54600 Federal Register / Vol. 76, No. 170 / Thursday, September 1, 2011 / Rules and Regulations 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

Centers for Medicare & Medicaid 

Services 

42 CFR Parts 417, 422, and 423 

[CMS–4131–F and CMS 4138–F] 

RIN 0938–AP24 and 0938–AP52 

Medicare Program; Medicare 

Advantage and Prescription Drug 

Benefit Programs 

AGENCY: Centers for Medicare & 

Medicaid Services (CMS), HHS. 

ACTION: Final rule. 

SUMMARY: This final rule finalizes 

revisions to the regulations governing 

the Medicare Advantage (MA) program 

(Part C), prescription drug benefit 

program (Part D) and section 1876 cost 

plans including conforming changes to 

the MA regulations to implement 

statutory requirements regarding special 

needs plans (SNPs), private fee-forservice plans (PFFS), regional preferred 

provider organizations (RPPO) plans, 

and Medicare medical savings accounts 

(MSA) plans, cost-sharing for dualeligible enrollees in the MA program 

and prescription drug pricing, coverage, 

and payment processes in the Part D 

program, and requirements governing 

the marketing of Part C and Part D 

plans. 

DATES: Effective Date: Except as 

otherwise specified these regulations are 

effective on October 31, 2011. 

FOR FURTHER INFORMATION CONTACT: 

Vanessa Duran, (410) 786–8697 and 

Heather Rudo, (410) 786–7627, 

General information. 

Christopher McClintick, (410) 786– 

4682, Part C issues. 

Lisa Thorpe, (410) 786–3048, Part D 

issues. 

Frank Szeflinski, (303) 844–7119, Part C 

payment issues. 

Camille Brown, (410) 786–0274, 

Marketing issues. 

SUPPLEMENTARY INFORMATION: 

I. Background 

The Balanced Budget Act of 1997 

(BBA) (Pub. L. 105–33) established a 

new ‘‘Part C’’ in the Medicare statute 

(sections 1851 through 1859 of the 

Social Security Act (the Act)) which 

established the current MA program. 

The Medicare Prescription Drug, 

Improvement, and Modernization Act of 

2003 (MMA) (Pub. L. 108–173) 

established the Part D program and 

made significant revisions to Part C 

provisions governing the Medicare 

Advantage (MA) program. The MMA 

directed that important aspects of the 

Part D program be similar to, and 

coordinated with, regulations for the 

MA program. Generally, the provisions 

enacted in the MMA took effect January 

1, 2006. The final rules implementing 

the MMA for the MA and Part D 

prescription drug programs appeared in 

the January 28, 2005 Federal Register 

on (70 FR 4588 through 4741 and 70 FR 

4194 through 4585, respectively). 

As we gained more experience with 

the MA program and the prescription 

drug benefit program, we proposed to 

revise areas of both programs and issued 

a proposed rule on May 16, 2008 (73 FR 

28556) that would have clarified 

existing policies or codified current 

guidance for both programs. The 

Medicare Improvements for Patients and 

Providers Act (MIPPA) (Pub. L. 110– 

275), enacted on July 15, 2008, called 

upon the Secretary to revise the 

marketing requirements for Part C and 

Part D plans in several areas. MIPPA 

also enacted changes with respect to 

Special Needs Plans (SNPs), Private FeeFor-Service plans (PFFS), Quality 

Improvement Programs, the prompt 

payment of Part D claims, and the use 

of Part D data. With the exceptions 

noted in this final rule, MIPPA required 

that these new rules take effect at a date 

specified by the Secretary, but no later 

than November 15, 2008. 

Because several of these proposed 

regulatory revisions in our May 16, 2008 

proposed rule were overtaken by 

statutory provisions in MIPPA, the 

MIPPA provisions superseded our 

proposed rulemaking in these areas. For 

example, some provisions in our May 

16, 2008 proposed rule addressed issues 

in areas in which MIPPA required that 

we establish marketing limits no later 

than November 15, 2008. As a result, we 

implemented all provisions addressed 

in our May 16, 2008 proposed rule, and 

later overtaken by MIPPA provisions, in 

our September 18, 2008 and November 

14, 2008 interim final rules with 

comment (IFCs). We finalized the nonMIPPA related provisions of our May 

16, 2008 proposed rule in our January 

16, 2009 final rule with comment 

period. 

This final rule finalizes the MIPPArelated provisions of our September 18, 

2008 IFC (73 FR 54226), our November 

14, 2008 IFC (73 FR 67406), our 

November 21, 2008 correction notice (73 

FR 70598), and one provision on two 

SNP-related statutory definitions that 

was finalized with a comment period in 

our January 16, 2009 final rule with 

comment period (74 FR 2881). 

II. Provisions of This Final Rule 

Revisions made in this final rule 

govern section 1876 cost contract plans 

and the MA and prescription drug 

benefit programs. Several of the final 

provisions affect both the MA and Part 

D programs. In our discussion that 

follows, we note when a provision 

affects both the MA and prescription 

drug benefit, and we include in section 

II.C. of this final rule, a table comparing 

the final Part C and Part D program 

changes by specifying each issue and 

the sections of the Code of Federal 

Regulations that we are revising for both 

programs. 

A. Changes to the Regulations in Part 

422—Medicare Advantage Program 

1. Special Needs Plans 

Congress authorized special needs 

plans (SNPs) as a type of Medicare 

Advantage (MA) plan designed to enroll 

individuals with special needs. The 

three types of special needs individuals 

eligible for enrollment in a SNP 

identified in the MMA include—(1) 

Institutionalized individuals (defined in 

§ 422.2 as an individual continuously 

residing, or expecting to continuously 

reside, for 90 days or longer in a long 

term care facility); (2) individuals 

entitled to medical assistance under a 

State Plan under title XIX of the Act; or 

(3) other individuals with severe or 

disabling chronic conditions that would 

benefit from enrollment in a SNP. 

As of January 2011, there are 455 SNP 

plan benefit packages (PBPs) in 

operation nationwide. These SNP PBPs 

include 298 dual-eligible SNP (D–SNP) 

PBPs, 92 chronic care SNP (C–SNP) 

PBPs, and 65 institutional SNP (I–SNP) 

PBPs. 

a. Model of Care (§ 422.101(f)) 

Section 164 of MIPPA added care 

management requirements for all SNPs 

effective January 1, 2010, as set forth in 

section 1859(f)(5) of the Act (42 U.S.C. 

1395w–28(f)). The new mandate 

required dual-eligible, institutional, and 

chronic condition SNPs to implement 

care management requirements which 

have two explicit components: an 

evidence-based model of care and a 

battery of care management services. 

While the revisions made in our 

September 18, 2008 IFC simply reflected 

the substance of the new MIPPA 

provisions, our May 16, 2008 proposed 

rule proposed other, related provisions 

which were finalized in our January 12, 

2009 final rule. 

The first component of the new 

mandate enacted in section 164 of 

MIPPA is a requirement for an evidencebased model of care with an appropriate 


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network of providers and specialists 

that meet the specialized needs of the 

SNP target population. We received a 

few comments on our September 18, 

2008 IFC about whether we would issue 

evidence-based guidelines for the model 

of care, but we did not in our September 

18, 2008 IFC implement this mandate to 

endorse any particular set of evidencebased guidelines or protocols; instead, 

we expected that SNPs would develop 

such guidelines and protocols based on 

the specific elements to be included in 

the model of care as found in the 2008 

and 2009 Call Letters. We expected that 

SNPs would be able to use resources 

such as the Agency for Healthcare 

Research and Quality (AHRQ, http:// 

www.ahrq.gov/). AHRQ does not 

endorse any particular set of evidencebased guidelines or protocols; however, 

its Web site includes access to 

nationally-recognized evidence-based 

practices. The second component is a 

battery of care management services that 

includes: (1) A comprehensive initial 

assessment and annual reassessments of 

an individual’s physical, psychosocial, 

and functional needs; (2) an 

individualized plan of care that 

includes goals and measurable 

outcomes, including specific services 

and benefits to be provided; and (3) an 

interdisciplinary team to manage care. 

In addition, MIPPA mandated a periodic 

audit of SNPs to ensure SNPs meet the 

model of care requirements. 

We also have issued guidance on the 

SNP model of care in our 2008 and 2009 

Call Letters. In addition, care 

coordination and the presence of a 

provider network comprised of clinical 

experts pertinent to a SNP’s target 

population have long been the 

cornerstones of the SNP model of care. 

In this final rule, we are revising 

§ 422.101(f)(1), which was effective 

January 1, 2010, to correct a typo. The 

phrase that we are replacing is 

‘‘indentifying goals,’’ and adding 

‘‘identifying goals’’ in its place. 

b. Definitions: Institutional-Equivalent 

and Severe or Disabling Chronic 

Condition (§ 422.2) 

Section 164 of MIPPA, inter alia, 

modified the requirements and 

definitions pertaining to an institutional 

special needs individual and a ‘‘severe 

or disabling chronic condition’’ special 

needs individual, without specifically 

defining the relevant terms. In response 

to our May 16, 2008 proposed rule 

regarding eligibility for institutionallevel individuals and severe or disabling 

chronic condition individuals, we 

received public comments that 

requested that we propose two 

additional SNP definitions. 

Accordingly, in our January 12, 2009 

final rule with comment period in 

which we added definitions based on 

comments from the May 16, 2008 

proposed rule, we specified the 

following definitions for ‘‘Institutional 

Equivalent’’ and ‘‘Disabling Chronic 

Condition.’’ 

‘‘Institutional-equivalent’’ means, for 

the purpose of defining a special needs 

individual, an MA eligible individual 

who is living in the community, but 

requires an institutional level of care 

(LOC). The determination that the 

individual requires an institutional LOC 

must be made by— 

• The use of a State assessment tool 

from the State in which the individual 

resides; and 

• An assessment conducted by an 

impartial entity with the requisite 

knowledge and experience to accurately 

identify whether the beneficiary meets 

the institutional LOC criteria. 

In States and territories that do not 

have an existing institutional LOC tool, 

the individual must be assessed using 

the same methodology that specific 

State uses to determine institutional 

LOC for Medicaid nursing home 

eligibility. 

In our January 12, 2009 final rule with 

comment period, we specified that the 

determination of institutional LOC must 

be made using a State assessment tool 

because States have extensive 

experience in making LOC 

determinations. We also specified that 

this LOC determination also be made by 

an additional entity, other than the 

Medicare Advantage Organization 

(MAO), to ensure the impartially of the 

assessment. 

‘‘Severe or Disabling Chronic 

Condition’’ means, for the purposes of 

defining a special needs individual, an 

MA eligible individual who has one or 

more co-morbid and medically complex 

chronic conditions that are substantially 

disabling or life-threatening; has a high 

risk of hospitalization or other 

significant adverse health outcomes; 

and requires specialized delivery 

systems across domains of care. 

We did not receive any comments on 

these definitions. As such, they are 

adopted without modification in this 

final rule. 

c. Dual-Eligible SNPs and Contracts 

With States (§ 422.107) 

Section 164(c) of MIPPA modified 

section 1859(f)(3)(D) of the Act to 

require that, effective January 1, 2010, 

all MA organizations offering new dualeligible SNPs (D–SNPs), or seeking to 

expand the service area of existing D– 

SNPs, have a contract with the State 

Medicaid agency(ies) in the State(s) in 

which the D–SNP operates to provide 

benefits, or to arrange for the provision 

of benefits to individuals entitled to 

receive medical assistance under title 

XIX of the Act. In order to implement 

this requirement, we specified in our 

(74 FR 54226) IFC published on 

September 18, 2008 that the contract 

with the State Medicaid agency(ies) 

must include, at minimum: (1) The 

MAO’s responsibility to provide or 

arrange for Medicaid benefits; (2) the 

category(ies) of eligibility covered under 

the D–SNP; (3) the Medicaid benefits 

covered under the D–SNP; (4) the costsharing protections covered under the 

D–SNP; (5) the identification and 

sharing of information on Medicaid 

provider participation; (6) the 

verification of enrollee’s eligibility for 

both Medicare and Medicaid; (7) the 

service area covered by the D–SNP; and 

(8) the contract period for the D–SNP. 

We further clarified that States are not 

required to enter into these contracts 

with a particular plan or any SNP in the 

state at all, and that we would not 

permit D–SNPs without State contracts 

to expand their service areas in 2010. 

We also specified that, for contract year 

2010, MAOs with existing D–SNPs may 

continue to operate in their existing 

service area without a State Medicaid 

Agency contract, provided they meet all 

other statutory requirements, including 

care management and quality 

improvement program requirements. We 

set forth these requirements at 

§ 422.107. 

Comment: Many commenters 

supported requiring the collaboration 

between MAOs offering D–SNPs and 

State Medicaid agencies. However, the 

majority of comments that offered 

qualified support raised questions and 

concerns about operational issues 

related to the submission of these State 

Medicaid Agency contracts to CMS. 

Several commenters contended that 

variation in State contracting and 

procurement processes make it difficult 

for D–SNPs to obtain State Medicaid 

Agency contracts by CMS’ deadline, and 

requested that we give D–SNPs 

additional time and flexibility, on a case 

by case basis, to meet our contracting 

deadlines. 

Response: We appreciate the 

commenters’ support for the 

requirement that D–SNPs contract with 

the State Medicaid agencies in the 

States within which the D–SNPs 

operate. Although we appreciate the 

information about how D–SNPs are 

impacted by our State Medicaid Agency 

contract submission deadlines, we are 

not modifying the provision to address 

the operational issues that the 

commenters raised because we do not 


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believe that rulemaking is the 

appropriate vehicle for addressing such 

issues. However, we note, that while we 

are not addressing these specific 

operational concerns in this final rule, 

we provided operational guidance to 

MAOs well in advance of the 2012 

contract submission deadline. 

Additional guidance for the 2013 

contract submission deadline will be 

included in the 2013 SNP Application, 

the Call Letter for CY 2013, and in any 

additional HPMS memoranda about the 

D–SNP–State Medicaid agency contract 

requirement. 

Comment: A number of commenters 

that submitted comments sought 

clarification on the States’ obligations to 

contract with D–SNPs, including 

whether a State Medicaid agency is 

required to enter into contracts with all 

D–SNPs that seek to operate in its State. 

One commenter expressed concern 

about being able to contract with all of 

the D–SNPs that operate in its State 

because of budgetary concerns and 

contended that this MIPPA requirement 

to contract with D–SNPs conflicts with 

its established Medicaid managed care 

models. A few commenters suggested 

that CMS hold D–SNPs harmless if the 

D–SNP made a good faith effort to 

contract and the State Medicaid 

agencies either refused to contract with 

the D–SNP at all or refused to include 

the required provisions of § 422.107(c) 

in the contract between the DSNP and 

the State Medicaid agency. Several of 

these commenters requested that CMS 

provide incentives and assistance to 

States to contract with D–SNPs and 

facilitate the contracting process 

between D–SNPs and the State 

Medicaid agencies. By contrast, one 

commenter recommended that CMS 

communicate with State Medicaid 

agencies about D–SNPs that seek to 

operate in its State so the State can let 

CMS know what SNPs it will not 

contract with, thereby alleviating CMS’ 

burden of reviewing SNPs with which a 

State will not contract. 

Response: As explicitly provided in 

section 164(c)(4) of MIPPA, States are 

not under any obligations to contract 

with D–SNPs and can decline a D– 

SNP’s request to enter into a contract for 

any reason. D–SNPs must still comply 

with the State contract requirements as 

established in section 164(c) and our 

regulations at § 422.107. However, as 

required by MIPPA and modified by the 

Affordable Care Act of 2010, to operate 

during contract year 2013 and beyond, 

all D–SNPs must secure a State 

Medicaid Agency contract containing, at 

minimum, all provisions listed in 

§ 422.107(c); existing D–SNPs that do 

not obtain a required contract with their 

State Medicaid agency(ies) will not be 

permitted to continue. We do not 

believe that Congress intended that we 

hold D–SNPs harmless if the D–SNP 

made a good faith effort to contract and 

the State Medicaid agencies either 

refused to contract with the D–SNP at 

all or refused to include the required 

provisions. As required by section 

164(c) of MIPPA, and in an effort to 

facilitate the contracting process 

between State Medicaid agencies and 

D–SNPs, we have established a State 

Resource Center to provide States with 

helpful information as they engage in 

contract negotiations with D–SNPs. This 

State Resource Center is designed to 

facilitate integration and coordination of 

benefits, policies, and day-to-day 

business processes between State 

Medicaid agencies and D–SNPs, and 

was also developed to provide a forum 

for States to make inquiries and share 

information with CMS and each other 

about the coordination of State and 

Federal policies pertaining to SNPs. 

States and D–SNPs seeking assistance 

with these requirements may e-mail at 

State_Resource_Center@cms.hhs.gov, or 

visit the State Resource Center Web site 

at https://www.cms.hhs.gov/ 

SpecialNeedsPlans/ 

05_StateResourceCenter.asp. We are, 

therefore, finalizing this provision 

without further modification. 

Comment: Several commenters 

requested clarification on the meaning 

of ‘‘providing benefits, or arranging for 

benefits to be provided’’ under 

§ 422.107(b), which states that ‘‘[t]he 

MA organization retains responsibility 

under the contract for providing 

benefits, or arranging for benefits to be 

provided, for individuals entitled to 

receive medical assistance under title 

XIX * * *’’. A few commenters sought 

confirmation that, with this language, 

CMS is not requiring D–SNPs to provide 

the Medicaid benefits directly to the 

dual-eligible beneficiary; rather, these 

commenters suggested that they should 

be able to subcontract with another 

entity for the provision of the benefits. 

Additionally, one commenter 

questioned whether States may enter 

into a State Medicaid Agency contract 

with a D–SNP under which the SNP 

does not have a contractual obligation to 

provide any Medicaid benefits. As noted 

by this commenter, such an option 

would enable States to facilitate the 

continued operation of D–SNPs without 

creating a conflict with the State’s 

existing managed care models. 

Response: D–SNPs may provide 

Medicaid benefits directly, or under 

contract with another entity, but must 

retain responsibility for the Medicaid 

benefits. States and D–SNPs identify the 

package of Medicaid benefits included 

under the D–SNP in their contract 

negotiations. The requirement that the 

D–SNP retain responsibility for the 

Medicaid benefits does not allow for a 

MIPPA compliant State Medicaid 

Agency contract under which the SNP 

does not have a contractual obligation to 

provide any Medicaid benefits. We are, 

therefore, finalizing this provision 

without further modification. 

Comment: Many commenters 

questioned and sought clarification on 

the minimum contract requirements 

specified in § 422.107(c) and questioned 

whether various existing contracting 

arrangements between MAOs and States 

(that is, HIPAA business associate 

agreements or existing contracts 

between States and Medicaid managed 

care organizations) would satisfy the 

requirements of § 422.107(c). 

Commenters also requested we clarify: 

(1) The meaning of ‘‘provide or arrange 

for Medicaid benefits’’ under 

§ 422.107(c)(1); (2) whether under 

§ 422.107(c)(2), the State Plan governs 

the categories of dual eligible 

beneficiaries to be specified under the 

State contract, and whether the D–SNP 

must serve all duals in a State as 

opposed to smaller subsets of the State’s 

dual-eligible population; (3) the scope of 

Medicaid benefits to be covered under 

the SNP; (4) the meaning ‘‘cost sharing 

provisions under the SNP’’; (5) the 

meaning of ‘‘identification and sharing 

of information on Medicaid provider 

participation’’; (6) the meaning of 

‘‘verification of enrollee’s eligibility for 

both Medicare and Medicaid’’; (7) 

whether the Medicaid managed care 

contract service area must match up 

with the D–SNP service area; and (8) 

whether CMS will accept contracts with 

evergreen clauses. 

Response: In order to comply with the 

State Medicaid Agency contract 

requirements under section 164 of 

MIPPA, all contracts must, at minimum, 

contain the provisions outlined in 

§ 422.107(c). We are unable to make a 

blanket determination that certain 

agreements between SNPs and State 

Medicaid agencies do or do not contain 

all of the required provisions; rather, we 

will review each contract individually 

for each required element to determine 

compliance. To provide D–SNPs more 

information on these requirements, we 

released and will continue to update 

additional guidance through the 

Medicare Managed Care Manual and 

other guidance vehicles (that is, HPMS 

memos) on the minimum contract 

requirements specified in § 422.107. 

Additionally, the following 

explanations provide some further 


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clarification on the required contract 

provisions: 

• The MA organization’s 

responsibility, including financial 

obligations, to provide or arrange for 

Medicaid benefits: This requirement 

under § 422.107(c) simply requires that 

the contract between the D–SNP and the 

State Medicaid agency clearly outline 

the process by which the D–SNP will 

provide or arrange for Medicaid benefits 

and specify how the Medicare and 

Medicaid benefits will be integrated 

and/or coordinated. The meaning of 

‘‘provide or arrange for Medicaid 

benefits’’ is previously discussed in 

response to the previous comment 

regarding the meaning of these terms 

under § 422.107(b). 

• The category(ies) of eligibility for 

dual-eligible beneficiaries to be enrolled 

under the SNP, including the targeting 

of specific subsets: This contract 

provision must specify the population 

of dual-eligible beneficiaries eligible to 

enroll in the D–SNP, and any 

enrollment limitations for Medicare 

beneficiaries under this D–SNP must 

parallel any enrollment limitations 

under the Medicaid program and 

Medicaid State Plan. A D–SNP contract 

with a State Medicaid agency may be for 

the State’s entire population of dualeligible beneficiaries or may cover 

certain categories of dual-eligible 

individuals. To the extent a State 

Medicaid agency excludes specific 

groups of dual eligibles from their 

Medicaid contracts or agreements, those 

same groups must be excluded from 

enrollment in the SNP, provided that 

the enrollment limitations parallel the 

structure and care delivery of the State 

Medicaid program. For organizations 

that contract with the State as a 

Medicaid managed care plan, 

enrollment in the D–SNP must be 

limited to the dual-eligible beneficiaries 

permitted to enroll in that organization’s 

Medicaid managed care contract. 

• The Medicaid benefits covered 

under the SNP: This State contract 

provision must specify information on 

benefit design and administration, and 

delineate plan responsibility to provide 

or arrange for benefits. The contract 

should specify the Medicaid benefits 

offered under the State Plan as well as 

those benefits the D–SNP will offer that 

go beyond what is required under 

Original Medicare. 

• The cost-sharing protections 

covered under the SNP: The State 

Medicaid Agency contract should 

include the limitation on out of pocket 

costs for the applicable categories of 

dual eligible beneficiaries (for example, 

full benefit dual-eligible individuals). 

D–SNPs must enforce limits on out-ofpocket costs for dual-eligibles, and 

contracts between D–SNPs and State 

Medicaid agencies must specify that the 

D–SNP will not impose cost-sharing 

requirements on specified dual-eligible 

individuals that would exceed the 

amounts permitted under the State 

Medicaid Plan if the individual were 

not enrolled in the D–SNP. 

• The identification and sharing of 

information on Medicaid provider 

participation: Meeting this contracting 

element requires that the information 

provided include a process for the State 

to identify and share information on 

providers contracted with the State 

Medicaid agency for inclusion in the 

SNP provider directory. Although CMS 

does not require all providers to accept 

both Medicare and Medicaid, the D– 

SNP’s Medicare and Medicaid networks 

should meet the needs of the dualeligible population served. 

• The verification of enrollee’s 

eligibility for both Medicare and 

Medicaid: The contract must describe in 

detail how the State Medicaid agency 

will provide D–SNPs with access to real 

time information to verify eligibility of 

enrolled dual eligible members. 

• The service area covered by the 

SNP: The State contract provision must 

clearly identify the covered service area 

in which the State has agreed the D– 

SNP may operate. The D–SNPs service 

area cannot exceed the service area 

specified in the State Medicaid Agency 

contract. By contrast, the Medicaid 

managed care service area can exceed or 

include more counties than the D–SNP 

service area. 

• The contract period for the SNP: 

The State Medicaid Agency contract 

requires a contract term covering at least 

January 1 through December 31 of the 

relevant MA contract year. If the State 

is unable to meet this required contract 

term provision, the D–SNP may include 

an evergreen clause within the contract 

and provide information about when the 

State issues updates to its existing 

contracts with evergreen clauses. 

Therefore, we are finalizing this 

provision without modification. 

Comment: One commenter sought 

clarification about whether a D–SNP 

with authority to operate without a State 

Medicaid Agency contract can increase 

enrollment in the existing counties in its 

service area. 

Response: D–SNPs that are permitted 

to operate in contract year 2012 without 

a State Medicaid Agency contract are 

also permitted to increase enrollment in 

the counties in their existing service 

area. Section 164(c) of MIPPA provided 

that all new D–SNPs must have 

contracts with the State Medicaid 

agencies in the States in which the D– 

SNPs operate. This provision allowed 

existing D–SNPs that were not seeking 

to expand their service areas the 

authority to continue operating without 

a State contract through the 2010 

contract year. In 2010, section 3205 of 

the Affordable Care Act extended this 

provision for existing, non-expanding 

D–SNPs through the end of the 2012 

contract year. As such, for contract year 

2012, D–SNPs are only required to have 

a signed State Medicaid Agency contract 

to operate if they: (1) Are offering a new 

D–SNP-type in CY 2012; (2) are 

expanding the service area of an existing 

D–SNP type in CY 2012; (3) offered a 

new D–SNP type in CY 2010 or CY 

2011; or (4) expanded the service area 

of an existing D–SNP during either of 

these 2 contract years. Since our April 

2011 final rule (76 FR 21563) entitled, 

Medicare Program: Changes to the 

Medicare Advantage and the Medicare 

Prescription Drug Benefit Programs for 

Contract Year 2012 and Other Changes, 

finalized changes to § 422.107(d)(1)(ii) 

such that existing D–SNPs can operate 

without State Medicaid contracts 

through CY 2012, provided they do not 

expand their service areas, the 

regulatory text changes we made to 

§ 422.107(d)(1)(ii) in our September 18, 

2008 IFC have been superseded. 

Therefore, in this final rule, we are not 

finalizing the regulatory text changes to 

§ 422.107(d)(1)(ii) that we described in 

our September 18, 2008 IFC. 

Comment: Two commenters sought 

clarification on whether MIPPA’s State 

Medicaid Agency contract requirement 

applies only to D–SNPs or to all SNPs 

types that serve and enroll dual-eligible 

beneficiaries. One commenter suggested 

this provision broadly apply to all SNP 

types. 

Response: Section 164(c) of MIPPA 

requires that D–SNPs contract with the 

State Medicaid agencies in the States in 

which the D–SNP operates to provide 

benefits, or arrange for benefits to be 

provided, for individuals entitled to 

receive medical assistance under title 

XIX. This requirement is found in 

section 164(c) of MIPPA under a 

subsection starting with the statutory 

text ‘‘ADDITIONAL REQUIREMENTS 

FOR DUAL SNPS.’’ Further, this 

provision specifically refers to a 

specialized MA plan for special needs 

individuals described in subsection 

(b)(6)(B)(ii), which we have interpreted 

in past guidance to mean D–SNPs. As 

such, it is clear that Congress only 

intended that this State contract 

requirement apply to D–SNPs, and not 

C–SNPs and I–SNPs that enroll dualeligible beneficiaries. Therefore, we are 

finalizing this provision without 

modification. 


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d. SNPs and Quality Improvement 

Program (§ 422.152) 

Section 164 of MIPPA amended 

section 1852(e)(3)(A) of the Act to add 

clause (ii) and added a new paragraph 

(6) to section 1857(d) of the Act. Section 

1852(e)(3)(A)(ii) of the Act requires that 

data collected, analyzed, and reported 

as part of the plan’s quality 

improvement (QI) program must 

measure health outcomes and other 

indices of quality at the plan level with 

respect to the model of care (MOC) as 

required in section 1859(f)(2) through 

(5) of the Act. As a Medicare Advantage 

(MA) plan, each SNP must implement a 

documented QI program for which all 

information is available for submission 

to CMS or for review during monitoring 

visits. The focus of the SNP QI program 

should be the monitoring and 

evaluation of the performance of its 

MOC (see § 422.101(f)). In the 

September 18, 2008 IFC, we stated that, 

no later than January 1, 2010, the 

program should be executed as a threetier system of performance 

improvement. 

The first tier of this program consisted 

of collection and analysis of data on 

quality and outcome to enable 

beneficiaries to compare and select 

among health coverage options. As part 

of the first tier implementation and to 

pilot the development of comparative 

measures to facilitate beneficiary choice, 

SNPs were required to collect, analyze, 

and submit 13 Healthcare Effectiveness 

Data and Information Set (HEDIS®) 

measures and three National Committee 

on Quality Assurance (NCQA) structure 

and process measures in CY 2008. Since 

CY 2008, we have required SNPs to 

submit eight HEDIS® and six NCQA 

structure and process measures. 

The second tier of the QI program for 

SNPs was effective on January 1, 2010 

and was implemented consistent with 

the requirements § 422.152(g). As we 

articulated in our September 18, 2008 

IFC, § 422.152(g) reflects the 

requirement under section 

1852(e)(3)(A)(ii) of the Act, added by 

MIPPA, that SNPs collect, analyze, and 

report data that measures the 

performance of their plan-specific MOC. 

SNPs may measure the effectiveness of 

their MOCs, as required under 

§ 422.152(g), using a variety of plandetermined methodologies, such as 

claims data, record reviews, 

administrative data, clinical outcomes, 

and other existing valid and reliable 

measures (for example, Assessing Care 

of Vulnerable Elders (ACOVE) 

measures, Minimum Data Set (MDS), 

HEDIS®, Health Outcomes Survey 

(HOS), and the Outcome and 

Assessment Information Set (OASIS)) at 

the plan level to evaluate the 

effectiveness of the process of care and 

clinical outcomes. Specifically, each 

SNP must measure the effectiveness of 

its MOC through the collection, 

aggregation, analysis, and reporting of 

data that demonstrate: Access to care; 

improvement in beneficiary health 

status; staff implementation of the MOC 

as evidenced by measures of care 

structure and process from the 

continuity of care domain; 

comprehensive health risk assessment; 

care management through an 

individualized plan of care; provision of 

specialized clinical expertise targeting 

its special needs population through a 

provider network; coordination and 

delivery of services and benefits through 

transitions across settings and 

providers; coordination and delivery of 

extra services and benefits that meet the 

needs of the most vulnerable 

beneficiaries; use of evidence-based 

practices and/or nationally recognized 

clinical protocols; and the application of 

integrated systems of communication. 

As we specified in our September 18, 

2008 IFC, each SNP must coordinate the 

systematic collection of data using 

indicators that are objective, clearly 

defined, and based on measures having 

established validity and reliability. We 

further clarified that the indicators 

should be selected from a variety of 

quality and outcome measurement 

domains such as functional status, care 

transitioning, disease management, 

behavioral health, medication 

management, personal and 

environmental safety, beneficiary 

involvement and satisfaction, and 

family and caregiver support. We also 

stated that SNPs must document all 

aspects of their QI program, including 

data collection and analysis, actions 

taken to improve the performance of the 

MOC, and the participation of the 

interdisciplinary team members and 

network providers in QI activities. 

We are currently implementing the 

third tier of the QI program, which is 

the required reporting of monitoring 

data, that consists of a prescribed 

sample of data that SNPs collect under 

the second tier of the QI program to 

measure their performance under their 

MOCs. MA organizations must currently 

collect and report ‘‘data that permits the 

measurement of health outcomes and 

other indices of quality.’’ Accordingly, 

MA organizations must collect and 

report data from the HEDIS®, HOS, and 

CAHPS® instruments, as well as the 

SNP structure and process measures. 

We make these performance data 

available to the public (on a summary 

basis and at the plan level). 

The Affordable Care Act (ACA) 

requires that, starting in 2012, all SNPs 

be approved by the National Committee 

on Quality Assurance (NCQA) based on 

standards developed by the Secretary. In 

our April 2011 final rule (76 FR 21466– 

21448), we specified that the SNP MOC 

would be the basis of NCQA’s approval 

of SNPs. We developed the standards 

and scoring criteria for each of the 11 

elements of the MOC for the NCQA to 

use for the SNP approval process. 

Section 1857(d)(6) of the Act 

stipulates that we will conduct reviews 

of the SNP MOC in conjunction with the 

periodic audits of the MA organizations. 

During 2010 and 2011, we conducted a 

pilot study to assist us in determining 

the best methods for assessing the MOCs 

once they were implemented by the 

SNPs. We will expand this effort in 

2012, by assessing a sample of the SNPs 

that attained a 3-year approval as a 

result of the NCQA SNP approval 

process that was mandated under the 

Affordable Care Act. This assessment 

will help us ensure that SNPs are 

providing care consistent with their 

approved MOC and to identify MAOs’ 

strengths and weaknesses in 

implementing their MOCs. We also 

hope to use this information to identify 

best practices to share with plans and 

the public. 

After considering comments we 

received, we are finalizing these 

provisions without modification. 

Comment: One commenter viewed 

this provision as a positive addition to 

demonstrating the value and 

effectiveness of the SNP model. To 

ensure successful implementation and 

to improve clarity the commenter 

offered the following suggestions: 

• Section 422.152(g)(2)—To ensure 

that CMS, contracting plans, and other 

interested parties are referring to the 

same standard, the commenter 

suggested that the regulation specify the 

source of the domains referenced (for 

example, CMS, NCQA, NIH). 

• Section 422.152(g)(2)(viii)—The 

commenter was concerned that the 

delivery of extra services and benefits to 

meet the specialized needs of the most 

vulnerable beneficiaries may conflict 

with current CMS guidance on MA bids 

and benefits. The commenter requests 

that CMS clarify how a SNP would 

provide a different benefit set or set of 

services to those populations as the term 

‘‘extra services and benefits’’ seems to 

imply. 

• Section 422.152(g)(2)(x)—The 

commenter believes that the use of the 

term ‘‘plans demonstrating use of 

integrated systems of communication’’ 


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is unclear and requests that CMS 

provide additional clarification as to the 

intent of the measure CMS references. 

Response: We appreciate the 

commenter’s interest in this issue. With 

respect to § 422.152(g)(2), we are using 

the definitions of domains as described 

by the Care Continuum Alliance, 

formerly the Disease Management 

Association of America. An integrated 

system of communication is the system 

the plan employs to communicate with 

all of its stakeholders—providers, 

beneficiaries, the public and regulatory 

agencies. This definition is included in 

Chapter 5 of the Medicare Managed Care 

Manual (‘‘Quality Improvement 

Program’’). The chapter, which is part of 

the Publication 100–16, may be 

accessed online at http:// 

www.cms.hhs.gov/Manuals/IOM. 

We expect MA organizations offering 

SNPs to incorporate some or all of the 

following benefits that exceed the basic 

required Medicare A and B benefits 

offered by other MA products available 

in the same service area—(1) No or 

lower beneficiary cost-sharing; (2) 

longer benefit coverage periods for 

inpatient services; (3) longer benefit 

coverage periods for specialty medical 

services; (4) parity (equity) between 

medical and mental health benefits and 

services; (5) additional preventive 

health benefits (for example, dental 

screening, vision screening, hearing 

screening, age-appropriate cancer 

screening, risk-based cardiac screening); 

(6) social services (for example, 

connection to community resources for 

economic assistance); (7) transportation 

services; and (8) wellness programs to 

prevent the progression of chronic 

conditions. 

Finally, in § 422.152(g)(2)(x), we state 

that, as part of its quality program, a 

SNP must incorporate use of integrated 

systems of communication as evidenced 

by measures from the care coordination 

domain. An integrated system of 

communication is the system the plan 

employs to communicate with all of its 

stakeholders—providers, beneficiaries, 

the public and regulatory agencies. An 

example of an integrated 

communication system is a call center 

that might, as a reminder, reach out to 

clients in advance of their scheduled 

appointments. 

Comment: One commenter expressed 

the view that current CMS policy in the 

area of allowed extra services and 

benefits to meet the needs of vulnerable 

beneficiaries is unclear, resulting in 

instability of benefit packages (for 

example, an extra benefit of 

independent living skills was approved 

one year and disapproved the next 

year). The commenter also contends that 

CMS’ policy is not applied consistently 

across organizations, resulting in an 

unlevel playing field for some MAOs. 

Another commenter advised that the 

plan’s care management approach may 

be more a matter of ‘‘how’’ and ‘‘when’’ 

benefits are provided and reimbursed 

than what extra benefits and services are 

provided. 

Response: We have provided 

guidance to MA organizations offering 

SNPs that they should incorporate some 

or all of the following benefits that 

exceed the basic required Medicare A 

and B benefits offered by other MA 

products available in the same service 

area—(1) No or lower beneficiary costsharing; (2) longer benefit coverage 

periods for inpatient services; (3) longer 

benefit coverage periods for specialty 

medical services; (4) parity (equity) 

between medical and mental health 

benefits and services; (5) additional 

preventive health benefits (for example, 

dental screening, vision screening, 

hearing screening, age-appropriate 

cancer screening, risk-based cardiac 

screening); (6) social services (for 

example, connection to community 

resources for economic assistance); (7) 

transportation services; and (8) wellness 

programs to prevent the progression of 

chronic conditions. As the commenter 

asserts, as important as the provision of 

‘‘extra’’ services is plans’ appropriate 

management of all benefits—both those 

covered by Parts A and B and those that 

extend or enrich Parts A and B services 

or provide supplemental benefits—for 

their particular populations is equally as 

important to us. With respect to the 

commenters’ assertion that our policy is 

not applied consistently across 

organizations, we note that our bid 

review process very carefully 

scrutinizes permissible supplemental 

benefits across all MA plan. 

Comment: A commenter stated that 

the term ‘‘health status,’’ in reference to 

the second-tier language in the 

September 18, 2008 IFC, can be 

interpreted in a variety of ways. In an 

effort to promote consistent compliance 

by SNPs, the commenter recommends 

that CMS provide an explanation of the 

meaning of the term. The commenter 

also stated that depending upon the 

beneficiary’s disease state, the course of 

the beneficiary’s medical condition may 

be expected to result in declining health 

status. The commenter recommends that 

CMS revise the regulation to 

accommodate this circumstance. 

Response: We have not provided a 

specific definition of health status, as it 

is more appropriate for SNPs to apply a 

definition that is appropriate for its 

population. We understand that for 

beneficiaries with certain medical 

conditions, the natural course of the 

disease will result in a decline in health 

status and death. However, our intent is 

to improve health status for the overall 

Medicare population. 

Comment: Several commenters 

contended that health outcomes cannot 

be achieved without consideration of 

other quality of life indicators, such as 

adequate housing, engagement in 

meaningful activities, employment/ 

community activities, and selfdetermination. These commenters 

suggested that meaningful measures of 

outcomes and quality should include 

personal experience outcomes. One of 

the commenters urged CMS to consider 

how ‘‘improvement in health status’’ 

will apply to persons whose care plan 

is focused on maintaining current 

functioning, delaying decline, or 

approaching the end of life. 

Response: We agree that health 

outcomes are linked to many other 

factors in a patient’s life. We intend to 

continue to explore best practices for 

measuring health outcomes in the 

Medicare population. We will also 

consider how ‘‘improvement in health 

status’’ will apply to persons whose care 

plan is focused on maintaining current 

functioning, delaying decline, or 

approaching the end of life. 

Comment: One commenter noted that 

the regulation identifies data collection, 

analysis, and reporting as well as audit 

requirements in its QI system but that it 

does not provide in-depth 

specifications. The commenter suggests 

that such measures and specifications 

need further development and should 

be integrated with State’s quality 

measures and data requirements. 

Response: Since the publication of the 

September 18, 2008 IFC, we have issued 

guidance to plans regarding in-depth 

data specifications in various guidance 

vehicles, including HPMS memoranda. 

Much of this guidance is also 

consolidated in Chapter 5 of the 

Medicare Managed Care Manual, 

‘‘Quality Improvement Program.’’ 

We are currently revising the process 

that MA organizations will use to 

submit their 2012 Chronic Care 

Improvement Programs (CCIPs) and 

Quality Improvement Projects (QIPs) 

and automating collection within a new 

module in the Health Plan Management 

System (HPMS). We are also revising 

and streamlining the templates that MA 

organizations will use for CCIP and QIP 

submission through the Paperwork 

Reduction Act process. The new format 

will allow MA organizations to 

demonstrate how the CCIP and/or QIP is 

developed, implemented and analyzed 

on a continuous cycle and to show 

where improvements in care occur. We 


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will provide more detailed guidance 

and timelines, as well as in-depth 

training on the new CCIP and QIP tools 

in the fall of 2011. We are also 

developing an MA quality Web page, 

which we intend to use to provide 

important information to external 

stakeholders, including MA 

organizations. 

With respect to the commenter’s 

specific concern about integration of 

quality data specifications with those of 

individual States, we note that is it not 

currently possible to integrate Medicare 

and Medicaid quality reporting 

requirements at this time. However, this 

is an issue we are currently exploring in 

coordination with the Federal 

Coordinated Health Care Office (FCHO). 

Comment: Several commenters 

advised that States have many quality 

assurance requirement processes in 

place for Medicaid as such the new 

requirements must not conflict/ 

override/interfere with current 

Medicaid contract requirements. 

According to the commenters, SNPs are 

concerned that they will be forced to try 

and reconcile conflicting Medicare and 

Medicaid requirements with States 

without clear guidance from CMS. Areas 

of potential overlap include care plans, 

initial/annual health risk assessments, 

performance measures, and appeals and 

grievances. 

Response: We understand the 

potential for conflicting requirements 

and are currently working with the 

FCHO to consider ways of more closely 

aligning Medicare and Medicaid 

requirements. 

The FCHO published the Alignment 

Initiative on May 16, 2011. This 

Initiative is focused on the new Office’s 

efforts to address misalignments 

between Medicare and Medicaid, 

including extensive treatment and 

discussion of differing Medicare and 

Medicaid requirements for integrated 

managed care plans, including SNPs. 

CMS is reviewing the extensive 

comments that it has received and is 

working on addressing issues identified 

by this Office and commenters. Further 

guidance will be forthcoming. 

Comment: One commenter questioned 

how continuum of care is defined. The 

commenter urged that CMS be careful 

not to encroach on the right of State 

Medicaid agencies to define what 

benefits to include in its contracts with 

SNPs. 

Response: We have no intention of 

encroaching on State Medicaid agencies’ 

rights to define the Medicaid benefits 

that are available for the dual eligible 

population. Continuum of care refers to 

patients receiving the care that is 

appropriate for managing their specific 

health conditions. We recommend using 

the Care Continuum Alliance’s 

definition as a resource. Additional 

information on continuum of care can 

be found at http:// 

www.carecontinuum.org. 

Comment: One commenter believed 

there was a lack of evidence based 

guidelines for some populations, such 

as specific disability groups; the 

commenter suggests that CMS should 

include language allowing locally 

recognized protocols to permit 

maximum flexibility. Another 

commenter stated that an evidence base 

does not exist for the co-morbid 

populations most likely to receive care 

via SNPs. 

Response: We understand that 

evidence-based practice in medicine is 

a growing field and, as such, 

acknowledge that there may not be 

evidence-based protocols for all clinical 

conditions and co-morbidities. We do, 

however, expect plans to institute 

evidence-based protocols and practices 

that are available and appropriate for 

their patient population. Where there is 

no evidence-based guidance, then we 

expect that the plan will seek guidance 

from their account manager at the 

regional office and, in conjunction with 

CMS, determine the best approach to 

implement. 

Comment: One commenter expressed 

concern that SNPs which have high 

cost, high need dual populations will be 

compared with other SNPs serving other 

subsets of the population without an 

appropriate risk adjustment and 

stratification system. The commenter 

questions whether CMS has a plan for 

making fair comparisons of data across 

such differences in populations among 

D–SNPs, as well as between C–SNPs, 

I–SNPs, and D–SNPs. 

Another commenter questioned how 

there can be comparisons across 

different types of SNPs when the 

populations are so different. The 

commenter recommends that CMS 

exclude integrated, full benefit D–SNPs 

from the requirements. 

Response: We understand that there 

are differences in SNP populations. The 

MOC is the vehicle for SNPs to identify, 

implement, provide, and coordinate 

appropriate health care for their specific 

target populations. Effecting the type of 

data comparisons recommended by the 

commenter would require us to develop 

data measures specific to each SNP 

type. At this time, we do not anticipate 

developing such measures. We are 

aware, however, of the measurement 

issues that SNPs with small enrollments 

face. We are currently focusing our 

attention on these issues in order to 

refine our measures for SNPs, including 

those with low enrollments. One way 

we are addressing this concern is 

through a contract to develop outcome 

measures for MA organizations, as well 

as for SNPs more specifically. Through 

this contract we are reviewing all 

current SNP measures and developing 

measures where there are gaps, 

including for SNPs with low 

enrollment. We expect this work on 

outcome measures to be completed in 

late 2014. 

We do not agree with the commenter 

that fully integrated dual eligible SNPs 

should be exempt from data reporting 

requirements. All SNP types must 

comply with our requirements. 

Comment: One commenter contended 

that reporting quality data by PBP/plan 

would result in many low enrollment 

SNPs not having any members in the 

denominator, or so few that the data/ 

rates would not be meaningful. The 

commenter recommends that quality 

data instead be reported by SNP type 

(for example, D–SNP) to ensure CMS 

and beneficiaries have meaningful data 

for plan comparison purposes. 

Response: We understand that there 

are potentially SNPs with very low 

enrollment (small denominators). 

Because of this, we currently have data 

reported at the contract level. We 

understand that plans with small 

enrollments, especially SNPs, may not 

have the data resources available to 

them to track and monitor quality on an 

ongoing basis. However, SNPs are 

required to collect HEDIS® data using 

selected measures that have been 

developed just for plans with smaller 

enrollments. These data, as well as the 

NCQA structure and process measures, 

should be used to track and monitor 

areas that could benefit from ongoing 

quality improvement. Also, small plans 

may have encounter data or other data 

specific to the operations of their 

organization that could be useful for 

quality improvement. 

As part of our continued effort to 

explore measures that are more sensitive 

for plans with low enrollment, we are 

developing outcome measures for the 

MA program, including SNPs. We will 

also conduct a pilot study to test the 

measures (for example, measures that 

address health outcomes related to 

coordination of care and transitions of 

care), as well as a larger study to 

validate the measures. One of our goals 

is to incorporate some of these measures 

into the MA plan rating system. This 

work will also assist us in developing 

measures to address the concerns of 

plans with low enrollment that cannot 

report using some of the current 

measures in the CAHPS®; HEDIS®, 


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and/or HOS instruments. We expect to 

complete our work in late 2014. 

Comment: One commenter advised 

that they have heard concerns from both 

States and plans regarding the 

stringency of the QI requirements and 

their potential impact on plans’ 

stability. 

Response: We appreciate the 

commenter’s interest in this issue. We 

believe that improving quality and 

having the data to demonstrate these 

improvements will help support the 

stability and viability of the program. 

Comment: One commenter 

recommended that CMS promptly issue 

guidance with operational instructions 

implementing the 2008 SNP Chronic 

Condition Panel Final Report. MIPPA 

restricted enrollment in C–SNPs to 

special needs individuals that ‘‘have 

one or more co-morbid and medically 

complex chronic conditions that are 

substantially disabling or lifethreatening, have a high risk of 

hospitalization or other significant 

adverse health outcomes, and require 

specialized delivery systems across 

domains of care.’’ 

Response: Fifteen SNP-specific 

chronic conditions were recommended 

by the panel and adopted beginning 

with the CY 2009 plan year. The Special 

Needs Plan Chronic Condition Panel 

Final Report was made public on 

November 12, 2008. The final report is 

available on the CMS Web site at: 

https://www.cms.gov/ 

SpecialNeedsPlans/Downloads/ 

SNP_CC_Panel_Final_Report.zip. 

Comment: In questioning how the 

new requirements to collect, analyze, 

and report data as well as new 

requirements for MOC, care 

management, etc., relate to existing CCI, 

HEDIS, and structure and process 

measures, one commenter urged CMS to 

work closely with SNPs and NCQA to 

minimize any new data reporting 

burdens, to prevent duplication of data 

collection and reporting efforts and to 

maximize use of existing structure and 

process measures to the extent possible 

in meeting new reporting requirements. 

The commenter also requested that CMS 

take into consideration the development 

time required to ensure accurate and 

complete data as well as provide 

technical specifications well in advance 

(for example, plans should have the 

technical specifications 6 months in 

advance). In addition, the commenter 

requested, that since SNPs have to meet 

both standard MA reporting as well as 

SNP-specific reporting, CMS take into 

account the total data and reporting 

burden on SNPs and consider staggering 

reporting of any new SNP requirements, 

similar to the process for Part C 

reporting. 

Response: We are sensitive to the 

potential overlap of QI data reporting 

requirements. As part of our overall QI 

strategy, are carefully and systematically 

evaluating the impact of data collection 

requirements related to QI in an attempt 

to decrease burden and prevent 

duplication, while achieving our 

programmatic goals. Where possible, we 

will attempt to stagger reporting 

requirements. 

Many of the measures that we have 

received comments on are included in 

the 5-star plan rating system. We are 

looking systematically at all of our QI 

reporting tools and measures and 

making a number of changes. For 

example, we are in the process of 

improving and implementing new 

reporting tools for the CCIPs and the 

QIPs for the CY 2012 reporting cycle. 

We expect that these new reporting 

tools will decrease the data collection 

and reporting burden for all MA 

organizations. We are also developing a 

module in HPMS that will allow for this 

reporting process to be automated. CMS 

is committed to continuing to review 

and to assess the measures to address 

these concerns. 

We acknowledge that the NCQA 

structure and process measures overlap 

heavily with the MOC and QI reporting 

requirements. The structure and process 

measures were developed in an effort to 

identify SNP-specific measures that are 

not affected by a plan’s enrollment size. 

Another goal of these measures is to 

evaluate some of the specific features of 

SNPs that make them unique among MA 

plans. These measures cannot replace 

the QIPs, since QIPs are a tool for 

evaluating weaknesses in the overall QI 

program for and MA organization, as 

well as monitoring the impact of any 

intervention that was implemented to 

mitigate a specific problem. 

Similarly, the MOC serves a unique 

purpose by ensuring that SNPs design a 

clinical care program to address the 

health care needs of the specific 

vulnerable populations they serve. The 

MOC is not a data collection system but, 

rather, a framework for coordinating the 

key evidence based elements critical to 

providing integrated, high quality care 

to vulnerable patients. 

We are looking systematically at all of 

our QI reporting tools and measures, 

and are in the process of making 

changes to eliminate some of the burden 

on plans. For example, we are in the 

process of streamlining and improving 

the CCIP and QIP reporting tools. By 

improving the reporting tools we expect 

to use in the 2012 reporting cycle we 

expect to decrease the burden for 

completing the data collection and 

reporting. We are also developing 

automating the submission process 

through an HPMS module. 

Comment: One commenter 

recommended that CMS require the data 

to be reported uniformly. The 

commenter pointed out that the first tier 

purpose of the QI program to provide 

data on quality and outcomes to enable 

beneficiaries to compare and select from 

among health coverage options and the 

second tier purpose for measuring 

essential components of the MOC using 

a variety of plan-determined 

methodologies discussed in the rule do 

not appear to require uniform data 

reporting that would promote 

comparisons among plans. 

Response: We appreciate the 

commenter’s interest in this issue. We 

understand the need for uniformity in 

reporting and will strive to incorporate 

this principle in the QI program. 

d. Special Needs Plans and Other MA 

Plans With Dual-Eligibles: 

Responsibility for Cost-Sharing 

(§ 422.504(g)(1)) and Written Disclosure 

of Cost-Sharing Requirements 

(§ 422.111(b)(2)(iii)) 

(1) Comprehensive Written Disclosure 

Requirement for Dual Eligible SNPs 

(§ 422.111(b)(2)(iii)) 

Section 164(c)(1) of MIPPA requires 

that plan sponsors offering D–SNPs 

must provide each prospective enrollee, 

prior to enrollment, with a 

comprehensive written statement that 

describes the benefits and cost-sharing 

protections that the individual would be 

entitled to under the D–SNP and the 

relevant State Medicaid plan. The 

comprehensive written statement must 

include the benefits that the individual 

is entitled to under Medicaid (Title 

XIX), the cost-sharing protections that 

the individual is entitled to under 

Medicaid (Title XIX), and a description 

of which of these benefits and costsharing protections are covered under 

the D–SNP. This provision is effective 

January 1, 2010. In the September 18, 

2008 IFC (73 FR 54226), we introduced 

the regulations at § 422.111(b)(2)(iii) to 

reflect these statutory requirements, and 

are finalizing it without modification in 

this final rule. 

Comment: One commenter mentioned 

that it believed that CMS’s current 

marketing materials for duals were 

confusing and inaccurate. The 

commenter expressed support for the 

comprehensive written statement 

requirement, which it believed would 

provide dual eligible enrollees with 

crucial information on a plan’s costsharing benefits. 


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Response: We agree that the 

comprehensive written statement will 

help dual-eligible beneficiaries make 

more informed enrollment choices. 

Comment: One commenter stated that 

the comprehensive written statement 

provision, as written in the interim final 

rule, was narrower than the 

corresponding section of MIPPA, which 

requires that CMS establish a standard 

content and format for the notice 

concerning cost sharing protections and 

Medicare and Medicaid benefits. The 

commenter also recommended adding 

language to the rule to specify that the 

comprehensive written statement must 

include a statement of the benefits that 

the SNP provides. 

Response: We disagree with the 

commenter’s assertion that we should 

modify the rule to specifically reference 

CMS’s responsibility to establish a 

standard content and format for the 

comprehensive written notice. Section 

164(c)(1) of MIPPA (section 1859(f)(3)(c) 

of the Act) directly mandates that CMS 

determine the form and content of the 

comprehensive written statement. 

Regulatory language is neither a 

necessary nor appropriate means of 

effectuating this statutory directive to 

the agency. Therefore, we are not adding 

this language to the final rule. 

In addition, the language in the 

regulatory text for this provision 

includes the requirement that the 

comprehensive written statement must 

include a description of the benefits and 

cost-sharing protections that the D–SNP 

provides. We do not believe this 

provision requires further clarification. 

Comment: Two commenters requested 

clarification on the format and 

administration of the requirements 

established in this provision. One 

commenter suggested that CMS develop 

a simple template that States could use 

to describe their Medicaid benefits, and 

requested that CMS clarify how the 

written statement could be modified to 

reflect States’ mid-year benefit changes. 

The commenter additionally asked CMS 

to define the role of the CMS Central 

Office and CMS Regional offices in 

coordinating the flow of information 

between States and SNPs. Another 

commenter asked CMS to clarify 

whether a plan that included this 

information on its Evidence of Coverage 

(EOC) document would be compliant 

with the comprehensive written 

statement requirement. 

Response: We are not modifying the 

provision to address the operational 

issues that the commenters raised. We 

do not believe that rulemaking is the 

appropriate vehicle for addressing 

comments on the operational issues 

related to the comprehensive written 

statement requirement. We will address 

operational issues related to the 

comprehensive written statement 

requirement for D–SNPs through 

operational guidance vehicles (for 

example, call letters, manual chapters, 

and HPMS memoranda). We anticipate 

that this future guidance will address 

the commenters’ concerns regarding the 

operational aspects of the 

comprehensive written disclosure 

requirement. 

(2) Limitation on Cost-Sharing for 

Certain Dual Eligible Special Needs 

Individuals (§ 422.504(g)(1)) 

Section 165 of MIPPA, which revised 

section 1852(a) of the Act, prohibits D– 

SNPs from imposing cost-sharing 

requirements on full benefit dualeligible individuals and Qualified 

Medicare Beneficiaries (QMBs), as 

described in sections 1935(c)(6) and 

1905(p)(1) of the Act, that would exceed 

the cost-sharing amounts permitted 

under the State Medicaid plan if the 

individual were not enrolled in the D– 

SNP. The effective date of this provision 

is January 1, 2010. 

Comment: One commenter asked 

CMS to clarify the difference between 

this provision’s requirement that limits 

cost-sharing for full benefit dual-eligible 

beneficiaries and the prohibition on 

balance billing Qualified Medicare 

Beneficiaries (QMBs) that is established 

in 1903(n) of the Act. The commenter 

also requested that CMS explain the 

difference between this provision and 

provisions that hold beneficiaries 

harmless in instances of non-payment 

by a health plan or a State Medicaid 

Agency. Another commenter asked CMS 

to clarify how a plan should construct 

its benefits and its bid for full benefit 

duals when the liability of the State 

varies by the reimbursement level in its 

State Medicaid plan. 

Response: We will continue to 

provide all MA plans, including D– 

SNPs, with guidance on the bid 

submission process. We do not believe 

that it is appropriate to address issues 

relating to plan bids through formal 

rulemaking. Unlike the statutory 

prohibition on QMB balance billing that 

outlines State cost-sharing 

responsibilities and provider billing 

requirements, this requirement at 

§ 422.504(g)(1)) limits the cost-sharing 

that MA plans may impose on their full 

benefit and zero-cost-share dual eligible 

enrollees. We are not describing the 

requirements of balance billing or ‘‘hold 

harmless’’ provisions in detail in this 

preamble, as they are outside the scope 

of this final rule. 

Comment: One commenter requested 

that CMS address how this requirement 

would apply to D–SNPs that enroll dual 

eligible individuals who are not all 

eligible for full State Medicaid benefits. 

The commenter also suggested that CMS 

strengthen its language regarding States’ 

cost-sharing responsibility. Finally, the 

commenter noted its belief that the 

protection of full-benefit dual eligible 

beneficiaries from cost-sharing above 

Medicaid levels should extend to full 

benefit dual eligible beneficiaries in all 

MA plans, not just those who are 

enrolled in SNPs. 

Response: In our January 2009 final 

rule (74 FR 1499) entitled, ‘‘Medicare 

Program; Medicare Advantage and 

Prescription Drug Benefit Programs: 

Negotiated Pricing and Remaining 

Revisions,’’ we extended the costsharing requirements that MIPPA 

imposed on D–SNPs to all MA plans. 

We also applied this cost-sharing 

protection to individuals who belong to 

any Medicaid dual eligibility category 

for which the State provides a zero costshare. Our January 2009 final rule (74 

FR 1499) replaced and superseded the 

language in our September 18, 2008 IFC, 

and finalized changes to 

§ 422.504(g)(1)(iii). Therefore, in this 

final rule, we are not finalizing the 

regulatory text changes to 

§ 422.504(g)(1)(iii) that we described in 

our September 18, 2008 IFC. 

(3) Private Fee-For-Service (PFFS) Plans 

(a) Changes in Access Requirements for 

PFFS Plans 

Section 162(a)(3) of MIPPA amended 

section 1852(d)(4)(B) of the Act to 

require, effective January 1, 2010, that 

PFFS plans meeting access standards 

based on signed contracts meet access 

standards with respect to a particular 

category of provider by establishing 

contracts or agreements with a sufficient 

number and range of providers to meet 

the access and availability standards 

described in section 1852(d)(1) of the 

Act. Section 1852(d)(1) of the Act 

describes the requirements that MA 

organizations offering a ‘‘network’’ MA 

plan must satisfy when selecting 

providers to furnish benefits covered 

under the plan. 

In the September 18, 2008 IFC, we 

revised § 422.114(a)(2)(ii) to reflect this 

new statutory requirement. We did not 

receive any comments on this 

requirement; therefore, we are finalizing 

the revisions to § 422.114(a)(2) as 

described in the September 18, 2008 

IFC. 


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Federal Register / Vol. 76, No. 170 / Thursday, September 1, 2011 / Rules and Regulations 54609 

(b) Requirement for Certain NonEmployer PFFS Plans to Use Contract 

Providers 

Section 162(a)(1) of MIPPA added a 

new paragraph (5) to section 1852(d) of 

the Act. The new paragraph creates a 

requirement for certain non-employer 

MA PFFS plans to establish contracts 

with providers. Specifically, for plan 

year 2011 and subsequent plan years, 

MIPPA required that non-employer/ 

union MA PFFS plans (employer/union 

sponsored PFFS plans were addressed 

in a separate provision of MIPPA) that 

are operating in a network area (as 

defined in section 1852(d)(5)(B) of the 

Act) must meet the access standards 

described in section 1852(d)(4). As 

noted above, section 1852(d)(4)(B) of the 

Act as amended by MIPPA, requires that 

PFFS plans must have contracts with a 

sufficient number and range of 

providers to meet the access and 

availability standards described in 

section 1852(d)(1) of the Act. Therefore, 

we stated in the September 18, 2008 IFC 

that these PFFS plans may no longer 

meet the access standards by paying not 

less than the Original Medicare payment 

rate and having providers deemed to be 

contracted, as provided under 

§ 422.216(f). 

‘‘Network area’’ is defined in section 

1852(d)(5)(B) of the Act, for a given plan 

year, as the area that the Secretary 

identifies (in the announcement of the 

risk and other factors to be used in 

adjusting MA capitation rates for each 

MA payment area for the previous plan 

year) as having at least two networkbased plans (as defined in section 

1852(d)(5)(C) of the Act) with 

enrollment as of the first day of the year 

in which the announcement is made. 

For plan year 2011, we informed PFFS 

plans of the network areas in the 

announcement of CY 2010 MA 

capitation rates, which was published 

on the first Monday of April 2009. We 

used enrollment data for January 1, 2009 

to identify the location of network areas. 

‘‘Network-based plan’’ is defined in 

section 1852(d)(5)(C) of the Act as (1) an 

MA plan that is a coordinated care plan 

as described in section 1851(a)(2)(A)(i) 

of the Act, excluding non-network 

regional PPOs; (2) a network-based MSA 

plan; or (3) a section 1876 cost plan. 

Types of coordinated care plans (CCPs) 

that meet the definition of a ‘‘networkbased plan’’ are HMOs, PSOs, local 

PPOs, as well as regional PPOs with 

respect to portions of their service area 

in which access standards are met 

through establishing written contracts or 

agreements with providers. MIPPA 

specified that the term ‘‘network-based 

plan’’ excluded a regional PPO that 

meets access requirements in its service 

area substantially through the authority 

of § 422.112(a)(1)(ii), rather than 

through written contracts. Section 

422.112(a)(1)(ii) permits regional PPOs 

to meet access requirements using 

methods other than written agreements 

with providers (that is, allowing 

members to see non-contract providers 

at in-network cost sharing in areas 

where the plan does not have 

established a network of contracted 

providers). 

We stated in the September 18, 2008 

IFC that, for purposes of determining 

the network area of a PFFS plan, we will 

determine whether any network-based 

plans with enrollment exist in each of 

the counties in the United States. 

Beginning in plan year 2011, in counties 

where there is availability of two or 

more network-based plans (such as an 

HMO plan, a PSO plan, a local PPO 

plan, a network regional PPO plan, a 

network-based MSA plan, or a section 

1876 cost plan), a PFFS plan operating 

in these counties must establish a 

network of contracted providers to 

furnish services in these counties in 

accordance with the amended section 

1852(d)(4)(B) of the Act. In such 

counties, a PFFS plan would no longer 

be able to meet access requirements 

through providers deemed to have a 

contract with the plan at the point of 

service in these counties. In counties 

where there are no network-based plan 

options, or only one other networkbased plan, the statute allows PFFS 

plans to continue to meet access 

requirements in accordance with section 

1852(d)(4) of the Act and 

§ 422.114(a)(2). Regardless of whether a 

PFFS plan meets access requirements 

through deeming or is subject to the 

requirement that it establish a network 

of providers with signed contracts, 

providers who do not have a contract 

with the PFFS plan may continue to be 

deemed to have a contract with the plan 

if the deeming conditions described in 

§ 422.216(f) are met. 

An existing PFFS plan may have some 

counties in its current service area that 

meet the definition of a network area 

and other counties that do not. We also 

stated that, in order to operationalize 

section 162(a)(1) of MIPPA, we will not 

permit a PFFS plan to operate a mixed 

model where some counties in the 

plan’s service area are considered 

network areas and other counties are 

considered non-network areas. 

Beginning in plan year 2011, an MA 

organization offering a PFFS plan will 

be required to create separate plans 

within its existing service areas where it 

is offering PFFS plans based on whether 

the counties located in those service 

areas are considered network areas or 

not. For example, if an existing PFFS 

plan has some counties in its current 

service area that are network areas and 

other counties that are non-network 

areas, then in order to operate in this 

service area in plan year 2011 and 

subsequent plan years, the MA 

organization must establish a unique 

plan with service area consisting of the 

counties that are network areas and 

another plan with service area 

consisting of the counties that are nonnetwork areas. Consequently, the PFFS 

plan operating in the counties that are 

network areas must establish a network 

of contracted providers in these 

counties in accordance with section 

1852(d)(4)(B) of the Act in order to meet 

access requirements. The PFFS plan 

operating in the counties that are not 

network areas can continue to meet 

access requirements under 

§ 422.114(a)(2) by paying rates at least as 

high as rates under Medicare Part A or 

Part B to providers deemed to have a 

contract with the plan if the conditions 

described in § 422.216(f) are met. The 

MA organization must file separate plan 

benefit packages for the PFFS plan that 

will operate in network areas and the 

plan that will operate in non-network 

areas. 

We stated in the September 18, 2008 

IFC that for purposes of making the 

judgment of provider network adequacy 

for PFFS plans that will be required to 

operate using a network of contracted 

providers in plan year 2011 and 

afterwards, we will apply the same 

standards for PFFS plans that we apply 

to coordinated care plans. To determine 

where a PFFS plan’s proposed network 

meets access and availability standards, 

we will follow the procedure described 

in the section above on ‘‘Changes in 

access requirements for PFFS plans.’’ 

We are finalizing the revisions to 

§ 422.114(a)(3) as described in the (73 

FR 54226) IFC published on September 

18, 2008 IFC to reflect the requirements 

found in section 162(a)(1) of MIPPA for 

non-employer PFFS plans. 

Comment: A few commenters urged 

CMS to modify the definition of a 

‘‘network area’’ to mean an area with 

CCPs offered by two different 

organizations in order to ensure that 

there is real competition in the area. 

Response: MIPPA defines ‘‘network 

area,’’ for a given plan year, as the area 

that the Secretary identifies (in the 

announcement of the risk and other 

factors to be used in adjusting MA 

capitation rates for each MA payment 

area for the previous plan year) as 

‘‘having at least 2 network-based plans 

with enrollment as of the first day of the 

year in which the announcement is 


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54610 Federal Register / Vol. 76, No. 170 / Thursday, September 1, 2011 / Rules and Regulations 

made.’’ ‘‘Network-based plan’’ is 

defined in MIPPA as (1) an MA plan 

that is a coordinated care plan as 

described in section 1851(a)(2)(A)(i) of 

the Act, excluding non-network regional 

PPOs; (2) a network-based MSA plan; or 

(3) a section 1876 cost plan. We 

interpret ‘‘having at least 2 networkbased plans’’ to mean that there are at 

least 2 plans, which meet the definition 

of a network-based plan, that are offered 

by the same MA organization or by 

different MA organizations. We believe 

this interpretation is consistent with the 

statutory requirements for identifying 

network areas. We do not believe we 

have the statutory authority to interpret 

the definition of a network area in a 

different manner. 

Comment: A commenter 

recommended that network-based plans 

‘‘with enrollment’’ should be defined as 

plans with a minimum enrollment 

threshold of 5,000 in MSAs with a 

population of more than 250,000 and 

1,500 in all other areas. The commenter 

stated that establishing a minimum 

membership standard would ensure that 

the CCPs that remain in the market are 

stable and minimize the possibility of 

future plan exit and further MA member 

disruption. 

Response: MIPPA defines ‘‘network 

area,’’ for a given plan year, as the area 

that the Secretary identifies (in the 

announcement of the risk and other 

factors to be used in adjusting MA 

capitation rates for each MA payment 

area for the previous plan year) as 

‘‘having at least 2 network-based plans 

with enrollment as of the first day of the 

year in which the announcement is 

made.’’ We interpret the phrase ‘‘with 

enrollment’’ to mean that a networkbased plan is required to have at least 

1 beneficiary enrolled in the plan in 

order to be counted for purposes of 

identifying the location of the network 

areas. We believe that interpreting ‘‘with 

enrollment’’ any differently would 

result in an artificial threshold and 

would not be consistent with the 

statute. 

Comment: A commenter 

recommended that CMS provide 

preliminary information about CY 2011 

network areas, based on January 1, 2009, 

enrollment data, in the CY 2010 

announcement and later update this 

information in the CY 2011 

announcement to reflect January 1, 

2010, enrollment data. The commenter 

further stated that the 2010 data and 

resulting network areas should be the 

basis for determining PFFS plan 

compliance with the MIPPA 

requirement for CY 2011. Another 

commenter recommended that once 

CMS denotes a county as a network 

area, that county should keep the 

network area designation. The 

commenter stated that counties should 

not switch from network to non-network 

status over time, even if one of the two 

CCPs in the county exit. 

Response: The methodology for 

identifying the location of network areas 

for a given plan year is specified in the 

statutory definition of a ‘‘network area.’’ 

MIPPA defines ‘‘network area,’’ for a 

given plan year, as the area that the 

Secretary identifies (in the 

announcement of the risk and other 

factors to be used in adjusting MA 

capitation rates for each MA payment 

area for the previous plan year) as 

‘‘having at least 2 network-based plans 

with enrollment as of the first day of the 

year in which the announcement is 

made.’’ We accordingly used enrollment 

data as of January 1, 2009, to identify 

the network areas for plan year 2011. 

The methodology we used to identify 

the list of network areas for plan year 

2011 is consistent with statutory 

requirements. The statute also requires 

us to update the list of network areas for 

each plan year, and not doing so would 

be inconsistent with the intent of the 

statute. Because of this requirement, we 

cannot allow counties to keep a network 

designation when one or more of the 

network-based plans in those counties 

exits the market because the county no 

longer meets the network designation 

criteria. 

Comment: A commenter urged that 

CMS recognize that MA organizations 

are in the process of creating PPOs and 

other MA plans in areas that are likely 

to be network areas in 2011, and 

therefore establish a passive enrollment 

process whereby PFFS enrollees in 

network areas automatically enroll in 

their current sponsor’s replacement 

product (if one is available) on January 

1, 2011, unless the beneficiary 

affirmatively chooses to join another 

plan or return to fee-for-service 

Medicare. 

Response: On April 16, 2010, we 

released guidance via HPMS on the 

renewal and non-renewal options for 

MA organizations for CY 2011. We 

allowed non-network PFFS plans to 

transition their enrollees to their full 

network PFFS plans in CY 2011. We 

extended this same option to PFFS 

plans for CY 2012 via the CY 2012 Final 

Call Letter. However, we do not believe 

it would be appropriate to allow 

transition of enrollees from one MA 

plan type (for example, PFFS plan) to 

another MA type (for example, HMO or 

PPO plan), as this would be a change 

from an ‘‘open’’ model to a closed 

network. 

Comment: A commenter 

recommended that CMS permit PFFS 

plans to employ a mixed model for 

complying with the network access 

standards imposed by MIPPA. 

Response: We believe that requiring 

MA organizations offering PFFS plans to 

have separate contracts for their nonnetwork, partial, and full network plans 

would allow these organizations to 

better manage their plans and allow 

CMS to more effectively oversee these 

plans. We also believe that not 

permitting PFFS plans to offer a mixed 

model would help beneficiaries to better 

distinguish among the three types of 

PFFS plans. 

Comment: A commenter 

recommended that CMS establish a 

special e-mail box for any PFFS-related 

MIPPA questions and use the questions 

submitted to the e-mail box to develop 

timely guidance issued before the 

annual Call Letter. 

Response: All of the PFFS-related 

provisions in this rule became effective 

prior to the publication of this final rule. 

Since we already released operational 

guidance to assist with the 

implementation of these provisions, we 

do not believe it would be useful to 

establish an e-mail box for PFFS-related 

MIPPA questions at this time. We note 

that plans may submit questions about 

these provisions to their Regional Office 

Account Manager. 

(c) Requirement for All Employer/Union 

Sponsored PFFS Plans to Use Contracts 

With Providers 

Section 162(a)(2) of MIPPA amended 

section 1852(d) of the Act by adding a 

new requirement for employer/union 

sponsored PFFS plans. For plan year 

2011 and subsequent plan years, MIPPA 

required that all employer/union 

sponsored PFFS plans under section 

1857(i) of the Act meet the access 

standards described in section 

1852(d)(4) of the Act only through 

entering into written contracts or 

agreements in accordance with section 

1852(d)(4)(B) of the Act, and not, in 

whole or in part, through establishing 

payment rates meeting the requirements 

under section 1852(d)(4)(A) of the Act. 

We revised § 422.114(a) in the 

September 2008 IFC to reflect this 

statutory change. Specifically, the 

changes to § 422.114(a) set forth how an 

MA organization that offers a PFFS plan 

must demonstrate to CMS that it can 

provide sufficient access to services 

covered under the plan. We stated in the 

September 18, 2008 IFC (73 FR 54226) 

that, in order to meet the access 

requirements beginning plan year 2011, 

an employer/union sponsored PFFS 

plan must establish written contracts or 


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Federal Register / Vol. 76, No. 170 / Thursday, September 1, 2011 / Rules and Regulations 54611 

agreements with a sufficient number 

and range of health care providers in its 

service area for all categories of services 

in accordance with the access and 

availability requirements described in 

section 1852(d)(1) of the Act. An 

employer/union sponsored PFFS plan 

will not be allowed to meet access 

requirements by establishing payment 

rates for a particular category of 

provider that are at least as high as rates 

under Medicare Part A or Part B. We 

also stated that while an employer/ 

union-sponsored PFFS plan must meet 

access standards through signed 

contracts with providers, providers that 

have not signed contracts can still be 

deemed to be contractors under the 

deeming procedures in 1852(j)(6) of the 

Act that currently apply. 

We added paragraph (a)(4) to 

§ 422.114 in order to reflect this new 

statutory requirement for employer/ 

union sponsored PFFS plans. 

Comment: A commenter 

recommended that CMS provide more 

clarification regarding network access 

standards for employer-sponsored PFFS 

plans. The commenter stated that CMS 

should adopt access standards that are 

unique to each group plan and 

eventually adopt access standards that 

evaluate provider access based on the 

population eligible for enrollment. 

Response: Currently, we do not 

review Health Service Delivery (HSD) 

tables for employer/union sponsored 

PFFS plans to determine whether the 

plans meet our network access 

standards. However, these plans must 

ensure that their enrollees have 

adequate access to providers consistent 

with Chapter 9 of the Medicare 

Managed Care Manual. 

We are finalizing § 422.114(a)(4) as 

described in the September 18, 2008 IFC 

to reflect the new requirement found in 

section 162(a)(2) of MIPPA for 

employer/union sponsored PFFS plans. 

(d) Variation in Payment Rates to 

Providers 

Section 162(b) of MIPPA added a 

clarification to the definition of an MA 

PFFS plan found at section 1859(b)(2) of 

the Act. Prior to MIPPA, the statute 

defined an MA PFFS plan as an MA 

plan that pays providers at a rate 

determined by the plan on a fee-forservice basis without placing the 

provider at financial risk; does not vary 

the rates for a provider based on the 

utilization of that provider’s services; 

and does not restrict enrollees’ choice 

among providers who are lawfully 

authorized to provide covered services 

and agree to accept the plan’s terms and 

conditions of payment. Section 162(b) of 

MIPPA added that although payment 

rates generally cannot vary based on 

utilization of services by a provider, an 

MA PFFS plan is permitted to vary the 

payment rates for a provider based on 

the specialty of the provider, the 

location of the provider, or other factors 

related to the provider that are not 

related to utilization. However, this 

section of MIPPA allowed MA PFFS 

plans to increase payment rates for a 

provider based on increased utilization 

of specified preventive or screening 

services. Section 162(b) of MIPPA was 

effective at the time of publication of the 

September 18, 2008 IFC. 

In the September 18, 2008 IFC, we 

revised paragraph (a)(3)(ii) of § 422.4 

and paragraph (a) of § 422.216 to add 

the clarifications found in section 162(b) 

of MIPPA. We did not receive any 

comments on our revisions; therefore, 

we are finalizing the revisions to 

§ 422.4(a)(3) and § 422.216(a) as 

described. 

3. Revisions to Quality Improvement 

Programs § 422.152 

a. Requirement for MA PFFS and MSA 

Plans to Have a Quality Improvement 

Program 

Section 163(a) of MIPPA repealed, 

effective January 1, 2010, the statutory 

exemption found at section 1852(e)(1) of 

the Act for MA PFFS plans and MSA 

plans from the requirement that MA 

plans have quality improvement 

programs meeting specified statutory 

requirements. We stated in the 

September 18, 2008 IFC that, beginning 

plan year 2010, each MA PFFS and 

MSA plan must have an ongoing quality 

improvement program that meets the 

requirements under § 422.152(a). We 

also revised § 422.152(a) to delete 

language exempting PFFS and MSA 

plans from having quality improvement 

programs. 

MAOs that offer one or more MA 

plans must have for each of their plans 

a QI program under which it meets all 

of the following requirements: 

• Has a chronic care improvement 

program (CCIP), that meets the 

requirements of § 422.152(c), and 

addresses populations identified by 

CMS based on a review of current 

quality performance. 

• Conducts quality improvement 

projects (QIP) that can be expected to 

have a favorable effect on health 

outcomes and enrollee satisfaction, 

meets the requirements of § 422.152(d), 

and addresses areas identified by CMS. 

• Encourages providers to participate 

in CMS and Health and Human Service 

(HHS) QI initiatives. 

1. • Develops and maintains a health 

information system. 

2. • Contracts with an approved 

Medicare CAHPS vendor to conduct the 

Medicare CAHPS satisfaction survey of 

Medicare enrollees. 

3. • Includes a program review 

process for formal evaluation that 

addresses the impact and effectiveness 

of its QI programs at least annually. 

4. • Corrects problems for each plan. 

Finally, MAOs must ensure that, (1) 

their reported data are accurate and 

complete, (2) they maintain health 

information for CMS review as 

requested, (3) they conduct an annual 

review of their overall QI program, and 

(4) they take action to correct problems 

revealed through complaints and QI 

program performance evaluation 

findings. 

We did not receive any comments on 

this requirement; therefore, we are 

finalizing the revisions to § 422.152(a) 

as described in the September 18, 2008 

IFC. 

b. Data Collection Requirements for MA 

PFFS and MSA Plans 

Section 1852(e)(3)(A)(i) of the Act 

amended by section 163(b)(1) of MIPPA 

by adding that MA PFFS and MSA 

plans must provide for the collection, 

analysis, and reporting of data that 

permits the measurement of health 

outcomes and other indices of quality, 

but these requirements for PFFS and 

MSA plans cannot exceed the 

requirements established for MA local 

plans that are PPO plans beginning in 

plan year 2011 and are subject to an 

exception for plan year 2010 (as 

discussed below). 

The statute provided a special rule 

that applies for plan year 2010, when 

MA PFFS and MSA plan quality 

requirements are not restricted to the 

data collection requirements established 

for MA local plans that are PPO plans 

under § 422.152(e). Instead, they must, 

for 2010 only, meet the data collection 

requirements with respect to 

administrative claims data, as specified 

in CMS guidance. We interpreted this 

exception to mean that for plan year 

2010, MA PFFS and MSA plans are 

required to report quality data based on 

administrative claims data from all 

providers that include contract, deemed 

(applicable to PFFS plans only), and 

non-contract providers. 

In the September 18, 2008 IFC, we 

added paragraph (h) to § 422.152 to 

describe the data collection 

requirements for MA PFFS and MSA 

plans. We stated that for plan year 2010, 

MA PFFS and MSA plans are not 

subject to the limitations under 

§ 422.152(e)(1)(i) and must meet the 

data collection requirements using 

administrative claims data only. We also 


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54612 Federal Register / Vol. 76, No. 170 / Thursday, September 1, 2011 / Rules and Regulations 

stated that for plan year 2011 and 

subsequent plan years, MA PFFS and 

MSA plans are subject to data collection 

requirements that may not exceed the 

requirements specified in § 422.152(e) 

for MA local plans that are PPO plans. 

Comment: A commenter suggested 

that CMS create an exception to the data 

collection requirements for 2010 for 

PFFS plans that will terminate in 2011. 

Response: In the 2010 Call Letter, we 

stated that MA organizations that will 

terminate their PFFS or MSA contracts 

effective January 1, 2011 will not be 

required to submit a HEDIS report for 

2010 for those contracts. 

We are finalizing § 422.152(h) as 

described in the September 2008 IFC to 

reflect the new quality data collection 

requirements for PFFS and MSA plans. 

c. Data Collection Requirements for MA 

Regional Plans 

Section 163(b)(2) of MIPPA deleted 

clause (ii) of section 1852(e)(3)(A) of the 

Act. Section 1852(e)(3)(A)(ii) had 

provided for CMS to establish separate 

regulatory requirements for MA regional 

plans relating to the collection, analysis, 

and reporting of data that permit the 

measurement of health outcomes and 

other indices of quality and also 

provided that these requirements for 

MA regional plans could not exceed the 

requirements established for MA local 

plans that are PPO plans. Furthermore, 

section 163(b)(3) of MIPPA amended 

section 1852(e)(3)(iii) of the Act by 

adding that MA regional plans are 

subject to the data collection 

requirements under section 

1852(e)(3)(A)(i) of the Act only to the 

extent that data are furnished by 

providers who have a contract with the 

MA regional plan. This provision is 

effective for plan years beginning on or 

after 2010 and allows for consistent data 

collection requirements between MA 

local plans that are PPO plans and MA 

regional plans. 

We received no comments on this 

section and no change to regulatory text 

is needed since existing language in 

§ 422.152(e) describes the requirements 

for MA local plans that are PPO plans 

as well as MA regional plans. Therefore 

we are finalizing this section without 

modification. 

4. Phase-Out of Indirect Medical 

Education Component of MA Capitation 

Rate (§ 422.306) 

In our September 18, 2008 IFC we 

noted that section 161 of MIPPA added 

a new paragraph (4) to 1853(k) of the 

Act, which directed the Secretary to 

phase-out indirect medical education 

(IME) amounts from MA capitation rates 

with a maximum adjustment percentage 

per year of 0.60 percent. We explained 

that implementation of the IME 

payment phase-out began in plan year 

2010. Each year after 2010 the 

maximum adjustment percentage was to 

increase up to an additional 0.60 

percent until the entire IME portion of 

the MA capitation rate in an area is 

reduced to zero. We stated that PACE 

programs are excluded from the IME 

payment phase-out. Finally, we stated 

that payment to teaching facilities for 

IME expenses for MA plan enrollees 

will continue to be made under section 

1886(d)(11) of the Act by Original 

Medicare. We stated that we were 

adding a new paragraph (c) to § 422.306 

to reflect this statutory IME phase-out. 

We received no comments on this 

provision and are finalizing our 

regulatory changes without 

modification. 

B. Changes to the Part D Prescription 

Drug Benefit Program 

1. Use of Prescription Drug Event Data 

for Purposes of Section 1848(m) of the 

Act (423.322(b)) 

Section 132 of MIPPA revised section 

1848(m) of the Act, as added and 

amended by section 131 of MIPPA, to 

provide incentive payments to eligible 

professionals for successful electronic 

prescribing. A successful electronic 

prescriber for a reporting period is one 

who meets the requirements for 

submitting data on electronic 

prescribing quality measures or, if the 

Secretary determines appropriate, 

submitted a sufficient number (as 

determined by the Secretary) of 

prescriptions under Part D during the 

reporting period. Congress added 

paragraph (3)(iv) to section 1848(m) of 

the Act to permit the Secretary to use 

the data regarding drug claims 

(prescription drug event data) submitted 

for payment purposes under the 

authority of section 1860D–15 of the Act 

as necessary for purposes of carrying out 

section 1848(m), notwithstanding the 

limitations set forth under section 

1860D–15(d)(2)(B) and (f)(2) of the Act. 

Consistent with the authority granted 

to the Secretary regarding the use of the 

prescription drug event data for 

purposes of section 1848(m) of the Act, 

in the IFC we revised § 423.322(b) to 

remove the restriction placed on 

officers, employees and contractors of 

the HHS when using these data in 

accordance with section 1848(m) of the 

Act. 

Comment: A commenter questioned 

whether MAOs are required to pay eprescribing incentive payments and if 

so, whether the payment will be based 

on MAO or national data. 

Response: This provision relates to 

the extended authority granted under 

MIPAA for the Secretary to use 

prescription drug event data for 

purposed of providing incentives 

payments for e-prescribing. The 

commenter’s questions are specific to eprescribing requirements and, therefore, 

are outside the scope of the final rule. 

However, as stated in the 2010 Call 

Letter dated March 30, 2009, payments 

to physicians who are contracted with 

MAOs are generally governed by the 

terms of the contract, and it is up to the 

MAO whether to take the e-prescribing 

incentive payment into account in 

establishing the amount the physician is 

paid. 

We are finalizing this provision 

without change. 

2. Elimination of Medicare Part D Late 

Enrollment Penalties Paid by Subsidy 

Eligible Individuals (§ 423.46 and 

§ 423.780) 

In the September 18, 2008 interim 

final rule (73 FR 54208), we stated that 

each year since the beginning of the 

Medicare prescription drug program we 

had conducted a Medicare payment 

demonstration that provided that 

Medicare beneficiaries who qualified for 

the low-income subsidy for Medicare 

prescription drug coverage were able to 

enroll in a Medicare prescription drug 

plan with no penalty. We stated the 

demonstration had tested the number 

and characteristics of the beneficiaries 

that benefited from waiver of the late 

enrollment penalty (LEP), and the cost 

of the waiver to Medicare. Originally 

this payment demonstration allowed 

certain Medicare beneficiaries to enroll 

in a Medicare prescription drug plan in 

2006 with no LEP. Under the original 

waiver, we did not collect the LEP from 

beneficiaries who enrolled in Medicare 

Part D in 2006 and were either eligible 

for the low-income subsidy or lived in 

an area affected by Hurricane Katrina. 

This payment demonstration was 

amended to include beneficiaries who 

were eligible for the low-income 

subsidy and enrolled ‘‘late’’ in Medicare 

Part D in 2007 and 2008. 

Section 114 of MIPPA revised the 

statute to waive the late enrollment 

penalty for subsidy eligible individuals. 

Accordingly, we revised our regulation 

at § 423.780(e) in order to reflect this 

MIPPA change. Under the revised 

regulation, we will no longer charge 

subsidy eligible individuals (defined in 

§ 423.773) a late enrollment penalty. 

This eliminated the need for the LEP 

payment demonstration. Finally, we 

stated this provision was effective 

January 1, 2009, when the current 

demonstration ended. We stated that we 


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were also are making a conforming 

change to § 423.46(a) to reflect the fact 

that subsidy eligible individuals may 

enroll in Medicare prescription drug 

plan with no penalty. 

We received no comments on these 

provisions and are finalizing our 

regulatory changes without 

modification. 

3. Prompt Payment of Clean Claims 

(§ 423.505 and § 423.520) 

Section 171 of MIPPA amended 

sections 1860–12(b) and 1857(f) of the 

Act by adding provisions with regard to 

prompt payment by prescription drug 

plans (PDPs) and Medicare Advantage 

prescription drug (MA–PD) plans, both 

of which are Part D sponsors as defined 

in § 423.4. We codified these new 

requirements in § 423.505 and § 423.520 

of the September 18, 2008 interim final 

rule. 

In accordance with the new sections 

1860D–12(b)(4) and 1857(f)(3)(A) of the 

Act, and as codified in § 423.520 

effective January 1, 2010, CMS’ contract 

with Part D sponsors must include a 

provision requiring sponsors to issue, 

mail, or otherwise transmit payment for 

all clean claims submitted by network 

pharmacies—except for mail-order and 

long-term care pharmacies—within 

specified timeframes for electronic and 

all other (non-electronically submitted) 

claims. 

Consistent with section 1860D– 

12(b)(4)(A)(ii) of the Act, a clean claim 

is defined in § 423.520(b) of the 

regulations as a claim that has no defect 

or impropriety—including any lack of 

any required substantiating 

documentation—or particular 

circumstance requiring special 

treatment that prevents timely payment 

of the claim from being made under the 

requirements of § 423.520. 

As provided in section 1860D– 

12(b)(4)(B) of the Act and codified in 

§ 423.520(a)(1)(i) and § 423.520(a)(1)(ii), 

Part D sponsors must make payment for 

clean claims within 14 days of the date 

on which an electronic claim is received 

and within 30 days of the date on which 

non-electronically submitted claims are 

received. Consistent with MIPPA, 

§ 423.520(a)(2)(i) and (ii) define receipt 

of an electronic claim as the date on 

which the claim is transferred, and 

receipt of a non-electronically submitted 

claim as the 5th day after the postmark 

day of the claim or the date specified in 

the time stamp of the transmission, 

whichever is sooner. 

Additionally, as provided in section 

1860D–12(b)(4)(D)(i) of the Act and as 

codified in § 423.520(c)(1), a claim will 

be deemed to be a clean claim to the 

extent that the Part D sponsor that 

receives the claim does not issue notice 

to the submitting network pharmacy of 

any deficiency in the claim within 10 

days after an electronic claim is 

received and within 15 days after a nonelectronically submitted claim is 

received. A claim deemed to be a clean 

claim must be paid by the sponsor 

within 14 days (for an electronic claim) 

or 30 days (for a non-electronic claim) 

of the date on which the claim is 

received, as provided in 

§ 423.520(a)(1)(i) and § 423.520(a)(1)(ii). 

Comment: One commenter suggested 

that we clarify that the word ‘‘day’’ as 

used throughout these provisions means 

‘‘calendar day.’’ 

Response: Section 1860D–12(b)(4)(B) 

defines the term ‘‘applicable number of 

calendar days’’ as ‘‘14 days’’ with 

respect to electronic claims and ‘‘30 

days’’ with respect to non-electronic 

claims. Elsewhere in the statute, 

Congress simply used the term ‘‘days.’’ 

Since Congress did not define ‘‘days,’’ 

nor use another more restrictive term, 

such as ‘‘business days,’’ we interpret 

‘‘calendar days’’ and ‘‘days’’ to have the 

same meaning for purposes of the 

prompt pay requirements and thus have 

simply used the term ‘‘days’’ throughout 

the regulation. 

Comment: Several commenters 

asserted that claims that are 

electronically adjudicated at point of 

sale (POS) should be deemed ‘‘clean 

claims’’ that are payable within 14 days, 

with no retroactive review allowed 

during the 10-day period for sponsors to 

provide notice of deficiencies. These 

commenters suggested that issues such 

as eligibility issues which are 

discovered during the 10-day period 

should be resolved among plans. 

Response: We believe that section 

1860D–12(b)(4)(D)(i) clearly provides 

that claims are deemed to be clean if the 

Part D sponsor involved does not 

provide notice to the claimants of any 

deficiencies within the statutory time 

period, which is 10 days for claims 

submitted electronically. The fact that a 

Part D sponsor adjudicates an electronic 

claim at POS does not preclude the 

sponsor from notifying the claimant of 

a deficiency within the ten day period. 

While a sponsor’s failure to pay a claim 

can cause the claim to be deemed clean 

pursuant to section 1860D– 

12(b)(4)(D)(iii) of the Act, payment of 

the claim in and of itself does not deem 

it to be a clean claim under the Act. 

Since the statute did not provide a time 

period for a pharmacy to cure a 

deficiency, we expect that such a time 

period would be a matter of negotiation 

between the parties, as well as whether 

payment for such a claim may be 

retracted in the meantime. 

Under section 1860D–12(b)(4)(D)(ii) of 

the Act and in § 423.520(c)(2) of the 

regulations, if the Part D sponsor 

determines that a submitted claim is not 

a clean claim, it is required to notify the 

submitting pharmacy that the claim has 

been determined not to be clean, specify 

all the defects or improprieties 

rendering the claim not a clean claim, 

and list all additional information 

necessary for the sponsor to properly 

process and pay the claim. This 

notification must be provided within 10 

days after an electronic claim is 

received, and within 15 days after a 

non-electronic claim is received. 

Once the submitting pharmacy 

resubmits the claim with the additional 

information specified by the Part D 

sponsor as necessary for properly 

processing and paying the claim, the 

sponsor has 10 days, consistent with 

section 1860D–12(b)(4)(D)(iii) of the 

Act, and, as specified in § 423.520(c)(3), 

provide notice to the submitting 

pharmacy of any defect or impropriety 

in the resubmitted claim. If the sponsor 

does not provide notice to the 

submitting pharmacy of any defect or 

impropriety in the resubmitted claim 

within 10 days of the sponsor’s receipt 

of such claim, the resubmitted claim is 

deemed to be a clean claim and must be 

paid consistent with the timeframes 

specified in § 423.520(a)(1) (within 14 

days of the date on which a resubmitted 

electronic claim is received and within 

30 days of the date on which a nonelectronically resubmitted claim is 

received). 

Comment: Several commenters stated 

that CMS should clarify the September 

18, 2008 IFC to limit the number of 

requests plans can make for additional 

information about a non-clean claim to 

one request and to only information 

readily available to pharmacies. The 

commenters provided the example of a 

plan asking for proof of eligibility on the 

10th day after receiving a non-clean 

electronic claim, and then waiting an 

additional 10 days after receipt of this 

additional documentation to request 

information on fulfillment of prior 

authorization requirements. 

Response: The statute and IFC State 

that if a Part D sponsor determines that 

a submitted claim is not a clean claim, 

it must notify the submitting pharmacy 

within the specified time period and 

‘‘such notification must specify all 

defects or improprieties in the claim 

and must list all additional information 

necessary for the proper processing and 

payment of the claim.’’ Since the statute 

and regulation use the term 

‘‘notification’’ in the singular and use 

the phrases ‘‘all defects and 

improprieties’’ and ‘‘all additional 


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information necessary,’’ we believe this 

provision plainly requires plans to 

identify all of the problems with the 

claim in a single notice and, therefore, 

plans cannot make multiple requests for 

additional information during the 

applicable time period (10 days for a 

non-clean electronic claim and 15 days 

for a non-clean non-electronic claim). 

Therefore, we disagree that a 

clarification of the regulation text is 

needed on this point. In addition, we 

believe that the statute and September 

18, 2008 IFC, which state that a claim 

is deemed to be a clean claim if the Part 

D sponsor that receives the claim does 

not provide notice to the submitting 

network pharmacy of any defect or 

impropriety in the claim within ten 

days after the date on which additional 

information is received, is intended 

only to provide a timeframe for a 

sponsor to notify a pharmacy of 

previously requested information that 

was not received or is still deficient, or 

of a new deficiency raised by the 

additional information received, and is 

not intended to permit Part D sponsors 

to request new information for the first 

time to cure a deficiency that could 

have been identified in the original 

claim submission. Therefore, we agree 

and have revised § 423.520(c)(2)(ii) to 

clarify that a Part D sponsor may only 

provide notice of any remaining defects 

or improprieties in the claim, or of any 

new deficiencies raised by the 

additional information. 

Comment: One commenter noted that 

there appeared to be an error in 

§ 423.520(c)(3) in referencing only 

§ 423.520(a)(1)(i) and (ii). 

Response: We agree with the 

commenter that the regulation should be 

drafted more clearly. While the 

regulation as currently written mirrors 

the statute in only cross-referencing the 

timeframe for paying a clean claim, and 

not the timeframe for deeming a claim 

clean where a sponsor does not provide 

timely written notice of any 

deficiencies, we believe it is clear that 

the intent of the statute is for sponsors 

to pay claims that are deemed clean 

within the time frame for paying a clean 

claim. Section 1860D–12(b)(4)(D)(i) of 

the Act is clear that claims that are not 

contested within the applicable 

timeframes are deemed clean. Therefore, 

we have revised the regulation 

accordingly to reference the timeframes 

for paying a clean claim in 

§ 423.505(a)(1)(i) and (ii) and the 

timeframes for contesting a claim in 

(c)(1)(i) and (ii). 

With respect to the act of payment 

itself, in accordance with section 

1860D–12(b)(4)(D)(iv) of the Act, 

§ 423.520(d) specifies that payment for a 

clean claim is considered to have been 

made on the date payment for an 

electronic claim is transferred. Payment 

for a clean claim is considered to have 

been made on the date payment for a 

non-electronic claim is submitted to the 

United States Postal Service or common 

carrier, respectively. 

Comment: One commenter suggested 

that the payment date for electronic 

claims should be when the transaction 

is initiated, and payment for nonelectronic claims should be when 

payment is given to the USPS or 

common carrier. Other commenters 

disagreed, suggesting that payment for 

electronic claims should be the date 

when funds are made available to the 

provider, and that there should be no 

exceptions in batch payments—meaning 

all payments in a batch should be made 

available to the provider on or before 

the 14th day after the date on which the 

earliest clean electronic claim of the 

batch was received. 

Response: Section 1860D– 

12(b)(4)(D)(iv) of the Act states plainly 

that payment of a clean claim is 

considered to have been made on the 

date on which the payment is 

transferred (for electronic claims) and 

the date the payment is submitted to the 

U.S. Postal Service or common carrier 

for delivery. Section 423.520(d) is 

consistent with the statute. We interpret 

the term ‘‘transferred’’ to mean when 

payment has been made to the payee. 

Thus, for an electronic claim, this 

would be the date on which funds will 

be posted to the payee’s (or its agent’s) 

account. For a non-electronic claim, we 

interpret ‘‘submitted’’ to mean the date 

when the payment is postmarked by the 

USPS or recorded as received by a 

common carrier. Payment for all claims 

must meet applicable statutory and 

regulatory timeframes, regardless of 

whether the claims are paid in batches 

or not. 

To the extent that a Part D sponsor 

does not issue, mail, or otherwise 

transmit payment for a clean claim 

within 14 days of the date on which an 

electronic claim is received and within 

30 days of the date on which a nonelectronically submitted claim is 

received, as specified in § 423.520(a)(1), 

section 1860D–12(b)(4)(C) of the Act 

requires that the sponsor pay interest to 

the submitting pharmacy. As required 

under section 1860D–12(b)(4)(C)(i) of 

the Act, and as codified in 

§ 423.520(e)(1), the Part D sponsor must 

pay such interest at a rate equal to the 

weighted average of interest on 3-month 

marketable Treasury securities 

determined for such period, increased 

by 0.1 percentage point for the period 

beginning on the day after the required 

payment date and ending on the date on 

which the payment is made under 

§ 423.520(d). For purposes of CMS 

payments to Part D sponsors for 

qualified prescription drug coverage, 

any interest amounts paid under 

§ 423.520(e)(1) do not count against the 

Part D sponsor’s administrative costs, 

nor are they treated as allowable risk 

corridor costs, under § 423.308. In other 

words, the Part D sponsor is fully liable 

for any interest payments for claims not 

paid timely, consistent with 

§ 423.520(d). In accordance with section 

1860D–12(b)(4)(C)(ii) of the Act and as 

codified in § 423.520(e)(2), CMS may 

determine that a Part D sponsor will not 

be charged interest under § 423.520(e)(1) 

as appropriate, including in exigent 

circumstances such as natural disasters 

and other similar unique and 

unexpected events that prevent timely 

claims processing. We will make such 

determinations on a case-by-case basis 

at the sponsor’s request. 

Comment: One commenter suggested 

that CMS’s authority is limited when 

determining exigent circumstances 

under which plans will not be charged 

interest on late paid claims and that the 

language was too broad. 

Response: We agree that the language 

in § 423.520(e)(2) could be interpreted 

as giving us slightly broader authority 

than MIPPA bestowed. Therefore, we 

have revised the section to more closely 

track the statutory language. 

The Act addressed payment of claims 

by electronic funds transfer (EFT). 

Section 1860D–12(b)(4)(E) of the Act 

and § 423.520(f) require that a Part D 

sponsor pay all electronically submitted 

clean claims by EFT if the submitting 

network pharmacy requests payment via 

EFT or has previously requested 

payment via EFT. For ease of sponsor 

execution, the requirement that 

payment be provided via EFT if a 

sponsor has previously requested EFT 

payment means that any such previous 

request must have occurred during the 

current contract year. This requirement 

also means that all Part D sponsors must 

have the capacity to pay via EFT so that 

they may pay via EFT any of their 

network pharmacies requesting payment 

for submitted claims in this manner. In 

addition, under § 423.520(f), for any 

payment made via EFT, the Part D 

sponsor may also make remittance 

electronically. 

In accordance with section 1860D– 

12(b)(4)(F)(i) of the Act and as codified 

in § 423.520(g)(1), the requirements in 

§ 423.520 do not in any way prohibit or 

limit a claim or action that any 

individual or organization may have 

against a pharmacy, provider, or Part D 

sponsor that is unrelated to the new 


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requirements in § 423.520. Further, as 

provided under section 1860D– 

12(b)(4)(F)(ii) of the Act and 

§ 423.520(g)(2), consistent with any 

applicable Federal or State law, a Part 

D sponsor may not retaliate against an 

individual, provider, or pharmacy for 

any such claim or action. Finally, as 

provided under section 1860d– 

12(b)(4)(G) of the Act and codified in 

§ 423.520(h), any determination that a 

claim submitted by a network pharmacy 

is a clean claim as defined in 

§ 423.520(b) must not be construed as a 

positive determination regarding the 

claim’s eligibility for payment under 

Title XVIII of the Act. In addition, any 

determination that a claim is a clean 

claim as defined in § 423.520(b) of the 

Act is not an indication that the 

government approves, or acquiesces 

regarding the submitted claim and does 

not relieve any party of civil or criminal 

liability, nor offer defense to any 

administrative, civil, or criminal action, 

with respect to the submitted claim. We 

received no comments on § 423.520(f), 

§ 423.520(g), or § 423.520(h). 

In addition to adding a new § 423.520 

to reflect the prompt payment 

requirements of section 1860D–12(b)(4) 

of the Act, we amended § 423.505(b) to 

include the prompt payment provisions 

as one of the required elements of the 

contract between CMS and the Part D 

sponsor. Therefore, § 423.505(b)(19) 

required that, effective contract year 

2010, the contract between CMS and the 

Part D sponsor must include the prompt 

payment provisions at § 423.520. 

We also amended § 423.505(i)(3) with 

respect to contracts or written 

arrangements between Part D sponsors 

and pharmacies or other providers, first 

tier, downstream and related entities to 

ensure that Part D sponsors’ contracts 

with these entities include prompt 

payment provisions consistent with 

§ 423.520. Section 423.505(i)(3)(vi) thus 

required that sponsors’ pharmacy 

contracts include the prompt payment 

provisions of § 423.520. We review 

pharmacy contract templates (except for 

mail-order and LTC pharmacy 

templates) for new applicants to ensure 

the addition of these prompt payment 

provisions. To the extent that such 

agents are authorized to receive 

payment on behalf of a participating 

pharmacy for claims submitted to a Part 

D sponsor, there is no distinction 

between a pharmacy and its agent for 

purposes of the prompt payment 

provisions at § 423.520. Thus, the 

prompt payment provisions at § 423.520 

extend to an agent authorized to receive 

payment for claims submitted to a Part 

D sponsor, as long as it is in compliance 

with all Federal and State laws. We 

received no comments on these 

provisions. 

The revisions to the regulations 

reflecting the previously-described 

MIPPA prompt payment provisions 

were all effective on January 1, 2010. 

We are finalizing these provisions with 

the amendments previously described. 

4. Submission of Claims by LTC 

Pharmacies (§ 423.505) 

Section 172 of MIPPA amended 

sections 1860D–12(b) and 1857(f)(3) of 

the Act to add a provision on the 

submission of claims by pharmacies 

located in or having a contract with a 

long term care facility. Effective January 

1, 2010, new sections 1860D–12(b)(5) 

and 1857(f)(3)(B) of the Act direct us to 

incorporate into each contract CMS 

enters into with a Part D sponsor a 

provision addressing the submission of 

claims by long-term care pharmacies. 

Specifically, our contracts with Part D 

sponsors must provide that long-term 

care pharmacies must have not less than 

30 days, nor more than 90 days, to 

submit claims to the sponsor for 

reimbursement under the plan. We 

codified this new statutory contract 

requirement at § 423.505(b)(20). 

Effective January 1, 2010, this provision 

applies to any claim submitted by a 

long-term care pharmacy, as defined in 

§ 423.100. 

Effective contract year 2010, new 

sections 1860D–12(b)(5) and 

1857(f)(3)(B) of the Act require that CMS 

contracts with Part D sponsors include 

a provision requiring sponsors to 

provide long-term care pharmacies (as 

defined in § 423.100) not less than 30 

days, nor more than 90 days, to submit 

claims for reimbursement under the 

plan. In addition to adding this 

requirement to the contract provisions 

specified in § 423.505(b), in the IFC we 

amended § 423.505(i) to specify that 

timeframes for submission of claims by 

long-term care pharmacies must be 

contained in Part D sponsor contracts 

with the long-term care pharmacies. As 

provided in § 423.505(i)(3)(vii), all 

sponsor contracts with long-term care 

pharmacies must contain a provision 

that establishes timeframes, consistent 

with § 423.505(b)(20), for the 

submission to the sponsor of claims for 

reimbursement. 

Comment: Two commenters stated the 

90-day limit for claims submission is 

problematic given the time required to 

process Medicaid applications, the 

retroactivity of many Medicaid 

eligibility determinations, and the time 

lags associated with updates to State 

eligibility data bases. These commenters 

noted that LTC pharmacies are holding 

receivables for copayments for 

beneficiaries who have Medicaid 

pending or are dual eligible, but whose 

status has not been updated or who had 

a retroactive Medicaid effective date. 

The commenters recommended that 

CMS codify in the regulation the 

statement in our September 18, 2008 

IFC preamble that the statute does not 

eliminate CMS’ policy requiring a new 

timely filing period for claims incurred 

during a period of retroactive Medicaid 

eligibility, or specify in the PDP contract 

that this provision does not preclude a 

LTC pharmacy from rebilling when the 

claim was not paid fully or correctly, or 

clarify the 90 days applies only to 

‘‘clean claims.’’ 

Response: This provision applies to 

claims for reimbursement of 

prescription drugs—not to claims 

adjustments resulting from retroactive 

changes affecting the beneficiary’s costsharing, premiums and plan benefit 

phase (such as changes in low-income 

subsidy (LIS) status). Since the 

publication in the September 18, 2008 

IFC, we published proposed and final 

rules on October 22, 2009 (74 FR 54634) 

and April 15, 2010 (75 FR 19678), 

respectively. In the April 2010 final 

rule, we codified at § 423.464 and 

§ 423.466 our previous policy guidance 

requiring sponsors to make retroactive 

claim adjustments and take into account 

other payer contributions as part of the 

coordination of benefits. We also added 

a new timeliness standard at § 423.466 

to require adjustment and issuance of 

refunds or recovery notices within 45 

days of the sponsor’s receipt of the 

information necessitating the 

adjustment. 

The specific change at § 423.464 

added a new paragraph (g)(7) to require 

sponsors to account for payments by 

State Pharmaceutical Assistance 

Programs (SPAPs) and other providers 

of prescription drug coverage in 

reconciling retroactive claims 

adjustments that create overpayments 

and underpayments, as well as to 

account for payments made and for 

amounts being held for payment, by 

other individuals for entities. We 

acknowledged in the preamble of the 

April 2010 final rule (75 FR 19724) that 

pharmacies are not providers of other 

prescription drug coverage, but noted it 

was our intention to apply the 45-day 

limit to all retroactive changes. As a 

result, we also amended § 423.800 to 

add a new paragraph (e) to make it clear 

that the 45-day timeframe applies to 

adjustments involving pharmacies and 

beneficiaries, including LTC pharmacies 

holding cost-sharing amounts due. The 

new paragraph (e) requires sponsors to 

process retroactive adjustments to costsharing for low-income subsidy 


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individuals and any resulting refunds 

and recoveries within the timeframe 

specified in § 423.466(a). We note that 

by definition ‘‘adjustments’’ can only be 

made to previously adjudicated claims. 

Comment: One commenter 

recommended the regulatory text 

explicitly address retroactive Part D 

enrollment for dual eligible 

beneficiaries and continue to operate 

under the CMS May 25, 2007 policy 

guidance requiring the use of the date of 

Medicaid notification to establish a 

timely claims filing period under 

§ 423.505(b)(20). The commenter noted 

that this would ensure beneficiaries and 

other parties, including pharmacies, 

have the opportunity to request 

reimbursement for claims incurred 

during the retroactive Part D enrollment 

period. 

Response: We stated in the September 

18, 2008 IFC preamble that the new LTC 

pharmacy claim submission 

requirement would not eliminate the 

requirement for Part D sponsors to 

provide a new timely claims filing 

period for claims incurred by dual 

eligible beneficiaries during a period of 

retroactive Part D enrollment as 

specified in May 25, 2007 

memorandum. However, since the 

publication in the September 18, 2008 

IFC, we have changed the manner in 

which these claims are processed. 

Beginning in January 2010, CMS 

implemented a demonstration project, 

known as the low-income newly eligible 

transition (NET) program, to handle 

retroactive Part D enrollment. Under the 

demonstration, a single, competitively 

procured Part D sponsor covers all Part 

D prescription drug claims for all 

periods of retroactive coverage for full 

benefit dual eligible and SSI-eligible 

individuals, as well as point-of-sale 

coverage at the pharmacy for certain LIS 

individuals who are not yet enrolled in 

a Part D plan. Beneficiaries who are 

retroactively auto/facilitated enrolled by 

CMS and LIS beneficiaries confirmed 

eligible for the demonstration are 

temporarily enrolled in the 

demonstration contractor’s plan. These 

beneficiaries are then prospectively 

auto/facilitated enrolled in a qualified 

PDP. 

Because the low-income NET 

demonstration eliminates the routine 

need for sponsors to reimburse claims 

incurred by individuals eligible for the 

program during periods of retroactive 

Part D enrollment, there is no longer a 

need for Part D sponsors to provide the 

special transition period required by the 

May 25, 2007 memorandum. This policy 

change is described in section 50.10 of 

the updated Coordination of Benefits 

(COB) chapter of the Medicare 

Prescription Drug Benefit Manual issued 

on March 19, 2010 which is available on 

the CMS Web site at http:// 

www.cms.gov/ 

PrescriptionDrugCovContra/Downloads/ 

Chapter14.pdf. Beneficiaries and 

pharmacies, including LTC pharmacies, 

can submit claims incurred during the 

period of retroactive Part D enrollment 

to the low-income NET program 

contractor without timely filing limits 

during the period of enrollment in the 

low-income NET program and for up to 

180 days following the beneficiary’s 

disenrollment from the program. Claims 

filing requirements are specified in the 

CMS contract with the low-income NET 

program contractor. As a result, we do 

not believe it is necessary to revise the 

regulatory language to address 

retroactive Part D enrollment. 

Comment: One commenter argued 

that the timeframe for claims 

submission is too restrictive for ICF/MR 

and IMD business cycles and noted 

further that PDP contract negotiations 

with LTC institutions can take 6 to12 

months, so flexible timeframes are 

necessary. 

Response: We recognize that the 

statutory timeframes for LTC pharmacy 

claims submission may not be aligned 

with previous billing practices, but we 

have no authority to revise the statutory 

timeframes to provide the flexibility 

sought by the commenter. 

After considering the comments 

received in response to the September 

18, 2008 IFC, we are finalizing these 

provisions without change. 

5. Regular Update of Prescription Drug 

Pricing Standard (§ 423.505) 

Section 173 of MIPPA amended 

sections 1860D–12(b) and 1857(f)(3) of 

the Act, effective January 1, 2009, to add 

a provision on the regular updating of 

prescription drug pricing standards. In 

accordance with new sections 1860D– 

12(b)(6) and 1857(f)(3)(C) of the Act, 

which we codified in § 423.505(b)(21) 

effective January 1, 2009, CMS’ 

contracts with Part D sponsors must 

include a provision requiring sponsors 

to regularly update any prescription 

drug pricing standard they use to 

reimburse network pharmacies based on 

the cost of the drug (for example, 

average wholesale price, wholesale 

average cost, average manufacturer price 

average sales price). As codified in 

§ 423.505(b)(21)(i) and 

§ 423.505(b)(21)(ii), these updates, if 

applicable, must occur on January 1 of 

each contract year and not less 

frequently than every 7 days thereafter. 

We also amended § 423.505(i)(3) with 

respect to contracts or written 

arrangements between Part D sponsors 

and pharmacies or other providers, first 

tier, downstream and related entities to 

ensure that Part D sponsors’ contracts 

with these entities include provisions 

for regularly updating any prescription 

drug pricing standard used by sponsors 

to reimburse their network pharmacies, 

as provided in § 423.505(b)(21). 

Specifically, § 423.505(i)(3)(viii)(A) 

requires that sponsors’ pharmacy 

contracts include the pricing standard 

update requirements at § 423.505(b)(21), 

if applicable, and § 423.505(i)(3)(viii)(B) 

further specified that a Part D sponsor’s 

pharmacy contract must indicate the 

source used by the Part D sponsor for 

making such pricing updates. 

We review pharmacy contract 

templates (except for mail-order and 

LTC pharmacy templates) for new 

applicants beginning for contract year 

2010 to ensure the addition of this 

provision, if applicable. 

Comment: One commenter requested 

a definition of ‘‘prescription drug 

pricing standard.’’ 

Response: We do not believe that such 

a definition is necessary at this time. 

The preamble to the September 18, 2008 

interim final rule provided the 

following examples of prescription drug 

pricing standards: ones that are based 

on ‘‘wholesale average cost, average 

manufacturer price, average sales 

price.’’ We believe these examples 

sufficiently illustrate what is meant by 

a prescription drug pricing standard— 

that is, it is an accepted methodology 

based on published drug pricing. We 

believe that defining the standard 

beyond this may be overly prescriptive 

and might not be flexible enough to 

evolve with industry changes. Also, we 

are prohibited under the section 1860D– 

11(i)(1) of the Act from interfering in 

negotiations between sponsors and 

network pharmacies, and we presume 

such negotiations would address if a 

‘‘prescription drug pricing standard’’ 

will be used between the parties. 

Comment: There were several related 

comments submitted by a number of 

commenters about the applicability of 

prescription drugs pricing standards 

and the 7-day update requirement, 

which were: (1) Plans must promptly 

use updated standards to actually 

process claims; (2) plans should have to 

update benchmark prices to reflect price 

on date of service if plans could have 

access to such data; (3) plans should 

have to use a benchmark provider that 

updates data at least weekly; and (4) 

plans should not be able to now update 

their standards every seven days if they 

previously updated more frequently or 

have access to more frequent updates. 

Response: Section 1860D–12(b)(6) 

requires that if a Part D sponsor ‘‘uses 


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a standard for reimbursement of 

pharmacies based on the cost of a drug,’’ 

the sponsor must update the standard 

on January 1 of the year and not less 

frequently than once every 7 days.’’ We 

believe the statute’s use of the word 

‘‘reimbursement,’’ here makes it clear 

that Part D sponsors must not only 

update prescription drugs pricing 

standards but actually use them to 

reimburse claims. Nevertheless, we have 

clarified the language of § 423.505(b)(21) 

to apply to prescription drug pricing 

standards used for reimbursement by 

Part D sponsors. Further, the statute 

plainly indicates that updates must 

occur at least every 7 days, but does not 

contemplate that we could require more 

frequent updates—though we note that 

a Part D sponsor can arrange with its 

contracted pharmacies to make more 

frequent updates. Finally, the statute is 

silent on the issue of whether sponsors 

must use the price on the date of service 

(DOS) to process a claim. The statute 

does not address this issue, and we 

believe it is best decided by the parties. 

Thus, pricing used to process Part D 

claims can be no older than 7 days, 

when a prescription drug pricing 

standard is used for reimbursement. 

This is consistent with our previous 

subregulatory guidance issued as a 

memo titled, ‘‘Guidance for regulations 

in the IFC on September 15, 2008, in 

which we stated, ‘‘* * * sponsors must 

ensure they design their internal 

processes to ensure that fee schedules 

tied to any drug pricing standard are 

updated within these prescribed 

timeframes, and that all claims are 

adjudicated in accordance with 

appropriately updated fee schedules.’’ 

However, pharmacies are not precluded 

from negotiating with Part D sponsors 

for more frequent updating, or for DOS 

pricing to be used, or for a particular 

standard to be applied, for that matter. 

Comment: Several commenters stated 

that CMS should require plans to 

maintain current pricing for 60 days 

while plans and pharmacies negotiate 

new pricing when benchmarks are 

eliminated or methods for deriving 

benchmarks materially altered. 

Response: Section 173 of MIPPA did 

not address this issue. In the absence of 

specific direction on this point, we 

believe Congress intended to leave that 

issue to the discretion of the Part D 

sponsors and its contracted pharmacies. 

Also, as previously noted, we are 

prohibited under section 1860D–11(i)(1) 

of the Act from interfering in 

negotiations between sponsors and 

network pharmacies, and therefore, we 

presume these matters would be 

addressed in the negotiations between 

the parties. However, we note that the 

regulation requires that if a standard is 

used, it be identified in the contract 

between the parties, and of course any 

existing contract between the parties 

that identifies a standard would have to 

be amended according to the 

amendment terms of the contract if the 

pricing standard were to change. 

In the September 18, 2008 interim 

final rule, we stated that we are aware 

that some pharmacies, particularly 

independent pharmacies, work with 

agents for purposes of negotiating and 

signing contracts with Part D sponsors 

on their participating pharmacies’ 

behalf, and that to the extent that such 

agents are authorized to receive 

payment on behalf of a participating 

pharmacy for claims submitted to a Part 

D sponsor, there is no distinction 

between a pharmacy and its agent for 

purposes of the drug pricing standard 

update requirements at § 423.505(b)(21). 

Thus, we stated the drug pricing 

standard update requirements at 

§ 423.505(b)(21) extend to an agent 

authorized to receive payment for 

claims submitted to a Part D sponsor, as 

long as it is in compliance with all 

Federal and State laws. We received no 

comments on these provisions. 

The regulations reflecting the 

previously described MIPAA provisions 

on the regular update of prescription 

drug pricing standards were all effective 

January 1, 2009. We are finalizing these 

provisions as corrected on November 

21, 2008 (73 FR 70598) with the 

amendments previously described. 

6. Use of Part D Data (§ 423.505(m)) 

On May 28, 2008, prior to the passage 

of MIPPA, CMS published a final 

regulation (73 FR 30664) regarding the 

collection and use of Part D claims data. 

This regulation resolved the statutory 

ambiguity between section 1860D– 

12(b)(3)(D) and section 1860D–15 of the 

Act. One of the incorporated provisions 

at section 1860D–12(b)(3)(D) of the Act, 

is section 1857(e)(1) of the Act, which 

provides broad authority for the 

Secretary to add terms to the contracts 

with Part D sponsors, including terms 

that require the sponsor to provide the 

Secretary, ‘‘with such information as the 

Secretary may find necessary and 

appropriate.’’ As we stated in our final 

rule on Part D claims data, we believe 

that the broad authority of section 

1860D–12(b)(3)(D) of the Act authorizes 

CMS to collect the same prescription 

drug event data we currently collect to 

properly pay sponsors under the statute 

for other purposes unrelated to 

payment. However, we acknowledged 

that section 1860D–15 of the Act 

contains provisions that might be 

viewed as limiting such collection, thus 

compelling us to clarify the Secretary’s 

broad authority under section 1860D– 

12(b)(3)(D) in our final regulation. 

Accordingly, in the final Part D data 

rule, we implemented the broad 

authority of section 1860D–12(b)(3)(D) 

of the Act to permit the Secretary to 

collect claims data that are collected for 

Part D payment purposes for other 

research, analysis, reporting, and public 

health functions. 

Section 181 of MIPPA amended 

section 1860D–12(b)(3)(D) to make clear 

that, notwithstanding any other 

provision of law, information provided 

to the Secretary under the application of 

section 1857(e)(1) may be used for 

purposes of carrying out Part D, and 

may be used to improve public health 

through research on the utilization, 

safety, effectiveness, quality, and 

efficiency of healthcare services. Thus, 

MIPPA further strengthened our final 

rule on Part D claims data and confirms 

our authority to use claims data 

collected under 1860D–12 of the Act for 

purposes of reporting to the Congress 

and the public, conducting evaluations 

of the overall Medicare program, making 

legislative proposals to Congress, and 

conducting demonstration projects. 

While MIPPA did not alter our ability 

to collect and use data for purposes 

outlined in our final rule on Part D 

claims data, section 181 of MIPPA 

added a provision with respect to the 

disclosure of claims data to 

Congressional support agencies. 

Specifically, section 181 of MIPPA 

added clause (ii) to section 1860D– 

12(b)(3)(D) of the Act, which requires 

the Secretary to make data collected 

under section 1860D–12(b)(3)(D) of the 

Act available to Congressional support 

agencies, in accordance with their 

obligations to support Congress as set 

out in their authorizing statutes, for the 

purposes of conducting Congressional 

oversight, monitoring, making 

recommendations, and analysis of the 

Part D program. In our previously issued 

final rule on Part D claims data, we 

specified that we would only release the 

minimum data necessary to 

Congressional oversight agencies in 

accordance with our data sharing 

policies. Section 1860D–12(b)(3)(D) of 

the Act, as amended, removed the 

minimum necessary data restriction 

when data are requested by a 

Congressional support agency that is 

requesting the data in accordance with 

its obligation to support Congress as set 

out in its authorizing statute. 

Section 423.505(f)(3) of the 

regulations now requires that Part D 

plan sponsors must submit all data 

elements included as part of their drug 

claims ‘‘for purposes deemed necessary 


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54618 Federal Register / Vol. 76, No. 170 / Thursday, September 1, 2011 / Rules and Regulations 

and appropriate by the Secretary, 

including, but not limited to,’’ reporting 

to Congress and the public on the 

operation of the Part D program, 

conducting evaluations of the overall 

Medicare program, making legislative 

proposals, conducting demonstrations 

and pilot projects, supporting care 

coordination and disease management 

programs, supporting quality 

improvement and performance 

measurement activities, and populating 

personal health care records. Prior to the 

issuance of the September 18, 2008 IFC, 

§ 423.505(m)(1) of the regulations 

provided that with respect to data 

collected under § 423.505(f)(3), ‘‘CMS 

may release the minimum data 

necessary for a given purpose to Federal 

executive branch agencies, 

congressional oversight agencies, States, 

and external entities in accordance with 

the applicable Federal laws, CMS data 

sharing procedures, and subject, in 

certain cases to encryption and or 

aggregation of certain sensitive 

information.’’ MIPPA revised section 

1860D–12(b)(3)(D) of the Act to provide 

specifically that information collected 

pursuant to this section be made 

available to Congressional support 

agencies, in accordance with their 

obligations to support Congress as set 

out in their authorizing statutes, for the 

purposes of conducting Congressional 

oversight, monitoring, making 

recommendations, and analysis of the 

Medicare Part D program. Consistent 

with this new statutory provision, in the 

September 18, 2008 IFC, we revised 

§ 423.505(m)(1) of our regulations, to 

omit any reference to ‘‘Congressional 

oversight agencies.’’ We also added a 

new paragraph (m)(3) to § 423.505 

specifying that the Secretary will make 

the information collected under 

§ 423.505(f)(3) available to 

Congressional support agencies for the 

purposes of conducting congressional 

oversight, monitoring, making 

recommendations, and analysis of the 

Medicare program. 

We used the same definition for 

Congressional support agencies in 

§ 423.505(m)(3) that we previously used 

for Congressional oversight agencies in 

the regulation at § 423.505(m)(1)(iv). As 

with the definition of Congressional 

oversight agencies at 

§ 423.505(m)(1)(iv), we did not include 

the Congressional Research Service 

(CRS) as a Congressional support agency 

unless it is requesting the data on behalf 

of a Congressional committee consistent 

with 2 U.S.C. 166(d)(1). As previously 

explained in the preamble to the final 

rule on Part D claims data (73 FR 

30664), when CRS is not acting as the 

agent of a Congressional committee, it 

does not have the same authority to 

request data from departments or 

agencies of the United States, and 

would be restricted in the same manner 

as external entities when requesting 

prescription drug event data. 

We received no comments on this 

section, and therefore are finalizing 

these provisions without modification. 

7. Exemptions From Income and 

Resources for Determination of 

Eligibility for Low-Income Subsidy 

(§ 423.772) 

Section 1860D–14 of the Act describes 

the rules for determining financial 

eligibility for the Medicare Part D LowIncome Subsidy (LIS). These rules 

closely conform to the Supplemental 

Security Income (SSI) methodology for 

determining financial eligibility. Section 

116 of MIPPA amended the types of 

income and resources to be taken into 

consideration for determining financial 

eligibility for LIS to deviate from the SSI 

methodology in two areas. Specifically, 

section 116 of MIPPA amended 1860D– 

14(a)(3) of the Act by exempting from 

the determination of LIS the following: 

• Support and maintenance furnished 

in kind from income. 

• Value of any life insurance policy 

from resources. 

Support and maintenance furnished 

in kind is any food or shelter that is 

given to the applicant/spouse or 

received because someone else pays for 

it. This includes room, rent, mortgage 

payments, real property taxes, heating 

fuel, gas, electricity, water, sewage, and 

garbage collection services. 

Life insurance policy includes whole 

life, term, and products that combine 

features of whole life and term policies. 

In general, it is the responsibility of 

the Social Security Administration to 

determine eligibility for LIS. However, 

the CMS maintain in regulation broad 

parameters for income and resources for 

the Medicare Part D Low-Income 

Subsidy. These regulations also govern 

how State Medicaid agencies process 

LIS applications when individuals 

apply there. In order for CMS 

regulations to conform to the new law, 

we are updating our regulations to 

reflect the new exclusions from income 

and resources. 

In order to reflect these changes, we 

revised the definitions of ‘‘income’’ and 

‘‘resources’’ in § 423.772. 

The amendments made by this 

provision were effective with respect to 

LIS applications filed on or after January 

1, 2010. 

We did not receive any comments and 

are therefore finalizing these provisions 

without modification. 

C. Changes to the MA and Prescription 

Drug Benefit Programs 

In order to assist readers in 

understanding how the final provisions 

we discuss in this section apply to both 

programs, we are including Table 1, 

which highlights the provisions 

affecting both programs and the 

pertinent sections of Parts 422 and 423. 

TABLE 1—PROVISIONS AFFECTING BOTH THE PART C AND PART D PROGRAMS

Provision Part 422 

subpart 

Part 422 CFR 

section 

Part 423 

subpart 

Part 423 CFR 

section 

Disclosure of plan information ................................................................... Subpart C ...... 422 .111 Subpart C ...... ..........................

Marketing: Standards for MA/Part D marketing: ....................................... Subpart V ....... 422 .2268 Subpart V ....... 423.2268 

• Nominal gifts 

• Scope of marketing 

• Co-branding 

• Including plan type in plan name 

Marketing: reporting terminations .............................................................. Subpart V ....... 422 .2272 Subpart V ....... 423.2272 

Marketing: .................................................................................................. Subpart V ....... 422.2274 Subpart V ....... 423.2274 

• Broker and agent compensation 

• Training and testing 


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1. Disclosure of Plan Information 

(§ 422.111) 

Section 164 of MIPPA revised section 

1859(f) of the Act to require, effective 

January 1, 2010, disclosure of SNP plan 

information to beneficiaries. In order to 

reflect the MIPPA changes, the 

September 18, 2008 IFC added a new 

paragraph (b)(iii) to § 422.111. The 

addition requires dual-eligible SNPs to 

provide the information specified in 

§ 422.111(b) 15 days before the annual 

coordinated election period to each 

prospective enrollee, both prior to 

enrollment and at least annually 

thereafter. We developed a model 

comprehensive statement for 

beneficiaries that could be included 

with any description of benefits offered 

by the SNP plan. 

We did not receive comments on this 

provision. Therefore, we are finalizing 

this provision without modification. 

2. Medicare Advantage and Prescription 

Drug Program Marketing Requirements 

(New Subparts V) 

a. General 

With this final rule, we are finalizing 

the provision of our September 18, 

2008, and November 14, 2008 interim 

final rules with comment periods ((73 

FR 54226) and (73 FR 67406), 

respectively). With the exception of the 

provisions relating to including plan 

type in the name of the plan (effective 

January 1, 2010), and the reporting by 

plans of agent and broker terminations 

to States (effective January 1, 2009), all 

of the Part C and Part D marketing 

requirements discussed below were 

effective upon publication of our 

September 18, 2008 and November 10, 

2008 IFCs. 

b. Standards for MA and PDP Marketing 

(§ 422.2268 and § 423.2268) 

We received a number of comments 

on the provisions contained in 

§ 422.2268 and § 423.2268 requesting 

clarification or pointing out areas of 

disagreement with the provisions. These 

comments were as follows: 

(1) Nominal Gifts (§ 422.2268(b) and 

§ 423.2268(b)) 

Plan sponsors are required to limit the 

offering of gifts and other promotional 

items to potential enrollees at 

promotional events to those gifts of 

‘‘nominal value’’ that are offered to all 

potential enrollees. 

Comment: One commenter requested 

clarification on the meaning of ‘‘all 

potential enrollees’’ in relation to the 

provision of nominal gifts at 

promotional events. 

Response: By ‘‘all potential 

enrollees,’’ we mean anyone in 

attendance at the event. Additionally, 

we specify that when plan sponsors 

provide nominal gifts at promotional 

events, anyone in attendance can get a 

gift. There should be no further 

requirements for gift receipt beyond 

attendance at the event. For example, at 

an event, the plan sponsor offers small 

piggy banks as a nominal gift. The plan 

sponsor cannot require that an attendee 

provide an address or phone number in 

order to receive the gift. 

(2) Limiting the Scope of Health Care 

Products To Be Discussed (§ 422.2268(g) 

and (h) and § 423.2268(g) and (h)) 

Any appointment with a beneficiary 

involving the marketing of health care 

related products (for example, where 

Medicare supplement, MA, and/or 

stand-alone PDP will be discussed) must 

be limited by the plan sponsor to the 

scope agreed upon by the beneficiary. In 

advance of any marketing appointment, 

the beneficiary must have the 

opportunity to agree to the range of 

choices that will be discussed, and that 

agreement must be ‘‘documented’’ by 

the plan sponsor. Discussion of 

additional lines of plan business (for 

example, MA, MA–PD, PDP or Medigap) 

not identified prior to the individual 

appointment requires a separate 

appointment that may not be 

rescheduled until 48 hours after the 

initial appointment, unless requested by 

the beneficiary. 

Comment: We received several 

comments on the requirement that the 

scope of the appointment be 

documented. Some commenters stated 

that the requirement for such 

documentation is a hassle for seniors to 

complete in advance of the 

appointment. A commenter believed 

that seniors get so much paper and 

complicated forms that they appreciate 

‘‘simple’’ communications, and 

suggested they would be put off by 

needing to complete some form 

documenting the scope of their 

appointment in order to speak to an 

agent. While the commenter appreciated 

the efforts of CMS to protect the public 

and regulate agents, he did not believe 

that a documentation requirement was 

the best way to accomplish either goal. 

Yet another commenter found requiring 

that a scope of appointment form be 

filled out in advance of appointments 

and home visits to be a reasonable 

protection for beneficiaries. However, 

this commenter also believed that 

requiring a scope of appointment form 

for a walk-in visit at an office or during 

seminars confuses the beneficiary since 

they do not understand why they have 

to sign a form when they have 

voluntarily initiated a walk-in visit or 

attending a seminar. Also, some 

commenters supported the scope of 

appointment requirements, but believed 

that requiring the provision in the 

proposed rule that 48 hours pass before 

a return visit to discuss additional 

health-related lines of business puts an 

unreasonable burden on the beneficiary 

and an added cost to plans and 

ultimately to enrollees. Also mentioned 

by these commenters as problematic 

was the difficulty this requirement 

poses for rural agents due to driving 

distances to meet face-to-face with 

beneficiaries that end up being costly 

and difficult to reschedule. We received 

additional comments pertaining to a 

specific draft form for use in 

documenting the scope of an 

appointment. 

Response: We believe the scope of 

appointment requirement is necessary 

beneficiary protection to document a 

beneficiary’s agreement to an 

appointment and the content of the 

discussion during the appointment. We 

disagree with the commenter suggesting 

that filling out a form documenting the 

scope of the appointment creates a 

hassle for seniors and note that agents/ 

brokers play a significant role in 

providing guidance and advice to 

beneficiaries when selecting health plan 

options including assistance with filling 

out applications. Because of their 

unique position, agents/brokers have the 

opportunity to unduly influence 

beneficiary choices. Therefore, we 

believe that the scope of appointment 

should be documented regardless of 

whether the beneficiaries walk into an 

agent’s office without an appointment 

seeking information. For example, if 

during the discussion of the agreed 

upon plan products, the beneficiary 

requests information regarding other 

products, it does no good to require the 

beneficiary to return (or the agent to 

come to the beneficiary) 48-hours later 

to continue the discussion. Instead, an 

expansion of the scope should be 

documented and the discussion may 

continue. We have also made 

allowances through operational 

guidance to accommodate the 

circumstances of rural agents like those 

described herein. In response to the 

comment on the 48-hour waiting period, 

we have moved this requirement to 

paragraph (g), and in response to the 

comments we have provided that a 48- 

hour waiting period must only be 

provided where ‘‘practicable.’’ 

Since neither the proposed nor final 

scope of appointment requirement 

specifies that a particular format must 

be used to document appointments, we 


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are not responding to comments related 

to any specific formats as that is outside 

of the scope of these regulations. 

Comment: A few commenters 

recommended that CMS exempt the 

scope of appointment form used by 

agents/brokers from requiring review 

and approval by a plan, since agents/ 

brokers represent multiple plans. The 

commenters do not see any advantage 

from a beneficiary protection 

perspective requiring agents/brokers to 

carry separate approved scope of 

appointment forms from each plan they 

represent. 

Response: MA and PDP sponsors are 

free to create their own scope of 

appointment form as long as it makes 

clear that the potential enrollee 

understood the scope of the 

appointment. There is no requirement 

from CMS that sponsors create their 

own forms and require agents or brokers 

to use them. Our requirement is that the 

scope of appointment be documented. 

To the extent that sponsors create their 

own forms for this purpose, CMS does 

require they have the plan name and 

logo on them. 

Comment: A commenter questioned 

whether any meeting outside the 

enrollee’s home that involves more than 

one potential enrollee could be 

considered a sales (or educational) event 

that does not require scope of 

appointment documentation. 

Response: A scope of appointment is 

not required at educational events. In 

the case of marketing/sales events, if the 

event is advertised to the general public, 

a scope of appointment is not required. 

On the other hand, if an agent holds a 

small group event with individuals who 

were personally invited (or requested 

the event), a scope of appointment 

would be required. 

Comment: A commenter strongly 

disagreed with the requirement that 

individual agents send every form 

documenting the scope of an 

appointment to the related health plan 

for every sales appointment, whether or 

not the beneficiary purchases a policy 

from the agent or not. 

Response: The purpose of the scope of 

appointment documentation 

requirement is to document each 

beneficiary appointment with an agent/ 

broker to discuss various Medicare plan 

products whether or not the beneficiary 

purchases a policy. While we do not 

specify how plan sponsors comply, it 

does hold plan sponsors accountable for 

complying with the scope of 

appointment requirements. 

Comment: A couple commenters 

questioned whether documentation of 

the scope of an appointment had to be 

kept for 10 years on sales calls, and 

asked about its compliance with the 

Paperwork Reduction Act (PRA). 

Response: The scope of appointment 

documentation is subject to the 

requirement in the MA regulations that 

it be maintained for a period of 10 years 

(§ 422.504(d) and § 423.504(b)(4)). 

Therefore, if the documentation is in the 

form of a recorded sales call, that 

recording is subject to the 10-year 

maintenance requirement. However, the 

Scope of Appointment Form, is not 

subject to PRA requirements because we 

are not collecting information or 

specifying the use of a particular format 

for doing so. If plans choose to use a 

form to document the scope of 

appointment, they are required to 

maintain that documentation. 

Comment: A commenter requested 

that the existing scope of appointment 

documentation requirement and 48- 

hour cooling off period be applied 

solely to Medicare Advantage. 

Response: We disagree and believe 

beneficiaries deserve the same 

marketing protection regardless of the 

nature of the Medicare product being 

marketed. While the statutory scope of 

appointment requirements apply to the 

marketing of all Medicare Advantage 

(including MA-only) and Prescription 

Drug plans, we have previously 

exercised our authority under section 

1876(i)(3)(D) of the Act to impose 

‘‘necessary and appropriate’’ 

requirements on section 1876 cost plans 

to require that they comply with MA 

marketing requirements. 

Comment: A commenter requested 

that CMS allow the practice of cold 

calling beneficiaries. 

Response: The prohibition against 

cold calling beneficiaries is set forth in 

the statute at section 1851(j)(1)(A) of the 

Act, and thus could not be changed by 

regulation. The request to do so is 

outside the scope of this rulemaking. 

Comment: Several commenters 

objected to beneficiaries with an 

existing relationship with an agent as 

having their ‘‘hands tied’’ in discussing 

Medicare coverage with their agents. 

Response: We have guidance in the 

Medicare Marketing Guidelines that 

describes how agents may interact with 

beneficiaries after they establish an 

ongoing relationship with them. For 

example, agents are not allowed to coldcall beneficiaries or contact 

beneficiaries unsolicited. However, an 

agent that has an established 

relationship with a beneficiary, would 

be expected to call the beneficiary to 

provide them with information about 

benefit options, updates, or plan 

changes. These follow-up calls would 

not be considered unsolicited contacts 

or cold-calls. 

Comment: A commenter requested 

that SNPs be allowed to work with 

trusted referral sources to obtain 

consent from the beneficiary to be 

contacted by the plan. The trusted 

referral source could include a family 

member, physician, social service 

providers, home health agency staff or 

other entities that are committed to the 

best interests of the beneficiary. Such a 

‘‘trusted referral source’’ would, under 

the commenter’s suggested approach, 

help the beneficiary execute a business 

reply form by explaining the scope of 

the marketing appointment and 

documenting beneficiary consent. In the 

view of the commenter, it would allow 

plans to deal with language, literacy and 

other barriers to effective direct mail 

marketing, comply with cold call and 

appointment rules, and protect the best 

interests of the beneficiary. In addition, 

the commenter requested that plans be 

able to bring a scope of appointment 

form to marketing meetings in cases 

where the agent is marketing to their 

beneficiary. 

Response: Beneficiaries may turn to a 

number of sources for advice and 

assistance with making health care 

choices. However, because providers 

like physicians, social workers, home 

health agency staff, and others, are 

trusted sources of information and are 

in a position to unduly influence a 

beneficiary’s decision, they must follow 

the guidance contained in the Medicare 

Marketing Guidelines with regard to the 

interactions between beneficiaries and 

providers. We do appreciate and 

recognize the marketing challenges 

faced by special needs plans. However, 

we believe that these issues are 

addressed adequately in subregulatory 

guidance and that further regulation is 

not necessary. For example, agents may 

document a new scope of appointment 

at a marketing meeting when the 

beneficiary indicates that he or she 

would like information beyond the 

scope of the original appointment. 

Comment: A commenter 

recommended that we integrate full 

benefit dual eligibles’ need for 

flexibility in the marketing rules that 

accommodate the challenges of selling 

to full benefit dual eligibles, while 

maintaining adequate protections for 

vulnerable populations. 

Response: While we recognize that 

there may be unique challenges when 

marketing to the dual eligible 

population, at this time, CMS believes 

that additional regulatory changes 

would not be necessary, beyond the 

scope of those changes addressed 

herein. CMS will consider whether 

further subregulatory guidance is 

needed. 


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(3) Use of Names and Logos, CoBranding (§ 422.2268(n) and 

§ 423.2268(n)) 

In section 103(b)(1)(B) of MIPPA, the 

Secretary was charged with 

‘‘establish[ing] limitations’’ with respect 

to ‘‘[t]he use of the name or logo of a cobranded provider on Medicare 

Advantage plan membership and 

marketing materials.’’ Section 103(b)(2) 

of MIPPA revises the Act to apply these 

same guidelines to PDP sponsors. 

Comment: We received mixed 

comments regarding this provision. One 

commenter had no major concerns 

about the co-branding provisions, but 

another commenter recommended that 

we clarify that the inclusion of the name 

and/or logo of the plan’s PBM and/or 

parent company on the member’s 

identification card is not considered 

‘‘co-branding’’ and so not subject to 

§ 423.2268(n). Another commenter 

supported the prohibition on displaying 

names or logos on plan cards. However, 

the commenter requested clarification 

regarding ‘‘other marketing materials’’ 

that are subject to a disclaimer, stating 

that in many cases, the use of a network 

provider’s name will be necessary to 

convey information to beneficiaries. 

Such instances could include network 

directory or brochures (under 

§ 422.2260 and § 423.2260) that list the 

names of providers in the plan’s 

network. Thus, the commenter believes 

that a broad use of the term without 

more clarity on what CMS intends to be 

captured by its proposal could create 

confusion to plans and network 

providers about the range of acceptable 

practices. 

Response: We agree that PBMs are not 

typically co-branding partners; however, 

PBMs assume different roles in the MA 

and Part D programs, including: plan 

sponsor, plan subcontractor, or health 

care provider (mail order pharmacy). 

Since beneficiaries may not always 

understand the relationship of the PBM 

to the plan sponsor, we believe that 

including the PBM’s name on the 

identification card may create confusion 

or lead the beneficiary to interpret this 

as a co-branding arrangement. 

Therefore, we believe that the cobranding requirements do apply and the 

name of the PBM cannot be included on 

the member identification card. We 

believe that unless a beneficiary must 

obtain services from a specific provider 

organization, the provider organization 

name should not be included on the ID 

card. We do not believe that additional 

clarification in the regulations is 

necessary regarding the specific 

materials that are intended as ‘‘other 

marketing materials.’’ We provide 

further interpretive guidance in the 

Medicare Marketing Guidelines. 

(4) Inclusion of Plan Type in Plan Name 

(§ 422.2268 and § 423.2268) 

Section 103(c)(1) of MIPPA requires 

that MA organizations and PDP 

sponsors include the plan type within 

the name of each plan being offered. For 

consistency across plans, the plan type 

is required to be included at the end of 

the plan name. 

Comment: One commenter was 

concerned about the clarity of the 

regulations containing various 

references to ‘‘lines of business’’ and 

‘‘plan type’’ in sections § 422.2268(h) 

and § 422.2268(q) and elsewhere. This 

commenter believed that the terms are 

employed somewhat interchangeably, 

but are not defined explicitly in the 

regulation. The commenter noted that 

there is a definition of plan type in 

§ 422.2274(a)(3)(i) but it was unclear as 

to whether CMS intended that this 

definition apply throughout the 

regulation. 

Response: We clarified the definition 

of ‘‘plan type’’ in the Medicare 

Marketing Guidelines and include 

examples of all of the plan type 

indicators. We do not believe that 

further regulatory definitions are 

necessary. 

c. Reporting Agent and Broker 

Terminations (§ 422.2272(d) and 

§ 423.2272(d)) 

Section 103 of the MIPPA, requires us 

to expand our proposed requirements 

on plans that use licensed agents and 

brokers. In accordance with MIPPA, 

§ 422.2272(d) and § 423.2272(d) 

implement the requirement that MA 

organizations and Part D sponsors are 

required to report to the State in which 

the MAO or Part D sponsor appoints an 

agent or broker, the termination of any 

such agent or broker, including the 

reasons for the termination if State law 

requires that the reasons for the 

termination be reported. 

We did not receive any comments on 

this provision; and are therefore, 

finalizing this provision without 

modification. 

d. Broker and Agent Compensation 

(§ 422.2274, § 423.2274) 

Section 103(b)(1)(B) of MIPPA revised 

the Act to charge the Secretary with 

establishing guidelines to ‘‘ensure that 

the use of compensation creates 

incentives for agents and brokers to 

enroll individuals in the Medicare 

Advantage plan that is intended to best 

meet their health care needs.’’ Section 

103(b)(2) of MIPPA revised the Act to 

apply these same guidelines to PDP 

sponsors. 

In our November 18, 2008 IFC, we 

invited comment on the approach taken 

in that rule to implementing the 

foregoing requirements. We are 

particularly interested in comments on 

whether this goal would be served by: 

(1) Providing for higher levels of 

compensation for an initial enrollment 

in Part C or Part D (given the added 

costs of explaining how the programs 

work) than for a change in enrollment 

from one Part C plan or Part D plan to 

another, (2) establishing a flat fee 

schedule; or (3) providing for lower 

payments in early years and higher 

payments in the renewal years, or in 

later renewal years, to incentivize agents 

or brokers to keep enrollees in the same 

plan rather than giving them an 

incentive to move enrollees. 

We are also concerned about amounts 

paid to Field Marketing Organizations 

(FMOs) or similar typoes of entities for 

their services that do not necessarily 

flow down to the agent or broker who 

deals with the beneficiary. Specifically, 

we are concerned that these FMOs or 

other similar entities could engage in a 

‘‘highest bidders’’ for their services. 

We received a number of comments 

from plan sponsors, individuals, and 

trade associations, concerning 

compensation. These covered aspects of 

compensation including: compensation 

rules, structures and rates, and data. A 

summary of the comments we received 

and our responses follow: 

(1) Compensation Rules 

Comment: Commenters recommended 

varied approaches, including: providing 

generous initial compensation payments 

and no renewal payments, eliminating 

renewal payments, paying renewals on 

a declining scale, paying compensation 

based on enrollment type (SEP, ICEP/ 

ICP), creating special compensation 

structures for PDPs, and relying on 

market forces. Reasons given for these 

recommendations included: renewal 

payments increase costs, diverted 

money could be better spent on benefits, 

and the compensation payments reduce 

efficiency. 

Response: We believe that our current 

compensation processes have reduced 

the incidence of aggressive marketing 

and encourage agents and brokers to 

assist beneficiaries with making health 

care decision based on the beneficiaries’ 

interests. We have done this by 

implementing a process that encourages 

agents and brokers to develop long-term 

relationships with beneficiaries. Thus, 

the 6-year compensation cycle is 

intended to recognize that beneficiaries 

need assistance from year-to-year in 


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understanding plan benefit changes so 

they can ensure that they are in the 

appropriate plan to meet their needs. 

While we agree that the amount of 

work required to adequately explain the 

various Medicare product lines to 

beneficiaries will vary based on the 

beneficiaries’ prior knowledge of the 

program, we believe that we have 

developed a process that recognizes the 

difference in experience of the 

beneficiary as well as the uniqueness of 

each product type. We have done this 

by allowing agents to be paid initial 

compensation for unlike plan changes, 

changes among MA/MA–PD, PDP, and 

1876 cost plans. For like plan changes 

(MA/MA–PD to MA/MA–PD, PDP to 

PDP, or cost to cost), agents, and brokers 

are paid renewal compensation. 

(2) Compensation Structures and Rates 

Comment: Commenters expressed the 

concern that the variation allowed plans 

in developing compensation structures 

could potentially create financial 

incentives for agents to push low-value 

(less expensive) plans or MA products 

(over PDPs); leading to increased 

‘‘cherry picking’’ or steering by 

independent agents and brokers. 

Response: We believe that some 

variation in compensation is 

unavoidable. For example, the amount 

of work required to explain to a 

beneficiary the benefits, policies, and 

procedures of a particular MA plan 

compared with the amount of work 

required to explain to a beneficiary the 

benefits, policies, and procedures of a 

PDP are quite different. One would not 

expect for the compensation to be the 

same. Furthermore, we think that 

making the amounts for both plans the 

same would only incentivize agents to 

maximize profits by aggressively selling 

the plan that takes the least amount of 

time to explain. 

At the time that our November 10, 

2008 IFC was promulgated, we collected 

historical agent and broker 

compensation data from Medicare plan 

sponsors. Analysis of that data resulted 

in the establishment by us of fair-market 

value cut-off amounts (FMV). We then 

allowed plan sponsors to adjust their 

2009 compensation amounts to an 

amount at or below the FMV. This 

allowed plan sponsors to be competitive 

in the marketplace while 

simultaneously limiting the high-end 

amount. We believe these amounts limit 

the variation in compensation paid to 

agents and brokers selling Medicare 

plans within specific geographic areas. 

In addition to the fair-market value 

cut-off amounts, we implemented a 

strong surveillance and compliance 

program as well as a number of 

operational policy changes designed to 

strengthen beneficiary protections 

against aggressive and deceptive 

marketing practices by agents or 

brokers. We implemented enrollment 

verification processes that require plans 

to verify with beneficiaries that they are 

enrolling in the plan of their choice and 

understand the benefits of that plan. We 

also require plans to report terminated 

agents or brokers to State Departments 

of Insurance. We believe that with these 

policy refinements and the existing 

rules requiring plans to recover all 

payments for an enrollment from agents 

or brokers when a rapid disenrollment 

occurs provide necessary protections for 

beneficiaries as they make their health 

care choices. 

Comment: We also received 

comments requesting that we create 

single commissions by product type 

(MA, MA–PD, PDP), create a flat rate for 

all product types that is the same for 

new plans as well as renewals, equalize 

commissions across all product types, or 

set benchmarks. In addition, 

commenters recommended that we limit 

the ability of agents and brokers to 

contract with multiple organizations 

and allow market forces to strengthen 

all Medicare plan products through 

competition. 

Response: Since the issuance of our 

November 10, 2008 IFC, we released the 

FMV cut-off amounts, which are 

essentially benchmarks. These amounts 

set ceilings for agent or broker 

compensation payments for enrollments 

based on geographic areas. Because the 

2009 FMV amounts were established 

through a blind bidding process that 

may have put low-bidding sponsors at a 

competitive disadvantage. During the 

summer of 2009, sponsors were allowed 

the opportunity to adjust their 

compensation amounts to any amount at 

or below the FMV. This was an 

important policy decision because, by 

regulation, all future compensation 

amounts are based on the 2009 amount 

filing. 

We believe that setting the FMV cutoff amounts was the best approach 

because it allows for market forces to act 

while limiting the amount of spending. 

We also believe that this approach, 

along with the compensation regulatory 

provisions achieves the goals of the 

policy, and is the most efficient option 

because it does not require a significant 

investment of time, money, and staff 

resources. For example, in order to 

create a flat rate, we would have to 

consider a number of variables like 

individual local market dynamics, the 

impacts on small versus large plan 

sponsors, and plan benefit changes from 

year-to-year. In order to update the rate, 

we would have to engage in a similar 

process each subsequent year. Such an 

endeavor would require additional 

systems development and staff 

resources. 

(3) Compensation Data 

Comment: Commenters questioned 

CMS’s ability to gather accurate and 

reliable market data, found the blindbidding process unfair, and contended 

that the 2006 rates were not sustainable 

market rates. We also received a request 

to share aggregate data, with plan 

sponsors, and allow plans to adjust their 

compensation amounts. A commenter 

also requested that national plans’ rates 

be included when making local plan 

comparisons. 

Response: We recognize the inherent 

problems with the initial data collection 

process and that it was a blind-bidding 

process that potentially disadvantaged 

plans that submitted more conservative 

compensation estimates. In the spring of 

2009, we published our FMV cut-off 

amounts based on the historical data 

submitted by plan sponsors in 

November 2008. The data included 

information in local markets for local 

and national plans. In July 2009, we 

allowed plan sponsors to adjust their 

original compensation amount 

submissions to an amount at or below 

the FMV. The purpose of this 

adjustment was to level the playing field 

allowing plans that initially submitted 

low compensation amounts (whether 

due to limited ability to collect 

historical data or underestimating the 

current market rates), the opportunity to 

become more competitive. In 2009, we 

began requiring plan sponsors to submit 

the range of amounts (high and low 

values) they pay their agents and 

brokers. These amounts are 

automatically updated from year-to-year 

and plan sponsors are only required 

attest to the amount and their continued 

use of independent agents and brokers. 

We currently posts plan compensation 

information on its Web site by State and 

county. 

At this time, we cannot change the 

way plan sponsors update their annual 

compensation amounts. However, we 

will consider this proposal for future 

rulemaking. 

(4) Spending Limits 

Comment: We received comments 

requesting that we establish limits on 

marketing expenditures. One suggestion 

was for a limit based on the percentage 

of the sponsor payments rates that can 

be expended on marketing. Another 

would apply limits on spending for 

marketing based on sponsor history of 

marketing misrepresentation. A third 


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would place hard caps on spending for 

marketing to limit the share of per 

capita payments to sponsors that is 

diverted away from extra benefits or 

lower cost sharing. 

Response: We believe that at this time 

it is unnecessary to place the types of 

limits on spending that were 

recommended by these commenters 

because, in addition to the 

establishment of the FMV cut-off 

amounts, we have in place a 

sophisticated surveillance and 

compliance program to monitor the 

activities of sponsors, agents, and 

brokers in the marketplace. The program 

includes the monitoring of marketing 

events, targeted audits of sponsors, 

coordination with the State Departments 

of Insurance, and penalties for sponsors 

who are not adequately ensuring that 

their agents or brokers are complying 

with our rules. 

(5) Marketing Entities 

Comment: We received several 

comments recommending that we 

charge plan sponsors a fee or increase 

existing users’ fees that would be used 

to pay SHIPs and other community 

volunteer organizations to ‘‘provide 

beneficiaries with advice and 

counseling on plan selection.’’ 

Response: In our October 2009, 

proposed rule (74 FR 54634), we 

solicited public comment on a number 

of ideas including whether or not State 

Health Insurance Assistance Programs 

had the capacity to serve significantly 

more Medicare beneficiaries. We 

received a number of comments and 

suggestions, and as in our April 2010 

final rule (75 FR 19678), there were a 

number of concerns about the adequacy 

of the funding necessary for SHIPs to 

serve more Medicare beneficiaries, the 

ability of SHIPs to create networks to 

service entire States, and the limits of 

SHIPs under their current structure to 

handle increased capacity. In addition 

to these concerns about the ability to 

transfer the responsibilities of 

independent agents and brokers to 

organizations like SHIPs, we believe 

that we do not have the statutory 

authority to increase or create new fees 

as a means of providing additional 

resources to SHIPs so that they can 

increase their capacity. 

Comment: We also received several 

comments regarding payments to FMOs 

which focused on the language the 

commenter found to be unclear 

describing the responsibility of plan 

sponsors to ensure that the payments 

made by FMOs, are consistent with the 

compensation regulations. The 

commenters recommended direct 

regulation of FMOs or more explicit 

regulation language pertaining to the 

payment arrangements between the 

FMOs and the agents who work for 

them. One comment compared FMO/ 

agent relationships to real estate broker/ 

agent relationships, and argued for 

flexibility in the way that FMOs paid 

agents based on factors like experience 

and tenure. 

Response: We agree that while it was 

always our intent that the compensation 

rules would apply at all levels including 

the FMO/writing agent level, our 

regulations language did not clearly 

express this intent. Therefore, we are 

explicitly clarifying our intent in 

§ 422.2274(a)(1)(iv)(A) (B) and 

§ 423.2274(a)(1)(iv)(A) and (B) of this 

final rule that the compensation rules 

apply to payments made by plan 

sponsors to the FMOs, as well as the 

FMOs’’ agents. We also note that our 

September 18, 2008 IFC provided plan 

sponsors with the flexibility to use 

factors like tenure and experience when 

developing compensation structures. 

(6) Employed Agents 

Comment: Commenters sought 

clarification of the fact that there were 

fundamental differences between 

compensation streams and 

responsibilities for employed agents and 

independent agents. These differences 

included the structure of the payment 

arrangements (salary and benefits for 

employees, straight commission for 

independent agents), responsibilities 

(employees typically do not maintain a 

relationship with beneficiaries beyond 

the point of enrollment), and level of 

oversight (in-house oversight of 

employees). A few commenters 

requested language that exempts 

employees of plan sponsors and their 

subcontractors (like call center staff) 

from the compensation requirements 

that they believe were intended for 

independent agents and brokers. 

Response: We clarified in the 

preamble of the September 18, 2008, 

interim final marketing regulations, that 

customer service representatives were 

not required to be licensed as long as 

they were engaged in duties specific to 

their job as customer service 

representatives (CSRs) (for example, 

providing factual responses to 

beneficiary questions or assisting with 

the enrollment process of beneficiaries 

who have decided on their own to 

enroll in the plan). We also clarified in 

the same regulations the differences 

between treatment of employed and 

independent agents and brokers 

(contracted). In addition, we have 

published the Medicare Marketing 

Guidelines which clarifies these issues 

and believes that further regulatory 

clarification is unnecessary. 

(8) Recommendations 

Comment: Several commenters 

requested that CMS consider the 

following recommendations: 

• Guaranteeing a 7-day reconciliation 

cycle for payments of compensation. 

• Eliminating charge backs for 

disenrollments. 

• Eliminating product specific 

training. 

• Clarifications of policy, definitions, 

and approach to controlling plan 

changes. 

Response: Since the time that public 

comments were solicited on these 

regulations, we have put in place a 

number of operational policies that 

address the concerns expressed by the 

commenters. For example, in 2009, we 

did not have the systems capability to 

provide plans with information so that 

they could reconcile payments. Instead, 

we used an ad hoc report that provided 

basic information to assist plan sponsors 

with paying agents appropriately. As of 

January 2010, we have been providing 

plan sponsors with an agent and broker 

compensation report that is generated 

from the Medicare Advantage and 

Prescription Drug System (MARX) and 

delivered with the monthly MARX 

enrollment reports. Since its 

implementation, plan sponsors are able 

to use the system to pay agents timely 

and accurately. We have also published 

guidance on a number of policy issues 

in the Medicare Marketing Guidelines 

including chargebacks for different 

types of disenrollments, the relationship 

of referral fees to total compensation, 

examples of types of remuneration 

under the definition of compensation, 

clarification that the compensation 

cycle operates on a calendar year, and 

the exclusion of employer group plans 

from some of the agent and broker 

requirements. Therefore, we believe that 

additional regulatory provisions are 

unnecessary. 

In addition to the aspects of 

compensation that we have learned 

through the comments we received on 

the interim final regulations, we have 

also identified several areas in our 

guidance which are not sufficiently 

clear. For example, we received a 

number of questions from plan 

sponsors, agents, and FMOs requesting 

clarification on the actual months for 

which agents or brokers could be 

compensated. The provision in the 

interim final regulations 

(§ 422.2274(a)(4) and § 423.2274(a)(4)) 

stated that ‘‘compensation shall be paid 

for months 4 through 12.’’ The intent of 

this provision was to ensure that, in the 


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54624 Federal Register / Vol. 76, No. 170 / Thursday, September 1, 2011 / Rules and Regulations 

case of a rapid disenrollment (a 

disenrollment within the first 3 months 

of enrollment), agents did not receive 

compensation. However in 

subregulatory guidance, we have since 

clarified the compensation policy 

around rapid disenrollments by 

clarifying the circumstances when a 

disenrollment would not be considered 

a rapid disenrollment (for example, 

when a beneficiary moves out of the 

plan service area within in the first 

three months of enrollment). 

We also learned that plan sponsors 

were interpreting ‘‘year’’ in different 

ways (§ 422.2274(a)(4) and 

§ 423.2274(a)(4)). Some sponsors were 

interpreting ‘‘year’’ to mean a year from 

the date of enrollment. Some sponsors 

have interpreted it to mean a calendar 

year, while others have interpreted it to 

mean a fiscal year. We have since 

clarified in subregulatory guidance that 

‘‘year’’ means a plan year, from January 

through December. 

We also have learned that plan 

sponsors and FMOs are unclear about 

the delineation between the activities 

that are part of the total compensation 

amount and those that are outside of our 

definition of compensation 

(§ 422.2274(a)(1)(iv) and 

§ 423.2274(a)(1)(iv)). We have clarified 

in subregulatory guidance that 

compensation ‘‘for activities other than 

selling Medicare products’’ must be at 

fair market value. However, we do not 

intend to define fair market value for 

these activities. 

Lastly, we have learned that plan 

sponsors are not clear what is meant by 

‘‘new compensation’’ in § 422.2274(a)(1) 

(ii) and § 423.2274(a)(1)(ii). By ‘‘new 

compensation’’ we meant that when an 

unlike plan type change is made, a new 

6-year compensation cycle begins. Thus, 

the agent would receive an initial 

compensation amount. 

After considering the comments 

received and experience we have gained 

over the past 3years, we are finalizing 

these requirements with modification. 

e. Agent and Broker Training 

(§ 422.2274(b) and § 423.2274(b)) 

Section 103(b)(1)(B) of MIPPA revised 

the Act to charge the Secretary with 

establishing ‘‘limitations with respect to 

the use by a Medicare Advantage 

organization of any individual as an 

agent, broker, or other third party 

representing the organization that has 

not completed an initial training and 

testing program and does not complete 

an annual retraining and testing 

program.’’ Section 103(b)(2) of MIPPA 

revises the Act to apply these same 

limitations to PDP sponsors. 

In § 422.2274(b) and § 423.2274(b), 

MA organizations and PDP sponsors are 

required to train all agents selling 

Medicare products on Medicare rules, 

regulations and compliance-related 

information annually. 

In § 422.2274(c) and § 423.2274(c), 

agents selling Medicare products are 

required annually to pass written or 

electronic tests on Medicare rules, 

regulations and information on the plan 

products they intend to sell. 

Comment: A commenter requested 

clarification of the term ‘‘selling’’ as it 

applies to various roles within a plan. 

The commenter asserted that confusion 

exists as to whom ‘‘selling’’ pertains. It 

was asked if all licensed agents being 

paid any commission or administrative 

payment by a plan are considered to be 

‘‘selling’’ MA and Part D plans, or if 

only the writing agent is considered to 

be ‘‘selling.’’ The commenter further 

recommended that CMS clarify, in the 

final rule, that all agents receiving any 

level of commission must be trained and 

tested annually to ensure that all levels 

of the sales force have up-to-date 

information. 

Response: We describe who would 

qualify as ‘‘one who sells’’ in the 

Medicare Marketing Guidelines. In the 

definitions section of the Medicare 

Marketing Guidelines we define a Sales 

Person, or one who sells, as follows: The 

term ‘‘sales person’’ is used in these 

Medicare Marketing Guidelines to 

define an individual who markets and/ 

or sells products for a single plan 

sponsor or numerous plan sponsors. It 

includes employees, brokers, agents, 

and all other individuals, entities, and 

downstream contractors that may be 

utilized to market and/or sell on behalf 

of a plan sponsor. While we realize that, 

in many instances, there may be many 

individuals involved in selling, it is the 

intent of the guidance for plans to 

encompass all possible points of contact 

which could reasonably be expected to 

sell and that those contacts are included 

in their respective training and testing 

programs. 

Comment: We received another 

comment which asserted that 

regulations requiring more standardized 

industry training and testing may have 

some negative impacts on beneficiary 

choices. While the commenter agreed 

that in years past not all agents were 

properly trained and that previous 

responses encouraged an industry 

certification process, they suggested that 

there is too much duplication of 

training. Specifically, it is mentioned 

that requiring agents and brokers to 

receive separate training and 

certification from each company that 

they represent for each product, 

discourages qualified agents and brokers 

from representing a wide variety of 

products. The commenter further 

asserted that agents and brokers would 

most likely select one or two products 

to promote due to the duplicative and 

time-consuming requirements imposed 

upon them, and that this would be 

detrimental to Medicare beneficiaries in 

an environment where choice is critical. 

Response: While we agree with the 

commenter that requiring different 

certifications from separate plan 

sponsors does create duplication in 

areas of training and testing in addition 

to considerable time (depending on the 

number of certifications desired), it is a 

requirement that will better protect 

beneficiaries. Many Medicare 

beneficiaries have suffered tremendous 

damages both monetarily and at a cost 

to their health due to poorly informed 

sales representatives. The training and 

testing certification process has been 

identified by both the industry and 

Medicare beneficiaries as a good 

protection. By implementing regulations 

that provide consistent and routine 

training and testing of agents, brokers, 

and all manner of personnel that may 

conduct sales-related activity, 

beneficiaries will be less likely to make 

important health decisions based on 

incomplete or inaccurate information. 

We will continue to evaluate the 

requirements and methods utilized to 

implement the training and testing in 

the future. 

Since our April 2011 final rule (76 FR 

21432) entitled, Medicare Program: 

Changes to the Medicare Advantage and 

the Medicare Prescription Drug Benefit 

Programs for Contract Year 2012 and 

Other Changes, finalized changes to 

§ 422.2274 and § 423.2274, paragraphs 

(b) and (c), we are not finalizing these 

provisions in this final rule. 

In § 422.2274(d) and § 423.2274(d), 

MA organizations and PDP sponsors are 

required to provide us the information 

designated by CMS as necessary to 

conduct oversight of marketing 

activities. 

We received no comments on these 

provisions and are finalizing them 

without modification. 

In § 422.2274(e) and § 423.2274(e), 

MA organizations and PDP sponsors are 

required to comply with State requests 

for information about the performance 

of licensed agents or brokers as part of 

a state investigation into the 

individual’s conduct. We will establish 

and maintain a memorandum of 

understanding (MOU) to share 

compliance and oversight information 

with States that agree to the MOU. 


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We received no comments on these 

provisions and are finalizing them 

without modification. 

D. Changes to Section 1876 Cost Plans 

1. Clarifying the Conditions Under 

Which 1876 Cost Plans or Portions of 

Their Service Areas May Be Prohibited 

In the September 2008 IFC, we 

implemented statutory requirements 

affecting section 1876 cost contract 

plans and policies related to the ability 

to offer cost contract plans when in the 

same service area or portion of a service 

area as MA coordinated care plans. 

Section 1876(h)(5)(C) of the Act 

prohibits the renewal of a cost plan, or 

a portion of a cost plan’s service area in 

an area where, during the previous year, 

two or more organizations offering a 

local MA plan meet a minimum 

enrollment test, or two or more 

organizations offering a regional MA 

plan meet the same test. The test is that 

the local or regional plan must have at 

least 5,000 enrollees in any portion of 

its service area that includes a 

Metropolitan Statistical Area (MSA) 

with a population over 250,000 

(enrollment in counties contiguous to 

the MSA count toward the 5,000) and 

enrollment of at least 1,500 in the other 

portion of its service area. Section 167 

of MIPPA clarified the application of 

minimum enrollment requirements by 

revising paragraphs 1876(h)(5)(C) of the 

Act. 

The MIPPA-based revisions include 

clarifying in section 1876(h)(5)(C)(iii) of 

the Act that the two plans triggering the 

prohibition may not be offered by the 

same MA organization. 

In addition, by revising section 

1876(h)(5)(C)(iii)(I) of the Act, MIPPA 

clarified that if a cost plan’s service area 

falls within more than one MSA with a 

population over 250,000 and the local or 

regional plans have a minimum of 5,000 

enrollees, the determination to prohibit 

a plan will be made with respect to each 

MSA and counties contiguous to each 

MSA that are not in another MSA with 

a population of more than 250,000. 

If a cost plan’s service area or portion 

of a service area falls in one MSA only, 

the determination to prohibit a plan will 

be based on the competing local or 

regional plans’ enrollments in that MSA 

only. 

In order to reflect these changes we 

revised paragraphs of § 417.402(c)(1) 

through (3). We received two comments 

on this provision and, with one 

exception discussed below, are 

finalizing the provision as specified in 

the IFC. 

Comment: A commenter suggested 

that we update our regulations at 

§ 417.402(c) to reflect the MIPPArevised date of January 1, 2010 on or 

after which CMS will nonπrenew 

affected service areas of cost contract 

plans. 

Response: Subsequent to this 

comment, new statutory language 

revised the nonπrenewal date from 

January 1, 2010 to January 1, 2013. We 

specified the new timeline in our final 

rule that appeared in the April 15, 2010 

Federal Register (76 FR 21732) and that 

implemented this and other provisions 

of the Affordable Care Act. 

Comment: A commenter requested 

that we clarify in our revision of 

§ 417.402(c)(3) that in determining 

minimum enrollment in MSAs and 

contiguous counties we specify that 

only those contiguous counties are 

taken into account if not in another 

MSA with a population of more than 

250,000. 

Response: This clarification is 

consistent with the statute and we have 

revised § 417.402(c)(3) accordingly. 

III. Collection of Information 

Requirements 

This final rule contains information 

collection provisions that are subject to 

review by the Office of Management and 

Budget (OMB) under the Paperwork 

Reduction Act of 1995 (44 U.S.C. 3501– 

3520). Under the Paperwork Reduction 

Act of 1995, we are required to provide 

30-day notice in the Federal Register 

and solicit public comment before a 

collection of information requirement is 

submitted to OMB for review and 

approval. In order to fairly evaluate 

whether an information collection 

should be approved by OMB, section 

3506(c)(2)(A) of the Paperwork 

Reduction Act of 1995 requires that we 

solicit comment on the following issues: 

• The need for the information 

collection and its usefulness in carrying 

out the proper functions of our agency. 

• The accuracy of our estimate of the 

information collection burden. 

• The quality, utility, and clarity of 

the information to be collected. 

• Recommendations to minimize the 

information collection burden on the 

affected public, including automated 

collection techniques. 

The title, description, and respondent 

description of the information collection 

provisions and an estimate of the annual 

reporting burden were provided in a 

series of interim final rules, (73 FR 

54208) and (73 FR 54226) issued 

September 18, 2008. Included in the 

estimate was the time for reviewing 

instructions, searching existing data 

sources, gathering and maintaining the 

data needed, and completing and 

reviewing each collection of 

information. We solicited public 

comment on each of the issues in the 

interim final rule that contained 

information collection requirements 

(ICRs). This final rule requires no new 

information collection. In the document 

below, we describe the information 

collection burden associated with 

provisions of the interim final rule that 

we are finalizing. 

A. ICRs Regarding the Model of Care 

(MOC) Requirements for Special Needs 

Plans (§ 422.101) 

Section 422.101(f)(1) states that MA 

organizations offering special needs 

plans (SNPs) must implement a model 

of care (MOC) with care management as 

a centerpiece designed to meet the 

specialize needs of the plan’s targeted 

enrollees. The burden associated with 

this requirement is the time and effort 

put forth by the SNP to establish a MOC 

that meets the requirements under 

§ 422.101(f). In our September 18, 2008 

IFC, we estimated that it would take 

each SNP 80 hours to meet this 

requirement in the initial year of 

development. We estimated that it 

would take 10 hours per year in 

subsequent years to revise the MOC 

based on performance data analysis 

through the plan’s quality improvement 

program. Existing SNPs already have 

MOCs and revise, rather than develop, 

their MOCs in response to this 

requirement. In our September 18, 2008 

IFC, we estimated that the 335 existing 

SNPs would have a cumulative annual 

burden of 3,350 hours to revise their 

MOC. We also estimated that we would 

approve approximately 150 new SNPs 

in January 2010, and that these 150 new 

SNPs would have a cumulative initial 

year burden of 12,000 hours to develop 

their MOC, and a cumulative annual 

burden of 1,500 hours to revise their 

MOC in subsequent years. We projected 

the total annual burden to be 3,350 

hours in calendar year 2009. We 

projected that the total annual burden to 

be 13,500 hours in calendar year 2010 

(12,000 hours for SNPs approved to 

begin operating January 1, 2010 and 

1,500 hours for SNPs approved prior to 

January 1, 2010). In this final rule, we 

are modifying the annual burden 

estimate reported in the interim final 

rule to reflect a significant increase in 

the number of existing SNPs in 2010 as 

compared to 335 existing SNPs that we 

estimated in the interim final rule. We 

are also modifying the estimate to reflect 

a significant decrease in the number of 

new SNPs approved for 2010 as 

compared to the 150 new SNPs that we 

estimated in the interim final rule. We 

estimate that the 544 SNPs existing in 

2010 will expend 10 hours per year in 


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subsequent years to revise the MOC 

based on performance data analysis 

through the plan’s quality improvement 

program. Therefore, we estimate a 

cumulative annual burden of 5,440 

hours for these existing SNPs to revise 

their MOCs. We estimate that the 15 

new SNPs approved in 2010 will have 

a cumulative initial year burden of 

1,200 hours (15 new SNPs multiplied by 

80 hours in the initial year of 

development) to develop their MOC, 

and a cumulative annual burden of 150 

hours (15 new SNPs multiplied by 10 

hours per year) to revise their MOC in 

subsequent years. 

In our September 18, 2008 IFC, we 

assumed hourly wages of $37.15 (based 

on United States Department of Labor 

(DOL) statistics for a management 

analyst) plus the added OMB figures of 

12 percent for overhead and 36 percent 

for benefits for a total hourly labor cost 

of $54.98, respectively, to represent 

average costs to plans, sponsors, and 

downstream entities for the provisions 

discussed in our September 18, 2008 

IFC. While we recognized that SNPs 

may need to utilize medical personnel 

or senior staff to comply with this 

requirement, we were unsure of these 

costs when we developed the cost 

estimate for this provision in the interim 

final rule. Therefore, in our September 

18, 2008 IFC, we requested comment on 

the additional cost impact of the MOC 

requirement on SNPs. We did not 

receive any comments in response to 

our request for comment on the cost 

estimate for this provision. Based on 

new information regarding the labor 

wages of staff that review the MOCs we 

are revising our hourly labor estimate 

from the estimate we reported in the 

interim final rule. In this final rule, our 

estimate of the information collection 

burden associated with this provision 

reflects an hourly salary of $55.46 for a 

GS 13, Step 10 analyst for 2010, with an 

additional 48 percent increase to 

account for fringe benefits and 

overhead. Therefore, we estimate a total 

hourly labor cost of $82.08, and a total 

cost (including start-up and annual 

costs) of $598,068 to implement the 

requirements of this provision. 

B. ICRs Regarding the State Contracting 

Requirements for Dual Eligible Special 

Needs Plans (§ 422.107) 

Section 422.107(a) requires that an 

MA organization seeking to offer a SNP 

serving beneficiaries eligible for both 

Medicare and Medicaid (dual-eligible 

SNPs) must have a contract with the 

State Medicaid agency. The MA 

organization retains responsibility 

under the contract for providing 

benefits, or arranging for benefits to be 

provided, for individuals entitled to 

receive medical assistance under Title 

XIX. Such benefits may include longterm care services consistent with State 

policy. 

Section 422.107 also allows MA 

organizations with an existing dualeligible SNP without a State Medicaid 

agency contract to continue to operate 

through 2010 provided they meet all 

other statutory requirements, that is, 

care management and quality 

improvement requirements and do not 

expand their service areas. 

The burden associated with this 

requirement is the time and effort put 

forth by each dual-eligible SNP to 

contract with the State Medicaid 

agency. In our September 18, 2008 IFC, 

we estimated it would take 460 SNPs 18 

hours each for 6 months to comply with 

this requirement (36 hours per year). 

Therefore, we estimated that the total 

annual burden associated with this 

requirement was 16,560 hours. In this 

final rule, we are revising the estimates 

we reported in the interim final rule to 

reflect a significant decrease in the 

number of SNPs that were required to 

comply with this requirement in 2010. 

In 2010, 43 SNPs were required to have 

State contracts. Therefore, we estimate 

that it will take 43 SNPs 36 hours to 

comply with this requirement each year, 

resulting in a total annual burden of 

1,548 hours. In our September 18, 2008 

IFC, we assumed hourly wages of $37.15 

(based on DOL statistics for a 

management analyst) plus the added 

OMB figures of 12 percent for overhead 

and 36 percent for benefits, respectively, 

to represent average costs to plans, 

sponsors and downstream entities for 

the provisions discussed in the interim 

final rule. In this final rule, we are 

updating the labor estimates we 

reported in our September 18, 2008 IFC 

to reflect the most recent 2009 data 

available from the DOL’s Bureau of 

Labor Statistics (BLS) for the hourly 

wages of management analysts. 

Therefore, our final labor cost estimate 

reflects a median hourly rate of $36.18 

for a management analyst, and a, 48 

percent addition to this hourly rate for 

overhead and fringe benefits, for a total 

hourly labor cost estimate of $53.55 per 

response. We estimate a total annual 

cost of $82,895 in order to implement 

this provision’s requirements. 

C. ICRs Regarding the Comprehensive 

Written Statement Requirement for 

D–SNPs (§ 422.111) 

Section 422.111(b)(2)(iii) states that 

each SNP must provide for prospective 

dual-eligible individuals, prior to 

enrollment, a comprehensive written 

statement describing cost-sharing 

protections and benefits that the 

individual is entitled to under title 

XVIII and the State Medicaid program 

under title XIX. This may be developed 

by the SNPs and distributed by the 

agents selling Medicare products. 

The burden associated with this 

requirement is the time and effort put 

forth by each SNP to develop and 

provide such written statement. In our 

September 18, 2008 IFC, we estimated 

that 460 SNPs would be affected 

annually by this requirement and that it 

would take each SNP 10 hours to 

comply with this requirement. 

Therefore, we estimated that the total 

annual burden associated with this 

requirement would be 4,600 hours. In 

this final rule, we are revising the 

annual burden estimate we reported in 

the interim final rule to reflect the most 

recent information we have regarding 

the number of D–SNP plan benefit 

packages (PBPs). In this final rule, we 

are revising the estimate we reported in 

the final rule to reflect an increase in the 

number of D–SNPs affected by this 

requirement. In 2010, 487 D–PBPs were 

affected by this requirement. 

Accordingly, we estimate the total 

annual burden associated with this 

requirement is 4,870 hours (10 hours 

multiplied by 487 D–SNP PBPs). We are 

also revising our labor cost estimates in 

this final rule to reflect the most recent 

hourly wage data available from the 

BLS. In our interim final rule, we 

estimated an hourly labor rate of $14.68 

for the hourly wages of word processors 

and typists based on 2006 BLS data. Our 

labor cost estimate in this final rule 

assumes a median hourly rate of $15.67, 

based on the most recent 2009 BLS data 

available for the hourly wages of word 

processors and typists. To account for 

fringe benefits and overhead, we add 48 

percent to this hourly rate to obtain a 

total hourly labor cost estimate of 

$23.19 per response. We estimate total 

annual costs of $112,935 in order to 

implement this provision’s 

requirements. 

D. ICRs Regarding the Access to Services 

Under an MA Private Fee-for-Service 

(PFFS) Plan (§ 422.114) 

1. Clarification Regarding Utilization 

The revised § 422.114(a)(2)(ii)(A) 

requires that for plan year 2010 and 

subsequent plan years, a private fee-forservice (PFFS) plan that meets access 

requirements, with respect to a 

particular category of provider, by 

establishing contracts or agreements 

with a sufficient number and range of 

providers must meet the network 

accessibility and adequacy requirements 

described in 1852(d)(1) of the Act. This 


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section of the statute describes the 

network adequacy requirements that 

coordinated care plans currently must 

meet when contracting with providers 

to furnish benefits covered under the 

plan. 

We use the network adequacy 

standards established for coordinated 

care plans in order to determine 

whether PFFS plans who want to meet 

access requirements under 

§ 422.114(a)(2)(ii) satisfactorily meet 

those requirements. Therefore, in our 

September 18, 2008 IFC, we assumed 

that there would be no additional 

burden on PFFS plans in order to 

comply with § 422.114(a)(2)(ii)(A). We 

did not receive any comments on our 

assumption on no additional burden on 

PFFS plans, and we are not changing 

this assumption in this final rule. 

2. Requirement for Certain NonEmployer PFFS Plans To Use Contract 

Providers 

Section 422.114(a)(3) requires that for 

plan year 2011 and subsequent plan 

years, an MA organization that offers a 

PFFS plan that is operating in a network 

area as defined in § 422.114(a)(3)(i) 

meets the access requirements in 

§ 422.114(a)(1) only if the MA 

organization has contracts or agreements 

with providers in accordance with the 

network accessibility and availability 

requirements described in 1852(d)(1) of 

the Act. 

The burden associated with this 

requirement is that beginning in plan 

year 2011, an MA organization offering 

a PFFS plan is required to create 

separate plans within its existing service 

area based on whether the counties 

located in that service area are 

considered network areas. In our 

September 18, 2008 IFC, we estimated 

the burden of this administrative 

requirement on the 77 MA organizations 

that offered 838 non-employer MA PFFS 

plans at the time that the interim final 

rule was published. We also estimated 

that an additional 300 plans would be 

created as a result of organizations 

creating separate PBPs for their network 

area and non-network area plans. We 

estimated that it would take 2 hours to 

create a new plan benefit package for a 

total of 600 hours to create 300 plan 

benefit packages. We are not modifying 

this total burden hour estimate in this 

final rule. However, as stated earlier, we 

are modifying our estimate of the hourly 

labor costs incurred through this 

requirement to reflect the most recent 

hourly wage data available from the 

BLS. Therefore, we estimate a total 

hourly labor cost of $53.55 for this 

provision, assuming an hourly labor 

cost of $36.18 for a management analyst 

in 2009, and a 48 percent increase to 

account for fringe benefits and 

overhead. We estimate a total annual 

cost of $32,130 associated with 

implementing this provision’s 

requirements. 

3. Requirement for all Employer/UnionSponsored PFFS Plans To Use Contracts 

With Providers 

Section 422.114(a)(4) requires that an 

employer/union sponsored PFFS plan 

operating on or after plan year 2011 

must establish written contracts or 

agreements with a sufficient number 

and range of health care providers in its 

service area for all categories of services 

in accordance with the network 

accessibility and availability 

requirements described in 1852(d)(1) of 

the Act. 

The burden associated with this 

requirement is the time and effort 

necessary for an organization offering an 

employer/union sponsored PFFS plan to 

submit the required application to CMS 

according to § 422.501. In our 

September 18, 2008 IFC, we estimated 

that approximately 10 organizations 

would submit applications for a year, 

and that it would take each of these 

organizations approximately 100 hours 

to complete an application, for a total 

burden of 1,000 hours for all applicants 

on an annual basis. We are not 

modifying this total burden hour 

estimate in this final rule. However, we 

are modifying our estimate of the hourly 

labor costs incurred through this 

requirement to reflect the most recent 

hourly wage data available from the 

BLS. We calculate a total hourly labor 

cost of $53.55 for this provision 

assuming the hourly salary of $36.18 for 

a management analyst in 2009, with a 

48 percent increase to account for fringe 

benefits and overhead. This burden 

associated with the requirement under 

§ 422.501 imposes $53,550 in annual 

costs and is captured in OMB #0938– 

0935. We have updated this PRA 

package approved under OMB #0938– 

0935 for this ICR to reflect our revised 

burden estimates. 

E. ICRs Regarding the Quality 

Improvement Program (§ 422.152) 

Section 422.152(g) states that MA 

organizations offering SNPs must 

conduct a QI program that: (1) Provides 

for the collection, analysis, and 

reporting of data that measures health 

outcomes and indices of quality at the 

plan level; (2) measures the 

effectiveness of its MOC; and (3) makes 

available to CMS information on quality 

and outcomes measures that will 

enable—(i) beneficiaries to compare 

health coverage options; and (ii) CMS to 

monitor the plan’s MOC performance. 

The burden associated with this 

requirement is the time and effort put 

forth by the SNP to develop, collect, and 

analyze the quality and health outcomes 

measures that meet the requirements 

under § 422.152(g). This requirement is 

for new and existing SNPs. The 

cumulative burden on SNPs is reflected 

in two parts: the burden on plans 

operating before implementation of this 

provision in our September 18, 2008 

IFC; and the burden on new SNPs that 

were approved to operate beginning on 

January 1, 2010. 

In our September 18, 2008 IFC, we 

estimated that it would take each SNP 

120 hours to meet this requirement in 

the initial year of development. We 

estimated that it would take 40 hours 

per year in subsequent years to revise 

the quality and health outcomes 

measures based on performance data 

analysis through the plan’s quality 

improvement program. In our 

September 18, 2008 IFC, we estimated 

that 335 existing SNPs would have a 

cumulative annual burden of 40,200 

hours (120 hours × 335 plans) to 

develop the quality and health 

outcomes measures needed to evaluate 

their model of care and overall plan 

performance. In calendar year 2010 and 

subsequent years, we estimated the 

existing SNPs would have a cumulative 

annual burden of 13,400 hours (40 

hours × 335 plans) to revise the quality 

and health outcomes measures based on 

performance data analysis through the 

plan’s quality improvement program. 

We anticipated that we would approve 

150 new SNPs by January 1, 2010, and 

that the 150 new SNPs would have a 

cumulative initial year (calendar year 

2010) burden of 18,000 hours (120 hours 

multiplied by 150 plans) to develop 

their quality and health outcomes 

measures needed to evaluate their 

model of care and overall plan 

performance, and a cumulative annual 

burden of 6,000 hours (40 hours 

multiplied by 150 plans) to revise their 

model of care in subsequent years. 

As stated elsewhere in this section, in 

this final rule we are modifying our 

September 18, 2008 IFC estimates to 

reflect a significant increase in the 

number of existing SNPs in 2010 as 

compared to 335 existing SNPs that we 

estimated in the interim final rule. We 

are also modifying the estimate to reflect 

a significant decrease in the number of 

new SNPs approved for 2010 as 

compared to the 150 new SNPs that we 

estimated in the interim final rule. 

First, we estimate that the 544 

existing SNPs existing in 2010 incurred 

a cumulative annual burden of 65,280 


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54628 Federal Register / Vol. 76, No. 170 / Thursday, September 1, 2011 / Rules and Regulations 

hours (120 hours × 544 plans) to 

develop the quality and health 

outcomes measures needed to evaluate 

their MOC and overall plan 

performance. For subsequent years, we 

estimate that these existing SNPs will 

have a cumulative annual burden of 

21,760 hours (40 hours × 544 plans) to 

revise the quality and health outcomes 

measures based on performance data 

analysis through the plan’s quality 

improvement program. Second, we 

estimate the 15 new SNPs that CMS 

approved by January 1, 2010 incurred a 

cumulative initial year (FY 2010) 

burden of 1,800 hours (120 hours 

multiplied by 15 plans) to develop the 

quality and health outcomes measures 

needed to evaluate their MOC and 

overall plan performance. We estimate 

that these SNPs will have a cumulative 

annual burden of 600 hours (40 hours 

multiplied by 15 plans) to revise their 

MOC in subsequent years. In summary, 

we are revising our September 18, 2008 

IFC estimates in this final rule to reflect 

a cumulative annual burden of 65,280 

hours in calendar year 2009, and a total 

annual burden of 23,560 hours (21,760 

hours for existing SNPs revising their 

measures, and 1,800 hours for new 

SNPs developing their measures) for 

calendar year 2010. 

As stated earlier in this section, while 

we recognized that SNPs may need to 

utilize medical personnel or senior staff 

to comply with this requirement, we 

were unsure of these costs when we 

developed the cost estimate for this 

provision in the interim final rule. 

Therefore, in our September 18, 2008, 

we requested comment on the 

additional cost impact of the MOC 

requirement on SNPs. We did not 

receive any comments in response to 

our request for comment on the cost 

estimate for this provision. However, 

based on new information regarding the 

labor wages of staff that review the 

MOCs we are revising our hourly labor 

estimate from the $54.98 hourly wage 

estimate that we reported in the interim 

final rule. In this final rule, our estimate 

of the information collection burden 

associated with this provision reflects 

an hourly salary of $55.46 for a GS 13, 

Step 10 analyst for 2010, with an 

additional 48 percent increase to 

account for fringe benefits and 

overhead. Therefore, we estimate a total 

hourly labor cost of $83.08 to 

implement the requirements of this 

provision, resulting in a onetime 

$5,573,006 start-up cost and $1,857,668 

in total annual costs. 

F. ICRs Regarding the Standards for MA 

Organization Marketing (§ 422.2268) 

Section 422.2268(g) states that MA 

organizations cannot market any health 

care related product during a marketing 

appointment beyond the scope agreed 

upon by the beneficiary, and 

documented by the plan, prior to the 

appointment. 

The burden associated with this 

requirement is the time and effort put 

forth by the MA organization to 

document a beneficiary’s 

acknowledgement confirming the 

specific types of choices that the 

marketing representative is authorized 

to discuss. In our November 10, 2008 

IFC, we stated that the burden 

associated with these requirements was 

exempt from the requirements of the 

PRA as defined in 5 CFR 1320.3(b)(2) 

because the time, effort, and financial 

resources necessary to comply with the 

requirement would be incurred by 

persons in the normal course of their 

activities. We received no comment on 

our burden determination in the interim 

final rule, and are therefore finalizing 

the burden estimate associated with this 

ICR without modification. 

G. ICRs Regarding the Licensing of 

Marketing Representatives and 

Confirmation of Marketing Resources 

(§ 422.2272) 

Section 422.2272(d) states that MA 

organizations must report to the State in 

which the MA organization appoints an 

agent or broker, the termination of any 

such agent or broker, including the 

reasons for such termination if State law 

requires that the reasons for the 

termination be reported. 

The burden associated with this 

requirement is the time and effort put 

forth by the MA organization to comply 

with the State requests for information. 

In our November 10, 2008 IFC, we 

stated that the burden associated with 

these requirements is exempt from the 

requirements of the PRA as defined in 

5 CFR 1320.3(b)(2) because the time, 

effort, and financial resources necessary 

to comply with the requirement would 

be incurred by persons in the normal 

course of their activities. We received 

no comment on our burden 

determination in our November 10, 

2008 IFC, and are therefore finalizing 

the burden estimate associated with this 

ICR without modification. 

H. ICRs Regarding the Broker and Agent 

Compensation and Training of Sales 

Agents Under MA Organizations 

(§ 422.2274(b) and § 422.2274(d)) and 

PDP Sponsors (§ 423.2274(b) and 

§ 423.2274(d)) 

Section 422.2274(b) states that if a 

MA organization markets through 

independent brokers or agents, they 

must train and test agents selling 

Medicare products concerning Medicare 

rules and regulations specific to the 

plan products they intend to sell. The 

burden associated with this requirement 

is the time and effort put forth by the 

MA organization to provide training and 

test agents. In our November 10, 2008 

IFC, we stated that the burden 

associated with these requirements is 

exempt from the requirements of PRA as 

defined in 5 CFR 1320.3(b)(2) because 

the time, effort, and financial resources 

necessary to comply with the 

requirement would be incurred by 

persons in the normal course of their 

activities. We received no comment on 

our burden determination for 

§ 422.2274(b) in our November 10, 2008 

IFC, and are therefore finalizing the 

burden estimate associated with the 

§ 422.2274(b) ICR without modification. 

In our November 10, 2008 IFC, we 

required all MA plans to post revised 

compensation structures to brokers or 

agents that conform precisely to our 

regulations and guidance under 

§ 422.2274(d). We additionally required 

every complete submission of a 

compensation structure to include a 

signed certification from an authorized 

senior official within the organization. 

The burden associated with this 

requirement was the time and effort put 

forth by the organization to post the 

compensation structures and to provide 

the structures and certification to CMS. 

In our November 10, 2008 IFC, we 

estimated it would take each 670 MA 

organizations 56 hours each to fulfill 

this requirement for a total of 37,520 

hours annually. Although this 

requirement applied to plans in 2009, 

we did not require plans to post their 

compensation structures in 2010 or 

2011. Instead, we now require MA 

organizations to update and attest to 

their information in the Health Plan 

Management System (HPMS). This Webbased system in HPMS allows new 

plans to submit information and 

automatically updates organization 

compensation information for existing 

plans. Once the information has been 

submitted or reviewed, the system 

allows the organization to attest to the 

accuracy of the information. In this final 

rule, we revise the November 10, 2008 

IFC’s estimate to reflect this burden. We 


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Federal Register / Vol. 76, No. 170 / Thursday, September 1, 2011 / Rules and Regulations 54629 

believe that the time necessary to 

complete this process is 2 hours. Based 

on our revised estimate in this final rule 

for the number of MA organizations, the 

total annual burden associated with this 

requirement is 1,326 hours (663 MA 

organizations multiplied by 2 hours per 

response). In this final rule, we are 

additionally revising our interim final 

rule hourly labor cost estimate of $14.68 

to reflect the most recent 2009 BLS data 

available. We estimate a median hourly 

rate of $15.67 for the wages of word 

processors and typists. To account for 

fringe benefits and overhead, we add 48 

percent to this hourly rate to obtain a 

total hourly labor cost estimate of 

$23.19 per response, and a total annual 

burden cost of $30,750. We are revising 

the PRA package approved under OCN 

0938–0753 to reflect these information 

requirements. 

Section 423.2274(b) requires the Part 

D sponsor to ensure that agents selling 

Medicare products are trained on 

Medicare rules and regulations specific 

to the plan products they intend to sell. 

The burden associated with this 

requirement is the time and effort put 

forth by the Part D sponsor to provide 

training and test agents. In our 

November 10, 2008 IFC, we determined 

that the burden associated with these 

requirements was exempt from the 

requirements of the PRA as defined in 

5 CFR 1320.3(b)(2) because the time, 

effort, and financial resources necessary 

to comply with the requirement would 

be incurred by persons in the normal 

course of their activities. We received 

no comments on our burden 

determination for § 423.2274(b) in our 

November 10, 2008 IFC, and are 

therefore finalizing our burden estimate 

for § 423.2274(b) without modification. 

In our November 10, 2008 IFC, we 

also required all Medicare PDPs to post 

revised compensation structures to 

brokers or agents that conform precisely 

to our regulations and guidance under 

§ 423.2274(d). Additionally, we required 

every complete submission of a 

compensation structure to include a 

signed certification from an authorized 

senior official within the organization. 

The burden associated with this 

requirement was the PDP’s time and 

effort to post its compensation 

structures and to provide the structures 

and certification to CMS. In our 

November 10, 2008 IFC, we anticipated 

it would take each Part D sponsor 49 

hours to fulfill this requirement and that 

87 Part D sponsors would be affected 

annually for a total of 4,263 hours 

annually. Although this requirement 

applied to Part D sponsors in 2009, we 

did not require Part D sponsors to post 

their compensation structures in 2010 or 

2011. Instead, we now require Part D 

sponsors to update and attest to their 

information in the Health Plan 

Management System (HPMS). This Webbased system in HPMS allows new 

sponsors to submit information and 

automatically updates organization 

compensation information for existing 

sponsors. Once the information has 

been submitted or reviewed, the system 

allows the organization to attest to the 

accuracy of the information. In this final 

rule, we revise the November 10, 2008 

IFC’s estimate to reflect this burden. We 

believe that the time necessary to 

complete this process is 2 hours. We are 

also revising the burden estimate to 

reflect updated figures for the number of 

Part D sponsors that were operating in 

CY 2009. Seventy-nine Part D sponsors 

are affected annually by this 

requirement, resulting in a total annual 

burden of 158 hours (79 Part D sponsors 

multiplied by 2 hours per response). 

Our labor cost estimate assumes a 

median hourly rate of $15.67, based on 

the most recent 2009 BLS data available) 

for the hourly wages of word processors 

and typists. To account for fringe 

benefits, we add 48 percent to this 

hourly rate to obtain a total hourly labor 

cost estimate of $23.19 per response and 

a total cost estimate of $3,664 annually. 

We are revising the PRA package 

approved under OCN 0938–0964 to 

reflect these information collection 

requirements. 

I. ICRs Regarding the Prompt Payment 

for Part D Sponsors (§ 423.520) 

Section 423.520(a)(ii)(2) requires the 

Part D sponsor to notify the submitting 

network pharmacy that a submitted 

claim is not a clean claim. Such 

notification must specify all defects or 

improprieties in the claim and must list 

all additional information necessary for 

the proper processing and payment of 

the claim. 

The burden associated with this 

requirement is the time and effort put 

forth by the Part D sponsor to provide 

proper notification to the network 

pharmacy. While there is burden 

associated with this requirement, in our 

September 18, 2008 IFC, we stated that 

the burden associated with these 

requirements is exempt from the 

requirements of the PRA, as defined in 

5 CFR 1320.3(b)(2), because the time, 

effort, and financial resources necessary 

to comply with this requirement would 

be incurred by persons in the normal 

course of their activities. We received 

no comment on our burden 

determination in the interim final rule, 

and are therefore finalizing the burden 

estimate without modification. 

J. ICRs Regarding the Standards for Part 

D Marketing (§ 423.2268) 

Section 423.2268(g) states that Part D 

organizations cannot market any health 

care related product during a marketing 

appointment beyond the scope agreed 

upon by the beneficiary, and 

documented by the plan, prior to the 

appointment. 

The burden associated with this 

requirement is the time and effort put 

forth by the Part D organization to 

document a beneficiary’s signed 

acknowledgement confirming the 

specific types of choices that the 

marketing representative is authorized 

to discuss. While there is burden 

associated with this requirement, in our 

November 10, 2008 IFC, we stated that 

the burden associated with these 

requirements is exempt from the 

requirements of the PRA as defined in 

5 CFR 1320.3(b)(2) because the time, 

effort, and financial resources necessary 

to comply with the requirement would 

be incurred by persons in the normal 

course of their activities. We received 

no comment on our burden 

determination in the interim final rule, 

and are therefore finalizing the burden 

estimate associated with this ICR 

without modification. 

K. ICRs Regarding the Licensing of 

Marketing Representatives and 

Confirmation of Marketing Resources 

(§ 423.2272) 

Section 423.2272(d) states that Part D 

sponsors must report to the State in 

which the Part D sponsor appoints an 

agent or broker, the termination of any 

such agent or broker, including the 

reasons for such termination if State law 

requires that the reasons for the 

termination be reported. 

The burden associated with this 

requirement is the time and effort put 

forth by the Part D sponsor to comply 

with the State requests for information. 

While there is burden associated with 

this requirement, in our November 10, 

2008 IFC, we stated that the burden 

associated with these requirements is 

exempt from the requirements of the 

PRA as defined in 5 CFR 1320.3(b)(2) 

because the time, effort, and financial 

resources necessary to comply with the 

requirement would be incurred by 

persons in the normal course of their 

activities. We received no comment on 

our burden determination in the interim 

final rule, and are therefore finalizing 

the burden estimate associated with this 

ICR without modification. 


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54630 Federal Register / Vol. 76, No. 170 / Thursday, September 1, 2011 / Rules and Regulations 

TABLE 2—ESTIMATED FISCAL YEAR REPORTING RECORDKEEPING BURDENS

Regulation sections OMB Control 

No. Respondents 

Burden per 

response 

(hours) 

Total annual 

burden 

(hours) 

Hourly labor 

cost of 

reporting 

($) 

Total labor 

cost 

($) 

Total 

capital/ 

maintenance 

costs 

($) 

Total cost 

($) 

422.101(f)(1) ................................... 0938–New ...... 544 10 5,440 83.08 551,651 0 551,651 

(Start-up) ......................................... ........................ 15 80 1,200 

422.101(f)(1) ................................... 0938–New ...... 544 10 5,440,150 83.08 464,417 0 46,417 

(Annual) .......................................... ........................ 15 10 

422.107(a) ...................................... 0938–New ...... 43 36 1,548 53.55 82,895 0 82,895 

422.111(b)(2) .................................. 0938–New ...... 487 10 4,870 23.19 112,935 0 112,935 

422.114(a)(3) .................................. 0938–New ...... 300 2 600 53.55 32,130 0 32,130 

422.114(a)(4) .................................. 0938–0935 ..... 10 100 1,000 53.55 53,550 0 53,550 

422.152(g) ...................................... 0938–New ...... 544 120 65,280 83.08 5,573,006 0 5,573,006 

(Start-up) ......................................... ........................ 15 120 1,800 

422.152(g) ...................................... 0938–New ...... 544 40 21,760 83.08 1,857,668 0 1,857,668 

(Annual) .......................................... ........................ 15 40 600 

422.2274(d) .................................... 0938–0753 ..... 663 26 1,326 23.19 30,750 0 30,750 

423.2274(d) .................................... 0938–0964 ..... 79 29 158 23.19 3,664 0 3,664 

Total ......................................... ........................ 2.141 ...................... 111,172 ...................... 8,762,666 0 8,762,666 

IV. Regulatory Impact Analysis 

A. Introduction 

We have examined the impacts of this 

rule as required by Executive Orders 

12866 on Regulatory Planning and 

Review (September 30, 1993) and 13563 

on Improving Regulation and Regulatory 

Review (January 18, 2011). Executive 

Orders 12866 and 13563 direct agencies 

to assess all costs and benefits of 

available regulatory alternatives and, if 

regulation is necessary, to select 

regulatory approaches that maximize 

net benefits (including potential 

economic, environmental, public health 

and safety effects, distributive impacts, 

and equity). Executive Order 13563 

emphasizes the importance of 

quantifying both costs and benefits, of 

reducing costs, of harmonizing rules, 

and of promoting flexibility. A 

regulatory impact analysis (RIA) must 

be prepared for major rules with 

economically significant effects ($100 

million or more in any one year). This 

final rule has been designated an 

‘‘economically significant’’ rule under 

section 3(f)(1) of Executive Order 12866. 

In addition, this is a major rule under 

the Congressional Review Act (5 U.S.C. 

804(2)). Accordingly, the rule has been 

reviewed by the Office of Management 

and Budget. 

B. Statement of Need 

The purpose of this final rule is to 

finalize provisions of several interim 

final rules that provide revisions to the 

Medicare Advantage (MA) program (Part 

C) and Prescription Drug Benefit 

Program (Part D), to implement 

provisions specified in the Medicare 

Improvements for Patients and 

Providers Act of 2008 (MIPPA), and to 

make other changes to the regulations 

based on our continued experience in 

the administration of the Part C and Part 

D programs. These latter revisions are 

necessary to: (1) Clarify various program 

participation requirements; (2) make 

changes to strengthen beneficiary 

protections; (3) strengthen our ability to 

identify strong applicants for Part C and 

Part D program participation and 

remove consistently poor performers; 

and (4) make other clarifications and 

technical changes. Refer to section I. of 

this final rule for background on the 

interim final rules that we are finalizing. 

The scope of the analysis of economic 

impacts for this final rule is limited to 

the costs and savings associated with 

the provisions in the interim final rule 

that we are finalizing. 

C. Overall Impacts 

The CMS Office of the Actuary has 

estimated savings and costs to the 

Federal government as a result of 

various provisions of this final rule. 

Tables 4 and 6 detail the breakdown of 

costs by cost-bearing entity. 

Specifically, Table 4 describes costs and 

savings to the Federal government and 

Table 6 describes costs to MA 

organizations and/or PDP sponsors and 

third party entities. As detailed in Table 

4, we expect an aggregate net savings to 

the Federal government of 

approximately $520 million for fiscal 

years (FYs) 2010 through 2015 as a 

result of the provisions in this final rule. 

This estimate represents $1.02 billion in 

savings to the Federal government, as a 

result of the requirement that certain 

non-employer and all employer privatefee-for-service plans must establish 

contracts with providers and costs of 

approximately $500 million as a result 

of the implementation of prompt 

payment by prescription drug plans and 

MA–PD plans from FYs 2010 through 

2015. Administrative costs associated 

with the provisions of the interim final 

rule as finalized by this final rule add 

negligibly to the total administrative 

costs of the MA or Part D programs. 

Table 6 describes the administrative 

costs that MA organizations and PDP 

sponsors will incur ($19.55 million) 

from FYs 2010 through 2015 as a result 

of the requirements in this final rule. 

Refer to section III. of this final rule 

(Collection of Information 

Requirements) for additional 

information on the calculations and 

assumptions that form the basis of our 

cost estimates for these provisions. 

As described in Table 3 reflecting the 

costs and savings in this RIA, we 

conclude that the provisions in this 

final rule result in a net savings of 

approximately $500.5 million over FYs 

2010 to 2015. 

D. Detailed Impacts 

1. Provider Contracts for Employer and 

Non-Employer PFFS Plans 

(§ 422.114(a)(3) and § 422.114(a)(4)) 

In our September 18, 2008 IFC, we 

estimated an incurred savings (before 

the Part B premium offset) of $780 

million for FY 2011 to $1.59 billion in 

FY 2018 as a result of the requirement 

that certain non-employer and all 

employer PFFS plans establish contracts 

with providers. We arrived at this figure 

by first determining how many 

coordinated care plans (excluding 

regional PPOs) were currently operating 

in counties that had PFFS plans. We 

then used this estimate to project how 

many PFFS plans and members would 

be subject to the new requirement to set 

up networks of providers by 2011. 

Based on the information, as well as the 

level of payments that these plans 

receive, we estimated how many 

members would end up in PFFS plans 

that did not need to form networks, how 


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Federal Register / Vol. 76, No. 170 / Thursday, September 1, 2011 / Rules and Regulations 54631 

many would be in plans that converted 

to network PFFS plans, how many 

would end up in a coordinated care 

plan, and how many would switch to 

original Medicare. We used different 

assumptions for individual plans and 

for group plans. However, for both 

group and individual plans, we 

assumed that most members would 

remain in a PFFS plan (either network 

or non-network). For members who 

stayed in either a network or nonnetwork PFFS plan, we assumed a 

higher plan bid and, therefore, a cost to 

Medicare. We assumed a savings for 

those beneficiaries that we believed 

would enroll in a MA coordinated care 

plan, and projected an even larger 

savings for beneficiaries that would 

enroll in original fee-for-service (FFS) 

Medicare. We assumed that 20 percent 

of the 2009 cohort PFFS enrollees 

would migrate to Medicare FFS in 2011. 

Based on this projected enrollment, we 

assumed that the per-capita savings for 

those migrating would range from 12 to 

15 percent, depending on plan type 

(employer vs. non-employer). 

In this final rule, we are revising the 

cost estimate projected in our 

September 18, 2008 interim final rule to 

reflect the actual proportion of 2009 

PFFS enrollees who migrated to 

Medicare FFS as compared to those who 

remained in an MA plan. Based on an 

analysis of enrollment in counties with 

the largest PFFS share in 2009, we 

estimated that only 6 percent of the 

2009 PFFS enrollees migrated to 

Medicare FFS as a result of the PFFS 

network requirements; with 

approximately half of these enrollees 

having migrated in 2010 and the other 

half having migrated in 2011. Our 

revised 6 percent migration assumption 

is based on actual MA enrollment 

changes from 2009 to 2011 in countries 

where PFFS enrollment comprised at 

least 50 percent of total MA enrollment. 

We additionally assume a 13 percent 

per-capita savings for those migrating 

from PFFS to FFS—a figure that is 

consistent with the 12 to 15 per-capita 

savings we estimated in our interim 

final rule—based upon 2010 data from 

the Medicare Payment Advisory 

Commission (MedPAC). 

Also, in this final rule, we are 

modifying the window over which we 

estimate costs and savings to conform to 

methodology specified by the Office of 

Management and Budget (OMB). We 

begin our measurement of costs and 

savings in FY 2010, which is the first 

year that the requirements finalized in 

this final rule resulted in a monetized 

impact. We then project the impacts 

forward over the minimum 5-year 

outlook window, resulting in costs and 

savings estimates for the period from 

FYs 2010 through 2015. In Table 4 we 

estimate a savings to the Federal 

government of $1.02 billion over FYs 

2010 through 2015 as the result of the 

requirement that certain non-employer 

and all employer private-fee-for-service 

plans must establish contracts with 

providers. We provide a detailed 

breakdown of these impacts in Table 5. 

We indicate the total costs and savings 

incurred by this provision over FYs 

2010 through 2015 in Table 3. 

2. Prompt Payment Provisions 

(§ 423.505 and § 423.520) 

In our September 18, 2008 IFC, we 

estimated that the prompt payment 

provisions contained this final rule 

would impose significant costs to PDPs, 

MA–PD plans, and their subcontractors. 

We estimated the loss of investment 

income resulting from the prompt 

payment provisions would increase the 

costs of the Part D program by $670 

million from FY 2010 through FY 2018. 

In this final rule, we are revising the 

cost estimates reported in the interim 

final rule based on new data projections 

from the CMS Office of the Actuary 

(OACT). In our September 18, 2008 IFC, 

we originally assumed that 80 percent of 

scripts would be electronic and that the 

clean claim percentage would be 80 

percent. However, we now believe that 

both of these percentages are too low. 

We have revised the original estimate 

under the assumption that 99 percent of 

claims are electronic and that 95 percent 

of them are clean claims. This 

modification results in a higher cost 

estimates that are reflected in Tables 3 

and 4. As stated earlier, in this final 

rule, we are also modifying the window 

over which we estimate costs and 

savings to conform to OMB convention 

for estimating costs and savings in major 

rulemaking. Based on the revised 

estimates and impact analysis window, 

we estimate a total cost of $500 million 

to PDPs, MA–PD plans, and their 

subcontractors from FY 2010 through 

FY 2015. 

TABLE 3—ESTIMATED COSTS AND SAVINGS BY PROVISION FOR FISCAL YEARS 2010 THROUGH 2015 

[$ In millions] 

Provision Regulation 

section(s) 

Fiscal year Total 

(FYs 2010–2015) 

2010 2011 2012 2013 2014 2015 ($ in millions) 

Developing SNP Models of 

Care (MOC) .......................... 422.101(f)(1) 0.55 0.46 0.46 0.46 0.46 0.46 2.85 

D–SNP Contracting Requirement with States ................... 422.107(a) 0.08 0.08 0.08 0.08 0.08 0.08 0.48 

Comprehensive Written Statement Requirement for D– 

SNPs .................................... 422.111(b)(2) 0.11 0.11 0.11 0.11 0.11 0.11 0.66 

Non-employer and Employer 

PFFS Network Requirements 422.114(a) 

422.114(b) 

¥69.92 ¥159.92 ¥179.92 ¥189.92 ¥199.92 ¥219.92 ¥1,019.52 

SNP Quality Requirements ...... 422.152(g) 5.57 1.86 1.86 1.86 1.86 1.86 14.87 

Training and Testing of Agents 

and Brokers .......................... 422.2274(d) 

423.2274(d) 

0.03 0.03 0.03 0.03 0.03 0.03 0.21 

Prompt payment by prescription drug plans and MA–PD 

plans under Part D ............... 423.505 

423.520 

50.0 70.0 80.0 90.0 100.00 110.00 500.00 

Total .................................. ¥13.58 ¥87.38 ¥97.38 ¥97.38 ¥97.38 ¥107.38 ¥500.45 


srobinson on DSK4SPTVN1PROD with RULES3
54632 Federal Register / Vol. 76, No. 170 / Thursday, September 1, 2011 / Rules and Regulations 

TABLE 4—ESTIMATED COSTS AND SAVINGS TO THE FEDERAL GOVERNMENT FOR FISCAL YEARS 2010 THROUGH 2015 

[$ In millions] 

Provision Regulation 

section(s) 

Fiscal year Total 

(FYs 2010–2015) 

2010 2011 2012 2013 2014 2015 ($ in millions) 

Non-Employer and Employer 

PFFS Network Requirements 422.114(a) 

422.114(b) 

¥70.00 ¥160.00 ¥180.00 ¥190.00 ¥200.00 ¥220.00 ¥1,020.00 

Prompt payment by prescription drug plans and MA–PD 

plans under Part D ............... 423.505 

423.520 

50.00 70.00 80.00 90.00 100.00 110.00 500.00 

Total .................................. ............................ ¥20.00 ¥90.00 ¥100.00 ¥100.00 ¥100.00 ¥110.00 ¥520.00 

TABLE 5—ESTIMATED FEDERAL SAVINGS FOR NON-EMPLOYER AND EMPLOYER PFFS NETWORK REQUIREMENTS FOR

FISCAL YEARS 2010 THROUGH 2015 

[$ In millions] 

Fiscal year Total 

(FYs 2010–2015) 

2010 2011 2012 2013 2014 2015 ($ in millions) 

Total HI ..................................................................

(Part C & FFS) ....................................................... 40.00 90 .0 100.00 110.00 120.00 130.00 590.00 

Total SMI (Part C & FFS) ...................................... 40.00 90 .0 100.00 110.00 110.00 120.00 570.00 

Total Medicare (without Part B premium offset) .... 80.00 180 .00 200.00 220.00 230.00 250.00 1,160.00 

Total Medicare (with Part B premium offset) 70.00 160 .00 180.00 190.00 200.00 220.00 1,020.00 

TABLE 6—ESTIMATED COSTS TO MA ORGANIZATIONS AND PDP SPONSORS FOR FISCAL YEARS 2010 THROUGH 2015 

[$ In millions] 

Regulation 

section(s) 

Fiscal year Total 

(FYs 2010–2015) 

2010 2011 2012 2013 2014 2015 ($ in millions) 

Developing SNP Models of 

Care (MOC) .......................... 422.101(f)(1) 0.55 0.46 0.46 0.46 0.46 0.46 2.85 

D–SNP Contracting Requirement with States ................... 422.107(a) 0.08 0.08 0.08 0.08 0.08 0.08 0.48 

Comprehensive Written Statement Requirement for 

D-SNPs ................................. 422.111(b)(2) 0.11 0.11 0.11 0.11 0.11 0.11 0.66 

Non-employer and Employer 

PFFS Network Requirements 422.114(a)(3) 

422.114(a)(4) 

0.03 

0.05 

0.03 

0.05 

0.03 

0.05 

0.03 

0.05 

0.03 

0.05 

0.03 

0.05 

0.48 

SNP Quality Requirements ...... 422.152(g) 5.57 1.86 1.86 1.86 1.86 1.86 14.87 

Training and Testing of Agents 

and Brokers .......................... 422.2274(d) 

423.2274(d) 

0.03 

*0.00 

0.03 

*0.00 

0.03 

*0.00 

0.03 

*0.00 

0.03 

*0.00 

0.03 

*0.00 

0.18 

0.02 

Total .................................. ............................ 6.42 2.62 2.62 2.62 2.62 2.62 19.55 

* Costs appear as zero due to rounding. CMS estimates actual costs of 0.003 million. 

E. Alternatives Considered 

The implementation of all of the 

economically significant provisions of 

the interim final rule as finalized by this 

final rule was directly mandated by 

MIPPA. Therefore, we did not consider 

alternative proposals for these selfimplementing provisions. 

F. Accounting Statement 

As required by OMB Circular A–4 

(available at http:// 

www.whitehouse.gov/omb/circulars/ 

index.html), in Table 7, we have 

prepared an accounting statement 

showing the classification of the 

expenditures associated with the 

prompt payment provisions of this final 

rule and the benefits associated with the 

PFFS network provisions. This table 

provides our best estimate of the costs 

and savings as a result of the changes 

presented in this interim final rule. 


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Federal Register / Vol. 76, No. 170 / Thursday, September 1, 2011 / Rules and Regulations 54633 

TABLE 7—ACCOUNTING STATEMENT: CLASSIFICATION OF ESTIMATED EXPENDITURES

Category Transfers 

($ in millions) 

Incurred Savings for the Non-Employer and Employer PFFS Network Provision, FYs 2010–2015 

Annualized Monetized Transfers Using 7% Discount Rate ..................................................................... ¥164.9. 

Annualized Monetized Transfers Using 3% Discount Rate ..................................................................... ¥167.7. 

From Whom To Whom? .......................................................................................................................... Federal Government to PFFS Plans. 

Prompt payment by prescription drug plans and MA–PD plans under Part D, FYs 2010–2015 

Annualized Monetized Transfers Using 7% Discount Rate ..................................................................... 81.1.

Annualized Monetized Transfers Using 3% Discount Rate ..................................................................... 82.4.

From Whom To Whom? .......................................................................................................................... Federal Government To Part D Sponsors. 

Costs for all other (non-marketing) provisions, FYs 2010–2015 

Annualized Monetized Costs Using 7% Discount Rate ........................................................................... 3.0. 

Annualized Monetized Costs Using 3% Discount Rate ........................................................................... 2.9. 

Who is Affected? ...................................................................................................................................... MAOs/PDP Sponsors. 

V. Regulatory Flexibility Act Analysis 

The Regulatory Flexibility Act (RFA) 

(September 19, 1980, Pub. L. 96–354), as 

modified by the Small Business 

Regulatory Enforcement Fairness Act of 

1996 (SBREFA) (Pub. L. 104–121), 

requires agencies to determine whether 

proposed or final rules would have a 

significant economic impact on a 

substantial number of small entities 

and, if so, to prepare a Regulatory 

Flexibility Analysis and to identify in 

the notice of proposed rulemaking or 

final rulemaking any regulatory options 

that could mitigate the impact of the 

proposed regulation on small 

businesses. For purposes of the RFA, 

small entities include businesses that 

are small as determined by size 

standards issued by the Small Business 

Administration, nonprofit organizations, 

and small governmental jurisdictions). 

Individuals and States are not included 

in the definition of a small business 

entity. 

The RFA also requires agencies to 

analyze options for regulatory relief of 

small entities, if a rule has a significant 

impact on a substantial number of small 

entities. The Secretary determined that 

the September 18, 2008 IFC (73 FR 

54226–54254) that we are finalizing 

would have a significant impact on a 

substantial number of small entities, 

such as small retail pharmacies and 

pharmacy benefit managers (PBMs). The 

cost impacts for these entities result 

from the prompt payment provision 

discussed earlier in this document. We 

provide a detailed analysis of this 

provision’s impact on small entities in 

the regulatory impact analysis in our 

September 18, 2008 IFC (73 FR 54226– 

54254). 

In addition, section 1102(b) of the Act 

requires us to prepare an analysis if a 

rule may have a significant impact on 

the operations of a substantial number 

of small rural hospitals. This analysis 

must conform to the provisions of 

section 604 of the RFA. We are not 

preparing an analysis for section 1102(b) 

of the Act because the Secretary has 

determined this final rule would not 

have a significant impact on the 

operations of a substantial number of 

small rural hospitals. 

VI. Unfunded Mandates Reform Act 

Analysis 

Section 202 of the Unfunded 

Mandates Reform Act of 1995 (March 

22, 1995, Pub. L. 104–4) requires that 

agencies assess anticipated costs and 

benefits before issuing any rule whose 

mandates require spending in any one 

year of $100 million in 1995 dollars, 

updated annually for inflation. In 2011, 

that threshold is approximately $136 

million. This final rule does not 

mandate any spending by State, local, or 

Tribal governments, in the aggregate, or 

by the private sector of $136 million. 

VII. Federalism Analysis 

Executive Order 13132 on Federalism 

(August 4, 1999) establishes certain 

requirements that an agency must meet 

when it promulgates a proposed rule 

(and subsequent final rule) that imposes 

substantial direct requirement costs on 

State and local governments, preempts 

State law, or otherwise has Federalism 

implications. Since this regulation does 

not impose any costs on State or local 

governments, the requirements of E.O. 

13132 are not applicable. 

List of Subjects 

42 CFR Part 417 

Administrative practice and 

procedure, Grant programs—health, 

Health care, Health insurance, Health 

maintenance organizations (HMO), Loan 

programs—health, Medicare, Reporting 

and recordkeeping requirements. 

42 CFR Part 422 

Administrative practice and 

procedure, Health facilities, Health 

maintenance organizations (HMO), 

Medicare, Penalties, Privacy, Reporting 

and recordkeeping requirements. 

42 CFR Part 423 

Administrative practice and 

procedure, Emergency medical services, 

Health facilities, Health maintenance 

organizations (HMO), Medicare, 

Penalties, Privacy, Reporting and 

recordkeeping. 

For the reasons set forth in the 

preamble, the Centers for Medicare & 

Medicaid Services amends 42 CFR 

chapter IV as set forth below: 

PART 417—HEALTH MAINTENANCE 

ORGANIZATIONS, COMPETITIVE 

MEDICAL PLANS, AND HEALTH CARE 

PREPAYMENT PLANS 

■ 1. The authority citation for part 417 

continues to read as follows: 

Authority: Sec. 1102 and 1871 of the Social 

Security Act (42 U.S.C. 1302 and 1395hh), 

secs. 1301, 1306, and 1310 of the Public 

Health Service Act (42 U.S.C., 300e, 300e–5, 

and 300e–9), and 31 U.S.C. 9701. 

Subpart A—General Provisions 

■ 2. Amend § 417.402 by revising the 

second sentence of paragraph (c)(3) to 

read as follows: 

§ 417.402 Effective date of initial 

regulations. 

* * * * * 

(c) * * * 


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54634 Federal Register / Vol. 76, No. 170 / Thursday, September 1, 2011 / Rules and Regulations 

(3) * * *. If the service area includes 

a portion in more than one MSA with 

a population of more than 250,000, the 

minimum enrollment determination is 

made with respect to each such MSA 

and counties contiguous to the MSA 

that are not in another MSA with a 

population of more than 250,000. 

PART 422—MEDICARE ADVANTAGE 

PROGRAM 

■ 3. The authority citation for part 422 

continues to read as follows: 

Authority: Secs. 1102 and 1871 of the 

Social Security Act (42 U.S.C. 1302 and 

1395hh). 

Subpart C—Benefits and Beneficiary 

Protections 

§ 422.101 [Amended] 

■ 4. In 422.101, paragraph (f)(1)(ii) is 

amended by removing the phrase 

‘‘indentifying goals’’ and adding the 

phrase ‘‘identifying goals’’ in its place. 

Subpart V—Medicare Advantage 

Marketing Requirements 

■ 5. Section 422.2268 is amended by 

revising paragraphs (g) and (h) to read 

as follows: 

§ 422.2268 Standards for MA organization 

marketing. 

* * * * * 

(g) Market any health care related 

product during a marketing 

appointment beyond the scope agreed 

upon by the beneficiary, and 

documented by the plan, prior to the 

appointment (48 hours in advance, 

when practicable). 

(h) Market additional health related 

lines of plan business not identified 

prior to an individual appointment 

without a separate scope of appointment 

identifying the additional lines of 

business to be discussed. 

* * * * * 

■ 6. Section 422.2274 is amended by 

revising paragraphs (a)(1)(ii) 

introductory text, (a)(1)(ii)(B), (a)(1)(iv), 

and (a)(4) to read as follows: 

§ 422.2274 Broker and agent requirements. 

(a) * * * 

(1) * * * 

(ii) The compensation amount paid to 

an agent or broker for enrollment of a 

Medicare beneficiary into an M A plan 

is as follows: 

* * * * * 

(B) For renewals, an amount equal to 

50 percent of the initial compensation 

in paragraph (a)(1)(ii)(A) of this section. 

* * * * * 

(iv) If the MA organization contracts 

with a third party entity such as a Field 

Marketing Organization or similar type 

entity to sell its insurance products, or 

perform services (for example, training, 

customer service, or agent 

recruitment)— 

(A) The total amount paid by the MA 

organization to the third party and its 

agents for enrollment of a beneficiary 

into a plan, if any, must be made in 

accordance with paragraph (a)(1) of this 

section; and 

(B) The amount paid to the third party 

for services other than selling insurance 

products, if any, must be fair-market 

value and must not exceed an amount 

that is commensurate with the amounts 

paid by the MA organization to a third 

party for similar services during each of 

the previous 2 years. 

* * * * * 

(4) Compensation may only be paid 

for the beneficiary’s months of 

enrollment during a plan year (that is, 

January through December). 

(i) Subject to paragraph (a)(4)(ii) of 

this section, compensation payments 

may be made up front for the entire 

current plan year or in installments 

throughout the year. 

(ii) When a beneficiary disenrolls 

from a plan during the— 

(A) First 3 months of enrollment, the 

plan must recover all compensation 

paid to agents and brokers. 

(B) Fourth through 12th month of 

their enrollment (within a single plan 

year), the plan must recover 

compensation paid to agents and 

brokers for those months of the plan 

year for which the beneficiary is not 

enrolled. 

* * * * * 

PART 423—VOLUNTARY MEDICARE 

PRESCRIPTION DRUG BENEFIT 

■ 7. The authority citation for part 423 

continues to read as follows: 

Authority: Sec. 1102, 1860D–1 through 

1860D–42, and 1871 of the Social Security 

Act (42 U.S.C. 1302, 1395w–101 through 

1395w–152, and 1395hh). 

Subpart K—Application Procedures 

and Contracts With Part D Plan 

Sponsors 

■ 8. Amend § 423.505 by revising 

paragraph (b)(21) introductory text to 

read as follows: 

§ 423.505 Contract provisions. 

* * * * * 

(b) * * * 

(21) Effective contract year 2009 and 

subsequent contract years, update any 

prescription drug pricing standard 

based on the cost of the drug used for 

reimbursement of network pharmacies 

by the Part D sponsor on— 

* * * * * 

■ 9. Amend § 423.520 by revising 

paragraphs (c)(2)(ii), (c)(3), and (e)(2) to 

read as follows: 

§ 423.520 Prompt payment by Part D 

sponsors. 

* * * * * 

(c) * * * 

(2) * * * 

(ii) Determination after submission of 

additional information. A claim is 

deemed to be a clean claim under 

paragraph (b) of this section if the Part 

D sponsor that receives the claim does 

not provide notice to the submitting 

network pharmacy of any remaining 

defect or impropriety, or of any new 

defect or impropriety raised by the 

additional information, in the claim 

within 10 days of the date on which 

additional information is received under 

paragraph (c)(2)(i) of this section. A Part 

D sponsor may not provide notice of a 

new deficiency or impropriety in the 

claim that could have been identified by 

the sponsor in the original claim 

submission under this paragraph. 

(3) Obligation to pay. A claim 

submitted to a Part D sponsor that is not 

paid by the Part D sponsor within the 

timeframes specified in paragraphs 

(a)(1)(i) and (ii) or contested by the Part 

D sponsor within the timeframe 

specified in paragraph (c)(1)(i) and (ii) 

of this section must be deemed to be a 

clean claim and must be paid by the 

Part D sponsor in accordance with 

paragraph (a) of this section. 

* * * * * 

(e) * * * 

(2) Authority not to charge interest. As 

CMS determines, a Part D sponsor is not 

charged interest under paragraph (e)(1) 

in exigent circumstances that prevent 

the timely processing of claims, 

including natural disasters and other 

unique and unexpected events. 

* * * * * 

Subpart V—Part D Marketing 

Requirements 

■ 10. Section 423.2268 is amended by 

revising paragraphs (g) and (h) to read 

as follows: 

§ 423.2268 Standards for Part D marketing. 

* * * * * 

(g) Market any health care related 

product during a marketing 

appointment beyond the scope agreed 

upon by the beneficiary, and 

documented by the plan, prior to the 

appointment (48 hours in advance, 

when practicable). 


srobinson on DSK4SPTVN1PROD with RULES3
Federal Register / Vol. 76, No. 170 / Thursday, September 1, 2011 / Rules and Regulations 54635 

(h) Market additional health related 

lines of plan business not identified 

prior to an individual appointment 

without a separate scope of appointment 

identifying the additional lines of 

business to be discussed. 

* * * * * 

■ 11. Section 423.2774 is amended by 

revising paragraphs (a)(1)(ii) 

introductory text, (a)(1)(ii)(B), (a)(1)(iv), 

and (a)(4) to read as follows: 

§ 423.2274 Broker and agent requirements. 

* * * * * 

(a) * * * 

(1) * * * 

(ii) The compensation amount paid to 

an agent or broker for enrollment of a 

Medicare beneficiary into a PDP is as 

follows: 

* * * * * 

(B) For renewals, an amount equal to 

50 percent of the initial compensation 

in paragraph (a)(1)(ii)(A) of this section. 

* * * * * 

(iv) If the Part D sponsor contracts 

with a third party entity such as a Field 

Marketing Organization or similar type 

entity to sell its insurance products or 

perform services (for example, training, 

customer service, or agent 

recruitment)— 

(A) The total amount paid by the Part 

D sponsor to the third party and its 

agents for enrollment of a beneficiary 

into a plan, if any, must be made in 

accordance with paragraph (a)(1) of this 

section; and 

(B) The amount paid to the third party 

for services other than selling insurance 

products, if any, must be fair-market 

value and must not exceed an amount 

that is commensurate with the amounts 

paid by the Part D sponsor to a third 

party for similar services during each of 

the previous 2 years. 

* * * * * 

(4) Compensation may only be paid 

for the beneficiary’s months of 

enrollment during a plan year (that is, 

January through December). 

(i) Subject to paragraph (a)(4)(ii) of 

this section, compensation payments 

may be made up front for the entire 

current plan year or in installments 

throughout the year. 

(ii) When a beneficiary disenrolls 

from a plan during the— 

(A) First 3 months of enrollment, the 

plan must recover all compensation 

paid to agents and brokers. 

(B) Fourth through 12th month of 

their enrollment (within a single plan 

year), the plan must recover 

compensation paid to agents and 

brokers for those months of the plan 

year for which the beneficiary is not 

enrolled. 

* * * * * 

(Catalog of Federal Domestic Assistance 

Program No. 93.773, Medicare—Hospital 

Insurance; and Program No. 93.774, 

Medicare—Supplementary Medical 

Insurance Program) 

Dated: May 5, 2011. 

Marilyn Tavenner, 

Principal Deputy Administrator and Chief 

Operating Officer, Centers for Medicare & 

Medicaid Services. 

Approved: August 12, 2011. 

Kathleen Sebelius, 

Secretary, Department of Health and Human 

Services. 

[FR Doc. 2011–22126 Filed 8–26–11; 11:15 am] 

BILLING CODE 4120–01–P 


srobinson on DSK4SPTVN1PROD with RULES3