[Federal Register Volume 75, Number 247 (Monday, December 27, 2010)]
[Notices]
[Pages 81278-81280]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-32498]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

[CMS-6041-NC]


Medicare Program: Solicitation of Comments Regarding Development 
of a Recovery Audit Contractor Program for the Medicare Part C and D 
Programs

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

ACTION: Request for information.

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SUMMARY: This notice presents an approach and requests comments on the 
provision of the Patient Protection and Affordable Care Act (Pub. L. 
111-148), as amended by the Health Care and Education Reconciliation 
Act of 2010 (Pub. L. 111-152), (collectively known as The Affordable 
Care Act (ACA)) that requires the expansion of the Recovery Audit 
Contractor (RAC) Program to the Medicare Part C and D programs.

DATES: Comment Date: To be assured consideration, comments must be 
received at one of the addresses provided below, no later than 5 p.m. 
on February 25, 2011.

ADDRESSES: In commenting, please refer to file code CMS-6041-NC. 
Because of staff and resource limitations, we cannot accept comments by 
facsimile (FAX) transmission.
    You may submit comments in one of four ways (please choose only one 
of the ways listed):
    1. Electronically. You may submit electronic comments on this 
regulation to http://www.regulations.gov. Follow the ``Submit a 
comment'' instructions.
    2. By regular mail. You may mail written comments to the following 
address ONLY: Centers for Medicare & Medicaid Services, Department of 
Health and Human Services, Attention: CMS-6041-NC, P.O. Box 8013, 
Baltimore, MD 21244-8013.
    Please allow sufficient time for mailed comments to be received 
before the close of the comment period.
    3. By express or overnight mail. You may send written comments to 
the following address ONLY: Centers for Medicare & Medicaid Services 
Department of Health and Human Services, Attention: CMS-6041-NC, Mail 
Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.
    4. By hand or courier. Alternatively, you may deliver (by hand or 
courier) your written comments only to one of the following addresses 
prior to the close of the comment period: a. For delivery in 
Washington, DC--Centers for Medicare & Medicaid Services Department of 
Health and Human Services, Room 445-G, Hubert H. Humphrey Building, 200 
Independence Avenue, SW., Washington, DC 20201.
    (Because access to the interior of the Hubert H. Humphrey Building 
is not readily available to persons without Federal government 
identification, commenters are encouraged to leave their comments in 
the CMS drop slots located in the main lobby of the building. A stamp-
in clock is available for persons wishing to retain a proof of filing 
by stamping in and retaining an extra copy of the comments being 
filed.)
    b. For delivery in Baltimore, MD--Centers for Medicare & Medicaid 
Services Department of Health and Human Services, 7500 Security 
Boulevard, Baltimore, MD 21244-1850.
    If you intend to deliver your comments to the Baltimore address, 
call (410) 786-9994 in advance to schedule your arrival with one of our 
staff members.
    Comments erroneously mailed to the addresses indicated as 
appropriate for hand or courier delivery may be delayed and received 
after the comment period.
    Submission of comments on paperwork requirements. You may submit 
comments on this document's paperwork requirements by following the 
instructions at the end of the ``Collection of Information 
Requirements'' section in this document.
    For information on viewing public comments, see the beginning of 
the SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION CONTACT: Cynthia Moreno (410) 786-1164.

SUPPLEMENTARY INFORMATION:
    Inspection of Public Comments: All comments received before the 
close of the comment period are available for viewing by the public, 
including any personally identifiable or confidential business 
information that is included in a comment. We post all comments 
received before the close of the comment period on the following Web 
site as soon as possible after they have been received: http://www.regulations.gov. Follow the search instructions on that Web site to 
view public comments.
    Comments received timely will also be available for public 
inspection as they are received, generally beginning approximately 
three weeks after publication of a document, at the headquarters of 
CMS, 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. Background

    The Balanced Budget Act of 1997 (BBA) (Pub. L. 105-33) established 
the Medicare+Choice (M+C) program. Under section 1851(a)(1) of the 
Social Security Act (the Act), every individual with Medicare Parts A 
and B, except for individuals with end stage renal disease, could elect 
to receive benefits either through the original Medicare program or an 
M+C plan, if one was offered where the beneficiary lived. The primary 
goal of the M+C program was to provide Medicare beneficiaries with a 
wider range of health plan choices.
    The Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act of 
1999, (Pub. L. 106-113), amended the M+C provisions of the BBA. Further 
amendments were made to the M+C program by the Medicare, Medicaid, and 
SCHIP Benefits Improvement and Protection Act of 2000 (Pub. L. 106-
554), enacted December 21, 2000.
    On December 8, 2003, the Congress enacted the Medicare Prescription 
Drug, Improvement, and Modernization Act of 2003 (MMA) (Pub. L. 108-
173). Title I of the MMA added new sections 1860D-1 through 1860D-42 to 
the Act creating the Medicare Prescription Drug Benefit (Part D) 
program, a landmark change to the Medicare program.
    Sections 201 through 241 of Title II of the MMA made significant 
changes to the M+C program. As directed by Title II of the MMA, we 
renamed the M+C program the Medicare Advantage (MA) program. We also 
revised our regulations to include new payment and bidding provisions 
based largely on risk, to recognize the addition of regional Preferred 
Provider Organization plans, to address the provision of prescription

[[Page 81279]]

drug benefits under the Medicare Part D regulations, and to make other 
changes.
    The MMA, at section 1860D-12(b)(3) of the Act, directed that 
specific aspects of the MA contracting requirements apply to the 
prescription drug plan benefit program. Consequently, the processes for 
contract determinations and the administrative appeal rights in the two 
programs are virtually identical.
    We published the regulations implementing the MA and prescription 
drug benefit regulations separately, as proposed and final rules, 
though their development and publication were closely coordinated. On 
August 3, 2004, we published proposed rules for the MA program (69 FR 
46866) and prescription drug benefit program (69 FR 46632). The final 
regulations implementing both programs, published on January 28, 2005 
(70 FR 4588 and 70 FR 4194, respectively), reflect this similarity.
    Section 306 of the MMA gave us authority to pilot a new contracting 
authority designed to detect improper payments. This MMA provision 
directed the Secretary to demonstrate the use of RACs in identifying 
Medicare fee-for-service (FFS) underpayments and overpayments and 
collecting Medicare overpayments. Overpayments and underpayments were 
identified through a careful review of individual Medicare claims to 
determine if the claims were medically necessary, correctly coded, and 
conformed to Medicare payment policy. An important characteristic of 
the RAC program is that RACs are paid contingency fees based on the 
overpayments collected from providers and for underpayments identified.
    The initial demonstration project ran from 2005 to 2008 in 
California, New York, Florida, Massachusetts, South Carolina, and 
Arizona. One of the key objectives of the RAC demonstration program was 
to identify improper payments in Medicare FFS programs and implement 
corrective actions that will prevent future improper payments. We 
designed the demonstration to accomplish two specific goals: To 
demonstrate whether RACs can identify past improper payments in the 
Medicare FFS program (as specified in section 306 of the MMA); and to 
determine whether the RACs can provide information to CMS that could 
help prevent future improper payments. The demonstration proved to be 
successful, recovering $992.7 million in gross overpayments, as well as 
identifying $37.8 million in underpayments that were subsequently paid 
to providers.
    The demonstration results showed the effectiveness of a recovery 
auditing program in Medicare Part A and Part B. The Tax Relief and 
Health Care Act of 2006 (Pub. L. 109-432) gave the Secretary until 
January 1, 2010 to implement the national RAC program nationwide. As of 
October 29, 2009 the RAC FFS Medicare program was fully implemented. 
Currently, the RACs are reviewing all claim and provider types upon 
approval from us. The ACA makes a number of changes to Medicare 
programs, including Medicare Part C and Part D, to enhance the agency's 
current efforts to further reduce fraud, waste, and abuse in Medicare 
programs.
    Section 6411(b) of ACA expands the use of RACs to all of Medicare 
(Title XVIII) amending the existing FFS RAC statute at section 1893(h) 
of the Act. The amendments to 1893(h) of the Act provide us with 
general authority to enter into contracts with RACs to identify 
overpayments and underpayments and recoup overpayments in Medicare Part 
C and Part D. In addition to the identification of underpayments and 
overpayments and the recoupment of overpayments, section 6411 of ACA 
also establishes special rules for Part C and Part D that require RACs 
to--
    <bullet> Ensure that each MA plan and Part D plan has anti-fraud 
plans in place and to review the effectiveness of the anti-fraud plans;
    <bullet> Examine claims for reinsurance payments to determine 
whether prescription drug plans submitting such claims incurred costs 
in excess of the allowable reinsurance costs permitted under the 
statute; and
    <bullet> Review estimates submitted by prescription drug plans by 
private plans with respect to the enrollment of high cost beneficiaries 
(as defined by the Secretary) and to compare such estimates with the 
numbers of such beneficiaries actually enrolled by such plans.

II. Proposed Approach and Solicitation of Comments for Section 6411 of 
the Affordable Care Act

    We want to utilize RAC overpayment and underpayment findings to 
reduce future improper payments in the Medicare Parts C and D programs. 
With that objective, we are interested in knowing how the RAC findings 
could be used to more accurately inform Medicare's reimbursement to 
Part C and Part D plans. Our current experience for utilizing RACs has 
been limited to the Medicare FFS model. Given the fundamental 
differences between Medicare FFS and the Medicare Parts C and D 
programs and since this is the first time we have attempted to expand 
RACs to other parts of the Medicare program, we are soliciting the 
views of industry stakeholders on how to best implement the RAC program 
requirements established in section 6411(b) of the ACA for the Medicare 
Part C and Part D programs. We recognize that the payment structure in 
the Medicare Part C and Part D programs is different than in Medicare 
FFS, so we want to ensure that the RACs are utilized in the most 
efficient and appropriate manner to return any identified overpayments 
to the Medicare Trust Fund.
    Based on the comments received from this solicitation, we may do 
further rulemaking on the development and implementation of 
requirements for RACs in the Part C and Part D programs. We are most 
interested in receiving comments on the following:
    <bullet> Methods for RACs to identify underpayments and 
overpayments in the Medicare Part C and Part D programs.
    <bullet> Utilizing a phased-in approach for RACs in the Medicare 
Part C and Part D programs, similar to the development of RACs in the 
Medicare FFS program.
    <bullet> The criteria or qualifications necessary to enable a RAC 
to knowledgeably and appropriately review the payments in Medicare Part 
C and Part D plans. (We note that in order to meet the qualifications, 
the Medicare FFS RACs must obtain the services of certified coders, 
nurses, or therapists, and a Contractor Medical Director.)
    <bullet> Specific conflict of interest rules that should apply to 
RACs for the Medicare Parts C and D programs.
    <bullet> Establishing an oversight entity for Medicare Part C and 
Part D RAC Issue Approval. We are considering establishing a review 
board for the Part C and Part D RACs. (We note that FFS RACs have the 
authority to pursue clear-cut vulnerabilities that can lead to improper 
payments. However, for more complex vulnerabilities, a review board is 
utilized. This board decides whether FFS RACs can proceed with the 
proposed review.)
    <bullet> Methods for resolving underpayments and how payments 
related to underpayments identified by the RAC would be implemented in 
the Part C and Part D programs.
    <bullet> Potential for allowing Part C and Part D plans to use RACs 
within their own plans to identify overpayments in its operations. 
Working through us, the RAC contractor would come to an agreement with 
interested MA organizations (MAO) to conduct claims review. The claims 
review would be conducted on claims submitted to the MAO for payment to 
providers serving the MAO enrollees. The RAC would be paid by the MA 
organization on a

[[Page 81280]]

contingency fee basis and overpayments the MAO recoups as a result of 
the RAC activities would be retained by the MAO. In approaching this 
work, the RAC contractor would consider the use of complex and 
automated review of claims.
    <bullet> Approaches to implementing the following special rules 
provisions of section 6411(b) of ACA:
    ++ We want to utilize RACs to ensure that each Part C and Part D 
plan has anti-fraud plans in place and to review the effectiveness of 
those anti-fraud plans. In accordance with section 1893(h) of the ACA, 
the RACs for the Part C and Part D programs would be paid on a 
contingency basis, as in the Medicare FFS program. We are interested in 
the industry's views on how to pay RACs on a contingency basis for 
reviewing anti-fraud plans in the Part C and Part D programs given 
there are no recoveries or overpayments resulting from a review of such 
plans. Should this contingency basis differ from how RACs are paid for 
reviewing Medicare FFS claims? If so, how?
    ++ The statute requires that we use RACs to examine claims for 
reinsurance payments to determine whether Part D plans submitting such 
claims incurred costs in excess of the allowable reinsurance costs 
permitted under the statute. Under the Part D statute, Part D plans 
legitimately incur costs in excess of allowable reinsurance costs 
during the catastrophic phase of the benefit. In the catastrophic phase 
of the defined standard benefit, 80 percent of the negotiated price is 
paid by Federal reinsurance, 15 percent is the responsibility of the 
sponsor (and is incorporated into their bid for the direct subsidy) and 
5 percent is the responsibility of the beneficiary. Prospective 
reinsurance payments to plans are based on plans' estimates of 
reinsurance costs and, as required by statute, we reconcile these 
prospective reinsurance payments for sponsors with actual reinsurance 
costs. Given this annual reconciliation process, requiring RACs to 
review the accuracy of the prospective reinsurance payments is less 
likely to result in recovery of overpayments.
    However, we are considering having RACs examine the accuracy and 
completeness of sponsors' reporting of Direct and Indirect Remuneration 
(DIR). The DIR information reported by plans includes rebates paid by 
pharmaceutical manufacturers, as well as other remuneration received by 
the plan that has the effect of reducing their drug costs, and is used 
as a factor in our payment calculations to Part D plans. Under-
reporting of DIR by plans would overstate plans' drug costs, including 
in the catastrophic phase of the benefit, and would result in an 
overpayment to the plan. We are interested in receiving comments on how 
RACs could be used to review the accuracy and completeness of DIR 
information provided to us by plans.
    ++ The statute also requires that we use RACs to review estimates 
submitted by Part D plans with respect to enrollment of high cost 
beneficiaries. A Part D sponsor's estimates for the enrollment of high 
cost beneficiaries may impact the reinsurance estimates in their Part D 
bids and thus, the prospective reinsurance subsidy payments they 
receive from us. However, given the structure of the Part D program 
that requires us to reconcile reinsurance subsidy payments against a 
Part D sponsor's actual costs, requiring RACs to undertake this 
activity is less likely to result in recovery of any reinsurance 
overpayments. However, as noted previously, we are interested in 
receiving comments on how RACs might be used to identify overpayments 
and underpayments associated with DIR reporting.
    ++ We are interested in learning about successful overpayment 
recoupment models in managed care that may already exist in the 
commercial sector and to what extent these models are applicable to 
Part C. Successfully integrating RACs into Part C presents a particular 
challenge because of how Part C payments are paid. Under the statutory 
payment formula, plans are paid on a capitated basis. Therefore, the 
plan, not the government, is at direct risk for any overpayments and 
underpayments made to its providers. We are interested in learning 
whether and how other purchasers have identified overpayments and 
underpayments made by capitated plans and to what extent savings were 
shared between the plan and the purchaser.
    <bullet> Any additional information concerning the development of a 
RAC program in Medicare Part C and Part D and how we can establish the 
required program elements to protect the Medicare Parts C and D 
programs from fraud, waste, and abuse.

(Catalog of Federal Domestic Assistance Program No. 93.773, 
Medicare--Hospital Insurance; and Program No. 93.774, Medicare--
Supplementary Medical Insurance Program)


    Dated: December 8, 2010.
Donald M. Berwick,
Administrator, Centers for Medicare & Medicaid Services.
[FR Doc. 2010-32498 Filed 12-23-10; 8:45 am]
BILLING CODE 4120-01-P