On October 9, 2009, CMS issued a proposed rule, Policy and Technical Changes to the Medicare Advantage and the Medicare Prescription Drug Benefit Programs (Proposed Rule), which establishes new and revised rules for Medicare managed care (Part C), Medicare Advantage (MA), and Medicare prescription drug plans (Part D). CMS will accept comments on the Proposed Rule until December 8, 2009.

The proposed changes will affect the regulations in 42 C.F.R. parts 417, 422, 423, and 480, which govern the MA and prescription drug benefit programs. Specifically, the proposed regulatory changes and additions address eight goals as follows:

Changes to Strengthen Ability to Distinguish Strong Part C and D Applicants and Remove Consistently Poor Performers

CMS' proposed changes and clarifications make certain that all current and potential Part C and D sponsors clearly understand and can reasonably anticipate how CMS measures performance to determine whether Part C and D sponsors are non-compliant with plan parameters. Among the changes, CMS has clarified that it will limit applicants to three submission opportunities to participate as sponsors: (1) the initial solicitation response; (2) a courtesy opportunity to address any identified deficiencies; and (3) a final opportunity during a 10-day cure period provided specifically in the regulations. CMS also will require all applicants to complete a Notice of Intent to Apply. Further, CMS is streamlining the applicant review process, limiting the review to information provided in the application itself and during any on-site visits and inspections. Also, CMS has clarified its previous guidance regarding training of downstream entities. CMS now proposes that providers and suppliers contracted with Part C and D sponsors will be deemed to have met the downstream entity-training requirement by virtue of being a supplier/provider enrolled in Medicare. This modification should simplify sponsor-training requirements for downstream entities. Lastly, CMS is proposing to review past Part C and D sponsor performance across all contracts held by an applicant as part of the application review.

Changes for Strengthening Beneficiary Protections

For Part D, CMS addresses proposals in the areas of:

Plan eligibility and enrollment policy

Transition period requirements

Coordination of benefits policy

Retroactive claims adjustment reimbursements and recoveries

Use of standardized technology

CMS also proposes to review the Part D rules regarding timeframes and responsibility for making redeterminations on disputed claims denials for beneficiaries. Under Part C, CMS proposes rules to:

Authorize CMS to establish an overall annual cap on member cost-sharing

Prohibit preferred provider organizations (PPO) and private fee-for-service plans (PFFS), and metropolitan statistical area plans from using compliance with voluntary prior notification procedures in determining cost-sharing amounts

Establish new requirements for organization determinations

Further, in regards to marketing of both Part C and D offerings, CMS continues to monitor plans that use independent agents and brokers to ensure their adherence to CMS requirements. CMS also proposes to strengthen marketing requirements by distinguishing marketing materials from enrollee communication materials and requiring the use of standard marketing material language and formatting to ensure clarity and accuracy among the plan documents.

Changes Providing Plan Offerings With Sufficient Enrollment and Meaningful Differences

One of the initial goals of the Part C and D offerings was that both market competition and flexibility provided to MA organizations and Part D sponsors would result in a broad array of cost-effective health and prescription drug coverage to beneficiaries. While CMS believes that the goal has largely been accomplished, CMS has decided that significant differences between benefit packages must exist to ensure thoughtful choices by beneficiaries. Part of CMS' goal of streamlining and simplifying the plan election process for beneficiaries is to reduce confusion. For example, some sponsors have submitted multiple plan options for approval by CMS that are not significantly different from each other. Beneficiaries might be confused in selecting among similar plan options from one sponsor in a particular geographic area. CMS also proposes to revise the non-renewal regulations to expressly provide grounds for non-renewal if a plan consistently attracts small numbers of enrollees.

Changes to Improve Payment Rules and Processes

CMS addresses four payment issues under the Part C program. First, CMS outlines a new proposed dispute- and appeal-rights process for risk adjustment data, validation, and audit findings that have resulted in Part C and D sponsor payment errors. Secondly, CMS proposes to require an actuarial certification for Part C bids. Third, CMS proposes clarification on how health care prepayment plans (HCCP) and cost plans authorized under 42 U.S.C. §1395 mm must determine acceptable administrative costs. Finally, CMS proposes to update its regulations to eliminate a two-percent minimum update for all rate calculations other than end-stage renal disease (ESRD).

Changes to Improve Data Collection for Oversight and Quality Assessments

CMS has proposed four changes to the regulations in this area. First, CMS proposes to use data collected by quality improvement organizations (QIO) to assess plan quality improvement and performance. Second, CMS proposes that beginning in 2011, Part C and Part D sponsors will have to pay for data-collection costs in the Consumer Assessment of Health Care Providers and Systems (CAHPS) survey. Third, CMS proposes that each Part C and D sponsor hire an independent auditor to determine reliability, validity, completeness, and comparability in accordance with specifications developed by CMS. Finally, CMS proposes to amend its rules on collection and use of prescription-drug event data for non-payment-related purposes.

Changes to Implement Policy Alterations

CMS proposes two policy changes. First, under Part C, CMS proposes to revise its rules to allow beneficiaries who elect Medical Savings Accounts (MSA) as health insurance plans to pay only a pro-rated deductible if the MSA deposit is pro-rated due to enrollment after January 1 of a calendar year. Second, in the area of Part D formulary policy, CMS proposes new requirements affecting the inclusion of protected drug categories and classes on formularies following the enactment of the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA), which made a number of changes to the Part C and D programs.

Changes to Verify Various Program Participation Requirements

In the past, CMS has implemented operational and/or policy guidance by memoranda or manual instruction to assist Part C and Part D sponsors in administering their respective programs. CMS proposes the following clarifications in the regulations to further aid Part C and D sponsors. These proposed regulations serve to codify prior guidance:

Clarify what CMS means by uniform benefits

Ensure security of personal health information and other personally identifiable information

Require plans to report other payor information to support coordination of benefits

Extend enrollment of visitor/travel benefit under Part C for up to 12 months

Codify authority to establish medication therapy management (MTM) program requirements

Clarify pharmacy and therapeutic committee (P & T) program requirements

Establish/codify generic equivalent disclosure

Establish access standards of application level

Establish standard timeframe for coverage requirements

Clarify innovation requirements

Revise cost contract per appeals and marketing requirements

Changes to Implement Corrections and Other Technical Changes

Further, CMS is implementing technical changes and corrections to the regulations as outlined below:

Application of Subpart M to Health Care Prepayment Plans

Generic Notice Requirements

Revision to Definition of Gross Covered Prescription Drug Costs

Application Evaluation Procedures

Intermediate Sanctions

Basis for Imposing Intermediate Sanctions and Civil Money Penalties

The Proposed Rule was posted on October 9, 2009 at http://www.federalregister.gov/inspection.aspx and is scheduled to be published in the Federal Register on October 22, 2009. The comment period for this proposed rule will close on December 8, 2009.

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