Medicare Program; Changes to the Medicare Advantage and the Medicare Prescription Drug Benefit Programs for Contract Year 2012 and Other Changes

DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 417, 422, and 423

[CMS-4144-F]

RIN 0938-AQ00

Medicare Program; Changes to the Medicare Advantage and the Medicare Prescription Drug Benefit Programs for Contract Year 2012 and Other Changes

AGENCY:

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

ACTION:

Final rule.

SUMMARY:

This final rule makes revisions to the Medicare Advantage (MA) program (Part C) and Prescription Drug Benefit Program (Part D) to implement provisions specified in the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010 (collectively referred to as the Affordable Care Act) (ACA) and make other changes to the regulations based on our experience in the administration of the Part C and Part D programs. These latter revisions clarify various program participation requirements; make changes to strengthen beneficiary protections; strengthen our ability to identify strong applicants for Part C and Part D program participation and remove consistently poor performers; and make other clarifications and technical changes.

DATES:

Effective Dates:

These regulations are effective on June 6, 2011, unless otherwise specified in this final rule. Amendments to 42 CFR 422.564, 422.624, and 422.626 published April 4, 2003 at 68 FR 16652 are effective June 6, 2011.

Applicability Date:

In section II.A. of the preamble of this final rule, we provide a table (Table 1) which lists key changes in this final rule that have an applicability date other than the effective 60 days after the date of display of this final rule.

FOR FURTHER INFORMATION CONTACT:

Vanessa Duran, (410) 786-8697, Christopher McClintick, (410) 786-4682, and Sabrina Ahmed, (410) 786-7499, General information.

Heather Rudo, (410) 786-7627 and Christopher McClintick, (410) 786-4682, Part C issues.

Deborah Larwood, (410) 786-9500, Part D issues.

Kristy Nishimoto, (410) 786-8517, Part C and Part D enrollment and appeals issues.

Deondra Moseley, (410) 786-4577, Part C payment issues.

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Background

II. Provisions of the Final Regulations and Analysis of and Responses to Public Comments

A. Overview of the Final Changes and Public Comments Received

1. Overview of the Final Changes

2. Public Comments Received on the Proposed Rule

B. Changes to Implement the Provisions of the Affordable Care Act

1. Cost Sharing for Specified Services at Original Medicare Levels (§ 417.454 and § 422.100)

2. Simplification of Beneficiary Election Periods (§ 422.62, § 422.68, § 423.38, and § 423.40)

3. Special Needs Plan (SNP) Provisions (§ 422.2, § 422.4, § 422.101, § 422.107, and § 422.152)

a. Adding a Definition of Fully Integrated Dual Eligible SNP (§ 422.2)

b. Extending SNP Authority

c. Dual-Eligible SNP Contracts With State Medicaid Agencies (§ 422.107)

d. Approval of Special Needs Plans by the National Committee for Quality Assurance (§§ 422.4, 422.101, and 422.152)

4. Section 1876 Cost Contractor Competition Requirements (§ 417.402)

5. Making Senior Housing Facility Demonstration Plans Permanent (§ 422.2 and § 422.53)

6. Authority to Deny Bids (§ 422.254, § 422.256, § 423.265, and § 423.272)

7. Determination of Part D Low-Income Benchmark Premium (§ 423.780)

8. Voluntary De Minimis Policy for Subsidy Eligible Individuals (§ 423.34 and § 423.780)

a. Reassigning LIS Individuals (§ 423.34)

b. Enrollment of LIS-Eligible Individuals (§ 423.34)

c. Premium Subsidy (§ 423.780)

9. Increase In Part D Premiums Due to the Income Related Monthly Adjustment Amount (D-IRMAA) (§ 423.44, § 423.286, and § 423.293)

a. Rules Regarding Premiums (§ 423.286)

b. Collection of Monthly Beneficiary Premium (§ 423.293)

c. Involuntary Disenrollment by CMS (§ 423.44)

10. Elimination of Medicare Part D Cost-Sharing for Individuals Receiving Home and Community-Based Services (§ 423.772 and § 423.782)

11. Appropriate Dispensing of Prescription Drugs in Long-Term Care Facilities Under PDPs and MA-PD Plans (§ 423.154)

12. Complaint System for Medicare Advantage Organizations and PDPs (§ 422.504 and § 423.505)

13. Uniform Exceptions and Appeals Process for Prescription Drug Plans and MA-PD Plans (§ 423.128 and § 423.562)

14. Including Costs Incurred by AIDS Drug Assistance Programs and the Indian Health Service Toward the Annual Part D Out-of-Pocket Threshold (§ 423.100 and § 423.464)

15. Cost Sharing for Medicare-Covered Preventive Services (§ 417.454 and § 422.100)

16. Elimination of the Stabilization Fund (§ 422.458)

17. Improvements to Medication Therapy Management Programs (§ 423.153)

18. Changes to Close the Part D Coverage Gap (§ 423.104 and § 423.884)

19. Payments to Medicare Advantage Organizations (§ 422.308)

a. Authority to Apply Frailty Adjustment Under PACE Payment Rules for Certain Specialized MA Plans for Special Needs Individuals (§ 422.308)

b. Application of Coding Adjustment (§ 422.308)

c. Improvements to Risk Adjustment for Special Needs Individuals With Chronic Health Conditions (§ 422.308)

20. Medicare Advantage Benchmark, Quality Bonus Payments, and Rebate (§ 422.252, § 422.258, and § 422.266)

a. Terminology (§ 422.252)

b. Calculation of Benchmarks (§ 422.258)

c. Increases to the Applicable Percentage for Quality (§ 422.258(d))

d. Beneficiary Rebates (§ 422.266)

21. Quality Bonus Payment and Rebate Retention Appeals (§ 422.260)

C. Clarify Various Program Participation Requirements

1. Clarify Payment Rules for Non-Contract Providers (§ 422.214)

2. Pharmacist Definition (§ 423.4)

3. Prohibition on Part C and Part D Program Participation by Organizations Whose Owners, Directors, or Management Employees Served in a Similar Capacity With Another Organization That Terminated its Medicare Contract Within the Previous 2 Years (§ 422.506, § 422.508, § 422.512, § 423.507, § 423.508, and § 423.510)

4. Timely Transfer of Data and Files When CMS Terminates a Contract With a Part D Sponsor (§ 423.509)

5. Review of Medical Necessity Decisions by a Physician or Other Health Care Professional and the Employment of a Medical Director (§ 422.562, § 422.566, § 423.562, and § 423.566)

6. Compliance Officer Training (§ 422.503 and § 423.504)

7. Removing Quality Improvement Projects and Chronic Care Improvement Programs from CMS Deeming Process (§ 422.156)

8. Definitions of Employment-Based Retiree Health Coverage and Group Health Plan for MA Employer/Union-Only Group Waiver Plans (§ 422.106)

D. Strengthening Beneficiary Protections

1. Agent and Broker Training Requirements (§ 422.2274 and § 423.2274)

a. CMS-Approved or Endorsed Agent and Broker Training and Testing (§ 422.2274 and § 423.2274)

b. Extending Annual Training Requirements to All Agents and Brokers (§ 422.2274 and § 423.2274)

2. Call Center and Internet Web site Requirements (§ 422.111 and § 423.128)

a. Extension of Customer Call Center and Internet Web site Requirements to MA Organizations (§ 422.111)

b. Call Center Interpreter Requirements (§ 422.111 and § 423.128)

3. Require Plan Sponsors to Contact Beneficiaries to Explain Enrollment by an Unqualified Agent/Broker (§ 422.2272 and § 423.2272)

4. Customized Enrollee Data (§ 422.111 and § 423.128)

5. Extending the Mandatory Maximum Out-of-Pocket (MOOP) Amount Requirements to Regional PPOs (§ 422.100 and § 422.101)

6. Prohibition on Use of Tiered Cost Sharing by MA Organizations (§ 422.262)

7. Delivery of Adverse Coverage Determinations (§ 423.568)

8. Extension of Grace Period for Good Cause and Reinstatement (§ 422.74 and § 423.44)

9. Translated Marketing Materials (§ 422.2264 and § 423.2264)

E. Strengthening Our Ability to Distinguish for Approval Stronger Applicants for Part C and Part D Program Participation and to Remove Consistently Poor Performers

1. Expand Network Adequacy Requirements to All MA Plan Types (§ 422.112)

2. Maintaining a Fiscally Sound Operation (§ 422.2, § 422.504, § 423.4, and § 423.505)

3. Release of Part C and Part D Payment Data (§ 422.504, § 423.505, and § 423.884)

4. Required Use of Electronic Transaction Standards for Multi-Ingredient Drug Compounds; Payment for Multi-Ingredient Drug Compounds (§ 423.120)

5. Denial of Applications Submitted by Part C and Part D Sponsors With Less Than 14 Months Experience Operating Their Medicare Contracts (§ 422.502 and § 423.503)

F. Other Clarifications and Technical Changes

1. Clarification of the Expiration of the Authority To Waive the State Licensure Requirement for Provider-Sponsored Organizations (§ 422.4)

2. Cost Plan Enrollment Mechanisms (§ 417.430)

3. Fast-track Appeals of Service Terminations to Independent Review Entities (IREs) (§ 422.626)

4. Part D Transition Requirements (§ 423.120)

5. Revision to Limitation on Charges to Enrollees for Emergency Department Services (§ 422.113)

6. Clarify Language Related to Submission of a Valid Application (§ 422.502 and § 423.503)

7. Modifying the Definition of Dispensing Fees (§ 423.100)

III. Collection of Information Requirements

A. ICRs Regarding Cost Sharing for Specified Services at Original Medicare Levels (§ 417.454 and § 422.100)

B. ICRs Regarding SNP Provisions (§ 422.101, § 422.107, and § 422.152)

1. Dual-Eligible SNP Contracts with State Medicaid Agencies (§ 422.107)

2. ICRs Regarding NCQA Approval of SNPs (§ 422.101 and § 422.152)

C. ICRs Regarding Voluntary De Minimis Policy for Subsidy Eligible Individuals (§ 423.34 and § 423.780)

D. ICRs Regarding Increase In Part D Premiums Due to the Income Related Monthly Adjustment Amount (D-IRMAA) (§ 423.44)

E. ICRs Regarding Elimination of Medicare Part D Cost-Sharing for Individuals Receiving Home and Community-Based Services (§ 423.772 and § 423.782)

F. ICRs Regarding Appropriate Dispensing of Prescription Drugs in Long-Term Care Facilities Under PDPs and MA-PD plans (§ 423.154) and Dispensing Fees (§ 423.100)

G. ICRs Regarding Complaint System for Medicare Advantage Organizations and PDPs (§ 422.504 and § 423.505)

H. ICRs Regarding Uniform Exceptions and Appeals Process for Prescription Drug Plans and MA-PD Plans (§ 423.128 and § 423.562)

I. ICRs Regarding Including Costs Incurred by AIDS Drug Assistance Programs and the Indian Health Service Toward the Annual Part D Out-of-Pocket Threshold (§ 423.100 and § 423.464)

J. ICRs Regarding Improvements to Medication Therapy Management Programs (§ 423.153)

K. ICRs Regarding Changes to Close the Part D Coverage Gap (§ 423.104 and § 423.884)

L. ICRs Regarding Medicare Advantage Benchmark, Quality Bonus Payments, and Rebate (§ 422.252, § 422.258 and § 422.266)

M. ICRs Regarding Quality Bonus Appeals (§ 422.260)

N. ICRs Regarding Timely Transfer of Data and Files When CMS Terminates a Contract With a Part D Sponsor (§ 423.509)

O. ICRs Regarding Agent and Broker Training Requirements (§ 422.2274 and § 423.2274)

P. ICRs Regarding Call Center and Internet Web site Requirements (§ 422.111 and § 423.128)

Q. ICRs Regarding Requiring Plan Sponsors to Contact Beneficiaries to Explain Enrollment by an Unqualified Agent/Broker (§ 422.2272 and § 423.2272)

R. ICRs Regarding Customized Enrollee Data (§ 422.111 and § 423.128)

S. ICRs Regarding Extending the Mandatory Maximum Out-of-Pocket (MOOP) Amount Requirements to Regional PPOs (§ 422.100(f) and § 422.101(d))

T. ICRs Regarding Prohibition on Use of Tiered Cost Sharing by MA Organizations (§ 422.100 and § 422.262)

U. ICRs Regarding Translated Marketing Materials (§ 422.2264 and § 423.2264)

V. ICRs Regarding Expanding Network Adequacy Requirements to Additional MA Plan Types (§ 422.112)

W. ICRs Regarding Maintaining a Fiscally Sound Operation (§ 422.2, § 422.504, § 423.4, and § 423.505)

X. ICRs Regarding Release of Part C and Part D Payment Data (Parts 422 and 423, Subpart K)

Y. ICRs Regarding Revision to Limitation on Charges to Enrollees for Emergency Department Services (§ 422.113)

IV. Regulatory Impact Analysis

Regulations Text

Acronyms

ACA The Affordable Care Act of 2010 (which is the collective term for the Patient Protection and Affordable Care Act (Pub. L. 111-148) and the Health Care and Education Reconciliation Act (Pub. L. 111-152))

AO Accrediting Organization

ADS Automatic Dispensing System

AEP Annual Enrollment Period

AHFS American Hospital Formulary Service

AHFS-DI American Hospital Formulary Service-Drug Information

AHRQ Agency for Health Care Research and Quality

ALJ Administrative Law Judge

ANOC Annual Notice of Change

BBA Balanced Budget Act of 1997 (Pub. L. 105-33)

BBRA [Medicare, Medicaid and State Child Health Insurance Program] Balanced Budget Refinement Act of 1999 (Pub. L. 106-113)

BIPA Medicare, Medicaid, and SCHIP Benefits Improvement Protection Act of 2000 (Pub. L. 106-554)

CAHPS Consumer Assessment Health Providers Survey

CAP Corrective Action Plan

CCIP Chronic Care Improvement Program

CCS Certified Coding Specialist

CHIP Children's Health Insurance Programs

CMP Civil Money Penalties or Competitive Medical Plan

CMR Comprehensive Medical Review

CMS Centers for Medicare & Medicaid Services

CMS-HCC CMS Hierarchal Condition Category

CTM Complaints Tracking Module

COB Coordination of Benefits

CORF Comprehensive Outpatient Rehabilitation Facility

CPC Certified Professional Coder

CY Calendar year

DOL U.S. Department of Labor

DRA Deficit Reduction Act of 2005 (Pub. L. 109-171)

DUM Drug Utilization Management

EGWP Employer Group/Union-Sponsored Waiver Plan

EOB Explanation of Benefits

EOC Evidence of Coverage

ESRD End-Stage Renal Disease

FACA Federal Advisory Committee Act

FDA Food and Drug Administration (HHS)

FEHBP Federal Employees Health Benefits Plan

FFS Fee-For-Service

FY Fiscal year

GAO Government Accountability Office

HCPP Health Care Prepayment Plans

HEDIS HealthCare Effectiveness Data and Information Set

HHS [U.S. Department of] Health and Human Services

HIPAA Health Insurance Portability and Accountability Act of 1996 (Pub. L. 104-191)

HMO Health Maintenance Organization

HOS Health Outcome Survey

HPMS Health Plan Management System

ICD-9-CM Internal Classification of Disease, 9th, Clinical Modification Guidelines

ICEP Initial Coverage Enrollment Period

ICL Initial Coverage Limit

ICR Information Collection Requirement

IRMAA Income-Related Monthly Adjustment Amount

IVC Initial Validation Contractor

LEP Late Enrollment Penalty

LIS Low Income Subsidy

LTC Long Term Care

MA Medicare Advantage

MAAA Member of the American Academy of Actuaries

MA-PD Medicare Advantage—Prescription Drug Plans

M+C Medicare +Choice program

MOC Medicare Options Compare

MPDPF Medicare Prescription Drug Plan Finder

MIPPA Medicare Improvements for Patients and Providers Act of 2008

MMA Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (Pub. L. 108-173)

MSA Metropolitan Statistical Area

MSAs Medical Savings Accounts

MSP Medicare Secondary Payer

MTM Medication Therapy Management

MTMP Medication Therapy Management Program

NAIC National Association Insurance Commissioners

NCPDP National Council for Prescription Drug Programs

NCQA National Committee for Quality Assurance

NGC National Guideline Clearinghouse

NIH National Institutes of Health

NOMNC Notice of Medicare Non-coverage

OEP Open Enrollment Period

OIG Office of Inspector General

OMB Office of Management and Budget

OPM Office of Personnel Management

OTC Over the Counter

PART C Medicare Advantage

PART D Medicare Prescription Drug Benefit Programs

PBM Pharmacy Benefit Manager

PDE Prescription Drug Event

PDP Prescription Drug Plan

PFFS Private Fee For Service Plan

POS Point of service

PPO Preferred Provider Organization

PPS Prospective Payment System

P&T Pharmacy & Therapeutics

QIO Quality Improvement Organization

QRS Quality Review Study

PACE Programs of All Inclusive Care for the Elderly

RADV Risk Adjustment Data Validation

RAPS Risk Adjustment Payment System

RHIA Registered Health Information Administrator

RHIT Registered Health Information Technician

SEP Special Enrollment Periods

SHIP State Health Insurance Assistance Programs

SNF Skilled Nursing Facility

SNP Special Needs Plan

SPAP State Pharmaceutical Assistance Programs

SSA Social Security Administration

SSI Supplemental Security Income

TMR Targeted Medication Review

TrOOP True Out-Of-Pocket

U&C Usual and Customary

USP U.S. Pharmacopoeia

I. Background

The Balanced Budget Act of 1997 (BBA) (Pub. L. 105-33) established a new “Part C” in the Medicare statute (sections 1851 through 1859 of the Social Security Act (the Act) which established the current MA program (known as Medicare+Choice under the BBA). The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) (Pub. L. 108-173) established the Part D program and made significant revisions to Part C provisions governing the Medicare Advantage (MA) program. The MMA directed that important aspects of the Part D program be similar to, and coordinated with, regulations for the MA program. Generally, the provisions enacted in the MMA took effect January 1, 2006. The final rules implementing the MMA for the MA and Part D prescription drug programs appeared in the

Federal Register

on January 28, 2005 (70 FR 4588 through 4741 and 70 FR 4194 through 4585, respectively).

As we have gained experience with the MA program and the prescription drug benefit program, we periodically have revised the Part C and Part D regulations to continue to improve or clarify existing policies and/or codify current guidance for both programs. In December 2007, we published a final rule with comment on contract determinations involving Medicare Advantage (MA) organizations and Medicare Part D prescription drug plan sponsors (72 FR 68700). In April 2008, we published a final rule to address policy and technical changes to the Part D program (73 FR 20486). In September 2008 and January 2009, we finalized revisions to both the Medicare Advantage and Medicare prescription drug benefit programs (73 FR 54226 and 74 FR 1494, respectively) to implement provisions in the Medicare Improvement for Patients and Providers Act (MIPPA) (Pub. L. 110-275), which contained provisions affecting both the Medicare Part C and Part D programs, and to make other policy changes and clarifications based on experience with both programs (73 FR 54208, 73 FR 54226, and 74 FR 2881). We also clarified the MIPPA marketing provisions in a November 2008 interim final rule (73 FR 67407).

Proposed and final rules addressing additional policy clarifications under the Part C and Part D programs appeared in the October 22, 2009 (74 FR 54634) and April 15, 2010

Federal Register

(75 FR 19678 through 19826), respectively. (These rules are hereinafter referred to as the October 2009 proposed rule and the April 2010 final rule, respectively.) As noted when issuing these rules, we believed that additional programmatic and operational changes were needed in order to further improve our oversight and management of the Part C and Part D programs, and to further improve a beneficiary's experience under MA or Part D plans.

Indeed, one of the primary reasons set forth in support of issuing our April 2010 final rule was to address beneficiary concerns associated with the annual task of selecting a Part C or Part D plan from so many options. We noted that while it was clear that the Medicare Part C and Part D programs have been successful in providing additional health care options for beneficiaries, a significant number of beneficiaries have been confused by the array of choices provided and have found it difficult to make enrollment decisions that are best for them. Moreover, experience had shown that organizations submitting multiple bids under Part C and Part D had not consistently submitted benefit designs significantly different from each other, which we believed added to beneficiary confusion. For this reason, the April 2010 rule required that multiple plan submissions in the same area have significant differences from each other. Other changes set forth in the April 2010 final rule were aimed at strengthening existing beneficiary protections, improving payment rules and processes, enhancing our ability to pursue data collection for oversight and quality assessment, strengthening formulary policy, and finalizing a number of clarifications and technical corrections to existing policy.

On November 22, 2010, a proposed rule (hereinafter referred to as the November 2010 proposed rule) appeared in the

Federal Register

(75 FR 224), in which we proposed to continue our process of implementing improvements in policy consistent with those included in the April 2010 final rule, while also implementing changes to the Part C and Part D programs made by recent legislative changes. The Patient Protection and Affordable Care Act (Pub. L. 111-148) was enacted on March 23, 2010, as passed by the Senate on December 24, 2009, and the House on March 21, 2010. The Health Care and Education Reconciliation Act (Pub. L. 111-152), which was enacted on March 30, 2010, modified a number of Medicare provisions in Pub. L. 111-148 and added several new provisions. The Patient Protection and Affordable Care Act (Pub. L. 111-148) and the Health

Care and Education Reconciliation Act (Pub. L. 111-152) are collectively referred to as the Affordable Care Act (ACA). The ACA includes significant reforms to both the private health insurance industry and the Medicare and Medicaid programs. Provisions in the ACA concerning the Part C and Part D programs largely focus on beneficiary protections, MA payments, and simplification of MA and Part D program processes. These provisions affect the way we implement our policies concerning beneficiary cost-sharing, assessing bids for meaningful differences, and ensuring that cost-sharing structures in a plan are transparent to beneficiaries and not excessive. Some of the other provisions for which we proposed revisions to the MA and Part D programs, based on the ACA and our experiences in administering the MA and Part D programs, concern MA and Part D marketing, including agent/broker training; payments to MA organizations based on quality ratings; standards for determining if organizations are fiscally sound; low income subsidy policy under the Part D program; payment rules for non-contract health care providers; extending current network adequacy standards to Medicare medical savings account (MSA) plans that employ a network of providers; establishing limits on out-of-pocket expenses for MA enrollees; and several revisions to the special needs plan requirements, including changes concerning SNP approvals and deeming. In general, the proposed rule was intended to strengthen the way we administer the Part C and Part D programs, and to aid beneficiaries in making the best plan choices for their health care needs.

II. Provisions of the Final Regulations and Analysis of and Responses to Public Comments

A. Overview of the Final Changes and Public Comments Received

1. Overview of the Final Changes

In the sections that follow, we discuss the changes made in the final rule to regulations in 42 CFR parts 417, 422, and 423 governing the MA and prescription drug benefit programs. To better frame the discussion of the specific regulatory provisions, we have structured the preamble narrative by topic area rather than in subpart order. Accordingly, we address the following five specific goals:

• Implementing the provisions of the ACA.

• Clarifying various program participation requirements.

• Strengthening beneficiary protections.

• Strengthening our ability to distinguish stronger applicants for Part C and Part D program participation and to remove consistently poor performers.

• Implementing other clarifications and technical changes.

A number of the revisions and clarifications in this final rule affect both the MA and prescription drug programs, and some affect section 1876 cost contracts. Within each section, we have provided a chart listing all subject areas containing provisions affecting the Part C, Part D, and section 1876 cost contract programs, and the associated regulatory citations that are being revised.

We note that these regulations are effective 60 days after the date of display of the final rule. Table 1 lists key changes that have an applicability date other than 60 days after the date of display of this final rule. The applicability dates are discussed in the preamble for each of these items.

We are implementing several changes to the regulations to reflect provisions in the ACA which are already in effect. Table 2 lists the key changes. While these ACA provisions became effective on the statutory effective date, the regulations implementing these provisions will be effective 60 days after the date of display of the final rule.

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2. Public Comments Received on the Proposed Rule

We received approximately 261 timely public comments on the November 2010 proposed rule. These public comments addressed issues on multiple topics. Commenters included health and drug plan organizations, insurance industry trade groups, pharmacy associations, pharmaceutical benefit manager (PBM) organizations, provider associations, representatives of hospital and long term care institutions, drug manufacturers, mental health and disease specific advocacy groups, beneficiary advocacy groups, researchers, and others.

In this final rule, we address all comments and concerns on the policies included in the proposed rule. We also reference comments that were outside the scope of the proposals set forth in the proposed rule, in the comment and response sections of this final rule.

We present a summary of the public comments and our responses to them in the applicable subject-matter sections of this final rule.

Comment:

A commenter stated that CMS revised the date for the closing of the comment period from January 21, 2011 to January 11, 2011 and requested that CMS provide a rationale for shortening the comment period for the proposed rule.

Response:

Our proposed rule was placed on display at the Office of the Federal Register and made available on the CMS Web site on November 10, 2010. Section 1871(b)(1) of the Act requires “notice” of the proposed rule, and a period of 60 days for public comment thereon. Because notice of the provisions of the proposed rule was provided on November 10, 2010 the comment period closed on January 11, 2011, which is 60 days after the date of display of the proposed rule at the Office of the Federal Register and on the CMS Web site.

B. Changes To Implement the Provisions of the Affordable Care Act

The ACA includes significant reforms of both the private health insurance industry and the Medicare and Medicaid programs. Provisions in the ACA that concern the Part C and Part D programs largely focus on beneficiary protections, MA payments, and simplification of MA and Part D program processes. The changes based on provisions in the ACA are detailed in Table 3.

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1. Cost Sharing for Specified Services at Original Medicare Levels (§ 417.454 and § 422.100)

Section 3202 of the ACA amended section 1852 of the Act to establish new standards for MA plans' cost sharing. Specifically, section 1852(a)(1)(B) of the Act was amended by the addition of a new clause (iii) that limits cost sharing under MA plans so that it cannot exceed the cost sharing imposed under Original Medicare for specific services identified in a new clause (iv). New section 1852(a)(1)(B)(iv) of the Act lists the three service categories for which cost sharing in MA plans may not exceed that required in Original Medicare (chemotherapy administration services, renal dialysis services, skilled nursing care) and section 1852(a)(1)(B)(iv)(IV) of the Act specifies that this limit on cost sharing also applies to such other services that the Secretary determines appropriate, including services that the Secretary determines require a high level of predictability and transparency for beneficiaries. The limits on cost sharing in clause (iii) are “subject to” an exception in clause (v) which provides that, “[i]n the case of services described in clause (iv) for which there is no cost sharing required under Parts A and B, cost sharing may be required for those services” under the clause (i) standard in place prior to the amendments made by section 3202 of the ACA. This section requires that overall cost sharing for Medicare Part A and B services be actuarially equivalent to that imposed under Original Medicare. As noted in the April 2010 final rule (75 FR 19712) and clarified in our April 16, 2010 policy guidance, the provisions of section 3202 of the ACA apply to MA plans offered in CY 2011. To codify these provisions, we proposed to amend § 422.100 by adding new paragraph (j). In addition, under our authority in section 1876(i)(3)(D) of the Act to impose “other terms and conditions” deemed “necessary and appropriate,” we proposed to add new paragraph (e) in § 417.101 to extend the requirements in section 3202 of the ACA to section 1876 cost contracts. In this rule we explain that our proposed addition to § 417.101 was technically incorrect and have corrected the regulation citation so that our proposed addition is new paragraph (e) to § 417.454 to extend the requirements in section 3202 of the ACA to section 1876 cost contracts. We believe that this extension is necessary in order to ensure that all Medicare beneficiaries have the benefit of the cost sharing protections enacted in the ACA, regardless of whether they receive their Part A and B benefits through Original Medicare, an MA plan, or under a section 1876 cost contract.

In our April 16, 2010 guidance issued via the Health Plan Management System (HPMS) (“Benefits Policy and Operations Guidance Regarding Bid Submissions; Duplicative and Low

Enrollment Plans; Cost Sharing Standards; General Benefits Policy Issues; and Plan Benefits Package (PBP) Reminders for Contract Year (CY) 2011”), we included clarifying information related to implementation of the required cost sharing for chemotherapy administration services, renal dialysis services, and skilled nursing care for CY 2011 and we defined chemotherapy administration services to include chemotherapy drugs, radiation therapy services and other related chemotherapeutic agents, as well as administration, and skilled nursing care to mean skilled nursing facility services. We also clarified that, since there is no cost sharing under Original Medicare for the first 20 days of skilled nursing services, under section 1852(a)(1)(B)(v) of the Act, the new restrictions in section 3202 of the ACA do not apply to such services during this period.

In our proposed additions to § 417.454 and § 422.100, we proposed to incorporate these definitions for the two service categories. We welcomed comments on these proposed cost sharing standards.

We also proposed to limit cost sharing for home health services under MA plans to that charged under Original Medicare and noted that, although we can generally rely on our authority at 1852(a)(1)(B)(iv)(IV) of the Act to apply Original Medicare cost sharing limits to other services that the Secretary determines appropriate, because there is no cost sharing under Original Medicare for home health services, as in the case of the first 20 days of skilled nursing facility services, the exception in clause (v) of section 1852(a)(1)(B) of the Act would apply, and the limit on cost sharing under section 1852(a)(1)(B)(iii) of the Act would not apply. Thus, in proposing to apply Original Medicare cost sharing amounts to home health services or any other service with zero cost sharing, we instead indicated that we would rely on our authority in section 1856(b)(1) of the Act to establish MA standards by regulation, and in section 1857(e)(1) of the Act to impose additional “terms and conditions” found “necessary and appropriate” to require that cost sharing for these services under MA plans conform to that under Original Medicare, meaning that no cost sharing could be imposed for these services.

We solicited public comment on our proposal to limit cost sharing for home health services to that charged for those services under Original Medicare.

Comment:

There were many commenters who opposed our proposal to limit cost sharing for home health services under MA and cost plans at Original Medicare levels. The commenters expressed concern that limiting cost sharing for home health decreases their flexibility in their plan design and limits the plans' tools to ensure appropriate utilization of home health care.

MedPAC strongly opposed our proposal to limit home health cost sharing to $0 for several reasons including: Home health is a less well-defined benefit in Medicare and its appropriate use is more difficult to monitor and the proposed prohibition on cost sharing for home health is unduly restrictive. They also argued that CMS' proposal is based on weak rationale. The comment included a statement of MedPAC's belief that cost sharing should be one of the tools that plans can use at their discretion as a means of ensuring appropriate utilization. The comment informed us that MedPAC was currently considering these kinds of issues as a part of their deliberations on whether or not to recommend that traditional FFS Medicare should have cost sharing for home health services, along with the level of such cost sharing and the circumstances in which the cost sharing would apply.

Response:

We find MedPAC's concerns about our proposal, in addition to those expressed by many other commenters to be persuasive and believe we should not finalize, at this time, our proposal to prohibit cost sharing for in-network home health services. MedPAC has recommended to Congress that it should direct the Secretary to establish a per episode copayment for home health episodes of care that are not preceded by a hospitalization or post-acute care use. We believe it is reasonable for us to take time to perform additional analyses of home health service utilization by beneficiaries enrolled in MA plans.

Comment:

We received several comments that supported our proposal to limit cost sharing for home health services at Original Medicare levels. Those commenters believe that it will provide beneficiaries with a benefit package that is transparent and easily predictable for out-of-pocket expenses.

Response:

We thank the commenters for their support but, as previously discussed at length, we believe that it would be more appropriate not to finalize our proposal. We will continue to evaluate the effectiveness of our current policies to protect beneficiaries from unfair or discriminatory cost sharing, confusing plan choices, and unaffordable care before implementing any additional policy change. Furthermore, under current policy only plans that provide extra beneficiary protection from high cost sharing by adopting a voluntary MOOP are permitted to charge cost sharing for home health services. We will continue to find the most appropriate balance between protecting beneficiaries from excessive out-of-pocket cost sharing and ensuring the financial viability of the MA program.

Comment:

One commenter stated that prohibiting cost sharing for home health could lead to further pricing challenges and another stated there are a number of provisions in the ACA that limit a plan's ability to charge cost sharing for specified services and that these provisions are being implemented at the same time that CMS is implementing payment cuts and medical costs are continuing to increase. The commenter stated all plans would be in jeopardy of financial insolvency if they are prohibited from balancing costs, benefits, and payment cuts.

Response:

As stated in our proposed rule, we estimated that the cost to the Medicare program of our proposal would not be significant. We also stated that we did not expect a significant financial impact on the relatively few plans that charge cost sharing for home health services. However, given our decision not to move forward with this proposal for other reasons, this issue is moot.

Comment:

We received one comment that expressed concern that our proposed codification section 3202 of the ACA could be interpreted and implemented in a manner so as to mandate the cost sharing obligation to be charged, rather than permitting plans to set cost sharing levels at or below that cost sharing limit amount.

Response:

We thank the commenter for sharing this concern. We thought we were clear in our proposal that plans would be able to set cost sharing levels at or below those charged under Original Medicare but will make every effort to be clear and consistent in our guidance related to these limits.

Comment:

We received two comments that requested that we add Durable Medical Equipment (DME) to the list of service categories for which cost sharing may not exceed the levels required under Original Medicare.

Response:

We thank the commenters for their suggestion and we will consider proposing that addition in future rulemaking.

Comment:

We received several comments that challenged CMS' decision to allow plans to charge cost sharing during the first 20 days of skilled nursing care. One commenter

stated that charging cost sharing in the first part of the SNF stay makes sense for the plans but does not make sense for the beneficiaries. They stated that they understand CMS' actuarial equivalency rationale and that the law allows MA cost sharing for the services, but believe CMS' policy is contrary to the intent of health care reform. Another commenter stated that prohibiting cost sharing for the first 20 days of skilled nursing care would increase transparency for beneficiaries and could offer better opportunities for frail beneficiaries.

Response:

Prior to the ACA, we allowed plans to charge cost sharing during the first 20 days of skilled nursing care so long as the plan's SNF benefit satisfied the actuarial equivalence test. In subregulatory guidance subsequent to enactment of the ACA, we clarified that because there is not cost sharing under Original Medicare for the first 20 days of SNF care, under section 1852(a)(1)(B)(v) of the Act, the new restrictions in section 3202 of the ACA do not apply to such services during this period and that we would continue our policy to allow cost sharing during the first 20 days of SNF care. We do not believe that enrolled beneficiaries are disadvantaged by this policy for at least two reasons. First, plans' cost sharing for SNF care is transparent to beneficiaries as it is reflected in the Summary of Benefits and the Medicare Plan Finder and second, because of the beneficiary protections from unexpected, unmanageable out-of-pocket costs that Medicare requires all MA plans to provide.

CMS limits the cost sharing that may be charged for SNF care so that it does not exceed what the beneficiary would pay under Original Medicare, including the minimal cost sharing we allow during the first 20 days in a covered SNF stay. We believe that minimal cost sharing is more than offset by other savings and protections offered under plans' benefit packages. One very important protection that all plans are required to offer is the maximum out-of-pocket (MOOP) limit on enrolled beneficiaries' out-of-pocket costs for covered in-network services. The maximum amount an enrolled beneficiary can be required to pay for those services is $6,700. In addition, most plans that charge cost sharing in the first 20 days of SNF care, waive the Original Medicare requirement for a 3-day qualifying inpatient hospital stay which saves beneficiaries enrolled in those plans from having to pay the costs for an inpatient stay.

Comment:

One commenter requested that CMS establish an employer group waiver excepting MA plans offered through employer/union group health plans from the proposed cost sharing standards.

Response:

We thank the commenter for this suggestion but we believe that employer group plans must be subject to the same cost sharing as other MA plans in order to provide the beneficiaries enrolled in those plans the same protections as beneficiaries enrolled in other MA and cost plans.

Comment:

Several commenters supported our proposed codification of section 3202 of the ACA to limit cost sharing for chemotherapy administration services, renal dialysis services, skilled nursing care, and such other services as the Secretary determines appropriate to levels not to exceed that charged under Original Medicare and stated that it was welcome news for beneficiaries. One commenter specifically expressed support for the extension of the cost sharing limits to section 1876 cost contracts. Some of the commenters also requested that CMS provide greater clarity that the limits on cost sharing apply only to in-network services.

Response:

We thank the commenters for their support and in response to the these comments we will revise our proposed regulation text to clarify in § 422.100 that the cost sharing charged for chemotherapy administration services, renal dialysis services and skilled nursing care provided in-network may not exceed the amount of cost sharing required for those services under Original Medicare. Thus, in part, the final regulation text will be revised to read: “On an annual basis, CMS would evaluate whether there are service categories for which MA plans'

in-network

cost sharing may not exceed that required under Original Medicare and specify in regulation which services are subject to that cost sharing limit.”

Comment:

A few commenters objected to our codification in the proposed rule of our proposal to extend the cost sharing limits of section 3202 of the ACA to section 1876 cost plans because we proposed to set forth this requirement in a new paragraph (g) to § 417.101, which otherwise does not govern cost plans. The commenters suggested that we instead add a new paragraph to § 417.454, Charges to Medicare enrollees. One commenter also recommended that we change our reference to “MA plans” in the proposed regulation language to “HMO” or “CMP” to be consistent with the standard terminology used in the regulations to refer to the section 1876 contracting entity.

Response:

We thank the commenters for their suggestions. Accordingly, in this final rule, we will not include the cost-sharing requirements in § 417.101, but will instead add new paragraph (e) to § 417.454 to require cost sharing charged by section 1876 cost plans for chemotherapy, renal dialysis and skilled nursing care to be limited to that charged under Original Medicare. We also will remove reference to “MA plans” in the new regulatory text language and replace it with “HMO or CMP.”

We have considered all of the comments on this proposal and will finalize, as revised, the addition of a new paragraph and (j) to § 422.100 to implement section 3202 of the ACA requiring that MA plans' in-network cost sharing charges for chemotherapy, SNF care and dialysis will be no greater than that charged under Original Medicare, and a new paragraph (e) to § 417.454 to extend these protections to section 1876 cost contracts. However, we will not finalize our proposal to add new paragraph (4) to § 417.454(e) or new paragraph (4) to § 422.100(j) to prohibit plans from charging cost sharing for home health services.

2. Simplification of Beneficiary Election Periods (§ 422.62, § 422.68, § 423.38, and § 423.40)

Section 3204 of the ACA modified section 1851(e)(3)(B) of the Act such that, beginning with plan year 2012, the annual coordinated election period (AEP) under Parts C and D will be held from October 15 to December 7. We proposed to amend 0§ 422.62(a)(2) and § 423.38(b) to codify this change.

Section 3204 of the ACA also revised section 1851(e)(2)(C) of the Act to establish, beginning in 2011, a 45-day period at the beginning of the year (January 1 through February 14) that allows beneficiaries enrolled in MA plans the opportunity to disenroll and join Original Medicare, with the option to enroll in a Medicare prescription drug plan. This 45-day period, also referred to as the Medicare Advantage Disenrollment Period (MADP), replaces the open enrollment period (OEP) that previously occurred annually from January 1st through March 31st. To codify this provision, we proposed the following changes:

• § 422.62(a) was amended to provide for this new disenrollment opportunity and clarify that the OEP ended after 2010;

• § 422.68(f) was amended to specify the effective date for disenrollment

requests submitted during the new 45-day disenrollment period;

• § 423.38(d) was amended to allow individuals who disenrolled from an MA plan between January 1 through February 14th to enroll in a standalone PDP; and

• § 423.40(d) was amended to specify the enrollment effective dates for individuals who enroll in a standalone Medicare prescription drug plan after disenrolling from MA during the 45-day period.

Comment:

Commenters requested that CMS conduct beneficiary education on the new AEP timeframe.

Response:

We are strongly committed to using all available means for ensuring that beneficiaries are made aware of the new AEP timeframes. Thus, we expect to conduct specific outreach and education on this topic and highlight the change in Medicare & You 2012 which will be mailed to all beneficiaries.

Comment:

Commenters recommended that CMS adjust the timing of plan bids and make other important information, such as model notices, available earlier for plan preparation of the AEP. In addition, commenters requested that plan marketing be allowed to start earlier than October 1 for the AEP.

Response:

We are considering the timing of our processes and will be making appropriate adjustments as we prepare for a successful implementation of the new AEP timeframe, but we do not plan to change the bid submission or plan marketing dates. The plan bid submission date is set by statute and remains the first week in June, leaving only a narrow timeframe for review and approval of bids and benefits and to ensure that marketing materials align with approved benefits. Accurate marketing materials are key to enabling beneficiaries to make appropriate determinations regarding their health care and prescription drug coverage. Also, we do not believe it is appropriate or necessary to allow plans to market earlier than October 1 given that a beneficiary may not enroll in a plan until October 15th.

Comment:

Commenters recommended that CMS create an open enrollment period that would allow beneficiaries to enroll in Medigap products without regard to health status or pre-existing conditions. Another commenter recommended that CMS clarify that beneficiaries who disenroll from an MA plan using the 45-day disenrollment period do not have guaranteed issue rights to prevent underwriting the plan premium if they choose to purchase a Medigap policy.

Response:

Section 1882 of the Act does not provide for a Federal annual open enrollment period for Medigap. Further the commenter is correct that using the MADP does not give the beneficiary guaranteed issue rights under Federal law to prevent health-based underwriting of the Medigap policy premium. In some cases, State Medigap laws may offer additional guaranteed issue rights to beneficiaries who are affected by the MADP.

Comment:

Some commenters recommended that CMS establish a special election period (SEP) for the first year of the new AEP timeframe to allow individuals to make plan elections through December 31. Additionally, one commenter suggesting allowing plan sponsors to accept and process enrollment requests received from December 8 through December 31.

Response:

Again, we will take a number of steps to ensure that beneficiaries are made aware of the new AEP timeframes, and that they have the tools they need to make informed decisions during the new AEP timeframe. We believe that through planned outreach and education efforts directly to beneficiaries and with stakeholders and plans, beneficiaries will have sufficient notification to make their health plan elections by December 7. We believe that the establishment of the suggested SEP would directly conflict with the clear intent of the statute.

Comment:

A commenter recommended that individuals using the opportunity afforded by the MADP be allowed to enroll in an MA plan offered by the same parent organization instead of defaulting to Original Medicare. Another commenter recommended CMS find a less expensive alternative to the MADP such as reinstating the open enrollment period or eliminating lock-in.

Response:

Again, the new 45-day disenrollment period, as established in the ACA, is clearly designed to permit only moves from MA to Original Medicare. Eliminating or broadening the scope of this election period would contradict the intent of the statute. Similarly, “lock-in” is mandated by the statute and cannot be eliminated by CMS.

Comment:

A commenter addressed CMS' plans to establish an SEP to allow beneficiaries in an MA plan with less than five stars to enroll in a plan with five stars outside of the normal enrollment periods. The commenter recommended that, in regions where there are no plans with five stars, individuals be allowed to enroll in plans with 4.5 stars outside of the normal enrollment periods.

Response:

We appreciate the suggestion; however the SEP for individuals to enroll in 5-star plans is outside the scope of this regulation. We will consider this suggestion as we finalize guidance concerning the scope of the SEP associated with Plan Ratings later this year. We appreciate the comments that were submitted and will be finalizing these proposals without modification.

3. Special Needs Plan (SNP) Provisions (§ 422.2, § 422.4, § 422.101, § 422.107, and § 422.152)

In our proposed rule, we defined a fully integrated dual eligible special needs plan (SNP) as specified by the ACA, and set forth proposed regulations implementing changes made by the ACA. These changes would extend the authority to offer SNPs, extend provisions permitting existing D-SNPs that are not expanding their service areas to continue operating without contracts with State Medicaid agencies through 2012, and establish a required NCQA quality approval process for SNPs.

a. Adding a Definition of Fully Integrated Dual Eligible SNP (§ 422.2)

Section 3205 of the ACA revised section 1853(a)(1)(B) of the Act to provide authority to apply a frailty payment under PACE payment rules for certain individuals enrolled in fully integrated dual eligible special needs plans described in section 3205(b) of the ACA. In order to implement this provision, we proposed a definition of fully integrated dual eligible special needs plan to § 422.2 that will apply for these purposes. Under our proposed definition, the D-SNP must meet the following criteria in order to be considered a fully integrated dual eligible special needs plan:

• Enroll special needs individuals entitled to medical assistance under a Medicaid State plan, as defined in section 1859(b)(6)(B)(ii) of the Act and § 422.2.

• Provide dual eligible beneficiaries access to Medicare and Medicaid benefits under a single managed care organization (MCO).

• Have a capitated contract with a State Medicaid agency that includes coverage of specified primary, acute and long-term care benefits and services, consistent with State policy.

• Coordinate the delivery of covered Medicare and Medicaid health and long-term care services, using aligned care management and specialty care network methods for high-risk beneficiaries.

• Employ policies and procedures approved by CMS and the State to coordinate or integrate member materials, including enrollment, communications, grievance and appeals, and quality assurance.

In this final rule, we adopt our proposed definition of a fully integrated dual eligible special needs plan with some modification. For reasons discussed below, we have in this final rule revised the definition by removing the word “including” and have replaced the word “assurance” with “improvement.”

Comment:

The majority of commenters supported our proposed definition of a fully integrated dual eligible special needs plan. However, three commenters raised concerns about two potential ambiguities in the part of the proposed definition which requires that a fully integrated dual eligible special needs plan “[e]mploy policies and procedures approved by CMS and the State to coordinate or integrate member materials, including enrollment, communications, grievance and appeals, and quality assurance.” Specifically, these commenters recommended that we eliminate the word “including” after member materials, because the functions that follow the word “including” in the proposed definition are not all related to member materials. Further, these same commenters suggested that we use the terms “performance measurement” in place of “quality assurance” in the proposed definition, because, as suggested by the commenters, the term “performance measurement” is more consistent with current regulatory language.

Response:

We appreciate the commenters' support for the definition we proposed for a fully integrated dual eligible special needs plan. We agree with the commenters that, as written, the final prong of the proposed definition is not sufficiently clear about what policies and procedures must be approved by CMS and the State to ensure integration and coordination. Accordingly, in response to these comments, we have revised this part of the proposed definition in § 422.2 of the MA program regulations by eliminating the word “including” after member materials because, as the commenters suggest, the functions that follow the word “including” are not all related to member materials. We believe this word deletion makes this prong of the definition more clear, and also more accurately reflects our intention that a fully integrated dual eligible special needs plan coordinate or integrate Medicaid and Medicare member materials, enrollment, communications, grievance and appeals, and quality improvement. In addition, we revised this part of the proposed definition by substituting the terms “quality improvement” for “quality assurance” (or “performance measurement” as suggested by three commenters). “Quality improvement” is most consistent with existing MA terminology. We believe the term “performance measurement” does not sufficiently specify our intention to ensure that this portion of the definition requires coordinated or integrated policies regarding quality. Further, the use of the term “quality improvement” intentionally demonstrates our intention that a fully integrated dual eligible special needs plan integrate or coordinate the full spectrum of programs and tools utilized to ensure quality.

Comment:

Several commenters suggested that we broadly or flexibly interpret the definition of a fully integrated dual eligible special needs plan to allow for the broad variety of dual eligible special needs plan contracting arrangements in place in different States. Additionally, one commenter that submitted a comment with this suggestion also requested that under the third prong of the definition, we allow for some combination of specified primary, acute and long-term care benefits and services because States need flexibility to design the details of their programs in response to their stakeholders' needs and concerns. In contrast, another commenter urged us to use caution when approving plans as fully integrated dual eligible special needs plans, and recommended that we specify that any fully integrated dual eligible special needs plan purporting to offer long-term supports and services must offer the full range available in a given State.

Response:

We believe that there is a great deal of flexibility in our proposed definition of a fully integrated dual eligible special needs plan, as written in the proposed rule and this final rule, to account for the variability in State integration efforts. For example, the terms “consistent with State policy” in the definition recognizes the variability in the degree and extent to which Medicaid services are covered from one State to the next. Additionally, as highlighted by another commenter, use of the word “specified” in the definition (“coverage of

specified

primary, acute, and long term care benefits and services, consistent with State policy”) also acknowledges that States vary in the degree to which Medicaid services are covered by the State by only requiring the plan to cover those services specified by the State Medicaid Agency. Moreover, fully integrated dual eligible special needs plans and States have the flexibility to choose to contract to serve certain subsets of the sState's overall dual eligible population, provided that the MIPPA compliant State contract between the State and the fully integrated dual eligible special needs plan supports this arrangement. Therefore, in order to meet this definition a plan will be required to provide all covered Medicaid primary, acute and long-term care services and benefits to beneficiaries, and not some combination thereof.

Comment:

One commenter recommended that we include in the definition of a fully integrated dual eligible special needs plan the reference to PACE frailty levels from the statutory definition of a fully integrated dual eligible special needs plan found in section 3205 of the ACA. This commenter suggested that this reference to PACE frailty levels should be included in the definition of a fully integrated dual eligible special needs plan, as well as where it now appears in § 422.308.

Response:

While section 3205 of the ACA provides us with the authority to apply a frailty adjustment payment to a fully integrated dual eligible special needs plan with a similar average level of frailty as the PACE program, the statute does not limit our ability to use the definition of a fully integrated dual eligible special needs plan for only this purpose. Therefore, we will not include this requested reference in the final definition so we are able use this definition for other purposes in the future.

Comment:

One commenter asked us to clarify what is meant by “aligned care management and specialty care network methods for high-risk beneficiaries,” and also provided brief recommendations on how to implement this requirement. Further, the commenter recommended that any clarification on the “aligned care management” requirement specify that a fully integrated dual eligible special needs plan is responsible for managing care that is covered by Medicare or Medicaid in such a way that the individual beneficiary gets full access to all services covered by both programs.

Response:

Section 164(d) of the Medicare Improvement for Patients and Providers Act of 2008 (MIPPA) requires that special needs plans “have in place an evidenced-based model of care with appropriate networks of providers and specialists * * * and use[s] an interdisciplinary team in the

management of care.” The terms “aligned care management and specialty care network methods for high-risk beneficiaries” derive from this requirement in MIPPA. In the September 18, 2008

Federal Register

, we issued an interim final rule with comment on this MIPPA provision. We have received several comments on this provision and will finalize the provision later this year. As such, the final rule will provide additional clarification on what is required to “coordinates the delivery of covered Medicare and Medicaid health and long-term care services, using aligned care management and specialty care network methods for high-risk beneficiaries” as required by the definition for a fully integrated dual eligible special needs plan.

Comment:

One commenter asked us to clarify the requirement that a plan designated as a fully integrated dual eligible special needs plan must provide notices specific to the dual-eligible population it is serving as opposed to generic notices designed for non-dual beneficiaries that do not correctly identify their rights and obligations.

Response:

We appreciate this concern and currently require certain communications be developed specific to a beneficiary's eligibility. For example, we have created an Annual Notice of Change/Evidence of Coverage standard template specifically for dual eligible special needs plans for use starting with contract year 2012. The template was developed through several rounds of consumer testing and listening sessions with SNP representatives and consumer advocates. Other CMS models may be customized to meet the needs of dual eligible members. Furthermore, fully integrated and dual eligible special needs plans are required to coordinate and integrate member materials to contain information specific to both the Medicare and Medicaid benefits. We are committed to ensuring beneficiaries receive appropriate and helpful marketing materials and will continue to explore opportunities to improve beneficiary experience in this regard.

Comment:

One commenter recommends that we approve and allow both fully integrated dual eligible special needs plans and non-fully integrated dual eligible special needs plans to operate so that a larger population of duals may be served by these plans.

Response:

We agree with this commenter's recommendation. We will continue to approve and allow both fully integrated dual eligible special needs plans and non-fully integrated dual eligible special needs plan to operate so a larger population of duals may be served by these plans.

Comment:

One commenter seeks clarification in the requirement that a fully integrated dual eligible special needs plan have a “capitated” contract with the State Medicaid agency.

Response:

In response to this comment to clarify the meaning of the term “capitated” in the third prong of the definition, a capitated contract is a contract that provides for a fixed payment from the State Medicaid Agency to the fully integrated dual eligible special needs plan that does not vary based on services provided in exchange for the plan's provision of the covered Medicaid benefits to the beneficiaries.

b. Extending SNP Authority

Based on section 3205(a) of the ACA, which revised section 1859(f)(1) of the Act, we proposed in our November 2010 proposed rule (75 FR 71198) to extend the authority for SNPs to restrict enrollment to special needs individuals, thereby permitting SNPs to continue to limit enrollment to special needs individuals through the 2013 contract year. This extension applies to all SNP categories defined at § 422.2, with the exception of dual eligible SNPs (D-SNPs) that do not have a contract with the State in which they operate in contract year 2013, as described in section II.B.3.c of this final rule.

This provision was effective upon enactment of the ACA. However, we proposed that the regulations implementing this provision would be effective 60 days after the publication of this final rule.

After considering comments, we are finalizing this provision without modification.

Comment:

Several commenters believed that delaying the proposed provision's effective date until 60 days after publication of the final rule was unnecessary.

Response:

We disagree with the commenters' claim that it is unnecessary to delay implementation of this provision until 60-days following publication of this final rule. While section 3205(a) of the ACA was effective upon enactment, the regulations codifying this provision can be effective no earlier than 60 days following publication of this final rule, as provided under the Administrative Procedure Act for economically significant regulations.

Comment:

One commenter suggested that extending the SNP program for longer than 1 year would provide SNPs with more operational certainty.

Response:

Our proposed provision extended all SNPs, with the exception of D-SNPs that do not have a State contract in the State in which they operate, until contract year 2013, consistent with the statutory language at section 1859(f)(1) of the Act. We do not have the statutory authority to extend the SNP authority beyond the length of time Congress specified in the ACA. Therefore, we are finalizing this provision without modification.

c. Dual-Eligible SNP Contracts With State Medicaid Agencies (§ 422.107)

Section 164(c)(2) of MIPPA required all new D-SNPs and all existing D-SNPs that are seeking to expand their service areas to have contracts with the State Medicaid agencies in the States in which they operate. The provision allowed existing D-SNPs that were not seeking to expand their service areas to continue to operate without a State contract through the 2010 contract year as long as they met all other statutory requirements. Section 3205 of the ACA, which revised section 164(c)(2) of MIPPA, extends the date that D-SNPs not seeking to expand their service areas can continue to operate without a State contract to December 31, 2012. In order to implement this provision, we proposed to revise § 422.107(d)(ii) to specify the new deadline.

This provision was effective upon enactment of the ACA. However, we proposed that the regulations implementing this provision would be effective 60 days after the publication of the final rule.

Comment:

Many commenters supported this proposed provision. However, the majority of the comments we received on this provision centered on the operational issues related to the State contracting requirement. Several commenters indicated that variation in State contracting and procurement processes has caused some D-SNPs to experience delays in obtaining contracts with State Medicaid agencies and they requested that CMS give D-SNPs additional flexibility to meet these contracting deadlines. A few commenters suggested that CMS incentivize States to engage with D-SNPs that are seeking to contract with the State(s) in their service areas, while another commenter proposed that CMS hold plans harmless if States either refuse to contract with them or require them to meet contract requirements that are beyond the minimum CMS-required contract elements. Other commenters recommended that CMS provide further regulatory and operational guidance on the State contracting process. Several commenters expressed concern that

States were receiving conflicting information from CMS central and regional offices (ROs), and asked CMS to develop a model State contract for dissemination to D-SNPs, States, and the CMS ROs. Some commenters recommended that CMS establish a system of review and oversight of D-SNP State contracts through rulemaking.

Response:

The proposed rule neither codified the D-SNP State contracting requirement nor specified specific contract requirements; it only amended § 422.107 to conform to the statutory extension of the State contracting deadline for existing, non-expanding D-SNPs. Comments about operationalizing the State contracting requirement were not strictly within the scope of this rule. We note that, although we are not addressing these specific operational concerns in this final rule, we intend to provide additional operational guidance on the D-SNP State contracting requirements in future operational guidance well in advance of the State contracting deadline of December 31, 2012.

d. Approval of Special Needs Plans by the National Committee for Quality Assurance (§ 422.4, § 422.101, and § 422.152)

The ACA amended section 1859(f) of the Act to require that all SNPs, existing, new, and those wishing to expand their service areas, be approved by the National Committee for Quality Assurance (NCQA) effective January 1, 2012 and subsequent years. Section 1859(f) of the Act further specified that the NCQA approval process shall be based on the standards established by the Secretary.

In our November 2010 proposed rule (75 FR 71199), we stated that both the quality improvement (QI) program plan description and the model of care (MOC) are critical clinical elements that represent the potential for the SNP to provide integrated care for Medicare enrollees. We proposed that NCQA review both the QI program plan description and the MOC submitted during the application process for all SNPs using standards developed by CMS. Specifically, we proposed to add a new paragraph (iv) to § 422.4(a) to require MA plans wishing to offer a SNP, whether new or current, to be approved by NCQA, effective January 1, 2012, by submitting their quality QI program plan and MOC to CMS for NCQA evaluation and approval, per CMS guidance. We also proposed to codify the new requirement at § 422.101(f), which specifies MOC requirements, by adding a new paragraph (vi). Finally, we proposed to codify the new requirement by revising § 422.152(g), which specifies QI program requirements.

In the proposed rule, we also clarified that CMS would not participate in the scoring and review of the MOC and QI program plans. We also stated in our proposed rule that we would release specific instructions and guidance to organizations, including the specific criteria that NCQA would use to evaluate the QI program plan description and MOC, information about technical assistance training that would be available to the SNPs as they prepared their QI program plan and MOC submissions, as well as details on the frequency of the SNP approval process. We also expressed concern that an annual approval process could be burdensome for plans and solicited comments on how to determine the appropriate frequency for the SNP approval process.

Based on the comments we received on the proposed rule, we are modifying § 422.4(a)(iv), § 422.101(f), and § 422.152(g), as described below.

Comment:

Several commenters expressed concern with our proposed SNP approval process and the components that comprise that process. Specifically, these commenters noted that both the 2012 application cycle and the 2011 SNP structure and process measure submissions were due in February 2011. The commenters requested that CMS clarify any relationship between the two processes. Other commenters requested that CMS link the SNP approval process to the work NCQA currently performs around QI, MOC and HEDIS® requirements.

Response:

In our proposed rule, we proposed that NCQA would review the QI program plan and MOC submitted by all SNPs during the application cycle using standards developed by CMS. Our basis for this proposal was that the description of the plan's QI program plan and the MOC contained critical elements representing the potential for a SNP to provide integrated care for Medicare enrollees. Some commenters appear to have confused our proposed requirements for the SNP approval process with other quality requirements, such as, the quality improvement projects (QIPs), chronic care improvement programs (CCIPs) and the NCQA structure and process measures. As a result of this confusion, the majority of these comments did not support using evaluation of either the QI program plan or MOC as part of this process. Other commenters recommended that CMS ensure that there is consistency between the requirements for the SNP approval process and those of the other, unrelated NCQA quality assessment process.

Response:

We agree with commenters that the QI program plan may not be the most appropriate basis for approval of SNPs. Therefore, we have modified our original proposal by removing evaluation of the QI program plan from the NCQA SNP approval process described in § 422.4(a)(iv), § 422.101(f), and § 422.152(g). As a result, the SNP approval process will be based only on evaluation of the MOC, which will allow the NCQA to focus purely on a component of quality that is primarily clinical in nature and is also unique to SNPs. Removing evaluation of the QI program plan from the SNP approval process may also help reduce the confusion and concern plans expressed about alignment of the SNP approval process with other QI assessment measures and activities. All MA plans will still be required to submit their QI program plan; however, we will retain responsibility for review and assessment of this component as part of our larger QI efforts.

Comment:

Several commenters urged CMS to ensure that there is consistency between the QI program and MOC documents submitted during the application process and NCQA structure and process measures submissions.

Response:

The submission of structure and process measures is an ongoing annual QI assessment activity for all SNPs. The SNP approval process is a separate process for ensuring that SNPs comprehend the unique requirements of the SNP program and are capable of implementing these requirements. We believe commenters may be confusing submission of structure and process measures and the SNP approval process given NCQA's involvement in both processes, even though there is no relationship between the two. Therefore, we clarify that there is no relationship between the documents required to be submitted during the application process and the information required for the structure and process measures submissions.

Comment:

Two commenters requested that CMS address the relationship between the requirements for D-SNPs to contract with States, the SNP application, and the new SNP approval process. They further requested that CMS clarify that if a D-SNP were approved by NCQA for longer than one year but lost its State contract, CMS would not approve the D-SNP and would terminate the plan.

Response:

The D-SNP State contracting requirement is separate from the SNP approval and SNP application

processes and is described elsewhere in this final rule.

Comment:

Several commenters recommended that CMS consider incorporating the SNP approval process into the existing NCQA accreditation process. One of the commenters requested that CMS replace specific Medicare requirements, such as QI program requirements that may be part of the NCQA accreditation process, in lieu of more appropriate and relevant MOC and SNP-specific measures.

Response:

Section 1859(f) of the Act specifies that the SNP approval process “shall be based on the standards established by the Secretary.” While CMS has broad discretion regarding the development of the SNP approval process, our goal is to develop a process that is equitable for all SNPs. We do not believe that substituting NCQA accreditation for explicit SNP approval is appropriate because accreditation is voluntary, and not all plans are accredited, nor is NCQA the only accreditation organization recognized by CMS. CMS also has agreements with URAC (formerly the Utilization Review Accreditation Committee) and the Accreditation Association for Ambulatory Healthcare (AAAHC) to be deeming accreditation organizations. Each accreditation organization defines its fully accredited status level differently.

Comment:

Several commenters supported our proposal to consider implementing a multi-year approval period for high scoring plans. These commenters recommended a 3-to-5-year approval cycle to limit the administrative burden on plans that demonstrate their ability to meet the needs of special needs populations. These commenters stated that implementing an extended approval cycle would also allow CMS the opportunity to provide additional oversight of low performing plans. Two commenters recommended that CMS structure the approval process in a manner similar to that of the NCQA structure and process measures review cycle.

Response:

We agree with the commenters' position that a multi-year approval period would limit MA organizations' administrative burden. To that end, we intend to implement a multi-year approval process that will allow plans that receive a higher score on NCQA's evaluation of their MOC to be granted a longer approval period, meaning they would not be required to be reapproved for 1 or more years, unlike plans that score at the lower end of the scoring spectrum and which will be granted a shorter approval period. Specific guidance regarding the standards for multiyear approvals will be provided in separate guidance such as HPMS memoranda and annual call letters.

Comment:

One commenter supported a multi-year approval cycle but recommended that, rather than develop new measures, CMS should use QI measures that SNPs currently collect, such as annual QI audit results.

Response:

We are conducting a review of the MOCs from a sample of the SNPs. While data are not yet available from these audits, we expect that the audits will be completed by the end of calendar year 2011. We will use these data to revise and improve the MOC requirements in the future, as well as to refine the required evaluation criteria for the SNP approval process over time. We will also continue to research additional and appropriate QI measures to use as part of this process.

Comment:

To avoid introducing additional complexity into the transition to NCQA approval of SNPs, one commenter recommended that CMS not introduce new criteria for evaluation of SNPs at this time. This commenter also recommended that, once our approval standards are finalized, CMS leave them intact for several years in order to give NCQA and plans time to assess operational impacts and to fine-tune their systems.

Response:

We intend to continue using criteria for evaluation of SNPs that are familiar to plans. However, we will continue researching the feasibility of revising the criteria for future approval cycles. We will communicate changes to these criteria and provide opportunities for public review and comment.

Comment:

Several commenters expressed concern that CMS is proposing to delegate full authority of the SNP approval process to NCQA. These commenters did not favor giving so much authority to a private entity whose processes and activities are not subject to public scrutiny. These commenters recommended that CMS periodically audit NCQA's work to ensure that the work it is tasked with performing is serving the best interests of the beneficiaries.

Response:

Section 1859(f) of the Act requires that NCQA approve SNPs based on standards established by the Secretary. We will maintain oversight of this process via its contract with NCQA, as well as by establishing appropriate standards for NCQA approval, as described elsewhere in this preamble.

Comment:

One commenter requested that CMS clarify that it will continue its own review of SNP applications rather than allow NCQA approvals of two documents to serve as deemed compliance with all regulatory requirements.

Response:

We confirm that we will retain responsibility of the MA and SNP application review process, and the SNP approval process is one component of this process. We believe this commenter may have confused the NCQA approval process with the annual application process, since both have the same timeline.

Comment:

Several commenters recommended that CMS remove the SNP approval process from the annual SNP application timeframe.

Response:

We disagree with these commenters' recommendation. While we proposed to link the SNP approval process to the MA application process, the SNP approval process is only one component of the overall process for determining whether a SNP may operate in contract year 2012. SNPs must still complete other components of the SNP proposal and other CMS requirements to be fully operational in contract year 2012. We believe we are minimizing MA organizations' administrative burden by linking the SNP approval process to the annual application cycle. Synchronizing the timelines for these two processes will allow SNPs to follow timelines and procedures with which they are familiar and allow for SNP approvals to be completed prior to the bid submission deadline.

Comment:

One commenter recommended that CMS work with SNPs to identify a list of SNP-specific clinical and non-clinical QIP topics that are relevant to target populations served by SNPs, as well as a list of topics for dual-eligible SNPs (D-SNPs) that could be coordinated with State Medicaid agencies so that they can meet both Federal and State requirements.

Response:

A major element in the design of the QIPs and CCIPs continues to be that they must address a target population that is appropriate for that plan. We intend to review the non-clinical and clinical QIPs and CCIPs that MA organizations have submitted to identify gaps in topics that plans should be addressing. We intend to issue further guidance on the submission of QIPs and CCIPs, through HPMS memoranda or the annual call letter process.

Comment:

Several commenters requested the opportunity to review and comment on the new QI program plan and MOC instructional guidance.

Response:

We are currently in the process of conducting a review of MOCs from a sample of SNPs. Information received from the review will be used to assist us in revising and improving the

MOC. In addition, we intend to use the information to modify and refine the required evaluation criteria over time to improve the QI program and the MOC. Updates or changes to the QI program plan and MOC instructional guidance will be made available in advance for public review and comment.

Comment:

One commenter recommended that the CMS Federal Coordinated Health Care Office work with NCQA and States to align MOC and QI program requirements established by CMS for the SNP approval process for D-SNPs.

Response:

We appreciate the recommendation and note that we are already working closely with the Federal Coordinated Health Care Office on a myriad of SNP issues.

Comment:

One commenter believed it was not clear when plans that are not requesting a service area expansion (SAE) would be evaluated. This commenter also requested that CMS clarify whether the January 1, 2012 effective date means that the approval process begins in 2012 or that the approvals must be completed for all existing SNPs prior to January 1, 2012 (thus beginning in 2011).

Response:

We approve potential applicants for contract the year prior to the date the contract becomes operational. Therefore, any requirements that must be in effect as of January 1, 2012 will be addressed as part of the 2012 SNP application cycle for contract year 2012. The deadline for submitting applications for consideration during the 2012 application cycle was February 24, 2011.

4. Section 1876 Cost Contractor Competition Requirements (§ 417.402)

In accordance with section 3206 of the ACA, which revised section 1876(h)(5)(C) of the Act, we proposed in our November 2010 proposed rule (FR 75 71199) to extend implementation of the section 1876 cost contract competition provisions until January 1, 2013. Previously, MIPPA had specified that section 1876 cost contractors operating in service areas or portions of service areas with two or more local or two or more regional Medicare coordinated care plans meeting minimum enrollment requirements (5,000 enrollees for urban areas and 1,500 enrollees for non urban areas) would be non-renewed beginning in 2010.

In implementing the new contract non-renewal date, we specified in our November 2010 proposed rule that we would evaluate enrollment of competing MA coordinated care plans beginning in 2012, send out non-renewal notices to affected section 1876 cost contracts in 2013, and that affected section 1876 cost contractors would first be unable to offer a plan beginning contract year 2014. We proposed to codify the statutory change in § 417.402(c).

We received no comments on this provision and are finalizing the provision as proposed.

5. Making Senior Housing Facility Demonstration Plans Permanent (§ 422.2 and § 422.53)

Section 3208 of the ACA established (at section 1859(g) of the Act) that as of January 1, 2010, senior housing facility plans participating as of December 31, 2009 “in a demonstration project established by the Secretary under which such a plan was offered for not less than 1 year” may continue participation as Medicare Advantage senior housing facility plans. In implementing this provision of the ACA, we proposed in our November 2010 proposed rule (75 FR 71199 and 71200) to amend the definitions at § 422.2 to include “senior housing facility plan” as a new coordinated care plan type. Our proposed definition of the term was consistent with the statutory requirements for such plans at section 1859(g) of the Act: that such a plan restrict enrollment to individuals who reside in a continuing care retirement community as defined in § 422.133(b)(2); provide primary care services onsite and have a ratio of accessible physicians to beneficiaries that we determine is adequate consistent with prevailing patterns of community health care as provided under § 422.112(a)(10); provide transportation services for beneficiaries to specialty providers outside of the facility; and was participating as of December 31, 2009 in a demonstration established by us for not less than 1 year. We also noted that a senior housing facility plan must otherwise meet all requirements applicable to MA organizations under this part.

In addition, we proposed to add a new § 422.53 to subpart B of Part 422 to address the eligibility and enrollment policies applicable to senior housing facility plans. We proposed specifying at § 422.53 that MA senior housing facility plans must restrict enrollment in these plans to residents of continuing care retirement communities, and that individuals enrolled in such plans must meet all other MA eligibility requirements in order to be eligible to enroll. In addition, we proposed specifying at § 422.53(c) that an MA senior housing facility plan must verify the eligibility of each individual enrolling in its plan using a CMS-approved process. We proposed that the regulations implementing this provision would be effective 60 days after the publication of the final rule.

We are finalizing our proposed provisions regarding senior housing facility plans without modification.

Comment:

One commenter requested that our regulations make clear that, if a beneficiary who is enrolled in a senior housing facility plan moves out of the senior housing facility, he/she would be eligible for a special election period and, therefore, able to enroll in another MA plan or PDP outside of the annual election period.

Response:

We agree with this commenter that a special election period should apply in this situation; however, it is not necessary to codify a new special election period for this situation. Current guidance in Chapter 2 of the Medicare Managed Care Manual

http://www.cms.gov/MedicareMangCareEligEnrol/Downloads/FINALMAEnrollmentandDisenrollmentGuidanceUpdateforCY2011.pdf,

entitled “Medicare Advantage Enrollment and Disenrollment,” provides that an MA enrollee is eligible for the SEP for changes in residence if he/she moves out of the plan's service area. Since a senior housing facility plan's service area is comprised of only the senior housing facility, an enrollee who moves out of the senior housing facility may use this existing SEP to enroll in any MA or Part D plan for which he/she is eligible in his/her new place of residence and is eligible for Medigap guaranteed issue rights if he/she disenrolls to Original Medicare.

6. Authority to Deny Bids (§ 422.254, § 422.256, § 423.265, and § 423.272)

Section 3209 of the ACA amends section 1854(a)(5) of the Act by adding subsection (C) (ii) to stipulate and expressly provide that the Secretary may deny a bid submitted by an MA organization for an MA plan if it proposes significant increases in cost sharing or decreases in benefits offered under the plan. Section 3209 of the ACA also extends this provision to apply to the review of bids from Part D sponsors by amending section 1860D-11(d) of the Act to add a new paragraph (3). This statutory authority applies to bids submitted for contract years beginning on or after January 1, 2011. However, as indicated in section II.A. of this final rule, the regulations codifying this provision will be effective 60 days after the date of display of the final rule.

In the proposed rule, we stated that we believe these amendments clarify the Secretary's authority to deny bids

submitted by MA organizations and PDP sponsors and provide support for our current policies as specified in our final rule, “Policy and Technical Changes to the Medicare Advantage and the Medicare Prescription Drug Benefit Programs” (75 FR 19678 through 19826). These policies include imposing limits on cost sharing and denying bids submitted by plans with sustained low enrollment or bids for multiple plans offered by the same MA organization or PDP sponsors in a service area that are not meaningfully different with respect to benefits or costs. These policies were further discussed in a memorandum sent on April 16, 2010 via the Health Plan Management System (HPMS) titled “Benefits Policy and Operations Guidance Regarding Bid Submissions; Duplicative and Low Enrollment Plans; Cost Sharing Standards; General Benefits Policy Issues; and Plan Benefits Package (PBP) Reminders for Contract Year (CY) 2011.”

Because these policies have been implemented so recently, we concluded that it was premature to propose additional regulatory restrictions limiting MA organizations' or PDP sponsors' flexibility in developing plan bids until we are able to evaluate the effectiveness and impact on the market of those current policies. However, in the preamble to the proposed rule, we requested comments on the criteria outlined in our April 16, 2010 guidance issued via HPMS and whether we should establish additional requirements to limit plan offerings in a service area and whether there are other measures we should consider as part of future rulemaking that may help us in our efforts to protect beneficiaries and promote the provision of high quality, affordable health plans. We also invited comments on whether we should adopt other substantive criteria for exercising our authority under 3209 of the ACA by implementing caps or limits on the number of plans offered in a region, or on the number of sponsors participating in the program. Finally, we solicited comments on the best way to ensure fair notice and equal treatment for all plan bids in the absence of specific non-acceptance and denial policies. While we indicated that we would not propose additional specific regulatory criteria for CY 2012, we noted that our decision should not be interpreted as an indication that we would not adopt specific policies in future rulemaking. We will consider the suggestions and comments we received from the public on the proposed rule to guide our future policy.

We proposed to codify the amendments made to sections 1854(a)(5) and 1860D-11(d) of the Act by adding paragraph (a)(5) to § 422.254, revising § 422.256(a), adding paragraph (b)(3) to § 423.265 and by adding paragraph (b)(4) to § 423.272.

Comment:

We received several recommendations in response to our request for comments on our current meaningful differences policies. Commenters recommended that CMS issue clear and comprehensive guidance containing the CMS criteria for evaluating and accepting or denying MA and Part D plan bids well in advance of the bid deadline. Moreover, commenters recommended that CMS provide specific information to MA organizations and Part D sponsors that is sufficiently detailed to allow sponsors the ability to replicate the methodologies applied in the tools that CMS uses in its bid evaluations. This information should be sufficient for plan actuaries to test their assumptions against CMS assumptions prior to their bid submission.

Response:

We appreciate your comments regarding our current meaningful differences policies. We have released, via the Final Rate Announcement and Call Letter for CY 2012 released on April 4, 2011, a detailed discussion of the methods and tools that CMS intends to use to evaluate bids and ensure beneficiaries enjoy meaningful choices among MA and Part D plans. Specifically, in the final CY 2012 Call Letter, we announce that we will make an out-of-pocket cost (OOPC) model available that will allow plans to calculate OOPC estimates for each of their benefit offerings to prepare for negotiations with us. Standalone PDPs, MA, and MA-PD sponsors and organizations are encouraged to run their plan benefit structures through the OOPC model to ensure meaningful differences between their plan offerings as required by CMS regulations (see § 423.272(b)(3)(i) and § 423.265(b)(2)). Plans will be asked to complete this analysis prior to submitting their bids for the CY 2012.

A detailed discussion regarding the thresholds that CMS will be using for CY 2012 meaningful differences policies are included in the Final Rate Announcement and Call Letter for CY 2012.

Comment:

We received several comments regarding the bid evaluation tools used by CMS and as specified in the April 16, 2010 guidance. Specifically, commenters indicated that if the total beneficiary cost (TBC) metric is used in future bidding cycles, CMS will need to take into account plan-specific variations such as plan consolidation, new plan service areas, pairing of plans to meet target margins and other payment policy issues such as the lagged sustainable growth rate (SGR) fix.

A few commenters indicated that CMS did not provide sufficiently detailed information as to how plan benefits as part of the OOPC calculation were projected and estimated for 2011. A number of sponsors discovered during bid negotiations that estimates they had produced to guide their benefit designs were significantly different than CMS recommendations. Commenters recommended CMS reevaluate use of the tool to analyze plan bids and engage in detailed discussion with MA and Part D plan sponsors to identify alternatives.

One commenter believes the OOPC tool, which is used by CMS to provide out-of-pocket costs information through the

http://www.Medicare.gov

Web site, is inappropriate and the estimates produced by the tool are not linked to the projections of MA and Part D plan-specific enrollee utilization of healthcare services and the revenue needed to fund them that are at the core of plan bids. Instead, these estimates reflect utilization under the Medicare fee-for-service program for a sample of beneficiaries that is somewhat out of date.

Response:

We appreciate the commenters' suggestions and critique of our current bid evaluation tools. Based on the comments we have received in response to this rule and from the industry following bid negotiations for CY 2011, we have committed to providing additional information regarding the OOPC calculation and an OOPC tool to address the industry's specific concerns and to support their development of plan bids for CY 2012. We have also provided additional guidance and proposed policies for bid review in the Final Rate Announcement and Call Letter for CY 2012.

Comment:

A few commenters recommend that star quality ratings either should, or should not, be used when evaluating plan bids. One commenter indicated that quality ratings, such as low star ratings, should be used as bid evaluation criteria since lower star ratings would result in decreased enrollment causing the plan to eventually fail meeting our low-enrollment thresholds. Other commenters support the use of star ratings and recommended that CMS only reassign beneficiaries to plans with a star rating of four stars or higher ensuring beneficiaries are offered plans that have a track record of quality service. One commenter indicated that they support the use of the star rating system; however, CMS would need to

consider the different changes faced by plans in geographic areas.

Response:

We appreciate the comments we received regarding the potential use of quality ratings in determining whether to deny or decline bids under our new authority. While we will not be codifying specific criteria under this rule at this time, in the future we may explore the use of our authority to deny bids based on quality ratings, such as the star ratings.

Comment:

Several commenters indicate that CMS should not impose limits on the number of plans in a service area, nor limit the number of MA organizations or Part D sponsors participating in the program, as this would be inconsistent with the competitive framework of the MA and Part D programs. One commenter indicated that limiting the number of plans in a specific service area would limit competition and potentially lead to higher prices and program costs in the long run. Another commenter suggests that CMS defer further consideration of initiatives to limit the number of plans offered until the impact of existing policies and statutory program changes can be fully evaluated.

Response:

We appreciate the comments we received regarding limiting the number of plans in a service area and limiting the organizations that participate in the program using the new authority to not accept bids. We will not be codifying such limits under this rule. We will consider these comments if we propose additional rulemaking limiting plans in a service area, or, limiting organizations participating in the program.

Comment:

One commenter requests that we continue the waiver of our meaningful differences policy for employer group waiver plans (EGWPs).

Response:

We announced in the Final Rate Announcement and Call Letter for CY 2012, released on April 4, 2011, that this waiver will continue to apply to EGWPs for CY 2012 and future contract years.

Comment:

Many commenters indicated either their support for, or opposition to, a premium increase threshold when determining whether to deny or decline bids under our new authority. In particular, one commenter indicated that CMS be permitted to deny a bid if such premium increases or benefit changes are unsubstantiated. An exception to an unsubstantiated change would be if actuarially the benefit design requires that benefits be decreased if premiums increased. Another commenter indicated that denying bids based upon changes to premiums assumes all sponsors have gravitated to the same level of maturity and that individual plan differences should be accounted for when applying a cap on premium increases.

Response:

We appreciate the comments we received regarding the use of strict limits on premium increases or benefit decreases when evaluating bids. While we will not be codifying into regulation strict limitations on premium increases or benefit decreases as part of this final rule, we will take these comments into consideration as our policies regarding our authority to deny bids evolve.

Comment:

One commenter urged that CMS consider a plan's proposed profit margin in order to assure consistent and fair treatment across health plans. This commenter believed that plans with higher profit margins have a greater capacity to implement member cost reductions requested by CMS, and plans that have losses, or very small profit margins, should be allowed to increase their profit to allow for risk reserves.

Response:

We appreciate the recommendation provided by this commenter. As our meaningful differences policies and the impact of such policies on plan bids evolve, we will consider the possibility of examining plan profit margins as part of our bid evaluation criteria.

Comment:

A few commenters believed it was important for us to develop an appeals process for plans that face bid denials and that such processes should allow for the timely reconsideration of our decision.

Response:

We will not be adopting specific bid denial criteria or processes in this final rule. We will continue to work with plans prior to, and during, the bidding process to ensure the meaningful differences policies and bid evaluation criteria, as set forth in our CY 2012 Final Rate Announcement and Call Letter, take into account the individual plan's population, service area, and level of maturity. We will ensure this information is provided in a timely manner so that plans will know, prospectively, our expectations regarding the plans that will be made available to our Medicare population.

Comment:

We received many comments requesting that CMS disclose, prior to bid development, all criteria that will be used to review bids each contract year. The commenters asserted that without definitions of what CMS identifies as “significant increases” in cost sharing or “decreases in benefits” offered and all other criteria by which plan bids will be evaluated and possibly denied, MAOs and Part D sponsors could be subject to inconsistent and potentially unfair bid denials. Commenters overwhelmingly requested that CMS make available in this final rule, its annual Call Letter or other appropriate published guidance, no later than mid-April, the specific standards plan bids will be required to meet as well as, the tools and methodologies that would be necessary for plans to replicate CMS' bid review results. They asserted that if plans are provided the appropriate tools and information they will be able to develop and submit initial plan bids that meet all CMS requirements.

Response:

We agree with commenters that plan bids based on guidance we provide prior to or during bid development are more likely to satisfy our requirements. The final CY 2012 Call Letter, released on April 4, 2011, provides the tools and information necessary for sponsors to develop and submit complete initial bids that will meet our requirements.

Comment:

Some of the comments we received requested that CMS not deny bids based on increases in beneficiary costs or on decreases in benefits offered because plans may need to increase costs or decrease benefit offerings to cover the growing gap between costs for providing services and revenue. Commenters expressed concern that continued application of the Total Beneficiary Cost (TBC) review criterion that CMS used for review of CY 2011 bids has the potential to undermine the financial integrity of plan bids and to adversely affect enrolled beneficiaries. Some stated their beliefs that the constraint on increases in plans' revenue required to meet the TBC measure is likely below a reasonable cost trend and could result in negative margins for some plan bids, putting them in conflict with other CMS bid guidance. Finally, commenters asserted that CMS criteria that limit premium and other beneficiary cost increases or decreases in benefits offered are not consistent with competitive bidding, the fundamental principal that bids should satisfy actuarial soundness requirements that anticipated revenue is sufficient to cover plan costs, or the requirement that bids be certified by actuaries.

Response:

We understand that MAOs and Part D plan sponsors may be facing a number of challenges as they develop plan bids for CY 2012, including those related to meeting our standards for meaningfully different plan offerings, out-of-pocket maximums and cost sharing standards. We develop bid requirements with input from our Office of the Actuary (OACT), which takes into consideration the potential impact of its own guidance regarding negative margins. Together, we have developed a

TBC requirement that will not restrict a plan's ability to meet any additional bid guidance (for example, OACT's negative margin requirement) and considers environmental changes, as well as changes in Medicare payment and their impact on plan bids. In our final CY 2012 Call Letter, we describe the methodology we will use to limit significant increases in TBC to ensure that plans offered for CY 2012 are affordable and offer good value for enrollees. As described previously, we have provided a detailed discussion of the methods and tools we intend to use to evaluate plan bids in our CY 2012 Call Letter. We evaluate this guidance annually, and make refinements as necessary, taking into consideration comments we receive from industry following the end of bid review season. For CY 2012, we also are providing additional information about the OOPC calculation and will make an OOPC model available so that plans will be able to calculate OOPC estimates for their target benefit offerings in advance of submitting their bids to CMS. We believe that this increased transparency will support plans in their work to develop their benefit designs.

Comment:

Many commenters indicated that if CMS does maintain its policy to approve only plan bids that do not propose significant increases in beneficiary costs or decreases in benefits offered using the TBC measure then the measure will need to take into account the large effects of CMS payment changes, plan-specific variations such as plan consolidation, new plan service areas, whether the plan is a SNP, pairing of plans to meet target margin and other payment policy issues. One commenter urged that MAOs be able to adjust for mistakes made in prior years' bids, such as to revise benefit amounts to curb demonstrated adverse selection into the plan.

Response:

We thank the commenters for their suggestions for enhancing the development of the TBC criterion. We have considered these issues and worked with OACT to incorporate several of these factors, to the extent possible, into the TBC measure for CY 2012. However, we wish to point out that CMS does not support the notion that a plan should be able to adjust their pricing year to year to account for “mistakes” in a prior year's bid. Plans are responsible for submitting bids that reflect accurate and actuarially reasonable bid projections and assumptions for the coming year, which should not include amounts attributable to making up for errors in a past year. Therefore, our TBC measure will not account for errors in a plan's previous year's bid. To the extent practicable, we will consider relevant and appropriate factors and circumstances in order to develop and publish in a timely manner measures that we will use to evaluate bids consistently across plans.

Comment:

Commenters expressed their concern that any single threshold established by CMS for review of significant increases in beneficiary costs or decreases in benefits offered would fail to address the many circumstances that vary across plans such as, geographic location, plan size, plan experience, plan type, and their belief that CMS must ensure that plans have some “due process” rights related to the upcoming contract year bid review. In addition to receiving full and timely disclosure of the criteria to be used for evaluating plan bids, commenters would like an opportunity to question, or comment on, CMS' methodologies prior to their implementation, and request assurance from CMS that bids will be reviewed using only published criteria. The commenters believe that CMS owes them a meaningful opportunity to challenge the application of CMS' criteria to their bids, using actuarial analysis, and to modify a bid that does not satisfy the criteria or where CMS choose not to accept the organization's rationale for the bid. As another example, commenters requested that CMS permit bid approvals in cases in which the plan can demonstrate actuarial justification for decreases in benefits offered and/or increases in beneficiary costs that exceed CMS' threshold.

Response:

We thank the commenters for sharing these concerns. As in past years, our goal is to ensure that the MA and Part D programs remain healthy and that there are meaningful, high value choices available to beneficiaries We note that during CY 2011 bid reviews, the vast majority of outlier plans came into compliance with CMS guidance or submitted acceptable justifications to CMS for their plan bid. In an effort to reduce confusion, and the need for resubmissions, CMS is providing comprehensive guidance and tools in advance of the bid submission deadline so that organizations can develop initial submissions that meet all bid requirements. Organizations had an opportunity to comment on our guidance and methodology through the draft CY 2012 Call Letter and we considered such comments in preparing the final CY 2012 Call Letter, released on April 4, 201l.

Comment:

One commenter recommended that CMS, as it implements its authority deny bids, continue to examine the impact of cost sharing for specialty tier drugs in a plan's formulary which may reduce patient access to needed medications.

Response:

This comment is not relevant to the discussion in the proposed rule concerning our authority to deny bids; rather, it is a comment on CMS' formulary review process. We have in place a rigorous formulary review process that ensures cost-sharing imposed by plans on drugs found on specialty tiers will not impede a beneficiary's access to medications.

7. Determination of Part D Low-Income Benchmark Premium (§ 423.780)

The ACA amends the statute governing the calculation of the LIS benchmark premium amount (see section 3302 of the ACA, as amended by section 1102 of HCERA). As amended, section 1860D-14(b)(3)(B)(iii) of the Act requires us to calculate the LIS benchmarks using MA-PD basic Part D premiums before the application of Part C rebates each year, beginning with 2011. We proposed to update the regulations at § 423.780(b)(2)(ii)(C) to incorporate this change. We also proposed that the regulations implementing this provision would be effective 60 days after the publication of the final rule.

Comment:

We received several comments in support of the proposed change.

Response:

We agree that LIS benchmarks should be calculated using basic Part D premiums before the application of Part C rebates and we are finalizing this provision without modification.

8. Voluntary De Minimis Policy for Subsidy Eligible Individuals (§ 423.34 and § 423.780)

Section 3303(a) of the ACA modifies section 1860D-14(a) of the Act by creating a new subsection (5) that permits PDPs and MA-PD plans to waive a

de minimis

monthly beneficiary premium for low income subsidy (LIS) eligible individuals who are enrolled in the plan. The provision also prohibits the Secretary from reassigning LIS individuals enrolled in a plan with a premium greater than the LIS benchmark premium amount, so long as the amount of the premium that exceeds the LIS benchmark is

de minimis

and the plan volunteers to waive that

de minimis

amount.

Section 3303(b) of the ACA modifies section 1860D-1(b)(1) of the Act by inserting new language in subparagraph (C) and adding a new subparagraph (D) that permits the Secretary to include PDPs and MA-PD plans that waive the

de minimis

amount in the auto-

enrollment process that we use to enroll those LIS-Eligible individuals who fail to enroll in a Part D plan. If these plans are included in the process, and more than one such plan exists within the respective PDP region, the statute requires that enrollees be randomly assigned among all such plans in the PDP region. We proposed to amend § 423.34 and § 423.780(f) to codify the new statutory requirements. The statutory provision is effective January 1, 2011; however, as indicated in section II.A. of this final rule, the regulations implementing these provisions are effective 60 days after the date of display of this final rule.

a. Reassigning LIS Individuals (§ 423.34)

Section 423.34(c) specifies that CMS may reassign certain LIS-eligible individuals if CMS determines that further enrollment is warranted. We have used this authority to reassign LIS-eligible individuals annually when a PDP's monthly beneficiary premium amount will exceed the low income benchmark, as calculated in § 423.780(b)(2). As noted previously, the ACA prohibits the Secretary from reassigning a plan's LIS eligible enrollees based on the fact that the plan's monthly beneficiary premium exceeds the LIS benchmark premium amount, so long as the amount of premium that exceeds the LIS benchmark is

de minimis

and the plan volunteers to waive that

de minimis

amount. Thus, plans that would otherwise have lost enrollees because of a

de minimis

monthly beneficiary premium can retain such membership. We proposed to amend § 423.34(c) regarding reassignment of LIS beneficiaries to reflect section 1860D-14(a)(5) of the Act.

Comment:

All commenters supported our proposal to amend section § 423.34(c) to reflect newly added section 1860-14(a)(5) of the Act. These commenters noted that the primary benefits of such a

de minimis

policy are to minimize the need for reassignments, and the associated disruptions of an individual's continuity of care. One commenter recommended that we provide additional language in § 423.34(c)(1) to describe the circumstances under which reassignment occurs and the individuals affected by reassignment, in order to provide meaningful context for the exception described in § 423.34(c)(2).

Response:

We agree with commenters that the

de minimis

policy supports the desirable goal of minimizing disruptions of an individual's continuity of care potentially associated with reassignment, while simultaneously ensuring a zero-premium Part D benefit to certain LIS-eligible individuals unlikely to have the financial means to pay the

de minimis

amount. Also, we appreciate the suggestion that additional context be added in § 423.34(c)(1) to describe the circumstances under which reassignment occurs and the individuals affected by reassignment. However, we believe that it is more appropriate to provide the level of detail the commenters request through subregulatory guidance. Therefore, we are finalizing our proposal to amend § 423.34(c) without modification. We will update Chapter 3 of the Medicare Prescription Drug Benefit Manual, (“Eligibility, Enrollment, and Disenrollment”—available at the following link:

http://www.cms.gov/MedicarePresDrugEligEnrol

) to provide the additional context requested by commenters.

b. Enrollment of LIS-Eligible Individuals (§ 423.34)

Section 423.34(d) specifies that CMS will automatically enroll LIS-eligible individuals who fail to enroll in a PDP. The pool of PDPs into which we auto-enroll these individuals includes those plans with monthly beneficiary premiums for LIS-eligible individuals that do not exceed the low income benchmark as calculated in § 423.780(b)(2). We proposed to amend § 423.34(d) regarding auto-enrollment of LIS-eligible individuals to be consistent with section 1860D-1(b)(1) of the Act, as modified by section 3303(b) of the ACA, which expands the Secretary's discretionary authority to include PDPs or MA-PD plans that voluntarily waive the de minimis amount in the pool of Part D plans qualified to receive auto-enrollees and reassignees, if the Secretary determines that such inclusion is warranted.

Comment:

The majority of commenters supported our proposal to amend § 423.34(d) to be consistent with section 1860D-1(b)(1) of the Act, as modified by section 3303(b) of the ACA. However, a few commenters urged that CMS not codify such discretionary authority with respect to including MA-PD plans that voluntarily waive the

de minimis

amount in the pool of qualified plans to receive auto-enrollees and reassignees. Among the reasons they cited for not including the provisions concerning MA-PD plans in the regulations were that: (1) Random auto-enrollment and reassignment of such beneficiaries into MA-PD plans could have deleterious consequences on an individual's access to his or her Part A and Part B benefits; and (2) the public policy goal of eliminating premium cost-sharing for such LIS-eligible beneficiaries would not be accomplished for those individuals enrolled into an MA-PD plan with a Part D beneficiary premium within the

de minimis

amount but a Part C beneficiary premium of an amount for which the LIS recipient would incur liability.

Response:

We agree with the concerns raised by these commenters, particularly with respect to the potential disruption of an individual's access to his or her Part A and Part B benefits (for example, by imposing network restrictions) by including MA-PD plans that voluntarily waive the

de minimis

amount in the pool of Part D plans qualified to receive auto-enrollees and reassignees. Since the inception of the auto-enrollment and reassignment processes, this concern has served as an underlying basis for inclusion of only PDPs in the pool of Part D plans that receive auto-enrollees and reassignees. We also agree that auto-enrollment and reassignment of such LIS-eligible individuals into MA-PD plans, in some cases, would fall short of our public policy goal of ensuring zero premium cost-sharing for these beneficiaries to access their Part D benefit.

For the reasons stated previously, we are amending § 423.34(d) to codify the Secretary's authority only with respect to including PDPs that voluntarily waive the

de minimis

amount in the pool of plans qualified to receive auto-enrollees and reassignees. At this time, we do not intend to exercise such authority to auto-enroll or reassign LIS-eligible beneficiaries into PDPs that voluntarily waive the

de minimis,

except under limited instances, such as to allow beneficiaries to remain within the same parent organization or to ensure that LIS-eligible beneficiaries in all PDP regions have access to a plan with zero beneficiary premium liability. However, the regulations will retain the flexibility to permit future reassignments to PDPs above the LIS benchmark that waive the

de minimis amount,

should the Secretary determine such reassignments to be warranted.

Comment:

One commenter suggested that CMS examine the impact on enrollment stability if the Agency were to apply the

de minimis

policy to partial premium subsidy recipients.

Response:

The underlying goal of the

de minimis

policy is to minimize unexpected disruptions of care that may result from reassignment. The proposed application of the

de minimis

policy to full-benefit subsidy beneficiaries supports this policy goal, as we do not reassign partial premium subsidy recipients enrolled in a Part D plan with

a beneficiary premium amount that exceeds the LIS benchmark amount. Since partial premium subsidy recipients pay a partial premium, they are more likely to be accustomed to proactively selecting a plan with a premium amount within their financial means to avoid disruption of care. Finally, application of the

de minimis

policy to partial premium subsidy recipients would partially undermine the downward pressure on Part D bids by decreasing the incentive for plans to bid lower in order to retain such beneficiaries. Therefore, we are making no modifications to our

de minimis

proposal with respect to its application to only full-benefit subsidy recipients.

Comment:

One commenter urged CMS to permit plan sponsors to reassign LIS beneficiaries enrolled in its “enhanced plan” into the plan sponsor's “basic plan.” The commenter noted that such a change would minimize disruption of care as the beneficiary would remain within the same parent organization, which typically has the same formularies and many similar benefits and services across plans. The commenter further noted that such a policy would prevent potential future terminations of members due to non-payment of premium, since their premium in the new plan should be much less than in the enhanced plan.

Response:

In accordance with our long-standing public policy of honoring a beneficiary's plan choice by excluding from the reassignment process those beneficiaries who have proactively enrolled in a plan, we will continue our like-minded policy that prohibits plans from passively and selectively reassigning LIS-eligible beneficiaries who have proactively enrolled in the sponsor's enhanced plan. In the rare instance of plan consolidations, such reassignments may be permitted at our discretion, as they would not dishonor the beneficiary's plan choice, since the chosen plan no longer exists under such circumstances. Such situations would generally involve the elimination of the enhanced plan for all enrollees, and thus would not result in the selective reassignment of LIS-eligible beneficiaries.

c. Premium Subsidy (§ 423.780)

We also proposed to amend § 423.780(f) to reflect section 1860D-14(a)(5) of the Act, permitting a Part D plan to waive a

de minimis

amount that is above the monthly beneficiary premium defined in § 423.780(b)(2)(ii)(A) or (B) for full subsidy individuals as defined in § 423.780(a) or § 423.780(d)(1), provided waiving the

de minimis

amount results in a monthly beneficiary premium that is equal to the established low income benchmark as defined in § 423.780(b)(2). In addition, because section 1860D-14(a)(5) of the Act refers to waivers of

de minimis

premium that exceeds the low-income benchmark, which accounts only for the basic benefit, we limit the waiver of the

de minimis

amount to the premium applicable to the basic benefit.

Comment:

We received one comment strongly encouraging CMS to increase the

de minimis

amount beyond $2.00 for full-benefit dual-eligible beneficiaries enrolled in special needs plans to help meet the needs of this more vulnerable population.

Response:

We determine the

de minimis

amount based on the outcome of the plan bidding process. We consider the impacts of setting the

de minimis

amount at varying levels each year, including the impact on the number of zero premium plans and the number of reassignments. At this time, however, we do not believe that it is necessary to apply different

de minimis

amounts for various plan types, because we believe that a uniform

de minimis

amount ensures that impacted beneficiaries are treated equitably in terms of their premium assistance regardless of plan type. Thus, we plan to continue establishing a uniform

de minimis

amount applicable to all plan types each year.

Comment:

Some commenters recommended that CMS release the LIS benchmarks and the

de minimis

amount earlier than August to allow adequate time for Part D sponsors to modify systems and member communications given the statutory change to the AEP.

Response:

While we appreciate concerns about providing sufficient time for Part D sponsors to modify their systems and member communications, we cannot determine the regional LIS benchmarks until August when the Part D bids have been received and reviewed. In order for Part D sponsors to modify systems and member communications, they would need both the regional LIS benchmarks and the

de minimis

amount. Additionally, we release the

de minimis

amount in August to ensure that it does not influence bid submissions inappropriately. Therefore, we will not be modifying the release date of the regional LIS benchmarks or

de minimis

amount and are finalizing our proposal without modification.

9. Increase In Part D Premiums Due to the Income Related Monthly Adjustment Amount (D—IRMAA) (§ 423.44, § 423.286, and § 423.293)

Section 3308 of the ACA amended section 1860D-13(a) of the Act by establishing an income related monthly adjustment amount (hereafter referred to as Part D—IRMAA) that is added to the monthly Part D premium for individuals whose modified adjusted gross income exceeds the same income threshold amounts established under section 1839(i) of the Act with respect to the Medicare Part B income related monthly adjustment amount (Part B—IRMAA).

In CY 2007, the income ranges set forth in section 1839(i) of the Act required that individual and joint tax filers enrolled in Part B whose modified adjusted gross income exceeded $80,000 and $160,000, respectively, would be assessed the Part B—IRMAA on a sliding scale. As specified in section 1839(i)(5) of the Act, since the implementation of the Part B—IRMAA, each dollar amount within the income threshold tiers has been adjusted annually based on the Consumer Price Index. As a result of the annual adjustment, for calendar year 2010, the income threshold amounts were increased to reflect the four income threshold amount tiers shown below:

ER15AP11.004

We note that section 3402 of the ACA freezes the income thresholds at the above 2010 levels through 2019.

In accordance with section 3308 of the ACA, effective January 1, 2011, any individual enrolled in the Medicare prescription drug program whose modified adjusted gross income exceeds the same income threshold amount tiers established under Part B will have an income related increase to his/her Part D monthly premium. Section 3308 of the ACA provides that the Part D—IRMAA will be calculated using the Part D national base beneficiary premium and the premium percentages in the above chart as follows: BBP × [(P percent −25.5 percent)/25.5 percent]. The BBP is the base beneficiary premium and P is the applicable premium percentage (35 percent, 50 percent, 65 percent, or 80 percent). The premium percentage used in the calculation will depend on the level of the Part D enrollee's modified adjusted gross income.

Section 3308 of the ACA requires CMS to provide the Social Security Administration (SSA) with the national base beneficiary premium amount used to calculate the Part D—IRMAA no later than September 15 of every year, beginning in 2010. Beginning in 2010, we must also provide SSA, no later than October 15 of each year, with: (1) The modified adjusted gross income threshold ranges; (2) the applicable percentages established for Part D—IRMAA in accordance with section 1839(i) of the Act; (3) the corresponding monthly adjustment amounts; and (4) any other information SSA deems necessary to carry out the Part D—IRMAA. With respect to the final item, we previously provided SSA with an initial list of all individuals enrolled in the Part D program.

In accordance with section 3308 of the ACA and the interim final rule with request for comments entitled “Regulations Regarding Income-Related Monthly Adjustment Amounts to Medicare Beneficiaries' Prescription Drug Coverage Premiums” (75 FR 75884), SSA used this initial list of Part D enrollees to request beneficiary-specific tax payer information from the Internal Revenue Service in order to determine: (1) Which Part D enrollees exceed the income threshold amounts established under section 1839(i) of the Act; and (2) the income related monthly adjustment amount that these enrollees must pay. This exchange of information between CMS and SSA occurred in 2010 so that individuals identified were billed the correct Part D—IRMAA beginning January 1, 2011. Following this initial data exchange with SSA, CMS will routinely provide SSA with the names of all individuals newly enrolling in the Part D program so that SSA can repeat the process of identifying individuals who must pay the Part D—IRMAA and the specific income-related amount. We will also routinely provide the names of individuals who have disenrolled from the Part D program so that such individuals will no longer be assessed the Part D—IRMAA. In cases where an individual disagrees with a determination that he/she is subject to the Part D—IRMAA, such individual may appeal as provided in the SSA regulations under 20 CFR part 418.

Section 3308 of the ACA also stipulates that the Part D—IRMAA must be withheld from benefit payments in accordance with section 1840 of the Act. Therefore, in cases where an individual is receiving benefit payments from SSA, the Railroad Retirement Board (RRB), or the Office of Personnel Management (OPM), the Part D—IRMAA must be withheld from such benefit payments. However, if the benefit payment is insufficient to allow the Part D—IRMAA withholding, or an individual is not receiving benefit payments as described in section 1840 of the Act, section 3308 of the ACA requires SSA to enter into agreements with CMS, RRB, and OPM, as necessary, in order to allow the Part D—IRMAA to be collected directly from these beneficiaries.

To implement section 3308 of the ACA, we proposed to revise § 423.286 (rules regarding premiums), § 423.293 (collection of monthly beneficiary premium), and § 423.44 (involuntary disenrollment by PDP).

a. Rules Regarding Premiums (§ 423.286)

Currently, § 423.286(a) provides that the monthly beneficiary premium for a Part D plan in a PDP region is the same for all Part D-eligible individuals enrolled in the plan with the exception of employer group waivers, the assessment of the Part D late enrollment penalty, or an enrollee receiving low-income assistance. We proposed to revise the following:

• Section 423.286(a) to include the assessment of the income related monthly adjustment amount as another exception to the requirement for a uniform monthly beneficiary premium for a Part D plan in a PDP region;

• Section 423.286(d)(4) to define the increase for the income related monthly adjustment amount for Part D;

• Section 423.286(d)(4)(i) to specify that SSA would determine the individuals that are subject to the Part D—IRMAA and the amount of the adjustment;

• Section 423.286(d)(4)(ii) to provide the formula used to calculate the monthly adjustment amount; and

• Section 423.286(d)(4) to provide appeals rights to individuals who disagree with SSA's determination that they are subject to the Part D—IRMAA or the threshold amount of the adjustment they must pay.

Comment:

Commenters wanted to know if there was any plan responsibility in tracking or collecting the Part D—IRMAA. One commenter believed the Part D—IRMAA would

cause beneficiary confusion and that plans would have little recourse to address beneficiary concerns. A few commenters requested that CMS provide information to plans, including copies of communications released to the IRMAA population and individuals' Part D—IRMAA billing information, potentially through the Medicare Advantage Prescription Drug (MARx) System via a transaction reply response (TRR). This information would enable plans to address both general and specific beneficiary concerns and provide proactive communications to improve the beneficiary experience. Lastly, a commenter encouraged CMS to provide plans with guidance regarding how plans' customer service agents can best handle beneficiary inquiries regarding income related adjustments to their premium.

Response:

Part D plan sponsors do not have responsibility for tracking or collecting the Part D—IRMAA. Section 3308 of the ACA clearly states that the additional amount is to be withheld from a beneficiary's Social Security benefit check. In cases where the benefit check is not sufficient to allow the withholding, the beneficiary will be directly billed the amount by CMS. However, as discussed below, Part D plan sponsors will be responsible for providing beneficiaries with the disenrollment notice after we notify plans that the beneficiary's Part D coverage has been terminated for failure to pay his/her Part D—IRMAA.

On December 10, 2010, we released to Part D plan sponsors a memorandum entitled, “Part D—Income Related Monthly Adjustment Amount—Frequently Asked Questions & Answers,” which included plain-language, beneficiary-friendly questions and answers specifically addressing inquiries plans may receive from beneficiaries. These FAQs include information such as how the Part D—IRMAA is collected, the responsible entity for determining who should be assessed the amount, as well as the appropriate government agency a beneficiary should contact with additional questions.

We have provided clear instructions to plans regarding the appropriate referral agency for specific questions regarding an individual's Part D—IRMAA determination and billing. We will continue to work with Part D plan sponsors to determine what specific additional guidance they need in answering beneficiary inquiries related to the Part D—IRMAA.

Comment:

A commenter asserted that there will be an increase in premium-related complaints submitted to 1-800-MEDICARE due to the Part D—IRMAA noting that plans are unable to influence or control members' experiences related to the premium increase and should not be penalized for these complaints. The commenter requested that CMS exclude complaints specific to the Part D—IRMAA premiums in plan quality metrics.

Response:

While there may be an increase in the number of beneficiary complaints related to the Part D—IRMAA, we believe our developed scripts and FAQs will address most concerns. We agree beneficiary complaints related to these types of issues should not be part of Medicare Part D plan sponsors' quality metrics.

Comment:

Commenters requested that we clarify how a Part D sponsor would operationalize the Part D—IRMAA and whether the Part D—IRMAA affects the Part D bid or the base beneficiary premium.

Response:

Currently, Part D sponsors are not expected to implement any operational changes with regards to the collection of the Part D—IRMAA. Unlike the normal Part D plan premiums, applicable beneficiaries will not pay the Part D—IRMAA to Part D sponsors. Instead, as noted previously, the Part D—IRMAA will be collected by the Federal government via a withholding from beneficiaries' SSA, RRB, or OPM benefit payments or collected by us directly. As stated previously, though, Part D plan sponsors will be responsible for providing beneficiaries with the disenrollment notice if we involuntarily disenroll an individual for failure to pay his/her Part D—IRMAA, just as they would for any other disenrollment action initiated via a CMS transaction file, such as those disenrollments that result from choosing another plan.

Consistent with section 1860D-15(a)(1) of the Act, we will not apply Part D—IRMAA to the base beneficiary premium used to calculate the Part D direct subsidy payments. In addition, no other Part D—IRMAA related adjustments will be made to the Part D payments received by Part D sponsors. As a result, the Part D—IRMAA is expected to have no impact on the Part D bids or Federal payments received by Part D sponsors.

Comment:

One commenter conveyed that it did not support the imposition of the Part D—IRMAA because of the “potentially adverse effect” of this provision, referencing our estimate that approximately 220,000 beneficiaries may disenroll from the Part D program as a result of the Part D—IRMAA (see 75 FR 71256). Another commenter suggested that CMS monitor the impact of this policy on enrollment in Part D plans and the potential for adverse selection. More specifically, this commenter was concerned that the most healthy, affluent seniors may elect to delay enrollment in a Part D plan as it may be financially advantageous to pay the late enrollment penalty for delaying enrollment rather than paying the Part D—IRMAA for many years when expected drug expenditures are minimal. Despite one of the commenters' dislike for this statutory requirement, the commenter applauded CMS for developing timely regulations to implement this new requirement.

Response:

We have no discretionary authority to waive the Part D—IRMAA, which is clearly required by the ACA. We are dedicated to ensuring a timely and thorough implementation and appreciate acknowledgement of our efforts to develop regulations to implement this new requirement. We will monitor all aspects of Part D—IRMAA implementation, including the impact of this policy has on future Part D disenrollments and enrollments.

Comment:

One commenter asserted that the introduction of the IRMAA for Part B and Part D premiums through Social Security deductions is not understood by many beneficiaries. Consequently, the commenter encouraged consideration of some notification from SSA or CMS of each individual's premiums under each Part prior to the upcoming year.

Response:

Each year, SSA will determine who will be assessed an IRMAA in both the Part B and Part D programs. In November, SSA will send the beneficiary an annual letter that indicates the amount of any IRMAA the individual may owe. Further, CMS and SSA developed beneficiary-friendly publications and FAQs to assist beneficiaries and our partners with understanding this new requirement. We believe that more outreach and education will assist beneficiaries in understanding the IRMAA and which government Agency (CMS or SSA) should be contacted with further questions. Plans may refer beneficiaries to SSA with questions regarding the content of their annual letter from SSA regarding the IRMAA.

We would also like to note that in the preamble of the proposed rule we inadvertently referenced the wrong citation in describing our proposal to add provisions regarding a beneficiary's right to file an appeal of SSA's Part D—IRMAA determination. We referenced § 423.286(d)(4)(iii) and (iv), but should have referred to § 423.286(d)(4)(i) which is where these provisions were

proposed and where they are being finalized in this rule.

b. Collection of Monthly Beneficiary Premium (§ 423.293)

We proposed establishing a new § 423.293(d)(1) to describe how the Part D—IRMAA would be collected. First, we addressed the process for collecting the Part D—IRMAA from SSA, RRB, or OPM benefit payments. In cases where SSA determines that a Part D enrollee must pay a Part D—IRMAA, such amount must be paid through withholding from the enrollee's Social Security benefit payments, or benefit payments by the RRB or OPM in the manner that the Part B premium is withheld. Additionally, we proposed at § 423.293(d)(2) that in cases where premium withholding is not possible because the monthly benefit check is insufficient to allow the withholding, or the enrollee is not receiving any monthly benefit payment, the individual must be directly billed for the Part D—IRMAA through an electronic funds transfer mechanism (such as automatic charges of an account at a financial institution or a credit or debit card account) or according to other means that we may specify.

Section 3308 of the ACA provides that the Part D—IRMAA is an increase to the monthly beneficiary premium for certain individuals. Section 1851(g)(B)(i) of the Act, as incorporated by section 1860D-1(b)(5) of the Act, establishes that a beneficiary may be terminated for failing to pay his/her Part D premiums. At § 423.293(d)(3), we proposed that CMS will terminate Part D coverage for any individual who fails to pay the income related monthly adjustment amount in accordance with proposed § 423.44 (see discussion below).

Comment:

Several commenters conveyed that they understood that implementation of the Part D—IRMAA requires coordination among CMS, Part D plan sponsors, and SSA, with SSA having primary responsibility for an individual's IRMAA determination. They suggested that the final regulations address the need for the timely exchange of beneficiary information and any updates in order to facilitate coordination amongst these entities. As an example, commenters contended that in cases where a higher income beneficiary is no longer enrolled in a Part D plan, the Part D sponsor should send this information immediately to CMS and SSA so that the Part D—IRMAA is no longer deducted from the beneficiary's benefit check or billed to the beneficiary.

Response:

We appreciate the recommendation that CMS and SSA maintain close and timely coordination related to Part D enrollment and the Part D—IRMAA. As noted in the proposed rule “* * * CMS will routinely provide SSA with the names of all individuals newly enrolling in the Part D program * * * and will also routinely provide the names of individuals who have disenrolled from the Part D program so that such individuals will no longer be assessed the Part D—IRMAA.” Furthermore, as stated in § 423.36 and in our guidance, Part D plan sponsors must submit the disenrollment transactions to CMS within 7 calendar days of receipt of the beneficiary's completed disenrollment request in order to ensure the correct effective date. (See Chapter 3, § 50.4.1 “Voluntary Disenrollments” of the

Medicare Prescription Drug Benefit Manual

published August 17, 2010). We believe that through this existing process, all involved entities will receive timely notification to address changes to either Part D enrollment or Part D—IRMAA.

Comment:

One commenter asserted that they foresaw enrollment “glitches” similar to those of LIS-eligible beneficiaries who were inadvertently dropped from one plan but not correctly auto-enrolled in the next. This commenter further stated that, undoubtedly, some high-income beneficiaries would face disenrollment because of miscommunications that result because prescription drug plan premiums are paid to their chosen plan and the Part D—IRMAA is paid to CMS. Based on this assertion, the commenter encouraged CMS to develop an expeditious, straight-forward process for resolving such problems and to publicize that process on Medicare.gov.

Response:

We appreciate the commenter's concern about possible problems or beneficiary confusion regarding payments for the Part D—IRMAA to the Federal government and plan premiums. The vast majority of individuals required to pay the Part D—IRMAA will have the IRMAA amount deducted from their monthly benefit check, which will eliminate the possibility of involuntary disenrollment for failure to pay the Part D—IRMAA. For those individuals who will be billed by CMS directly, we will notify them via monthly billing notices. Further, we have developed FAQs for use by plans, partners, and 1-800-MEDICARE to educate beneficiaries on the proper means to make payments for their Part D—IRMAA. However, we will consider outlining the process for Part D—IRMAA payment and possible disenrollment on Medicare.gov to assist in beneficiary understanding.

c. Involuntary Disenrollment by CMS (§ 423.44)

Section 3308 of the ACA provides that the Part D—IRMAA increases the monthly beneficiary premium for individuals who are subject to the assessment. Therefore, we proposed to apply provisions similar to the existing Part D premium rules to terminate Part D coverage (provided for by Section 1860D-13(c) of the Act) for any individual who fails to pay the Part D—IRMAA. Specifically, we proposed the following:

• Section 423.44(e)(1) provides that CMS will disenroll individuals who do not pay their Part D—IRMAA.

• Section 423.44(e)(2) provides individuals a 3-month grace period to pay outstanding Part D—IRMAA amounts before they are involuntarily disenrolled.

• Section 423.44(e)(3) provides an opportunity for a disenrolled beneficiary to establish “good cause” for failure to pay their Part D—IRMAA and have their plan enrollment reinstated if Part D—IRMAA arrearages are paid.

• Section 423.44(e)(4) requires PDPs, after notification by CMS, to notify enrollees of the termination of their enrollment in the Part D plan in a form and manner determined by CMS.

• Section 423.44(e)(5) establishes that the effective date of disenrollment is the first day following the initial grace period.

• Finally, we proposed modifying the title of § 423.44 from “Involuntary Disenrollment by the PDP” to “Involuntary Disenrollment from Part D Coverage.”

Comment:

We received several comments on the length of the proposed grace period applicable to Part D—IRMAA premiums. While several commenters commended CMS for proposing a longer grace period to pay the Part D—IRMAA, other commenters suggested that CMS synchronize the 3-month grace period for payment of the Part D—IRMAA with the plans' minimum 2-month grace period already established by CMS regulations and guidance. Commenters asserted that having different grace periods could cause potential conflict and confusion if the enrollee failed to pay both the Part D premium and the Part D—IRMAA and was provided a grace period by both the PDP and CMS, but on differing timelines (for example, a 2-month grace period under the PDP and a 3-month grace period under CMS).

Commenters also requested that we take into consideration the potential

overlap, conflicts, and/or confusion that could occur for beneficiaries receiving notices for non-payment of their plan premium and non-payment of the Part D—IRMAA and any conflicting grace periods. The commenter requested that CMS revise the approach to better coordinate the timing of the plan beneficiary disenrollment notices with the plan and the Part D—IRMAA grace periods and that we should do our best to prevent the potential problems. Another commenter asked us to clarify that a Part D beneficiary could be disenrolled from a Part D plan for failure to pay the plan premium after the plan's two-month grace period regardless of whether the enrollee has paid their Part D—IRMAA or has not exhausted the 3-month grace period for the D—IRMAA.

In addition, one commenter recommended that CMS delay implementation of the grace period specific to the Part D—IRMAA in light of the other CMS provisions that require process and system changes. According to this commenter, CMS should consider this recommendation since the Part D—IRMAA affects only a small percentage of the total Part D population.

Response:

Under the Original Medicare program, beneficiaries assessed the Part B-IRMAA are afforded an initial 3-month grace period to pay their Part B premiums before they are terminated. As individuals may be subject to both the Part B and the Part D—IRMAA, we believe that the grace period for both programs should be consistent.

With respect to synchronizing the Part D—IRMAA with plan premium grace periods, our regulations at § 423.44(d)(1)(iii) stipulate that plans choosing to implement a policy of involuntary disenrollment for failure to pay the Part D plan premium must provide a minimum 2-month grace period. A Part D plan sponsor with an established 2-month minimum grace period may disenroll a beneficiary for failing to pay the plan's premium, if such grace period ends prior to the 3-month grace period allotted for payment of the Part D—IRMAA. Current guidance (Medicare Prescription Drug Benefit Manual, Chapter 3, § 50.3.1) allows plans to implement a longer grace period or forgo involuntary disenrollments for failure to pay premiums entirely. Therefore, plans already have the ability to modify their respective grace periods and are encouraged to do so if they believe the existence of two different grace periods will create conflict or confusion.

As noted previously, the vast majority of individuals subject to the Part D—IRMAA are paying the income-based amount through a deduction from their Social Security checks, and thus the grace period associated specifically with payment of the Part D—IRMAA is not a factor. However, to the extent that individuals fail to pay only the Part D—IRMAA, we believe it is appropriate to use the same procedures and time frames that apply to the Part B-IRMAA. Note that individuals who fail to pay the Part D premium that is owed to a plan may be disenrolled by the plan after the expiration of the 2-month grace period, regardless of the payment status of their Part D—IRMAA.

If a plan chooses to retain a grace period that is shorter than the one specific to the Part D—IRMAA, once the beneficiary is disenrolled from the plan, the assessment of the Part D—IRMAA will cease. Therefore, the beneficiary will receive the disenrollment notice as a result of not paying the plan's premium and there will be no need to issue the involuntary notice for failing to pay the Part D—IRMAA. For example, if the beneficiary fails to pay the plan premium within the plan's grace period but the grace period specific to the Part D—IRMAA has not lapsed, the Part D plan sponsor will, in accordance with CMS rules, send us a plan transaction to disenroll the beneficiary. Following confirmation from us that the disenrollment transaction has been accepted, the Part D plan sponsor must send the beneficiary the disenrollment notice no later than 3 business days following the last day of the grace period. (See Chapter 3, Section 50.3.1 of the Medicare Prescription Drug Benefit Manual.) Once the beneficiary has been disenrolled from the plan, the withholding and/or billing of the Part D—IRMAA will cease. Lastly, in those cases where the Part D—IRMAA and the plan premium grace periods are different, but end on the same date, the beneficiary will receive two disenrollment notifications—Notice of Failure to Pay Plan Premiums and the Notification of Involuntary Disenrollment by the Centers for Medicare and Medicaid Services for Failure to Pay the Part D—IRMAA since the former conveys information about requesting the plan to reconsider its decision and the latter provides information about requesting a “good cause” determination.

For these reasons, we are finalizing the regulatory provisions as proposed. However, we will carefully consider these comments and potential system impacts as it develops its program instructions to plans regarding the procedures for disenrolling beneficiaries who fail to pay their Part D—IRMAA and the timing of when plans will convey the notice. In addition, we will closely monitor the disenrollment process and make adjustments to the process to ensure optimum coordination between the timing of the grace period and the issuance of the beneficiary disenrollment notice.

Comment:

One commenter recommended that CMS make attempts to collect the Part D—IRMAA before terminating the enrollee, and encourages CMS to publish, with opportunity for public comment, the proposed process for doing so.

Response:

As explained previously, for individuals that do not have their Part D—IRMAA deducted from their Social Security checks, we are following the same process we use in collecting the Part B-IRMAA. This process involves repeated monthly statements (initial bill, second notice and a delinquent notice) to the beneficiary to solicit the payment and to notify the individual of the potential consequences of failure to make a payment prior to disenrollment at the end of the initial 3-month grace period. In addition, if payment is not made, the beneficiary will have an additional 3 months to establish “good cause” for failure to pay their Part D—IRMAA and remit payment for any arrearages to be reinstated into their Part D plan. We believe this process provides sufficient notification to the beneficiary and opportunity to pay their Part D—IRMAA prior to disenrollment for failure to pay.

Comment:

Several commenters expressed concern with the proposed requirement that plans issue the disenrollment notice to enrollees involuntarily disenrolled for failure to pay their Part D—IRMAA. Commenters believed that CMS was in the best position to send these notices in a timely manner since we, not the plan, are aware of the member's Part D—IRMAA amount and any possible arrearages. Commenters were concerned that if plans served as an intermediary in this process, they would inevitably be contacted with complaints or subject to grievances. It was suggested that a CMS-generated notice would reduce the burden on plans and would more clearly communicate to enrollees that CMS should be contacted regarding questions on the Part D—IRMAA.

Response:

As described previously, individuals who are subject to disenrollment based on their failure to pay the Part D—IRMAA will have first received a series of monthly billing statements from CMS informing them of

their obligation to pay the Part D—IRMAA, and the consequences of their failure to do so. If and when disenrollments do become necessary, we believe affected individuals should be afforded the same notices that other individuals would receive from their plans. Thus, we disagree that plans should not be responsible for sending a disenrollment notice. Such notices are part of a plan's daily business operations. This process is consistent with existing requirements for disenrollment of a beneficiary who is no longer eligible to remain in a Medicare prescription drug plan due to loss of Medicare Part A and/or B. In this situation, we involuntarily disenroll the beneficiary, and the beneficiary's Part D plan sponsor is required to provide the individual with the Disenrollment Due to Loss of Medicare Part A and/or Part B Notice (See Chapter 3, Section 50.2.2 of the Medicare Prescription Drug Benefit Manual).

We recognize that Part D plan sponsors may receive questions from their members regarding the disenrollment. As such, the notification used by Part D plan sponsors will explicitly state that the disenrollment is being effectuated by the plan at CMS' direction. This notice further instructs the beneficiary to contact us, not the plan, about questions pertaining to the notice. As noted previously, the December 10, 2010 CMS memorandum mentioned previously provides plans with language they can use in responding to members' Part D—IRMAA inquiries. We will continually develop and release information to Part D plan sponsors, partners, and beneficiaries via the CMS information channels (1-800-MEDICARE,

http://www.medicare.gov

) that will assist beneficiaries with questions about their Part D—IRMAA and direct them to the appropriate entity for assistance. Thus, we will retain the proposed provision that Part D plan sponsors will provide a beneficiary with the notice when he/she is disenrolled for failing to pay the Part D—IRMAA.

Comment:

A commenter contended that it was not clear from our proposal if CMS intended to tell Part D plan sponsors to disenroll the non-paying member before or after the end of the grace period. The commenter concluded that if timing for notification is the latter, this could result in a retroactive disenrollment from the plan, with possible complications in terms of bills for non-covered services and medications retroactive to the effective date of the disenrollment.

Response:

We recognize this concern and will keep this issue in mind as we develop operational guidance on the disenrollment process.

Comment:

Two commenters disagreed with the proposed policy of an additional 3-month grace period for individuals to establish “good cause” after the disenrollment date, allowing for no disruption in coverage if reinstated. Another commenter suggested that plans be informed if a disenrolled member requests a “good cause” determination for failure to pay their Part D—IRMAA.

Response:

We believe that beneficiaries should be afforded the opportunity to establish “good cause” for not paying the Part D—IRMAA amount and the ability to be reinstated in their Part D coverage without interruption. We appreciate the comment regarding plan notification of requests for good cause and will take this into consideration as we develop the process for good cause” determinations. (See section II.C.8 of this preamble for a further discussion of this issue.)

Comment:

A few commenters expressed concern about what would happen to individuals involuntarily disenrolled from their plan for failure to pay their Part D—IRMAA. Some commenters requested that we clarify that a disenrollment for failure to pay the Part D—IRMAA would result in a loss of health coverage if the individual is enrolled in an MA plan, cost plan, or employer group health plan with prescription drug coverage. Another commenter asked whether a beneficiary who is disenrolled for failure to pay the Part D—IRMAA would be subject to the Part D late enrollment penalty (LEP) upon reenrollment in a Part D plan. In addition, commenters made the following suggestions:

• Establish a special enrollment period (SEP) for disenrolled individuals to re-enroll into another MA-only (or a cost plan).

• Allow for passive enrollment into an MA-only plan within the same organization if an individual is disenrolled from their MA-PD plan for failure to pay Part D—IRMAA.

• Grant employer group waiver plans a waiver from the disenrollment process.

Response:

An individual in an MA-PD who fails to pay the Part D—IRMAA within the 3-month grace period will be disenrolled to Original Medicare. Because this policy ensures that beneficiaries will not lose health care coverage, we believe an SEP is unwarranted and unnecessary. Furthermore, a beneficiary's Part D coverage may be reinstated without interruption if within 3 months after disenrollment, the enrollee demonstrates “good cause” for failure to pay the Part D—IRMAA and pays all Part D—IRMAA and plan premium arrearages. The SEP policy at § 423.38(c)(8)(ii) permits CMS to address exceptional enrollment cases for individuals on a case-by-case basis. To the extent that individuals believe they have exceptional situations that warrant consideration to enroll in a MA-only (or other plan that does not offer Part D coverage), they should call 1-800-MEDICARE and ask to be put in touch with a CMS regional caseworker. In addition, the policies for the Part D LEP remain unchanged by the implementation of Part D—IRMAA. An individual who is disenrolled for failure to pay the Part D—IRMAA may be subject to the Part D LEP if he or she goes without creditable prescription drug coverage for 63 days or more. If an individual would like to restart prescription drug coverage, he or she would have to pay any arrearages and make an election during a valid enrollment period.

Individuals in employer group waiver plans and employer group health plans will also be disenrolled for failure to pay Part D—IRMAA. Employer groups that want to assure that their members retain coverage are not prohibited from informing their retirees that they will be reimbursed by their employer group for any Part D—IRMAA they are required to pay.

We appreciate the comments on our proposals and, for the reasons contained in the discussion previously, are finalizing these provisions as proposed. We have, however, made technical revisions to § 423.286(d)(4) and§ 423.293(d) to incorporate references to the new SSA regulations regarding the Part D IRMAA, which were published after the issuance of our proposed rule.

10. Elimination of Medicare Part D Cost-Sharing for Individuals Receiving Home and Community-Based Services (§ 423.772 and § 423.782)

The MMA, as reflected in § 423.782, established that full-benefit dual eligible institutionalized individuals have no cost-sharing for covered Part D drugs under their PDP or MA-PD plan. Section 3309 of the ACA eliminates cost-sharing for full-benefit dual eligible individuals who are receiving home and community-based services (HCBS) under a home and community-based waiver authorized for a State under section 1115 or subsection (c) or (d) of section 1915 of the Act, or under a State Plan Amendment under section 1915(i) of the Act, or if such services are

provided through enrollment in a Medicaid managed care organization with a contract under section 1903(m) or 1932 of the Act. These services are targeted to frail, elderly individuals who, without the delivery in their home of services such as personal care services, would be at risk of institutionalization. We proposed to amend § 423.772 to establish the definition of “individual receiving

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