apply to both the
Medicare and Medicaid benefits where coordination occurs between these
programs under Medicare/Medicaid Plans and Special Needs Plans. Another
commenter expressed concern that the preclusion list will not be
aligned with state lists and that the impact on the beneficiary at the
point of sale will not be aligned between state and federal processes;
the commenter stated that this would be particularly relevant for an
MMP beneficiary. Another commenter recommended that for Medicare-
Medicaid Plans and Special Needs Plans involving situations where the
prescriber is listed on the preclusion list, the beneficiary should not
be eligible for coverage under both plans. The commenter believed that
this would eliminate confusion for beneficiaries who have multiple
prescriptions that could apply to either the Medicare benefit or the
Medicaid benefit. Another commenter asked whether, for dual-eligible or
Medicare-Medicaid Program beneficiaries, the drug can be covered under
Medicaid or whether the final rule applies to both lines of business.
Response: We appreciate the feedback of these commenters. In our
experience, State Medicaid agencies do currently construct their own
exclusion lists based on state-specific criteria. The criteria they use
may or may not be consistent with the criteria used to determine if a
provider should be placed on the preclusion list. At this time, we are
not requiring states to utilize the preclusion as a means of excluding
providers in the Medicaid program but we intend to make the preclusion
list available to State Medicaid programs in the future and are
exploring how best to share this information with states. Also, for
dual eligible beneficiaries, if a Part D drug claim is rejected by the
Part D plan because the prescriber is included on the preclusion list,
the drug cannot be covered by Medicaid and eligible for federal
financial participation (FFP) under Medicaid for dual eligible
beneficiaries.
Comment: A commenter urged CMS to work closely with industry
stakeholders to define the minimum necessary attributes of the
preclusion list file layout.
Response: We appreciate the commenter's suggestion and will take
this into consideration as we work to operationalize these
requirements.
Comment: A commenter asked that CMS confirm that, similar to the
OIG excluded provider guidance, plan sponsors will not return reject
code 569 (``Provide Notice: Medicare Prescription Drug Coverage and
Your Rights'') on claims that reject as a result of a precluded
provider.
Response: We appreciate the commenter's question and will take this
into consideration. However, we believe this is an operational detail
best addressed outside of rulemaking.
Comment: A commenter urged CMS to ensure that the list is available
to prescribers so they are able to confirm their inclusion on the list
independent of notification by a plan sponsor.
Response: Prescribers will be notified in advance of being placed
on the preclusion list as required by Sec. 423.120(c)(6). The
notification would explain that the provider has met the criteria for
preclusion and has the right to appeal that determination within 60
days. Once a provider has exhausted their first level appeal process or
has not submitted an appeal within 60 days, an additional 90-day period
will lapse prior to their addition to the preclusion list. The 90-day
period allows the plans 30-days to intake the preclusion data and a 60-
day beneficiary notification period. Subsequent updates to the list
will provide any newly added provider with a 60-day appeals window but
will not provide a 90-day period as discussed above, thus after
implementation beneficiaries may not be notified that they may have
received a prescription or services from a provider that is now
precluded.
We therefore believe it is unnecessary to provide the list to
prescribers. As for making the file publicly available, CMS does not
intend to make this

[[Page 16654]]

information available to the public except as required by law. CMS
notes that if the file were made public, the information in it could be
used in an inappropriate manner and not for its intended purpose.
Comment: A commenter stated that CMS must notify prescribers when
they are placed on the preclusion list. The commenter did not believe
this administrative function should be the plan sponsors'
responsibility.
Response: We agree with the commenter. As written in the regulation
text at Sec. 423.120(c)(6)(v)(A), ``CMS sends written notice to the
prescriber via letter of his or her inclusion on the preclusion list.''
Comment: A commenter stated that CMS should not duplicate exclusion
efforts already administered via the OIG.
Response: While we appreciate the commenter's feedback, we do not
believe we are duplicating efforts currently undertaken by the OIG. We
note that the preclusion list uses exclusion data from the OIG along
with other provider data to create an alternative to enrollment. As
previously stated, the preclusion list will include prescribers and
providers who have engaged in behavior for which CMS has or could have
revoked the prescriber or provider to the extent applicable if he or
she had been enrolled in Medicare. Further, the intent of the
preclusion list is to be broader than the OIG exclusion list, for it
can include prescribers and providers who may not be excluded but still
pose a threat to the program and/or beneficiaries.
Comment: In response to our solicitation of comments, a commenter
did not recommend any opioid-specific criteria for inclusion on the
preclusion list. The commenter believed that the end result (for
example, suspension/termination of medical and/or DEA license) should
serve as the preclusion criteria.
Response: We appreciate the commenter's feedback. We note that
Medicare has the authority to revoke for improper prescribing practices
(42 CFR 424.535(a)(14)), which includes a pattern or practice that is
abusive or represents a threat to the health and safety of our
beneficiaries. In screening nonenrolled providers, we would apply this
authority in determining their inclusion on the list. Further, CMS has
the ability to revoke providers for suspension or revocation of their
DEA certification or registration, or loss of prescribing authority (42
CFR 424.535(a)(13)).
Comment: A number of commenters stated that monthly updates of the
preclusion list would be inadequate and that the list should be updated
weekly or no less than bi-monthly; a commenter stated that a reasonable
timeframe for incorporating the preclusion list into its claims
adjudication system would be within four (4) business days of the
file's posting This commenter explained that upon removal or resolution
of a provider's preclusion, the industry will need to be able to begin
paying the claims as soon as possible in order to prevent beneficiary
access issues. Even if a new override mechanism for data delays is
created, the commenter continued, most pharmacies will be unwilling to
override the rejection for fear of audit risk and/or payment
recoupment. The commenter expressed concern that claims would be
rejected for up to a month for prescribers whose preclusion statuses
have been resolved. The same situation could happen with newly
precluded prescribers; if an event occurs that warrants the
prescriber's inclusion on the preclusion list, the commenter expressed
concern over the prospect of paying claims for these prescribers for up
to a full month, particularly if the prescriber's behavior places
beneficiaries at risk. Other commenters shared these concerns.
Response: We appreciate the commenter's concerns. We note, however,
that the OIG list is posted every 30 days and plans are able to
integrate that file into their systems in a reasonable amount of time.
The preclusion list will be designed to be integrated in a similar
manner and claims adjudicated in a similar process. We therefore
believe that posting the list once every 30 days is sufficient.
Further, the specific time period for which a provider is precluded
will be identified on the file shared with plans.
Comment: A commenter requested technical guidance for any PDE
changes that will be needed to support the preclusion list process.
Among the specific questions the commenter raised were: (1) Whether CMS
could confirm that plans will no longer need to identify an exception
for ``other authorized prescribers'' on the PDE, and that this field
should be submitted with spaces or blanks; and (2) whether CMS
anticipates any other changes to the PDE file layout and/or processes
related to the preclusion list.
Response: We will issue any necessary PDE guidance outside the
regulatory process. We note that the regulatory text no longer refers
to other authorized prescribers. Such a designation was necessary to
identify which claims should be paid under an enrollment requirement
since other authorized prescribers could not enroll. However, under the
preclusion list requirement, only claims thatmust be rejected need to
be identified.
Comment: A commenter asked CMS to clarify the conduct that would
lead to non-Medicare providers being included on the preclusion list.
Response: As we stated in the proposed rule, the preclusion list
will include those prescribers and providers that have engaged in
behavior for which CMS could have revoked the prescriber or provider to
the extent applicable if he or she had been enrolled in Medicare. CMS
revokes providers based on the authorities located at 42 CFR 424.535.
If it is determined that a prescriber or provider meets the criteria
that would cause them to be revoked if he or she were enrolled in the
program and the underlying cause for revocation is considered to be
detrimental to the program, the prescriber or provider will be placed
on the preclusion list. CMS would not have the authority outside of
those listed at 42 CFR 424.535 to revoke a provider or therefore add
them to the preclusion list.
Comment: A commenter recommended that CMS provide sponsors with
clarifications on the process of creating and maintaining the
preclusion list, followed by an opportunity to submit comments and
feedback.
Response: We appreciate the commenter's question and will take this
into consideration.
Comment: A commenter recommended that CMS require plan sponsors to
treat all precluded provider claims in the same manner regardless of
the drug. If the CMS preclusion warrants a discretionary effective date
based on the preclusion reason, the commenter stated that this should
be managed by CMS.
Response: We appreciate the commenter's recommendation and believe
that it is consistent with our proposal. If a provider is placed on the
preclusion list, any prescription drug claims submitted with the
provider listed as the prescriber must be denied or rejected regardless
of the drug or medication being prescribed.
Comment: A commenter asked whether the range of providers defined
as ``in scope'' for purposes of complying with the preclusion list
requirement will be made clear for purposes of implementing the
adjudication logic. As an illustration, the commenter asked whether
providers (such as pharmacies) under MAOs would be designated as ``in
scope'' for this requirement. If so, the commenter stated, CMS must
provide clear instructions for sponsors to adjudicate claims (or not)
involving situations where a pharmacy on the

[[Page 16655]]

preclusion list is in a position to fill a prescription for a non-
precluded prescriber.
Response: We appreciate this comment and clarify that the
preclusion list will include any prescriber or provider that falls
within the preclusion list definition in, respectively, Sec. Sec.
423.100 and 422.2.
Comment: A commenter urged CMS to define how individuals/entities
would be identified by CMS to add to the preclusion list and how the
list will be created and maintained, followed by a comment opportunity
for the industry to provide feedback.
Response: As already mentioned, the preclusion list will include
those prescribers and providers that have engaged in behavior for which
CMS has or could have revoked the prescriber or provider to the extent
applicable if the prescriber or provider was or had been enrolled in
Medicare. CMS revokes prescribers and providers based on the
authorities located at Sec. 424.535. If it is determined that a
prescriber or provider has met the criteria that would cause the
prescriber or provider to be revoked if they were enrolled with the
program, or is revoked, and the underlying cause for revocation is
considered detrimental to the Medicare program, the prescriber or
provider will be placed on the preclusion list.
Comment: A commenter recommended that CMS clarify how and in what
instances CMS would apply sanctions to a plan that pays an individual/
entity on the preclusion list.
Response: CMS will determine appropriate compliance action on a
case-by-case basis. In doing so, CMS will weigh key factors such as
beneficiary harm, and duration and extent of compliance failure.
Comment: A commenter stated that a pharmacy often needs to send out
medications for nursing home beneficiaries. If the preclusion list is
not made readily available electronically, the commenter sought
clarification as to which party would be responsible for payment of
these medications.
Response: As already mentioned, CMS will make the preclusion list
available every 30 days via a secure server from which plans will be
able to download the most up to date list. If the plan fails to utilize
the most up-to-date version of the list, the plan is at risk of paying
for prescriptions written by precluded prescribers.
Comment: A commenter stated according to chapter 18, section 40.3.1
of CMS' Prescription Drug Benefit Manual and in previous technical
guidance, plans do not have to provide beneficiaries s with the
standardized pharmacy notice (CMS-10147--Medicare Prescription Drug
Coverage and Your Rights) if the reason for the reject is due to a
provider who has been excluded from participation in the Medicare
program. The commenter sought clarification that this policy will also
apply to claims rejected due to a prescriber being on the preclusion
list.
Response: Regarding this particular technical guidance, it applies
only to those prescribers who have been excluded by the OIG. Thus, if a
beneficiary's prescribing provider is both excluded and is on the
preclusion list, CMS will provide guidance on which list should take
precedence in regard to how notification should be made to
beneficiaries.
(3) Miscellaneous Payment Issues
Comment: A number of commenters urged CMS to: (1) Include language
to clearly identify the scope of the payment prohibition to
individuals/entities on the preclusion list; and (2) clarify which
payments to individuals/entities are permissible and which are not (for
example, health care services only; administrative services also).
Response: Payment for covered services or items furnished by a
precluded prescriber or provider is prohibited under this rule, and the
screening process for the preclusion list will apply to any prescriber
or provider and not those conducting administrative services. However,
we note that urgent and emergency services as defined in Sec. 422.113,
are excluded as indicated in the regulatory text at Sec. 460.86(a) for
Part C covered services and Sec. 422.224(a) for Part D covered drugs.
Comment: A commenter noted that proposed Sec. 422.222(a) would
prohibit payment for health care items and services. The commenter
asked whether a person or entity could still be paid for administrative
services furnished to the sponsor. If the person or entity can be paid
for such services, the commenter suggested that this be made clear
throughout the proposed preclusion list provisions, for some provisions
refer to a general prohibition against ``payments'' while others
reference a prohibition against payment for ``health care items and
services.'' In this vein, the commenter also cited Sec. 422.224(a),
which the commenter stated, appears to combine the payment prohibitions
arising from an OIG exclusion with a party's inclusion on the
preclusion list. The commenter found this confusing because a sponsor
is precluded from paying a person who is excluded by the OIG for both
health care services and administrative services, whereas CMS seemingly
intends for the preclusion list prohibition to only apply to health
care items and services. The commenter urged CMS to explain this
distinction in Sec. 422.224.
Response: As mentioned in our previous response, payment for
covered services or items furnished by a precluded prescriber or
provider is prohibited under this rule, and the screening process for
the preclusion list will apply to any prescriber or provider and not
those conducting administrative services. Further, administrative
services may not be reimbursed via the claims process and therefore may
not be subject to payment denials due to preclusion.
Additionally, we note that urgent and emergency services as defined
in Sec. 422.113, are excluded as indicated in the regulatory text at
Sec. 460.86(a) for Part C covered services and Sec. 422.224(a) for
Part D covered drugs.
Comment: A commenter stated that the proposed provision to Sec.
422.224(a) does not appear to exclude emergency or urgently needed
services from the payment prohibition therein. The commenter
recommended that CMS make clearer that such services are indeed
excluded from Sec. 422.224(a)'s purview.
Response: Ultimately, we do not believe that even emergency or
urgent situations would warrant subjecting beneficiaries to care
provided by providers who meet the preclusion list criteria and
therefore, decline to adopt the commenter's recommendation in
finalizing the rule.
Comment: A commenter noted that Sec. 422.224(a) applies the
preclusion list payment prohibition to Medicare enrollees of the MAO/
Medicare cost plan. An MAO or Medicare cost plan, the commenter
explained, commonly offers other product lines besides the MA program
or Medicare cost plan program that will cover Medicare enrollees; an
example is the offering of commercial health plan coverage where an
enrollee is covered under Medicare either as primary or secondary
payer. The commenter stated that the OIG exclusion payment prohibitions
extend to payments for these persons as well and asked whether CMS
intended to extend the preclusion list payment prohibition to non-MA/
cost enrollees of an MAO or a Medicare cost plan.
Response: We do not believe we have the authority to regulate
commercial health plans or other non-Medicare product lines offered by
the MAO.
(4) Application to Other Parties
Comment: Since PACE organizations provide Medicare and Medicaid
covered services, a commenter asked how the

[[Page 16656]]

preclusion list requirement will apply to staff and contractual
individuals and entities that are not eligible to enroll in Medicare
(for example, nurses, recreational therapists, drivers). The commenter
sought clarification that such individuals and entities will not be
vetted for inclusion on the preclusion list and that it will not be
necessary to check these individuals and entities against the
preclusion list. Another commenter interpreted the proposed preclusion
list requirement (as well as the OIG exclusion list) to apply to: (1)
The staff of the PACE organization (whether employed directly by or
under contract with the organization); and (2) entities with which a
PACE organization may contract to furnish care, such as inpatient
hospitals, nursing homes, and post-acute care settings. The commenter
did not, however, believe that the preclusion list proposal required
the PACE organization to verify whether employees or contracted staff
of a hospital or other provider entity with which the PACE organization
contracts are included on the preclusion list. Likewise, the commenter
did not believe the preclusion list policy included staff members of
the PACE interdisciplinary team who are not eligible for Medicare
provider or supplier enrollment, such as nurses, recreational
therapists, and drivers. The commenter urged that CMS clarify these
issues.
Response: PACE would follow the same approach as MA organizations;
that is, PACE would verify that contracted providers that furnish Part
A and B services and items are not on the preclusion list. This would
include those providers that are not otherwise eligible to enroll in
Medicare. To address the specific points raised by the commenter, the
administrative staff of the PACE organization would not be subject to
the preclusion list requirements. Further, to the extent a PACE program
contracts with a precluded provider, the requirements could only be
applied if that entity or provider is visible on the claim. Regarding
application of the preclusion list, we will hold PACE organizations to
the same requirements as MAOs.
Comment: A commenter asked whether CMS expects PACE organizations
to hold contracted entities responsible for confirming that their
staffs (whether employed or contracted) are not on the CMS preclusion
list. The commenter recommended that the preclusion list requirements
not extend beyond those individuals and entities with whom PACE
organizations contract directly unless a similar requirement is
implemented in fee-for-service Medicare such that hospitals, nursing
homes, home health agencies, etc. are required to check their staff
against the preclusion list. The commenter's concern is that by
imposing an additional contractual requirement on PACE organizations,
their ability to secure contracts may be negatively impacted. Also, the
commenter urged that any requirement on PACE organizations for
employees of contracted entities to be vetted against the CMS
preclusion list be delayed until such a requirement for these employees
exists in fee-for-service, at which time such a requirement would be
universal and not applied distinctively by PACE (and MA) organizations.
Response: As mentioned in our previous response, PACE would follow
the same approach as MA organizations; specifically, PACE would verify
that contracted providers that furnish Part A and B services and items
are not on the preclusion list. This would include those providers that
are not otherwise eligible to enroll in Medicare.
Comment: Regarding the requirement to provide notice to PACE
participants if a PACE organization receives a request for payment by
an individual or entity excluded by the OIG or included on the
preclusion list, a commenter asked CMS to consider the differences
between PACE organizations and MA plans in implementing the notice
requirement.
Response: We appreciate the commenter's recommendation and will
take this into consideration as we work to operationalize this
requirement.
(5) Preclusion List Criteria
Comment: Several commenters believed that some of the criteria to
be used to make preclusion list determinations lack objectivity. A
commenter cited the following examples: (1) The seriousness of the
conduct underlying the prescriber's revocation; (2) the degree to which
the [physician's] conduct could affect the integrity of the Part D/MA
program; and (3) any other evidence that CMS deems relevant to its
determination. The commenter stated that such criteria hurts the
program by potentially limiting the pool of available clinicians for
Medicare beneficiaries and puts the professional reputation of the
physician in jeopardy; the commenter stated that once a clinician has
been placed on the list, there will be professional consequences for
him or her. The commenter did not believe that CMS' proposed appeals
process is enough to address this concern. The commenter urged CMS to
remove criteria that are subjective in nature in the final rule.
Response: We appreciate the commenter's suggestion and believe the
appeals process addresses this concern as no provider will be added to
the preclusion list until they have exhausted their first level of CMS
appeal or if they fail to appeal their addition to the list.
Specifically, beneficiaries and Part C and D plans will not be notified
of the provider's preclusion status until after this period in order to
avoid negative consequences for a provider whose preclusion status is
not yet final. In regard to the subjectivity of the preclusion list
standards, we believe it is necessary to maintain this subjectivity
given some providers are revoked for reasons that may not be considered
detrimental to the program. For example, a provider may have failed to
update an expired license.
Ultimately, we believe the preclusion list approach will broaden
the pool of available clinicians as they are no longer restricted by
the requirement that they be enrolled in order to furnish items or
services.
Comment: A commenter expressed concern that the requirements for
putting a prescriber on the preclusion list are too narrow. The
commenter supported a means of including physicians or other
prescribers on the preclusion list who have a history of problematic
opioid prescriptions, or at least to flag such prescriptions if they
would meet the requirements under the Plan Sponsor Drug Management Plan
and do not meet any exemption.
Response: We appreciate the commenter's recommendation and will
take this into consideration in any future regulatory revisions of the
preclusion list provisions. At this time, however, we are unable to
adopt these recommendations in this final rule as such data is not
readily accessible to make such a determination.
Comment: A commenter recommended that Medicare revocation reasons
Sec. 424.535(a)(6), (9), and (10) be excluded as reasons for a
provider to be included on the preclusion list, for these reasons only
apply to those that are enrolled in Medicare.
Response: We agree that the revocation authorities at Sec.
424.535(a)(6), (9), and (10) would not be applicable to prescribers and
providers that are not Medicare enrolled but are evaluated for
inclusion on the list. However, these revocation authorities will apply
to prescribers and providers that are Medicare enrolled and are under
review for inclusion on the list. Logically, we would not be able to
evaluate non-Medicare enrolled providers against this criteria, and do
not believe it is

[[Page 16657]]

necessary to specifically exclude these revocation authorities from the
preclusion list criteria. To illustrate, the revocation authority at
Sec. 424.535(a)(4) is based upon the provider indicating as true
information that is in fact false or misleading on the enrollment
application. The providers who will be precluded may not have enrolled
with Medicare and therefore would not be subject to this revocation
authority. We therefore decline to adopt the commenter's recommendation
in finalizing the rule.
Comment: A commenter recommended that CMS develop prescriber
preclusion list criteria that focuses on beneficiary safety and
mitigates the risks of opioid prescribing.
Response: We believe that by utilizing Medicare's current
revocation authorities as criteria to evaluate a prescriber's inclusion
on the preclusion list, we are, in fact, safeguarding beneficiaries
against overprescribing of opioids. The current revocation reasons at
Sec. 424.535 allow CMS to exclude or remove from the program those
prescribers who may prove to be a detriment to Medicare. The preclusion
list expands CMS' authority by allowing the application of these
revocation authorities to not only Medicare-enrolled prescribers and
providers but also to any prescriber or provider that could potentially
provide care to our beneficiaries, thus further broadening our ability
to keep out problematic providers. We also reiterate that Medicare has
two revocation authorities at Sec. 424.535(a)(13) and (14) that
specifically focus on a prescriber's prescribing practices. The
authority at (a)(14), for instance, gives Medicare the ability to
revoke if a prescriber shows a pattern or practice of abusive
prescribing that CMS determines is a threat to the health and safety of
Medicare beneficiaries. Given this clarification, we respectfully
decline to adopt the commenter's recommendation.
(6) NPI Issues
Comment: Several commenters expressed support for our proposed
changes to Sec. 423.120(c)(5).
Response: We thank the commenters for their support.
Comment: A commenter stated that Sec. 423.120(c) is among the
sections of this rule that are listed as waived for PACE organizations.
The commenter asked whether CMS intended to impose the requirements in
proposed Sec. 423.120(c)(5) and Sec. 423.120(c)(6) on PACE
organizations. If, the commenter asked, the requirements under proposed
Sec. 423.120(c)(5) for an active and valid NPI on all pharmacy claims
apply to PACE organizations, the commenter requested a waiver for PACE
organizations of the requirement in proposed Sec. 423.120(c)(5)(ii)
for Part D sponsors to communicate at point-of-sale if an NPI is active
and valid. The commenter stated that such a waiver would be consistent
with CMS' recognition of differences in how Part D may be implemented
by PACE organizations and the way PACE organizations interact with
their contracted pharmacies to obtain Part D drugs on behalf of their
participants.
Response: Section 423.120(c) is waived for PACE organizations, and
no waiver is necessary. However, to the extent a PACE organization
adjudicates claims electronically or contracts with a pharmacy to fill
prescriptions on their behalf and such pharmacy adjudicates beneficiary
claims electronically on behalf of PACE enrollees, PACE organizations
must comply with the requirements of Sec. 423.120(c).
Comment: A commenter sought confirmation that the NPI is intended
for encounter data submitted to CMS via the Encounter Data System
(EDS), and not the abbreviated format via the Risk Adjustment
Processing System. The commenter also suggested that the proposed
change to Sec. 422.310(d)(5) be revised to state as follows: ``(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 submitted to CMS via the Encounter Data System (EDS), MA Plans
must submit a NPI in a billing provider field on each MA encounter data
record, per CMS guidance.''
Response: The proposed provision at Sec. 422.310(d)(5) does refer
only to encounter data. The record layout for Risk Adjustment
Processing System (RAPS) data has not changed and is not addressed in
this rule-making. Finally, we decline to accept the commenter's
suggested revision to the regulation text, because the name of a system
such as the EDS could change over time, and we believe it is clear that
this provision applies to MA encounter data. Thus, we are finalizing
paragraph (d)(5) as proposed.
Comment: With respect to the requirement for a valid NPI on drug
claims, a commenter stated that the beneficiary should not be held
responsible for the price of the drug in the event of an invalid NPI.
Response: We refer the commenter to Sec. 423.120(c)(5)(iv), which
generally states that a sponsor may not make payment to a beneficiary
dependent upon the sponsor's acquisition of an active and valid
prescriber NPI in the case of a beneficiary request for reimbursement.
Comment: A commenter noted that the MACRA legislation, which
included the valid NPI requirement, was signed into law on April 16,
2015 and became effective January 1, 2016. Accordingly, the commenter
stated that it, alongside other major PBMs, has been enforcing the
active NPI requirement at the point of sale since January 1, 2016. The
commenter thus expressed confusion about the modifications to (c)(5)
and the request for comments, and sought clarification from CMS
regarding the intent of this modified guidance.
Response: The modifications to (c)(5) are to comply with MACRA. In
this regard, CMS previously issued guidance on June 1, 2015 \77\ that
existing procedures to comply with the previous requirement at Sec.
423.120(c)(5)(iii)(B)(2) which stated that a Part D sponsor must pay a
claim even when the pharmacy does not correct the NPI or confirm that
it is active and valid will no longer apply as of January 1, 2016.
Thus, the modifications to (c)(5) are intended to remove this
regulatory language because it does not comply with MACRA. Sponsors in
compliance with the June 1, 2015 guidance should not have to change any
existing claims procedures due to these modifications.
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\77\ https://www.cms.gov/Medicare/Prescription-Drug-Coverage/PrescriptionDrugCovGenIn/Downloads/HPMS-Memo-Prescriber-Enrollment-Enforcement-v06012015.pdf.
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Comment: A commenter expressed support for the proposed amended
requirements for risk adjustment data, but urged that CMS consider two
related issues prior to final rulemaking. First, while standard claims
transactions (which represent the vast majority of claims) include
provider NPI data, a provider that submits a manual, paper claim may
not have an NPI on file with the plan. Plans may engage in efforts to
obtain an NPI, but responses to these efforts from an unaffiliated
provider is not always timely. The commenter recommended that CMS adopt
a limited exception to its proposed NPI requirement where a provider
submits a paper claim and does not have an NPI on file with the
receiving plan. Second, the commenter stated that a number of
providers, including rehabilitation centers and durable medical
equipment (DME) suppliers, are contracted by and bill plans under a
group or ``Type 2'' NPI. The commenter stated that the proposed rule
was not clear regarding whether CMS will accept a Type 2 NPI in
satisfaction of the proposed encounter data standard. For plans that

[[Page 16658]]

currently accept and use Type 2 NPIs, capturing individual NPIs would
likely require changes to both credentialing policies and contracting
standards; the administrative burden of making these changes would be
considerable. The commenter added that while the use of exclusively
Type 1 NPIs could represent a very significant burden for some plans,
the commenter did not believe that use of a Type 2 NPI would provide
any less support for CMS' program integrity efforts than that provided
by a Type 1 NPI. The commenter requested that the final rule provide
allowances for submission of either Type 1 or Type 2 NPIs in risk
adjustment encounter data.
Response: MA organizations and other submitters of MA encounter
data should follow 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), including the TR3 guidance for
use of Type 1 and Type 2 NPIs. Submitters should also follow CMS'
existing guidance regarding NPIs that is specific to encounter data
submissions. For example, CMS released a December 21, 2017 memo
``Encounter Data Record Submissions--NPI Submission Guidance--
Frequently Asked Questions (FAQ),'' released through CMS' Health Plan
Management System (HPMS), which discusses situations under which
default NPIs may be used. As noted in this memo, CMS expects the number
of encounter data records (EDRs) with default NPIs for providers who
would otherwise have an NPI (that is, not atypical providers) to be a
very small percentage of an MAO's total EDR submissions. CMS is
monitoring the level of default NPI use.
Comment: A commenter urged CMS to enforce Section 507 of MACRA as
effectively and efficiently as possible, taking into account the
burdens that may be imposed on plans and providers, as well as on
beneficiary access to needed medications. For example, the commenter
cautioned that the proposed enforcement mechanism could prove
problematic with respect to certain providers in limited contexts--such
as teaching hospitals with residents and interns who may use the NPI of
their attending physician. As such, the commenter encouraged CMS to
provide additional clarity about how the final policy will be
implemented to account for these and similar situations that may arise,
in order to maintain beneficiary access.
Response: Section 507 of MACRA amends section 1860D-4(c) of the
Social Security Act (42 U.S.C. 1395w-104(c)) by requiring that pharmacy
claims for covered Part D drugs include prescriber NPIs beginning
January 1, 2016 that are determined to be valid under procedures
established by the Secretary in consultation with appropriate
stakeholders. MACRA does not address the issue of which NPI a pharmacy
must use on a claim for a prescription written by a resident--only that
is be active and valid. In addition, the modifications to (c)(5) are
technical to make the regulatory text consistent with exiting law and
guidance.
Comment: A commenter urged CMS to consider how to mitigate
potential access challenges created for patients when claims with
invalid NPIs are submitted in error.
Response: As already stated, section 507 of MACRA amends Section
1860D-4(c) of the Social Security Act (42 U.S.C. 1395w-104(c)) by
requiring that pharmacy claims for covered Part D drugs include
prescriber NPIs beginning January 1, 2016 that are determined to be
valid under procedures established by the Secretary in consultation
with appropriate stakeholders. The modifications to (c)(5) are
technical to make the regulatory text consistent with existing law and
guidance.
Comment: With the revisions to Sec. 423.120(c)(5) and based on
section 507 of MACRA, a commenter sought clarification as to whether
the 24-hour follow-up for the plan sponsor to work with the pharmacy to
identify the prescriber NPI and resubmit the claim is no longer
applicable. Another commenter asked whether, in instances when a
pharmacy encounters an issue with a prescriber NPI and the pharmacy
either cannot or does not correct the NPI, plans are still required to
outreach to network pharmacies within 24 hours in an attempt to obtain
a valid NPI.
Response: Such outreach is no longer required. CMS' previous
guidance in this regard was based upon the prior requirement--which the
modifications to Sec. 423.120(c)(5) are removing--for sponsors to pay
pharmacy claims with inactive and invalid NPIs when the pharmacy either
could not or did not correct the prescriber NPI and then obtain the
active and valid ones afterward.
Comment: A commenter urged CMS to make two modifications to Sec.
423.120(c)(5). First, the commenter suggested changes to new Sec.
423.120(c)(5)(ii), which, as proposed, would require the sponsor at the
point of sale to communicate whether a submitted NPI is active and
valid to accommodate for long-term care (LTC) pharmacies where there is
no point of sale. The commenter stated that this provision must contain
a blanket exception for LTC pharmacies prohibiting the PDP or PBM from
denying any claim by an LTC pharmacy. Second, the commenter sought
revisions to new Sec. 423.120(c)(5)(iii)(B), which, as proposed, would
permit a PDP or its PBM to deny reimbursement to a pharmacy that
dispensed a drug prescribed by a physician without an NPI number under
certain conditions; the commenter stated that this provision must
contain a similar blanket exception prohibiting the denial of LTC
pharmacy claims in all circumstances, given other regulatory
requirements mandating that the prescription be filled. The commenter
stated that the aforementioned changes must also be made to the
proposed MA regulations. By making these changes, the commenter
contended, CMS can ensure that LTC pharmacies are able to meet
beneficiary needs as well as comply with other legal requirements
mandating the dispensing of medications to nursing home residents.
Response: Section 507 of MACRA requires that for plan year 2016 and
thereafter, claims for covered Part D drugs must include an active and
valid prescriber NPI. MACRA did not provide an exemption for pharmacy
claims submitted by long-term care pharmacies. Therefore, we decline to
create one in the technical change we are making to 423.120(c)(5) to
comply with MACRA.
(7) Effective Date
Comment: Many commenters expressed concern about the January 1,
2019 effective date of the preclusion list requirement. Aside from the
need for CMS to address all of the operational complexities of the
requirement (for example, regarding file layouts, frequency of updates,
interaction with other lists, types of payments affected) and to issue
appropriate guidance to affected stakeholders, commenters noted several
other reasons for the unworkability of the January 1, 2019 date. First,
and most generally, stakeholders need enough time to adapt to and
implement the new requirements. Second, plans may need to make system
changes, with several commenters noting that some code values specific
to prescriber enrollment will need to be sunsetted and potentially new
values created. Third, plan sponsors will need sufficient opportunity
and guidance to clearly understand, test, and use the new file layout,
including how each field is to be

[[Page 16659]]

interpreted, and how the file may change over a given time period.
Adhering to a January 1, 2019 date, some commenters cautioned, would
lead to beneficiary confusion and delays in getting needed medications.
Various commenters suggested an effective date of no earlier than
January 1, 2020. Others recommended the following effective dates: (1)
12 months after the preclusion list provisions are finalized or
published; (2) at least twelve (12) months after CMS releases its final
guidance, with all of the specifications, to have the preclusion list
fully incorporated into its claims adjudication systems; or (3) a
minimum of 18 months after the publication of necessary technical
guidance and confirmed file layouts. Another commenter urged that the
deadline for full incorporation should be a mid-year date (for example,
July 1), as opposed to January 1. A mid-year deadline would allow Part
D sponsors to focus more exclusively on this important system
modification, while being able to adequately prepare for annual
readiness implementation activities at the beginning of the calendar
year. Another commenter stated that with a January 1, 2019 effective
date, a fully functional production file is not likely to be provided
to plan sponsors in time for full testing across various scenarios,
such as transition periods and coverage reviews, by that date. The
commenter asked whether CMS will acknowledge that flexibility on full
implementation may be necessary.
Response: We appreciate the commenters' concerns and
recommendations. We recognize that operationalizing these changes
across the Part D and MA programs will require effort and resources for
plans and for CMS. However, we believe this approach is similar to how
plans currently utilize the OIG exclusion list and should be
operationalized in the same manner. We therefore believe that a
significant amount of additional work will not be necessary. Although,
the enrollment requirement may have been delayed various times, due to
the decrease in burden under the preclusion list approach, we do not
believe a delay is necessary and that the January 1, 2019 timeline is
sufficient.
Comment: Responding to our solicitation for comment regarding a
reasonable time period for Part D sponsors and PBMs to incorporate the
preclusion list into claims adjudication systems, a commenter suggested
a 180-day period. This would give Part D sponsors and PBMs sufficient
time to prepare their systems and operationalize the changes. The
commenter added that after the initial incorporation, CMS should post
the preclusion list by the 15th of every month and require Part D
sponsors to utilize the list beginning on the first day of the
following month.
Response: We understand the commenter's concerns. As stated in our
previous response, however, we believe that January 1, 2019 is the
appropriate date. Further, we do not believe making the list available
on the 15th of each month allows the plan enough time to properly
ingest preclusion data into their claims adjudication systems.
(8) Provisional Supply
Comment: A number of commenters opposed the provisional supply
requirement and recommended its removal from the final rule for several
reasons.
First, they contended that the preclusion list is akin to the OIG
exclusion list, for which there is no concomitant supply requirement.
They explained that beneficiaries generally understand that
prescriptions written by excluded parties will not be covered. They saw
no reason for a provisional supply requirement for the preclusion list
when there is none for the OIG exclusion list.
Second, they stated that a problematic prescriber, especially one
prescribing opioids or other potentially dangerous drugs, should not be
entitled to payment, nor enable receipt of a medication for such a long
period of time that may negatively impact a beneficiary. Indeed,
several commenters specifically noted that the provisional fill
requirement could harm beneficiaries. A commenter explained that
prescribers on the preclusion list would likely have already been
notified by CMS of that status, potentially several times. In this
scenario, the precluded provider is aware of their status yet will
continue to see Medicare patients and issue prescriptions for them.
This places beneficiaries at risk, especially if the prescription
issued involves controlled substances/opioids or other high-risk drugs.
Third, concerns were expressed about the length of the provisional
supply period, specifically with respect to cost and overutilization;
particular concern was expressed about the burdens on plan sponsors of
operating and administering the provisional fill requirement. A
commenter, stating that the provisional supply requirement is highly
complex, urged CMS to eliminate it. The commenter contended that if the
preclusion list aims to identify problematic prescribers who, through
their prescribing activity, pose a risk to beneficiaries, then CMS can
manage patient access to care based on the post-dated preclusion
effective date that is applied to the file. The commenter stated that:
(1) This approach could address CMS' objective of preventing
problematic prescribers from continuing to prescribe opioids; (2)
supporting a 90-day or any other discretionary period determined by CMS
before adding a prescriber to the preclusion list (post-beneficiary
notification) would eliminate the need to provide provisional coverage
at point of service; and (3) this would also solve the complexities
that plans face in programming systems to track provisional supply and
ensuring the program works in conjunction with other Medicare
requirements, such as the transition fill program.
Fourth, commenters outlined the difference between the original
provisional fill policy, which was designed to minimize potential
disruptions in access to needed drugs while prescribers were enrolling
into Medicare, and the newly proposed requirement, which would apply to
demonstrably problematic prescribers. Noting, again, that provisional
fills are not available for prescriptions written by OIG excluded
prescribers, commenters stated that there is no policy justification
for having provisional fills for prescribers who have engaged in
improper behavior.
We note that a commenter recommended that CMS provide outreach to
the prescriber and the beneficiary prior to including the prescriber on
the preclusion list; specifically, once the appeal period ends and CMS
adds the prescriber to the preclusion list, CMS would then notify the
beneficiary. The prescriber would be added to the precluded list 90
days after the beneficiary notification date. This, the commenter
stated, would help eliminate the complexities of implementing the
provisional supply process, as the 90-day period would be built into
the effective date; CMS could add the end-date based on reenrollment
bar criteria. The commenter added that its recommendation that the
provisional supply requirement be eliminated would streamline point-of-
sale edits and avoid potential overlaps or conflicts with other
programs, such as transition fill. The commenter also contended that
this would deal with the immediate need to address opioid prescribing
risks as well as reduces the likelihood of beneficiary disruption at
point-of-sale.
Response: We appreciate the commenters' concerns and
recommendations. Given the commenter's points, we agree that the
preclusion list will be operationalized

[[Page 16660]]

in the same manner as the OIG exclusion list and allowing a provisional
fill for the preclusion list and not the exclusion list will cause
confusion among beneficiaries. Second, we share the commenter's concern
regarding problematic prescribers and their ability to continue
prescribing controlled substances. Finally, we agree that the
provisional fill requirement is highly complex and would represent
additional burden for plans to implement as evidenced by many of the
comments we received.
Based on the large number of comments we received urging us to
eliminate the provisional fill based on the concerns mentioned earlier
CMS will not finalize the provisional supply requirement at Sec.
423.120(c)(6)(v) and will not finalize the provisional fill as proposed
in the interim final rule expiring in mid-May. Instead, CMS will only
place a prescriber and their applicable preclusion period on the
preclusion list after the prescriber has exhausted the appeals process
(described in more detail below), plus an additional 90-day period,
including a 60-day period for plans to ingest preclusion data and a 30-
day beneficiary notice period.
Comment: A commenter asked whether the preclusion list will be on a
per script basis or whether the plan can preliminarily notify the
beneficiary that all scripts prescribed by a particular doctor on the
preclusion list will be rejected.
Response: Section 423.120(c)(6) requires the beneficiary to be
notified within 3 days of adjudication of a claim written by a
prescriber on the preclusion list. However, because we are not
finalizing the provisional supply requirement, we are modifying the
language to require the sponsors to send an advance notice to any
beneficiary who has received a prescription from a precluded provider
as soon as possible but that the beneficiary must receive such notice
no later than 30 days prior to the initial publication of the
preclusion list.
Comment: Expressing concern that the proposed rule places the
responsibility of managing provisional coverage on the industry, a
commenter requested that CMS consider the numerous risks associated
with the proposed provisional coverage period and support an alternate
approach that allows CMS to manage patient access to care concerns with
the use of post-dated preclusion effective dates. The commenter cited
several risks. First, the commenter stated that unique provisional
coverage rules based on the drug class will create beneficiary and
prescriber confusion, as well as compromise existing claim adjudication
hierarchical rules. Second, the commenter noted industry confusion as
to whether a remaining days' supply would apply to the 90-day
provisional coverage period, where prescriptions could require a
shortened days' supply or the beneficiary could obtain up to 180 days'
supply of a medication. The commenter cited the following scenario: (1)
A prescriber's preclusion effective date is January 1, 2020; (2) the
beneficiary obtains a 90-day supply of medication on January 1, 2020;
(3) a provisional coverage period of January 1, 2020 through April 1,
2020 is set at the beneficiary/prescriber level; and (4) on March 20,
2020, the beneficiary requests a prescription refill for a 90-day
supply. The commenter asked which of the following rules would apply:
(a) The 90-day supply is covered, for the March 20 claim date of
service is within the provisional coverage period; or (b) a 13-day
supply is covered because there are only 13 days remaining (March 20
through April 1) in the provisional coverage period.
Response: We appreciate the commenters' concerns and
recommendations. As already stated, however, we are not finalizing our
proposed provisional fill policy.
Comment: A commenter stated that although provisional fills would
likely reduce such access disruptions for beneficiaries, potential
beneficiary confusion associated with the conflicting messages
(specifically, the message that prescriptions from the precluded
provider cannot be filled in the future, with the exception of this one
time) may only delay the disruption until the beneficiary seeks to
refill the prescription at issue. At this point, the commenter stated,
the disruption may be greater to the beneficiary because the delay in
addressing the invalid prescription at the outset potentially risks
non-adherence to the necessary medication while seeking a non-excluded
prescriber to issue a substitute order.
Response: We understand the commenter's concerns. However, as
already mentioned, we are not finalizing our proposed provisional fill
policy.
Comment: For claims submitted after the provisional coverage
period, a commenter asked whether these claims receive NCPDP Reject
Code 569 (Provide Notice: Medicare Prescription Drug Coverage and Your
Rights) or Reject Code 829 (Pharmacy Must Notify Beneficiary: Claim Not
Covered Due To Failure To Meet Medicare Part D Active, Valid Prescriber
NPI Requirements).
Response: If payment is denied because the prescriber or provider
is on the preclusion list, the beneficiary will not have the right to
appeal. Therefore, it will not be necessary to use the NCPDP Reject
code `569.
Comment: A commenter asked whether the type of fill and prescriber
type need to be included in the PDE.
Response: We will issue any necessary PDE guidance outside of the
regulatory process.
Comment: A number of commenters supported our proposed provisional
supply requirement, believing that it would ensure that beneficiaries
continue to receive needed prescriptions while they find another
prescriber.
Response: While we appreciate the commenters' support, we have
decided not to finalize our proposed provisional supply requirements
for the reasons stated above. We believe a 60-day notification period
for beneficiaries will provide ample time for those impacted
individuals to locate a new provider. Any beneficiary who received
services furnished by a precluded provider within the past 12 months of
the implementation date of the preclusion list will be notified that
they have 30 days to locate a new provider.
Comment: Supporting the provisional supply requirement, a commenter
encouraged CMS to ensure that information on the provisional supply
requirement is provided to beneficiaries in advance to minimize
confusion and disruption. The commenter added that CMS should carefully
align the policies it finalizes with respect to the implementation of
CARA in the context of the proposed prescriber preclusion list; this
should include policies to ensure that enrollees with medical needs for
pain medication will have appropriate access to that medication should
a physician or other prescriber that prescribed pain medications for
that enrollee be placed on the preclusion list. The commenter also
stated that CMS should ensure that the provisional supply requirement
is implemented in an administratively feasible manner, such that it is
easily incorporated into prescription claims systems.
Response: Given that we are not finalizing our proposed provisional
supply requirements, we believe that these comments are moot.
Comment: A commenter stated that in cases where timely access to
needed opioids is medically appropriate, CMS should take steps to
require Part D sponsors to provide timely transfer to a new prescriber
when the first prescriber is on the preclusion list. Such an

[[Page 16661]]

approach will ensure that patients can obtain timely access to pain
management while also allowing for an appropriate assessment for any
substance use disorder and referral to treatment as needed.
Response: We believe that the 60 day notification period (as
mentioned above) will provide ample time for a patient to seek care
from another prescriber.
Comment: Several commenters noted that a provider could appear on
both the Medicare Exclusion Database (MED) (which contains OIG
exclusions) and the proposed preclusion list. This scenario, a
commenter stated, could present operational challenges for plan
sponsors, for while provisional fills do not apply to drugs prescribed
by providers on the MED, they would apply to prescribers on the
preclusion list. The commenter suggested that CMS consider not
including providers on the MED on the CMS preclusion list; this would
eliminate duplication and help ensure that plan sponsors have more
clarity surrounding whether a provisional fill is required.
Response: We recognize the commenters' concerns regarding the
interaction between the MED and the preclusion list and its
relationship to the provisional fill requirement. As already mentioned,
however, we (1) are not finalizing our proposed provisional supply
requirements and (2) will provide plans with guidance on which list
should take precedence, in regard to beneficiary notification, when a
provider appears on both lists.
Comment: A commenter suggested that as an alternative to providing
beneficiaries with a 90-day provisional supply of a drug, CMS could
provide advance notice of a prescriber's placement on a preclusion list
and make it effective 30 days after receipt; this way, Part D sponsors
have time to run a report to identify affected beneficiaries and
provide them with notice that they may obtain only one (1) additional
prescription fill from the precluded prescriber.
Response: We appreciate the commenter's suggestion, and note this
is similar to the process we are finalizing as outlined above.
Comment: A commenter asked whether CMS will use the claim
processing date (as opposed to the date of service) to apply the
provisional coverage rule. The commenter cited a scenario in which a
drug is dispensed to a beneficiary (according to the date of service)
prior to his or her prescriber's inclusion on the preclusion list but
the pharmacy processes the claim after the date of inclusion; the
commenter asked whether the 90-day provisional coverage period would
begin on the date of service or on the date the claim is processed by
the pharmacy. The commenter recommended that CMS use the claim
processing date to apply the provisional coverage requirement.
Response: While we appreciate the commenter's suggestion, we note
that we are not finalizing our proposed provisional fill requirement.
Comment: A commenter understood the provisional coverage policy to
require that once the 90-day period commences, the beneficiary will be
able to: (1) Fill any and all prescriptions from the precluded
prescriber during this period; and (2) take multiple fills during the
90-day provisional coverage period (for example, one 30-day fill, then
another 30-day fill, and then a 90-day fill). The commenter sought
clarification as to whether this is CMS' intention.
Response: Given that we are not finalizing our proposed provisional
supply requirements, we believe that this comment is moot.
Comment: A commenter stated that if CMS is unable to eliminate the
provisional supply requirement, CMS should furnish clarification
regarding several issues. First, the commenter stated that previous
technical guidance provided details around provisional supply being a
lifetime edit; specifically, for medications prescribed by a precluded
prescriber, this guidance clarified that beneficiaries who change
pharmacies during a provisional supply period would still only receive
one provisional supply of medication. Similarly, for beneficiaries who
change plans within the same contract, if the plan sponsor or its PBM
can determine via claims history that the beneficiary has already
received a provisional supply, then the provisional supply requirement
has been satisfied. The commenter asked CMS to confirm that these
details from previous technical guidance still apply for provisional
coverage. Second, if a single claim involves both a provisional supply
and a transition supply, the commenter asked CMS to specify whether
there will be a combination letter for the beneficiary notice. The
commenter recommended that the notification process be kept separate
for the two programs. The provisional supply notice would be less
frequent than a transition letter, for only the initial dispensing
event would trigger a letter advising the beneficiary of the issue with
the prescriber. The transition notification should remain status quo
and address the medication in question and educate the beneficiary
about his/her appeal rights. Third, the proposed rule states that
reasonable efforts must be made by the plan to the prescriber notifying
them of a beneficiary who was sent a notice that the prescriber is
being precluded. The commenter asked CMS to clarify whether this
outreach is necessary given that CMS would have previously reached out
to the prescriber prior to placement on the preclusion list. The
commenter stated that CMS notes its intention to allow the normal Part
D rules to apply for safety edits, prior authorization, quantity
limits, etc., during the provisional coverage period. The commenter:
(1) Contended that all appropriate edits for opioids should also apply
during the provisional coverage period, as these are designed to
prevent serious adverse events; and (2) recommended that all safety and
utilization management edits remain the same during the provisional
fill period, regardless of medication type (that is, opioids versus
non-opioids).
Response: We appreciate the commenter's concerns and
recommendations and reiterate that we have decided not to finalize our
proposed provisional supply requirement. Further, we will provide
beneficiaries with a 30 day advance notice prior to prescriptions being
rejected due to their prescriber being precluded.
Comment: Several commenters stated that if the provisional supply
requirement is retained, plan sponsors will require at least 12 months
for its implementation. A commenter stated that plan sponsors will,
during the 12-month period, need (1) CMS to release the specific
provisional fill requirements, (2) model beneficiary notice letters,
(3) guidance to better understand how provisional fills work when a
prescriber is on both the preclusion and OIG lists, and (4) information
on how provisional fills function in relation to the existing
transitional fill requirements. Another commenter, noting the time and
resources that will be required to make necessary updates required to
sponsors' (and their contracted PBMs') IT systems, procedures, and
operational policies, urged that the implementation date of the
provisional supply requirement be delayed to a date determined to be
feasible after consultation with sponsors and their contracted PBMs.
Another commenter urged that CMS continue dialogue with industry
partners on implementing the provisional fill functionality, including
the establishment of an ``active date'' no sooner than 8 months after a
production file is made available and the functional assumptions around
the file are communicated to the industry.

[[Page 16662]]

Response: While we appreciate the commenters' concerns and
recommendations, we reiterate that we are not finalizing our proposed
provisional supply provisions.
Comment: Regarding the provisional supply requirement, a commenter
stated the following: (1) Placing edits on opioids contradicts CMS'
proposal that the definition of a drug is no longer needed; (2) the
provisional supply provisions as stated lack clarity on the use of a
``preclusion reason'' to be able to identify when a different
provisional coverage period would apply; (3) it is unclear if the
revised provisional coverage period applies across a beneficiary's
lifetime (for example, changing plans, changing pharmacies) as was
outlined in the prescriber enrollment provisional coverage technical
guidance; (4) claims that meet both transitional fill and provisional
coverage criteria will result in the beneficiary receiving two
different notices; and (5) it is unclear how plan sponsors would
coordinate the provisional coverage period and adhere to Sec.
423.120(c)(6)(iii), which would state that a Part D plan sponsor may
not submit a 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 for the date of
service.
Response: We recognize the commenter's concerns and reiterate that
we are not finalizing our proposed provisional supply provisions.
Comment: A commenter expressed concern regarding the provisional
supply language in Sec. 423.120(c)(6) that reads, ``. . . and if
allowed by applicable law.'' The commenter believed that this implies a
requirement to validate state-by-state prescriptive authority at the
point of sale. The previous technical guidance, the commenter stated,
made clear that this was not a point of sale requirement. The commenter
asked that CMS confirm whether or not this is still true.
Response: Given that we are not finalizing our proposed provisional
supply requirements, we believe that this comment is moot.
Comment: A commenter stated that stand-alone prescription drug
plans (PDPs) and PBMs have no contractual relationship with network
prescribers; only an MAPD with a contracted provider network could
manage a requirement to transfer the beneficiary to a new provider upon
preclusion. A commenter suggested that this could be managed through
the provisional fill notification to the beneficiary, whereby the
beneficiary is instructed that coverage will not continue after the 90-
day provisional period ends; also, MAPDs should be instructed to remove
precluded prescribers from their provider network.
Response: While we appreciate the commenter's suggestion, we
reiterate that we are not finalizing our proposed provisional fill
requirement. In addition, and with respect to the removal of precluded
prescribers from an MAPD's network, we decline to make the commenter's
recommendation as removing the provider seems redundant given they are
already precluded.
Comment: A commenter stated that the proposed provisional supply
requirement failed to consider the way LTC pharmacies actually operate,
particularly legal and regulatory requirements unique to LTC
pharmacies. Unlike retail pharmacies that have access to real time
adjudication at the pharmacy counter, LTC pharmacies often must
dispense first, and adjudicate afterwards. The commenter stated that
while the 90-day supply of medications permitted under (current and
proposed) Sec. 423.120(c)(6) is appropriate, the proposed ``three-day
fill'' exception for retail pharmacy is insufficient for an LTC
pharmacy. The commenter stated that CMS must address this issue and
prohibit PDPs/PBMs from denying claims that LTC pharmacies had to
dispense before being able to verify an NPI number or a preclusion list
listing.
Response: With respect to NPIs, Section 507 of MACRA requires that
for plan year 2016 and thereafter, claims for covered Part D drugs must
include a valid prescriber NPI. MACRA did not provide an exemption for
pharmacy claims submitted by long-term care pharmacies. Therefore, we
decline to create one in the technical change we are making to
423.120(c)(5) to comply with MACRA. With respect to the preclusion
list, under the requirements we are finalizing, Part D sponsors are
required to provide impacted beneficiaries with a 60 day advance notice
which would sufficiently alert LTC facilities that there will be an
upcoming issue with coverage for the beneficiaries' prescriptions under
Part D.
(9) Appeals
Comment: Several commenters contended that the administrative
burden on both providers and payers could be reduced by allowing
providers to appeal before being included on the preclusion list. A
commenter suggested that once the initial determination is made, CMS
should immediately send notice of the initial determination and the
reasoning for inclusion. The notice should include a grace period of a
length that CMS deems sufficient to file an appeal. During this grace
period, CMS should not place the provider on the preclusion list. If,
the commenter continued, the provider does not file an appeal by the
end of the grace period, CMS should then add the provider on the
preclusion list. If the provider does file an appeal, the provider
should not be included on the preclusion list until the provider's
appeal is upheld or the provider can no longer exercise the appeal
options, whether due to lack of timely filing or because the appeals
opportunity has been exhausted. The commenter contended that by
forgoing immediate inclusion on the preclusion list when the initial
determination has been made, CMS will reduce potential provider burden
by limiting the number of appeals a provider has to file; as an
illustration, the commenter stated that if the provider was
accidentally included on the preclusion list, the provider would have
sufficient time to correct the issue without suffering from a loss of
revenue due to preclusion list-related denials. The commenter added
that MA plans would also benefit from not having to manually overturn
denials due to the provider's mistaken inclusion on the preclusion
list; such a manual process, the commenter stated, only extends for a
longer time the period between services rendered and reimbursement for
those services.
Another commenter stated that the approach described by the
previous commenter would minimize beneficiary confusion and eliminate
the need for a provisional fill requirement. Another commenter
suggested that claims not be denied until the provider's appeal is
completed and, if the provider loses their appeal, the provider then
would be listed on the preclusion list. Another commenter, noting that
our proposal that the preclusion list would be updated monthly, asked
whether, if a prescriber appeals its inclusion on the preclusion list,
it will require a month for the prescriber to be removed from the list
in the event of a successful appeal.
Response: We appreciate these comments and generally agree with
them. Concerning appealing one's placement on the preclusion list, our
proposal includes the right for providers or prescribers to appeal
their inclusion on the preclusion list in accordance with the appeals
process at 42 CFR part 498 that we had proposed in the November 28,
2017 proposed rule.
Prescribers and providers will only be placed on the list upon
exhausting their first level appeal plus an additional 90-

[[Page 16663]]

day period. The 90-day period allows the plans 30-days to intake the
preclusion data and a 60-day beneficiary notification period (That is,
claims will not begin to be denied until the expiration of this
additional 60-day beneficiary notification period.). Subsequent updates
to the list will provide any newly added provider with a 60-day appeals
window but will not provide a 90-day period as discussed above, thus
after implementation beneficiaries may not be notified that they may
have received a prescription or services from a provider that is now
precluded. We note, however, that the appeals process is intended to
permit a prescriber or provider to challenge CMS' placement of the
prescriber or provider on the list and not to challenge the underlying
reason for the revocation, OIG exclusion, or other adverse action that
led to the preclusion list inclusion. Indeed, the preclusion appeals
process would neither include nor affect appeals of payment denials or
enrollment revocations, for there are separate appeals processes for
these actions. Any appeal under this proposed provision will be limited
strictly to the individual's inclusion on the preclusion list. In
addition, CMS will send written notice to the provider of his or her
inclusion on the preclusion list. The notice would contain the reason
for the inclusion and would inform the providers of his or her appeal
rights. This is to ensure that the prescriber or provider is duly
notified of the action, why it was taken, and their ability to
challenge CMS' determination.
Comment: A commenter asked CMS to clarify how the appeal process
would work and when reinstatements would occur. In the case of
reinstatements, the commenter recommends that reinstatements take place
when the next file is released, rather than mid-term, and that CMS not
allow retroactive reinstatements.
Response: As already mentioned, prescribers and providers will be
afforded appeal rights based on the process at 42 CFR part 498.
Concerning reinstatement, the preclusion list will include periods for
which the prescriber or provider is unable to receive Medicare
reimbursement or submit prescriptions reimbursable by the Medicare
program; if a prescriber or provider is reinstated after further
appeal, the list will be adjusted to remove the prescriber or
provider's period of preclusion and the provider would no longer be
subject to the payment prohibition. The removal would be applied
retroactively. However, a provider or prescriber would need to resubmit
any claims denied as a result of the preclusion.
Comment: A commenter stated that CMS should handle any appeals. The
commenter did not believe this administrative function should be the
responsibility of plan sponsors.
Response: We agree with the commenter. Appeals from precluded
providers due to placement on the list, will be handled by CMS.
Comment: A commenter requested clarification regarding a
beneficiary's appeal rights for alleged errors in applying the
preclusion list. The commenter stated that under existing CMS
regulations, the denial of access to a Part D drug on the basis that
the provider is excluded is not a coverage determination and does not
trigger appeal or grievance rights. The commenter contended it
therefore follows that if a beneficiary does not have access to a Part
D drug because the prescriber is on the preclusion list, it is not a
coverage determination and no appeal or grievance rights are triggered.
Accordingly, the commenter recommended that CMS follow processes
applicable in situations involving an excluded/sanctioned prescriber
and not provide any appeal rights. The commenter also suggested that
any beneficiary complaint about a denial due to an individual or entity
included on the preclusion list be treated via the grievance process,
as there is no beneficiary liability and, as such, nothing for the
beneficiary to appeal. The commenter supported CMS' proposal of a
separate appeals process for parties on the preclusion list should the
latter disagree with CMS' decision to include them on the list. Another
commenter recommended that in order to keep the preclusion list and OIG
exclusion list processes aligned, CMS should not allow beneficiaries to
appeal a prescriber preclusion. The commenter stated that CMS should
either allow or disallow beneficiary appeals in both instances for
consistency and to prevent beneficiary confusion; this is because
beneficiaries, according to the commenter, will not understand the
difference between an exclusion and a preclusion.
Response: We agree with the commenters. We believe that the denial
of access to a Part D drug on the basis that the provider is excluded
by the OIG does not currently grant the beneficiary appeal rights, and
we are finalizing a similar policy to a prescriber or provider being on
the preclusion list.
Comment: A commenter stated that if CMS allows beneficiaries to
appeal a preclusion only, CMS should confirm whether the point of sale
appeal notice (NCPDP Reject Code `569') requirement applies.
Response: If payment is denied because the prescriber or provider
is on the preclusion list, the beneficiary will not have the right to
appeal. Therefore, it will not be necessary to use the NCPDP Reject
code `569.'
Comment: A commenter asked CMS to confirm that, prior to adding a
prescriber to the preclusion list, the appeals timeframe must be
exhausted. If CMS adds the prescriber to the preclusion list while the
appeals timeframe is still in effect, the commenter stated that this
could cause beneficiary disruption due to inappropriate rejects,
especially if the prescriber's appeal is approved. Another commenter
stated that plans will not have any authority over the preclusion list;
therefore, they will not be able to address or resolve the
beneficiary's appeal. The commenter stated that there will need to be a
process in place to address beneficiary appeals, concerns, and
questions about why their prescriber is being added to the preclusion
list; plan sponsors will not have access to the reason for the
preclusion to answer such questions.
Response: As already mentioned, providers will be afforded appeal
rights in accordance with the appeal process at 42 CFR part 498. With
respect to the plans' ability to respond to beneficiary questions
concerning a provider's inclusion on the preclusion, CMS will furnish
guidance on this matter outside of rulemaking.
Comment: A commenter asked CMS to align the appeals process with
the provisional supply period so that an initial appeals determination
would be rendered prior to the end of the provisional supply period.
The commenter believed that this would help reduce patient care
disruption when clinicians are incorrectly placed on the preclusion
list.
Response: As already stated, we are not finalizing our provisional
supply proposal and will place a prescriber or provider on the
preclusion list only after the prescriber or provider has exhausted
their first level of appeal plus an additional 90-day period. The 90-
day period allows the plans 30-days to intake the preclusion data and a
60-day beneficiary notification period. Subsequent updates to the list
will provide any newly added provider with a 60-day appeals window but
will not provide a 90-day period as discussed above, thus after
implementation beneficiaries may not be notified that they may have
received a prescription or services from a provider that is now
precluded.

[[Page 16664]]

Comment: A commenter stated that the proposed rule did not clarify
what happens to a clinician who wins his or her initial redetermination
but CMS challenges the redetermination. The commenter asked whether a
provider is taken off the preclusion list if they are initially
successful in their appeal but CMS challenged the decision.
Response: As mentioned previously, prescribers and providers that
are notified of their meeting the criteria for placement on the
preclusion list will be afforded the formal appeals process at 42 CFR
part 498 that as we proposed in the November 28, 2017 proposed rule.
Prescribers and providers will only be placed on the list upon
exhausting their first level appeal.
Comment: A commenter agreed with CMS' proposal that individuals who
are on the preclusion list should be permitted to appeal their
inclusion on the list. However, the commenter asked CMS to issue
additional operational guidance on the appeals process and, in
particular, to provide additional detail about (1) the communications
process if a prescriber's appeal was successful, and (2) the timeline
for removing the prescriber from the preclusion list. Another commenter
urged that CMS: (1) Clarify for plan sponsors and prescribers that CMS
will handle any appeal requests directly rather than through plans,
given that CMS gathered and acted on the information that placed the
prescriber on the preclusion list; and (2) implement a process for
notifying prescribers of a date after which adjudicators will stop
their prescription claim processing.
Response: As mentioned previously, prescribers and providers that
are notified of their meeting the criteria for placement on the
preclusion list will be afforded the formal appeals process at 42 CFR
part 498 that as we proposed in the November 28, 2017 proposed rule.
Prescribers and providers will only be placed on the list upon
exhausting their first level appeal.
(10) Additional Comments
Comment: A commenter stated that in CMS' implementation of the
preclusion list, the beneficiary should be held harmless (unless the
beneficiary has engaged in some manner of fraud).
Response: We believe the contract provisions required between the
MA plan and a network provider pursuant to Sec. 422.504(g)(1)(iii) are
binding on providers; such agreements specify that QMBs must not be
charged cost sharing when the state is responsible for paying such
amounts under the Medicaid program. Further, the regulation at Sec.
422.504(g) contains broader beneficiary protection requirements for MA
organizations, including a requirement that the plan must indemnify the
beneficiary from any fees that are the legal obligation of the MA
organization for services furnished by providers that do not contract,
or that have not otherwise entered into an agreement with the MA
organization, to provide services to the organization's enrollees
Comment: A commenter stated that if CMS removes the enrollment
requirement, which the commenter opposed, CMS should (1) enact
protections so that a beneficiary who disenrolls from an MA plan can
continue to see a provider who did not enroll in Medicare and that the
provider can be allowed to submit a claim to Medicare on behalf of the
beneficiary, and (2) allow some flexibility for MA coverage of services
of providers that are highly specialized and do not typically accept
Medicare.
Response: We appreciate the commenter's recommendation. In regard
to beneficiaries leaving the MA program and defaulting to traditional
Medicare, we are not aware of this as a significant issue nor was it a
part of our rationale for the enrollment requirement. We also believe
that the preclusion list approach will support the need for highly
specialized providers. No longer needing to enroll, highly specialized
providers can provide services to MA beneficiaries, while the
preclusion list will prohibit those providers that would typically be
revoked from the program based on our authorities at Sec. 424.535 from
servicing MA beneficiaries.
Comment: A commenter stated that the distribution of the preclusion
list should include basic hold harmless and indemnification language in
favor of the MAOs.
Response: Response under development and will be furnished in the
next round of clearance.
Comment: A commenter urged CMS to expand efforts to coordinate and
increase the sharing of information with other federal public programs,
state medical boards, and other entities on potentially problematic
prescribing to help inform the identification of prescribers who should
appear on the preclusion list.
Response: We appreciate the commenter's recommendation and will
consider it as we work to operationalize the preclusion list
requirement.
Commenter: To ensure that MA plans have appropriate processes in
place to screen providers, suppliers, and prescribers against the
preclusion list, a commenter recommended including review as part of
CMS' ongoing audit and monitoring activities, potentially as part of
the Program Audits or the Industry Wide Timeliness Monitoring.
Alternatively, the commenter stated, prescription drug events and/or
risk adjustment data might be used as a means to confirm that plans are
not paying providers and suppliers on the prelusion list.
Response: We agree with the commenter. We will work to build such
review processes into the already existing program audits as we
operationalize this requirement.
Comment: Several commenters asked CMS to confirm that, with the
proposed removal of the enrollment requirement, MAOs will retain the
right to require providers and suppliers offering services to
beneficiaries to be enrolled in Medicare per their contracts.
Response: MAOs can establish enrollment in Medicare as a
contracting condition.
Comment: A commenter stated that the proposed rule did not
specifically mention how CMS will implement the exception for emergency
and urgently needed services furnished by a provider on the preclusion
list. The commenter suggested that CMS create a Healthcare Common
Procedure Coding System (HCPCS) modifier for this exception to allow
for timely, automated processing of claims. The commenter explained
that if a provider on the preclusion list furnishes a service that
meets the definition under Sec. 422.113 for emergency or urgently
needed services, the provider should be required to include the
assigned modifier on a claim; the modifier would alleviate the need for
payers to manually review every claim in case a rare urgently needed or
emergency service exception might apply. The commenter stated that CMS
has this same processing mechanism in place for providers who have
opted-out of Medicare; those providers must submit claims using HCPCS
modifier GJ to signal that an urgently needed or emergency exception
applies, and the commenter contended that CMS should create a separate
and distinct modifier for preclusion list providers. If, the commenter
stated, the scarcity of HCPCS modifiers warrants sufficient merit to
outweigh the creation of a new modifier, the commenter recommended that
CMS edit the GJ modifier so that it is required to be used by providers
on the preclusion list in addition to Medicare opt-out providers.
Response: We are not requiring that MAOs reference the preclusion
list when paying non-contract providers though we believe it would be a
best practice for MAOs to do so. However, if an MAO determines that a
non-contract

[[Page 16665]]

provider is on the preclusion list and not eligible for Medicare
payment the MAO should also not pay that provider consistent with the
requirement that MAOs pay non-contract providers the same as Original
Medicare as required under the MA regulations at Sec. 422.214. MAOs
are required to ensure that their contracted providers are properly
credentialed and not on the preclusion list. When periodically re-
validating credentialed providers the MAO should also re-verify that
their contracted providers are not on the preclusion list.
Comment: A commenter stated that a challenge associated with FFS
provider enrollment for MA-only providers is the CMS policy that would
terminate a provider's enrollment in FFS Medicare if at least one claim
is not submitted within a 12-month period. If a provider has no
intention of treating FFS Medicare beneficiaries, the provider would
have to undertake the administrative burden of re-enrolling with FFS
Medicare on an annual basis. The commenter recommended that CMS address
this issue, specifically suggesting that the CMS-855 enrollment form be
modified to allow a provider to indicate that he or she only intends to
treat MA beneficiaries, thus eliminating the need for the provider to
reenroll.
Response: In finalizing this rule, we will no longer be requiring
enrollment in Medicare FFS in order for providers to participate with
MA plans. Even if we made the commenter's suggested change to the CMS-
855 forms, we still believe that this does not accurately address the
large volume of prescribers and providers that have yet to enroll with
the program. As already mentioned, there are close to 340,000 active
Part D prescribers who are not enrolled in or opted-out of Medicare and
120,000 MA providers that would require outreach and would need to
enroll. We believe the success rate for enrollment of MA providers
would be similar to that experienced with the Part D population. Based
on these figures and our concerns for potential access to care issues,
we again believe that this outweighs the benefits gained from requiring
enrollment.
Comment: A commenter contended that the proposed rule did not
address the exemption from credentialing for ordering and referring
dentists through PECOS, the Part D enrollment portal, or the paper CMS-
855O form. Also, the commenter asked how the proposed rule would affect
the credentialing of ordering and referring dentists who refer oral
biopsies for interpretation to a pathology lab.
Response: The final rule will not apply to the existing enrollment
requirement for ordering and referring providers at 42 CFR 424.507,
which has been enforced since January 6, 2014. Thus, providers who
order or refer would continue to need to enroll for certain ordered or
referred services to be reimbursed.
Comment: Several commenters noted that sections 6405(a) and (b) of
the Affordable Care require physicians and eligible professionals who
(1) order durable medical equipment, prosthetics, orthotics, and
supplies or (2) certify home health services must be enrolled in
Medicare or validly opted-out for the item or service to be covered.
These requirements are currently codified in Sec. 424.507, are in
effect, and are also applicable to physicians and eligible
professionals who order imaging and clinical laboratory services. The
commenters suggested that CMS (1) replace this current enrollment
requirement with a preclusion list requirement akin to that described
in this rule, and (2) work to seek legislative relief from section 6405
of the Affordable Care Act.
Response: We believe that the subject matter addressed by the
commenter pertains to a different regulatory provision (Sec. 424.507)
and is therefore outside the scope of this rule.
Comment: With respect to the current version of Sec.
423.120(c)(5)(v), a commenter stated that the U.S. Drug Enforcement
Administration's 2010 Rule for Electronically Prescribing Controlled
Substances defines identity proofing requirements for DEA Registrants
(providers), which includes in-person identity proofing that involves
checking identity documents such as a driver's license and/passport.
Additionally, providers could be identity-proofed remotely by answering
a series of questions that should be known only to them, typically
based on information contained in one's credit report. This is known as
knowledge-based verification (KBV). The commenter stated that KBV was
not an optimal solution since: (1) Passing the questions is based on a
combination of accuracy and timing; (2) the credit reporting agencies
do not have data on 100 percent of health care providers; and (3) there
have been cyber-attacks across healthcare industries, compromising
personally identifiable data on Americans. Should CMS continue to use
KBV, it should be augmented with other means as part of a risk based
approach.
Response: We appreciate this comment but believe it is outside the
scope of this rule.
Comment: A commenter stated that the Healthcare Information and
Management Systems Society (HIMSS) formed the Identity Management Task
Force that focused on policy and technical challenges relating to
identity, attribute, and role-based access management, as it pertained
to patient identity, provider identity and IT asset identities. The
Task Force published: (1) ``Patient Portal Identity Proofing and
Authentication'' in 2016; and (2) identity proofing and authentication
recommendations for patients accessing their health information
electronically. The commenter stated that while the paper defines best
practices for patients, it leverages existing National Institute of
Standards and Technology (NIST) guidance for identity proofing and
authentication, and many of the cases are applicable to providers; the
commenter recommended that CMS review them. The commenter also noted
that NIST updated its Digital Identity Guidelines in July 2017 (NIST
Special Publication 800-63A, ``Digital Identity Guidelines: Enrollment
and Identity Proofing'') and that CMS should consider them as they
relate to identity proofing providers.
Response: We appreciate this comment but believe it is outside the
scope of this rule.
Comment: Several commenters stated that some dentists who opted out
in order to comply with the Part D enrollment requirements did not
realize that they would consequently be unable to furnish Part C items
and services until after the initial 90-day period for withdrawing his
or her opt-out affidavit had expired. The commenters urged CMS to
permit its MACs to contact each dentist who has opted out and allow him
or her to withdraw his or her affidavit even if the initial 90-day
period has passed.
Response: The November 28, 2017 proposed rule did not propose
changes to current opt-out policy. We note that, as stated in chapter
15 of the Medicare Benefit Policy Manual, if a physician or
practitioner who has not previously opted out changes his or her mind
after the Medicare contractor has approved the affidavit, the opt-out
may be terminated within 90 days of the effective date of the
affidavit. If the physician or practitioner has previously opted out,
the physician or practitioner may cancel his or her opt-out by
submitting a written notice to each Medicare enrollment contractor to
which he or she would file claims absent the opt-out, not later than 30
days before the end of the current 2-year opt-out period, indicating
that the physician or practitioner does not want to extend the
application of the opt-out affidavit for a subsequent 2-year period.

[[Page 16666]]

Comment: A commenter stated that prescribing authority is already
tied to a physician having a DEA number and not an NPI. Since
physicians must already establish a relationship with the federal
government through the DEA in order to prescribe, the commenter
encouraged CMS to explore implementation of these policies though
closer coordination with the DEA.
Response: We appreciate this comment but believe it is outside the
scope of this rule.
Comment: In response to our solicitation of comments concerning
additional solutions for beneficiaries who try to fill an opioid
prescription from a provider on the preclusion list, a commenter stated
that requiring a Part D sponsor to transfer beneficiaries from one
medical provider to another is not feasible; the commenter explained
that Part D sponsors do not have contracts with medical providers. The
commenter also stated that any drug-specific carve out within the
program at this time would add significant complexity in administering
the preclusion list. The commenter thus made two recommendations.
First, CMS should not pursue drug-specific solutions but should allow
the flexibility to make decisions based on the totality of a
prescriber's activity. Second, to the extent that CMS will require Part
D sponsors to transfer beneficiaries to new prescribers, CMS should
provide Part D sponsors with at least a 30-day notice to effectively
assist the beneficiaries in the transition.
Response: We appreciate the commenter's recommendation. We agree
that a notice period is necessary to effectively transition
beneficiaries. Accordingly, and as mentioned previously, we are
specifying that after the prescriber or provider has exhausted their
first level appeal, there will be a 90-day period, during which time
the plan can begin working to transition the beneficiary to a new
prescriber or provider. The 90-day period allows the plans 30-days to
intake the preclusion data and a 60-day beneficiary notification
period. Subsequent updates to the list will provide any newly added
provider with a 60-day appeals window but will not provide a 90-day
period as discussed above, thus after implementation beneficiaries may
not be notified that they may have received a prescription or services
from a provider that is now precluded.
Comment: In response to our solicitation of comments on limits that
should be set with respect to doses for opioid prescriptions, a
commenter stated that CMS should manage the opioid epidemic outside of
these proposed provisions. The commenter stated that creating separate
policies for opioid and non-opioid medications: (1) Is extremely
burdensome; and (2) introduces additional and unnecessary complexities
into a new process when there are already better clinical programs in
place to manage this crisis. The commenter encouraged CMS to issue
uniform regulations regarding provisional fills and to utilize Part D
sponsors' clinical programs to combat the opioid epidemic.
Response: We appreciate the commenter's recommendation and note
that we are not finalizing our proposed provisional supply policy.
Further, the preclusion list approach will apply to prescribers of
prescription drugs, including opioids.
Comment: In response to our request for comment regarding whether
additional beneficiary protections are necessary, a commenter made two
recommendations. First, CMS should consider having notice requirements
to ensure that all beneficiaries receiving care from an individual or
entity placed on the preclusion list will be notified well in advance
so that they can seek care and treatment elsewhere. Second, an
exception should be made for those in the middle of a course of
previously covered treatment so that their care is not interrupted.
Response: As mentioned previously, we have proposed that after the
prescriber or provider has exhausted their first level appeal, there
will be a 90-day period The 90-day period allows the plans 30-days to
intake the preclusion data and a 60-day beneficiary notification
period, during which time we believe the plan will have adequate time
to transition the beneficiary to a new prescriber or provider.
Subsequent updates to the list will provide any newly added provider
with a 60-day appeals window but will not provide a 90-day period as
discussed above, thus after implementation beneficiaries may not be
notified that they may have received a prescription or services from a
provider that is now precluded. Finally, we decline to adopt additional
requirements for beneficiary notice or exceptions to the preclusion
list consequences in this final rule.
Comment: While supportive of the preclusion list concept, a
commenter expressed concern that the preclusion list requirement could
(1) unnecessarily increase complexity in the Part D program, (2) expose
Medicare beneficiaries to problematic prescribers, and (3) perpetuate a
cycle where there is insufficient time to implement complex new
requirements that have substantial operational challenges. To mitigate
some of these issues, the commenter recommended that CMS create and
manage a single prescriber preclusion list that is modeled after the
OIG exclusion list so that the two files can be handled in a similar
manner.
Response: We agree with this recommendation and believe that the
preclusion list concept would align with the OIG list and the process
that Medicare health and drug plans use to handle prescribers and
providers on that list. As already mentioned, we are not finalizing the
90-day provisional supply period. CMS instead will place a prescriber
or provider on the preclusion list after the prescriber or provider has
exhausted their first level appeal plus an additional 90-day period,
including a 60-day period for plans to ingest preclusion data and a 30
day-beneficiary notice period.
Comment: A commenter suggested that CMS adopt the following
operational steps before a precluded provider edit occurs at the point
of sale: (1) CMS conducts analysis and identifies the specific
prescriber; (2) CMS notifies the prescriber of the pending precluded
status and outlines the appeal process; (3) once the appeal period has
concluded, CMS notifies the impacted beneficiaries; and (4) CMS adds
the prescriber to the precluded provider file with a future effective
date of 90 days after beneficiary notification, with CMS to add the
precluded provider end-date based on reenrollment bar criteria. (The
commenter contended that the failure to sufficiently post-date
effective dates may create additional risks where CMS may need to
support point-of-service override processes due to timing delays
associated with monthly file updates.) The commenter believed that
these steps would allow CMS to manage the provisional fill period and
any variances across preclusion types or beneficiary risk levels (for
example, opioids). Several other commenters recommended that CMS adopt
this approach.
Response: We appreciate the commenter's feedback and believe our
approach allows ample notification time for beneficiaries and
prescribers or providers. A prescriber or provider will only be placed
on the preclusion list upon exhausting their first level appeal.
However, before claims are impacted there will be a 90-day period. The
90-day period allows the plans 30-days to intake the preclusion data
and a 60-day beneficiary notification period, during which time the
plan can begin working to transition the beneficiary to a new
prescriber or provider. Subsequent updates to the list will provide any
newly added provider with a 60-day

[[Page 16667]]

appeals window but will not provide a 90-day period as discussed above,
thus after implementation beneficiaries may not be notified that they
may have received a prescription or services from a provider that is
now precluded.
Comment: A commenter recommended that CMS provide MA plans with a
30-day advance notice of the addition of individuals or entities to the
preclusion list in order to (1) align with provider termination
notification requirements and (2) assist MA plans in identifying and
notifying beneficiaries of the individual's or entity's preclusion
status.
Response: We appreciate the commenter's feedback and, as stated
earlier, agree that a 30-day period is necessary after the exhaustion
of the provider or prescriber's first level appeal for adequate notice
to be provided to MA plans. In addition, we believe that an additional
60-day period is appropriate during which notification will be provided
to the beneficiary. We are therefore finalizing a 90-day period between
the end of the first level appeal and the placement of the provider or
prescriber on the preclusion list. However, we will not finalize the
provisional fill requirement.
Subsequent updates to the list will provide any newly added
provider with a 60-day appeals window but will not provide a 90-day
period as discussed above, thus after implementation beneficiaries may
not be notified that they may have received a prescription or services
from a provider that is now precluded.
(d) Final Provisions
Given the foregoing, we are finalizing as proposed all of the
provisions we identified in section 10(a) and (b) above except as
follows:
We are changing Sec. 423.120(c)(6)(iv) to remove the
provisional supply requirement and to revise the notice requirement as
follows:
++ Paragraph (iv)(A) will state that 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 written notice to the beneficiary required by paragraph
(c)(6)(iv)(B) of this section.
++ Paragraph (iv)(B)(1) will be revised to read as follows:
``Subject to all other Part D rules and plan coverage requirements,
provide an advance written notice to any beneficiary who has received a
prescription from a prescriber on the preclusion list as soon as
possible but to ensure that the beneficiary receives the notice no
later than 30 days after publication of the most recent preclusion
list.''
++ We are deleting paragraphs (iv)(B)(1)(i) and (ii). Paragraph
(iv)(B)(1)(i), which deals with provisional drug supply, is no longer
needed, while the language in paragraph (iv)(B)(1)(ii) will be merged
into revised paragraph (iv)(B)(1).
++ In paragraph (iv)(B)(2), we are changing the reference to
(c)(6)(iv)(B)(1)(ii) to (c)(6)(iv)(B)(1). This is because, as already
mentioned, paragraph (c)(6)(iv)(B)(1)(ii) is being deleted and the
language therein merged into paragraph (c)(6)(iv)(B)(1).
Revise Sec. 422.222(a) to state: ``An MA organization may
not pay, directly or indirectly, on any basis, for items or services
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''. We note that the
language that excluded emergency and urgently needed services from the
scope of Sec. 422.222(a) has been removed. Sec. 422.222(a)
Beneficiaries will not be permitted to appeal the
application of the preclusion list to a particular prescriber,
individual, or entity.
11. 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 that final rule, we specified in
Sec. 422.152 that MA organizations must have ongoing QI Programs,
which include chronic care programs, but CMS generally provided MA
organizations the flexibility to shape their QI efforts to the needs of
their enrollees.
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 and that some MA 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 also amended 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 reported and 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.
Through annual review of QIP and CCIP reporting submissions, CMS
found its implementation of the QIP and CCIP requirements had become
burdensome and complex, rather than streamlined and conformed to MA
organizations' implementation of QIPs and CCIPs. 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. For example, many MA
organizations merely re-iterated the CMS reporting requirements and did
not provide quantitative data or demonstrate that they were meeting
their intended project goals. Often, the results data lacked clarity
and context and were difficult to interpret and validate. MA
organizations cited numerous studies but did not indicate how they
would use the information to improve enrollee outcomes.

[[Page 16668]]

We gained little value from the information reported. 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. Over the years, we have modified the
reporting requirements in an attempt to gain specific and quantifiable
project goals, clear and concise results data, a favorable effect on
enrollee health outcomes, and meaningful descriptions of how the MA
organization will disseminate those results amongst the industry to
promote best practices.
However, we also found that the scaled down 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 mandated 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 Part C 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 MA 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), 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, perhaps by
using different means than a QIP.
Based on this, we concluded that 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 proposed to delete Sec. Sec.
422.152(a)(3) and 422.152(d), which outline the QIP requirements. In
addition, in order to ensure any references for other provisions in
this section remain accurate, we proposed to reserve paragraphs (a)(3)
and (d). The removal of these requirements will reduce burden on both
MA organizations and CMS.
We explained in the proposed rule that even with this proposed
removal of the QIP requirements, the MA requirements for QI Programs
will 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 will 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 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. As explained in the proposed rule, the proposed
amendments do 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 continue to
believe that these other 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.
We solicited comments on our proposal, including whether additional
revision to Sec. 422.152 is necessary to eliminate redundancies CMS
has identified in this preamble.
We received the following comments, and our response follows:
Comment: Most commenters expressed strong support for this proposal
to remove the QIP requirement for MA organizations. A few supportive
commenters suggested that CMS also remove the CCIP requirement for MA
organizations. Specifically, the Medicare Payment Advisory Commission
(MedPAC) encouraged CMS to remove as well the duplicative CCIP
attestation because measures around prevalent chronic conditions are
already measured in the star rating program (for example, diabetes,
hypertension).
Response: We appreciate the significant support for this proposal.
We acknowledge the suggestion to also remove the CCIP requirement for
MA organizations, and believe MedPAC has a valid concern that chronic
condition measures are already measured in the star rating program.
However, section 1852(e) of the Act requires that each MA organization
include a CCIP as part of its required overall QI Program. Therefore,
we will continue to require that MA organizations attest annually to
having an ongoing CCIP and that the CCIP comply with the requirements
issued by CMS under Sec. 422.152(a)(2) and (c).
Comment: Another commenter expressed appreciation for CMS's interim
sub-regulatory steps to streamline QIP and CCIP reporting requirements
and reduce burden on both MA organizations and CMS (that is, for
reporting associated with 2018 QIPs and CCIPs); the commenter
encouraged CMS to continue to evaluate whether any additional steps can
be taken for 2018 QIPs and CCIPs to further streamline reporting and
reduce burden. Similarly, a commenter requested that

[[Page 16669]]

CMS make a decision on this proposal so as to limit the resources
invested in developing a new 2018 QIP.
Response: We would like to clarify that the required attestations
for 2018 QIPs and CCIPs were already completed at the end of December
2017. Therefore, all organizations should have already developed their
2018 QIP plan and implemented it beginning on January 1, 2018. This
final rule, making the proposed changes, will be applicable for the
2019 MA plan requirements.
Comment: Another commenter recommended that CMS take into account
the impact on state external quality review organization (EQRO)
evaluation activities that currently implement the optional use of MA
organizations' QIP reports as part of annual reviews for Medicaid
managed care plans, citing 42 CFR 438.360.
Response: CMS's removal of the QIP requirement for MA organizations
at Sec. 422.152(a)(3) and (d) does not alter the Medicaid managed care
plan requirements at Sec. 438.360. If review of an MA organization's
CCIP does not produce information that meets the conditions specified
in Sec. 438.360(a), then this information could not be used to satisfy
that regulation. Guidance on part 438 requirements is outside of the
scope of this rule, but we appreciate the comment. We will consider how
the QIP removal may impact state EQRO evaluation activities and may
issue guidance as necessary to state Medicaid agencies.
Comment: A commenter questioned whether CMS has intentions to make
Medicare quality initiatives (that is, MA QI requirements) and Program
of All-Inclusive Care for the Elderly (PACE) quality initiatives (that
is, Quality Assessment and Performance Improvement or QAPI program)
more comparable.
Response: Although there are some similarities in the required
quality initiatives for MA and PACE, the PACE QAPI program requirements
are outside the scope of this rule. Due to the unique nature of the
PACE model, we do not currently intend to align the requirements
between the QIP and the QAPI program. However, we may consider doing so
in the future.
Comment: A few commenters opposed this proposal, believing that it
is premature to eliminate the QIPs without careful evaluation and
consideration of where overlaps occur and which QIPs lead to the
greatest improvements. Instead of eliminating the QIPs for MA
organizations, they suggested that CMS, when issuing mandatory topics
for QIPs, take into account any relevant overlap to ensure QIPs are
addressing the most important areas and taking into account other
related activities.
Response: We disagree with the suggestion that CMS retain the QIP
and consider any relevant overlap and other related activities when
issuing mandatory QIP topics instead of finalizing the removal of the
QIP requirements in Sec. 422.152. Although we are eliminating the QIP
requirement, MA organizations must still have a CCIP (section 1852(e)
of the Act; 422.152(a)(2) and (c)). Through the CCIP, MA organizations
must address chronically ill populations identified by CMS through a
list of chronic conditions. However, MA organizations are not required
to choose from this list and may choose other chronic conditions as
appropriate to meet the needs of their enrollee population. We believe
that this flexibility allows MA organizations to identify a focus area
that does not overlap or duplicate other related activities, including
star rating metrics. Alternatively, an MA organization may choose to
design a CCIP that intentionally relates to other activities. We do not
prohibit correlated quality activities, and MA organizations may take
advantage of this flexibility.
Comment: Another commenter expressing opposition for this proposal
stated that the QIP requirements dovetail with existing Medicaid
quality requirements and integrated programs have a unique opportunity
to pursue joint Medicare and Medicaid QIPs. They feared that the
lessening of CMS expectations in this area will result in less
attention on such activities by dual eligible special needs plans (D-
SNPs).
Response: We understand the commenter's concerns regarding joint
Medicare and Medicaid quality initiatives. However, we believe that MA
organizations offering integrated D-SNPs may still achieve this by
connecting the Medicaid quality project with the required CCIP for MA.
States may also strengthen quality requirements through State Medicaid
Agency Contracts.
After consideration of the public comments we received, we are
finalizing our proposal to remove the QIP requirements for MA
organizations in Sec. 422.152(a)(3) and (d), as proposed. We are
reserving those paragraphs.
12. Reducing Provider Burden--Comment Solicitation
In the proposed rule, we solicited comment on the nature and extent
of the burden faced by providers pursuant to MA organizations' requests
for medical records and for ideas to address the burden. We thank the
over 40 commenters who responded. We plan to carefully review the
information received, including ideas for continued conversations with
stakeholders.

C. Implementing Other Changes

1. Reducing the Burden of the Medicare Part C and Part D Medical Loss
Ratio Requirements (Sec. Sec. 422.2410, 422.2420, 422.2430, 422.2460,
422.2480, 422.2490, 423.2410, 423.2420, 423.2430, 423.2460, 423.2480,
and 423.2490)
a. Overview of Proposed Rule
In the November 28, 2017 proposed rule (82 FR 56366), we proposed
certain modifications to the medical loss ratio (MLR) requirements in
the Medicare Part C and Part D programs. Briefly, we proposed to change
the MLR calculation by including in the MLR numerator, as QIA, all
expenditures for fraud reduction activities or for Medication Therapy
Management (MTM) programs that meet the requirements of Sec.
423.153(d). As explained in the proposed rule, we believe that the
proposed inclusion of all fraud reduction activities in the MLR
numerator as QIA renders extraneous the provision that provides an
adjustment to incurred claims for amounts recovered through fraud
recovery efforts, up to the amount of fraud reduction expenses. We also
proposed to revise the MLR reporting requirements to significantly
reduce the amount of MLR data that MA organizations and Part D sponsors
submit to CMS on an annual basis. Finally, we proposed certain
conforming and technical amendments, which are described in greater
detail in section II.C.1.e. of this final rule.
b. Background
The proposed rule provided background on the Part C and Part D
medical loss ratio (MLR) requirements, including the statutory and
regulatory authority. 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. In the
May 23, 2013 Federal Register (78 FR 31284), we published a final rule
that codified the MLR requirements for 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

[[Page 16670]]

requirement that they have an MLR of at least 85 percent (see
Sec. Sec. 422.2410 and 423.2410). Section 1857(e)(4) of the Act
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, which is incorporated by reference in section 1860D-12(b)(3)(D) 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 private insurance. We
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.
c. Changes to the Calculation of the Medical Loss Ratio (Sec. Sec.
422.2420, 422.2430, 423.2420, and 423.2430)
(1) Fraud Reduction Activities
In the proposed rule, we explained that our general approach in
developing the Medicare MLR rules has been to align with the commercial
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. However, we also recognized in the
original MLR rule (78 FR 12429) 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 where we initially aligned the commercial and Medicare MLR
rules was the treatment of expenditures related to fraud reduction
efforts, which we defined to include both fraud prevention and fraud
recovery (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 (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 a positive
adjustment to incurred claims. The initial Medicare MLR proposed rule,
published February 22, 2013 (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.
In the November 28, 2017 proposed rule, we explained that we had
reconsidered our policy regarding the treatment of fraud reduction
expenses in the Medicare MLR numerator based on the specific
characteristics of the MA and Part D programs. We noted that limiting
or excluding amounts invested in fraud reduction undermines the federal
government's efforts to combat fraud in the Medicare program; such
action also reduces the potential savings to the government, taxpayers,
and beneficiaries that robust fraud prevention efforts in the MA and
Part D programs can provide. We also stated that fraud prevention
activities can improve patient safety and deter the use of medically
unnecessary services, which is part of the reason we require such
activities as a condition of participation in the MA and Part D
programs.
For these reasons, we proposed certain changes to the treatment of
expenses for fraud reduction activities in the Medicare MLR
calculation. First, we proposed 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
proposed 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, given the
proposed revisions of the QIA definitions surrounding the treatment of
fraud reduction activities, we proposed 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 noted that 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 an additional incentive for 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 the
Medicare statute 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 and drug
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 will ultimately result in
lower payments to MA organizations and Part D sponsors out of the
Medicare

[[Page 16671]]

trust funds, and could also result in lower premiums or additional
supplemental benefits for beneficiaries.
As we explained in the proposed rule, we believe that the inclusion
of expenditures for fraud reduction activities in the QIA portion of
the MLR numerator, as proposed, makes it unnecessary to include in
incurred claims the amount of claim payments recovered through fraud
reduction efforts, up to the amount of fraud reduction expenses. 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 as a result of fraud, rather than in preventing payment of
fraudulent claims. Under our proposal, claim payments recovered through
fraud reduction efforts will no longer be included in the MLR numerator
as a limited adjustment to incurred claims. Instead, all expenditures
for fraud reduction activities will 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 the same level of incentive to just pursue
recovery of paid fraudulent claims, and may now be further incented to
invest in fraud prevention. We believe that effective fraud reduction
strategies will include efforts to prevent payment of fraudulent
claims, and that the 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 proposed 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.
Redesignate the introductory text of Sec. Sec.
422.2430(a) and 423.2430(a) as paragraphs (a)(1), and revise these
newly designated paragraphs (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 solicited comment on these proposed changes, particularly
whether our proposal was 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 solicited comment on the
types of activities that should be included in, or excluded from, fraud
reduction activities. In addition, we solicited comment on alternative
approaches to accounting for fraud reduction activities in the MLR
calculation. In particular, we were interested in receiving input on
the following:
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; and
Whether fraud reduction activities should be subject to
any or all of the exclusions from QIA 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 will 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).)
We received 43 comments pertaining to the proposed changes to the
treatment of expenses for fraud reduction activities in the Medicare
MLR calculation. The following is a summary of the comments we received
on these proposals and our responses:
Comment: A majority of the commenters supported the proposal to
designate all fraud reduction activities as activities that improve
healthcare quality, or QIA. A number of commenters noted that fraud
prevention can improve patient safety, deter the use of medically
unnecessary services, and can lead to higher levels of health care
quality. Several commenters noted that they agreed with our conclusion
that the MLR regulations' limited adjustment to incurred claims for
fraud recoveries, up to the amount of fraud reduction expenditures,
curtailed the incentive to invest in fraud prevention.
Response: We appreciate the support.
Comment: Several commenters opposed our proposal to include all
expenditures for fraud reduction activities in the MLR numerator as
expenditures for QIA. Some commenters that opposed our proposal argued
that the MLR is supposed to represent the proportion of revenue that is
spent on medical costs or improving healthcare quality, whereas amounts
spent on fraud prevention, detection, and recovery provide little value
to beneficiaries and represent administrative expenses that are part of
a plan sponsor's cost of doing business. As such, the commenters argued
the costs were not appropriate for inclusion in the numerator. Other
commenters expressed concern that the proposal would encourage plans to
adopt aggressive practices to reduce fraud, such as claim audits, that
would ultimately increase provider burden.
Response: We appreciate the concerns raised by the commenters. We
respectfully disagree with the argument that fraud reduction expenses
do not provide significant value to beneficiaries. We believe, and a
number of commenters on the proposed rule noted, that fraud prevention
can improve health care quality by ensuring that patients receive care
that is legitimate and appropriate, and that providers have the
appropriate credentials for the services they perform. In addition, as
explained in the proposed rule, we believe that fraud reduction
activities can lower the cost of care and reduce trust fund
expenditures and thereby potentially provide value to beneficiaries,
the government, and taxpayers.
We acknowledge that the proposed inclusion of fraud reduction
activities in the MLR numerator could encourage MA organizations and
Part D sponsors to implement new practices for combatting fraud and
that these may involve new administrative

[[Page 16672]]

requirements for providers. However, we note that MA organizations and
Part D sponsors would no longer have the same level of incentive to
``pay and chase'' claims in order to account for fraud reduction
expenditures in the MLR numerator under the proposed rule; they would
instead be further incented to implement pre-payment fraud prevention
efforts, as they would now be able to include expenditures related to
these efforts in their MLR numerator, regardless of whether they have
recovered any claims payments through fraud reduction efforts. We
believe that any increase in provider burden as a result of newly-
implemented pre-payment fraud prevention practices could potentially be
offset by a reduction in the provider's burden associated with the need
to contest efforts from health plans to recover claims already paid, as
is necessary under the current rules for health plans' fraud reduction
expenditures to have a positive impact on their MLR.
Comment: A commenter requested that we amend the regulations for
the commercial and Medicaid markets to align with the proposed changes
to the treatment of fraud reduction expenditures in the Medicare MLR
regulations.
Response: The commercial and Medicaid MLR regulations are outside
the scope of this final rule but we will take these comments under
advisement.
Comment: We received several comments that requested that we expand
the proposal to include in QIA all efforts to reduce fraud, waste, and
abuse.
Response: We did not propose in this regulation to designate
efforts to reduce waste and abuse as QIA for MLR purposes. We
appreciate the comments we received on these issues, however, and will
consider whether adding these activities to the QIA category of the MLR
numerator should be incorporated into future rulemaking.
Comment: We received one comment that directly addressed our
solicitation in the proposed rule concerning the establishment of a new
category in the MLR numerator for fraud reduction expenses. The
commenter argued that treating fraud reduction expenses separately
might encourage plan sponsors to pay more attention to fraud reduction
activities and would make it easier to track, measure, and audit
expenses that were allocated to this category. Many commenters
supported the inclusion of fraud reduction activities in the QIA
category of the MLR numerator, without expressing an opinion on whether
we should instead create a new numerator category for fraud reduction
expenses.
Response: We thank the commenter for responding to our
solicitation. We note that MA organizations and Part D sponsors are
expected to keep track of any expenses they intend to include in the
MLR numerator, regardless of how the expenses are categorized in the
underlying analysis and data. Given that the majority of commenters
indicated a preference for the proposed inclusion of fraud reduction
activities in the QIA category of the MLR numerator, we have decided
against establishing a separate numerator category for fraud reduction
expenditures. We believe, as noted earlier and in the proposed rule,
that fraud reduction is sufficiently related to and supports QIA to
consider it properly part of that category.
Comment: Several commenters responded to our solicitation for
feedback on whether fraud reduction activities should be subject to any
or all of the exclusions at Sec. Sec. 422.2430(b) and 422.2430(b).
Several commenters recommended that we amend Sec. Sec. 422.2430(b)(1)
and 423.2430(b)(1), which exclude from QIA any activities that are
designed primarily to control or contain costs, to create an exception
for fraud reduction activities. The commenters contended that fraud
reduction activities could arguably be described as cost-control
activities and expressed concern that a particular fraud reduction
activity could (or would) be excluded from QIA due to concerns or
confusion regarding this section of the regulation, thereby
discouraging investment in such activities by some health plans that
may be concerned about being out of compliance if they attempted to
incorporate these expenses as QIA. A few commenters recommended that
CMS remove the regulatory language at Sec. Sec. 422.2430(b)(5) and
423.2430(b)(5) that excludes from QIA ``costs directly related to
upgrades in health information technology that are designed primarily
or solely to improve claims payment capabilities,'' as this would
exclude investments in health IT that could be used to reduce the
incidence of fraud, such as claims code auditing, pre-pay coding,
physician-profiling, and audit/recovery operations. The commenters
noted that this change to the regulatory language should retain the
exclusion for costs related to claims adjudication systems.
Response: We agree with the commenters that maintaining the current
exclusion of cost-control activities without creating an exception for
fraud reduction activities could cause confusion regarding which fraud
reduction activities could be included in QIA. As explained earlier,
one of the reasons we proposed to depart from the commercial MLR rules
in our treatment of fraud reduction efforts is to encourage MA
organizations and Part D sponsors to pay fewer fraudulent claims, which
we believe will lower the overall cost of providing coverage to MA and
Part D enrollees and potentially produce savings for beneficiaries,
taxpayers, and the federal government. We believe that excluding from
QIA fraud reduction activities that are designed primarily to control
or contain costs would undermine the incentive to engage in fraud
reduction activities.
We also agree that the current exclusion of costs directly related
to health IT that are designed primarily or solely to improve claims
payment capabilities could be construed to exclude investments in
technology solutions that are designed to enhance MA organizations' and
Part D sponsors' ability to reduce the incidence of fraud. In order to
avoid creating uncertainty about whether investments in health IT as a
means of reducing fraud may be included in QIA, we believe it is
appropriate that we revise Sec. Sec. 422.2430(b)(5) and 423.2430(b)(5)
to specify that the exclusion of costs directly related to upgrades in
health information technology that are designed primarily or solely to
improve claims payment capabilities does not apply to costs that are
related to fraud reduction activities under Sec. Sec.
422.2430(a)(4)(ii) and 423.2430(a)(4)(ii).
After consideration of the public comments received, we are
finalizing the regulatory changes to paragraphs (a) of Sec. Sec.
422.2430 and 423.2430 as proposed, with the following modifications. We
are revising Sec. Sec. 422.2430(b)(1) and 423.2430(b)(1), which
exclude from QIA activities that are designed primarily to control or
contain costs, to provide an exception for fraud reduction activities.
We are also revising the Sec. Sec. 422.2430(b)(5) and 423.2430(b)(5)
to provide that costs related to fraud reduction activities under
Sec. Sec. 422.2430(a)(4)(ii) and 423.2430(a)(4)(ii) are not subject to
the exclusion that applies to costs directly related to upgrades in
health information technology that are designed primarily or solely to
improve claims payment capabilities.
(2) Medication Therapy Management (MTM) (Sec. Sec. 422.2430 and
423.2430)
In the May 23, 2013 final rule (78 FR 31294), we provided guidance
that Medication Therapy Management (MTM) activities (defined at

[[Page 16673]]

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 be for a purpose identified in
paragraph (a)(1) and: (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)
will 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 received
numerous inquiries seeking clarification whether MTM programs are QIA.
To address those questions and resolve any ambiguities or
uncertainties, we proposed to specifically address MTM programs in the
MLR regulations.
We proposed 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. We believe that the MTM
programs that we require under the Part D regulations 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 will 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 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 solicited
comment on these proposed changes.
We received 39 comments pertaining to our proposal to amend the MLR
regulations to specify that all MTM programs that comply with Sec.
423.153(d) are QIA.
Comment: Nearly all of the comments supported the proposal to
explicitly designate MTM programs that comply with Sec. 423.153(d) as
QIA for MLR purposes. A number of commenters noted that MTM programs
promote medication adherence and care coordination, which contribute to
improved health outcomes and a reduction in health care costs. Several
commenters argued that eliminating uncertainty with respect to whether
MTM expenditures will be included in the MLR numerator will encourage
sponsors to expand access to MTM programs to include greater numbers of
enrollees who may benefit from participation.
Response: We appreciate the support.
Comment: A commenter requested that we clarify that the Center for
Medicare & Medicaid Innovation's (CMMI) Part D Enhanced MTM models are
also QIA, thereby incentivizing participation in these models.
Response: We have waived the MLR requirements to the extent
necessary to permit all prospective payments for approved and
permissible MTM services under the Part D Enhanced MTM model to be
treated as QIA for purposes of MLR reporting. See ``Announcement of
Part D Enhanced Medication Therapy Management Model Test'' (September
28, 2015), available at https://innovation.cms.gov/Files/x/mtm-announcement.pdf.
Comment: A commenter requested that we take steps to ensure that
any required MTM programs established by plan sponsors do not create an
undue administrative burden for prescribing physicians or medication
denials and delays for patients.
Response: We acknowledge the commenter's concerns about possible
increases to physician burden or medication denials and delays for
beneficiaries. However, this final rule addresses the designation of
MTM programs that meet the requirements of Sec. 423.153(d) as QIA for
MLR purposes; we believe that rules and requirements pertaining to the
administration of MTM programs are outside the scope of this final
rule.
Comment: A commenter recommended that we only include MTM programs
in QIA if the sponsor utilizes pharmacists at qualified long-term care
pharmacies.
Response: As noted earlier, one of the reasons we proposed to
explicitly designate MTM programs that comply with Sec. 423.153(d) as
QIA is to encourage sponsors to expand access to these programs. We do
not believe that it is necessary to create additional requirements for
MTM programs to qualify as QIA, beyond the requirements already present
in Sec. 423.153(d).
After consideration of the public comments received, we are
finalizing without substantive our proposal to amend Sec. Sec.
422.2430(a) and 423.2430(a) to specify that all MTM programs that
comply with Sec. 423.153(d) are QIA.
(3) Additional Technical Changes to Calculation of the Medical Loss
Ratio (Sec. Sec. 422.2420 and 423.2420)
We also proposed 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
proposed 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).
We received no comments on the proposed technical changes and
therefore are finalizing the proposed changes to Sec. Sec. 422.2420(d)
and 423.2420(d) without modification.
d. Proposed Regulatory Changes to Medicare MLR Reporting Requirements
(Sec. Sec. 422.2460 and 423.2460)
We proposed to reduce the MLR reporting burden by requiring MA
organizations and Part D sponsors to submit the minimum amount of
information that CMS needs in order to determine whether an MA or Part
D contract has satisfied the minimum MLR requirement with respect to a

[[Page 16674]]

contract year, and whether the contract must remit funds to CMS or face
additional sanctions.
As we explained in the November 28, 2017 proposed rule (82 FR
56459), our general approach when initially developing the Medicare MLR
regulations was to align the Medicare MLR requirements with the
commercial MLR requirements to the greatest extent possible. Consistent
with this policy, when we originally developed the Medicare MLR
reporting format, we attempted to model it on the tools used to report
commercial MLR data. We believed at the time that this would limit the
burden on organizations that participate in both markets. However, it
was not possible to make these forms and reports identical due to
differences in the types of data collected for purposes of commercial
MLR reporting versus Medicare MLR reporting. We explained in the
November 2017 proposed rule that we had become concerned that requiring
health insurance issuers to complete what was ultimately a
substantially different set of forms for Medicare MLR purposes had
created an unnecessary additional burden. We noted that our proposal to
reduce the burden of MLR reporting for the MA and Part D programs
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.
Specifically, we proposed that the Medicare MLR reporting
requirements will be limited to the following data fields, as shown in
Table E1:

Organization name
Contract number
Adjusted MLR (which will 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))
Remittance amount

Table 10--MLR Reporting for Fully Credible, Partially Credible, and Non-Credible Contracts
----------------------------------------------------------------------------------------------------------------
Remittance amount
Organization Contract No. Adjusted MLR (%) ($)
----------------------------------------------------------------------------------------------------------------
ABC, Inc............................................... H1234 90.1 $0
XYZ, LLC............................................... S4321 84.8 17,420
MAO1, LLC.............................................. H4321 N/A N/A
----------------------------------------------------------------------------------------------------------------

We noted in the proposed rule that although we were proposing a
significant reduction in the amount of MLR data that MA organizations
and Part D sponsors must report to CMS on an annual basis, we did not
propose 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 for purposes of determining that remittance
amounts under Sec. Sec. 422.2410(b) and 423.2410(b) and sanctions
under Sec. Sec. 422.2410(c), 422.2410(d), 423.2410(c), and 423.2410(d)
were accurately calculated, reported, and applied. Moreover, MA
organizations and Part D sponsors will continue to be required to
retain documentation supporting the MLR data 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.
We also proposed to make a technical change to Sec. 422.2460 by
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 proposed 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
Adjusted 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.
We received 33 public comments, some in support and some in
opposition to our proposal to reduce the amount of MLR data that MA
organizations and Part D sponsors submit to CMS on an annual basis. We
received the following comments and our response follows:
Comment: Most of the commenters supported our proposed changes to
the MLR reporting requirements. Several commenters that supported the
proposal expressed concern that the audit burden would increase once we
started relying solely on audits to monitor compliance. Other
commenters stated that although they supported the proposed reduction
in the amount of MLR data they would be required to submit to us on an
annual basis, they did not expect their MLR reporting burden to be
significantly reduced since they would still be required to collect and
analyze the same information in order to calculate the MLR percentage
and remittance amount. A commenter asked that we issue guidance on how
we will facilitate the current desk review in light of the proposed
changes.
Response: We appreciate the support. We do not expect that the
proposed changes to the MLR reporting requirements would cause MLR
audits to be more burdensome than the MLR audits that we have conducted
in previous years. We acknowledge that MA organizations and Part D
sponsors will continue to collect the same

[[Page 16675]]

information in order to calculate the MLR percentage and remittance
amount. However, as we explained in section II.B.9 of the proposed rule
(82 FR 56472), in estimating the reduction to the MLR reporting burden
that would result from the proposed changes to the reporting
requirements, we assumed that MA organizations and Part D sponsors
would spend eleven fewer hours per contract performing the following
tasks: (1) Reviewing 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) drafting narrative
descriptions of methodologies used to allocate expenses; (3) performing
an internal review of the MLR report form prior to submission; (4)
uploading and submitting the MLR report and attestation; and (5)
correcting or providing explanations for any suspected errors or
omissions discovered by CMS or our contractor during initial review of
the submitted MLR report. We believe that the aggregate savings to MA
organizations and Part D sponsors as a result of the proposed changes
meaningfully reduce the burden of the MLR reporting requirements. The
changes to the MLR reporting requirements in this final rule will not
affect MLR reporting until MLR data for contract year 2018 is submitted
in 2019. The desk reviews of MLR data submitted for contract years 2016
and 2017 will not be affected by the changes to the reporting
requirements.
Comment: Several commenters objected to the proposal to reduce the
amount of MLR data that MA organizations and Part D sponsors submit to
CMS on an annual basis. Several commenters contended that we cannot
conduct meaningful compliance oversight with the minimal amount of MLR
data that we proposed to collect. Several commenters noted that it is
important that we continue to have access to detailed data on spending
for health care services and quality improvement activities by MA
organizations and Part D sponsors. A few commenters argued that the
lack of transparency into how an MLR is calculated will result in more
``gaming'' of the MLR by MA organizations and Part D sponsors.
Response: As noted earlier, we did not propose to change our
authority under Sec. Sec. 422.2480 or 423.2480 to conduct selected
audit reviews of the data reported under Sec. Sec. 422.2460 and
423.2460, which includes the capability to request detailed data
regarding the QIA expenditures included in the Medicare MLR, in order
to determine that the MLR and remittance amounts were calculated and
reported accurately, and that sanctions were appropriately applied. MA
organizations and Part D sponsors will still be required to submit an
attestation regarding the MLR data submitted, as they currently do. We
believe that we can continue to effectively oversee MA organizations'
and Part D sponsors' compliance with the MLR requirements by relying
solely on audits. In addition, we note that MA organizations and Part D
sponsors are required to submit and attest to the data that details
their spending on enrollee health care services as part of their annual
bids.
Comment: A commenter indicated no objection to the proposed
reduction in the amount of MLR data reported to CMS by MA organizations
and Part D sponsors, but noted that, in order to monitor the financial
performance of Medicare-Medicaid Plans, states would need to maintain
their ability to specify and require detailed reporting of financial
and MLR data through MIPAA contracting authority, Financial Alignment
Initiatives, and other coordinated and integrated mechanisms.
Response: We appreciate the commenter's interest in maintaining
access to MLR data for Medicare-Medicaid Plans and other integrated
care products. This final rule does not diminish states' existing
authority to collect MLR data from such plans under state law, MIPAA
contracting, or Medicaid managed care regulations, or terms of three-
way contracts for MMPs.
Comment: A commenter recommended the mandatory retention period
that applies to documents and records that support MAOs' and Part D
sponsors' MLR calculations be shortened from 10 years to 3 years.
Response: In their contracts with CMS, MA organizations and Part D
sponsors agree to maintain for 10 years books, records, documents, and
other records of accounting procedures and practices that are
sufficient for CMS to conduct various reviews, audits, and inspections.
Sec. Sec. 422.504(d) and 423.505(d). We are not persuaded that a
shorter record retention period is appropriate for documents that
support the MLR calculation.
Comment: A commenter requested that we similarly reduce the amount
of MLR data that is reported by commercial health insurance plans.
Response: The MLR reporting requirements for commercial health
insurance plans are outside the scope of this rule, but we will take
these comments under advisement.
Comment: A few commenters requested that we continue to develop and
make available the reporting template as a tool to assist in
calculating the MLR.
Response: In section V.C.16 of the proposed rule (82 FR 56488), we
explained that, if our proposed reduction in the amount of MLR data
reported to CMS were to be finalized, we would reduce the amount we
currently pay to contractors for software development, data management,
and technical support related to MLR reporting. We intend to
discontinue development of the more detailed MA and Part D reporting
template after we collect the MLR reports for contract year 2017. We
intend to continue to make available the prior years' more detailed MLR
reporting templates (used in contract years 2014 through 2017) on the
CMS website (CMS.gov) as well as in the Health Plan Management System
(HPMS). Therefore, commenters can continue to utilize the prior years'
more detailed MLR reporting templates to assist with their MLR
calculations.
Comment: A commenter requested that we provide instructions to aid
MA organizations and Part D sponsors in the preparation of their
simplified MLR data submissions, similar to the instructions that we
provided to instruct MA organizations and Part D sponsors on how to
complete the more detailed MLR reporting template.
Response: As explained in the Supporting Statement accompanying the
PRA listing for CMS Form Number CMS-10476 (published November 28,
2017), respondents can continue to use the current instructions to
familiarize themselves with the guidance specific to the calculation of
the MLR, and we expect that the revised instructions (for contract year
2018 and thereafter) will make minimal changes to address the
simplified reporting requirements. We intend to make the revised MLR
Data Submission Instructions available in subregulatory guidance for
contract year 2018 MLR reporting. For more information, we refer
readers to the Supporting Statement, which is available on the CMS
website at https://www.cms.gov/Regulations-and-Guidance/Legislation/PaperworkReductionActof1995/PRA-Listing-Items/CMS-10476.html.
After consideration of the public comments received, we are
finalizing the changes to the MLR reporting requirements in Sec. Sec.
422.2460 and 423.2460 as proposed.

[[Page 16676]]

e. 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 proposed 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. The proposed technical changes bring these provisions into
conformity with the more substantive regulatory text changes being
proposed herein. The 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 to conform
to 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.
We received no comments on these aspects of our proposal and
therefore are finalizing the proposed technical changes to Sec. Sec.
422.2410, 422.2480, 422.2490, 423.2410, 423.2480, and 423.2490 without
modification.
2. Medicare Advantage Contract Provisions (Sec. 422.504)
Under section 1857 of the Act, CMS enters 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. We proposed 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) states that compliance with paragraphs (1)
through ((13)) is material to the performance of the MA contract; in
addition, Sec. 422.504(a)(16) states that compliance with paragraphs
(a)(1) through (a)(15) is material to the contract. Neither provision
addresses paragraphs (a)(17) or (a)(18). These inconsistencies could
cause confusion on the part of MA organizations and complicate CMS
enforcement of the regulations.
We proposed 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 proposed to
renumber current paragraphs Sec. Sec. 422.504(a)(17) and (a)(18). The
proposed revision to the paragraph (a) introductory text was to provide
that compliance with all contract terms listed in paragraph (a) is
material.
We received no comments on this proposal and therefore are
finalizing these changes to Sec. 422.504(a) as proposed without
modification.
3. Late Contract Non-Renewal Notifications (Sec. Sec. 422.506,
422.508, and 423.508)
According 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 for this 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 proposed to clarify our 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 one-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 (and we did not propose to add
one).
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 and,
as applicable, 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 proposed to modify Sec. 422.506(a)(3) to remove language that
indicates late non-renewals may be permitted by CMS so that there will
only be one process--mutual termination under Sec. Sec. 422.508--that
is applicable if CMS or the organization is not taking action under
Sec. 422.506(b) (Nonrenewal of contract) or Sec. 422.510 (Termination
of contract by CMS). Also, we proposed to amend Sec. Sec.
422.508(a)(3) and 423.508(a) 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.
We received the following comments, and our response follows:
Comment: A commenter expressed support for our clarification that
CMS considers MA organization non-renewal requests received after the
first Monday in June as a request for mutual termination covered under
Sec. 422.508. The commenter requested that CMS clarify any differences
in the notification requirements and other processes for contracts that
non-renew under Sec. 422.506 and contracts that mutually terminate
under Sec. 422.508.
Response: We appreciate the commenter's support for our proposal
clarifying that CMS treats non-renewal requests received after the
first Monday in June as a request to mutually terminate the contract.
The provisions under Sec. Sec. 422.506(a)(2)(ii) and 422.508(a)(1)
outline the notification requirements for contracts that non-renew and
mutually terminate; CMS has provided guidance on these provisions in
the Medicare Managed Care Manual, Chapter 11 and annual non-renewal and
contract closeout guidance released in our Health Plan Management
System.
After considering this comment, we are finalizing our proposal to
remove Sec. 422.506(a)(3) and to revise Sec. Sec. 422.508(a)(3) and
423.508(a) without amendment.
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 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 subpart K of 42 CFR part

[[Page 16677]]

422. 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. Sec. 422.502(c)(3)(iii) and 423.503(c)(3)(iii) using the
procedures in subparts N of 42 CFR parts 422 and 423. We proposed to
correct an inconsistency in the text that identifies CMS's deadline for
rendering its determination on appeals of application denials.
According to Sec. Sec. 422.660(c) and 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 2009 proposed rule (74
FR 54650 and 54651), we proposed to modify Sec. Sec. 422.660(c) and
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. 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 proposed to modify Sec. Sec.
422.664(b)(1) and 423.652(b)(1) to align with the September 1 date
codified in Sec. Sec. 422.660(c) and 423.650(c), which was codified on
April 15, 2010.
We received no comments on this proposal and therefore are
finalizing the amendments to Sec. Sec. 422.664(b)(1) and 423.652(b)(1)
without modification.
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 assure that
adequate and appropriate stop-loss insurance is provided 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); that regulation was adopted in
2000, and was based on a similar rule adopted for section 1876 risk
plans pursuant to the similar physician incentive plan requirements
under section 1876(i)(8). In recent years, CMS has received a number of
requests to update the stop-loss insurance limits in Sec. 422.208
associated with physician incentive plan (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).
We proposed to change the existing regulation in three substantive
ways:
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 the large variety of potential risk arrangements.
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 received comments from 9 stakeholders regarding our proposal to
update the physician incentive plan (PIP) rule. In this final rule we
are finalizing the stop loss limits substantially as proposed but with
modifications to adopt definitions and streamline the regulation text.
The heart of our proposal--to adopt a methodology that can be applied
to updated claims information in order to create tables that associate
minimum attachment points for stop-loss coverage based on the panel
size of the physician or physician groups that are at risk of
substantial financial loss--is being finalized as proposed. Also, as we
discuss below, we are considering future rulemaking to implement a more
extensive update of the PIP regulation. Additionally, based on the
comments we received on the proposed rule and our own review of the
proposal, we are clarifying the methodology we proposed in determining
when physicians and physician groups are at substantial financial risk
and the resulting stop-loss insurance requirements. We are adopting
limited changes to the regulation text (compared to the proposed
regulation text) to clarify these changes and improve the readability
of the text at Sec. 422.208; we are also adopting definitions for
terms used in the final rule. This final rule also includes a
correction to a typo in the Panel Size row 16,100, Net Benefit Premium
column of the Combined Stop-Loss Insurance Deductible table (Table PIP-
11), which we discovered in our review for purposes of finalizing the
proposed rule. As proposed, we will apply the methodology in the final
regulation to provide sub-regulatory guidance (for example, in the
annual CMS Call Letter) based on changes to medical costs and health
care utilization patterns; these updates are anticipated to be in the
form of a combined stop-loss insurance deductible table and a separate
stop-loss insurance deductible table. As noted in the proposed rule, we
believe this update to the regulation governing the stop loss insurance
requirements is needed at this time given the changes in underlying
medical costs since the tables were originally established. However, we
are also aware that approaches to risk sharing have evolved since the
physician incentive regulation was first established. Because of these
health care contracting developments, we are considering more extensive
changes to the physician incentive rule in the future. To that end, CMS
will seek further dialogue with stakeholders on this topic to inform
future rulemaking.
a. Determination of Substantial Financial Risk and Stop-Loss Insurance
Requirements for Physicians and Physician Groups
Under the current PIP regulation at Sec. 422.208, aggregate stop-
loss protection must cover 90 percent of the costs of referral services
that exceed 25 percent of potential payments. Per patient stop-loss
protection must cover 90 percent of the cost of referral services that
exceed the per-patient deductible limit. The current stop-loss
insurance deductible

[[Page 16678]]

limits are identified in a table codified at Sec. 422.208(f)(2)(iii).
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. There is no requirement
for stop-loss protection when the physician or physician group has a
panel of risk patients of more than 25,000; we did not propose to
change this requirement or the general rule that aggregate stop-loss
protection must cover 90 percent of the costs of referral services that
exceed 25 percent of potential payments. We noted in the proposed rule
our belief that the general provisions in the current regulation--for
example, the determination of substantial financial risk (see Sec.
422.208(d)(2))--do not need to be updated. We did seek comment about
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.
We received the following comments and our responses follow:
Comment: We received a question asking if a bonus based on both
quality and utilization counts towards substantial financial risk.
Response: The statute mandates protection for physicians and
physician groups when risk of substantial financial loss is tied to
referrals; therefore we must include incentives that are triggered by
the level of referrals. This condition is not changed if quality is an
additional trigger for the same referral based payment. However, we do
exclude quality-only bonuses from determinations of substantial
financial risk.
Comment: We received two comments asking if bonus-only risk
arrangements would be subject to the rule.
Response: Bonus-only arrangements can tie part of physician
compensation to reductions or limits in services and referrals. We
interpret the statutory direction to include bonus-only risk
arrangements in determining when a physician or physician group is at
risk of substantial financial loss. Thus, an excessive bonus-only risk
arrangement that exceeds the risk threshold and is payable due to a
reduction in physician referrals for services, would be subject to the
rule. This would be particularly true if the base payment before
bonuses was a relatively low amount.
Comment: Some commenters were concerned that the physician
incentive rules could apply to payments made to physicians related to
the quality of their care and patient satisfaction.
Response: The Medicare statute at section 1852(j)(4) of the Social
Security Act, which established the physician incentive regulation,
requires that financial incentives related to referrals a physician
makes are subject to the physician incentive rule. However, bonus
payments or other payments to physicians for the quality of care
furnished or patient satisfaction that are not tied to the referrals a
physician makes are not subject to this rule.
Comment: A commenter asked us to clarify the ``substantial
financial risk'' test when an independent practice association (IPA), a
management services organization (MSO), or any other type of
intermediary negotiates with the MAO on behalf of physicians/physician
groups.
Response: The regulation provides that a physician/physician group
is placed at substantial financial risk when the physician/physician
group may lose (or fail to receive) 25% or more of potential payments
as a result of use and cost of referral services. Payments based on
other factors, such as quality of care furnished, are not considered in
this determination. The substantial financial risk test is always
focused on the potential payments to physicians/physician groups. The
regulation provides, at paragraph (b), that it applies to an MA
organization and any of its subcontracting arrangements that utilize a
physician incentive plan in their payment arrangements with individual
physicians or physician groups.
If stop-loss protection is required, it is to be determined at
either the physician/physician group level or the intermediary level as
illustrated in the following cases.
Case 1: In this case, the physicians/physician groups have an
agreement with the intermediary for payments which are not influenced
by the financial outcome of the intermediary. The intermediary does not
share any additional payments with or reduce payments to the physician/
physician group based on use and costs of referral services. Withholds,
bonuses, capitation, or any other similar arrangements are applied to
payments only at the intermediary level and not to payments to those
who provide health care services. If the physician/physician group will
earn the same income regardless of their referral practices, there is
no risk of substantial financial loss and stop-loss protection is not
required by this regulation.
Case 2: The intermediary shares additional payments based on use
and costs of referral services with the contracted physicians/physician
groups. The amount of the additional payment paid to each physician/
physician group is related to the referral services associated with
that individual physician/physician group. In this case, the
physicians/physician groups are at financial risk based on their
referral patterns. The analysis must be performed at the physician/
physician group level to evaluate whether that risk is a substantial
financial risk of 25% or more of potential payments for each physician/
physician group.
Case 3: The intermediary shares additional payments based on use
and costs of referral services with the contracted physicians/physician
groups, but the amount of additional payments per physician/physician
group are not related to the referral services of the individual
physician/physician group. The additional payments are shared equally
by all physicians/physician groups contracted with the intermediary
based on the financial outcome of the intermediary. In this case,
determination of substantial financial risk may be done at the
intermediary level because the risk is evenly shared among all
contracted physicians/physician groups. That is, the physicians/
physician groups may pool their membership to determine if they are at
substantial financial risk.
Case 4: The physicians/physician groups have an ownership stake in
the intermediary. The intermediary shares additional payments based on
use and costs of referral services with the contracted physicians/
physician groups. The amount of the additional payment paid to each
physician/physician group is related to the referral services
associated with that individual physician/physician group. In this
case, the physicians/physician groups are at financial risk based on
their referral patterns. The analysis must be performed at the
physician/physician group level to evaluate whether that risk is a
substantial financial risk of 25% or more of potential payments for
each physician/physician group.
Case 5: The physicians/physician groups have an ownership stake in
the intermediary. The intermediary shares additional payments based on
use and costs of referral services with the contracted physicians/
physician groups, but the amount of additional payments per physician/
physician group are not related the referral services of the individual
physician/physician group.

[[Page 16679]]

The additional payments are shared equally by all physicians/physician
groups contracted with the intermediary based on the financial outcome
of the intermediary. In this case, determination of substantial
financial risk may be done at the intermediary level because the risk
is evenly shared among all contracted physicians/physician groups. That
is, the physicians/physician groups may pool their membership to
determine if they are at substantial financial risk.
Comment: A few commenters asked if MA plans are required to pay for
the stop loss coverage.
Response: MA organizations are responsible for assuring that the
coverage is in place. The regulation does not require MA organizations
to pay for this coverage. Payment for the coverage may be negotiated
between the MA organization and its network providers that participate
in the physician incentive plan.
Comment: We received one comment with regard to ensuring that MA
plans have incentive programs that are open to all providers, including
nurse practitioners, and not just physicians.
Response: This comment is outside the scope of this regulation.
We are not finalizing any changes to the definition of substantial
financial risk or risk threshold.
b. Update Deductible Limits and Codify Methodology
Our proposal to 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 was the most
significant proposed change. We explained in the preamble that medical
cost increases and changes in utilization that have occurred since
adoption of the current rule raised concerns that the current
regulation requires stop-loss insurance that is more conservative and
more expensive than is necessary. The statute provides us with the
authority to adopt standards identifying the adequate and appropriate
amount of stop-loss coverage, taking into account patient panel size
and other factors. In developing the new attachment points for the
stop-loss protection required under the statute, we stated our belief
that it is appropriate to furnish more flexibility for MA organizations
and the physicians and physician groups that participate in PIPs to
select between single combined stop-loss insurance and separate stop-
loss insurance for institutional services and professional services.
We explained in the proposed rule the analysis we went through to
develop tables that could be used to identify the specific deductibles
for the required stop-loss protection. To develop the specific
attachment points, we used a data-driven analysis using Medicare Part A
and B claims data from 340,000 randomly selected beneficiaries. We
believe that this sample size provided a statistically significant
sample for purposes of the analysis. We assumed a multi-specialty
practice, and estimated medical group income based on FFS claims,
including payments for all Part A and B services. We used projections
of net income based on services provided personally by individual
physicians and directly by physician groups because that is how we have
determined ``potential payments'' as defined in the existing
regulation. We then 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 percent
confidence, the point at which a multi-specialty group of a given panel
size that engaged in a global capitation arrangement would, through
referral services, lose more than 25 percent of its potential payments.
We set that point--the threshold for loss of 25 percent of potential
payments--as the single combined per patient deductible as illustrated
in the Combined Stop-Loss Insurance Deductible Table (Table PIP-11),
which was included in the preamble of the proposed rule. We performed
an analysis for multiple panel sizes, which are also listed on Table
PIP-11. We proposed to describe the methodology used for calculating
Table PIP-11 in the regulation, at paragraphs (f)(2)(iii) and (iv), but
did not propose to codify the table itself so that CMS could update the
table in the future as necessary using the methodology and updated
data. We proposed that the new rule (including the published Table PIP-
11) would apply for contract years beginning on or after January 1,
2019 and until CMS published an update through the annual Call Letter
or through other sub-regulatory guidance to MAOs.

Table PIP-11--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
1,400............................... 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 28
16,800.............................. 1,000,000 12
17,400-25,000....................... 2,000,000 4
>25,000............................. No Stop Loss 0
------------------------------------------------------------------------

We proposed at Sec. 422.208(f)(2)(iii)(A) that Table 1 be used to
determine the maximum attachment point/maximum deductible for per-
patient-combined stop-loss insurance coverage that must be provided for
90 percent of the costs

[[Page 16680]]

above the deductible or an actuarial equivalent deductible limit can be
determined. The methodology for developing the table was described in
proposed Sec. 422.208(f)(2)(iv). For panel sizes that fall between the
table values, proposed Sec. 422.208(f)(2)(iii)(A) directed use of
linear interpolation to identify the required deductible. In addition,
our proposed Sec. 422.208(f)(2)(iii)(B) provided for use of Table 1
when using non-risk patients equivalents in determining the panel size.
In addition to the maximum deductible permitted for per-patient
combined stop-loss protection, proposed Table 1 included a ``net
benefit premium'' (NBP) column. We explained in the proposed rule how
the NBP would be used to identify the attachment points for separate
stop-loss insurance for institutional services and professional
services when using the Separate Stop-Loss Insurance Deductibles Table
(Table PIP-12). We explained how the NBP column would not be used when
combined insurance was used to satisfy the stop-loss protection
requirements in Sec. 422.208. 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. We also explained
how Table PIP-12 was calculated using a methodology similar to the
calculation of Table PIP-11 and proposed to codify the methodology for
developing Table PIP-12 in proposed Sec. 422.208(f)(2)(v) and (vi).
Similar to our approach in Table PIP-11, we used Fee-For-Service
Medicare Part A and Part B claims data to develop Table PIP-12. We
estimated professional potential payments and institutional potential
payments using the same data set as was used for populating Table PIP-
11. The central limit theorem was used to obtain the distribution of
claim means, and deductibles were obtained at the 98 percent confidence
level. The methodology and assumptions for Table PIP-12 were proposed
to be codified in Sec. 422.208(f)(2)(vi) as the standards for
developing and updating Table PIP-12 in the future as necessary.
BILLING CODE 4120-01-P

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[GRAPHIC] [TIFF OMITTED] TR16AP18.013

[[Page 16682]]

[GRAPHIC] [TIFF OMITTED] TR16AP18.014

BILLING CODE 4120-01-C
We also explained how our proposal would use Table PIP-12. The NBP
would be identified from the third column of Table PIP-11, based on the

[[Page 16683]]

panel size for the applicable physician or physician group. Our
proposal permitted use of linear interpolation for panel sizes that did
not appear on Table PIP-11. The cell in Table PIP-12 with a numerical
entry that is greater than or equal to the NBP would be selected; the
associated combination of professional and institutional deductible
levels for that NBP would be the maximum deductibles for the required
stop-loss protection for each of those respective claims. The coverage
identified using Table PIP-12 this way was proposed as the required
stop-loss protection for separate per-patient coverage pursuant to
proposed Sec. 422.208(f)(2). We proposed to codify the use of Table
PIP-12 for deductibles for separate stop-loss insurance professional
services and institutional services based on the NBP in paragraph
(f)(2)(v).
We solicited specific comments on the proposed regulation, as
follows:
Whether the methodology for developing Tables PIP-1 and
PIP-2 as codified in proposed paragraphs (f)(2)(iv), (vi), and (vii)
provided sufficient detail;
Whether the proposed regulation text clearly identified
how the tables should be used; and
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.
We received the following comments and our responses follow:
Comment: We received several comments in favor of CMS updating the
deductible amounts.
Response: We thank the commenters for the support. We are updating
the deducible amounts and finalizing this regulation as proposed with
clarifications and changes described in this final rule.
Comment: Several commenters agreed with CMS that the stop loss
tables should be regularly updated for cost and utilization. Some
suggested a 2- to 3-year cycle.
Response: We concur with this comment, will monitor cost and
utilization every 2 to 3 years, and will implement future updates to
the stop loss tables when CMS determines that changes in medical costs
and changes in patterns of health care utilization justify an update.
Comment: Some commenters stated that CMS should consider changes to
the physician incentive plan rule to better reflect changes in the
incentive arrangements that are currently being used. These commenters
also asked that CMS consider a broad update to the rule and its
underlying methodology and allow for greater stakeholder input. They
also stated that the changes being proposed further complicate an
already complicated regulation and add technical jargon.
Response: CMS will seek further dialogue with stakeholders on this
topic to inform future rulemaking. We are mindful of the need to
minimize complexity and make our rules as transparent as possible.
However, a degree of complication cannot be avoided in our attempt to
add the flexibility needed to handle the many variations in risk
sharing arrangements between MA plans and physicians. We replaced the
term ``DGCP'' with the term ``risk patients,'' which we believe is
clearer.
Comment: A commenter requested that CMS add the following language
to the regulation at Sec. 422.208(f)(2)(iii)(A) ``Stop-loss protection
must cover 90 percent of costs of referral services 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 of
referral services above the deductible.''
Response: We agree and have made this change to the regulation. We
are finalizing paragraph (f)(2)(iii) with this statement. We are also
finalizing the text to refer more consistently to ``the required stop-
loss protection'' to be clear that the protection described in this
statement with the deductibles identified in the tables is required.
Comment: Several commenters questioned CMS' interpretation of the
definition of potential payments to physicians.
Response: It is not our intention to change the definition of
potential payments in the current regulation. Per the regulation,
potential payments means the maximum payments possible to physicians or
physician groups including payments for services they furnish directly,
and additional payments based on use and costs of referral services
such as withholds, bonuses, capitation or any other compensation to the
physician or physician group. It does not include payments that ``pass
through'' the physician or physician group to compensate other health
care providers for referred services. In the development of Tables PIP-
11 and PIP-12, potential payments were derived from payments for Parts
A and B services provided directly by the physician in the sample
claims data. Our interpretation of potential payments is a reasonable
approximation of what portion of the full global capitation amount can
be expected to be earned by the physician or physician group including
withholds and bonuses. We use this amount to trigger substantial
financial risk in the determination of the maximum deductible in the
Tables.
Comment: Commenters requested that CMS to clarify how it defines
``global capitation''.
Response: We are finalizing a definition for the term ``Global
capitation'' in Sec. 422.208(a) to avoid ambiguity. Global capitation
means a specific type of ``capitation'' that includes both professional
and institutional services. Services covered by global capitation may
also include prescription drug benefits and supplemental benefits as
well as basic benefits (as those terms are defined in Sec.
422.100(c)). For purposes of Tables PIP-11 and PIP-12 global capitation
includes all Parts A and B services except hospice. If the capitation
for a physician group is different from all Parts A and B services
except hospice, the group must use an actuarially equivalent amount of
stop loss coverage.
Comment: A commenter asked for more detail with respect to the
description of the methodology including a detailed calculation for one
of the cells in the table.
Response: The methodology and calculation of the panel size for the
Single Combined Deductible of $100,000 in the Combined Stop-Loss
Insurance Deductible Table (Table PIP-11) is presented here and the
parameters for the methodology for this table is finalized in paragraph
(f)(2)(iv). Per the PIP regulation, if the physician incentive plan
places a physician or physician group at substantial financial risk for
services the physician or physician group does not furnish itself the
MA organization must assure that the physician or physician group has
stop loss protection. Substantial financial risk is defined to be 25
percent of potential payments.
We used the central limit theorem to determine the required panel
size for each deductible level in Table PIP-11 and Table PIP-12. Our
goal is to determine the number of individuals required for each
deductible so that there is a 98 percent probability that actual
referral claims net of deductible are less than the sum of expected
referral claims net of deductible plus 25 percent of potential
payments.
We model the distribution of claim amounts using the following
statistical formula and the Central Limit Theorem:
Aggregate referral claims for a group of n individuals

[[Page 16684]]

[GRAPHIC] [TIFF OMITTED] TR16AP18.015

Where

Xi is the annual referral claim amount net of deductible paid by the
physicians with mean ([micro]) and variance ([sigma]\2\) for an
individual, calculated on a per capita basis. Xi is assumed to be
independently and identically distributed for each individual.
Statistics are calculated using a sample of 340,000 randomly
selected beneficiaries from the Medicare Part A and B claims data
excluding hospice,
[micro] is the population mean for physician paid referral claims
net of the deductible,
[sigma] is the standard deviation for physician paid referral claims
net of the deductible level.

For this example, the standard deviation for an attachment point of
$100,000 is $17,158, r is our estimate of potential payments which does
not vary relative to the deductible and is calculated to be $1,400
PMPY, n is the panel size, and N(n x [micro], n x [sigma]\2\) denotes
the Normal distribution with mean, n x [micro], and variance, n x
[sigma]\2\.
Given the definitions and assumptions above, we solve for the
following probability:

[GRAPHIC] [TIFF OMITTED] TR16AP18.023

Standardizing and solving for the Z value we attain the formula

(n[micro] + n0.25r - n[micro]) / ([sigma][radic]n) = Z0.98 =
2.05 (Note that this is a one-tail test)
[GRAPHIC] [TIFF OMITTED] TR16AP18.019

Therefore, the cell on the combined table with a deductible of
$100,000 corresponds to at least 10,100 patients.
The net premium is then calculated as 90% of the sum of the claims
above $100,000, divided by the number of patients.
Comment: We received a comment recommending that CMS consult with
stop loss coverage experts in developing this regulation. We believe
that this regulation, as finalized, is consistent with the applicable
actuarial principles and practices.
Response: Over the years, CMS has had numerous discussions with
qualified actuaries regarding our method of determining stop-loss
insurance requirements.
After consideration of the comments, we are finalizing changes to
the regulation text at Sec. 422.208(f)(2)(iii) through (vi)
substantially as proposed. We are finalizing the five new definitions;
the codification of the methodology CMS would use to update the stop-
loss deductible limits; and the requirements for using the tables to
identify the stop-loss protection required when a multi-specialty
physician practice in a global capitation arrangement is at risk for
substantial financial loss; and regulation text reiterating that stop-
loss protection must cover at least 90 percent of the costs of referral
services above the deductible or an actuarially equivalent amount of
the costs of referral services that exceed the per-patient deductible
limit. We are finalizing definitions for the terms ``Combined Stop-Loss
Insurance Deductible Table (Table PIP-11)'' and the ``Separate Stop-
Loss Insurance Deductible Table (Table PIP-12)'' to refer to the tables
developed using the methodologies codified at paragraphs (f)(2)(iv) and
(vi). We are also finalizing definitions for the terms ``global
capitation,'' ``net benefit premium,'' and ``non-risk patient
equivalents'' as those terms are discussed above. Finally, we are also
finalizing changes to the regulation compared to the proposal to better
organize and clarify the requirements.
c. Actuarially Equivalent Arrangements
We stated in the proposed rule that, over the past several years,
MA organizations have requested that CMS update the tables as well as
provide additional flexibilities around protection arrangements. We
noted our belief 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
we provided where actuarially equivalent modifications might be
necessary included: Global capitation arrangements that include some,
but not all Part A and B services; global capitation arrangements that
include supplemental benefits and/or drug benefits; capitation
arrangements that include only physician services; stop-loss policies
with different coinsurances; stop-loss policies that use medical loss
ratios (MLRs), 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. We proposed to amend Sec. 422.208
to provide, as a new paragraph (f)(3), that stop-loss protection would
comply with the requirements so long as it were certified as
actuarially equivalent to the coverage described in paragraph (2),
meaning the coverage described in the tables developed using the
methodology codified in paragraph (f)(2). We proposed that
certification of the actuarially equivalent protection must be done by
an actuary who meets the qualification standards established by the
American Academy of Actuaries, follows the standards of the Actuarial
Standards Board, develops the deductibles of the alternate coverage to
be actuarially equivalent to the coverage in the tables, and makes the
computations in accordance with generally accepted actuarial principles
and practices.
We received the following comments and our responses follow:
Comment: We received many comments in favor of and two against
allowing actuarial equivalent arrangements. Supporters welcome the
flexibility for compliance with the PIP regulation. A commenter was
concerned with added complexity and administrative burden, the other
commenter pointed out a typographical error.
Response: CMS is finalizing as proposed to allow actuarial
equivalent arrangements. Given that the finalized tables address only
multi-specialty provider groups selecting per-person stop-loss
insurance, allowing actuarial equivalence is critical to meeting the
requirements of this regulation. The typographical error referring to
stop-loss protection for non-capitated

[[Page 16685]]

arrangements has been corrected in the final regulation text. We are
finalizing Sec. 422.208(f)(3) as proposed to permit MA organizations
to use other stop-loss protection arrangements so long as the following
conditions are met: The deductibles for the alternate coverage are
actuarially equivalent to the coverage described in paragraph (f)(2);
the actuary makes the computations in accordance with generally
accepted actuarial principles and practices; and the actuary is
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.
After consideration of the comments, we are finalizing the
regulation text in Sec. 422.208(f)(3) substantively as proposed with
revisions to correct grammatical errors and to refer to the defined
tables as appropriate.
d. Non-Risk Patient Equivalents Included in Panel Size
We stated in the proposed rule that we believe the number of a
physician's or physician group's non-risk patients should be taken into
account when determining the stop-loss deductible(s) for risk
arrangements. 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 proposed, at Sec.
422.208(f)(2)(iii) and (v), to allow Non-risk patient equivalents
(NPEs), such as Medicare FFS patients or commercial FFS 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, both
Medicare and non-Medicare, divided by an estimate of what the average
capitation per member per year (PMPY) would be for all non-global risk
patients. Both the numerator and denominator are for physician services
that are rendered by the physician or physician group. We proposed that
the deductible for the stop-loss insurance that is required under this
regulation will be the lesser of: (1) The deductible for globally
capitated patients plus $100,000; or (2) the deductible calculated for
globally capitated patients plus NPEs. The deductible for these groups
will be separately calculated using the tables and requirements in our
proposed regulation at paragraphs (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 proposed the same
flexibility for combined per-patient stop-loss insurance and the
separate stop-loss insurances. We are finalizing this as proposed.
We received the following comments and our responses follow:
Comment: Several commenters asked CMS to clarify how non-risk
patient equivalents (NPEs) are calculated and used.
Response: NPEs are a measure of the number of non-risk patients,
both Medicare and non-Medicare. To calculate NPEs, estimate the annual
claims for physician rendered services for non-risk patients. Then
estimate what a PMPY capitation for physician rendered services would
be if non-risk patients were capitated for physician rendered services.
The quotient is the number of NPEs. As noted above, we are finalizing a
definition for the term to avoid ambiguity.
For example, assume that the physician claims for non-risk patients
is expected to be roughly $22 million. Assume that the average
capitation for physician rendered services is $2,000. The number of
NPEs would be $22 million divided by $2,000, which is 11,000 non-risk
patient equivalents. This calculation provides a standard cost level
for non-risk patients regardless of their utilization.
To use, assume that the physician medical practice has 7,000 risk
patients. One would first look up the deductible (or attachment point)
for combined coverage using 7,000 patients. Then, look up the
attachment point using 18,000 = (7,000 + 11,000) patients. The final
attachment point is the lesser of the attachment point with 18,000
patients, or $100,000 plus the attachment point with 7,000 patients.
Therefore the NPEs can add a maximum of $100,000 to the combined
attachment point.
Comment: A commenter asked for clarification about how CMS, in its
stop-loss methodology, determines what is a risk pool and how it
affects the number of risk patients. Another commenter asked about the
pooling level.
Response: It is not our intent to alter the authority to pool
patients provided in Sec. 422.208(g), which allows a physician or
physician group to pool, under certain circumstances, the Medicare and
Non-Medicare patients for whom they accept capitation risk to determine
panel size. Stated differently, pooling allows at-risk commercial, at-
risk Medicare, and at-risk Medicaid patients to be considered in the
determination of the panel size. With the amendment we are finalizing
in Sec. 422.208(f)(2), we are authorizing the use of Non-risk Patient
Equivalents (NPE) so that the panel size includes non-risk patients
served by the physician or physician group. With regard to the level of
pooling, if there is an intermediary involved, the pooling may be
accomplished at the physician/physician group level or the intermediary
level. See the response to the question regarding how the PIP
regulation is applied when an intermediary is involved for guidance in
section II.C.5.a of this final rule.
Comment: Some commenters questioned how MA plans can satisfy their
regulatory obligation given the situation in which physicians or
physician groups will not share sufficient patient income information
for the MA plan to determine NPE. Some suggested other measurements.
Response: CMS will allow MA plan sponsors to accept attestations
regarding the calculation of NPE from physicians or physician groups.
Comment: A commenter recommended that CMS amend the regulation at
(f) by adding a dollar sign when using the term DGCP + 100,000 so that
it states DGCP + $100,000, and is therefore clear what unit is being
applied. (See (f)(2)(iii)(B) and (f)(2)(v)(B).)
Response: We agree and have made the change to the physician
incentive regulation as proposed in the comment. We have also removed
the reference to DGCP and replaced it with the phrase ``risk patients''
for continuity with the original regulation.
We are finalizing amendments to Sec. 422.208 to permit use of the
non-risk patient panel size in identifying the required stop-loss
protection in paragraph (f)(2)(iii).
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. 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

[[Page 16686]]

the interim final rule (IFR) adopted on September 18, 2008 (73 FR
54226).
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 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. Sec. 422.2274(b)(2)(i), 422.2274(b)(2)(ii), 423.2274(b)(2)(i),
and 423.2274(b)(2)(ii), but we failed to do so. This language is no
longer relevant, as the current compensation structure is not based on
the initial payment, but having the language in the regulations has
created confusion with plans and brokers.
We proposed to make a technical correction to the existing
regulatory language at Sec. Sec. 422.2274(b) and 423.2274(b). We
proposed 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 proposed to renumber the existing provisions under
Sec. Sec. 422.2274(b) and 423.2274(b) for clarity.
Although not summarized in the preamble of the proposed rule, we
also proposed to correct the language in the newly redesignated Sec.
423.2274(b)(2)(iii). The current regulation text reads, ``When a
beneficiary disenrolls from an MA plan. . . .'' Because the reference
is within the Part D regulations (section 423), the regulation should
refer to Part D sponsors. We proposed regulation text to correct the
text so that the reference to ``an MA plan'' instead refers to ``a Part
D sponsor.'' (82 FR 56526)
We received the following comments, and our response follows:
Comment: A few commenters indicated support for the proposed change
citing decreased burden on plans and requested that we adopt the change
as proposed.
Response: We appreciate the support for this provision.
Comment: A commenter indicated support for the provision but also
requested that CMS investigate current compensation and administrative
fees charged by field marketing organizations (FMO) for exchanges.
Response: We appreciate the support for the provision. The request
to investigate the compensation and administrative fees of exchange
FMOs is outside the scope of this regulation but we will take it under
consideration.
All of the comments we received were generally supportive, and
therefore we are finalizing the proposal to redesignate paragraphs
(b)(1)(iii) as (b)(1)(iv); redesignate paragraphs (b)(2)(iii) as
(b)(1)(iii); remove paragraphs (b)(2)(i) and (ii); and redesignate
paragraphs (b)(3) as paragraphs (b)(2) in Sec. Sec. 422.2274 and
423.2274, without modification. In addition, we are finalizing the
technical correction to newly redesignated paragraph Sec.
423.2274(b)(2)(iii) to replace the reference to an MA plan with a
reference to a Part D sponsor.
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.
As discussed in the proposed rule, we have become aware since
implementation of the provision in Sec. Sec. 422.2272(e) and
423.2272(e) that the regulation does not allow latitude for punitive
action by the sponsoring organization 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

[[Page 16687]]

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), that requires 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 proposed to delete Sec. Sec. 422.2272(e) and 423.2272(e), the
provisions that limit what MA organizations and Part D sponsors can do
upon discovery 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).
We received the following comments, and our response follows:
Comment: We received ten comments supporting the change as
proposed.
Response: We appreciate the support from industry of this proposed
change.
Upon consideration of the comments, we are finalizing the removal
of paragraphs (e) from Sec. Sec. 422.2272 and 423.2272 as proposed.
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; and 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 and 1839(b) of the Act, Sec. Sec. 406.32(d), 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 proposed 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.
We received the following comments and our response follows:
Comment: A few commenters stated that they believed this proposal
would only minimally impact plans.
Response: We agree that this change to Sec. 405.924(a) will
minimally impact plans since these premium adjustments are already
considered initial determinations.
After consideration of the public comments, we are finalizing the
change to Sec. 405.924(a) as proposed.
9. Eliminate Use of the Term ``Nonrenewal'' 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 bases and procedures for contract termination
versus those for nonrenewal of 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 nonrenewals 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 nonrenewal authority. We proposed to revise our use of
terminology such that that the term ``nonrenewal'' only refers to
timely elections by contracting organizations to discontinue their
contracts at the end of a given year. We

[[Page 16688]]

proposed to remove the CMS initiated nonrenewal authority codified 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 nonrenewals 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
MA or Part D contract.
The similarities between CMS-initiated nonrenewal and termination
are demonstrated by the extensive but not complete overlap in bases for
CMS action under both processes. For example, both 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. Further, 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 proposed
striking these provisions from the nonrenewal portion of the regulation
and adding them to the list of bases for CMS-initiated contract
terminations in Sec. Sec. 422.510 and 423.509.
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 proposed
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 during the annual election
period. Therefore, we proposed 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.
We received the following comments and our response follows:
Comment: CMS received only a few comments on this proposal, all
expressing general support. The commenters expressed particular
appreciation for our proposal to preserve the requirement that affected
beneficiaries receive notice of a CMS-initiated termination at least 90
days prior to the December 31 effective date when CMS makes such a
determination on or before August 1. The commenters noted that the 90-
day notice deadline enables affected beneficiaries to make a needed
plan election during the annual coordinated election period.
Response: CMS appreciates the expressions of support for the
proposal. We note that in the event of a CMS-initiated contract
termination, the contracting organization has administrative appeal
rights that, if exercised, could prevent affected beneficiaries from
receiving plan termination notices during the annual coordinated
election period. When CMS terminates an MA organization or Part D plan
sponsor contract under Sec. Sec. 422.510 or 423.509, the organization
may request a review of the decision by a hearing officer under
Sec. Sec. 422.660 and 423.650. Generally, a request for a hearing
generally postpones the effective date of the termination (except, for
example, in instances such as financial insolvency or imminent threats
to beneficiary health and safety), meaning that beneficiary notices
would be delayed until after the completion of the hearing process. So,
while we intended to establish beneficiary notification deadlines that
align with the annual coordinated plan election period, we recognize
that in some instances, the exercise of administrative appeal rights by
terminated organizations may prevent that outcome for beneficiaries.
Comment: Some commenters asked CMS to clarify whether the proposed
change would prohibit MAOs from expanding or marketing other plans in
the service area in which one of its plans was terminated or non-
renewed.
Response: The proposal would make no changes to rules that govern
an MA organization's or Part D plan sponsor's ability to offer or
market other plans in the same service area affected by the CMS-
initiated termination. CMS' decision to terminate an organization's MA
or Part D contract would have no impact on the status of any other type
of MA or Part D contract the organization may operate in the same
service area as the terminated contract. A CMS-initiated termination
may affect the contacting organization's ability to qualify for a new
or expanded contract covering the same service area as the terminated
contract. Under Sec. Sec. 422.502(b)(3) and 423.503(b)(3), CMS may
deny applications from organizations for which CMS has terminated a
contract within the 38 months preceding the contract qualification
application deadline. Our proposal does nothing to change that
authority. As is currently the case, CMS' application of this authority
depends on the facts associated with each case, including the type of
contract (for example, MA coordinated care plan, MA private fee-for-
service) and the

[[Page 16689]]

service areas associated with the terminated contract and the new
application.
Comment: Some commenters asked CMS to clarify how the proposed
change would affect the plan information displayed on Medicare.gov.
Response: CMS proposed eliminating the category of CMS-initiated
nonrenewals primarily to reduce confusion among sponsoring
organizations and different CMS staff concerning the authority under
which CMS or a contracting organization may end a Medicare contract and
the instructions that apply to each process (for example, timing of
contract decision, beneficiary notice requirements). In implementing a
termination or nonrenewal, it is critical for the party taking the step
to end the contract to be clearly identified so that the end of the
contract can be properly implemented. Generally, enrollees need only
know when their plan will no longer be available, not the party
responsible for the decision to discontinue the plan. Therefore, we do
not expect the proposed regulatory change to have an impact on how and
what plan information is displayed on Medicare.gov, since it is a tool
designed for use primarily by beneficiaries. Nevertheless, CMS will
keep this proposed change in mind when considering any updates to the
Medicare.gov website.
Based on our consideration of the comments and the expressions of
support for this primarily technical change to the regulations
governing the MA and Part D contract termination processes, we are
finalizing the amendments to Sec. Sec. 422.506(b), 422.510(a),
422.510(b), 423.507(b), 423.509(a) and 423.509(b) as proposed with two
minor modifications to Sec. Sec. 422.510(b) and 423.509(b). In
reviewing the proposed regulation text, we found that the provisions
directing organizations with contracts terminated prior to August 1 to
issue beneficiary notices at least 90 days prior to the end of the
current contract year should have been added to Sec. Sec.
422.510(b)(1) and 423.509(b)(1), which govern ordinary terminations,
not Sec. Sec. 422.510(b)(2) and 423.509(b)(2), which govern immediate
contract terminations. Therefore, we have deleted the references in the
regulation text to Sec. Sec. 422.510(b)(2)(v) and 423.509(b)(2)(v) and
placed the relevant language at Sec. Sec. 422.510(b)(1)(iv) and
423.509(b)(1)(v).
We also identified a grammatical error in the proposed Sec.
422.510(b)(2) and an inconsistency with the language of Sec.
423.509(b)(2)(v) which we are correcting in the finalized text. As a
result we are making the necessary grammatical correction in the new
Sec. 422.510(b)(1)(iv) and making it consistent with Sec.
423.510(b)(1)(v).

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 (PRA) requires that we solicit comment
on the following issues:
The need for the information collection and its usefulness
in carrying out the proper functions of our agency.
The accuracy of our estimate of the information collection
burden.
The quality, utility, and clarity of the information to be
collected.
Recommendations to minimize the information collection
burden on the affected public, including automated collection
techniques.
In the November 28, 2017 (82 FR 56336) proposed rule, we solicited
public comment on each of these issues for the following sections of
the rule containing information collection requirements (ICRs). We
received comments and we provide a summary of the comments and our
responses under the respective ICR section.

A. Wage Data

While we did not receive comments related to any of the private
sector or individual occupations or wage estimates, we are revising our
wage estimates for individuals. To derive average costs for individual
respondents, the proposed rule used the federal minimum wage of $7.27/
hour as set out under the Fair Labor Standards Act (29 U.S.C. 206(a)).
Based on internal review, we are now adopting a rate of $23.86/hour
from the U.S. Bureau of Labor Statistics (BLS).
1. Private Sector Wages
To derive average costs, we used data from 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, Table F1
presents the mean hourly wage, the cost of fringe benefits and overhead
(calculated at 100 percent of salary), and the adjusted hourly wage.

Table 13--National Occupational Employment and Wage Estimates
----------------------------------------------------------------------------------------------------------------
Fringe
Occupation Mean hourly benefits and Adjusted
BLS occupation title code wage ($/hr) overhead ($/ hourly wage ($/
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
----------------------------------------------------------------------------------------------------------------

[[Page 16690]]

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.
2. Wages for Individuals
To derive average costs for individuals, we used data from the May
2016 National Occupational Employment and Wage Estimates for our salary
estimate. We believe that the burden will be addressed under All
Occupations (occupation code 00-0000) at $23.86/hour since the group of
individual respondents varies widely from working and nonworking
individuals and by respondent age, location, years of employment, and
educational attainment, etc.
Unlike our private sector adjustment to the respondent hourly wage,
we are not adjusting this figure for fringe benefits and overhead since
the individuals' activities would occur outside the scope of their
employment.

B. Information Collection Requirements (ICRs)

1. ICRs Regarding the Implementation of the Comprehensive Addiction and
Recovery Act of 2016 (CARA) Provisions (Sec. 423.153(f))
Excluding beneficiary appeals, the following requirements and
burden will be submitted to OMB for approval under control number 0938-
0964 (CMS-10141). We did not receive any public comments pertaining to
our proposed burden estimates, therefore we are finalizing them as
proposed.
As discussed in section II.A. of this rule, Sec. 423.153(f)
implements 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. The rule stipulates that Part D plan sponsors
are 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 (currently approved
under OMB control number 0938-0964 (CMS-10141). However, the approval
only accounts for the notice that is currently sent to beneficiaries
who have a POS edit put in place to monitor opioid access (which will
count as the initial notice described in the preamble of this final
rule and defined in Sec. 423.153(f)(4)) and does not capture the
second notice that at-risk beneficiaries will receive confirming their
determination as such or the alternate second notice that potentially
at-risk beneficiaries will 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 are using an average of 923 edits per
year (4,617 POS edits/5 years) to assess the burden under Sec.
423.153(f). If we assume that the number of edits or access to coverage
limitations will likely double due to the addition of pharmacy and
prescriber ``lock-in'' to OMS by this rulemaking, to approximately
1,846 such limitations, we then estimate a total of 3,693 initial and
second notices (1,846 limitations x 2) corresponding to such edits/
limitations. We estimate it will 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 hours x
$39.22/hour) or $3.26 per notice ($12,040.54/3,693 notices).
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) 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 all of the
notices into their claims systems. This results in a total one-time
burden of 1,095 hours (5 hours per sponsor x 219 sponsors) at a cost of
$89,680.50 (1,095 hours x $81.90/hour) or $409.50 per sponsor
($89,680.50/219 sponsors).
In aggregate, the burden to upload and prepare the additional
second notice is 1,402 hours (307 hours + 1,095 hours) at a cost of
$101,722 ($12,041 + $89,681).
Revisions to Sec. 423.38(c)(4) will 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 codified in Sec.
423.38(c)(4), this SEP is extended to include ``other subsidy-eligible
individuals'' so that both full and partial subsidy individuals are
treated uniformly. As such, the SEP limitation in this final rule will
also be extended to include both full and partial subsidy individuals.
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 until such identification is terminated in
accordance with Sec. 423.153(f).
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 initial notice to
the beneficiary that he or she has been identified as a potential at-
risk beneficiary.
As explained previously, 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 to monitor opioid
access. This notice is covered under currently approved OMB control
number 0938-0964 (CMS-10141), and will count as the initial notice
described in the preamble of this final rule and defined in Sec.
423.153(f)(4)). This initial notice will include language to notify an
individual of the inability to use the duals' SEP. Therefore, the
burden associated with the notification of the inability to use the
duals' SEP is currently approved under OMB control number 0938-0964
(CMS-10141).
This final rule also codifies an existing provision whereby an
individual can make an election within 3 months of a gain, loss, or
change to Medicaid or LIS eligibility, or notification of such a
change, whichever is later.
An individual who is determined to be a potential at-risk or an at-
risk individual will be able to use this SEP to change plans. Also, if
a potential at-risk or at-risk individual is eligible for another
election period (for example, AEP, OEP, or other SEP), this SEP
limitation will not prohibit the individual from making an election.
Providing a limitation for dually- and other LIS-eligible at-risk
beneficiaries after the initial notification will decrease sponsor
burden in processing disenrollment and enrollment requests for dual-
and LIS-eligible beneficiaries who wish to change plans as outlined
later in this section.
We estimate that 1,846 beneficiaries will meet the criteria to be
identified as an at-risk beneficiary and have a

[[Page 16691]]

limitation implemented. About 76 percent of the 1,846 beneficiaries are
estimated to be LIS (1,403 = 1,846 beneficiaries x 0.76). Approximately
10 percent of LIS-eligible enrollees use the duals' SEP to make changes
annually (140 = 1,403 x 0.10). Thus we estimate, at most, 140 changes
per year will no longer take place because of the duals' SEP enrollment
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 million 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.
This final rule also provides that the review 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 will 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 will have rights to an expedited
redetermination. 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 burden for preparing and filing the appeal is exempt
from the requirements of the PRA; however, the burden for appeals is
included in the regulatory impact analysis of this final rule.
In aggregate, these components of this provision will result in an
annual net cost of $101,722 (see Tables F2 and F3).

Table 14--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
----------------------------------------------------------------------------------------------------------------
* This rule does not impose any new or revised information collection requirements/burden.
** Exempt from the PRA.

Table 15--Estimated Burden for the CARA Provisions
[In hours]
----------------------------------------------------------------------------------------------------------------
2019 2020 2021 3-year average
----------------------------------------------------------------------------------------------------------------
Preparation and Upload Notices.................. $101,722 0 0 $33,907.3
SEP Limitation *................................ 0 0 0 0
Appeals **...................................... N/A N/A N/A N/A
---------------------------------------------------------------
Total....................................... 101,722 0 0 33,907.3
----------------------------------------------------------------------------------------------------------------
* This rule does not impose any new or revised information collection requirements/burden.
** Exempt from the PRA.

2. 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)
Enrollment requirements and burden are currently approved by OMB
under control number 0938-0753 (CMS-R-267). Since this rule will not
impose any new or revised requirements/burden and we did not receive
any public comments pertaining to the burden discussion that was set
out in our proposed rule, we are not making any changes under the 0938-
0753 control number. (Note: While CMS-R-267 has expired, we are
proposing to reinstate the collection through this final rule.) We
acknowledge that the establishment, through subregulatory guidance, of
a new and simplified positive (that is, ``opt in'') election process
that would be available to all MA organizations for their commercial,
Medicaid or other non-Medicare plan members, may result in a minimal
reduction in burden; however, this potential reduction is not
quantifiable, and therefore, de minimus.
We note that this enrollment mechanism is optional and that it
existed prior to this regulation. As outlined in the proposed rule, we
are codifying an existing process that has been in place for more than
a decade. In terms of enrollment operations, the default enrollment
process has elements similar to beneficiary-initiated enrollments
(determining eligibility, processing the enrollment transaction and
notifying the beneficiary) and, as such, the overall burden for
enrollment processing is not changing and is captured in our existing
PRA package. With regard to the default enrollment notice, we note that
there is not a standardized notice that previously existed, nor is a
new standardized notice being created; this enrollment notice serves
the same purpose as the notice required for beneficiary-initiated
enrollments, in that it informs the beneficiary of the enrollment start
date and of other information necessary to access plan benefits and
services.
As is the case currently for the seamless conversion enrollment
process, MA organizations choosing to offer a default enrollment
process will request approval from CMS and, if approved, implement a
process with notification and processing elements similar to those
carried out for beneficiary initiated enrollments, including issuance
of a plan-developed notice to inform individuals of the

[[Page 16692]]

enrollment and of other important plan information.
As discussed in section II.A.7. of this rule, we are finalizing our
proposal to revise Sec. Sec. 422.66 and 422.68 by: Codifying the
requirements for default enrollment that are currently set out in
subregulatory guidance,\78\ revising current practice to limit the use
of this type of enrollment mechanism, and clarifying the effective date
for ICEP elections. This will 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 the
provision 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 will not change. For those
MA organizations that want to use this enrollment mechanism and request
and obtain CMS approval, the administrative requirements will remain
unchanged from the current practice.
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\78\ Chapter 2 of the Medicare Managed Care Manual found at
https://www.cms.gov/Medicare/Eligibility-and-Enrollment/MedicareMangCareEligEnrol/index.html?redirect=/MedicareMangCareEligEnrol/.
---------------------------------------------------------------------------

As indicated in the preamble to this final rule, we are finalizing
the proposed changes with the following modifications, none of which we
believe will result in any impact to the Medicare Trust Funds.
Section 422.66(c)(2)(i) is revised to clarify that we will
allow default enrollment into a FIDE-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.
Section 422.66(c)(2)(i) is revised to clarify that, for an
organization to be approved for default enrollment, it must have an
overall quality rating, from the most recently issued ratings, under
the rating system described in Sec. Sec. 422.160 through 422.166, of
at least 3 stars or is a low enrollment contract or new MA plan as
defined in Sec. 422.252. In addition, the MA organization must not be
under an enrollment suspension.
Section 422.66(c)(2)(ii) is revised to include an approval
period not to exceed 5 years, subject to CMS authority to rescind or
suspend approval if the plan is non-compliant.
Section 422.66(c)(2)(iv) is revised to state that the
notice issued by the MA organization will include information on the
differences in premium, benefits and cost sharing between the
individual's current Medicaid managed care plan and the dual eligible
MA special needs plan and the process for accessing care under the MA
plan; an explanation of 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 MA plan; and a general description of alternative Medicare
health and drug coverage options available to an individual in his or
her Initial Coverage Election Period.
Section 422.66(c)(2)(iv) is revised to clarify that the
mandatory notice is in addition to the information and documents
required to be provided to new enrollees under Sec. 422.111.
3. ICRs Regarding Passive Enrollment Flexibilities To Protect
Continuity of Integrated Care for Dually Eligible Beneficiaries (Sec.
422.60(g))
As discussed in section II.A.7. of this rule, we are finalizing a
limited expansion of passive enrollment authority under Sec.
422.60(g). More specifically, the new provisions at Sec. 422.60(g)
will allow CMS, in consultation with a state Medicaid agency, to
implement passive enrollment procedures in situations where criteria
identified in Sec. 422.60(g)(1)(iii) and (g)(2) are met. We are
finalizing these provisions as proposed, with one exception.
Specifically, we are modifying Sec. 422.60(g)(4) to require, under new
Sec. 422.60(g)(4)(i)(B), that plans receiving passive enrollments
under Sec. 422.60(g)(1)(iii) send two notices to enrollees. We also
clarify that for passive enrollments under Sec. 422.60(g)(1)(i) and
(ii), only one notice will continue to be required. Accordingly, we are
modifying Sec. 422.60(g)(4) to require, under new paragraph
(g)(4)(i)(B), that plans receiving passive enrollments under Sec.
422.60(g)(1)(iii) send two notices to enrollees. New Sec.
422.60(g)(4)(i)(A) will retain the original requirement that one notice
be provided to passive enrollee under Sec. 422.60(g)(1)(iii). However,
we note that we are making no changes to the criteria for determining
plan eligibility for passive enrollment under Sec. 422.60(g)(1)(iii).
In the proposed rule, we estimated that approximately 1 percent of
the 373 active D-SNPs would meet the criteria 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. We therefore estimated that there would be only four
instances (373 SNPs x 0.01) in which CMS would conduct passive
enrollment each year. We did not receive any comments related to the
overall number of respondents or our claim that the provision is exempt
from the PRA.
Because we are not changing the eligibility criteria for integrated
D-SNPs that may receive passive enrollments in this final rule, our
estimated number of affected entities remains four. Since we estimate
fewer than 10 respondents, the information collection requirements and
burden related to the final provisions under Sec. 422.60(g) are exempt
(5 CFR 1320.3(c)) from the requirements of the PRA.
4. ICRs Regarding the Part D Tiering Exceptions (Sec. 423.578(a) and
(c))
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). We did not receive any PRA-
related public comments and are finalizing the proposed provisions
without modification. Since this rule will not impose any new or
revised requirements/burden, we are not making any changes under the
0938-0976 control number. As discussed in section II.A.9 of this rule,
we are finalizing the proposed changes to Sec. 423.578(a) and (c)
without modification. The changes establish 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 changes also clarify the 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 current requirement to send written notice of an adverse
coverage determination is not changed by this rule. We do not expect
that any of the changes will significantly impact the overall volume or
the approval rate of tiering exceptions requests, which represent a
consistently low percentage of total request volume.
5. ICRs Regarding Establishing Limitations for the Part D Special
Enrollment Period for Dual Eligible Beneficiaries (Sec. 423.38(c)(4))
Enrollment processing and notification requirements are codified at

[[Page 16693]]

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 enrollment processing and
notification requirements and burden are currently approved by OMB
under control number 0938-0964 (CMS-10141). Since this rule will not
impose any new or revised requirements/burden, we are not making any
changes under the 0938-0964 control number. We did not receive any
comments pertaining to the burden discussion within our proposed rule.
As discussed in section II.A.10. of this rule, we are finalizing
the proposed provision with modifications. The revisions do not affect
any of our currently approved requirements and burden under OMB control
number 0938-0964.
In section II.A.10. of this final rule, we are revising Sec.
423.38(c) to limit the SEP for dual- and LIS-eligible individuals
(other than potential at-risk or at-risk beneficiaries) so that it is
only available onetime-per-calendar-quarter election during the first
nine months of the year. In addition, we are establishing new SEPs at
Sec. 423.38(c)(9) and (c)(10) for beneficiaries who have a change in
their dual or LIS-eligible status or have been assigned into a plan by
CMS or a State, respectively.
In instances where an individual is not able to utilize the dual
SEP because of this rule's 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 will send a
notice to the beneficiary to acknowledge the voluntary disenrollment
request. If the beneficiary is subject to the dual SEP limitation, the
plan will send a notice to deny their voluntary disenrollment request.
The requirement to acknowledge the beneficiary request and address the
resolution will be the same in both scenarios, but the content of the
notice will be different. As indicated earlier, the requirements and
burden associated with the provision of both notices are currently
approved by OMB under control number 0938-0964 (CMS-10141).
6. ICRs Regarding Medicare Advantage and Prescription Drug Plan Quality
Rating System (Sec. Sec. 422.162, 422.164, 422.166, 422.182, 422.184,
and 422.186)
As discussed in section II.A.11. of this rule, we are finalizing
our proposal to codify the existing measures and methodology for the
Part C and D Star Ratings program. The provisions will not change any
respondent requirements or burden pertaining to any of CMS' Star
Ratings-related PRA packages including: OMB control number 0938-0732
for CAHPS (CMS-R-246), OMB control number 0938-0701 for HOS (CMS-
10203), 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).
We received no comments on our proposed burden discussion and therefore
are finalizing this provision without modification. Since this rule
will not impose any new or revised requirements/burden, we are not
making changes under any of the aforementioned control numbers.
7. ICRs Related to Expedited Substitutions of Certain Generics and
Other Midyear Formulary Changes (Sec. Sec. 423.100, 423.120, and
423.128)
The general notice requirements and burden are currently approved
by OMB under control number 0938-0964 (CMS-10141). We are finalizing
the proposed provision with a modification that has no impact on our
information collection requirements or associated burden estimates (see
section II.A.14. of this rule for details). Since this rule would not
impose any new or revised requirements/burden, we are not making any
changes under the 0938-0964 control number.
In section II.A.14. of the proposed rule, we proposed to expedite
certain generic substitutions and other midyear formulary changes by,
for instance, permitting Part D sponsors to immediately substitute
newly approved generic drugs as specified and, for other formulary
changes, to provide 30 rather than 60 days notice and, as applicable,
provide a month's supply rather than a 60-day supply. Also, we proposed
to except applicable generic substitutions from the transition process.
We are finalizing the provisions as proposed, with the following
changes. We are specifying that Part D sponsors may substitute during
the plan year generics that have are released after the date that they
initially submit their formulary; that substituted generics must be
offered on the same or lower cost-sharing tier rather than at the same
or lower cost-sharing; and that Part D sponsors must provide, when
required, an ``approved'' month's supply--that is, the month's supply
approved in a plan's bid. 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 certain 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 burden.
While the proposed provisions would additionally require general
notice that certain generic substitutions could take place immediately,
this notice would appear in documents that Part D sponsors are already
providing to their enrollees, such as formularies and EOCs. CMS will
provide this language in the model documents it distributes as part of
the yearly revisions to those documents. The marketing and beneficiary
communications general notice requirements and burden are currently
approved by OMB under control number 0938-0964 (CMS-10141). Similarly,
Sec. 423.128(d)(2)(ii) already requires websites to include
information about drug removals and changes to cost-sharing. In other
words, the general notice requirement would not require efforts in
addition to routine updates to beneficiary communications materials and
websites. 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
provision does require notice including direct notice to affected
enrollees. However, our practice has been to approve all generic
substitutions that would meet the requirements of this provision--which
again means that the provisions will just permit those substitutions to
take place sooner.
8. ICRs Regarding the Restoration of the MA Open Enrollment Period
(Sec. Sec. 422.60, 422.62, 422.68, 423.38, and 423.40)
The following requirements and burden will be submitted to OMB for
approval under control number 0938-0753 (CMS-R-267). Since we did not
receive any public comments pertaining to our burden estimates, we are
finalizing them as proposed, with the exception of our wage and cost
estimates for beneficiaries. (Note: While CMS-R-267 has expired, we are
proposing to reinstate the collection through this final rule.)
As discussed in section II.B.1. of this rule, we are finalizing our
proposal to codify the requirements for open enrollment and
disenrollment opportunities at Sec. Sec. 422.60, 422.62, 422.68,
423.38, and 423.40. This action will eliminate the existing MADP and
establish an MA Open Enrollment Period (OEP). This new OEP revises a
previous OEP which will allow MA-

[[Page 16694]]

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 will be collected, the burden associated
with this requirement will 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.\79\ Using
the 3 percent adjustment, we expect that 558,000 individuals (18.6
million MA beneficiaries x 0.03), will use the OEP to make an
enrollment change.
---------------------------------------------------------------------------

\79\ Medicare Beneficiary Database (MBD), December 29, 2016.
https://www.cms.gov/.
---------------------------------------------------------------------------

We estimate it will take a beneficiary approximately 30 minutes
(0.5 hours) at $23.86/hour to complete an enrollment request. The
burden for all beneficiaries is estimated at 279,000 hours (558,000
beneficiaries x 0.5 hour) at a cost of $6,656,940 (279,000 hour x
$23.86/hour) or $11.93 per beneficiary ($6,656,940/558,000
beneficiaries).
There are currently 468 MA organizations in 2017.\80\ 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
will result in approximately 1,192 enrollments per organization
(558,000 individuals/468 organizations) during the OEP each year.
---------------------------------------------------------------------------

\80\ Medicare Beneficiary Database (MBD), December 29, 2016.
https://www.cms.gov/.
---------------------------------------------------------------------------

We estimate it will 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 the 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 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 $6,656,940 and a per beneficiary burden of
30 minutes at a cost of $11.93.
9. ICRs Regarding the Medicare Advantage Plan Minimum Enrollment Waiver
(Sec. 422.514(b))
The requirements and burden associated with the submission of the
minimum enrollment waiver in the application are currently approved by
OMB under control number 0938-0935 (CMS-10237). We received no comments
on our proposed provisions and are finalizing them without change.
Consequently, we are not making any changes under the 0938-0935 control
number.
Section 422.514(b) provides 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. Section 422.514(b)
also requires 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, this rule removes 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). The revision to Sec.
422.514(b)(2) now clarifies that CMS will only accept a waiver through
the application process and that we will allow the minimum enrollment
waiver, if approved by CMS, to remain effective for the first 3 years
of the contract.
10. ICRs Regarding Disclosure Requirements (Sec. Sec. 422.111 and
423.128)
CMS will submit the following requirements and burden to OMB for
approval under control number 0938-1051 (CMS-10260). We did not receive
any comments pertaining to our proposed requirements or burden
estimates. With the exception of the added language in Sec.
422.111(h)(2)(iii), we are finalizing them as proposed.
a. Timing of Disclosure (Sec. Sec. 422.111(a)(3) and 423.128(a)(3))
As discussed in section II.B.4 of this rule, we are finalizing our
proposal to revise the timing of disclosing the information required
under Sec. 422.111(a) and (b) and the timing of such disclosures under
Sec. 423.128(a) and (b) which provide for the disclosure of plan
content information to beneficiaries. Sections 422.111(a)(3) and
423.128(a)(3) require that MA plans and Part D sponsors provide the
information in Sec. Sec. 422.111(b) and 423.128(b) by the first day of
the annual enrollment period. This is a change from current practice,
which requires that plans provide the information 15 days before that
period. Importantly, plans must continue to distribute the ANOC 15 days
prior to the AEP. In other words, the revised provision provides 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.

[[Page 16695]]

Consequently, there is no change in burden.
b. Method of Disclosure (Sec. Sec. 422.111(h)(2) and 423.128(d)(2))
Sections 422.111(h)(2)(i) and 423.128(d)(2)(i) require that plans
maintain a website 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 website ``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) requires the disclosures ``in the manner specified by CMS.''
In Sec. 422.111(h)(2)(ii), we had proposed to modify the sentence
stating that the posting of the EOC, Summary of Benefits, and provider
network information on the plan's website does not relieve the plan of
its responsibility to provide hard copies of these documents to
beneficiaries ``upon request.'' In this final rule, we removed the
``Summary of Benefits'' from that sentence and added ``The summary of
benefits. Posting does not relieve the MA organization of its
responsibility under paragraph (a) of this section to provide hard
copies to enrollees as CMS directs'' to Sec. 422.111(h)(2)(iii)
excepting the Summary of Benefits from electronic delivery of certain
required documents. We also added the phrase ``in the manner specified
by CMS'' in Sec. 422.111(a).
The changes give 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 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, and EOC documents are those for which
electronic posting and delivery of a hard copy upon request are
permissible. Electronic delivery reduces plan burden by eliminating
printing (paper and toner) and mailing costs, when applicable.
Additionally, the IT systems of the plans are already set up to format
and print these documents.
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,\81\ and prescription drug contracts for contract year 2019.
At this time, we have no mechanism for measuring the number of
beneficiaries who have asked to receive this document electronically by
opting into a plan's electronic delivery system. However, we expect
this number to be not significant.
---------------------------------------------------------------------------

\81\ 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,\82\ we estimate that 33 percent of these beneficiaries who are
in MA and Prescription Drug contracts will prefer to opt in to receive
hard copies instead of 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 32,026,000 beneficiaries (47,800,000 beneficiaries x 0.67).
---------------------------------------------------------------------------

\82\ 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 assume a cost of $50 for
10,000 pages. Each toner will 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 (32,026,000 EOCs x $0.75 per
EOC).
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 an annual savings of $54,668,382
($24,019,500 + $24,019,500 + $6,629,382).
11. ICRs Regarding Communication/Marketing Materials and Activities
(Parts 422 and 423, Subpart V)
CMS will submit the following requirements and burden to OMB for
approval under control number 0938-1051 (CMS-10260). As indicated,
public comments were received and are summarized below along with our
response. We are not making any changes to the proposed provisions, and
we are finalizing them as proposed. However, we have made technical
changes to correct errors identified in the proposed rule's burden
analysis. To address a mathematical error, we have updated the total
number of materials submitted from 80,110 to 79,584. We have also
addressed an additional mathematical error for the material no longer
submitted under the 6000 code from 1,407 to 1,667. As a result of these
corrections, the total number of materials that will no longer be
submitted has changed from 39,824 to 39,298, the total number of hours
has changed from 19,912 to 19,649, and the cost saved has changed from
$1,398,372 to $1,357,353. In addition, we removed the PACE and
Medicare-Medicaid Plans from the chart as they will not be impacted by
this regulation.
As discussed in section II.B.5. of this rule, we are finalizing our
proposal 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
revised definition appropriately safeguards 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.'' The
narrowed definition reduces 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.
Consistent with the figures in our currently approved information
collection request, we continue to estimate 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

[[Page 16696]]

analysis, we also must estimate the number of marketing materials that
would have been submitted to us under the current regulatory marketing
definition.
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 16697]]

[GRAPHIC] [TIFF OMITTED] TR16AP18.016

BILLING CODE 4120-01-C
By reducing the number of marketing materials submitted to CMS by
39,298 documents (79,584 current-40,286 excluded) we estimate a savings
of

[[Page 16698]]

19,649 hours (39,298 materials * 0.5 hours per material) at a cost
savings of $1,357,353 (19,649 hours * 69.08 per hour). Some key points
in the calculations are as follows:
There were a total of 79,584 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 this final rule.
The 79,584 figure also excludes codes 15000, 16000, and 17000 Medicare-
Medicaid Plan (MMP) materials. The MMP materials are not being counted
as the decision for review rests with the states and CMS.
Section 1851(h) of the Act 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 79,584.
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 final rule.
Marketing code 4000 covers all advertisements which
constitute 55 percent (43,965) of the 79,584 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)
will 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 79,584.
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 (currently approved under
OMB control number 0938-0763 (CMS-R-262)). Formularies, however, will
no longer fall under the new regulatory definition of marketing and
hence will not be submitted separately for review as marketing
materials.
Marketing code 6000 includes sales scripts which are
predominantly used to encourage enrollment, and will likely still fall
under the scope of the new marketing definition. As such, we must
subtract 1,169 documents (code 6013) from the 79,584 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.
We received the following comments. A summary of the comments and
our response follow:
Comment: A commenter wanted CMS to include PACE marketing materials
in the marketing chart.
Response: PACE marketing materials were intentionally omitted
because PACE marketing is not impacted by changes to subpart V under
both parts 422 and 423.
Comment: A commenter requested that Table 16 (currently Table F4)
reflect the inclusion of materials that will fall under the purview of
CMS review based on this final regulation.
Response: The intent of the chart is to provide an estimate of the
aggregate savings that will result from the regulatory changes to
Subpart V, rather than to provide a comprehensive list of the materials
that will or will not require submission as a result of this final
rule. As noted in response to comments in section II.B.5. of this rule,
CMS intends on issuing subregulatory guidance to provide more detailed
information on material status.
Comment: A commenter requested that the descriptions in the chart
include all materials that fall under the general marketing code
listed.
Response: In developing the chart, CMS used the marketing code
descriptions reflected in HPMS. The description is meant to give the
reader a sense of what materials fall under the code as opposed to an
all-inclusive list. Listing all material types would not be practical.
Readers can reference the marketing section of HPMS for a list of all
codes and material types.
12. ICRs Related to Preclusion List Requirements for Individuals and
Entities in MA, Cost Plans, and PACE (Sec. 422.222) and Prescribers in
Part D (Sec. 423.120(c)(6))
a. Preclusion List Requirements for Part C (Sec. 422.222)
The following requirements and burden will be submitted to OMB for
approval under control number 0938-0685 (CMS-855A, -855B, and -855I).
We did not receive any comments pertaining to our proposed
requirements, therefore we are finalizing them as proposed.
Consistent with the proposed rule (82 FR 56488), we estimate that
120,000 MA providers and suppliers have yet to enroll in Medicare via
the CMS-855 application. Based on internal CMS statistics we estimate
that 6,000 Part A providers and certain Part B certified suppliers
would have completed the CMS-855A application, 24,000 Part B
organizational suppliers would have completed the CMS-855B application,
and 90,000 physicians and non-physician practitioners would have
completed the CMS-855I application. We believe that savings will accrue
for providers and suppliers from the elimination of our MA/Part C
enrollment requirement under Sec. 422.222. Table 17 summarizes the
burden associated with the completion of each form.

Table 17--CMS-855 Application Savings
[Time and costs]
--------------------------------------------------------------------------------------------------------------------------------------------------------
Number of Hours for an
respondents no Hours for Hours for a authorized
Submission type longer completion by physician to official to Hours for Time savings Cost savings
required to office review and review and completion * (hours) ($)
enroll personnel sign sign
--------------------------------------------------------------------------------------------------------------------------------------------------------
CMS-855A................................ 6,000 5 n/a 1 6 36,000 $1,641,960
CMS-855B................................ 24,000 4 n/a 1 5 120,000 5,759,040
CMS-855I................................ 90,000 2.5 0.5 n/a 3 270,000 16,676,100
---------------------------------------------------------------------------------------------------------------
Total............................... 120,000 11.5 0.5 2 14 426,000 24,077,100
--------------------------------------------------------------------------------------------------------------------------------------------------------
* The per response time estimate is consistent with what is currently approved by OMB.

[[Page 16699]]

In projecting the savings, we assume that a medical and health
services manager will serve as the provider's or supplier's
``authorized official'' and will sign the CMS-855A or CMS-855B
application on the provider's or supplier's behalf.
Therefore, we project the following total hour and savings:
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/hour x 5
hours) + ($105.16/hour x 1 hour)], we estimate a total savings of
$1,641,960 (6,000 applications x $273.66).
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/hour x 4
hours) + ($105.16/hour x 1 hour)], we estimate a total savings of
$5,759,040 (24,000 applications x $239.96).
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/hour x 2.5 hours) + ($202.08/hour x 0.5 hours)], we
estimate a savings of $16,676,100 (90,000 applications x $185.29).
Given the foregoing, we estimate that providers and suppliers will
experience a total reduction in hour burden of 426,000 hours (270,000
hours + 120,000 hours + 36,000 hours) and a total cost savings of
$24,077,100 ($16,676,100 + $5,759,040 + $1,641,960). We expect these
reductions and savings to accrue in 2019 and not in 2020 or 2021.
Nonetheless, when distributed over the course of OMB's 3-year approval
period (2019 to 2021), we expect an annual savings of 142,000 hours
(426,000 hours/3 years) at $8,025,700 ($24,077,100/3 years) per year.
b. MA Encounter Data (Sec. 422.310(d)(5))
The requirements and burden associated with the collection and
reporting of encounter data is currently approved by OMB under control
number 0938-1152 (CMS-10340). Encounter data is a source to determine
providers rendering MA services that should be on the preclusion list.
Since this rule's provision is consistent with existing policy the
change will not impose any new or revised requirements/burden.
Consequently, we are not making any changes under the 0938-1152 control
number.
This final rule revises Sec. 422.310 by adding a new paragraph
(d)(5) which requires that, for the data described in Sec.
422.310(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 provision, since it is consistent with
existing policy.
c. Preclusion List Requirements for Part D Sponsors
(1) Enrollment in Medicare Part D (Sec. 423.120(c)(6))
The following requirements and burden will be submitted to OMB for
approval under control number 0938-1135 (CMS-855O). We did not receive
any comments pertaining to our proposed requirements, therefore we are
finalizing them as proposed.
As discussed in the proposed rule (82 FR 56474), we believe that
savings will accrue for the prescriber community from this rule's
elimination of the requirement under Sec. 423.120(c)(6)) that
prescribers enroll in Medicare in order to prescribe Part D drugs.
In the proposed rule (82 FR 56474), we estimated that approximately
420,000 prescribers have yet to enroll in Medicare via the CMS-855O
application. Based on updated data we are revising this estimate to
approximately 340,000 un-enrolled prescribers. However, our data shows
that there are 25,000 providers who overlap leaving 315,000 unenrolled
prescribers in Part D. We also estimate that it will take 0.5 hours for
a prescriber to complete a CMS-855O application.
This is based on the following assumptions:
A medical secretary will take 0.42 hours at $33.70/hour to
prepare the application.
A physician will take 0.08 hours at $202.08/hour to review
and sign the application.
This will result in a per application cost of $30.32 [(0.42 hours x
$33.70/hour) + (0.08 hours x $202.08/hour)] and a total savings of
$10,308,800 (315,000 applications x $30.32) and 170,000 hours (315,000
applications x 0.5 hours). We believe that these savings will accrue in
2019.
(2) Part D Sponsor Requirements
The following notice preparation and distribution requirements and
burden will be submitted to OMB for approval under control number 0938-
0964 (CMS-10141). We did not receive any comments pertaining to our
proposed requirements, therefore we are finalizing them as proposed.
As discussed in sections II.D.10. and 11. of this rule, we are
finalizing our proposal under Sec. 423.120(c)(6) to 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 will be the time and effort necessary
for Part D adjudication systems to be programmed and for model notices
to be created, generated, and disseminated. However, we are not
finalizing the provision that required 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.
For 2019, we estimate that it will take all 30 sponsors and PBMs
with Part D adjudication systems a total of approximately 93,600 hours
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 since all changes were
implemented in 2019. The sponsors and PBMs will need approximately 6 to
12 months to perform system changes and testing. The total time 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 results in the aforementioned 93,600 hour figure (3 workers x
1,040 hours x 30 sponsors/PBMs) at a cost of $9,006,192 (93,600 hours x
$96.22/hour).
Consistent with the May 6, 2015 IFC, we continue to estimate that
212 parent organizations will need to create two template notices to
notify beneficiaries and prescribers that prescriptions will be
rejected due to the prescriber's inclusion on the Preclusion List. We
project that it will take each organization 3 hours at $69.08/hour for
a business operations specialist to create the two template 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 hours x $69.08/hour)
or $207.24 per organization ($43,935/212 organizations). As mentioned,
there will be no burden associated with 2020 and 2021 since all changes
were implemented in 2019.
We also estimate that it will take an average of 5 minutes (0.083
hour) at

[[Page 16700]]

$39.22/hour for an insurance claim and policy processing clerk to
prepare and distribute the notices. We estimate that an average of 800
prescribers will be on the preclusion list in early 2019 with roughly
80,000 Part D beneficiaries affected; that is, 80,000 beneficiaries
will have been receiving prescriptions written by these prescribers and
will therefore receive the notice referenced in Sec. 423.120(c)(6). In
2019 we estimate a total burden of 6,640 hours (80,000 responses x
0.083 hours) at a cost of $260,421 (6,640 hours 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 will be added to the preclusion list, though this will 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).

Table 18--Estimated Time for Part D Notice Preparation and Distribution
[Hours]
----------------------------------------------------------------------------------------------------------------
2019 2020 2021 3-year average
----------------------------------------------------------------------------------------------------------------
Part D Sponsor--System Programming.............. 93,600 0 0 31,200
Part D Sponsor--Template Creation............... 636 0 0 212
Part D Sponsor--Letter Preparation and 6,640 1,245 1,245 3,043
Distribution...................................
---------------------------------------------------------------
Total....................................... 100,876 1,245 1,245 34.455
----------------------------------------------------------------------------------------------------------------

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

13. ICRs Regarding the Removal of Quality Improvement Project for
Medicare Advantage Organizations (Sec. 422.152)
CMS will submit the following requirements and burden to OMB for
approval under control number 0938-1023 (CMS-10209). We did not receive
any comments pertaining to our proposed requirements or burden
estimates. Consequently, we are finalizing them as proposed. (Note:
While CMS-10209 has inadvertently expired, we are proposing to
reinstate the collection through this final rule.)
As discussed in section II.B.11. of this rule, we are finalizing
our proposal to remove the Quality Improvement Project (QIP)
requirements (and CMS-direction of QIPs) from the Quality Improvement
(QI) Program requirements. The driver of the anticipated savings is the
removal of requirement to attest having a QIP annually.
To derive our savings, we estimate that it takes 1 MA organization
15 minutes (0.25 hour) at $67.54/hour for a compliance officer 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 are 750 QIP attestations annually.
Using these assumptions, we estimate that the removal of the QIP
provision will result in a total annual savings of 187.5 hours (750
contracts x 0.25 hour) at $12,663.75 (187.5 hours x $67.54/hour) or
$16.89 per contact ($12,663.75/750 contracts).
14. ICRs Regarding Medical Loss Ratio Reporting Requirements
(Sec. Sec. 422.2460 and 423.2460)
The following requirements and burden will be submitted to OMB for
approval under control number 0938-1232 (CMS-10476). We received a
comment pertaining to our proposed requirements or burden estimates. As
discussed later, we are finalizing them as proposed. A summary of the
public comment and our response are set out below.
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. As discussed in section II.C.1. of this final rule, our
amendments to Sec. Sec. 422.2460 and 423.2460 will 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 will 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. In the information collection request currently approved
by OMB under control number 0938-1232 (CMS-10476), we estimate that 616
MA and Part D contracts will be subject to the MLR data submission
requirements for each contract year. Our previous estimate of 616 was
based on the number of MA and Part D contracts that we expected would
be subject to the

[[Page 16701]]

MLR requirements at the time that we published the May 23, 2013 final
rule (78 FR 31284). We are revising this estimate to reflect the
average number of MA and Part D contracts subject to the MLR data
submission requirements for contract years 2014 to 2018. Based on this
more recent data, we estimate that 587 MA and Part D contracts will be
subject to the MLR data submission requirements for each contract year.
The total number of MA and Part D contracts is relatively stable from
year to year.
Our estimate for the amount of time that MA organizations and Part
D sponsors will spend on administrative tasks related to the amended
MLR reporting requirements is based on the burden estimates that are
currently approved by OMB under control number 0938-1232 (CMS-10476),
but updated to reflect the revised number of contracts discussed
earlier and also updated for more current wage and cost information.
This is consistent with the approach used in the proposed rule
regarding burden estimates. In the approved information collection
request, we estimate that, on average, MA organizations and Part D
sponsors will spend 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. 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. In our
proposed rule, we corrected 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
contract.
We arrived at the 11.5-hour estimate by considering the amount of
time it will 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 this rule's provision to scale back the MLR
reporting requirements will reduce the amount of time spent on
administrative work by 11 hours, from 47 hours to 36 hours. We also
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 data
from BLS, we estimate that MA organizations and Part D sponsors will
incur annual MLR reporting costs of approximately $5,045 per contract
on average under this final rule as opposed to $6,587 per contract
under the current regulations. Consequently, the changes will, on
average, reduce the annual administrative costs by $1,542 per contract.
Across all MA and Part D contracts, we estimate that this rule's
amendment will reduce the annual administrative burden related to MLR
reporting by 6,457 hours along with a savings of $904,884. Table 20
compares the estimated administrative burden related to current MLR
reporting requirements, burden with updated contract and cost
information, and the burden under this final rule.

Table 20--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
--------------------------------------------------------------------------------------------------------------------------------------------------------
Annual burden under currently 616...................... 47 28,952 $135.58/hr.............. $3,925,312 $6,372
approved collection (OMB control
number 0938-1232) (CMS-10476).
Annual burden (with updated number 587...................... 47 27,589 $140.14/hr.............. $3,866,322 $6,587
of contracts and cost) under
current regulation.
Annual burden under this final rule 587...................... 36 21,132 $140.14/hr.............. 2,961,438 5,045
Change in burden under this final No change................ (11) (6,457) No change............... (904,884) (1,542)
rule.
--------------------------------------------------------------------------------------------------------------------------------------------------------
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.

We received the following comment, and our response follows:
Comment: A commenter expressed support for the reduction in the MLR
reporting burden, and requested that we continue to produce and make
available form CMS-10476 as it is useful to assist submitters with
their MLR calculations.
Response: We appreciate the support. We intend to continue to make
available the prior years' MLR Report on our website (CMS.gov) as well
as in the Health Plan Management System (HPMS). Therefore, the
commenter can continue to utilize the prior years' more detailed MLR
Reports to assist with their MLR calculations.
We are finalizing this provision without modification.

C. Summary of Information Collection Requirements and Burden

[[Page 16702]]

Table 21--Annual Recordkeeping and Reporting Requirements
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total
Regulatory section(s) in title OMB control Respondents Responses Burden per Total annual burden Labor cost of cost
42 of the CFR No.* response (hours) reporting ($)
--------------------------------------------------------------------------------------------------------------------------------------------------------
422.60, 422.62, 422.68, 423.38, 0938-0753 468.................. 558,000.............. 5 min 46,500............... $69.08/hr $3,21
and 423.40 eligibility 2,220
determination.
422.60, 422.62, 422.68, 423.38, 0938-0753 468.................. 558,000.............. 1 min 9,300................ $69.08/hr 642,4
and 423.40 notification. 44
422.60, 422.62, 422.68, 423.38, 0938-0753 468.................. 558,000.............. 1 min 9,300................ $69.08/hr 642,4
and 423.40 report to CMS. 44
422.60, 422.62, 422.68, 423.38, 0938-0753 468.................. 558,000.............. 5 min 46,500............... $34.66/hr 1,606
and 423.40 record keeping. ,110
422.152 QIP.................... 0938-1023 468.................. (750)................ (15 min) (188)................ $67.54/hr (12,6
64)
422.222 enrollment **.......... 0938-0685 120,000.............. (120,000)............ varies (426,000)............ varies (24,0
77,10
0)
422.2260 and 423.2260 marketing 0938-1051 527.................. (39,298)............. (30 min) (19,649)............. $69.08/hr (1,35
materials. 7,353
)
422.2460 and 423.2460 MLR 0938-1232 587.................. (587)................ (11 hr) (6,457).............. $140.14/hr (904,
reporting. 884)
423.120(c)(6 enrollment) **.... 0938-1135 340,000.............. (340,000)............ varies (170,000)............ varies (10,3
08,80
0)
423.120(c)(6) create model 0938-0964 212.................. 212.................. 3 hr 636.................. $69.08/hr 43,93
notices. 5
423.120(c)(6) Prepare and test 0938-0964 90................... 90................... 1040 93,600............... $96.22 9,006
system changes. ,192
423.120(c)(6) 2019 prepare and 0938-0964 212.................. 80,000............... 0.083 hr 6,640................ $39.22/hr 260,4
distribute the notices. 21
423.120(c)(6) 2020 and 2021 0938-0964 212.................. 15,000............... 0.083 hr 1,245................ $39.22/hr 48,82
prepare and distribute the 9
notices.
423.153(f) notice preparation.. 0938-0964 219.................. 3,693................ 0.083 hr 307.................. $39.22/hr 12,04
1
423.153(f) notice upload....... 0938-0964 219.................. 3,693................ 5 hr 1,095................ $81.90/hr 89,68
1
------------------------------------------------------------------------------------------------------------------------
Subtotal: Private Sector varies............... varies............... varies (407,171)............ varies (21,0
Burden. 96,48
4)
422.62, 423.38, and 423.40 0938-0753 18,600,000........... 558,000.............. 30 min 279,000.............. $23.86 6,656
complete enrollment. ,940
------------------------------------------------------------------------------------------------------------------------
Subtotal: Burden on 18,600,000........... 558,000.............. 30 min 279,000.............. $23.86 6,656
Beneficaries. ,940
422.111(a)(3) and (h)(2)(ii) 0938-1051 n/a.................. (32,026,000)......... n/a n/a.................. n/a (24,0
and 423.128(a)(3) EOC paper. 19,50
0)
422.111(a)(3) and (h)(2)(ii) 0938-1051 n/a.................. (32,026,000)......... n/a n/a.................. n/a (24,0
and 423.128(a)(3) EOC toner. 19,50
0)
422.111(a)(3) and (h)(2)(ii) 0938-1051 n/a.................. (32,026,000)......... n/a n/a.................. n/a (6,62
and 423.128(a)(3) EOC mailing. 9,382
)
------------------------------------------------------------------------------------------------------------------------
Subtotal: Non-Labor Burden. n/a.................. (32,026,000)......... n/a n/a.................. n/a (54,6
68,38
2)
------------------------------------------------------------------------------------------------------------------------
Total.................. varies............... varies............... varies (128,171)............ varies (69,1
07,92
6)
--------------------------------------------------------------------------------------------------------------------------------------------------------
* OMB control numbers and corresponding CMS ID numbers: 0938-0753 (CMS-R-267), 0938-1023 (CMS-10209), 0938-0685 (CMS-855A, -855B, and -855I), 0938-1051
(CMS-10260), 0938-1232 (CMS-10476), 0938-1135 (CMS-855O, and 0938-0964 (CMS-10141).
** The requirements and burden were set out in the NPRM text, but the figures were inadvertently excluded from the burden summary table.
This table reflects the following changes from the proposed rule:
The marketing provision (section II.B.5. of this rule) has changes due to numerical errors and more accurate estimates as documented in the
marketing provision.
The minimum wage was changed from $7.25 an hour to $23.86 an hour. This is explained earlier in the opening section.
Two rows were deleted from the Table 21 for the CARA provision (section II.B.14. of this rule) since they are properly addressed in the section
IV. of this rule (Regulatory Impact Analysis) and do not belong in the this section (Collection of Information).
One row was added to the preclusion provision (section III.B.12. of this rule) to reflect an omitted row on the burden to programmers to
implement changes. The totals and subtotals were updated accordingly.
Added enrollment figures under Sec. Sec. 422.222 and 423.120(c)(6).

IV. Regulatory Impact Analysis

A. Statement of Need

This final 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.
This final rule affects Medicare Advantage plans and Part D
sponsors (NAICS category 524114 with a minimum threshold for small
business size of $38.5 million (http://www.sba.gov/content/small-business-size-standards). This final rule additionally effects
hospitals (NAICS subsector 622), and a variety of provider categories
including physicians, specialists, and laboratories (subsector 621).

[[Page 16703]]

To clarify the flow of payments between these entities and the
Federal government, note that Medicare Advantage Organizations (MAO)
submit proposed plan designs, called bids, in June 2018 for operation
in contract year 2019. These bids project payments to hospitals,
providers and staff as well as the cost of administration and profits.
These bids in turn determine the payments of the Medicare Trust Fund to
the MAOs who reimburse providers and other stakeholders for their
services. Consequently, our analysis will focus on MAOs.
There are various types of health plans including, HMOs (Part D
sponsors and MA plans), Demonstrations, Cost Plans, Prescription Drug
Plans (PDP) and PACE plans. 42% of all Medicare health plan
organizations are not-for-profit and 32% of all Part D sponsors and MA
plans are not for profit (These figures were determined by examining
records from the most recent year for which we have complete data,
2016).
There are a variety of ways to assess whether MAOs meet the $38.5
million threshold for small businesses. The assessment can be done by
examining net worth, net income, cash flow from operations and
projected claims as indicated in their bids. Using projected monetary
requirements and projected enrollment for 2018 from submitted bids, 32
percent of the MAOs fell below the $38.5 million threshold for small
businesses. Additionally, an analysis of 2016 data, the most recent
year for which we have actual data on MAO net worth, also shows that 32
percent of all MAO falls below the minimum threshold for small
businesses.
If a final rule has a substantial impact on a substantial number of
small entities, the final rule must discuss steps taken, including
alternatives, to minimize burden on small entities. While a significant
number (more than 5 percent) of not-for-profit organizations and small
businesses are affected by this final rule, the impact is not
significant. To assess impact we use the data in Table G10 of this
section which shows that the raw (not discounted) net effect of this
final rule over five years is 1.5 billion dollars. Comparing this
number to the total monetary amounts projected to be needed just for
2019, based on plan submitted bids, we find that the impact of this
rule is significantly below the 3 percent-5 percent threshold for
significant impact. Had we compared the 2019 impact of the final rule
to projected 2019 monetary need, the impact would be still less.
In considering the requirements of the RFA certain other aspects of
this rule have bearing. The impact of this rule is positive, that is,
the rule has a net savings and in fact almost all provisions reduce
burden.
We also note that economic burden, when it exists, is not a
significant problem for MAOs (whether small or big) since the MAOs pass
all burden on to the Trust Fund through the bid and therefore a further
alternative to relieve burden is not needed.
Consequently, the Secretary has determined that this final rule
will not have a significant economic impact on a substantial number of
small entities and the requirements of the RFA have been met.
In addition, section 1102(b) of the Act requires us to prepare a
regulatory analysis for any final rule 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 final 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 final 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 final rule that imposes
substantial direct requirement costs on state and local governments,
preempts state law, or otherwise has federalism implications. Since
this final 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 final
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 will take approximately 15.6
hours for each person to review this final 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. Comprehensive Addiction and Recovery Act of 2016 (CARA) Provisions
Section 423.153(f) will 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. In the NPRM for
this rule, we provided 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 included in the NPRM
was 2015. We note that the measurement year for the revised estimates
included in Table G22 is 2017.

[[Page 16704]]

Table 22--Guidelines to Identify At-Risk Beneficiaries
--------------------------------------------------------------------------------------------------------------------------------------------------------

--------------------------------------------------------------------------------------------------------------------------------------------------------
Option Average MME................... Number of opioid prescribers AND opioid dispensing Estimated number of Estimated number of
pharmacies potentially at-risk potentially at-risk
Part D Part D
beneficiaries. beneficiaries
--------------------------------------------------------------------------------------------------------------------------------------------------------
Original estimates.. Revised estimates
(2015).............. (2017) *
--------------------------------------------------------------------------------------------------------------------------------------------------------
1....................... >=90.......................... 4+...................... 4+...................... 33,053.............. 11,753.
>=90.......................... 6+...................... 1+...................... Minimum Criteria....
2....................... >=90.......................... 4+...................... 4+...................... 52,998.............. 22,569.
>=90.......................... 5+...................... 1+......................
3....................... >=90.......................... 3+...................... 3+...................... 103,832............. 44,332 Minimum
>=90.......................... 5+...................... 1+...................... Criteria.
4....................... >=90.......................... 3+...................... 3+...................... 152,652............. 72,246.
>=90.......................... 4+...................... 1+......................
5....................... >=90.......................... 3+...................... 3+...................... 319,133............. 152,438.
>=90.......................... 3+...................... 1+......................
--------------------------------------------------------------------------------------------------------------------------------------------------------

Under Option 1, CMS proposed to integrate the CARA lock-in
provisions with our current Part D Opioid Overutilization Policy/
Overutilization Monitoring System (OMS). We proposed to initially
define frequently abused drugs as all and only opioids for the
treatment of pain. The guidelines to identify at-risk beneficiaries
will be the current Part D OMS criteria finalized for 2018 after
stakeholder input. Plans that adopt a drug management program will have
to engage in case management of the opioid use of all enrollees who
meet these criteria, which will be reported through OMS and plans must
provide a response for each case. The integration of CARA lock-in
provisions with our current policy will allow plans to use pharmacy/
prescriber lock in as an additional tool to address the opioid
overutilization of identified at-risk beneficiaries.
In the proposed rule, we estimated that the CARA provisions would
result in a net savings of $10 million (the estimated savings of $13
million [rounded up from $12.6 million] less the total estimated costs
of $2,836,651 = $10,163,349) in 2019. However, as noted in the
preamble, we are finalizing modifications to our proposed policy on
implementation of drug management. These modifications will have
implications on the projected savings for the CARA provisions. First,
we are expanding the definition of frequently abused drugs to include
opioids and benzodiazepines for purposes of Part D drug management
programs beginning 2019. Second, with respect to clinical guidelines,
we are finalizing the criteria we proposed in Option 3 above as a
``floor'' that Part D plan sponsors must adopt, consistent with the
current policy as well as allowing sponsors to continue to report
additional beneficiaries to OMS--and will adopt the following
supplemental criteria, which will serve as a ``ceiling'': Use of
opioids (regardless of average daily MME) during the most recent 6
months with 7 or more opioid prescribers OR 7 or more opioid dispensing
pharmacies. These ceiling criteria were included in the additional
criteria options that we set forth in the chart above in the proposed
rule; specifically, in Row 2 of option 6. We are finalizing as the
clinical guidelines floor and ceiling criteria that include a program
size of approximately 67,000 beneficiaries--44,000 of whom Part D
sponsors with drug management programs must review and 23,000 of whom
such sponsors may review.
Therefore, we estimate that the finalized CARA provisions, in 2019,
will result in a net cost of $2,836,652 to industry (plan sponsors)
with a benefit of reduction in opioid prescriptions which will reduce
Trust Fund spending by $19 million dollars. The following are details
on each of these estimates.
There are an additional ~23,000 at-risk beneficiaries that we
estimate would be added to the drug management programs as a result of
the ceiling criteria. 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 will impact
the remaining 39 percent of at-risk beneficiaries. CMS anticipates
between 10 and 30 percent reduction in prescriptions for frequently
abused drugs will be possible through drug management programs and
picked the average, 20 percent. Therefore, in the proposed rule, we
stated that we believe there could be a 20 percent reduction in the
prescriptions for frequently abused drugs for at-risk beneficiaries.
Similar to the ~44,000 at-risk beneficiaries identified by the floor
criteria, we assumed that 39 percent of the additional 23,000 will
reduce their opioid usage by 20 percent under the program.
We used a proxy to identify costs for these additional 23,000 at-
risk beneficiaries, which is to pull the beneficiaries with opioid
scripts with 7 or more pharmacies in the most recent 6 months who
weren't part of the 44,000 under the floor criteria. However, we got
only about 20,000 count. Since we couldn't pull those with 7 or more
prescribers easily, we assumed the remaining 3,000 were those with 7 or
more prescribers. For those 20,000, their opioid cost was only $31
million and their benzodiazepines cost was $1 million. Similar to the
other 44,000, we assumed that 39 percent of the 20,000 will reduce
their opioid usage by 20 percent under the program. For those 39
percent, the opioid cost for the additional at-risk beneficiaries that
would be identified by the ceiling criteria was only $10 million and
their benzodiazepine cost was less than $0.4 million. In fact, the 39
percent of those

[[Page 16705]]

44,000 at-risk beneficiaries identified by the floor criteria only
incurred $1 million of benzodiazepine costs. As a result, because the
benzodiazepine spending among at-risk beneficiaries was so small and
the potential savings from this program should be much smaller than
that for opioids, CMS did not include the potential savings for
benzodiazepines to this savings estimate.
Because we used a proxy to identify costs for the additional 23,000
at-risk beneficiaries and the opioid spend was not that significant, we
assumed the cost distribution is similar to those 20,000. Since CMS
scored the opioid savings for $2 million on the 20,000, we scaled it up
by 23,000/20,000 to get $2.3 million savings in opioid for the ceiling
criteria.
Therefore, the combined projected dollar savings to the Medicare
Trust Fund for opioids for at-risk beneficiaries identified by both the
ceiling criteria ($2.3 million) and floor criteria ($16.3 million) is
about $19 million (rounded up from $18.6 million) in 2019. Since the
$19 million is an effect of the rule, it is classified as a benefit.

Table 23--Estimated Benefits to the Trust Fund of the CARA 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
----------------------------------------------------------------------------------------------------------------
Implementation of the Various............ 19 19 19 20 20 $97
Comprehensive Addiction and
Recovery Act of 2016 (CARA)
Provisions.
----------------------------------------------------------------------------------------------------------------

Part D plan sponsors will 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
decides 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 will 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 will 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 $101,722 ($12,041 +
$89,681) in 2019 in section III of this final 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
will 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 will 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 will 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 will 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 hours at an annual estimated cost of $35,183 in 2019. As
previously discussed, we estimate that 1,846 beneficiaries will 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

[[Page 16706]]

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 will result, in 2019, in a net cost of
$2,836,652 ($101,722 + $547,415 + $2,152,332 + $35,183). Additionally,
an effect of the regulatory lock-in is a benefit of reduced opioid
scripts resulting in a reduction of $19 million in payments by the
Trust Fund.
We received the following comments and our response follows:
Comment: A commenter agreed with CMS's estimate that the proposed
Medicare lock-in program could prevent or reduce the human toll of
opioid abuse and overuse and generate a savings in 2019 of $13 million
to the Trust Fund because of reduced scripts, and that our estimate of
savings are consistent with recent research that found that lock-in
programs have reduced spending on opioid prescriptions and decreased
the number of prescriptions and pharmacies used by at-risk individuals
in state Medicaid programs.
Response: We thank the commenter for their agreement. We do note
that modifications to the CARA provisions have been finalized, which
has changed the regulatory impact. We now anticipate a projected
savings of $17 million in 2019.
2. Reducing the Burden of the Compliance Program Training Requirements
(Sec. Sec. 422.503 and 423.504)
The final provision will 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 will 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 will
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]
website 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 website 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 MA 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 will be eliminated by this proposal. If
we add pharmacists, pharmacy technicians, billing offices, physician
practice groups, we will 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 will be expected to
take the training under the current regulation, but we hope this
example demonstrates the reduction in burden this proposal will mean
for the industry.
We requested comment in order to develop a more complete
monetization of cost savings. However, we received no comments on this
burden estimate in the proposed rule.
We did receive numerous comments on the corresponding regulatory
proposal, with overwhelming support for finalizing the provision as
proposed. Most commenters who expressed their support for the proposal
commented on the tremendous burden the current CMS compliance training
requirements imposed, and agreed with CMS that the proposal would
greatly reduce burden on FDRs and sponsoring organizations.
Therefore we are finalizing this provision as proposed without a
quantitative estimate of impact.
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

[[Page 16707]]

saved annually under this proposal. The $0.6 million reflects a savings
to industry from reduced use of actuarial resources.
The number of plan bids received by CMS may increase because of a
variety of factors that are not related to the elimination of the
meaningful difference requirement, such as payments, bidding and
service area strategies, serving unique populations, and in response to
other program constraints or flexibilities. Business decisions made by
MA organizations or potential MA program new entrants that are not
related to the elimination of the meaningful difference requirement are
not included in this impact analysis. As noted in the preamble
discussion, several commenters expressed concerns about the ability of
Medicare beneficiaries to make the nuanced comparisons among various
plan types and benefit packages, limited resources to assist
beneficiaries with complicated decisions, and older people and people
with disabilities not using technology to the same extent as non-
Medicare beneficiary populations in making plan comparisons (for
example, MPF). CMS expects that eliminating the meaningful difference
requirement will improve plan choice for beneficiaries by driving
provider network and benefit package innovation and affordable health
care coverage. Several commenters, as discussed in the preamble, noted
that eliminating the current meaningful difference requirement that
established arbitrary differences between plans will allow MA
organizations to put the beneficiary at the center of benefit design as
MA organizations will not be pressured to make benefit changes to
comply with an arbitrary requirement that may ultimately result in
higher premiums and/or cost sharing for beneficiaries. This will result
in MA organizations being able to offer a portfolio of plan options
with clear differences between benefits, providers, and premiums that
are more easily understood by beneficiaries. CMS expects that
eliminating the meaningful difference requirement will improve the plan
options available for beneficiaries, but does 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 the number of plan
options. As it is unknown how many organizations will choose to add
plan options as a result of this provision, we are unable to estimate
the impact to beneficiaries should this lead to more competition. CMS
expects increased competition will lead to potentially lower premiums
and/or cost-sharing for Medicare beneficiaries. CMS does not anticipate
beneficiaries will need additional time to compare differences between
plans related to the elimination of the meaningful difference
requirement. This particular change is expected to help MA
organizations differentiate plan offerings more effectively so that
beneficiaries can make decisions more efficiently. We believe that the
tools and information CMS provides for beneficiaries to make decisions
(for example. Medicare Plan Finder, Medicare and You Handbook, 1-800-
MEDICARE), in addition to our enforcement of communication and
marketing requirements, aim to mitigate any potential choice overload.
CMS does not believe this 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. In addition, CMS
does not expect a significant increase in time spent on bid review as a
result of eliminating meaningful difference requirement nor does CMS
expect this change will increase provider burden.
We received the following comments, and our response follows:
Comment: A few commenters supported this proposal and referenced
the potential savings in a positive manner.
Response: We thank the commenters for their support.
Comment: Some commenters had concern that eliminating the
meaningful difference requirement would result in a large number of
plan options and believe this potential outcome may challenge or
complicate beneficiary decision-making; these commenters questioned if
elimination of the requirement provides enough benefits to outweigh the
risks. A commenter did not support this proposal but noted that the
estimated savings from eliminating the meaningful difference
requirement was significant. This commenter stated concern that this
proposal would result in beneficiary choice anxiety from the potential
increase in plan options. Another commenter did not find the estimated
savings significant enough to warrant finalizing this proposal.
Response: The intention of this proposal is 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. The primary motivation for our proposal is the
improvement of plan innovation for a growing MA beneficiary population;
reduction of resources and plan expenses was not a major factor in this
particular proposal. The number of plan bids may increase because of a
variety of factors that are not related the elimination of the
meaningful difference requirement, such as new MA entrants, payments,
bidding and service area strategies, serving unique populations, and in
response to other program constraints or flexibilities. MA
organizations are expected to continue designing PBPs that, within a
service area, are different from one another with respect to key
benefit design characteristics. MA organizations also consider
beneficiary choice anxiety when developing their own portfolio of plan
offerings, so that sales and broker personnel and marketing materials
can highlight key differences between their plan offerings and support
informed choice. CMS will continue to provide beneficiaries with tools,
such as MPF, to evaluate plan options and assist in choosing the best
option. Beneficiaries may continue to limit their choices based on
characteristics, such as plan type, Part D coverage, differences in
provider network, Part B and plan premiums, and unique populations
served (for example, special needs plans). As stated in Meaningful
Differences in Medicare Advantage Bid Submissions and Bid Review
(Sec. Sec. 422.254 and 422.256), we are going to use our existing
authority at Sec. 422.2268, and CMS will monitor to ensure
organizations are not engaging in activities that are discriminatory or
potentially misleading or confusing to Medicare beneficiaries. CMS will
communicate and work with organizations that appear to offer a large
number of similar plans in the same county and discuss any concerns.
For example, from a beneficiary's perspective, CMS would expect plans
within the same contract, plan type and county be distinguishable by
beneficiaries using such factors as the inclusion or exclusion of Part
D coverage, provider network, plan premium, Part B premium buy-down,
estimated out-of-pocket costs, and benefit design. CMS intends to issue
guidance through the annual Call Letter process and HPMS memoranda to
help organizations avoid potential beneficiary confusion; we expect a
minimal number of contacts with MA organizations regarding these
concerns.
We received less than 10 comments on this proposal that
specifically

[[Page 16708]]

referenced the estimated savings of eliminating the meaningful
difference requirement and the only concern noted about the estimated
savings was that it was not significant. Therefore, we are finalizing
this provision without modification.
4. Physician Incentive Plans--Update Stop-Loss Protection Requirements
(Sec. 422.208)
As we discussed in the proposed rule, 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.
With this final rule we are replacing the current insurance schedule in
the regulation with updated stop-loss insurance requirements that will
allow insurance with higher deductibles. This updated schedule will
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 described below.
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.
BILLING CODE 4120-01-P

[[Page 16709]]

[GRAPHIC] [TIFF OMITTED] TR16AP18.017

BILLING CODE 4120-01-C
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 24, which reflects
current insurance rates, that is, what would be charged

[[Page 16710]]

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.
Next, we compute the premium under the finalized rule. We still
assume an average of 6,000 capitated members. However, the finalized
rule allows higher deductibles corresponding to medical inflation. The
new deductibles may be found in Table 26. 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 difference in premium between using (i) Sec. 422.208(f)(iii)
to calculate deductibles (combined attachment point) and (ii) using
Table 26 to calculate deductibles results in a savings of $2,000-$1,500
= $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 $500 PMPY savings is not true savings since the plans and
physicians are simply trading claims for premiums to the insurance
company. Since the net impact is $0, the $500 is not listed as either a
savings or transfer. However, the reduced $100 PMPY for profit and
admin reflects a reduction in reinsurance service resources and hence
is classified as a savings. However, not all of the $100 PMPY results
in reductions in dollars spent by the Trust Fund. The details are as
follows.
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. Accordingly, using our revised stop loss
insurance requirement in this final rule, we estimate the total
aggregate projected annual savings, reflecting a reduction in
reinsurance services will be 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 therefore assumed
that of the $204.6 million in annual savings, the Medicare Trust fund
will reduce payments by 35 percent x $204.6 million = $71,610,000; the
remaining 65 percent x $204.6 million = $132,990,000 will be returned
to the plans as rebates. These rebates will 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.
We received no comments on our impact analysis. However, we did
receive comments on the methodology CMS is using to calculate stop loss
insurance requirements. We respond to those comments in the preamble
and the section for the Physician Incentive Plan regulation update to
42 CFR 422.208.
We are finalizing the update to the physician incentive regulation
stop-loss table as proposed.
5. Changes to the Agent/Broker Requirements (Sec. Sec. 422.2272(e) and
423.2272(e))
We proposed 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 proposed 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 will 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.
We received no comments on this proposal and therefore are
finalizing this provision without modification.
6. Coordination of Enrollment and Disenrollment Through MA
Organizations and Effective Dates of Coverage and Change of Coverage
We proposed 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
and issue written notification of the enrollment a minimum of 60 days
in advance of their Medicare eligibility.
Our proposal represented the partial codification of existing
policy on seamless conversion enrollment that has been specified in
subregulatory guidance since 2006, but with additional parameters and
limits. Under the new requirements, seamless conversion default
enrollments can only occur from the organization's Medicaid managed
care plan into an integrated D-SNP with facilitation from the state (in
the form of a contract term and provision of data). This will result in
the discontinuation of the use of the current 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 changes will
have any impact to the Medicare Trust Funds.
We did not receive comments on the burden estimates associated with
this proposal. We did receive comments on the substantive proposal,
which we address in this final rule. As indicated in the preamble to
this final rule, we are finalizing the proposed changes with the
following modifications, none of which we believe will result in any
impact to the Medicare Trust Funds.

[[Page 16711]]

Section 422.66(c)(2)(i) is revised to clarify that we will
allow default enrollment into a FIDE-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.
Section 422.66(c)(2)(i) is revised to clarify that, for an
organization to be approved for default enrollment, it must have an
overall quality rating, from the most recently issued ratings, under
the rating system described in Sec. Sec. 422.160 through 422.166, of
at least 3 stars or is a low enrollment contract or new MA plan as
defined in Sec. 422.252. In addition, the MA organization must not be
under an enrollment suspension.
Section 422.66(c)(2)(ii) is revised to include an approval
period not to exceed 5 years, subject to CMS authority to rescind or
suspend approval if the plan is non-compliant.
Section 422.66(c)(2)(iv) is revised to state that the
notice issued by the MA organization will include information on the
differences in premium, benefits and cost sharing between the
individual's current Medicaid managed care plan and the dual eligible
MA special needs plan and the process for accessing care under the MA
plan; an explanation of 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 MA plan; and a general description of alternative Medicare
health and drug coverage options available to an individual in his or
her Initial Coverage Election Period.
Section 422.66(c)(2)(iv) is revised to clarify that the
mandatory notice is in addition to the information and documents
required to be provided to new enrollees under Sec. 422.111.
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 estimating the additional costs for the projection window 2019-
2023, we assumed that approximately 24,600 MA-enrolled individuals
would 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 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
will take advantage of the new open enrollment period.
We applied 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 figured 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 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 costs 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 25
that demonstrates the calculations and displays the cost estimates for
each year 2019-2023. These costs are classified as transfers since
there is no increase in resources. The costs reflect switching from
health plans without bonuses to health plans with bonuses. Thus the
healthcare services to the enrollees that switch remain the same (no
increase in resources) albeit at a higher cost.

Table 25--Calculation of Increased Dollar Spending by the Medicare Trust Funds for the Extended Open Enrollment Period
--------------------------------------------------------------------------------------------------------------------------------------------------------
Net costs
2019 base year Trend factor Trend factor Trend factor Trend factor (rounded to
Year (million) 2020 2021 2022 2023 nearest
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
--------------------------------------------------------------------------------------------------------------------------------------------------------

To the impact on the Trust Fund, must be added the impact on Part C
plans and Part D sponsors from enrollment. This impact was estimated in
the Collection of Information section as $6.1 million ($3.2 million for
determining eligibility + $0.64 million for notification of enrollees +
$0.64 million for submission of enrollment information to CMS + $1.6
million for storage of enrollment forms). Determination of eligibility,
notification of enrollees, and submission to CMS use added resources
and therefore are classified as a cost to the plan. However, the cost
of storage is classified as a transfer since the costs of storage of
enrollment by the plan elected during

[[Page 16712]]

the open enrollment period are offset by the savings of cost of storage
of enrollment by the former plan from which enrollment is taking place.
Thus, $1.6 million of the $6.1 million is a transfer between plans and
sponsors while the remaining $6.1-$1.6 = $4.5 million is an actual
cost.
Hence, the total cost of this open enrollment provision for 2019 is
$4.5 million with a transfer of $10.6 million ($9 million to the Trust
fund + $1.6 million in enrollment actions).
We received no comments on the reduction in burden estimates
associated with this proposal. We received comments on the substantive
proposal, which we address in this final rule. As indicated in the
preamble to this final rule, we are finalizing this provision as
proposed.
8. Lengthening Adjudication Timeframes for Part D Payment
Redeterminations and IRE Reconsiderations
We believe the 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. 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 website 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
changes involve requests for payment where the enrollee has already
received the drug, we do not believe the changes will impose undue
burden on enrollees.
We did not receive comments on the reduction in burden estimates
associated with this proposal. We did receive comments on the
substantive proposal, which we address in this final rule. As indicated
in the preamble to this final rule, we are finalizing this provision as
proposed.
9. Elimination of Medicare Advantage Plan Notice for Cases Sent to the
IRE
The changes at Sec. 422.590(f) will 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 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
website 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, result in $34.66 an hour. Thus, the reduction in
administrative time spent will be 0.083 hours x 47,108 cases = 3,910
hours with a consequent savings of 3,910 hours x $34.66 per hour =
$135,520. This is a savings to industry since it reduces the computer
and staff resources needed to produce and send out notices.
We do not believe the change will adversely impact health plan
enrollees. The notice requirement we are eliminating is duplicative and
enrollees will be notified by the IRE that their case was received by
the IRE for review.
We did not receive comments on the burden estimates outlined in the
proposed rule, therefore we are finalizing this provision as proposed.
10. Revisions to Parts 422 and 423, Subpart V, Communication/Marketing
Materials and Activities
CMS proposed 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 that pose little risk to current or potential
enrollees and are not traditionally considered ``marketing.'' The
proposed change will 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 will more specifically outline the materials
that are and are not considered marketing materials.
We believe the net effects of the proposed changes will 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 final rule, we estimated the reduced
burden to industry at $1.4 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 $1.4 million = $0.14 million.
We received no comments on our proposal and therefore we are
finalizing this provision without modification.
11. Medicare Advantage and Part D Prescription Drug Plan Quality Rating
System
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 modify the
methodology of the Star Ratings assigned to consolidating contracts and
to codify that methodology. The methodology and measures 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 will be based on the enrollment weighted average of
the

[[Page 16713]]

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
will dissuade many plans from consolidating contracts since it will be
possible for some plans to lose QBPs under certain scenarios. If less
contracts consolidate to higher Star Ratings, less QBPs will be paid to
plans and this will result in Trust Fund transfers. Plans receiving
smaller or no bonuses may reduce benefits, thus transferring the costs
of benefits to the beneficiary, but we do not believe this will be
widespread since plans would lose enrollees if they excessively
curtailed benefits.
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 will 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 Star Rating methodology changes, there will still
be 50 percent of the projected impacted enrollees that will 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 26. These savings
are classified as transfers because there is no reduction of resources.
The savings result from enrollee transfers between health plans with
and without QBP. Thus the healthcare services remain the same (no
reduction), albeit at a cheaper price.

Table 26--Calculations of Net Savings per Year to the Medicare Trust Fund for Star Ratings
--------------------------------------------------------------------------------------------------------------------------------------------------------
Percent not Backing out of
Year Enrollment (3% annual PMPM cost (5% annual Number months consolidating Average rebate Part B premium Net savings
trend) trend) per year (%) percentage (%) (%) (in $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
--------------------------------------------------------------------------------------------------------------------------------------------------------

We received the following comments and our response follows:
Comment: A commenter urged CMS to provide additional detail
underlying its estimate in the regulatory impact analysis of the
proposed rule.
Response: CMS compared the Star Ratings for those plans that were
cross-walked from one contract to a different contract. The enrollment
estimate of 160,000 in 2018 was calculated by estimating the number of
enrollees that were cross-walked from a non-Quality Bonus Payment plan
in 2017 to a Quality Bonus Payment plan in 2018. An updated estimate
would be significantly higher if CMS were to have compared the
enrollment from the non-Quality Bonus Payment plans in the 2018 star
ratings before cross-walks to the enrollment from Quality Bonus Payment
plans in the 2018 star ratings after cross-walks. Since the preliminary
Star Ratings are published in the fall of the prior year, the plans are
given time to complete the cross-walk procedures before the Medicare
Advantage bids are submitted in the spring of the following year.
Summary of Regulatory Changes
For the reasons set forth in the proposed rule and our responses to
the related comments summarized earlier, we are finalizing the
provisions as proposed at Sec. Sec. 422.162(b)(3) and 423.182(b)(3)
without modification.
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, as discussed in the following
sentences. 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 CMS estimates, we do not anticipate
additional government or beneficiary cost impacts from this provision.

[[Page 16714]]

Table 27--Estimated Aggregate Costs and Savings to the Health Care Sector for the Any Willing Pharmacy 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
Final clarification of Any Willing Pharmacy rules, and
clarification of the definition of retail pharmacy will 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.'' \83\ \84\ 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.
---------------------------------------------------------------------------

\83\ 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.
\84\ National Community Pharmacist's Association comment letter
to CMS-4159-P, March 2014. Available at http://www.ncpa.co/pdf/NCPA-Comments-to-CMS-Proposed-Rule-2015FINAL-3.7.14.pdf.
---------------------------------------------------------------------------

We received the following comments and our response follows:
Comment: A commenter suggested that by eliminating preferred
pharmacy networks, the proposed any willing pharmacy policy would cost
the government in excess of $175 million for even a moderate decrease
in the number of preferred pharmacies. This same commenter, along with
others, urged us to clarify that we are not rolling back Part D plan
sponsors' ability to create and maintain preferred pharmacy networks.
Response: We thank the commenters, however, their concern was
predicated on the idea that we proposed to eliminate Part D plan
sponsors' ability to create and maintain preferred pharmacy networks.
As we explicitly stated and elaborated elsewhere in this final rule,
this policy in no way changes existing policy regarding Part D plan
sponsors' ability to create and maintain preferred pharmacy networks.
We are finalizing as proposed our timing of contracting
requirements at Sec. 423.505. We are finalizing, as modified, our
definition of retail pharmacy at Sec. 423.100, having removed the
mention of retail cost sharing. We are not finalizing our proposed
definition of mail order pharmacy.
13. Eliminating the Requirement To Provide PDP Enhanced Alternative
(EA) to EA Plan Offerings With Meaningful Differences (Sec. 423.265)
The 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''. When 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 will be
approximately 275 EA to EA plan pairings that will be required actuary
time spent in evaluation of the meaningful difference requirement. We
further estimate that it will 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 = $60,357. 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). As it is unknown how many organizations will choose to add a
second EA plan as a result of this provision, we are unable to estimate
the impact to beneficiaries should this lead to more competition.
Presumably, increased competition could lead to potentially lower
premiums and/or cost-sharing for Medicare beneficiaries.
We did not receive comments, specific to the regulatory impact
analysis, on this proposal.
14. 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 provisions will be those identified
in the collection of information section of this final 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 will accrue from individuals and entities no
longer required to enroll in or opt-out of Medicare to prescribe Part D
drugs or furnish Part C services and items. The savings and cost by
year are summarized in Table 28. As explained in the Collection of
Information section of this final rule, the savings and cost of this
analysis reflect increased and reduced use of resources respectively:
Providers and suppliers save $10.3 and $24.1 million from the removal
of the requirement to enroll in Medicare as a prerequisite to
furnishing health care items and services to Medicare Advantage
enrollees; this reduces

[[Page 16715]]

resources needed for such enrollment. Part D sponsors or their PBMs
spend $9.3 million in additional resources to program edits into plan
systems as well as produce and send required notifications to
enrollees. The net savings, is $25.1 million as shown.

Table 28--Savings and Cost to Industry and Providers Arising From the Preclusion Provision
----------------------------------------------------------------------------------------------------------------
Item/year 2019 2020 2021 2022 2023
----------------------------------------------------------------------------------------------------------------
Part D Cost..................... -$9,310,548 -48,829 -48,829 -48,829 -48,829
Part D Savings.................. 10,308,800 .............. .............. .............. ..............
Part C Savings.................. 24,077,100 .............. .............. .............. ..............
Net Savings..................... 25,075,352 -48,829 -48,829 -48,829 -48,829
----------------------------------------------------------------------------------------------------------------

Costs associated with an alternative approach are found in the
Alternatives Considered portion of this section.
We will be responsible for the development and monitoring of the
preclusion list using our own resources. We do not anticipate a change
in the number of individuals or entities billing for service, for we
will 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 welcomed public comment on these estimates, for we believed that
stakeholder feedback could assist us in developing more concrete
projections. We received no comments on this proposal and therefore are
finalizing this provision without modification.
15. Removal of Quality Improvement Project for Medicare Advantage
Organizations (Sec. 422.152)
This provision will 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 government reviews these
attestation submissions. To estimate amounts, we considered how many
QIP attestations are performed annually.
We estimated that--
This review requires one person reviewing for 0.25 hours
for a single QIP attestation. We assumed 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
website at https://www.opm.gov/policy-data-oversight/pay-leave/salaries-wages/2017/general-schedule/.
We calculated 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 final rule, and $19,305 are savings to the federal government.
We received no comments on the RIA for this proposal, and
therefore, we are finalizing the RIA without modification.
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 to perform initial analyses or
desk reviews of the detailed MLR reports submitted by MA organizations
and Part D sponsors. These initial analyses or desk reviews are done by
our contractors 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 will be receiving only the minimum amount
of data from MAOs and Part D sponsors, we expect that we will reduce
the amount we pay to contractors for software development, data
management, and technical support related to MLR reporting. We
currently pay a contractor $300,000 each year for these services.
Although we expect that MAOs and Part D sponsors will continue to use
the HPMS or a similar system to submit and attest to their simplified
MLR submissions, we will 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 that, by eliminating these services, we will reduce our
payments to contractors by approximately $100,000 a year.
In total, we estimate that the changes to the MLR reporting
requirements will save the government $490,000 a year. As noted in the
Collection of Information section of this final rule, the 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 final 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) will 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.
We received no comments on our regulatory impact analysis and are
finalizing this provision.
17. Expedited Substitutions of Certain Generics and Other Midyear
Formulary Changes (Sec. Sec. 423.100, 423.120, and 423.128)
The provisions will 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) generics released
after their initial formulary submission date 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 two months after the start of the

[[Page 16716]]

plan year. A related proposal would except from our transition policy
applicable generic substitutions and additions with cost-sharing
changes. Lastly, we proposed 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 website, 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 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 will 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 will
overlap across plan years a minimal amount of times. We received no
comments on our regulatory impact analysis and are finalizing this
provision with modifications discussed in II.A.14.
18. Similar Treatment of Biosimilar and Interchangeable Biological
Products and Generic Drugs for Purposes of LIS Cost Sharing
a. Savings
Codification of lower cost sharing for biosimilar and
interchangeable biological products for LIS enrollees will reduce
marketplace confusion about what level of cost-sharing Part D enrollees
should be charged for biosimilar and interchangeable biological
products. By establishing cost sharing at the lower level for LIS
enrollees, this provision will also improve LIS enrollee incentives to
use biosimilar and interchangeable biological products instead of
reference biological products. As discussed in the proposed rule, this
will reduce costs for 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 enrollee protections while also
improving enrollee incentives to choose biosimilar and interchangeable
biological products over reference biological products. Improved
incentives to choose lower-cost alternatives will reduce costs to Part
D enrollees and the Part D program. CMS estimates this proposal will
provide a modest savings of $10 million in 2019, with savings
increasing by approximately $1 million each year through 2028. These
savings are classified as transfers since there is no reduction in
services; drugs are still being sold, albeit at a cheaper price because
of the use of biosimilar biological products.
CMS anticipates some natural shift from reference biological
products to biosimilar and interchangeable biological products, but
biosimilar biological products' price differential and market share are
lower 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 nine approved (as of
March 7, 2018) biosimilar biological products. The market dynamic
between Neupogen[supreg] and Zarxio[supreg] has behaved consistent with
CMS' anticipation and CMS expects other biosimilar 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], CMS estimated biosimilar biological products to be 16
percent less expensive than their reference biological product. CMS
estimates this proposal will result in a minor shift of an additional 5
percent of prescriptions to biosimilar biological products by LIS
enrollees under this proposal. Consequently, savings are not estimated
to be significant at this time.

Table 29--Estimated Savings to the Medicare Trust Fund for Calendar Years 2019 Through 2023 for Similar
Treatment of Biosimilar and Interchangeable Biological Products and Generic Drugs for Purposes of LIS Cost
Sharing
----------------------------------------------------------------------------------------------------------------
Calendar year ($ in millions) Total CYs 2019-
Provision Regulation --------------------------------------------- 2023 ($ in
section(s) 2019 2020 2021 2022 2023 millions)
----------------------------------------------------------------------------------------------------------------
Federal Government (Medicare) Impacts
----------------------------------------------------------------------------------------------------------------
Similar Treatment of Sec. 423.4....... 10 11 12 13 14 60
Biosimilar and
Interchangeable Biological
Products and Generic Drugs
for Purposes of LIS Cost
Sharing.
----------------------------------------------------------------------------------------------------------------

b. Benefits of Similar Treatment of Biosimilar and Interchangeable
Biological Products and Generic Drugs for Purposes of LIS Cost Sharing
Final codification of lower cost sharing for biosimilar and
interchangeable biological products for LIS enrollees will reduce
marketplace confusion about what level of cost-sharing LIS enrollees
should be charged for biosimilar and interchangeable biological
products. By establishing cost sharing at the lower level, this
provision will also improve Part D enrollee incentives to use
biosimilar and interchangeable biological products instead of reference
biological products. As discussed previously, this will reduce costs to
Part D enrollees and generate savings for the Part D program.
We received the following comments, and our response follows:
Comment: A couple of commenters noted that our proposed change
generates administrative burden for Part D plan sponsors due to
programming changes.
Response: We appreciate the commenters' perspective, however we
believe that the benefit to LIS Part D enrollees outweigh the concerns
regarding Part D plan sponsor's administrative burden. Given the low
number of biosimilar biological products on the market, it is not
apparent to us that this would require significant administrative
burden on

[[Page 16717]]

Part D plans to identify such products and implement this change.
We are finalizing our proposal as modified, amending Sec.
423.782(a)(2)(iii)(A) and Sec. 423.782(b)(3) instead of Sec. 423.4.
19. Changes to the Days' Supply Required by the Part D Transition
Process (Sec. 423.120)
We do not believe that finalizing 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 supplies to plan enrollees in the LTC and outpatient
settings, they will only have to make a technical change to these
systems that consists of changing the required number of days' supply
to the approved month's supply in their plan benefit package. 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 provision would impose any new burden
on LTC facilities and the pharmacies that serve them. We believe this
regulation will eliminate the additional time that LTC facilities and
pharmacies have to transition Part D patients--time we now believe they
do not need to effectuate the transition.
In the context of requesting that we not reduce the transition
supply from 90 days to a month, commenters generally indicated that
preparing for transitions created an administrative burden. We
acknowledge and appreciate the efforts undertaken to smooth
transitions, but do not believe our provision in and of itself would
create any new burden. While they would have a smaller time frame in
which to take actions, LTC facilities and pharmacies would need to make
the same outreach calls to health care providers as has previously been
the case--albeit within a shorter period of time. And while we are
recommending that LTC pharmacies try to anticipate and plan for
somewhat predicable events such yearly changes to benchmark status
necessitating beneficiary moves, it is not inconceivable that to the
extent required, these entities might undertake contingency planning
that could ultimately lessen the administrative burdens over the long
run.
We believe this provision would 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.
D. Alternatives Considered
1. 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.
2. Similar Treatment of Biosimilar and Interchangeable Biological
Products and Generic Drugs for Purposes of LIS Cost Sharing
The critical policy question was how to provide lower cost sharing
for biosimilar and interchangeable biological products for LIS
enrollees. Classifying biosimilar and interchangeable biological
products as generic drugs only for cost-sharing purposes for LIS
enrollees risked confusion in the marketplace which could lead to
inappropriate utilization of biosimilar and interchangeable biological
products and in turn, increased costs to the Part D program. Adding
biosimilar and interchangeable biological products to regulatory cost-
sharing provisions for LIS enrollees can appropriately resolve
marketplace confusion while also improving Part D enrollee incentives
to choose lower cost alternatives.
3. Preclusion List
We considered a preclusion list that will include providers and
suppliers who are prescribing Part D drugs and 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: Encounter data and
Prescription drug event (PDE) which 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
will occur after the service, item or drug was provided to the Medicare
beneficiary. We estimate that it will cost the Trust Fund approximately
$42.8 million if we do not proactively screen providers and prescribers
and delay screening until after the PDE and encounter data is
available. We estimate an additional 1.4 million providers or
prescribers will 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 have 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 460,000 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 1,840 new revocations. Based on the approximate
1-month delay in the availability of the PDE and encounter data, 3
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 1,840 new
revocations, a delay in screening will cost the Trust Fund
approximately $42.8 million (3,324 x 7 x 1,840). 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.

E. Accounting Statement

As required by OMB Circular A-4 (available at https://obamawhitehouse.archives.gov/omb/circulars_a004_a-4/), in Table 30 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 30 is based on Table 31 which lists savings, costs, and
transfers by provision.

[[Page 16718]]

Table 30--Accounting Statement: Classifications of Estimated Savings, Costs, and Transfers From Calendar Years
2019 to 2023
[$in millions]
----------------------------------------------------------------------------------------------------------------
Savings
--------------------------------------------------------
Discount rate Whom to whom
-------------------------- Period covered
7% 3%
----------------------------------------------------------------------------------------------------------------
Net Annualized Monetized Savings.. 295.23 296.29 CYs 2019-2023............... MA Organizations and
Part D Sponsors,
Industry, Govt.
Annualized Monetized Savings...... 302.53 303.59 CYs 2019-2023............... MA Organizations and
Part D Sponsors,
Industry, Govt.
Annualized Monetized Cost......... (7.30) (7.30) CYs 2019-2023............... MA Organizations and
Part D Sponsors,
Industry, Govt.
Transfers......................... 37.17 37.41 CYs 2019-2023............... Federal Government,
MA plans and Part D
Sponsors, Providers
and Re-insurers.
----------------------------------------------------------------------------------------------------------------
Note: Monetized figures in 2018 dollars. Positive numbers indicate aggregate level annualized savings at the
giving percentage. Transfers are a separate line item. Table 30 is based on Table 31. Minor (cent) errors are
due to rounding.

The following Table 31 summarizes savings, costs, and transfers by
provision and formed a basis for the accounting table.
BILLING CODE 4120-01-P

[[Page 16719]]

[GRAPHIC] [TIFF OMITTED] TR16AP18.018

BILLING CODE 4120-01-C

F. Conclusion

This final rule has a net savings of between $280 to $335 million
for each of the next 5 years. The savings are equivalent to a level
annualized amount of about $295 million per year for both 7 percent and
3 percent interest rates. These net savings are to Part D sponsors,
Part C plans, pharma, providers, industry, as well as the federal
government. Transfers between the federal government, Part C plans,
Part D sponsors, re-insurers, and providers are between $30 and $45
million and are equivalent to a monetized level amount of about $37
million per year at the 3-percent and 7-percent levels. Both industry
and the federal government save from program efficiencies and reduced
work.
As a result of benefits, savings, and transfers of this final rule,
the Medicare Trust Fund, in 2019, will reduce in aggregate its cost for
paying for plan benefits by $123.6 million dollars ($19 million from
the CARA provision + $71.6 million from the physician incentive plans
provision + $10 million from the provision to treat biosimilar and
interchangeable biological products as generic drugs for purposes of
LIS cost sharing + $32 million from the star ratings provision -9
million from the open enrollment provision). This reduction in Medicare
Trust Fund costs will gradually increase; in 2028, the Trust Fund is
expected to reduce costs by $241.7 million dollars. These savings to
the Medicare Trust Fund are actuarially equivalent to a level amount of
about $170 million per year in 2018 dollars ($171.69 million discounted
at the 3% level, and $167.75 million per

[[Page 16720]]

year discounted at the 7% level). These savings do not include the MLR
provision savings of $490,000 savings a year due to not paying a
contractor nor the marketing material provision savings of $140,000 a
year due to reduced time spent by Federal employees reviewing marketing
materials.
Additionally, this final rule is beneficial to beneficiaries. The
impact of this final rule on beneficiaries is complicated with some
provisions beneficial, one provision burdensome, and the rest neutral.
Although quantitative formulations of the impacts can sometimes be
provided, because of the variability of many factors, in many cases,
impact can only be measured qualitatively.
The following provisions are beneficial for beneficiaries for the
reasons indicated:
CARA: Enrollees will--(1) have fewer enrollment forms to
fill out (because they are locked in); (2) there will be fewer enrollee
opioid addictions; (3) the illnesses arising from opioid addiction will
be reduced; we estimate that the Trust Fund, in 2019, will spend $19
million less because of reduced opioid prescriptions; enrollees are
therefore saving coinsurance on these payments;
Passive enrollment flexibilities: Enrollees are
relieved of the burden of filling out enrollment forms; plans are
relieved of the burden of verifying eligibility and storage of these
forms. There is a cost to enrollees of the ability to actively choose a
new plan; this cost is minimized by the special election period
afforded to enrollees and described in the two passive enrollment
notifications. Additionally, if enrollees remain in the plan they are
passively enrolled into, they will continue receiving services from an
integrated D-SNP similar to the plan they previously chose.
Disclosure: Plans have the option to deliver
required documents using alternate methods including electronic
delivery. Enrollees of these plans may receive disclosure documents
electronically and have enhanced electronic search capabilities
available; furthermore, enrollees have greater access to their
documents at any location with a browser. Plans that opt to use
alternative methods of delivery (including electronic delivery) must
provide the documents in hard copy upon request.
Expedited generic substitutions and midyear
formulary changes: Part D sponsors have the option to provide enrollees
with access to generics sooner than currently permitted. While we will
require Part D sponsors to provide all enrollees with general advance
notice that immediate generic substitutions can take place, under this
revision Part D sponsors no longer have to provide advance notice of
the generic substitution to enrollees who are currently taking the
brand name drug. This means that enrollees who would might have so
chosen may not have the chance to consult with their prescribers before
they receive the generic drug. We believe these consequences are
mitigated by the fact that beneficiaries have general familiarity with
generic drug substitutions as part of the larger pharmacy market and
that additionally they may still avail themselves of the strong
Medicare beneficiary protections, including the exceptions process.
Preclusion: The removal of the Part D and Medicare
Advantage enrollment requirements for prescribers and providers as a
prerequisite for prescribing drugs and furnishing health care items and
services will result in greater ease for enrollees in obtaining needed
drugs and health care items and services;
PDP EA to EA meaningful difference: Enrollees may
experience lower Part D supplemental premiums if enrolled in an EA
plan, as sponsors will not be pressured to make benefit changes to
comply with a requirement that ultimately results in higher
supplemental premiums for beneficiaries. We believe that the tools CMS
provides for beneficiaries to make decisions (for example. Medicare
Plan Finder, Medicare and You Handbook, 1-800-MEDICARE), in addition to
our enforcement of communication and marketing requirements, aim to
mitigate any potential choice overload should this provision result in
additional PDP plan offerings;
Similar Treatment of Biosimilar and Interchangeable
Biological Products as Generic Drugs: This provision will reduce
confusion in the marketplace surrounding this issue, will improve
enrollee protections while also improving enrollee incentives to choose
biosimilar and interchangeable biological products over reference
biological products. Improved incentives to choose lower-cost
alternatives will reduce costs to Part D enrollees. Note, the co-
insurance portion of the estimated reductions in dollars spent by the
Trust Fund, $10 million in 2019, reflects quantitative estimates of
savings to Part D plan sponsors and reduced costs of enrollees;
Part C Meaningful Difference: As discussed earlier in this
section, CMS expects the elimination of the Part C meaningful
difference evaluation, in conjunction with the expansion of benefit
flexibilities, will allow organizations to provide benefit offerings
that satisfy the unique needs of beneficiaries, increase enrollee
satisfaction, reduce overall plan expenditures, and result in more
affordable plans. Beneficiaries will continue to compare plans as they
have in the past, that is, limit their choices based on
characteristics, such as plan type, Part D coverage, differences in
provider network, Part B and plan premiums, unique populations served,
and benefits. CMS and MA organizations will continue to provide
beneficiaries with tools, such as MPF and communication materials, to
evaluate plan options and assist in choosing the best plan option. In
addition, the elimination of the meaningful difference provision is not
necessarily encouraging ``new'' plans, but rather allowing plans to use
existing capabilities and expanded flexibilities discussed in the
proposed rule to improve innovation within existing and new plans. It
is unknown how many organizations will choose to add plan options,
decrease premiums and/or cost sharing and by what degree. CMS expects
that increased competition will provide value to beneficiaries through
more innovative health plans that meet their needs, and affordability
through benefits and premiums. These factors are difficult to
accurately measure quantitatively and as such, we consider the benefits
qualitative. CMS also believes that the tools and information CMS
provides for beneficiaries to make decisions (for example, Medicare
Plan Finder, Medicare and You Handbook, 1-800-MEDICARE), in addition to
our enforcement of communication and marketing requirements, aim to
mitigate any potential choice overload.
Only one provision, OEP, is burdensome to beneficiaries. Enrollees
will have the burden of filling out enrollment forms and plans will
have the burden of verifying eligibility, sending notifications to
enrollees and CMS, and storing enrollment forms. This burden has been
assessed quantitatively in the Collection of Information section as
costing $6.1 million to plans and $6.7 million to beneficiaries.
The remaining provisions are neutral because either the provision
codified or clarified existing practice (coordination of enrollment/
disenrollment, any willing pharmacy), the provision had no new or
revised information requirements (limitations on SEP for Part D duals,
Part D tiering, changes to transition supply), the provision did not
change practice and therefore had no

[[Page 16721]]

impact (minimum enrollment waiver), the provision removed duplicative
efforts (removal of quality improvement projects, lengthening
adjudication timeframes), or the provisions reduced burden on other
stakeholders without impacting enrollees (removal of quality
improvement projects reduced the burden on CMS review staff, marketing
materials reduced the burden on CMS review staff, elimination of
notices for IRE reduced plan burden, Medical Loss Ratio reduced plan
burden, compliance training reduction affected staff training,
physician incentive plans reduced costs of insurance for MA
organizations, agent-broker gives plans more flexibility in dealing
with unlicensed brokers).

G. Reducing Regulation and Controlling Regulatory Costs

This rule, as finalized, will be an Executive Order (E.O.) 13771
regulatory action. Details on the estimated costs and cost savings can
be found in the preceding analysis. Executive Order 13771 requires that
the costs associated with significant new regulations ``shall, to the
extent permitted by law, be offset by the elimination of existing costs
associated with at least two prior regulations.'' We believe that this
final rule is a significant regulatory action as defined by Executive
Order 12866. This final rule is considered an E.O. 13771 deregulatory
action. We estimate that this rule generates annualized cost savings of
$365.55 discounted relative to year 2016 at 7 percent over a perpetual
time horizon.

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, Incorporation by reference, Medicare, Penalties,
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 amends 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 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.

PART 422--MEDICARE ADVANTAGE PROGRAM

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

[[Page 16722]]

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 (1)(iii),
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 (2)(ii), 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 that is
described in paragraph (g)(2)(i) of this section and 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) of this
section 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 from the most recently issued
ratings, under the rating system described in Sec. Sec. 422.160
through 422.166, of at least 3 stars 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:
(i) In the case of a passive enrollment described in paragraphs
(g)(1)(i) and (ii) of this section, 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. This notice must be provided to all
potential passively-enrolled enrollees, in a form and manner determined
by CMS, prior to the enrollment effective date (or as soon as possible
after the effective date if prior notice is not practical).
(ii) In the case of a passive enrollment described in paragraph
(g)(1)(iii) of this section, two notices that describe the costs and
benefits of the plan and the process for accessing care under the plan
and clearly explain the beneficiary's ability to decline the enrollment
or choose another plan.
(A) The first notice described in paragraph (g)(4)(ii) of this
section must be provided, in a form and manner determined by CMS, no
fewer than 60 calendar days prior to the enrollment effective date.
(B) The second notice described in paragraph (g)(4)(ii) of this
section must be provided, in a form and manner determined by CMS, no
fewer than 30 days prior to the enrollment effective date.
(5) Special election period. In the case of a passive enrollment
described in this paragraph, individuals will be provided with a
special enrollment period described in at Sec. 423.38(c)(10) of this
chapter.

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

[[Page 16723]]

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 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) of this chapter.
(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) of this
chapter.
(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
communications 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 dual eligible 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 (including a fully integrated dual
eligible special needs plan as defined in Sec. 422.2) 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 dual eligible MA special
needs plan 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;
(E) CMS has approved the MA organization to use default enrollment
under paragraph (c)(2)(ii) of this section;
(F) The MA organization has a minimum overall quality rating from
the most recently issued ratings, under the rating system described in
Sec. Sec. 422.160 through 422.166, of at least 3 stars or is a low
enrollment contract or new MA plan as defined in Sec. 422.252; and
(G) The MA organization does not have any prohibition on new
enrollment imposed by CMS.
(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 approval will be for a period not to
exceed five years, although CMS may suspend or rescind approval prior
to the expiration of this period if 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 dual eligible MA special needs plan is effective the month in which
the individual is first entitled to both Part A and Part B.
(iv) Notice requirement for default enrollments. In addition to the
information described in Sec. 422.111 and no fewer than 60 calendar
days prior to the enrollment effective date described in paragraph
(c)(2)(iii) of this section, the MA organization must provide to each
individual who qualifies for deemed enrollment under paragraph (c)(2)
of this section a notice that includes the following:
(A) Information on the differences in premium, benefits and cost
sharing between the individual's current Medicaid managed care plan and
the dual eligible MA special needs plan and the process for accessing
care under the MA plan;
(B) 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 MA plan; and
(C) A general description of alternative Medicare health and drug
coverage options available to an individual in his or her Initial
Coverage Election Period.
(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 while enrolled in a health plan offered by the
MA organization during the month immediately preceding the MA plan
enrollment effective date, and who

[[Page 16724]]

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 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. Beginning
no earlier than January 1, 2020, 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.
(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
on 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. Beginning no earlier than January 1, 2020, 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; beginning no earlier than
January 1, 2020, CMS may 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. Beginning no earlier than January 1, 2020, 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.
(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) and adding paragraph (h)(2)(iii) 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 and information (names,
addresses, phone numbers, and specialty) on the network of contracted
providers. Posting

[[Page 16725]]

does not relieve the MA organization of its responsibility under
paragraph (a) of this section to provide hard copies to enrollees upon
request.
(iii) Posting does not relieve the MA organization of its
responsibility under paragraph (a) of this section to provide hard
copies of the Summary of Benefits to enrollees when CMS determines hard
copy delivery of the Summary of Benefits is in the best interest of the
beneficiary.
* * * * *

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.

(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 C.
(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 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. Except for Sec. 422.162(b)(3), 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 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 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 website 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

[[Page 16726]]

(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.
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), with both the reward factor and CAI applied as
applicable, as described in Sec. 422.166(f). 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 for such measures 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.
(v) This provision governing the Star Ratings of surviving
contracts is applicable to contract consolidations that are approved on
or after January 1, 2019.
(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, data submitted by plans, and
CMS administrative data.
(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.

[[Page 16727]]

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 nationally endorsed and in alignment with the private sector, such
as measures developed by National Committee for Quality Assurance
(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 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 (e)
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 (f);
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 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

[[Page 16728]]

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 scores will be converted to measure-
level Star Ratings by determining the cut points using hierarchical
clustering algorithms in accordance with Sec. 422.166(a)(2)(i) through
(iii).
(vi) The Part D improvement measure cut points for MA-PDs and PDPs
will be determined using separate clustering algorithms in accordance
with Sec. Sec. 422.166(a)(2)(iii) and 423.186(a)(2)(iii) of this
chapter.
(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
standards/substandards 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. CMS will
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 is
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
is 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 are 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.

[[Page 16729]]

(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,
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 criteria in
paragraphs (a)(3)(i)(A) and (B) of this section are met plus at least
one of the criteria in paragraphs (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 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.
(iii) A contract is assigned 3 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, 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, the reliability is low,
and 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 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.
(v) A contract is assigned 5 stars if both of the following
criteria in paragraphs (a)(3)(v)(A) and (B) of this section are met
plus at least one of the criteria in paragraphs (a)(3)(v)(C) or (D) of
this section is met:
(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 standard error
above the 80th percentile.
(4) 5-Star Scale. 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.

[[Page 16730]]

(ii) Outcome and Intermediate outcome measures receive a weight of
3.
(iii) Patient experience and complaint measures receive a weight of
2.
(iv) Access measures receive a weight of 2.
(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 (f).
(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; 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 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 (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 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 (f)(2) 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 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) 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 from
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) The Star Ratings measures that remain after the exclusion
criteria, paragraph (f)(2)(ii) of this section, have been applied will
be adjusted for the determination of the CAI. CMS will announce the
measures identified for adjustment in the calculations of the CAI under
this paragraph (f)(2) through the process described for changes in and
adoption of payment and risk adjustment policies in section 1853(b) of
the Act.
(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

[[Page 16731]]

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.
(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 (overall, Part C, Part D for MA-PD, and Part D for PDPs)
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 the 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) 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.
(ii) If the highest rating is less than 4 stars without the use of
the improvement measure(s) and 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)(1):
(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) to read 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:
0
a. In paragraph (a) by adding the definitions of ``Combined Stop-Loss
Insurance Deductible Table (Table PIP-11)'', ``Global capitation'',
``Net benefit premium'', ``Non-Risk Patient Equivalents (NPE)'', and
``Separate Stop-Loss Insurance Deductible Table (Table PIP-2)'' in
alphabetical order;
0
b. By revising paragraph (f)(2)(iii); and
0
c. By adding paragraphs (f)(2)(iv) through (vi) and (f)(3).
The additions and revisions read as follows:

[[Page 16732]]

Sec. 422.208 Physician incentive plans: requirements and
limitations.

(a) * * *
Combined Stop-Loss Insurance Deductible Table (Table PIP-11) means
the table described and developed using the methodology in paragraph
(f)(2)(iv) of this section.
Global capitation means a specific type of ``capitation'' that
includes both professional and institutional services. Services covered
by global capitation may also include prescription drug benefits and
supplemental benefits as well as basic benefits (as those terms are
defined in Sec. 422.100(c)). For purposes of Tables PIP-11 and PIP-12
global capitation includes all Parts A and B services except hospice.
Net benefit premium means the total amount of stop-loss claims (90
percent of claims above the deductible) for that panel size divided by
the panel size. It is determined for each panel size and shown in Table
PIP-11, described in paragraph (f)(2)(iv) of this section. It is then
used in Table PIP-12, described in paragraph (f)(2)(vi) of this
section, to identify all separate institutional and separate
professional deductible combinations that meet the stop-loss
requirements for multi-specialty physician groups participating in
PIPs.
Non-Risk Patient Equivalents (NPE) means the estimate of annual
claims for physician rendered services for non-risk patients served by
the physician or physician group divided by what the PMPY capitation
for physician rendered services would be if the beneficiary were part
of the risk arrangement. Both Medicare and non-Medicare patients are
included in this calculation.
* * * * *
Separate Stop-Loss Insurance Deductible Table (Table PIP-2) means
the table described and developed using the methodology in paragraph
(f)(2)(vi) of this section.
* * * * *
(f) * * *
(2) * * *
(iii)(A) Stop-loss protection must cover at least 90 percent of
costs of referral services 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 the
required stop-loss protection for the various panel sizes for contract
years beginning on or after January 1, 2019 is determined using the
Combined Stop-Loss Insurance Deductible Table (Table PIP-11). For panel
sizes not shown on Table PIP-11 and for values not shown on Table PIP-
12, linear interpolation (between the table values) may be used to
identify the maximum deductible(s) for the required stop-loss coverage.
Tables PIP-11 and PIP-12 apply to only multi-specialty physician groups
in global capitation arrangements with per-patient stop-loss insurance.
For all other physician incentive plan arrangements, the MA
organization must assure that the physician or physician group entering
into the physician incentive plan arrangement is covered by actuarially
equivalent stop-loss protection that meets the requirements of this
regulation.
(B) Using Table PIP-11, the deductible is identified for the panel
size that is the number of risk patients plus non-risk patient
equivalents. Non-risk patient equivalents may add a maximum of $100,000
to the deductible. The deductible for the stop-loss insurance required
to be provided for the physician or physician group is then based on
the lesser of:
(1) The deductible for the risk patient panel size plus $100,000;
and
(2) The deductible for the panel size that is the total of the
number of risk patients plus non-risk patient equivalents.
(iv) Table 1 is developed and updated by CMS using the methodology
in this paragraph. CMS publishes Table PIP-11 in guidance (such as an
attachment to the Rate Announcement issued under section 1853(b) of the
Act) in advance of the bid due date for the upcoming year if CMS
determines that an update would be prudent for that year.
(A) The stop-loss tables are calculated using claims data for a
statistically valid sample of beneficiaries enrolled in Fee-for-Service
Medicare Parts A and B from the most available recent year. The sample
includes only claims for beneficiaries eligible for both Part A and
Part B for whom Medicare is the primary insurer and excludes hospice
claims. The estimate of medical group income is derived from payments
for all Part A and Part B services (excluding hospice) in the sampled
claims data (to emulate a multi-specialty practice). The central limit
theorem is used to obtain the distribution of claim means for a multi-
specialty group of any given panel size. The distribution of claim
means is 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 no more than 25 percent of potential payments. This
point is the deductible in Table PIP-11 for the given panel size.
(B) The `net benefit premium' (NBP) column in Table PIP-11 is not
used for computation of combined insurance but is used to determine the
separate deductibles for professional services and institutional
services in the Separate Stop-Loss Insurance Deductible Table (Table
PIP-12).
(C) 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 so long as the separate deductibles
for institutional services and professional services are determined
using Table 2 as described in paragraph (f)(2)(vi)(B) of this section.
Table PIP-2 is developed and updated by CMS using the methodology in
paragraph (f)(2)(vi). CMS publishes Table PIP-2 in guidance (such as an
attachment to the Rate Announcement issued under section 1853(b) of the
Act) in advance of the bid due date for the upcoming year if CMS
determines that an update would be prudent for that year.
(B) The maximum deductibles for each category of services
(institutional and professional claims) are identified by using the net
benefit premium (NBP) determined in Table PIP-11 as the starting point
in Table PIP-12. Any combination of institutional and professional
attachment points for which the NBP in Table PIP-12 is greater than the
NBP determined in Table PIP-11 is permissible. Interpolation may be
used to find the NBP values in Table PIP-12 that are closest to the NBP
identified in Table PIP-11.
(vi) Table PIP-12 is developed using a methodology similar to that
for Table PIP-11.
(A) Claims data are obtained as described in paragraph
(f)(2)(iv)(A).
(B) Professional and institutional claims are defined and
categorized based on industry standards and based on payments for 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.
(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 Tables PIP-11 and PIP-12.
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.

[[Page 16733]]

(iii) Meets 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 42 CFR
part 498.
(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 items or services 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 D
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 D 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 is amended 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.
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

[[Page 16734]]

the terms of this paragraph (a) 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 subpart D of this
part. 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--
0
a. By removing paragraph (a)(3);
0
b. By redesignating paragraphs (a)(4) and (5) as paragraphs (a)(3) and
(4);
0
c. In newly redesignated paragraph (a)(4) introductory text by
removing the reference ``paragraph (a)(4)'' and adding in its place the
reference ``paragraph (a)(3)''.
0
d. By removing and reserving paragraph (b).

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)(1)(iv) 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) * * *
(1) * * *
(iv) 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 prior 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) 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
(2) 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 paragraph
(b)(1) of this section and stop-loss insurance that is adequate and
acceptable to CMS; and
(3) 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.

[[Page 16735]]

0
44. Section 422.2260 is revised to read as follows:

Sec. 422.2260 Definitions.

As used in this subpart--
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 activities and use of materials that meet the
following:
(1) Conducted by the MA organization or downstream entities.
(2) Intended to draw a beneficiary's attention to a MA plan or
plans.
(3) Intended to influence a beneficiary's decision-making process
when selecting an MA plan for enrollment or deciding 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) Materials used by marketing representatives such as scripts or
outlines for telemarketing or other presentations.
(3) Presentation materials such as slides and charts.
Materials that do not include the following are not considered
marketing materials:--
(1) Information about the plan's benefit structure or cost sharing;
(2) 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;
(4) Unless otherwise specified by CMS based on their use or
purpose, materials that are required under Sec. 422.111; or
(5) Any materials specifically designated by CMS as not meeting the
definition of the proposed marketing definition based on their use or
purpose.

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 and CMS may determine, upon review of
such materials, that the 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. Revising the section heading;
0
b. Removing the introductory text; and
0
c. 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 does 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 vital materials 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

[[Page 16736]]

marketing materials, unless the materials clearly indicate that other
providers are available in the network.
(10) Knowingly target or send unsolicited 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);
0
d. Redesignating paragraph (b)(3) as paragraph (b)(2); and
0
e. In newly redesignated paragraph (b)(2)(ii)(A) by removing the
reference ``paragraph (b)(3)(iii)'' and adding in its place the
reference ``paragraph (b)(2)(iii)''.

Sec. 422.2410 [Amended]

0
50. Section 422.2410 is amended in paragraph (a) by removing the phrase
``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--
0
a. By redesignating paragraph (a) introductory text and paragraphs
(a)(1) and (2) as paragraphs (a)(1), (2), and (3), respectively;
0
b. By adding a new paragraph (a) subject heading and revising newly
redesignated paragraph (a)(1);
0
c. By adding paragraph (a)(4);
0
d. In paragraph (b)(1), by removing the word ``costs'' and adding in
its place the phrase ``costs other than those that are related to fraud
reduction'';
0
e. In paragraph (b)(5), by adding the phrase ``(and that are not
related to fraud reduction activities under paragraph (a)(4)(ii) of
this section)'' after ``capabilities''; and
0
f. By 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) of this section.
* * * * *
(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''; and
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--VOLUNTARY MEDICARE PRESCRIPTION DRUG BENEFIT

0
56. The authority citation for part 423 continues to read as follows:

Authority: Secs. 1102, 1106, 1860D-1 through 1860D-42, and 1871
of the Social Security Act (42 U.S.C. 1302, 1306, 1395w-101 through
1395w-152, and 1395hh).

0
58. Section 423.32 is amended by:
0
a. Revising paragraph (b) introductory text; and
0
b. 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

[[Page 16737]]

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 paragraphs (c) introductory text, (c)(4), and (c)(8)(i)(C);
0
b. Adding paragraphs (c)(9) and (10);
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)(i) Except as provided in paragraph (ii), the individual is a
full-subsidy eligible individual or other subsidy-eligible individual
as defined in Sec. 423.772, who is making an allowable onetime-per-
calendar-quarter election between January through September.
(ii) An individual described in paragraph (i) is not eligible for
this special enrollment period if he or she has been notified that he
or she has been identified as a ``potential at-risk beneficiary'' or
``at-risk beneficiary'' as defined in Sec. 423.100 and such
identification has not been terminated in accordance with Sec.
423.153(f)).
* * * * *
(8) * * *
(i) * * *
(C) The PDP (or its agent, representative, or plan provider)
materially misrepresented the plan's provisions in communications as
outlined in subpart V of this part.
* * * * *
(9) The individual is making an election within 3 months after a
gain, loss, or change to Medicaid or LIS eligibility, or notification
of such a change, whichever is later.
(10) The individual is making an election within 3 months after
notification of a CMS or State-initiated enrollment action or that
enrollment action's effective date, whichever is later.
(d) Enrollment period to coordinate with MA annual 45-day
disenrollment 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) of this chapter, 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) of this chapter, 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) of this chapter 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 open enrollment
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) of this chapter, 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'', and
``Frequently abused drug'';
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 this
section);
(ii) Not an exempted beneficiary; and
(iii) Determined to be at-risk for misuse or abuse of such
frequently abused drugs by a Part D plan sponsor under its 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 and such
identification had not been terminated upon disenrollment.
* * * * *
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 the standards in Sec.
423.153(f)(16) and, beginning with contract year 2020, will be
published in guidance annually.
* * * * *
Exempted beneficiary means with respect to a drug management
program, an enrollee who--
(1) Has elected to receive hospice care or is receiving palliative
or end-of-life 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) Is being treated for active cancer-related pain.
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.
* * * * *
Potential at-risk beneficiary means a Part D eligible individual--

[[Page 16738]]

(1) Who is identified using clinical guidelines (as defined in this
section); 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 and such
identification had not been terminated upon disenrollment.
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 of this chapter.
(ii) The prescriber is currently under a reenrollment bar under
Sec. 424.535(c) of this chapter.
(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 (1)(iii),
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 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 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 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 ``30 days'';
0
f. In paragraph (b)(5)(i)(B), by removing the phrase ``60 day supply''
and adding in its place the phrase ``an approved month's supply'';
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 paragraph
(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) * * *
(i) * * *
(B) Not apply in cases in which a Part D sponsor substitutes a
generic drug for a brand name drug as permitted under paragraph
(b)(5)(iv) 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 an approved month's supply of
medication, unless the prescription is written by a prescriber for less
than an approved month's supply and requires the Part D sponsor to
allow multiple fills to provide up to a total of an approved 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 on the same or lower cost-sharing tier
and with 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
submitted its initial formulary for CMS approval consistent with
paragraph (b)(2) of this section 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

[[Page 16739]]

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 (c)(5)(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 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 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) Subject to all other Part D rules and plan coverage
requirements, provide an advance written notice to any beneficiary who
has received a prescription from a prescriber on the preclusion list as
soon as possible but to ensure that the beneficiary receives the notice
no later than 30 days after publication of the most recent preclusion
list.
(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) 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 paragraphs (a)(3) and
(d)(2)(iii) to read as follows:

Sec. 423.128 Dissemination of Part D plan information.

(a) * * *
(3) At the time of enrollment and at least annually thereafter, by
the first day of the annual coordinated election period.
* * * * *
(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 clinical staff conducting
case management required under paragraph (f)(2) of this section,
including that the staff must have a current and unrestricted license
to practice within the scope of his or her profession in a State,
Territory, Commonwealth of the United Stated (that is, Puerto Rico), or
the District of Columbia.
(ii) The necessary and appropriate contents of files for case
management required under paragraph (f)(2) of this section, which must
include documentation of the substance of prescriber and beneficiary
contacts.
(iii) Monitoring reports and notifications about incoming enrollees
who meet the definition of an at-risk

[[Page 16740]]

beneficiary or 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 met 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 prescribers have not responded to the inquiry
described in paragraph (f)(2)(i)(B) of this section, make reasonable
attempts to communicate with the prescribers telephonically and/or by
another effective communication method designed to elicit a response
from 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 still 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 any or 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;
(B) Dispensed to the beneficiary by one or more network pharmacies;
or
(C) Both.
(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) Except in the case of a pharmacy limitation imposed pursuant to
paragraph (f)(3)(ii)(B) of this section, obtained the agreement of at
least one prescriber 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)(A) Except as provided in paragraph (f)(2)(ii)(B) of this
section regarding a prescriber limitation, if the sponsor has complied
with the requirement of paragraph (f)(2)(i)(C) of this section about
attempts to reach prescribers, and the prescribers were not responsive
after 3 attempts by the sponsor to contact them within 10 business
days, then the sponsor has met the requirement of paragraph
(f)(4)(i)(B) of this section for eliciting information from the
prescribers.
(B) The sponsor may not implement a prescriber limitation pursuant
to paragraph (f)(3)(ii)(A) of this section if no prescriber was
responsive.
(5) Initial notice to a beneficiary. (i) After conducting the case
management required by paragraph (f)(2) of this section, a Part D
sponsor that intends to limit the access of a potential at-risk
beneficiary, or subject to the exception in paragraph (f)(8)(ii) of
this section, of an at-risk beneficiary (as defined in subparagraph (2)
of the definition in Sec. 423.100), 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. 423.582 and Sec. 423.584.
(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.

[[Page 16741]]

(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.
(iv) If the Part D plan sponsor subsequently intends to make a
change to the terms of an ongoing limitation(s) established under
paragraph (f)(3) of this section, including the intention to impose an
additional limitation on the at-risk beneficiary, the sponsor must
comply with the requirements of paragraph (f)(3) of this section, as
well as all applicable requirements for beneficiary notices described
in paragraphs (f)(5) through (8) 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.
(4) An explanation of the beneficiary's right to a redetermination
under Sec. 423.580, 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.
(iii) 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) Notices: Timing and exceptions. (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
60 days after the date of the initial notice described in paragraph
(f)(5) of this section.
(ii) A gaining plan sponsor may forgo providing the initial notice
and may immediately provide a second notice described in paragraph
(f)(6) of this section to an at-risk beneficiary as defined in
subparagraph (2) of the definition in Sec. 423.100), 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, if the edit is the same as the one
that was implemented in the immediately prior plan.
(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 or
change in--

[[Page 16742]]

(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 that the
beneficiary continues to have reasonable access to frequently abused
drugs, taking into account all relevant factors, including but not
limited to--
(i) Geographic location;
(ii) Beneficiary preference;
(iii) The beneficiary's predominant usage of a prescriber or
pharmacy or both;
(iv) The impact on cost-sharing;
(v) Reasonable travel time;
(vi) Whether the beneficiary has multiple residences;
(vii) Natural disasters and similar situations; and
(viii) 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, or the selection
of an out-of-network provider is necessary; 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, unless the
selection of an out-of-network pharmacy is necessary.
(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.
(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. For prescribers, this
notification occurs during case management as described in paragraph
(f)(2) or when the prescriber provides agreement pursuant to paragraph
(f)(4)(i)(B) of this section.
(ii) The sponsor must receive confirmation from the prescriber(s)
or pharmacy(ies) or both, as applicable, that the selection is accepted
before conveying this information to the at-risk beneficiary, unless
the pharmacy has agreed in advance in a network agreement with the
sponsor to accept all such selections and the agreement specifies how
the 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 limitation
under this paragraph, to be an at-risk beneficiary; or
(ii)(A) The end of a one year period calculated from the effective
date of the limitation, as specified in the notice provided under
paragraph (f)(6) of this section, unless the limitation was extended
pursuant to paragraph (f)(14)(ii)(B) of this section.
(B) The end of a two year period calculated from the effective date
of the limitation, as specified in a notice provided under paragraph
(f)(6) of this section, subject to the following requirements:
(1) The plan sponsor determines at the end of the one year period
that there is a clinical basis to extend the limitation;
(2) Except in the case of a pharmacy limitation imposed pursuant to
paragraph (f)(3)(ii)(B) of this section, the plan sponsor has obtained
the agreement of a prescriber of frequently abused drugs for the
beneficiary that the limitation should be extended.
(3) The plan sponsor has provided another notice to the beneficiary
in compliance with paragraph (f)(6) of this section.
(4) If the prescribers were not responsive after 3 attempts by the
sponsor to contact them within 10 business days, then the sponsor has
met the requirement of paragraph (f)(14)((ii)(B)(2) of this section.
(5) The sponsor may not extend a prescriber limitation implemented
pursuant to paragraph (f)(3)(ii)(A) of this section if no prescriber
was responsive.
(15) Data disclosure. (i) CMS identifies potential at-risk
beneficiaries 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) Provide information 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 meets paragraph (1) of the definition in Sec. 423.100
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 about any potential at-risk
beneficiary that meets paragraph (2) of the definition in Sec. 423.100
that a sponsor identifies within 30 days from the date of the most
recent CMS report identifying potential at-risk beneficiaries.
(D) Provide information to CMS as soon as possible but no later
than 7 days of the date of the initial notice or second notice that the
sponsor provided to a beneficiary, or as soon as possible but no later
than 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.
(E) 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

[[Page 16743]]

(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 a 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. Adding paragraph (b)(2)(iv);
0
d. Revising paragraph (b)(4); and
0
e. 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 October 31, 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, 2020, the standards specified in
paragraphs (b)(2)(iv) and (b)(3), (b)(4)(ii), (b)(5)(iii), and (b)(6)
of this section.
(2) * * *
(iv) 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),
to provide for the communication of a prescription or related
prescription-related information between prescribers and dispensers for
the following:
(A) GetMessage.
(B) Status.
(C) Error.
(D) NewRxRequest.
(E) NewRx.
(F) RxChangeRequest.
(G) RxChangeResponse.
(H) RxRenewal Request.
(I) Resupply.
(J) RxRenewalResponse.
(K) Verify.
(L) CancelRx.
(M) CancelRxResponse.
(N) RxFill.
(O) DrugAdministration.
(P) NewRxRequest.
(Q) NewRxResponseDenied.
(R) RxTransferRequest.
(S) RxTransferResponse.
(T) RxTransferConfirm.
(U) RxFillIndicatorChange.
(V) Recertification.
(W) REMSIinitiationRequest.
(X) REMSIinitiationResponse.
(Y) REMSRequest.
(Z) REMSResponse.
* * * * *
(4) Medication history. Medication history to provide for the
communication of Medicare Part D medication history information among
Medicare Part D sponsors, prescribers and dispensers:
(i) Until January 1, 2020, Either the National Council for
Prescription Drug Programs Prescriber/Pharmacist Interface SCRIPT
Standard, Implementation Guide Version 8, Release 1 (Version 8.1),
October 2005 (incorporated by reference in paragraph (c)(1)(i) 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)(v) of this section.
(ii) On or after January 1, 2020, 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 to subpart
D to read as follows:

Subpart D--Cost Control and Quality Improvement Requirements

* * * * *
Sec
423.180 Basis and scope of the Part D Prescription Drug Plan Quality
Rating System.
423.182 Part D Prescription Drug Plan 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 Prescription Drug Plan
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. Except for Sec. 423.182(b)(3), 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 Prescription Drug Plan Quality Rating System.

[[Page 16744]]

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 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 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 website 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.
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).
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 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 unweighted mean of the individual
measure ratings under the topic area in accordance with Sec.
423.186(b). Summary ratings are the weighted mean of the individual
measure ratings for Part C or Part D in accordance with Sec.
423.186(c), with both the reward factor and CAI applied as applicable,
as described in Sec. 423.186(f). Overall Star Ratings are calculated
by using the weighted mean 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.
(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

[[Page 16745]]

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.
(iii) This provision governing the Star Ratings of surviving
contracts is applicable to contract consolidations that are approved on
or after January 1, 2019.
(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 measurements of health outcomes and other indices of
quality. Part D sponsors 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. 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
(NCQA) and the Pharmacy Quality Alliance (PQA) 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.
(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) 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 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 (e)
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 (f);
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

[[Page 16746]]

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 scores will be converted to measure-
level Star Ratings by determining the cut points using hierarchical
clustering algorithms in accordance with Sec. 423.186(a)(2)(i) through
(iii).
(vi) The Part D improvement measure cut points for MA-PDs and PDPs
will be determined using separate clustering algorithms in accordance
with Sec. Sec. 422.166(a)(2)(iii) and 423.186(a)(2)(iii).
(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 measures based on data that a Part D
organization must submit to CMS under Sec. 423.514 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.
(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. CMS will 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 is
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
is 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 D IRE
data, the reduction is applied to both of the contract's Part D appeals
measures.
(F) 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.
(G) 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.
(H) 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.
(I) Contracts are 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.
(J) 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.
(K) A contract's lower bound is compared to the thresholds of the
scaled reductions to determine the IRE data completeness reduction.
(L) 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.

[[Page 16747]]

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,
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 criteria in
paragraphs (a)(3)(i)(A) and (B) of this section are met plus at least
one of the criteria in paragraphs (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 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.
(iii) A contract is assigned 3 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, 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, the reliability is low,
and 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 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.
(v) A contract is assigned 5 stars if both of the following
criteria in paragraphs (a)(3)(v)(A) and (B) of this section are met
plus at least one of the criteria in paragraphs (a)(3)(v)(C) or (D) of
this section is met:
(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 standard error
above the 80th percentile.
(4) 5-Star Scale. 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) 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.
(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
2.
(iv) Access measures receive a weight of 2.
(v) Process measures receive a weight of 1.
(2) Rules for new measures. New measures to the Star Ratings
program

[[Page 16748]]

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 (f).
(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.
(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(f)(2) 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 from
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) The Star Ratings measures that remain after the exclusion
criteria, paragraph (f)(2)(ii) of this section, have been applied will
be adjusted for the determination of the CAI. CMS will announce the
measures identified for adjustment in the calculations of the CAI under
this paragraph (f)(2) through the process described for changes in and
adoption of payment and risk adjustment policies in section 1853(b) of
the Act.
(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

[[Page 16749]]

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 (overall, Part D for MA-PD, and Part D for PDPs) 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 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 the 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) 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.
(ii) If the highest rating is less than 4 stars without the use of
the improvement measure(s) and 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''.
(1) Medicare Plan Finder performance icons. Icons are displayed on
Medicare Plan Finder to note performance as provided in this paragraph
(h)(1):
(i) 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.
(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 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.
* * * * *

0
68. Section 423.272 is amended by revising paragraph (b)(3)(ii) to read
as follows:

Sec. 423.272 Review and negotiation of bid and approval of plans
submitted by potential Part D sponsors.

* * * * *
(b) * * *
(3) * * *
(ii) Transition period for PDP sponsors with new acquisitions.
After a 2-year transition period, as determined by CMS, CMS approves a
bid offered by a PDP sponsor (or by a parent organization to that PDP
sponsor) that recently purchased (or otherwise acquired or merged with)
another Part D sponsor if it finds that the benefit package or plan
costs represented by that bid are substantially different from benefit
packages or plan costs represented by another bid submitted by the same
Part D sponsor (or parent organization to that Part D sponsor), as
provided under Sec. 423.265(b)(2).
* * * * *

[[Page 16750]]

Sec. 423.503 [Amended]

0
69. 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
70. 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
71. 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 7 business days after receiving such a request from the
pharmacy.
* * * * *
(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
72. Section 423.507 is amended by removing and reserving paragraph
(b).

0
73. 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
74. Section 423.509 is amended by revising paragraph (a)(4)(v)(A) and
adding paragraphs (a)(4)(xiii) and (xiv) and (b)(1)(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) * * *
(1) * * *
(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
75. 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
76. Section 423.560 is amended by--
0
a. Revising the definition of ``Appeal'';
0
b. Adding the definition of ``At-risk determination'' in alphabetical
order;
0
c. Revising the definitions of ``Grievance'', ``Reconsideration'', and
``Redetermination''; and
0
d. Adding the definition of ``Specialty tier'' in alphabetical order.
The revisions and additions 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.
At-risk determination means a decision made under a plan sponsor's
drug management program in accordance with Sec. 423.153(f) that
involves the identification of an individual as an at-risk beneficiary
for prescription drug abuse; a limitation, or the continuation of a
limitation, on an at-risk beneficiary's access to coverage for
frequently abused drugs (that is, a beneficiary specific point-of-sale
edit or the selection of a prescriber and/or pharmacy and
implementation of lock-in, or); and information sharing for subsequent
plan enrollments.
* * * * *
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

[[Page 16751]]

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
77. 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.). Determinations made in accordance with the processes
at Sec. 423.153(f) are collectively referred to as an at-risk
determination, defined at Sec. 423.560, made under a drug management
program.
* * * * *
(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
controversy meets the requirements in Sec. 423.1976.
* * * * *

0
78. 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
79. Section 423.578 is amended by--
0
a. Revising paragraphs (a) introductory text, (a)(1), (2), (4)
introductory text, (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

[[Page 16752]]

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
80. 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
81. 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
82. 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 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
83. 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
84. 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
85. 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

[[Page 16753]]

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
86. 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 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
87. Section 423.652 is amended in paragraph (b)(1) by removing the
phrase ``July 15'' and adding in its place ``September 1''.

0
88. 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
89. 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 of this part 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
90. Section Sec. 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
91. Section 423.782 is amended by revising paragraphs (a)(2)(iii)(A)
and (b)(3) to read as follows:

Sec. 423.782 Cost-sharing subsidy.

(a) * * *
(2) * * *
(iii) * * *
(A) A copayment amount of not more than $1 for a generic drug,
biological product for which an application under section 351(k) of the
Public Health Service Act (42 U.S.C. 262(k)) is approved, or preferred
drugs that are multiple source (as defined under section
1927(k)(7)(A)(i) of the Act) or $3 for any other drug in 2006, or for
years after 2006 the amounts specified in this paragraph (a)(2)(iii)(A)
for the percentage increase in the Consumer Price Index, rounded to the
nearest multiple of 5 cents or 10 cents, respectively; or
* * * * *
(b) * * *
(3) For covered Part D drugs above the out-of-pocket limit (under
Sec. 423.104(d)(5)(iii)) in 2006, copayments not to exceed $2 for a
generic drug, biological product for which an application under section
351(k) of the Public Health Service Act (42 U.S.C. 262(k)) is approved,
or preferred drugs that are multiple source drugs (as defined under
section 1927(k)(7)(A)(i) of the Act) and $5 for any other drug. For
years beginning in 2007, the amounts specified in this paragraph (b)(3)
for the previous years increased by the annual percentage increase in
average per capita aggregate expenditures for covered Part D drugs,
rounded to the nearest multiple of 5 cents.
* * * * *

0
92. Section 423.1970 is amended by revising paragraph (b) to read as
follows:

[[Page 16754]]

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
93. 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
94. 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
95. Section 423.2022 is amended by--
0
a. Removing the first appearance of the paragraph (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
96. 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
97. 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
98. 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
99. 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
100. 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
101. 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
102. 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''.

Sec. 423.2126 [Amended]

0
103. 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
104. The subpart V heading is revised to read as set forth above.

0
105. Section 423.2260 is revised to read as follows:

Sec. 423.2260 Definitions.

As used in this subpart--
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 activities and use of materials that meet the
following:
(1) Conducted by the Part D sponsor or downstream entities.
(2) Intended to draw a beneficiary's attention to a Part D plan or
plans.
(3) Intended to influence a beneficiary's decision-making process
when selecting a Part D plan for enrollment or deciding 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) Materials used by marketing representatives such as scripts or
outlines for telemarketing or other presentations.
(iii) Presentation materials such as slides and charts.
(2) Materials that do not include the following are not considered
marketing 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
(iv) Unless otherwise specified by CMS based on their use or
purpose, materials that are required under Sec. 423.128; or

[[Page 16755]]

(v) Any materials specifically designated by CMS as not meeting the
definition of the proposed marketing definition based on their use or
purpose.

0
106. Section 423.2262 is amended by revising paragraph (d) to read as
follows:

Sec. 423.2262 Review and distribution of marketing materials.

(d) Enrollee communication materials. Enrollee communication
materials may be reviewed by CMS and CMS may determine, upon review of
such materials, that the materials must be modified, or may no longer
be used.

0
107. 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, 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
108. 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 vital materials, unless in the language of these individuals.
Specifically, Part D sponsors 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.
(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 unsolicited 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
109. Section 423.2272 is amended by removing paragraph (e).

Sec. 423.2274 [Amended]

0
110. 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 paragraphs (b)(3) and (4) as paragraphs (b)(2) and
(3);
0
e. In newly redesignated paragraph (b)(2)(ii)(A) by removing the
reference ``paragraph (b)(3)(iii)'' and adding in its place the
reference :paragraph (b)(2)(iii)''; and
0
f. 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.

[[Page 16756]]

Sec. 423.2410 [Amended]

0
111. 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
112. Section 423.2420 is amended--
0
a. By removing and reserving paragraph (b)(2)(viii);
0
b. By revising paragraph (d)(2)(i); and
0
c. By 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
113. Section 423.2430 is amended--
0
a. By redesignating paragraphs (a) introductory text and paragraphs
(a)(1) and (2) as paragraphs (a)(1), (2), and (3), respectively;
0
b. By republishing the paragraph (a) subject heading and revising newly
redesignated paragraph (a)(1);
0
c. By adding paragraph (a)(4);
0
d. In paragraph (b)(1), by removing the word ``costs'' and adding in
its place the phrase ``costs other than those that are related to fraud
reduction'';
0
e. In paragraph (b)(5), by adding the phrase ``(and that are not
related to fraud reduction activities under paragraph (a)(4)(ii) of
this section)'' after ``capabilities''; and
0
f. By 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
114. 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
115. 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
116. 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
117. The authority citation for part 460 continues to read as follows:

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
118. 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
119. 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
120. Section 460.68 is amended by removing paragraph (a)(4).

Sec. 460.70 [Amended]

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

Sec. 460.71 [Amended]

0
122. Section 460.71 is amended by removing paragraph (b)(7).

0
123. 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

[[Page 16757]]

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
124. The authority citation 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
125. 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
126. 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: March 29, 2018.
Seema Verma,
Administrator, Centers for Medicare & Medicaid Services.
Dated: April 2, 2018.
Alex M. Azar II,
Secretary, Department of Health and Human Services.
[FR Doc. 2018-07179 Filed 4-6-18; 4:15 pm]
BILLING CODE 4120-01-P

83_FR_16513

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		Rules and Regulations
Action		Final rule.
Dates		Effective Date: This rule is effective June 15, 2018.
Contact		Theresa Wachter, (410) 786-1157, Part C Issues.
FR Citation		83 FR 16440
RIN Number		0938-AT08
CFR Citation		42 CFR 405 42 CFR 417 42 CFR 422 42 CFR 423 42 CFR 460 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; Incorporation by Reference; Aged; Health Records and Medicaid

83 FR 16440 - 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 83, Issue 73 (April 16, 2018)

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