# Medicare Program; Contract Year 2024 Policy and Technical Changes to the Medicare Advantage Program, Medicare Prescription Drug Benefit Program, Medicare Cost Plan Program, Medicare Parts A, B, C, and D Overpayment Provisions of the Affordable Care Act and Programs of All-Inclusive Care for the Elderly; Health Information Technology Standards and Implementation Specifications

> Briefs, arguments, decisions, and more.

URL: https://www.frixlaw.com/law-library/documents/fr%3A2022-26956

## Record

- **Collection:** Federal Register
- **Document type:** Proposed Rule
- **Published:** December 27, 2022
- **Citation:** 87 FR 79452

## Text

DEPARTMENT OF HEALTH AND HUMAN SERVICES
Centers for Medicare & Medicaid Services
42 CFR Parts 401, 405, 417, 422, 423, 455, and 460
Office of the Secretary
45 CFR Part 170
[CMS-4201-P]
RIN 0938-AU96
Medicare Program; Contract Year 2024 Policy and Technical Changes to the Medicare Advantage Program, Medicare Prescription Drug Benefit Program, Medicare Cost Plan Program, Medicare Parts A, B, C, and D Overpayment Provisions of the Affordable Care Act and Programs of All-Inclusive Care for the Elderly; Health Information Technology Standards and Implementation Specifications

AGENCY:

Centers for Medicare & Medicaid Services (CMS), Office of the National Coordinator for Health Information Technology, Department of Health and Human Services (HHS).

ACTION:

Proposed rule.

SUMMARY:

This proposed rule would revise the Medicare Advantage (Part C), Medicare Prescription Drug Benefit (Part D), Medicare cost plan, and Programs of All-Inclusive Care for the Elderly (PACE) regulations to implement changes related to Star Ratings, medication therapy management, marketing and communications, health equity, provider directories, coverage criteria, prior authorization, passive enrollment, network adequacy, identification of overpayments, formulary changes, and other programmatic areas. This proposed rule would also codify regulations implementing section 118 of Division CC of the Consolidated Appropriations Act, 2021, section 11404 of the Inflation Reduction Act, and includes a large number of provisions that would codify existing sub-regulatory guidance in the Part C, Part D, and PACE programs. This proposed rule would also amend the existing regulations for Medicare Parts A, B, C, and D regarding the standard for an identified overpayment.

DATES:

To be assured consideration, comments must be received at one of the addresses provided below, no later than 5 p.m. on February 13, 2023.

ADDRESSES:

In commenting, please refer to file code CMS-4201-P. Because of staff and resource limitations, we cannot accept comments by facsimile (FAX) transmission.

Comments, including mass comment submissions, must be submitted in one of the following three ways (please choose only one of the ways listed):

1.
Electronically.
You may submit electronic comments on this regulation to
http://www.regulations.gov.
Follow the “Submit a comment” instructions.

2.
By regular mail.
You may mail written comments to the following address ONLY: Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-4201-P, P.O. Box 8013, Baltimore, MD 21244.

Please allow sufficient time for mailed comments to be received before the close of the comment period.

3.
By express or overnight mail.
You may send written comments to the following address ONLY: Centers for Medicare & Medicaid Services,Department of Health and Human Services, Attention: CMS-4201-P, Mail Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.

For information on viewing public comments, see the beginning of the
SUPPLEMENTARY INFORMATION
section.

FOR FURTHER INFORMATION CONTACT:

Catherine Gardiner, (410) 786-7638—General Questions.

Katie Parker, (410) 786-0537—Parts A and B Overpayment Provision.

Carly Medosch, (410) 786-8633—Part C and Cost Plan Issues.

Lucia Patrone, (410) 786-8621- Part D Issues.

Nathan Jessen, (608) 520-1837—Part D Issues.

Kristy Nishimoto, (206) 615-2367—Beneficiary Enrollment and Appeals Issues.

Kelley Ordonio, (410) 786-3453—Parts C and D Payment Issues; Parts C and D Overpayment Provisions.

Hunter Coohill, (720) 853-2804—Enforcement Issues.

Lauren Brandow, (410) 786-9765—PACE Issues.

Melissa Seeley, (212) 616-2329—D-SNP Issues.

Alexander Baker, (202) 260-2048—Health IT Standards.

PartCandDStarRatings@cms.hhs.gov
—Parts C and D Star Ratings Issues.

SUPPLEMENTARY INFORMATION:

Inspection of Public Comments:
All comments received before the close of the comment period are available for viewing by the public, including any personally identifiable or confidential business information that is included in a comment. We post all comments received before the close of the comment period on the following website as soon as possible after they have been received:
http://www.regulations.gov.
Follow the search instructions on that website to view public comments.

Comments received timely will also be available for public inspection as they are received, generally beginning approximately 3 weeks after publication of a document, at the headquarters of the Centers for Medicare & Medicaid Services, 7500 Security Boulevard, Baltimore, Maryland 21244, Monday through Friday of each week from 8:30 a.m. to 4 p.m. To schedule an appointment to view public comments, phone 1-800-743-3951.

I. Executive Summary

A. Purpose

The primary purpose of this proposed rule is to amend the regulations for the Medicare Advantage (Part C), Medicare Cost Plan, and Medicare Prescription Drug Benefit (Part D) programs, and Programs of All-Inclusive Care for the Elderly (PACE). This proposed rule includes a number of new policies that would improve these programs as well as codify existing Part C and Part D sub-regulatory guidance. This proposed rule would also amend the existing regulations for Medicare Parts A, B, C, and D regarding the standard for an identified overpayment.

Additionally, this rule implements certain sections of the following Federal laws related to the Parts C and D programs:

• The Inflation Reduction Act (IRA) of 2022.

• The Consolidated Appropriations Act (CAA), 2021.

• The Bipartisan Budget Act (BBA) of 2018.

• The Substance Use-Disorder Prevention that Promotes Opioid Recovery and Treatment (SUPPORT) for Patients and Communities Act of 2018.

B. Summary of the Major Provisions

1. Medicare Advantage/Part C and Part D Prescription Drug Plan Quality Rating System (§§ 422.162, 422.164, 422.166, 422.260, 423.182, 423.184, and 423.186)

In this rule, we are proposing a health equity index (HEI) reward for the 2027 Star Ratings to further incentivize Parts C and D plans to focus on improving care for enrollees with social risk factors (SRFs); as part of this change, we are also proposing to remove the current reward factor. This proposal supports CMS efforts to ensure attainment of the highest level of health for all people. We are proposing to reduce the weight of

patient experience/complaints and access measures to further align efforts with other CMS quality programs and the current CMS Quality Strategy, as well as to better balance the contribution of the different types of measures in the Star Ratings program. We are also proposing to remove the Part C Diabetes Care—Kidney Disease Monitoring and the stand-alone Medication Reconciliation Post-discharge measures; add the Part C Kidney Health Evaluation for Patients with Diabetes and the updated Colorectal Cancer Screening and Care for Older Adults—Functional Status Assessment measures; add the Part D Concurrent Use of Opioids and Benzodiazepines, Polypharmacy Use of Multiple Anticholinergic Medications in Older Adults, and Polypharmacy Use of Multiple Central Nervous System Active Medications in Older Adults measures; and update the Part D Medication Adherence for Diabetes Medications, Medication Adherence for Hypertension (RAS Antagonists), and Medication Adherence for Cholesterol (Statins) measures. We are proposing to remove guardrails (that is, bi-directional caps that restrict upward and downward movement of a measure's cut points for the current year's measure-level Star Ratings compared to the prior year's measure-threshold specific cut points) when determining measure-specific-thresholds for non-Consumer Assessment of Healthcare Providers and Systems (CAHPS) measures; modify the Improvement Measure hold harmless policy; add a rule for the removal of Star Ratings measures; and remove the 60 percent rule that is part of the adjustment for extreme and uncontrollable circumstances (also called the disaster adjustment). We are also proposing a series of technical clarifications related to the disaster adjustment, Quality Bonus Payment (QBP) appeals processes, treatment of ratings for contracts after consolidation, weighting of measures with a substantive specification change, and addressing the codification error related to use of Tukey outlier deletion. These changes would apply (that is, data would be collected and performance measured) for the 2024 measurement period and the 2026 Star Ratings, except for the removal of the Part C Diabetes Care—Kidney Disease Monitoring measure, which would apply for the 2022 measurement period and the 2024 Star Ratings; the HEI reward, which would include data from the 2024 and 2025 measurement periods and apply for the 2027 Star Ratings; and the risk adjustment based on sociodemographic status characteristics to the three adherence measures, which would be implemented for the 2026 measurement period and the 2028 Star Ratings.

2. Medication Therapy Management (MTM) Program (§ 423.153)

Section 1860D-4(c)(2) of the Act requires all Part D sponsors to have an MTM program designed to assure, with respect to targeted beneficiaries, that covered Part D drugs are appropriately used to optimize therapeutic outcomes through improved medication use, and to reduce the risk of adverse events, including adverse drug interactions. Section 1860D-4(c)(2)(A)(ii) of the Act requires Part D sponsors to target those Part D enrollees who have multiple chronic diseases, are taking multiple Part D drugs, and are likely to meet a cost threshold for covered Part D drugs established by the Secretary. CMS codified the MTM targeting criteria at § 423.153(d)(2).

Part D sponsors currently have significant flexibility in establishing their MTM eligibility criteria within the established framework. CMS has observed decreasing eligibility rates and near-universal convergence among Part D sponsors to the most restrictive criteria currently permitted. Due to the increasing cost threshold and variations in the targeting criteria implemented by sponsors, Part D enrollees with more complex drug regimens who would benefit most from MTM services are often not eligible. In addition, enrollees with equivalent patient profiles may or may not be eligible for MTM depending on the criteria their plan requires.

After an extensive analysis to identify potential disparities in MTM program eligibility and access, CMS is proposing changes to the MTM targeting criteria at § 423.153(d)(2) to promote consistent, equitable, and expanded access to MTM services. The combination of proposed changes includes: (1) requiring plan sponsors to target all core chronic diseases identified by CMS, codifying the current 9 core chronic diseases
1

in regulation, and adding HIV/AIDS for a total of 10 core chronic diseases; (2) lowering the maximum number of covered Part D drugs a sponsor may require from 8 to 5 drugs and requiring sponsors to include all Part D maintenance drugs in their targeting criteria; and (3) revising the methodology for calculating the cost threshold ($4,935 in 2023) to be commensurate with the average annual cost of 5 generic drugs ($1,004 in 2020). The proposed changes would reduce eligibility gaps so that more Part D enrollees with complex drug regimens at increased risk of medication therapy problems would be eligible for MTM services. They would also better align MTM eligibility criteria with statutory goals to reduce medication errors and optimize therapeutic outcomes for beneficiaries with multiple chronic conditions and taking multiple Part D drugs, while maintaining a reasonable cost criterion.

1
The current core chronic diseases are: diabetes*, hypertension*, dyslipidemia*, chronic congestive heart failure*, Alzheimer's disease, end stage renal disease (ESRD), respiratory disease (including asthma*, chronic obstructive pulmonary disease (COPD), and other chronic lung disorders), bone disease-arthritis (osteoporosis, osteoarthritis, and rheumatoid arthritis), and mental health (including depression, schizophrenia, bipolar disorder, and other chronic/disabling mental health conditions). Enumerated in statute (*).

In this rule, we are also proposing to codify longstanding CMS guidance that a beneficiary is unable to accept an offer to participate in the comprehensive medication review (CMR) only when the beneficiary is cognitively impaired and cannot make decisions regarding their medical needs. We are also proposing other technical changes to clarify that the CMR must include an interactive consultation that is conducted in real-time, regardless of whether it is done in person or via telehealth.

3. Strengthening Translation and Accessible Format Requirements for Medicare Advantage, Part D, and D-SNP Enrollee Marketing and Communication Materials (§§ 422.2267 and 423.2267)

Sections §§ 422.2267(a)(2) and 423.2267(a)(2) require MA organizations, cost plans, and Part D sponsors to translate required materials into any non-English language that is the primary language of at least 5 percent of individuals in a plan benefit package service area. In addition, 45 CFR 92.102(b) requires plans to provide appropriate auxiliary aids and services, including interpreters and information in alternate formats, to individuals with impaired sensory, manual, or speaking skills, where necessary to afford such persons an equal opportunity to benefit from the service in question. However, CMS has learned from oversight activities, enrollee complaints, and stakeholder feedback that enrollees often must make a separate request each time they would like a material in an alternate language or need auxiliary aids or services.

In addition, an increasing number of dually eligible individuals are enrolled in managed care plans where the same plan covers both Medicare and Medicaid services. In some cases, Medicaid standards for Medicaid managed care plans require translation of plan materials into a language not

captured by the Medicare Advantage requirements.

We are proposing to specify in Medicare regulations that MA organizations, cost plans, and Part D sponsors must provide materials to enrollees on a
standing basis
in any non-English language that is the primary language of at least 5 percent of the individuals in a plan benefit package service area or accessible format using auxiliary aids and services upon receiving a request for the materials or otherwise learning of the enrollee's preferred language and/or need for an accessible format using auxiliary aids and services. We are also proposing at §§ 422.2267(a)(3) and 423.2267(a)(3) to extend this requirement to individualized plans of care for special needs plans. We are also proposing to require that fully integrated dual eligible special needs plans (FIDE SNPs), highly integrated dual eligible special needs plans (HIDE SNPs), and applicable integrated plans (AIPs) as defined at § 422.561, translate required materials into any languages required by the Medicare translation standard at § 422.2267(a) plus any additional languages required by the Medicaid translation standard as specified through their Medicaid capitated contracts.

4. Health Equity in Medicare Advantage (MA) (§§ 422.111 and 422.112)

CMS is working to achieve policy goals that advance health equity across its programs and pursue a comprehensive approach to advancing health equity for all, including those who have been historically underserved, marginalized, and adversely affected by persistent poverty and inequality.
2

To that end, we are proposing the following regulatory updates.

2

https://www.whitehouse.gov/briefing-room/presidential-actions/2021/01/20/executive-order-advancing-racial-equity-and-support-for-underserved-communities-through-the-federal-government/
.

First, current regulations require MA organizations to ensure that services are provided in a culturally competent manner. The regulation provides examples of populations that may require consideration specific to their needs. In this proposed rule, we propose to further clarify the broad application of our policy. Specifically, we propose to amend the list of populations to include people: (1) with limited English proficiency or reading skills; (2) of ethnic, cultural, racial, or religious minorities; (3) with disabilities; (4) who identify as lesbian, gay, bisexual, or other diverse sexual orientations; (5) who identify as transgender, nonbinary, and other diverse gender identities, or people who were born intersex; (6) who live in rural areas and other areas with high levels of deprivation; and (7) otherwise adversely affected by persistent poverty or inequality.

Next, CMS currently provides best practices for organizations to use in developing their provider directories, including incorporating non-English languages spoken by each provider and provider/location accessibility for people with physical disabilities. In this rule, we propose to codify these best practices by requiring organizations to include providers' cultural and linguistic capabilities (including American Sign Language, ASL) in their provider directories. If finalized, this change would improve the quality and usability of provider directories, particularly for non-English speakers, limited English proficient individuals, and enrollees who use ASL. We are also proposing to require organizations to identify certain providers waived to treat patients with medications for opioid use disorder (MOUD) in their provider directories.

In addition, as the use of telehealth becomes more prevalent, there is evidence of disparities in telehealth access due in part to low digital health literacy, especially among populations who already experience health disparities. Low digital health literacy is one of the most significant obstacles in achieving telehealth equity, and many older adults with low digital health literacy experience gaps in access to the health care they need. This is concerning for the MA program because its enrollee population includes older adults who are age 65 or older, which is why we are proposing to address the issue by requiring MA organizations to develop and maintain procedures to identify and offer digital health education to enrollees with low digital health literacy to assist with accessing any medically necessary covered telehealth benefits.

Finally, MA organizations' existing quality improvement (QI) programs are an optimal vehicle to develop and implement strategies and policies designed to reduce disparities in health and health care, and advance equity in the health and health care of MA enrollee populations, especially those that are underserved. To support these efforts, we propose to require MA organizations to incorporate one or more activities into their overall QI program that reduce disparities in health and health care among their enrollees. MA organizations may implement activities such as improving communication, developing and using linguistically and culturally appropriate materials (to distribute to enrollees or use in communicating with enrollees), hiring bilingual staff, community outreach, or similar activities. We believe adopting this proposed requirement for MA organizations as part of their required QI programs will align with health equity efforts across CMS policies and programs.

5. Utilization Management Requirements: Clarifications of Coverage Criteria for Basic Benefits and Use of Prior Authorization, Additional Continuity of Care Requirements, and Annual Review of Utilization Management Tools (§§ 422.101, 422.112, 422.137, 422.138, and 422.202)

In recent years, CMS has received numerous inquiries regarding MA organizations' use of prior authorization and its effect on beneficiary access to care. We are proposing several regulatory changes to address these concerns regarding prior authorization. First, we propose that prior authorization policies for coordinated care plans may only be used to confirm the presence of diagnoses or other medical criteria and/or ensure that an item or service is medically necessary based on standards specified in this rule. Second, we propose that an approval granted through prior authorization processes be valid for the duration of the approved course of treatment and that plans provide a minimum 90-day transition period when an enrollee who is currently undergoing treatment switches to a new MA plan. Third, we propose that MA plans must comply with national coverage determinations (NCD), local coverage determinations (LCD), and general coverage and benefit conditions included in Traditional Medicare statutes and regulations as interpreted by CMS. Further, we propose that MA plans cannot deny coverage of a Medicare covered item or service based on internal, proprietary, or external clinical criteria not found in Traditional Medicare coverage policies. We propose that when there is no applicable coverage criteria in Medicare statute, regulation, NCD, or LCD, MA organizations may create internal coverage criteria that are based on current evidence in widely used treatment guidelines or clinical literature that is made publicly available to CMS, enrollees, and providers.

Finally, to ensure prior authorization is being used appropriately, we propose to require that all MA plans establish a Utilization Management Committee to review all utilization management, including prior authorization, policies

annually and ensure they are consistent with current, traditional Medicare's national and local coverage decisions and guidelines. These proposed changes will help ensure enrollees have consistent access to medically necessary care, without unreasonable barriers or interruptions.

6. Medicare Advantage (MA) and Part D Marketing (Subpart V of Parts 422 and 423)

In accordance with our statutory authority to review marketing materials and application forms and to develop marketing standards under sections 1851(h), 1851(j), 1860D-1(b)(1)(vi), and 1860D-4(l) of the Act, as well as the statutory requirements in sections 1852(c) and 1860D-4(a) of the Act requiring MA organizations and Part D sponsors disclose specific types of information to enrollees, we are proposing several changes to 42 CFR parts 422 and 423, subpart V, to strengthen beneficiary protections and improve MA and Part D marketing. These changes include: notifying enrollees annually, in writing, of the ability to opt out of phone calls regarding MA and Part D plan business; requiring agents to explain the effect of an enrollee's enrollment choice on their current coverage whenever the enrollee makes an enrollment decision; requiring agents to share key pre-enrollment information with potential enrollees when processing telephonic enrollments; simplifying plan comparisons by requiring medical benefits be in a specific order and listed at the top of a plan's Summary of Benefits; limiting the time that a sales agent can call a potential enrollee to no more than six months following the date that the enrollee first asked for information; limiting the requirement to record calls between third-party marketing organizations (TPMOs) and beneficiaries to marketing (sales) and enrollment calls; clarifying that the prohibition on door-to-door contact without a prior appointment still applies after collection of a business reply card (BRC) or scope of appointment (SOA); prohibiting marketing of benefits in a service area where those benefits are not available, prohibiting the marketing of information about savings available to potential enrollees that are based on a comparison of typical expenses borne by uninsured individuals, unpaid costs of dually eligible beneficiaries, or other unrealized costs of a Medicare beneficiary; requiring TPMOs to list or mention all of the MA organization or Part D sponsors that they sell; requiring MA organizations and Part D sponsors to have an oversight plan that monitors agent/broker activities and reports agent/broker non-compliance to CMS; modifying the TPMO disclaimer to add SHIPs as an option for beneficiaries to obtain additional help; placing discrete limits around the use of the Medicare name, logo, and Medicare card; prohibit the use of superlatives (for example, words like “best” or “most”) in marketing unless the material provides documentation to support the statement, and the documentation is for the current or prior year; and, clarifying the requirement to record calls between TPMOs and beneficiaries, such that it is clear that the requirement includes virtual connections such as video conferencing and other virtual telepresence methods.

7. Behavioral Health in Medicare Advantage (MA) (§§ 422.112 and 422.116)

As part of the Medicare Program; Contract Year 2023 Policy and Technical Changes to the Medicare Advantage and Medicare Prescription Drug Benefit Programs Proposed Rule, which appeared in the January 12, 2022
Federal Register
(87 FR 1842) (hereinafter referred to as the January 2022 proposed rule), we solicited comments from stakeholders regarding challenges in building MA behavioral health networks and opportunities for improving access to services. Stakeholders commented on the importance of ensuring adequate access to behavioral health services for enrollees and suggested expanding network adequacy requirements to include additional behavioral health specialty types.

To strengthen our network adequacy requirements and reaffirm MA organizations' responsibilities to provide behavioral health services, we propose to: (1) add Clinical Psychology Licensed Clinical Social Worker, and Prescribers of Medication for Opioid Use Disorder as specialty types that will be evaluated as part of the network adequacy reviews under § 422.116, and make these new specialty types eligible for the 10-percentage point telehealth credit as allowed under § 422.116(d)(5); (2) amend our general access to services standards in § 422.112 to include explicitly behavioral health services; (3) codify, from existing guidance on reasonable wait times for primary care visits, standards for wait times that apply to both primary care and behavioral health services; (4) clarify that some behavioral health services may qualify as emergency services and, therefore, must not be subject to prior authorization; and (5) extend current requirements for MA organizations to establish programs to coordinate covered services with community and social services to behavioral health services programs to close equity gaps in treatment between physical health and behavioral health.

8. Enrollee Notification Requirements for Medicare Advantage (MA) Provider Contract Terminations (§§ 422.111 and 422.2267)

CMS requires notification to MA enrollees when a provider network participation contract terminates. CMS is proposing to revise § 422.111(e) by establishing specific enrollee notification requirements for no-cause and for-cause provider contract terminations and adding specific and more stringent enrollee notification requirements when primary care and behavioral health provider contract terminations occur. CMS is also proposing to revise § 422.2267(e)(12) to specify the requirements for the content of the notification to enrollees about a provider contract termination.

9. Transitional Coverage and Retroactive Medicare Part D Coverage for Certain Low-Income Beneficiaries Through the Limited Income Newly Eligible Transition (LI NET) Program (§§ 423.2500-423.2536)

CMS has operated the LI NET demonstration since 2010. The LI NET demonstration provides transitional, point-of-sale coverage for low-income beneficiaries who demonstrate an immediate need for prescriptions, but who have not yet enrolled in a Part D plan, or whose enrollment is not yet effective. LI NET also provides retroactive and/or temporary prospective coverage for beneficiaries determined to be eligible for the Part D low-income subsidy (LIS) by the Social Security Administration (SSA) or a State. In this proposed rule, we propose regulations to make the LI NET program a permanent part of Medicare Part D, as required by the Consolidated Appropriations Act, 2021 (CAA).

10. Medicare Parts A, B, C, and D Overpayment Provisions of the Affordable Care Act (§§ 401.305(a)(2), 422.326(c), and 423.360(c))

The proposed regulatory provisions would amend the existing regulations for Medicare Parts A, B, C, and D regarding the standard for an “identified overpayment” and will align the regulations with the statutory language in section 1128J(d)(4)(A) of the Act, which provides that the terms “knowing” and “knowingly” have the meaning given those terms in the False

Claims Act at 31 U.S.C. 3729(b)(1)(A). Specifically, in this regulation we propose to remove the existing “reasonable diligence” standard and adopt by reference the False Claims Act definition of “knowing” and “knowingly” as set forth at 31 U.S.C. 3729(b)(1)(A). Under the proposed rule, an MA organization, Part D sponsor, provider or supplier has identified an overpayment if it has actual knowledge of the existence of the overpayment, or acts in reckless disregard or deliberate ignorance of the overpayment.

11. Changes to an Approved Part D Formulary—Immediate Substitutions (§§ 423.4, 423.100, 423.104, 423.120, and 423.128)

Current regulations permit Part D sponsors to immediately remove from the formulary a brand name drug and substitute its newly released generic equivalent. Part D sponsors meeting the requirements can provide notice of specific changes, including direct notice to affected beneficiaries, after they take place; do not need to provide a transition supply of the substituted drug; and can make these changes at any time including in advance of the plan year. Consistent with these requirements, we propose to permit Part D sponsors to immediately substitute: (i) a new interchangeable biological product for its corresponding reference product; (ii) a new unbranded biological product for its corresponding brand name biological product; and (iii) a new authorized generic for its corresponding brand name equivalent.

12. Expanding Eligibility for Low-Income Subsidies (LIS) Under Part D of the Medicare Program (§§ 423.773 and 423.780)

Section 11404 of the IRA amended section 1860D-14 of the Act to expand eligibility for the full LIS to individuals with incomes up to 150 percent of the Federal poverty level (FPL) beginning on or after January 1, 2024. In addition, the IRA allows for individuals to qualify for the full subsidy based on the higher resource requirements currently applicable to the partial LIS group. This change will provide the full LIS subsidy for those who currently qualify for the partial subsidy, and we are proposing to implement this change in this regulation.

C. Summary of Costs and Benefits

BILLING CODE 4120-01-P

EP27DE22.000

EP27DE22.001

EP27DE22.002

EP27DE22.003

EP27DE22.004

EP27DE22.005

EP27DE22.006

EP27DE22.007

BILLING CODE 4120-01-C
II. Implementation of Certain Provisions of the Bipartisan Budget Act of 2018, the Consolidated Appropriations Act, 2021, and the Inflation Reduction Act of 2022

A. Applying D-SNP Look-Alike Requirements to Plan Benefit Package Segments (§§ 422.503(e), 422.504, 422.510 and 422.514)

In the final rule titled “Medicare Program; Contract Year 2021 Policy and Technical Changes to the Medicare Advantage Program, Medicare Prescription Drug Benefit Program, and Medicare Cost Plan Program” which appeared in the
Federal Register
on June 2, 2020 (85 FR 33796) (hereinafter referred to as the June 2020 final rule), CMS finalized the contracting limitations for D-SNP look-alikes at § 422.514(d) and the associated authority and procedures for transitioning enrollees from a D-SNP look-alike at § 422.514(e). For plan year 2022 and subsequent years, as provided in § 422.514(d)(1), CMS will not enter into a contract for a new non-SNP MA plan that projects, in its bid submitted under § 422.254, that 80 percent or more of the plan's total enrollment are enrollees entitled to medical assistance under a State plan under Title XIX. For plan year 2023 and subsequent years, as provided in § 422.514(d)(2), CMS will not renew a contract with a non-SNP MA plan that has actual enrollment, as determined by CMS using the January enrollment of the current year, consisting of 80 percent or more of enrollees who are entitled to medical assistance under a State plan under Title XIX, unless the MA plan has been active for less than 1 year and has enrollment of 200 or fewer individuals at the time of such determination.

We established these contract limitations to address the proliferation and growth of D-SNP look-alikes, which raised concerns related to effective implementation of requirements for D-SNPs established by section 1859 of the Act (including amendments made by the Medicare Improvements for Patients and Providers Act of 2008 (Pub. L. 110-275) and the Bipartisan Budget Act of 2018 (Pub. L. 115-123)). We adopted the regulation to ensure full implementation of requirements for D-SNPs, such as contracts with State Medicaid agencies; a minimum integration of Medicare and Medicaid benefits; care coordination through health risk assessments (HRAs); evidence-based models of care. In addition, we noted how limiting these D-SNP look-alikes would address beneficiary confusion stemming from misleading marketing practices by brokers and agents that misrepresent to dually eligible individuals the characteristics of D-SNP look-alikes. For a more detailed discussion of D-SNP look-alikes and their impact on the implementation of D-SNP Medicare and Medicaid integration, we direct readers to the June 2020 final rule (85 FR 33805 through 33820) and the Medicare and Medicaid Programs; Contract Year 2021 and 2022 Policy and Technical Changes to the Medicare Advantage Program, Medicare Prescription Drug Benefit Program, Medicaid Program, Medicare Cost Plan Program, and Programs of All-Inclusive Care for the Elderly (85 FR 9018 through 9021) (also known as the February 2020 proposed rule). We are proposing amendments to close unforeseen loopholes in the scope of the regulation adopted to prohibit D-SNP look-alikes.

1. Applying Contracting Limitations for D-SNP Look-Alikes to MA Plan Segments

As written at § 422.514(d) and (e), the contracting limitations for D-SNP look-alikes are based on analysis at the MA plan level. Section 1854(h) of the Act authorizes MA organizations to segment an MA plan and apply the uniformity requirements for MA plans at the segment level, provided that the segments are comprised of one or more MA payment areas. As implemented in §§ 422.2 (defining “MA plan”), 422.100(d), 422.254, and 422.262, MA plans may include multiple segments in an MA plan in which different benefit designs, cost-sharing, and premiums are available; bids are submitted at the segment level if an MA plan is segmented and evaluation of compliance with MA requirements is done at the segment level where appropriate. See § 422.100(f)(6) providing for evaluation of cost-sharing at the segment level for segmented plans. In effect, each segment of an MA plan is like a plan itself. We discussed in the Medicare Program; Medicare+Choice Program (65 FR 40170, 40204 through 40205) final rule, which appeared in the
Federal Register
on June 29, 2000 (also known as the June 2000 final rule) how the authority in section 1854(h) of the Act for an MA organization to segment an MA plan has practical implications that are similar to offering multiple plans. One or more segments can be part of the same MA plan even though the Medicare Part C benefits, cost-sharing, premiums, and marketing materials can differ. For example, MA plan benefit package H1234-567 could offer multiple segments distinguished by three additional digits, such as H1234-567-001, H1234-567-002, and H1234-567-003. Since adopting § 422.514(d), we have seen MA plans where a specific segment looks like a D-SNP look-alike and would be subject to the contracting prohibitions in § 422.514(d) if the segment were treated as an MA plan. As finalized, § 422.514(d) does not clearly apply to a segment within an MA plan. However, we believe that by applying the D-SNP look-alike contracting limitations only at the MA plan level without applying it to segments of plans, our existing regulation has an unintended and unforeseen loophole through which D-SNP look-alikes could persist, contrary to the stated objectives in our prior rulemaking.

Based on January 2022 Monthly Membership Report (MMR) data, we identified 47 non-SNP MA plans that meet the criteria outlined at § 422.514(d)(2) when we performed our analysis at the plan level. If we were to apply the § 422.514(d)(2) criteria at the MA plan segment level, segments of three additional non-SNP MA plans would be identified as D-SNP look-alikes. The segments in those three plans collectively have approximately 3,000 enrollees. While the number of non-SNP MA plans at the segment level is currently small, this number could grow in the future and provide an opportunity for MA organizations to circumvent the D-SNP look-alike contracting limitations at § 422.514(d). For example, in our analysis of proposed D-SNP look-alike transitions for contract year 2023, two D-SNP look-alikes in contract year 2022 are proposing to transition a combined total of approximately 7,800 D-SNP look-alike enrollees into two new non-SNP MA plan segments, which could create two new D-SNP look-alike segments for contract year 2023.

We propose adding a new paragraph at 42 CFR 422.514(g) to provide that § 422.514(d) through (f) apply to segments of the MA plan in the same way that those provisions apply to MA plans. As a result, CMS will not contract with or renew a contract with a plan segment where the MA plan or segment is not a D-SNP and the enrollment thresholds in paragraph (d)(1) or (d)(2) are met. This proposal, to treat a segment of an MA plan as an MA plan, would be consistent with CMS' annual review of MA plan bids and Medicare cost-sharing, in which each MA plan segment submits a separate bid pricing tool and plan benefit package like an unsegmented MA plan and CMS separately evaluates these submissions for compliance with MA requirements.

As discussed in the June 2020 final rule, CMS implements the contracting prohibition in § 422.514 at the plan level. Where an MA plan is one of several offered under a single MA contract and the MA organization does not voluntarily non-renew the D-SNP look-alike, CMS will sever the D-SNP look-alike from the overall contract using its authority under § 422.503(e) to sever a specific MA plan from a contract and terminate the deemed contract for the look-alike plan (85 FR 33812). However, CMS does not currently have clear regulatory authority to sever a segment from an MA plan to terminate a contract that has only a segment of an MA plan. CMS adopted the severability regulation at § 422.503(e) in the Medicare Program; Establishment of the Medicare+Choice Program interim final rule (63 FR 35103, hereafter known as the June 1998 interim final rule) as part of implementing the statutory authority for MA contracts to cover more than one MA plan. Without amending § 422.503(e), CMS would need to sever the entire MA plan that has the D-SNP look-alike segment such that other segments in that MA plan would be subject to the contracting prohibition and not renewed under § 422.514(d) as proposed to be amended here if the MA organization failed to comply with § 422.514(d). Instead, we propose to amend § 422.503(e) to allow for CMS to sever a segment from an MA plan and allow the remaining segments of that MA plan to continue along with any other MA plans offered under the same contract. We propose to rely on our authority to adopt MA standards under section 1856(b)(1) of the Act and our authority to adopt additional contract terms when necessary and appropriate, and not inconsistent with the MA statute, under section 1857(e)(1) of the Act. Our primary impetus for this proposal relates to D-SNP look-alikes, but our proposal at § 422.503(e) is not specific to D-SNP look-alikes; because each segment of an MA plan is like a plan itself, we believe severability should apply similarly at the plan and segment level. We also propose to amend § 422.504(a)(19) to adopt a new contract term that MA organizations agree not to segment an MA plan in a way that results in a D-SNP look-alike. In conjunction with the proposed amendments to § 422.514(g) to apply the prohibitions on contracting with D-SNP look-alikes to segments of an MA plan, the amendments to § 422.503(e) would allow CMS to eliminate existing D-SNP look-alike segments and the amendments to § 422.504(a)(19) would allow CMS to prevent new D-SNP look-alikes.

2. Applying Contracting Limitations for D-SNP Look-Alikes to Existing MA Plans

We identified a second loophole during our analysis of contract year 2023 MA plan bids to identify any new MA plans that meet the contract limitation at § 422.514(d)(1). An existing (that is, renewing) MA plan that did not meet the criteria in § 422.514(d)(2) (using January 2022 MMR data as provided in paragraph (e)(3)) projected in its contract year 2023 bid that the MA plan would have 80 percent or higher enrollment of dually eligible individuals in 2023. Because this MA plan is not a new MA plan for contract year 2023, the contract prohibition in § 422.514(d)(1) did not apply. To prohibit similar situations in the future, we propose to amend § 422.514(d)(1) to apply it to both new and existing (that is, renewing) MA plans that are not D-SNPs and submit bids with projected enrollment of 80 percent or more enrollees of the plan's total enrollment that are dually eligible for Medicare and Medicaid. We propose to revise paragraph (d)(1) to provide that CMS does not enter into or renew an MA contract for plan year 2024 and subsequent years when the criteria in paragraphs (d)(1)(i) and (ii) are met. We are proposing to begin this prohibition with 2024 because we expect that 2024 will be the first plan year after the final rule adopting this proposal. Pending finalization of this proposal, § 422.514(d)(1) will continue to prohibit contracts with new MA plans that meet the criteria. As contracts for 2022 and 2023 have been awarded as of the time this proposed rule is issued, the earliest our proposed revision to expand the scope of § 422.514(d)(1) can apply is 2024.

3. Contract Limitations for D-SNP Look-Alikes as a Basis for MA Contract Termination (§ 422.510(a)(4))

Finally, we propose an amendment to § 422.510(a)(4), which outlines the bases for termination of an MA contract. Specifically, we propose to add language at § 422.510(a)(4) to add a new paragraph (a)(4)(xvi) that permits CMS to terminate an MA contract when the MA organization meets the criteria in § 422.514(d)(1) or (d)(2). This proposed amendment is consistent with how § 422.514(d) provides that CMS will not enter into or renew an MA contract in certain circumstances. In our view, § 422.514(d) is sufficient authority for the non-renewal, that is termination, of MA contracts when § 422.514(d) applies. However, we believe that adopting a specific provision in § 422.510(a)(4) will avoid any inadvertent ambiguity on this topic and make it clear that the procedures outlined in § 422.510, including notices, timeframes, and appeal rights, apply when CMS does not renew an MA contract based on application of § 422.514(d).

B. Part D Special Enrollment Period Change Based on CAA Medicare Enrollment Changes (§ 423.38)

Section 101 of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) (Pub. L 108-173) established a Part D—Voluntary Prescription Drug Benefit program for Medicare-eligible individuals. The MMA added section 1860D-1(b)(3)(C) of the Act, which authorized the Secretary to establish Part D special enrollment periods (SEP) for Medicare-eligible individuals to enroll in a Part D plan based on exceptional circumstances—that is, an individual may elect a plan or change his or her current plan election when the individual meets an exceptional condition as determined by the Secretary.

The SEPs for exceptional conditions were historically included in our manual instructions rather than through regulation. In 2020, we codified a number of SEPs that we had adopted and implemented through subregulatory guidance as exceptional circumstance SEPs, including the SEP for Individuals Who Enroll in Part B During the Part B General Enrollment Period (GEP) (85 FR 33909). This SEP, as codified at § 423.38(c)(16), allowed individuals who are not entitled to premium-free Part A and who enroll in Part B during the GEP for Part B (January-March) to enroll in a Part D plan. This SEP begins April 1st and ends June 30th, with a Part D plan enrollment effective date of July 1st. This SEP effective date aligns with the entitlement date for Part B for individuals who enroll in Part B during the GEP.

Currently, when an individual enrolls in Part B during the GEP, their Part B enrollment entitlement date is July 1st, regardless of when during the GEP they enrolled. Division CC, title I, subtitle B, section 120 of the Consolidated Appropriations Act, 2021 (CAA) Pub. L 116-260 modified section 1838(a)(2) of the Act, to address the beginning of the entitlement for individuals enrolling during their GEP pursuant to section 1837(e) of the Act. As added by the CAA, section 1838(a)(2)(D)(ii) of the Act requires that, for an individual who enrolls in Part B during the GEP on or

after January 1, 2023, entitlement begins the first day of the month following the month in which the individual enrolled. For example, if an individual enrolls in Part B in February 2023 (during the GEP), their Part B coverage will begin on March 1st.

Based on Medicare enrollment statutory changes made by the CAA described previously, we are proposing to revise the start and end date for the SEP for Individuals Who Enroll in Part B During the Part B GEP to align with the Part B entitlement dates for someone who enrolls in Part B using the GEP that starts January 1, 2023. Accordingly, we are also proposing to revise the effective date of the individual's Part D plan enrollment, which is always July 1st under the current parameters of this Part D SEP. That is, we are proposing to modify § 423.38(c)(16) to provide that on or after January 1, 2023, an individual who is not entitled to premium-free Part A and who enrolls in Part B during the GEP is eligible to use the SEP for Individuals Who Enroll in Part B During the Part B GEP to request enrollment in a Part D plan, and that this SEP will begin when the individual submits the application for Part B, and will continue for the first 2 months of enrollment in Part B. Further, we propose to modify § 438.38(c)(16) to provide that where an individual uses this Part D SEP to request enrollment in a Part D plan, the Part D plan enrollment would be effective the first of the month following the month the Part D plan sponsor receives the enrollment request. For example, an individual who enrolls in Part B on February 10th for a Part B entitlement date of March 1st can use the Part D SEP to request enrollment in a Part D plan during the period from February 10th to April 30th. If the individual submitted an enrollment request for a Part D plan on February 10th and the enrollment is accepted, the effective date of their Part D coverage would be March 1st. Note that an individual's Part D enrollment effective date cannot be prior to the Part A and/or Part B entitlement date, and the individual must also meet other Part D plan eligibility criteria as described in § 423.30(a). Per current practice, the Part D plan would need to confirm that the individual had enrolled in Part B (or Part B and premium Part A) prior to the individual's Part D enrollment effective date. The Social Security Administration (SSA) will have to first process the individual's Part B application and submit that information into SSA systems, which, in turn, would be populated in the CMS enrollment systems, for a Part D plan to have access to that entitlement information.

We expect this proposed change in enrollment and effective dates using this Part D SEP would simplify the enrollment process and reduce the potential for gaps in prescription drug coverage. Also, we believe it will be easier for beneficiaries to understand the effective date of their Medicare coverage using this Part D SEP, as we are proposing that the Part D effective date will be the first of the month following the month the beneficiary submits an enrollment request, which aligns with most Part D enrollment and SEP timeframes. Although the current SEP for Individuals Who Enroll in Part B During the Part B GEP lasts for 3 calendar months, and the proposed timeframe for use of this SEP would be shorter, the proposed timeframe aligns with most of our other Part D SEPs. In addition, this proposed timeframe would provide the individual the opportunity for a Part D plan enrollment effective date that is within 63 days of the Part B entitlement. For individuals who have maintained creditable drug coverage prior to enrolling in Part B, this proposed SEP timeframe will help to ensure that an individual would not incur a Part D late enrollment penalty (LEP). For example, if an individual enrolls in Part B in February and is entitled to Part B effective March 1st, they could enroll in a Part D plan for an effective date of March 1st, April 1st or May 1st, depending on whether the Part D plan sponsor received the enrollment request in February, March or April, respectively. Any of these Part D plan effective dates would provide Part D coverage to an individual who maintained creditable coverage prior to enrolling in Part B in February within the 63-day timeframe to avoid the penalty. Proposing this exceptional condition SEP also supports President Biden's April 5, 2022 Executive Order on Continuing to Strengthen Americans' Access to Affordable, Quality Health Coverage, which, among other things, requires agencies to examine policies or practices that make it easier for all consumers to enroll in and retain coverage, understand their coverage options, and select appropriate coverage, and also examine policies or practices that strengthen benefits and improve access to healthcare providers.

This proposal would revise the timeframes for use of the Part D SEP described in § 423.38(c)(16) based on the change in effective date for GEP enrollments made by section 120 of the CAA. These proposed revisions are needed to align the timeframe for use of this Part D SEP based on new Part B GEP enrollment effective date parameters.

Because an individual may elect a Part D plan only during an election period, Medicare Part D sponsors already have procedures in place to determine the election period(s) for which an applicant is eligible. Our proposal would not add to existing enrollment processes, so we believe any burden associated with this aspect of enrollment processing would remain unchanged from the current practice, and would not impose any new requirements or burden.

All information impacts of this provision have already been accounted for under OMB control number 0938-1378 (CMS-10718). We do not believe the proposed changes will adversely impact individuals requesting enrollment in Medicare plans, the plans themselves, or their current enrollees. Similarly, we do not believe the proposed changes would have any impact to the Medicare Trust Funds.

C. Alignment of Part C and Part D Special Enrollment Periods With Medicare Exceptional Condition Enrollment (§§ 422.62 and 423.38)

Section 1851(e)(4)(D) of the Act authorizes the Secretary to create special enrollment periods (SEPs) for an individual to disenroll from an MA plan or elect another MA plan if the individual meets an exceptional condition provided by the Secretary. This authority was originally codified at § 422.62(b)(4) in the June 1998 interim final rule as a general SEP for CMS to apply on an ad hoc basis. (63 FR 35073)

As noted previously, section 1860D-1(b)(3)(C) of the Act authorizes the Secretary to establish Part D SEPs for Medicare-eligible individuals to enroll in a Part D plan if they meet certain exceptional circumstances. This authority was originally codified at § 423.38(c)(8)(ii) (70 FR 4529). The MMA also added section 1860D-1(b)(1)(B) of the Act which provides that in adopting the Part D enrollment process, the Secretary “shall use rules similar to (and coordinated with) the rules for enrollment, disenrollment, termination, and change of enrollment with an MA-PD plan under the following provisions of section 1851.”

Historically, we had included in our regulations those MA and Part D SEPs that have been specifically named in the statute, and established SEPs for exceptional conditions in our subregulatory guidance. In the June 2020 final rule, we codified, at §§ 422.62(b) and 423.38(c), respectively, the MA and Part D SEPs that we had adopted and implemented through

subregulatory guidance as exceptional condition SEPs (85 FR 33796). Codifying these SEPs provided transparency and stability to the MA and Part D programs by ensuring that these SEPs are known to plans and beneficiaries.

As required by section 1851(a)(3) of the Act (for the MA program) and section 1860D-1(a)(3)(A) of the Act (for the Part D program) and described in §§ 422.50(a)(1) and 423.30(a)(1)(i), eligibility for MA or Part D plan enrollment requires that an individual first have Medicare Parts A and B for MA eligibility and either Part A or B for Part D eligibility. Individuals who are entitled to premium-free Part A are generally auto-enrolled when they are first eligible, if they are already receiving retirement or disability benefits from the SSA or Railroad Retirement Board, or they may submit an application to enroll in premium-free Part A at any time after meeting the requirements for entitlement. Under normal conditions, individuals who want to enroll in premium Part A, Part B, or both, must submit a timely enrollment request during their Initial Enrollment Period (IEP), the GEP, or an existing SEP for which they are eligible. Those who fail to enroll during their IEP may face a lengthy penalty for late enrollment (life-long for Part B) and a potential gap in coverage. Prior to the enactment of the Consolidated Appropriations Act, 2021 (CAA) (Pub. L 116-260), CMS did not have broad authority to create SEPs based on exceptional conditions for enrollment into Medicare Parts A and B. However, Division CC, title I, subtitle B, Section 120 of the CAA established section 1837(m) of the Act to authorize the Secretary to establish Part B SEPs for individuals who are eligible to enroll in Medicare and meet such exceptional conditions as the Secretary provides. Per section 1818(c) of the Act, the provisions of section 1837 of the Act, excluding subsection (f) thereof, applies to the premium Part A program. This authority to adopt exceptional conditions SEPs for premium Part A and Part B is effective January 1, 2023. The ability to grant SEPs for exceptional conditions is an important tool that will allow CMS to provide relief to individuals who missed an opportunity to enroll in Medicare due to circumstances that were outside of their control, ensure continuous health coverage, and avoid late enrollment penalties on the premium Part A or Part B premiums. CMS finalized new exceptional condition SEPs under section 1837(m) of the Act in 42 CFR 406.27 and 407.23 for Medicare parts A and B, respectively, in a final rule that was published in the
Federal Register
on November 3, 2022, titled “Medicare Program; Implementing Certain Provisions of the Consolidated Appropriations Act, 2021 and Other Revisions to Medicare Enrollment and Eligibility Rules” (87 FR 66454). These SEPs would be available to individuals who have missed an enrollment period due to an exceptional condition that is specified in the final rule. Specifically, individuals who miss an IEP, GEP, or another SEP, such as the Group Health Plan SEP, due to a specified exceptional condition, would be eligible to enroll in Medicare premium Part A or Part B using the new SEPs.

Based on Medicare enrollment changes made by the CAA described previously, we are proposing to add corresponding exceptional condition SEPs for MA and Part D enrollment, as authorized under sections 1851(e)(4)(D) and 1860D-1(b)(3)(C) of the Act, to align with the new Medicare premium Part A and B exceptional condition SEPs that CMS has finalized in 42 CFR 406.27 and 407.23. These new Medicare Part C and D SEPs would be based on an individual's use of a Medicare premium Part A or Part B exceptional conditions SEP. That is, individuals who use an exceptional condition SEP to enroll in premium Part A and/or Part B will be provided an opportunity to enroll in a MA or Part D plan, provided that the individual meets applicable eligibility requirements for the plan.

We are proposing at § 422.62(b) to redesignate current paragraphs (26) as (27) and add a new paragraph (26) to provide an SEP for individuals to enroll in a MA plan or MA plan that includes Part D benefits (MA-PD plan), when they use a Medicare exceptional condition SEP to enroll in premium Part A and/or Part B. We are also proposing at § 423.38(c) to redesignate current paragraph (34) as (35) and add new paragraph (34) to provide an SEP for individuals to enroll in a stand-alone Part D prescription drug plan (PDP) when they use a Medicare exceptional condition SEP to enroll in premium Part A or Part B.

The proposed new MA SEP would begin when the individual submits the application for premium Part A and Part B, or only Part B, and would continue for the first 2 months of enrollment in Part A (premium or premium-free) and Part B. Similarly, the proposed new Part D SEP would begin when the individual submits their premium Part A or Part B application and would continue for the first 2 months of enrollment in premium Part A or Part B. The MA or Part D plan enrollment would be effective the first of the month following the month the MA or Part D plan receives the enrollment request. For example, an individual who enrolls in premium Part A or Part B using an exceptional conditions SEP, as codified in 42 CFR 406.27 and 407.23, on July 10th for an entitlement ate of August 1st, can use the MA or Part D exceptional circumstance SEP to request enrollment in a MA or Part D plan during the period from July 10th to September 30th. If the individual submitted an enrollment request for an MA or Part D plan on July 10th and the enrollment is accepted, the effective date of their MA or Part D coverage would be August 1st.

An individual's MA or Part D plan enrollment effective date cannot be prior to the Part A and/or Part B enrollment date, and the individual must also meet other MA or Part D plan eligibility criteria as described in §§ 422.50(a) or 423.30(a), respectively, in order to use the new MA or Part D SEP we are proposing. Per current practice, the MA or Part D plan would need to confirm that the individual had enrolled in premium Part A and/or Part B, as applicable, using one of the new SEPs for exceptional conditions prior to the individual's MA or Part D enrollment effective date. The SSA will have to first process the individual's premium Part A and/or Part B application and submit that information into SSA systems, which, in turn, would be populated in the CMS enrollment systems, for an MA or Part D plan to have access to that enrollment information.

Providing an opportunity for Part D enrollment at the time of Medicare premium Part A or Part B enrollment using an exceptional condition SEP will help ensure that an individual will have timely access to Part D drugs, within the timeframe of 63 days
3

established in regulation at § 423.46(a), to prevent a Part D late enrollment penalty from being assessed. For example, if an individual enrolls in premium Part A or Part B using an exceptional condition SEP in July and is entitled to premium Part A and/or Part B effective August 1st, they could enroll in a Part D plan

for an effective date of August 1st, September 1st, or October 1st, depending on whether the Part D plan sponsor received the enrollment request in July, August, or September respectively. Any of these Part D plan effective dates would provide an individual with Part D coverage within the 63-day timeframe of Medicare eligibility to avoid the penalty. This is an important beneficiary protection, especially for those individuals who have to bear the cost of paying a premium for Part A.

3
42 CFR 423.46(a) states that, a Part D eligible individual must pay the late penalty described under § 423.286(d)(3), except as described at § 423.780(e), if there is a continuous period of 63 days or longer at any time after the end of the individual's initial enrollment period during which the individual meets all of the following conditions:

(1) The individual was eligible to enroll in a Part D plan.

(2) The individual was not covered under any creditable prescription drug coverage.

(3) The individual was not enrolled in a Part D plan.

This proposed MA exceptional condition SEP will allow beneficiaries who are enrolled in premium Part A and in Part B to exercise their option to receive their healthcare from an MA plan, instead of Original Medicare, as soon as the individual is enrolled in both Parts A and B, without waiting for the annual coordinated election period. Proposing exceptional condition SEPs for MA and Part D also supports President Biden's April 5, 2022 E.O. on Continuing to Strengthen Americans' Access to Affordable, Quality Health Coverage, which, among other things, requires agencies to examine policies or practices that make it easier for all consumers to enroll in and retain coverage, understand their coverage options, and select appropriate coverage, and also examine policies or practices that strengthen benefits and improve access to healthcare providers.

Because an individual may elect an MA or Part D plan only during an election period, MA organizations and Part D sponsors already have procedures in place to determine the election period(s) for which an applicant is eligible. Our proposal would not add to existing enrollment processes, so we believe any burden associated with this aspect of enrollment processing would remain unchanged from the current practice, and would not impose any new requirements or burden.

Consequently, this provision will not have added impact. All burden impacts of these provisions have already been accounted for under OMB control number 0938-1378 (CMS-10718). We do not believe the proposed changes will adversely impact individuals requesting enrollment in Medicare plans, the plans themselves, or their current enrollees. Similarly, we do not believe the proposed changes would have any impact to the Medicare Trust Funds.

D. Transitional Coverage and Retroactive Medicare Part D Coverage for Certain Low-Income Beneficiaries Through the Limited Income Newly Eligible Transition (LI NET) Program (§§ 423.2500 through 423.2536)

1. Background on the LI NET Demonstration and Introduction to the Proposals

a. Background on the LI NET Demonstration

The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) established the Medicare Part D prescription drug benefit, which became effective on January 1, 2006. Prior to 2006, beneficiaries who were eligible for both Medicaid and Medicare (dual eligible) received prescription drug benefits through Medicaid. When the MMA went into effect, dual eligible beneficiaries began receiving their prescription drug benefits through Medicare Part D.

From the beginning of Part D, CMS recognized the need to provide both immediate and retroactive coverage for full benefit dual eligible (FBDE) beneficiaries who were newly identified by either CMS or a State. Prior to 2010, CMS automatically enrolled newly identified beneficiaries eligible for the Part D low-income subsidy (LIS) into a Part D plan with a premium at or below the low-income benchmark (“benchmark” plans), which have no or reduced premiums for LIS-eligible beneficiaries. Each benchmark plan receiving these beneficiaries was required to grant retroactive coverage to the beginning of a beneficiary's LIS-eligible status or their last uncovered month, whichever date was later. At the time, there were around 300 Part D benchmark plans, and each needed to develop the capacity to provide transitional and retroactive coverage for these beneficiaries. Conducting retroactive claims adjudication and providing point-of-sale coverage was not efficient for Part D sponsors and accordingly, in 2010, CMS established the Medicare Part D Demonstration for Retroactive and Point of Sale Coverage for Certain Low-Income Beneficiaries, also known as Medicare's Limited Income Newly Eligible Transition (LI NET demonstration). The LI NET demonstration consolidates administration of transitional and retroactive Part D coverage for eligible beneficiaries to a single Part D sponsor.

Part D coverage under the LI NET demonstration differs from coverage under traditional Part D plans in that the LI NET demonstration provides point-of-sale coverage for beneficiaries who demonstrate an immediate need for prescriptions, and also provides retroactive and/or temporary coverage for beneficiaries determined to be eligible, or likely to be eligible, for the Part D LIS by the Social Security Administration (SSA) or a State. The LI NET demonstration provides temporary, transitional Part D prescription drug coverage for LIS-eligible beneficiaries, including beneficiaries who are eligible for the Part D LIS but who are not yet enrolled in a Part D drug plan, or are enrolled in a plan but for whom coverage has not yet taken effect.

The purposes of the demonstration are to provide the following:

• More efficient prescription drug coverage and claims reimbursement for newly eligible low-income beneficiaries, including periods of retroactive eligibility;

• More efficient prescription drug coverage and claims reimbursement for individuals who are not enrolled in a PDP and whose LIS status is not yet established in CMS' systems, but who arrive at a pharmacy with an immediate need for their prescription. This may occur, for instance, when a State has determined that a beneficiary is eligible for Medicaid but that information does not yet appear in CMS' systems;

• A seamless transition for LIS-eligible beneficiaries from LI NET into a qualifying PDP with basic prescription drug coverage absent a beneficiary's choice otherwise; and

• More efficient prescription drug coverage and claims reimbursement for LIS-eligible beneficiaries who are losing existing coverage in a PDP. For example, a beneficiary could be terminated for moving out of the service area of their current PDP. The beneficiary would be automatically enrolled into LI NET for that month and the following month, with enrollment into a qualifying PDP with basic prescription drug coverage that would become effective at the end of the LI NET enrollment absent the beneficiary's choice otherwise.

b. Introduction to the Proposals To Implement LI NET as a Permanent Program

Division CC, title I, subtitle B, section 118 of the Consolidated Appropriations Act 2021 (CAA) (Pub. L. 116-260) modified section 1860D-14 of the Act by redesignating subsection (e) of section 1860D-14 as subsection (f) and by establishing a new subsection (e) Limited Income Newly Eligible Transition Program. New subsection (e)(1) requires the Secretary to “carry out a program to provide transitional coverage for covered Part D drugs for LI NET eligible individuals. . .” no later

than January 1, 2024. This directive in section 118 of the CAA makes LI NET a permanent program within Part D, beginning in 2024.

The proposed rulemaking to establish the LI NET program is consistent with President Biden's Executive Order 13985 on Advancing Racial Equity and Support for Underserved Communities Through the Federal Government (January 20, 2021) and Executive Order 14085 on Transforming Federal Customer Experience and Service Delivery to Rebuild Trust in Government (December 13, 2021). LI NET ensures that low-income beneficiaries transitioning from Medicaid to Medicare do not experience a gap in coverage for their prescription medications. Executive Order 14085 calls for the Federal Government to design and deliver services with “a focus on the actual experience of the people whom it is meant to serve” and “deliver services more equitably and effectively, especially for those who have been historically underserved.” We have designed the proposed LI NET program with beneficiary needs foremost in mind, ensuring continuous drug coverage and access for eligible low-income individuals.

LI NET policies, infrastructure, and operations have evolved over the past 12 years to balance providing needed coverage with responsible stewardship of taxpayer dollars and efficiency in administering the program. The LI NET demonstration has proven successful in providing low-income individuals transitional Part D coverage. Approximately 8 million low-income individuals received the benefits of the LI NET program under the demonstration, with over 100,000 beneficiaries enrolled in LI NET in any given month. It has become a program that beneficiary advocacy groups rely on when supporting low-income individuals and connecting them with services. LI NET works directly with over a dozen advocacy groups and 51 State Health Insurance Assistance Programs (SHIPs), which collectively work with LIS beneficiaries to remove access barriers and provide health insurance counseling.

We believe the LI NET demonstration has become a reliable, stable program that has been successful in providing transitional and retroactive Part D coverage to millions of beneficiaries. In developing our proposals for implementing the permanent LI NET program, we have taken into consideration our experience under the LI NET demonstration. Where appropriate, we discuss the policies and practices under the LI NET demonstration that inform our proposals for how to implement aspects of the LI NET program that are not directly specified by the statute.

We rely on the premise that Part D regulations apply to the LI NET program and to the LI NET sponsor as part of the Part D program and as a type of Part D sponsor, except for when the statute requires us to deviate or when existing regulations would not apply. For example, as discussed further in this proposed rule, because the LI NET sponsor is required to have an open formulary, existing Part D requirements on formulary development would not be applicable.

Our proposals to make LI NET a permanent program start with § 423.2500. In § 423.2500(a), we propose the basis of the LI NET program would be based on section 1860D-14 of the Act. We propose in § 423.2500(b) the scope of the LI NET program, which would begin no later than January 1, 2024. Under this program, eligible individuals would be provided transitional coverage for part D drugs. Section § 423.2504 sets forth the LI NET eligibility and enrollment proposals and § 423.2508 proposes LI NET benefits and beneficiary protections. Next, we propose in § 423.2512 the requirements to be an LI NET sponsor and § 423.2516 proposes how the Part D sponsor administering LI NET in partnership with CMS will be selected and the requirements set forth in the LI NET contract to provide services and coverage. Section 423.2518 provides a proposal for intermediate sanctions in the event of contract violations. Section 423.2520 proposes how an LI NET contract would be non-renewed or terminated. Section 423.2524 lays out our proposals for bidding and determining the LI NET payment rate. Finally, § 423.2536 enumerates the Part D requirements we propose waiving for LI NET.

We propose to align sunsetting the demonstration seamlessly with the start of the LI NET program under this section. Specifically, the LI NET demonstration would continue to operate until December 31, 2023, and the LI NET program would start to operate on January 1, 2024 according to the regulations that we finalize.

2. Eligibility and Enrollment

a. Eligibility

Section 1860D-14(e)(2) of the Act provides that an individual is eligible for LI NET coverage if they: (A) meet the requirements of section 1860D-14(a)(3)(A)(ii) and (iii) of the Act; and (B) have not yet enrolled in a prescription drug plan or an MA-PD plan, or, who have so enrolled, but with respect to whom coverage under such plan has not yet taken effect. This means that to be eligible, the individual would need to be a full-benefit dual-eligible individual or low-income subsidy (LIS) eligible individual as defined at § 423.773 and—

• Not yet be enrolled in a prescription drug plan or an MA-PD plan; or

• Be enrolled but their coverage has not yet taken effect.

Under these requirements, LI NET would be available to all categories of individuals who are LIS-eligible, including:

• Full Subsidy-Full Benefit Dual Eligible (FBDE) individuals, including institutionalized beneficiaries and beneficiaries receiving home and community-based services;

• Full Subsidy-Non-FBDE Individuals, including those who have applied or are eligible for QMB/SLMB/QI or SSI, with income and resource thresholds at or below the amounts set by CMS each year; and

• Partial Subsidy Individuals, including those who have applied and have income and resource amounts below the thresholds set by CMS each year.

We propose to codify at Subpart Y the LI NET eligibility requirements set forth in section 1860D-14(e)(2) of the Act. We propose to establish in paragraph (a) of new § 423.2504 two categories of individuals eligible to enroll in LI NET that encompass the previously noted categories of low-income individuals recognized by Part D. The first category, which we term “LIS-eligible” in proposed paragraph (a)(1), would be composed of individuals whose low-income status has been confirmed either through CMS's data in our system of record or because the individual can demonstrate their current or future low-income status. The second category, which we term “immediate need” in proposed paragraph (a)(2), would consist of individuals whose low-income status has not been confirmed, because CMS's data do not yet reflect the individual's low-income status, but the individual has indicated that they are eligible for the LIS.

We refer to the individuals in the category established in proposed paragraph (a)(2) as “immediate need” because they present at a pharmacy or to the LI NET sponsor in immediate need of a prescription and have no Part D coverage. Ideally, these beneficiaries would be able to show documentation of their pending LIS status, such as a letter received from the State showing the beneficiary's LIS status. However,

we do not believe an absence of documentation in hand at the point-of-sale should be a barrier to entry to LI NET for immediate need individuals. This is because our experience in the demonstration is that 80 percent of immediate need individuals do have their eligibility confirmed,
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and we would not want to turn away these individuals who imminently require access to their prescription drugs. Under the LI NET demonstration, individuals can indicate the likelihood of their low-income status by providing the evidence they have, which can include verbal explanations of why they consider themselves eligible.

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Of the 80 percent of immediate need LI NET beneficiaries whose LIS status is ultimately confirmed, for 89 percent confirmation was within 10 days, and for 97 percent confirmation was within 21 days. In the demonstration, beneficiaries whose LIS status is not able to be confirmed within 21 days continue to be enrolled in LI NET for two months, but they can no longer fill prescriptions after 21 days.

We propose in § 423.2504(a)(2) to grant immediate access to covered Part D drugs at the point-of-sale for individuals whose eligibility as defined at § 423.773 cannot be confirmed at the point-of-sale. Under proposed paragraph (a)(2)(i), immediate need individuals may provide documentation to the LI NET sponsor to confirm LIS eligibility. Documentation could include, but would not be limited to—

• A copy of the beneficiary's Medicaid card that includes their name and eligibility date;

• A copy of a letter from the State or SSA showing LIS status;

• The date that a verification call was made to the State Medicaid Agency, the name and telephone number of the State staff person who verified the Medicaid period, and the Medicaid eligibility dates confirmed on the call;

• A copy of a State document that confirms active Medicaid status;

• A screen-print from the State's Medicaid systems showing Medicaid status; or

• Evidence at point-of-sale of recent Medicaid billing and payment in the pharmacy's patient profile.

Under proposed paragraph (a)(2)(ii), if an immediate need individual's LIS status cannot be confirmed within a period of 2 months, that individual would not be automatically enrolled into a Part D plan. This is the same as current practice under the LI NET demonstration. We solicit comment on the proposal to align the 2 months of enrollment with the ability to fill prescriptions for these immediate need beneficiaries.

We propose in § 423.2504(a)(2)(i) that immediate need beneficiaries whose eligibility cannot be confirmed can continue to fill prescriptions throughout their 2-month enrollment in LI NET. We believe this ensures access to LI NET benefits and is an administratively simple approach as compared with alternative ideas, such as the approach under the demonstration of keeping immediate need beneficiaries with uncertain eligibility enrolled in LI NET but unable to fill prescriptions. We propose in § 423.2504(a)(2)(ii) that if, by the end of an immediate need individual's enrollment in LI NET, neither CMS's systems nor the beneficiary's provision of documentation confirms low-income status, then that individual would not be auto-enrolled into a qualifying standalone Part D plan following their LI NET coverage.

b. Enrollment

Section 1860D-14(e) of the Act does not specify a process for enrollment into the LI NET program. Therefore, in forming our proposed enrollment process, we look to the process used in the demonstration. Under the LI NET demonstration, there are four ways for eligible individuals to be enrolled into the demonstration. They are as follows:

Automatic enrollment. Individuals who are LIS-eligible but do not yet have Part D coverage, and those individuals who have selected a Part D plan but whose enrollment has not taken effect, are enrolled by CMS into the LI NET demonstration unless the beneficiary has affirmatively declined enrollment in Part D.

Point of sale enrollment. Immediate need individuals whose claims are submitted by the pharmacy at the point-of-sale and billed to LI NET are enrolled into the LI NET demonstration by the LI NET sponsor.

Direct reimbursement request. Individuals who are LIS-eligible and who submit receipts for reimbursement for claims paid out of pocket are retroactively enrolled into the LI NET demonstration by the LI NET sponsor, with 36-month retroactive coverage for full dual eligible individuals and those who receive supplemental security income (SSI) benefits.

LI NET application form. Beneficiaries who are not enrolled into LI NET through auto-enrollment, point-of-sale enrollment or via an approved direct reimbursement request may submit an application form to the LI NET sponsor with supporting documentation demonstrating their LIS status. The LI NET sponsor will periodically check for eligibility and enroll applicants once eligibility is confirmed.

The majority of LI NET beneficiaries are enrolled into the LI NET demonstration automatically by CMS; about 90 to 95 percent of LI NET beneficiaries are those we identify in our systems and enroll into the demonstration. To do this, CMS “sweeps” our data monthly to identify all beneficiaries who are—

• Eligible for LIS;

• Eligible for Part D;

• Not enrolled in a Part D plan or receiving the Retiree Drug Subsidy (RDS) or coverage through Veterans Affairs;

• Have not opted-out of Part D enrollment for any reason (for example, because they declined it);

• Not incarcerated, are lawfully present in the US, and do not live in another country; and

• Are not enrolled in a Part C plan that disallows concurrent enrollment in a Part D plan.

Beneficiaries identified in the monthly sweep are automatically enrolled into the LI NET demonstration for that month and the following month. CMS then prospectively enrolls the beneficiary into a traditional Part D plan, with coverage under that plan taking effect immediately after the LI NET coverage ends. This population of beneficiaries includes those who may be gaining Part D eligibility or LIS status but have not made an election into a Part D plan.

A smaller number of beneficiaries, about five to ten percent of LI NET beneficiaries, enroll in the LI NET demonstration outside of the sweeps process. Some enroll at the point-of-sale, as described previously. An even smaller number of beneficiaries contact the LI NET sponsor directly to enroll in the LI NET demonstration. Individuals can submit a request for reimbursement to the LI NET sponsor. If the person is LIS-eligible, the LI NET sponsor enrolls them into the LI NET demonstration and reimburses them for out-of-pocket costs during the duration of their retroactive enrollment. As with an individual who is enrolled at the point-of-sale, the start date of LI NET enrollment would be the first of the month the request is received. There may be individuals who do not have an immediate need for medication and believe they are eligible for LI NET. These individuals can fill out an application form, which allows the LI NET sponsor to periodically check their eligibility and enroll them into LI NET if they become eligible.

Consistent with the enrollment processes under the demonstration, we propose in § 423.2504(b) to codify the ways in which individuals can be enrolled into LI NET: auto-enrollment,

point-of-sale for immediate need individuals, direct reimbursement, and LI NET enrollment form.

In § 423.2504(b)(1), we propose that individuals who are LIS-eligible and whose auto-enrollment into a Part D plan (as outlined in § 423.34(d)(1)) has not taken effect will be automatically enrolled by CMS into the LI NET program unless they have affirmatively declined enrollment in Part D per § 423.34(e). LIS-eligible beneficiaries who have made the decision to opt out of enrollment in Part D must take a proactive step to contact CMS for us to record that decision in our systems by placing a flag on the beneficiary's record. Beneficiaries may opt out of Part D enrollment if they have other insurance or do not want to participate as a matter of principle. We assume that a beneficiary who opts out of Part D enrollment would also want to opt out of transitional coverage under the LI NET program. Therefore, proposed § 423.2504(b)(1) would provide that when a beneficiary affirmatively declines enrollment in Part D per § 423.34(e), that would also entail opting out of LI NET enrollment.

In defining “transitional coverage” for LI NET, the statute sets forth requirements for the duration of LI NET coverage under section 1860D-14(e)(3). Section 1860D-14(e)(3)(A) of the Act establishes that “immediate access to covered part D drugs at the point of sale during the period that begins on the first day of the month such individual is determined to meet the requirements of clauses (ii) and (iii) of subsection (a)(3)(A) and ends on the date that coverage under a prescription drug plan or MA-PD plan takes effect with respect to such individual.” The starting point of enrollment into LI NET for these types of LIS-eligible beneficiaries, whether they are automatically enrolled or immediate need individuals, is required by statute but the duration of time they prospectively remain enrolled in LI NET is not specified. Under the demonstration, we have typically capped non-retroactive coverage in LI NET to 2 months. Consistent with the statute and with our operations under the demonstration, in § 423.2504(c), we propose that LI NET enrollment begins on the first day of the month an individual is identified as eligible under § 423.2504 and ends after 2 months.

Section 1860D-14(e)(3)(B) of the Act sets a limit on how far back retroactive LI NET coverage can extend. Full-benefit dual eligible individuals (as defined in section 1935(c)(6)) and recipients of supplemental security income (SSI) benefits under title XVI) are eligible for up to 36 months of retroactive coverage. In proposed § 423.2504(c)(2), retroactive LI NET coverage would begin on the date an individual is identified as full-benefit dual or an SSI benefit recipient, or 36 months prior to the date such individual enrolls in (or opts out of) Part D coverage, whichever is later. This duration of time is similar to retroactive coverage under the demonstration, which provides for a maximum retroactive period of 36 months for Full Subsidy LIS eligible individuals.
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As with LI NET beneficiaries without retroactive coverage, we propose that LI NET coverage would end with enrollment into a Part D plan or opting out of Part D coverage.

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The LI NET demonstration provides an exception to the 36-month maximum period of retroactive enrollment if there is a Medicaid determination within the last 90 days that confers Medicaid eligibility going back further than 36 months. In these situations, LI NET enrollment under the demonstration goes back to the start of Medicaid eligibility. We are not proposing an exception to the 36-month limit on retroactive coverage in this rulemaking as the statute does not provide for such an exception.

We propose in § 423.2504(d) that enrollment in LI NET would end on the date that coverage under Part D takes effect, consistent with section 1860D-14(e)(3) of the Act. In the case of immediate need beneficiaries for whom LIS-eligibility is not confirmed and who are not enrolled into a PDP, enrollment would end 2 months after the immediate need enrollment begins. No matter the method of enrollment, we propose that the minimum duration of LI NET enrollment is 2 months unless the beneficiary elects to disenroll from LI NET or to enroll in a Part D plan. For example, an individual whom we auto-assign into LI NET starting April 1, 2024 would remain in LI NET for April and May 2024 before being enrolled into an appropriate Part D plan starting June 1, 2024.

We provide two beneficiary examples to further explain how LI NET enrollment and disenrollment would work under our proposals:

Example 1:
Beneficiary Kristy is a full-benefit dual eligible and arrives at a pharmacy on May 5, 2024, with documentation showing that her LIS application is pending. She would have immediate coverage in LI NET for May and June 2024. If, in the course of adjudicating her LIS application, it is discovered that she was actually LIS-eligible dating back to January 2016, Kristy would be retroactively enrolled in LI NET as of July 1, 2021, which is the later of 36 months prior to the date she is enrolled in a Part D plan or the date she was first LIS eligible (since January 2016 is more than 36 months prior to her Part D plan enrollment, her retroactive coverage under LI NET is capped at 36 months prior to such enrollment). Kristy's LI NET coverage would end June 30, 2024, upon her enrollment into a benchmark PDP starting July 1, 2024, unless she makes the choice to opt-out.

Example 2:
The Social Security Administration notifies CMS in February 2024 that Beneficiary Ravi was eligible for both Medicare and SSI starting in November 2022. CMS provides Ravi retroactive Medicare drug coverage from November 2022, which is the later of 36 months prior to enrollment in a Part D plan or the date Ravi was first LIS eligible, through March 2024. After March 2024, if Ravi does not actively enroll in a plan of their choosing, CMS would randomly enroll them into a benchmark PDP with an April 1, 2024 effective date.

As noted previously, our goal in the proposals is to match current eligibility and enrollment policy in effect in the demonstration and the Part D program, to the extent the statute permits. We seek comment on whether revised or additional regulations are required to achieve accurate, streamlined, and beneficiary friendly eligibility determinations and enrollment in the LI NET program.

3. Benefits and Beneficiary Protections

Section 1860D-14(e)(4)(B)(i) of the Act requires the LI NET program to provide eligible beneficiaries with access to all Part D drugs under an open formulary. The statute, at clauses (ii) and (iii) of section 1860D-14(e)(4)(B) of the Act, also requires the LI NET program to permit all pharmacies that are determined by the Secretary to be in good standing to process claims under the program, and to be consistent with such requirements as the Secretary considers necessary to improve patient safety and ensure appropriate dispensing of medication. These requirements are consistent with how the LI NET demonstration has operated, and we propose to codify the requirement that the LI NET program provide access to all Part D drugs under an open formulary in § 423.2508(a). We propose in § 423.2508(b) to require the LI NET sponsor to permit all pharmacies that CMS determines to be in good standing to process claims under the program, whether or not the pharmacy is a network or out-of-network (OON) pharmacy for the LI NET sponsor. Under the demonstration, we consider a pharmacy, including retail, mail-order, and institutional pharmacies, to be “in good standing” when it is licensed and does not have a fraud, waste, or abuse

determination against it. For the permanent LI NET program, we propose that a pharmacy would be in good standing if it is licensed, has not been revoked from Medicare under § 424.535, does not appear on the Office of Inspector General's list of entities excluded from Federally funded health care programs pursuant to section 1128 of the Act and from Medicare under section 1156 of the Act (unless the OIG waives the exclusion, which the OIG has authority to do in certain specified circumstances), and does not appear on the preclusion list as defined in § 423.100. A pharmacy will appear on the preclusion list if it:

• Is currently revoked from Medicare, is under an active reenrollment bar, and CMS has determined that the underlying conduct that led to the revocation is detrimental to the best interests of the Medicare program, including LI NET;

• Has engaged in behavior for which CMS could have revoked the entity to the extent applicable if they had been enrolled in Medicare, and CMS determines that the underlying conduct that would have led to the revocation is detrimental to the best interests of the Medicare program, including LI NET; or

• Has been convicted of a felony under Federal or State law within the previous 10 years that CMS deems detrimental to the best interests of the Medicare program, including LI NET.

In § 423.2508(c), we propose requirements we consider necessary to improve patient safety and ensure appropriate dispensing of medication consistent with subpart D of the Part D regulations. Existing Part D requirements related to appropriate dispensing, patient safety, electronic dispensing, quality improvement organization (QIO) activities, compliance, and accreditation would improve patient safety and appropriate dispensing. Specifically, we propose to apply the following provisions to the LI NET program and LI NET sponsor, as appropriate:

• § 423.153(b) and (c) for dispensing and point-of-sale safety edits.

• § 423.154 for appropriate dispensing of prescription drugs in long-term care facilities.

• § 423.159, requiring an electronic prescription drug program.

• § 423.160, excepting the requirements pertaining to formulary standards in § 423.160(b)(5), setting forth standards for electronic prescribing.

• § 423.162, for quality improvement organization (QIO) activities.

• § 423.165, regarding compliance deemed on the basis of accreditation.

We solicit comment on whether any of these provisions would not be compatible with the LI NET program proposed in this rulemaking.

Section 1860D-14(e)(4)(B)(iv) of the Act provides the Secretary the authority to establish requirements for the LI NET coverage provided to LI NET eligible individuals. We draw upon our experience under the demonstration to propose cost sharing and appeals policy for LI NET in sections § 423.2508(d) and (e), respectively.

We propose in § 423.2508(d)(1) that LI NET beneficiaries under § 423.2504(a)(1) (that is, beneficiaries whose LIS-eligibility is established and who have not yet enrolled in a prescription drug plan or MA-PD plan, or who have enrolled in a prescription drug or MA-PD plan but coverage under such plan has not yet taken effect) would pay the applicable cost sharing for their low-income category as established in the yearly Announcement of Calendar Year Medicare Advantage (MA) Capitation Rates and Part C and Part D Payment Policies (the Rate Announcement publication specified in § 422.312). Under the demonstration, LI NET beneficiaries pay the reduced cost-sharing aligned with the LIS categories defined in the Part D program. Because there is already the existing statutory requirement for CMS to update the parameters for the LIS benefit each year using statutory indexing methods, and because CMS and pharmacy systems are already set up to reflect the appropriate cost-sharing based on the LIS category of the individual, we believe it is reasonable to calculate and charge cost-sharing in alignment with the Part D LIS categories. For immediate need beneficiaries, we propose in § 423.2508(d)(2) these individuals would by default pay the cost-sharing associated with the category of non-institutionalized FBDE individuals with incomes above 100 percent of the Federal poverty level and full-subsidy-non-FBDE individuals (that is, Category Code 1). Of the four LIS eligibility categories, this category has the highest level of cost-sharing. Proposed § 423.2508(d)(2) would further provide that if the beneficiary is later confirmed to belong to a different LIS category, the beneficiary would be refunded by the LI NET sponsor for the difference between the cost sharing they paid versus what they would have paid in their confirmed LIS category. This approach allows for the least government liability for individuals whose LIS eligibility is unable to be confirmed while still allowing prescription drug access for immediate need individuals.

We propose in § 423.2508(e) that LI NET enrollees have rights with respect to Part D grievances, coverage determinations, and appeals processes set out in subpart M of the Part D regulations. The established processes would adequately adjudicate LI NET beneficiary concerns. This approach of using existing processes avoids needing to devote resources to establishing separate grievance, coverage determinations. Furthermore, consistency with other Part D contracts as it relates to grievances, coverage determinations, and appeals would be simplest for LI NET sponsors.

4. LI NET Sponsor Requirements

Section 1860D-14(e)(4)(A) of the Act specifies that, as determined appropriate by the Secretary, the LI NET program is to be administered through a contract with a single administrator. Since the beginning of the demonstration, CMS has had one Part D sponsor serve as the sole contractor for administering the program. We have found that this approach supports our goal of administrative simplicity by making it unnecessary for each individual plan sponsor to check eligibility and conduct a retroactive enrollment/reimbursement process. In our experience, the benefits of having a single Part D sponsor administer LI NET include the following:

• Providing a single point of contact for beneficiaries and pharmacies attempting to have their claims paid.

• Providing a single point of contact for State Medicaid agencies submitting Medicaid eligibility and attempting to reconcile and coordinate claims.

• Simplifying the filing of retroactive beneficiary claims.

There may be circumstances in which CMS may want to consider contracting with more than one Part D sponsor to administer LI NET. Though we have had stability in LI NET in terms of only having the single LI NET sponsor for the duration of the demonstration, we recognize the need for some protections should it become necessary for another entity to take over as LI NET sponsor and assume responsibility for providing LI NET coverage. The downside of consolidating LI NET functions into a single sponsor is the potential for beneficiary impact should there be a reason that the single LI NET sponsor no longer continues its functions. We believe that this potential of beneficiary impact is mitigated by our proposals to non-renew or terminate the LI NET contract, which are discussed in greater detail in section II.D.5. of this proposed rule, titled “Contractor Selection and Contracting Guidelines.” Accordingly,

while we propose at new § 423.2512 that the program will be operated by “one or more” Part D sponsors, we intend to initially continue with the current practice of operating the program through a single sponsor because we determined the benefits outweigh potential beneficiary impacts, which have not come to bear since the start of the demonstration in 2010.

We propose to establish at § 423.2512 the requirements the LI NET sponsor must meet when administering the LI NET program.

• Because LI NET may enroll beneficiaries from across the nation, we propose to specify at § 423.2512(a)(1) that the LI NET sponsor(s) would be selected from among the Part D sponsors with a national presence, with an established contracted pharmacy network in all geographic areas of the United States in which LIS is available, which as of the date of this proposed rule is the 50 States and the District of Columbia. Because LIS is not available in the territories, CMS would not require the LI NET sponsor to have network pharmacies in territories. LI NET beneficiaries could still access LI NET benefits while in the territories if needed, however, through out-of-network pharmacies.

• We find that some experience as a Part D sponsor should be a pre-requisite for being an LI NET sponsor, and propose at § 423.2512(b) that any candidates to be an LI NET sponsor have a minimum of 2 consecutive years contracting with CMS as a Part D sponsor.

• We propose at § 423.2512(c) some technical and operational requirements of the LI NET sponsor. In § 423.2512(c)(1) and (c)(2) we propose that the LI NET sponsor have the technical capability and the infrastructure to provide immediate, current, and retroactive coverage for LI NET enrollees and the technical capability to develop the infrastructure necessary for verifying Medicaid dual eligibility status for presumed eligible LI NET enrollees. In § 423.2512(c)(3), we propose requiring the LI NET sponsor to identify, develop, and implement outreach plans in consultation with CMS targeting key stakeholders to inform them about the LI NET program. Under the demonstration, CMS enrolls over 90 percent of LI NET beneficiaries into the LI NET plan and we expect CMS would continue to be responsible for most enrollees in a permanent LI NET program. For the beneficiaries who are not auto-enrolled, outreach is important so that stakeholders like the states, SHIPs, and pharmacies to have awareness and knowledge about the LI NET program. Under the demonstration, the LI NET sponsor routinely conducts outreach in consultation with CMS to inform stakeholders about the program. We propose to adopt this approach for the permanent LI NET program.

As discussed further in this section of this rule, we propose to waive requirements under §§ 423.128(d)(2)(ii), 423.128(d)(2)(iii), and 423.128(d)(4). We also propose in § 423.2512(c)(4) that the LI NET sponsor be required to establish and manage a toll-free customer service telephone line and fax line that can be accessed by pharmacy providers and beneficiaries, or others acting on their behalf, for purposes that include but are not limited to: handling inquiries about services under the LI NET program, providing the status of eligibility or claims, and having the ability to accept documentation for evidence of eligibility.

Reimbursement to beneficiaries with retroactive coverage is provided for in section 1860D-14(e)(3)(B) of the Act, as the “amounts that would have been paid under this Part had such individual been enrolled in a prescription drug plan or MA-PD plan.” This entails establishing a process for beneficiaries to request and receive such reimbursement. In the demonstration we provide a means for beneficiaries who receive retroactive coverage to submit a direct member out-of-pocket reimbursement request for Part D covered drugs for any past month(s) in which they were entitled to retroactive coverage under LI NET. The LI NET sponsor provides reimbursement to eligible beneficiaries based on the submitted cost minus any applicable copayments. Once the LI NET sponsor receives a written reimbursement request, they follow timeframes that are consistent with those Part D sponsors are already accustomed to in § 423.636(a)(2) when they authorize payment for a benefit due to a reversal in their coverage determination. That is, under the demonstration, the LI NET sponsor has 14 calendar days to reply with whether the claim is eligible for reimbursement, including the reason for denying the request if applicable. If the request for reimbursement is granted, the LI NET sponsor issues the reimbursement no later than 30 days after it determines the claim is eligible for reimbursement. As these timelines have proved workable under the demonstration, we propose in § 423.2512(c)(5) that the LI NET sponsor meet these deadlines related to direct reimbursement in the permanent LI NET program.

In § 423.2512(c)(6), we propose requiring the LI NET sponsor to adjudicate claims from out-of-network pharmacies according to the LI NET sponsor's standard reimbursement for their network pharmacies. As the LI NET sponsor must provide access to all Part D drugs under an open formulary, we believe there is the need for some protection against unreasonably high drug costs for OON claims in LI NET. Other Part D sponsors have the option to deny such claims, or to pay OON claims according to their standard reimbursement for their network pharmacies (with beneficiaries paying any difference between the cost of the OON claim the negotiated price). Because this restraint on unreasonable drug costs borne by the Medicare Trust Funds would not otherwise be present for LI NET, we believe a limit on how much the LI NET sponsor can be reimbursed for OON claims is needed.

5. Selection of LI NET Sponsor and Contracting Provisions

Section 1860D-14(e)(6) of the Act authorizes us to implement LI NET without regard to laws relating to the making, performance, amendment, or modification of contracts of the United States as we may determine to be inconsistent with the furtherance of the purpose of Title XVIII. Thus, CMS is not required to follow the Federal Acquisition Regulation (FAR) or the contracting authority used under the Part D program. Neither is CMS required to contract with every qualified plan sponsor to provide LI NET Part D coverage, as we are required to do for qualified plan sponsors providing non-LI NET Part D coverage. If we followed the same approach for LI NET, we could have many points of contact for beneficiaries and pharmacies attempting to have their retroactive claims paid and multiple points of contact for State Medicaid agencies submitting Medicaid eligibility and attempting to reconcile and coordinate claims. This approach would not serve the purpose of providing smooth, transitional coverage for Part D drugs for LI NET eligible individuals through the LI NET program, which is a Part D program under Medicare in Title XVIII.

Using the authority in section 1860D-14(e)(6) of the Act, we propose to follow the contracting approach set forth in proposed § 423.2516 to select the LI NET sponsor for the 2024 plan year and onwards.

In § 423.2516(a), we propose that CMS would appoint a Part D sponsor that meets the requirements at § 423.2512 to serve as the LI NET sponsor. To determine this appointment, we propose that CMS may choose to conduct discussions with potentially eligible

entities to establish mutual interest and ability to administer the program. This circumstance could arise if, for example, CMS needs additional information in any particular year to learn more about a Part D sponsor's ability to administer the LI NET program. Under the demonstration, there is a multi-year contract approved by the Office of Management and Budget, and each year CMS and the LI NET sponsor have executed an addendum to the contract that included such information as the payment rates and risk corridors as determined in the final bid. As we consider options for establishing regulations to implement the permanent LI NET program, we find it is appropriate that we bring the LI NET contractor into closer alignment with other contracts in the Part D program by executing an LI NET contract with a Part D plan sponsor each plan year that contains, among other information, payment information for that year. Our expectation is that unless circumstances shift to prompt a change, the existing LI NET sponsor would continue in that role in the succeeding year. Therefore, in § 423.2516(b), we propose selection criteria CMS may use in appointing an LI NET sponsor based on some features of the LI NET program that are related to a Part D sponsor's ability to successfully administer the program. These are—

• Experience covering low-income beneficiaries, including but not limited to enrolling and providing coverage to low-income subsidy individuals as defined in § 423.34;

• Pharmacy access as outlined in § 423.120;

• Past performance consistent with § 423.503(b), including Star Ratings (as detailed in § 423.186), and previous intermediate sanctions (as detailed in § 423.750); and

• Ability to meet the requirements listed in § 423.505 that are not waived under § 423.2536.

As we are proposing that Part D requirements apply to the LI NET program unless waived, we intend for § 423.505 to apply to LI NET, with the exception of § 423.505(k)(6), which we propose to waive in proposed § 423.2536(g). For example, the contract between the LI NET sponsor and CMS would be required to contain provisions in which the LI NET sponsor agrees to accept new enrollments, make enrollments effective, process voluntary disenrollments, and limit involuntary disenrollments (see § 423.505(a) and (b)(2)). As another example, consistent with § 423.505(b)(22), the LI NET contract would be required to include a provision in which the LI NET sponsor agrees to use the CMS complaint tracking system to address and resolve complaints received by CMS against the sponsor. Per § 423.505(k), the LI NET contract would also require the LI NET sponsor to submit certifications of data that determine payment as applicable, such as for enrollment and payment information, claims data, bid submission information, DIR data, and overpayments. The only certification the LI NET sponsor would not submit is the one pertaining to data for price comparison under § 423.505(k)(6); we believe this certification is unnecessary given that the LI NET plan is not one for which beneficiaries shop and thus would not be comparing against other plan options based on price considerations. We intend to exclude LI NET from Medicare Plan Finder, consistent with past practice under the demonstration. Therefore, it would not make sense to require certification to data for price comparison purposes, and we propose to waive this requirement in § 423.2536(g).

In § 423.2516(c), we propose that the term of the appointment will be ongoing provided mutual agreement between CMS and the selected party, subject to an annual contracting and bid process (per proposed § 423.2524(c)) to determine payment rates for the upcoming year. This approach has worked well during the demonstration and we see no reason to propose a different approach for the permanent program.

If the LI NET sponsor violates its contract, we propose in § 423.2518 that CMS would have the authority to impose intermediate sanctions as outlined in subpart O of the Part D regulations, just as we would for any other Part D sponsor.

In § 423.2520(a) we propose that if the LI NET sponsor decides for any reason to non-renew its existing contract, it must notify CMS by January 1 of the year before the next contract year. Except as provided in paragraph (c) of this section, if CMS decides for any reason to non-renew the existing contract with the incumbent LI NET sponsor, CMS would notify the LI NET sponsor by January 1 of the year before the next contract year. We propose that CMS could non-renew for any reason, without cause, and the LI NET sponsor would not have a right to appeal the non-renewal. To provide CMS the authority to non-renew the LI NET contract with that particular sponsor for any reason with no appeal, we propose in § 423.2536(e) waiving the appeals requirements in Subpart N except for those relevant to a contract termination. As there has only been a single LI NET sponsor for the duration of the demonstration, and we are anticipating a single LI NET sponsor for the permanent LI NET program, we do not want to assume the risk of the appeals process not providing finality by the time an LI NET sponsor would need to begin preparing the LI NET bid. Even if we required the appeals process to be complete by the April timeframe and while the appeal was pending moved forward with selection process, we would be cutting into or needing to forgo entirely the transition time of 3 months we propose in § 423.2520(b) to ensure seamless transition of the LI NET program. Proposing to assume these risks would not further the purpose of the LI NET program being ready and available to provide immediate, current, and retroactive coverage for LI NET enrollees. We note that non-renewal, whether at the election of CMS or the LI NET sponsor, would not have an impact on the sponsor's eligibility to be selected as the LI NET sponsor in future years. As discussed in section II.D.4. of this proposed rule, we intend to initially contract with a single Part D sponsor to administer the LI NET program. Unlike beneficiaries in traditional Part D plans, beneficiaries enrolled in LI NET would not have the option of simply choosing to enroll in LI NET under a different sponsor. For these reasons, ample notice is needed if the LI NET sponsor does not intend to continue as the LI NET sponsor in the following year. We anticipate that CMS would be able to provide the same amount of notice to the LI NET sponsor if we were contemplating changing the LI NET sponsor for the following year. A decision to non-renew the LI NET contract with a particular Part D sponsor would not bar or prohibit that sponsor from being considered to be the LI NET sponsor in a future year. Any CMS decisions regarding LI NET sponsor selection would have no bearing on a Part D sponsor proceeding with the application process for other, non-LI NET, Medicare prescription drug plans.

In § 423.2520(b), we propose that after a notice of non-renewal, CMS would select a successor LI NET sponsor from among the other eligible entities (as detailed in proposed § 423.2516). Similar to how our multi-year contracts with our contractors require an outgoing contractor to coordinate with any successor contractor during a transition period, proposed § 423.2520(b) would require the outgoing LI NET sponsor to coordinate with the successor LI NET sponsor appointed by CMS for a period of no less than 3 months to ensure seamless transition for LI NET enrollees,

including timely transfer of any data or files. All data, files, written materials, and LI NET work products would be considered CMS's property. During the transition period, the outgoing and incoming LI NET sponsors would work together to develop a transition plan, including setting up a training schedule and a schedule of events for a smooth changeover.

There may be exigent circumstances of risk to beneficiaries in which a more immediate termination is warranted. Referencing portions of CMS's immediate termination authority in § 423.509, we propose to establish in § 423.2520(c) that CMS may terminate the LI NET contract immediately if:

• CMS determinates that a delay in termination, resulting from non-compliance with the procedures provided in this Part prior to termination, would pose an imminent and serious risk to the health of the individuals enrolled with the LI NET sponsor, per § 423.509(b)(2)(i)(A);

• The LI NET sponsor has experienced financial difficulties so severe that its ability to make necessary health services available is impaired to the point of posing an imminent and serious risk to beneficiary health, or otherwise fails to make services available to the extent that such a risk to health exists per § 423.509(b)(2)(i)(B); or

• The LI NET sponsor has had one or more of the issues enumerated in paragraphs (a)(4)(i) and (xii) of § 423.509.

Proposed § 423.2520(d) would provide that if CMS intends to terminate the contract under proposed § 423.2520(c), CMS provides written notice to the LI NET sponsor informing it of its termination appeal rights in accordance with subpart N of this Part.

We expect to identify the LI NET contract as X0001, and advance the plan benefit package number by one each year so that we can update the payment rates in our systems for the new payment year. If the LI NET contract with a particular LI NET sponsor is terminated, we would not discontinue use of the contract number X0001. Instead, we would terminate the relationship with that specific LI NET sponsor to provide LI NET coverage, and continue to allow enrollment under contract X0001.

6. Bidding and Payments to the LI NET Sponsor

Section 1860D-14(e) of the Act does not specify how CMS is to determine the amounts that it pays to the LI NET sponsor under the contract or how payments are to be made. We propose to establish the methodology and formulas that we would use to determine the amounts we pay to the LI NET sponsor under the contract. We use our payment policies under the demonstration, including the bidding requirements, as the basis for the proposed LI NET payment policies in this rule. We do so because LI NET payment activities bear many similarities to those of typical Part D plans, because the infrastructure to pay in this manner is already established, and because we are proposing that the LI NET sponsor must be a Part D sponsor who would be familiar with these payment activities already, in this proposed rule.

We propose in § 423.2524(a) that CMS payments for the LI NET program would be made from the Medicare Prescription Drug Account, as payments are made to other Part D sponsors.

In § 423.2524(b) we propose requirements related to the LI NET bid. Because most of the provisions in Subpart F would not be applicable to LI NET, we propose to waive Subpart F except for those provisions we propose to apply to LI NET.

Section 423.2524(b)(1) proposes that the submission of LI NET bids and related information will follow the requirements and limitations in Part 423, Subpart F, §§ 423.265(b), (c), (d)(1), (d)(2)(i), (d)(2)(ii), (d)(2)(iv), (d)(2)(v), (d)(4), (d)(6), and (e). This proposal would require the LI NET sponsor to submit a bid and supplemental information in a format specified by CMS, with the same deadline as other Part D bids of no later than the first Monday of June each year. It also gives CMS the ability to request additional information from the LI NET sponsor to support bid amounts, and the ability to require revisions to the submitted LI NET bid before it is accepted. As with other Part D bids, a qualified actuary, whether internal or external to the plan sponsor, would certify the LI NET sponsor's actuarial valuation (which may be prepared by others under the qualified actuary's direction or review). The qualified actuary would need to be a member of the American Academy of Actuaries.

We propose in § 423.2524(b)(2) that the following provisions would apply in the review, negotiation, and approval of the LI NET bid: § 423.272(a), (b)(1), and (b)(4). This would allow CMS to review the LI NET bid, conduct negotiations regarding the terms and conditions of the proposed bid, and approve it only if the bidding LI NET sponsor and the LI NET plan comply with all applicable CMS Part D requirements. As in typical Part D bid reviews, CMS would be able to decline the LI NET bid if it proposes significant increases in cost sharing (§ 423.272(b)(4)). This approach follows the bid process under the demonstration, in which the LI NET sponsor submits a bid that estimates their costs and includes assumptions for enrollment and utilization based on prior experience. Starting with PY2021, the LI NET sponsor began using an LI NET Bid Pricing Tool (BPT) and accompanying instructions that were adapted from the traditional Part D BPT and instructions. Once the LI NET bid is accepted, we update this information in our systems for the new payment year for the LI NET demonstration. Each year, we advance by one the number designating the current plan benefit package. For example, the contract-PBP was X0001-011 for plan year 2021 and X0001-012 for plan year 2022.

Proposed § 423.2524(b)(3) specifies the basic rule and major components of the LI NET bid, which are the LI NET sponsor's estimate of its revenue needs for Payment Rates A and B, which are discussed in greater detail in proposing § 423.2524(d).

In § 423.2524(c) we propose that CMS would provide advance monthly LI NET payments, on a per-member, per-month (PMPM) basis, equal to the sum of Payment Rates A and B as established in the LI NET sponsor's approved bid submitted annually under paragraph (b) of this proposed section. Paying on a PMPM basis would align with other Part D payments and with our operations under the LI NET demonstration in which we provide a capitated PMPM amount established by the bid for each beneficiary enrolled in the demonstration. Unlike typical Part D monthly payments, the monthly LI NET payment under the demonstration is a PMPM amount that represents the sum of Payment Rates A and B, as determined by the LI NET bid. The bid represents the LI NET sponsor's total expected cost, minus any beneficiary co-pays, and with a reasonable margin that represents the LI NET sponsor's profit. Also, unlike other Part D payments, payments under the LI NET demonstration would not be risk adjusted. Because payments under the LI NET demonstration are cost reconciled (with the exception of risk corridors) and there is no concern about the LI NET sponsor cherry-picking beneficiaries, we use a simpler payment methodology that does not include risk adjustment.

We propose in § 423.2524(c)(1) that Payment Rate A would be a monthly payment for projected administrative costs, constrained by an annual percentage cap set as part of the bid

review and negotiation under § 423.272(a). Payment Rate A would include two elements, as it does unde

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/fr%3A2022-26956. Public record. Not legal advice.