1842 Federal Register / Vol. 87, No. 8 / Wednesday, January 12, 2022 / Proposed Rules 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

Centers for Medicare & Medicaid 

Services 

42 CFR Parts 422 and 423 

[CMS–4192–P] 

RIN 0938–AU30 

Medicare Program; Contract Year 2023 

Policy and Technical Changes to the 

Medicare Advantage and Medicare 

Prescription Drug Benefit Programs 

AGENCY: Centers for Medicare & 

Medicaid Services (CMS), Department 

of Health and Human Services (HHS). 

ACTION: Proposed rule. 

SUMMARY: This proposed rule would 

revise the Medicare Advantage (MA) 

(Part C) program and Medicare 

Prescription Drug Benefit (Part D) 

program regulations to implement 

changes related to marketing and 

communications, past performance, Star 

Ratings, network adequacy, medical loss 

ratio reporting, special requirements 

during disasters or public emergencies, 

and pharmacy price concessions. This 

proposed rule would also revise 

regulations related to dual eligible 

special needs plans (D–SNPs), other 

special needs plans, and cost contract 

plans. 

DATES: To be assured consideration, 

comments must be received at one of 

the addresses provided below, by March 

7, 2022. 

ADDRESSES: In commenting, please refer 

to file code CMS–4192–P. 

Comments, including mass comment 

submissions, must be submitted in one 

of the following three ways (please 

choose only one of the ways listed): 

1. Electronically. You may submit 

electronic comments on this regulation 

to https://www.regulations.gov. Follow 

the ‘‘Submit a comment’’ instructions. 

2. By regular mail. You may mail 

written comments to the following 

address ONLY: Centers for Medicare & 

Medicaid Services, Department of 

Health and Human Services, Attention: 

CMS–4192–P, P.O. Box 8013, Baltimore, 

MD 21244–8013. 

Please allow sufficient time for mailed 

comments to be received before the 

close of the comment period. 

3. By express or overnight mail. You 

may send written comments to the 

following address ONLY: Centers for 

Medicare & Medicaid Services, 

Department of Health and Human 

Services, Attention: CMS–4192–P, Mail 

Stop C4–26–05, 7500 Security 

Boulevard, Baltimore, MD 21244–1850. 

For information on viewing public 

comments, see the beginning of the 

SUPPLEMENTARY INFORMATION section. 

FOR FURTHER INFORMATION CONTACT: 

Marna Metcalf Akbar, (410) 786–8251, 

or Melissa Seeley, (212) 616–2329— 

General Questions. 

Jacqueline Ford, (410) 786–7767—Part C 

Issues. 

PartCandDStarRatings@cms.hhs.gov— 

Part C and D Star Ratings Issues. 

Marna Metcalf-Akbar, (410) 786–8251— 

D–SNP Issues. 

SUPPLEMENTARY INFORMATION: 

Inspection of Public Comments: All 

comments received before the close of 

the comment period are available for 

viewing by the public, including any 

personally identifiable or confidential 

business information that is included in 

a comment. We post all comments 

received before the close of the 

comment period on the following 

website as soon as possible after they 

have been received: https://

www.regulations.gov. Follow the search 

instructions on that website to view 

public comments. CMS will not post on 

Regulations.gov public comments that 

make threats to individuals or 

institutions or suggest that the 

individual will take actions to harm the 

individual. CMS continues to encourage 

individuals not to submit duplicative 

comments. We will post acceptable 

comments from multiple unique 

commenters even if the content is 

identical or nearly identical to other 

comments. 

Acronyms 

ACC Automated Criteria Check 

ANOC Annual Notice of Change 

ARB At-Risk Beneficiaries 

BBA Bipartisan Budget Act 

CAHPS Consumer Assessment of 

Healthcare Providers and Systems 

CMS Centers for Medicare & Medicaid 

Services 

COI Collection of Information 

COVID–19 Coronavirus 2019 Disease 

C–SNP Chronic Condition Special Needs 

Plan 

DME Durable Medical Equipment 

D–SNP Dual Eligible Special Needs Plan 

EOC Evidence of Coverage 

FFS Fee-for-Service 

FIDE SNP Fully Integrated Dual Eligible 

Special Needs Plan 

HEDIS Healthcare Effectiveness Data and 

Information Set 

HHS Department of Health and Human 

Services 

HIDE SNP Highly Integrated Dual Eligible 

Special Needs Plan 

HOS Health Outcomes Survey 

HPMS Health Plan Management System 

HSD Health Service Delivery 

ICR Information Collection Requirement 

I–SNP Institutional Special Needs Plan 

MA Medicare Advantage 

MAC Medicare Administrative Contractor 

MACPAC Medicaid and CHIP Payment and 

Access Commission 

MA–PD Medicare Advantage Prescription 

Drug 

MCO Managed Care Organization 

MCMG Medicare Communications and 

Marketing Guidelines 

MACPAC Medicaid and CHIP Payment and 

Access Commission 

MedPAC Medicare Payment Advisory 

Commission 

MIPPA Medicare Improvements for Patients 

and Providers Act 

MLR Medical Loss Ratio 

MMA Medicare Prescription Drug, 

Improvement, and Modernization Act 

MMP Medicare-Medicaid Plan 

MOC Model of Care 

MOOP Maximum Out-of-Pocket 

NAMBA National Average Monthly Bid 

Amount 

NEMT Non-emergency Medical 

Transportation 

NMM Network Management Module 

OACT Office of the Actuary 

OMB Office of Management and Budget 

PACE Programs of All-Inclusive Care for the 

Elderly 

PBP Plan Benefit Package 

PDE Prescription Drug Event 

PDP Prescription Drug Plan 

PHE Public Health Emergency 

PRA Paperwork Reduction Act 

RFI Request for Information 

RFA Regulatory Flexibilities Act 

SAE Service Area Expansion 

SB Summary of Benefits 

SNP Special Needs Plan 

SSA Social Security Administration 

TPMO Third-Party Marketing Organization 

I. Executive Summary 

A. Purpose 

Over 27 million individuals receive 

their Medicare benefits through 

Medicare Advantage (MA or Part C), 

including plans that offer Medicare 

Prescription Drug Benefit (Part D) 

coverage. Over 24 million individuals 

receive Part D coverage through 

standalone Part D plans. The primary 

purpose of this proposed rule is to 

implement changes to the MA and Part 

D programs. The proposed provisions in 

this rule will reduce out-of-pocket 

prescription drug costs; improve price 

transparency and market competition 

under the Part D program; strengthen 

consumer protections to ensure MA and 

Part D beneficiaries have accurate and 

accessible information about their 

health plan choices and benefits; 

strengthen CMS oversight of MA and 

Part D plans; and improve the 

integration of Medicare and Medicaid 

programs for individuals enrolled in 

dual eligible special needs plans (D– 

SNPs). The proposed D–SNP provisions 

build on the Patient Protection and 

Affordable Care Act of 2010 (Affordable 

Care Act) (Pub. L. 111–148), the 


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Federal Register / Vol. 87, No. 8 / Wednesday, January 12, 2022 / Proposed Rules 1843 

1Centers for Medicare & Medicaid Services. 

(n.d.). Person & Family Engagement Strategy: 

Sharing with Our Partners. Retrieved from https:// 

www.cms.gov/Medicare/Quality-Initiatives-PatientAssessment-Instruments/QualityInitiativesGenInfo/ 

Downloads/Person-and-Family-EngagementStrategy-Summary.pdf. 

2Medicaid and CHIP Payment and Access 

Commission, ‘‘Report to Congress on Medicaid and 

CHIP,’’ June 2020. Retrieved from: https://

www.macpac.gov/wp-content/uploads/2020/06/ 

June-2020-Report-to-Congress-on-Medicaid-andCHIP.pdf. 

Bipartisan Budget Act (BBA) of 2018 

(Pub. L. 115–123), CMS experience 

administering the MA and Part D 

programs, and the experiences of 

Medicare-Medicaid Plans (MMPs) to 

better align and integrate benefits for 

dually eligible beneficiaries. 

B. Summary of Major Provisions 

1. Enrollee Participation in Plan 

Governance (§ 422.107) 

Managed care plans derive significant 

value from engaging enrollees in 

defining, designing, participating in, 

and assessing their care systems.1 We 

are proposing to require that any MA 

organization offering a D–SNP must 

establish one or more enrollee advisory 

committees in each State to solicit direct 

input on enrollee experiences. We also 

propose that the committee include a 

reasonably representative sample of 

individuals enrolled in the D–SNP(s) 

and solicit input on, among other topics, 

ways to improve access to covered 

services, coordination of services, and 

health equity for underserved 

populations. We believe that the 

establishment and maintenance of an 

enrollee advisory committee is a 

valuable beneficiary protection to 

ensure that enrollee feedback is heard 

by managed care plans and to help 

identify and address barriers to highquality, coordinated care for dually 

eligible individuals. 

2. Standardizing Housing, Food 

Insecurity, and Transportation 

Questions on Health Risk Assessments 

(§ 422.101) 

Section 1859(f)(5)(A)(ii)(I) of Social 

Security Act (hereafter known as the 

Act) requires each special needs plan 

(SNP) to conduct an initial assessment 

and an annual reassessment of the 

individual’s physical, psychosocial, and 

functional needs. We codified this 

requirement at § 422.101(f)(1)(i) as part 

of the model of care requirements for all 

MA SNPs. Certain social risk factors can 

lead to unmet social needs that directly 

influence an individual’s physical, 

psychosocial, and functional status. 

Many dually eligible individuals 

contend with multiple social risk factors 

such as homelessness, food insecurity, 

lack of access to transportation, and low 

levels of health literacy.2 Building on 

CMS’s experience with other programs 

and model tests, we propose to require 

that all SNPs include standardized 

questions on housing stability, food 

security, and access to transportation as 

part of their health risk assessments. 

Our proposal would result in SNPs 

having a more complete picture of the 

risk factors that may inhibit enrollees 

from accessing care and achieving 

optimal health outcomes and 

independence. We believe this 

knowledge would better equip the MA 

organizations offering these SNPs to 

meet the needs of their members. Our 

proposal would also equip MA 

organizations with person-level 

information that would help them better 

connect people to covered services and 

social service organizations and public 

programs that can help resolve housing 

instability, food insecurity, or 

transportation challenges. Our proposal 

also would have the benefit of 

standardizing these data elements 

collected through HRAs, which we 

believe would eventually facilitate 

better data exchange among SNPs (when 

an individual transitions from one SNP 

to another) as well as facilitate the care 

management requirements under 

section 1859(f)(5) of the Act. 

3. Refining Definitions for Fully 

Integrated and Highly Integrated D– 

SNPs (§§ 422.2 and 422.107) 

Dually eligible individuals have an 

array of choices for how to receive their 

Medicare coverage. We propose several 

changes to how we define fully 

integrated dual eligible special needs 

plan (FIDE SNP) and highly integrated 

dual eligible special needs plan (HIDE 

SNP) to help differentiate various types 

of D–SNPs, clarify options for 

beneficiaries, and improve integration. 

We propose to require, for 2025 and 

subsequent years, that all FIDE SNPs 

have exclusively aligned enrollment, as 

defined in § 422.2, and cover Medicaid 

home health, durable medical 

equipment, and behavioral health 

services through a capitated contract 

with the State Medicaid agency. We 

propose to require that each HIDE SNP’s 

capitated contract with the State apply 

to the entire service area for the D–SNP 

for plan year 2025 and subsequent 

years. Consistent with existing policy 

outlined in sub-regulatory guidance, we 

also propose to codify specific limited 

benefit carve-outs for FIDE SNPs and 

HIDE SNPs. 

We believe these proposals will create 

better experiences for beneficiaries and 

move FIDE SNPs and HIDE SNPs 

toward greater integration, which we 

believe is a purpose of the amendments 

to section 1859(f) of the Act regarding 

integration made by section 50311(b) of 

the BBA of 2018. 

4. Additional Opportunities for 

Integration Through State Medicaid 

Agency Contracts (§ 422.107) 

Section 164 of Medicare 

Improvements for Patients and 

Providers Act of 2008 (MIPPA) (Pub. L. 

110–275) amended section 1859(f) of the 

Act to require that a D–SNP contract 

with the State Medicaid agency in each 

State in which the D–SNP operates to 

provide benefits, or arrange for the 

provision of Medicaid benefits, to which 

an individual is entitled. States have 

used these contracts to better integrate 

care for dually eligible individuals. We 

propose to codify new pathways 

through which States can use these 

contracts to require that certain D–SNPs 

with exclusively aligned enrollment (a) 

establish contracts that only include one 

or more D–SNPs within a State, and (b) 

integrate materials and notices for 

enrollees. Where States choose to use 

this opportunity, it would help 

individuals better understand their 

coverage. Because Star Ratings are 

assigned at the contract level, this 

proposal would also provide the State 

and the public with greater transparency 

on the quality ratings for the D–SNP(s), 

helping CMS and States better identify 

disparities between dually eligible 

beneficiaries and other beneficiaries and 

target interventions accordingly. 

We also propose mechanisms to better 

coordinate State and CMS monitoring 

and oversight of certain D–SNPs when 

a State has elected to require these 

additional levels of integration, 

including granting State access to 

certain CMS information systems. 

Collectively, our proposals would 

improve Federal and State oversight of 

certain D–SNPs (and their affiliated 

Medicaid managed care plans) through 

greater information-sharing among 

government regulators. 

5. Attainment of the Maximum Out-ofPocket Limit (§§ 422.100 and 422.101) 

In order to ensure that MA plan 

benefits do not discriminate against 

higher cost, less healthy enrollees, MA 

plans are required to establish a limit on 

beneficiary cost-sharing for Medicare 

Part A and B services after which the 

plan pays 100 percent of the service 

costs. Current guidance allows MA 

plans, including D–SNPs, to not count 

Medicaid-paid amounts or unpaid 

amounts toward this maximum out-ofpocket (MOOP) limit, which results in 


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increased State payments of Medicare 

cost-sharing and disadvantages 

providers serving dually eligible 

individuals in MA plans. We propose to 

specify that the MOOP limit in an MA 

plan (after which the plan pays 100 

percent of MA costs for Part A and Part 

B services) is calculated based on the 

accrual of all cost-sharing in the plan 

benefit, regardless of whether that cost 

sharing is paid by the beneficiary, 

Medicaid, other secondary insurance, or 

remains unpaid because of State limits 

on the amounts paid for Medicare costsharing and dually eligible individuals’ 

exemption from Medicare cost-sharing. 

The proposal would result in more 

equitable payment for MA providers 

serving dually eligible beneficiaries. We 

project that our proposal would result in 

increased bid costs for the MOOP for 

some MA plans. A portion of those 

higher bid costs would result in 

increased Medicare spending of $3.9 

billion over 10 years. That cost is 

partially offset by lower Federal 

Medicaid spending of $2.7 billion and 

the portion of Medicare spending paid 

by beneficiary Part B premiums, which 

totals $600 million over 10 years. The 

net 10-year cost estimate for the 

proposal is $614.8 million. 

6. Special Requirements During a 

Disaster or Emergency (§ 422.100(m)) 

In order to ensure enrollees have 

uninterrupted access to care, current 

regulations provide for special 

requirements at § 422.100(m) for MA 

plans during disasters or emergencies, 

including public health emergencies 

(PHEs), such as requirements for plans 

to cover services provided by noncontracted providers and to waive 

gatekeeper referral requirements. The 

timeframe during which these special 

rules apply can be very limited 

depending on the type or scope of the 

disaster or emergency, while other 

situations, like the current PHE for 

COVID–19, may have an uncertain end 

date. Currently, the regulation states 

that a disaster or emergency ends (thus 

ending the obligation for MA plans to 

comply with the special requirements) 

the earlier of when an end date is 

declared or when, if no end date was 

identified in the declaration or by the 

official that declared the disaster or 

emergency, 30 days have passed since 

the declaration. This has caused some 

confusion among stakeholders, who are 

unsure whether to continue special 

requirements during a state of disaster 

or emergency after 30 days, or whether 

those special requirements do not apply 

after the 30-day time period has elapsed. 

This proposal would clarify the period 

of time during which MA organizations 

must comply with the special 

requirements to ensure access for 

enrollees to covered services throughout 

the disaster or emergency period, 

especially when the end date is unclear 

and the period renews several times. We 

also propose to codify an additional 

condition for triggering the special 

requirements imposed by 

§ 422.100(m)(1), specifically that there is 

a disruption in access to health care at 

the same time as the disaster or 

emergency. 

7. Amend MA Network Adequacy Rules 

by Requiring a Compliant Network at 

Application (§ 422.116) 

We are proposing to amend § 422.116 

to require applicants to demonstrate that 

they meet the network adequacy 

standards for the pending service area as 

part of the MA application process for 

new and expanding service areas and to 

adopt a time-limited 10-percentage 

point credit toward meeting the 

applicable network adequacy standards 

for the application evaluation. Under 

our current rules, we require that an 

applicant attest that it has an adequate 

provider network that provides 

enrollees with sufficient access to 

covered services, and we will not deny 

an application based on the evaluation 

of the MA plan’s network. Network 

adequacy reviews are a critical 

component for confirming that access to 

care is available for enrollees. As such, 

we believe that requiring applicants to 

meet network adequacy standards as 

part of the application process will 

strengthen our oversight of an 

organization’s ability to provide an 

adequate network of providers to deliver 

care to MA enrollees. This change 

would also provide MA organizations 

with information regarding their 

network adequacy ahead of bid 

submissions, mitigating current issues 

with late changes to the bid that may 

affect the bid pricing tool. Finally, we 

understand that it may be difficult for 

applicants to have a full network in 

place almost one year ahead of the 

beginning of the contract as the 

proposed change for network adequacy 

rules would require. Therefore, the 

proposal includes a 10-percentage point 

credit towards the percentage of 

beneficiaries residing within published 

time and distance standards for new or 

expanding service area applicants. Once 

the contract is operational, the 10- 

percentage point credit would no longer 

apply and MA organizations would 

need to meet full compliance. 

8. Allow CMS To Calculate Star Ratings 

for Certain Measures for 2023 Given 

Impacts of the COVID–19 Public Health 

Emergency (§ 422.166) 

Due to the scope and duration of the 

COVID–19 public health emergency, we 

codified a change to the 2022 Star 

Ratings methodology in the interim final 

rule titled ‘‘Medicare and Medicaid 

Programs, Clinical Laboratory 

Improvement Amendments (CLIA), and 

Patient Protection and Affordable Care 

Act; Additional Policy and Regulatory 

Revisions in Response to the COVID–19 

Public Health Emergency’’ (CMS–3401– 

IFC; 85 FR 54820), published in the 

Federal Register and effective on 

September 2, 2020, which included a 

change to our extreme and 

uncontrollable circumstances policy at 

42 CFR 422.166(i)(11) to make it 

possible for us to calculate 2022 Star 

Ratings for MA contracts. We propose 

making a technical change at 

§ 422.166(i)(12) to enable CMS to 

calculate 2023 Star Ratings for three 

Healthcare Effectiveness Data and 

Information Set measures that are based 

on the Health Outcomes Survey. 

Specifically, these measures are 

Monitoring Physical Activity, Reducing 

the Risk of Falling, and Improving 

Bladder Control. Without this technical 

change, CMS will be unable to calculate 

measure-level 2023 Star Ratings for 

these measures for any MA contract. 

9. Past Performance Methodology To 

Better Hold Plans Accountable for 

Violating CMS Rules (§§ 422.502 and 

422.503) 

In the previous rulemaking cycle, 

CMS modified the past performance 

methodology, revising the elements that 

are reviewed to determine if CMS 

should permit an organization to enter 

into or expand an existing contract. The 

current regulatory language prohibits an 

organization from expanding or entering 

into a new contract if it has a negative 

net worth or has been under sanction 

during the performance timeframe. We 

are proposing to include an 

organization’s record of Star Ratings, 

bankruptcy issues, and compliance 

actions in our methodology going 

forward. 

10. Marketing and Communications 

Requirements on MA and Part D Plans 

To Assist Their Enrollees (§§ 422.2260 

and 423.2260, 422.2267 and 423.2267, 

422.2274 and 423.2274) 

CMS has seen an increase in 

beneficiary complaints associated with 

and has received feedback from 

beneficiary advocates and stakeholders 

concerned about the marketing practices 


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of third-party marketing organizations 

(TPMOs) who sell multiple MA and Part 

D products. In 2020, we received a total 

of 15,497 complaints related to 

marketing. In 2021, excluding 

December, the total was 39,617. We are 

unable to say that every one of the 

complaints are a result of TPMO 

marketing activities, but based on a 

targeted search, we do know that many 

are related to TPMO marketing. In 

addition, we have seen an increase in 

third party print and television ads, 

which appears to be corroborated by 

state partners. Through rulemaking, we 

will address the concerns with TPMOs 

by means of the following three 

proposed updates to the 

communications and marketing 

requirements under 42 CFR parts 422 

and 423, subpart V: (1) We propose to 

define TPMOs in the regulation at 

§§ 422.2260 and 423.2260 to remove any 

ambiguity associated with MA plans/ 

Part D sponsors responsibilities for 

TPMO activities associated with the 

selling of MA and Part D plans, (2) we 

propose to add a new disclaimer that 

would be required when TPMOs market 

MA plans/Part D products 

(§§ 422.2267(e) and 423.2267(e)), and (3) 

we propose an update to §§ 422.2274 

and 423.2274 to require additional plan 

oversight requirements associated with 

TPMOs, in addition to what is already 

required under §§ 422.504(i) and 

423.505(i) if the TPMO is a first tier, 

downstream or related entity (FDRs). 

CMS’ January 2021 final rule (86 FR 

5864) did not require notice and 

taglines, based on the HHS Office for 

Civil Rights repeal of certain notice and 

tagline requirements associated with 

section 1557 of the Patient Protection 

and Affordable Care Act of 2010 

(Affordable Care Act). In the months 

since the publication of this rule, CMS 

gained additional insight regarding the 

void created by the lack of notification 

requirements. Based on the significant 

population (12.2 percent) of those 65 

and older who speak a language other 

than English in the home and 

complaints CMS received through our 

Complaint Tracking Module, we 

propose to require MA and Part D plans 

create a multi-language insert that 

would inform the reader, in the top 

fifteen languages used in the U.S., that 

interpreter services are available for 

free. As a note, CMS provides plans a 

list of all languages that are spoken by 

5 percent or more of the population for 

every county in the U.S. We propose to 

require the inclusion of the multilanguage insert whenever a Medicare 

beneficiary is provided a CMS required 

material (for example, Evidence of 

Coverage, Annual Notice of Change, 

enrollment form, Summary of Benefits) 

as defined under §§ 422.2267(e) and 

423.2267(e). Finally, we propose 

codifying a number of current subregulatory communications and 

marketing requirements that were 

inadvertently not included during the 

previous updates to 42 CFR parts 422 

and 423, subpart V. 

11. Greater Transparency in Medical 

Loss Ratio Reporting (§§ 422.2460 and 

423.2460) 

To improve transparency and 

oversight concerning the use of Trust 

Fund dollars, we are proposing to 

reinstate the detailed medical loss ratio 

(MLR) reporting requirements that were 

in effect for contract years 2014 to 2017, 

which required reporting of the 

underlying data used to calculate and 

verify the MLR and any remittance 

amount, such as incurred claims, total 

revenue, expenditures on quality 

improving activities, non-claims costs, 

taxes, and regulatory fees. In addition, 

we are proposing the collection of 

additional details regarding plan 

expenditures so we can better assess the 

accuracy of MLR submissions, the value 

of services being provided to enrollees 

under MA and Part D plans, and the 

impacts of recent rule changes that 

removed limitations on certain 

expenditures that count toward the 85 

percent MLR requirement. 

12. Pharmacy Price Concessions to Drug 

Prices at the Point of Sale (§ 423.100) 

The ‘‘negotiated prices’’ of drugs, as 

the term is currently defined in 

§ 423.100, must include all network 

pharmacy price concessions except 

those contingent amounts that cannot 

‘‘reasonably be determined’’ at the 

point-of-sale. Under this exception, 

negotiated prices typically do not reflect 

any performance-based pharmacy price 

concessions that lower the price a 

sponsor ultimately pays for a drug, 

based on the rationale that these 

amounts are contingent upon 

performance measured over a period 

that extends beyond the point of sale 

and thus cannot reasonably be 

determined at the point of sale. 

We are proposing to eliminate this 

exception for contingent pharmacy price 

concessions. We are proposing to delete 

the existing definition of ‘‘negotiated 

prices’’ at § 423.100 and to adopt a new 

definition for the term ‘‘negotiated 

price’’ at § 423.100, which we are 

proposing to define as the lowest 

amount a pharmacy could receive as 

reimbursement for a covered Part D drug 

under its contract with the Part D plan 

sponsor or the sponsor’s intermediary 

(that is, the amount the pharmacy 

would receive net of the maximum 

negative adjustment that could result 

from any contingent pharmacy payment 

arrangement and before any additional 

contingent payment amounts, such as 

incentive fees). To implement the 

proposed change at the point of sale, 

Part D sponsors and their pharmacy 

benefit managers (PBMs) would load 

revised drug pricing tables reflecting the 

lowest possible reimbursement into 

their claims processing systems that 

interface with contracted pharmacies. 

The proposed changes would take effect 

on January 1, 2023, meaning, if 

finalized, Part D sponsors would need to 

account for the changes in the bids that 

they submit for contract year 2023. 

We are also proposing to add a 

definition of ‘‘price concession’’ at 

§ 423.100. Although ‘‘price concession’’ 

is a term important to the adjudication 

of the Part D program, it has not yet 

been defined in the Part D statute, Part 

D regulations, or sub-regulatory 

guidance. We are proposing to define 

price concession in a broad manner to 

include all forms of discounts and direct 

or indirect subsidies or rebates that 

serve to reduce the costs incurred under 

Part D plans by Part D sponsors. 

C. Summary of Costs and Benefits 

BILLING CODE 4120–01–P 


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Summary of Major Provisions Description Impact 

of Rule 

1. Enrollee Participation in Plan We propose to require that that any MA There is on average an 

Governance(§ 422.107) organization offering a D-SNP must annual impact of $0.9 

establish one or more enrollee advisory million for establishing and 

committees in each State to solicit direct maintaining these advisory 

input on enrollee experiences. committees with however a 

wide ran_ge of variabilitv. 

2. Standardizing Housing, Food Building on CMS's experience with other For the initial year of 

Insecurity, and Transportation programs and model tests, we propose to implementation, there is an 

Questions on Health Risk Assessments require that all SNPs include standardized impact on Medicare 

(§ 422.101) questions on housing stability, food Advantage special needs 

security, and access to transportation as plans to update systems. We 

part of their health risk assessments. are unable to reliably 

estimate the additional 

burden in subsequent years. 

3. Refining Definitions for Fully We propose to require, for 2025 and There is a one-time impact 

Integrated and Highly Integrated D- subsequent years, that all FIDE SNPs have to update contracts. 

SNPs (§§ 422.2 and 422.107) exclusively aligned enrollment, as defined 

in § 422.2, and cover Medicaid home 

health, durable medical equipment, and 

behavioral health services through a 

capitated contract with the State Medicaid 

agency. We propose to require that each 

HIDE SNP's capitated contract with the 

State apply to the entire service area for the 

D-SNP for plan year 2025 and subsequent 

years. Consistent with existing policy 

outlined in sub-regulatory guidance, we 

also propose to codify specific limited 

benefit carve-outs for FIDE SNPs and 

HIDE SNPs. 

4. Additional Opportunities for We propose to codify new pathways There is a one-time $1.1 

Integration through State Medicaid through which States can use the State million impact shared 

Agency Contracts Medicaid agency contracts to require that among the Federal 

(§ 422.107) certain D-SNPs with exclusively aligned Government, State 

enrollment (a) apply and request to governments, and MA 

establish contracts that only include one or organizations to create new 

more D-SNP within a State, and (b) contracts and to update 

integrate materials and notices for systems to review the new 

enrollees. We also propose mechanisms to materials. 

better coordinate State and CMS 

monitoring and oversight of certain DSNPs when a State has elected to require 

these additional levels of integration, 

including granting State access to certain 

CMS information systems. 
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Summary of Major Provisions Description Impact 

of Rule 

5. Attainment of the Maximum Out-of- We propose to specify that the maximum The proposal would increase 

Pocket Limit(§§ 422.100 and 422.101) out-of-pocket limit in an MA plan (after Medicare spending by $3. 9 

which the plan pays 100 percent of MA billion over 10 years. That 

costs) is calculated based on the accrual of cost is partially offset by 

all cost- sharing in the plan benefit, lower Federal Medicaid 

whether that cost sharing is paid by the spending of $2.7 billion and 

beneficiary, Medicaid, other secondary the portion of Medicare 

insurance, or remains unpaid because of spending paid by 

State limits on the amounts paid for beneficiary Part B 

Medicare cost-sharing and dually eligible premiums, which totals 

individuals' exemption from Medicare $600 million over 10 years. 

cost- sharing. The net 10-year cost 

estimate for the proposal is 

$614.8 million. 

6. Special Requirements during a This proposal would clarify the period of None anticipated. 

Disaster or Emergency (§ 422. lO0(m)) time during which MA organizations must 

comply with the special requirements to 

ensure access for enrollees to covered 

services throughout a disaster or 

emergency (including PHEs) period, 

especially when the end date is unclear and 

the period renews several times. We also 

propose an additional condition, that there 

is a disruption in access to health care for 

enrollees, for triggering the special 

requirements imposed bv § 422.l00(m)(l). 

7. Amend MA Network Adequacy We are proposing to amend§ 422.116 to None anticipated. 

Rules by Requiring a Compliant require an applicant to demonstrate 

Network at Application(§ 422.116) compliance with network adequacy 

standards as part of the MA application 

process for new and expanding service 

areas and to adopt a time-limited 10 

percentage point credit toward meeting the 

applicable network adequacy standards for 

the annlication evaluation. 

8. Allow CMS to Calculate Star We propose making a technical change at None anticipated. 

Ratings for Certain Measures for 2023 § 422.166(i)(l2) to enable CMS to 

Given Impacts of the COVID-19 Public calculate 2023 Star Ratings for three 

Health Emergency(§ 422.166) Healthcare Effectiveness Data and 

Information Set measures that are based on 

the Health Outcomes Survev. 

9. Past Performance Methodology to We are proposing to include Star Ratings, None anticipated. 

Better Hold Plans Accountable for bankruptcy issues, and compliance actions 

Violating CMS Rules (§§ 422.502 and in our methodology going forward. 

422.503) 
1848 Federal Register / Vol. 87, No. 8 / Wednesday, January 12, 2022 / Proposed Rules 


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Summary of Major Provisions Description Impact 

of Rule 

10. Marketing and Communications Through rulemaking, we will address the There is an annual impact of 

Requirements on MA and Part D Plans concerns with TPMOs by means of $0.3 million to print the 

to Assist Their Enrollees(§§ 422.2260 proposed updates to the communications multi-language insert. 

and 423.2260, 422.2267 and 423.2267, and marketing requirements under 42 CFR 

422.2274 and 423.2274) parts 422 and 423, subpart V. 

We propose to require MA and Part D 

plans to create a multi-language insert that 

would inform the reader, in the top fifteen 

languages used in the U.S., that interpreter 

services are available for free. We propose 

to require the inclusion of the multilanguage insert whenever a Medicare 

beneficiary is provided a CMS required 

material as defined under§§ 422.2267(e) 

and 423.2267(e). 

Lastly, we propose codifying a number of 

current sub-regulatory communications 

and marketin_g requirements. 

11. Greater Transparency in Medical To improve transparency and oversight Medicare Advantage 

Loss Ratio Reporting(§§ 422.2460, concerning the use of Trust Fund dollars, organizations and Part D 

422.2490, and 423.2460) we are proposing to reinstate the detailed sponsors are expected to pay 

MLR reporting requirements that were in an additional $268.6 million 

effect for contract years 2014-2017, which in remittances to the 

required reporting of the underlying data Treasury over a 10-year 

used to calculate and verify the MLR and period. There is an annual 

any remittance amount. In addition, we are additional $2.3 million 

proposing the collection of additional administrative cost to MA 

details regarding plan expenditures so we organizations and Part D 

can better assess the accuracy of MLR sponsors for complying with 

submissions, the value of services being these provisions, as well as 

provided to enrollees, and the impacts of a $0.2 million cost to the 

recent rule changes. government for Federal 

contractors. 
Federal Register / Vol. 87, No. 8 / Wednesday, January 12, 2022 / Proposed Rules 1849 

3For example, see chapter 1 of Medicaid and 

CHIP Payment and Access Commission, Report to 

Congress on Medicaid and CHIP, June 2021, and 

chapter 12 of Medicare Payment Advisory 

Committee, June 2019 Report to the Congress: 

Medicare and the Health Care Delivery System. 

BILLING CODE 4120–01–C 

II. Provisions of the Proposed Rule 

A. Improving Experiences for Dually 

Eligible Individuals 

1. Overview and Background 

Over 11 million people are 

concurrently enrolled in both Medicare 

and Medicaid. Beneficiaries who are 

dually eligible for both Medicare and 

Medicaid can face significant challenges 

in navigating the two programs, which 

include separate or overlapping benefits 

and administrative processes. 

Fragmentation between the two 

programs can result in a lack of 

coordination for care delivery, 

potentially resulting in: (1) Missed 

opportunities to provide appropriate, 

high-quality care and improve health 

outcomes; and (2) undesirable 

outcomes, such as avoidable 

hospitalizations and poor beneficiary 

experiences. Advancing policies and 

programs that integrate care for dually 

eligible individuals is one way in which 

we seek to address such fragmentation.3

‘‘Integrated care’’ refers to delivery 

system and financing approaches that— 

• Maximize person-centered 

coordination of Medicare and Medicaid 

services, across primary, acute, longterm, behavioral, and social domains; 

• Mitigate cost-shifting incentives, 

including total-cost-of-care 

accountability across Medicare and 

Medicaid; and 

• Create seamless experiences for 

beneficiaries. 

There is a range of approaches to 

integrating Medicare and Medicaid 

benefits or financing for dually eligible 

individuals, including through 

demonstrations and existing programs. 

The most prevalent forms of integrated 

care use capitated financing, including 

capitation of health plans to cover the 

full range of Medicare and Medicaid 

services. Some States have carefully 

married MA dual eligible special needs 

plans (D–SNPs) with Medicaid managed 

care organizations (MCOs) to create 

integrated care programs for dually 

eligible individuals. Researchers have 

generally found positive results from 

such integrated care approaches. For 

example, a study in Minnesota showed 

that enrollees in fully integrated 

Medicare-Medicaid managed care plans 

had greater primary care physician use 

and lower inpatient hospital and 

emergency department use in 

comparison to service delivery when 

Medicare and Medicaid-funded services 

were delivered independently. The 

study also found that home and 

community-based service use was 

greater for the fully integrated MedicareMedicaid managed care plans than the 

comparison population and nursing 


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Summary of Major Provisions Description Impact 

of Rule 

12. Pharmacy Price Concessions to We are proposing to eliminate the Requiring pharmacy price 

Drug Prices at the Point of Sale ( § exception for pharmacy price concessions concessions in the 

423.100) that cannot reasonably be determined at the negotiated price is expected 

point of sale. We are also proposing to to reduce beneficiary costs 

delete the existing definition of "negotiated by $21.3 billion over 10 

prices" at§ 423.100 and to adopt a new years, or approximately 2 

defmition for the term "negotiated price" at percent. In addition, the 

§ 423 .100, which we are proposing to proposal is estimated to 

define as the lowest amount a pharmacy have $40 billion in Part D 

could receive as reimbursement for a costs for the government 

covered Part D drug under its contract with over 10 years due to 

the Part D plan sponsor or the sponsor's increases in direct subsidy 

intermediary. Lastly, we are proposing to and low-income premium 

add a definition of "price concession" at § subsidy payments, which 

423.100. represents a 3 percent 

increase. Manufacturers 

would save about $14.6 

billion over 10 years. We 

expect a one-time cost to 

plan sponsors of $0 .1 

million to update svstems. 
1850 Federal Register / Vol. 87, No. 8 / Wednesday, January 12, 2022 / Proposed Rules 

4Anderson, W.L., Feng, Z., & Long, S.K. 

Minnesota Managed Care Longitudinal Data 

Analysis, prepared for the U.S. Department of 

Health and Human Services Assistant Secretary for 

Planning and Evaluation (ASPE) (March 31, 2016). 

Retrieved from: https://aspe.hhs.gov/report/ 

minnesota-managed-care-longitudinal-dataanalysis. 

5 Kim, H., Charlesworth, C.J., McConnell, K.J., 

Valentine, J.B., and Grabowski, D.C. ‘‘Comparing 

Care for Dual-Eligibles Across Coverage Models: 

Empirical Evidence from Oregon’’, Medical Care 

Research and Review, (November 15, 2017) 1–17. 

Retrieved from: https://journals.sagepub.com/doi/ 

abs/10.1177/1077558717740206. 

6Health Management Associates. Value 

Assessment of the Senior Care Options (SCO) 

Program (July 21, 2015). Retrieved from https://

www.mahp.com/wp-content/uploads/2017/04/SCOWhite-Paper-HMA-2015_07_20-Final.pdf. 

7Medicare Payment Advisory Committee. 

‘‘Chapter 3, Care coordination programs for dualeligible beneficiaries.’’ In June 2012 Report to 

Congress: Medicare and Health Care Delivery 

System (June 16, 2012). Retrieved from https://

www.medpac.gov/wp-content/uploads/import_

data/scrape_files/docs/default-source/reports/ 

jun12_ch03.pdf.*COM028* 

8 Ibid. 

9CMS Medicare-Medicaid Coordination Office 

FY 2020 Report to Congress, available at: https://

www.cms.gov/files/document/reportto

congressmmco.pdf. 

10Most recently, see MACPAC’s June 2021 Report 

to Congress and MedPAC’s June 2019 Report to 

Congress. 

11For a discussion of codified requirements for 

information sharing between States and D–SNPs 

and unified appeals processes, see the final rule 

titled ‘‘Medicare and Medicaid Programs; Policy 

and Technical Changes to the Medicare Advantage, 

Medicare Prescription Drug Benefit, Programs of 

All-Inclusive Care for the Elderly (PACE), Medicaid 

Fee-For-Service, and Medicaid Managed Care 

Programs for Years 2020 and 2021,’’ (84 FR 15710 

through 15717 and 84 FR 15720 through 15744) at: 

https://www.federalregister.gov/documents/2019/ 

04/16/2019-06822/medicare-and-medicaidprograms-policy-and-technical-changes-to-themedicare-advantage-medicare. For a discussion of 

codified contract limitations on D–SNP look-alike 

plans, see the final rule titled ‘‘Medicare Program; 

Contract Year 2021 Policy and Technical Changes 

to the Medicare Advantage Program, Medicare 

Prescription Drug Benefit Program, and Medicare 

Cost Plan Program,’’ (85 CFR 33805 through 33820) 

at: https://www.federalregister.gov/documents/ 

2020/06/02/2020-11342/medicare-programcontract-year-2021-policy-and-technical-changesto-the-medicare-advantage-program. 

12For a discussion of D–SNP look-alikes, see the 

proposed rule titled ‘‘Medicare and Medicaid 

Programs; Contract Year 2021 and 2022 Policy and 

Technical Changes to the Medicare Advantage 

Program, Medicare Prescription Drug Benefit 

Program, Medicaid Program, Medicare Cost Plan 

Program, and Programs of All-Inclusive Care for the 

Elderly,’’ (85 FR 9018 through 9025) at: https://

www.govinfo.gov/content/pkg/FR-2020-02-18/pdf/ 

2020-02085.pdf. 

13Centers for Medicare & Medicaid Services. SNP 

Comprehensive Report (January 2021). Retrieved 

from https://www.cms.gov/Research-Statistics-Dataand-Systems/Statistics-Trends-and-Reports/ 

MCRAdvPartDEnrolData/Special-Needs-Plan-SNPData.html. 

facility use was no greater.4 A study in 

Oregon found that dually eligible 

individuals enrolled in plans with 

aligned financial incentives for 

Medicare and Medicaid experienced 

more improvement in their care relative 

to those enrolled in nonaligned 

Medicare Advantage and Medicaid 

managed care plans.5 Other studies have 

found that integrated care programs 

foster high beneficiary satisfaction,6

perform better than non-integrated plans 

on certain quality metrics,7 and provide 

benefit flexibility needed to allow 

beneficiaries to continue living in the 

community.8 Overall, the number of 

dually eligible individuals in integrated 

care or financing models or both has 

increased over time, now exceeding 1 

million beneficiaries, but it remains the 

exception rather than the rule in most 

States.9

An increasing number of dually 

eligible individuals are enrolled in 

managed care plans. The broader trend 

toward managed care presents 

opportunities for integrated care. It also 

presents risks for further fragmentation 

and complexity. In fact, while 

enrollment in integrated care has 

increased, it is also becoming 

increasingly likely that dually eligible 

individuals are in one sponsor’s 

Medicaid MCO and a competitor’s D– 

SNP. The result: Duplicative health risk 

assessments (HRAs); multiple ID cards, 

handbooks, and provider and pharmacy 

directories; strong incentives for costshifting where possible; multiple care 

coordinators; more complex billing 

processes for providers; and similar 

other fragmented care, burdens, or 

increased costs. 

The Medicare Payment Advisory 

Commission (MedPAC), Medicaid and 

CHIP Payment and Access Commission 

(MACPAC), and a wide array of health 

policy organizations have long pushed 

for greater CMS investment in integrated 

care. Over the last few years, MedPAC 

and MACPAC have written extensively 

on opportunities to promote integration 

through managed care policies.10

Section 2602 of the Patient Protection 

and Affordable Care Act of 2010 (Pub. 

L. 111–148) (Affordable Care Act) 

established the Medicare-Medicaid 

Coordination Office (MMCO) within 

CMS to better align and integrate 

benefits for dually eligible individuals, 

including specific responsibilities. 

Section 50311(b)(2) of the Bipartisan 

Budget Act (BBA) of 2018 amended that 

provision to also charge MMCO with— 

• Developing regulations and 

guidance related to the integration or 

alignment of policy and oversight under 

Medicare and Medicaid regarding D– 

SNPs; and 

• Serving as the single point of 

contact for States on D–SNP issues. 

In two recent MA/Part D rulemakings, 

CMS has adopted regulations 11 to: (1) 

Promote better information sharing 

between States and D–SNPs; (2) unify 

appeals processes across Medicare and 

Medicaid for certain D–SNPs that are 

also capitated for Medicaid benefits; and 

(3) phase out ‘‘D–SNP look-alike’’ plans 

that enroll a high percentage of dually 

eligible individuals without meeting the 

requirements for D–SNPs.12

Despite this recent work, additional 

actions are needed to maximize the 

potential of D–SNPs to deliver personcentered integrated care—and 

ultimately better health outcomes and 

independence in the community—for 

dually eligible older adults, people with 

disabilities, and people with end stage 

renal disease. 

Maximizing the potential of D–SNPs 

to achieve these goals will require a 

sustained effort over multiple years, 

including— 

• Partnership with and technical 

assistance for States; 

• Technical assistance and support 

for providers and health plans, 

especially among the local not-for-profit 

plans that disproportionately serve 

Medicaid beneficiaries; 

• Monitoring and oversight that 

protects beneficiaries and promotes 

person-centered coordination of care; 

and 

• Federal rulemaking to raise the bar 

on integration without excessive 

disruption for enrollees. 

We are working to improve and 

increase options for more integrated 

care in a variety of ways, including 

through D–SNPs and MedicareMedicaid Plans (MMPs). 

a. Dual Eligible Special Needs Plans 

Special needs plans (SNPs) are MA 

plans created by the Medicare 

Prescription Drug, Improvement, and 

Modernization Act of 2003 (Pub. L. 108– 

173) that are specifically designed to 

provide targeted care and limit 

enrollment to special needs individuals. 

Under section 1859(b)(6) of the Act, 

SNPs restrict enrollment to certain 

populations. The most common type of 

SNP is a dual eligible special needs 

plan, or D–SNP, in which enrollment is 

limited to individuals entitled to 

medical assistance under a State plan 

under title XIX of the Act. 

D–SNPs are intended to integrate or 

coordinate care for dually eligible 

individuals more effectively than 

standard MA plans or the original 

Medicare fee-for-service (FFS) program 

by focusing enrollment and care 

management on this population. As of 

January 2021, approximately 3.3 million 

dually eligible individuals (more than 1 

of every 4 dually eligible individuals) 

were enrolled in 627 D–SNPs.13


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Federal Register / Vol. 87, No. 8 / Wednesday, January 12, 2022 / Proposed Rules 1851 

14See https://www.govinfo.gov/content/pkg/FR2019-04-16/pdf/2019-06822.pdf. 

15See https://www.govinfo.gov/content/pkg/FR2020-02-18/pdf/2020-02085.pdf. 

16MMP enrollment as of December 2020. See 

CMS Monthly Enrollment by Contract Report 

(December, 2020). Retrieved from https://

www.cms.gov/research-statistics-data-andsystemsstatistics-trends-and-reportsmcradvpartd

enroldatamonthly/enrollment-contract-2020-12. 

17For more information on the One Care 

Implementation Council, see the Center for 

Consumer Engagement in Health Innovation at 

Community Catalyst & the LeadingAge LTSS Center 

@UMass Boston. ‘‘The One Care Implementation 

Council: Stakeholder Engagement Within a Duals 

Demonstration Initiative.’’ (June, 2018). Retrieved 

from https://www.healthinnovation.org/resources/ 

publications/body/One-Care-ImplementationCouncil-Review-June-2018-1.pdf. 

Federal statute and implementing 

regulations have established several 

requirements for D–SNPs in addition to 

those that apply to all MA plans to 

promote coordination of care, including 

HRA requirements as described in 

section 1859(f)(5)(A)(ii)(I) of the Act and 

at § 422.101(f)(1)(i), evidence-based 

models of care (MOCs) as described in 

section 1859(f)(5)(A)(i) of the Act and at 

§ 422.101(f), and contracts with State 

Medicaid agencies as described in 

section 1859(f)(3)(D) of the Act and at 

§ 422.107. The State Medicaid agency 

contracting requirement allows States to 

require greater integration of Medicare 

and Medicaid benefits from the D–SNPs 

in their markets. 

Most recently, section 50311(b) of the 

BBA of 2018 amended section 1859 of 

the Act to add new requirements for D– 

SNPs, beginning in 2021, including 

minimum integration standards, 

coordination of the delivery of Medicare 

and Medicaid benefits, and unified 

appeals and grievance procedures for 

integrated D–SNPs, the last of which we 

implemented through regulation to 

apply to certain D–SNPs with 

exclusively aligned enrollment, termed 

‘‘applicable integrated plans.’’ These 

requirements, along with clarifications 

to existing regulations, were codified in 

the ‘‘Medicare and Medicaid Programs; 

Policy and Technical Changes to the 

Medicare Advantage, Medicare 

Prescription Drug Benefit, Programs of 

All-Inclusive Care for the Elderly 

(PACE), Medicaid Fee-For-Service, and 

Medicaid Managed Care Programs for 

Years 2020 and 2021’’ final rule (84 FR 

15696 through 15744) (hereinafter 

referred to as the April 2019 final 

rule).14

For a more comprehensive review of 

D–SNPs and legislative history, see the 

proposed rule titled ‘‘Medicare and 

Medicaid Programs; Contract Year 2021 

and 2022 Policy and Technical Changes 

to the Medicare Advantage Program, 

Medicare Prescription Drug Benefit 

Program, Medicaid Program, Medicare 

Cost Plan Program, and Programs of AllInclusive Care for the Elderly,’’ (85 FR 

9018 through 9021) which appeared in 

the Federal Register on February 18, 

2020 (hereinafter referred to as the 

February 2020 proposed rule).15

b. Medicare-Medicaid Plans 

To test additional models of 

integrated care, we established the 

Medicare-Medicaid Financial 

Alignment Initiative (FAI) in July 2011 

with the goal of improving outcomes 

and experiences for full-benefit dually 

eligible individuals while reducing 

costs for both States and the Federal 

government. Although the FAI includes 

two models, the model with the largest 

number of States participating is a 

capitated model through which CMS, 

the State, and health plans (called 

Medicare-Medicaid Plans or MMPs) 

enter into three-way contracts to 

coordinate the full array of Medicare 

and Medicaid services for members. 

Certain elements of the capitated 

model demonstrations vary by State, but 

all MMPs include— 

• A beneficiary advisory committee 

or governance board to provide ongoing 

input on plan operations; 

• An integrated set of member 

materials, including provider 

directories, beneficiary notices, and a 

single ID card; 

• Person-centered care planning, 

including HRAs and care plans; 

• Care coordination and assistance 

with care transitions; 

• Aligned Medicare and Medicaid 

plan enrollment and disenrollment 

effective dates; 

• Medicare provider network 

adequacy standards specific to the 

dually eligible individual population; 

• Integrated grievance and appeal 

processes at the plan level; 

• Joint oversight by CMS and the 

States through contract management 

teams; 

• Benefit flexibility, an integrated 

medical loss ratio (MLR), and other 

financing provisions intended to 

promote person-centeredness and 

mitigate incentives for cost-shifting 

across programs; and 

• A set of CMS core and State-specific 

quality measures, a subset of which are 

part of performance-based risk through 

a quality withhold on the payment to 

the MMP. 

CMS and States partnered with MMPs 

to create a seamless experience for 

beneficiaries, but MMPs operate as both 

MA organizations and Medicaid 

managed care organizations. As such, 

unless waived by CMS, MMPs are 

required to comply with Medicaid 

managed care requirements under 42 

CFR part 438, with MA (also known as 

Part C) requirements in title XVIII of the 

Act as well as 42 CFR part 422 and, with 

regard to the Medicare prescription drug 

benefit, Part D requirements in title 

XVIII of the Act and 42 CFR part 423. 

Section 1115A of the Act (as added by 

section 3021 of the Affordable Care Act) 

authorizes waiver of certain Medicare 

provisions and CMS used that authority 

to waive several Medicare requirements 

for the FAI. For States participating in 

the capitated model, CMS typically uses 

authority under section 1115(a), 

1915(b), 1915(c), or 1932(a) of the Act to 

waive or exempt the State from certain 

provisions of title XIX of the Act or 

establish the authority to deliver 

Medicaid services through managed 

care. 

As of July 2021, there are 39 MMPs 

in nine States serving approximately 

400,000 members.16

While an independent evaluation of 

the FAI is still underway, we have 

already gleaned several lessons 

regarding integrated, managed care from 

the capitated financial alignment model: 

• Enrollee participation in 

governance helps identify and address 

barriers to high-quality, coordinated 

care. Stakeholder engagement has been 

an important tenet of the FAI since its 

inception. We required participating 

States to work with a variety of 

stakeholders, including beneficiaries 

and their advocates, as a condition of 

demonstration approval and 

implementation processes. Some have 

cultivated robust and impactful 

advisory bodies. For example, 

Massachusetts developed a One Care 

Implementation Council,17 at least half 

of whose membership is comprised of 

enrollees and/or their representatives, 

charged with tracking quality of 

services, providing support and input to 

the State, and promoting accountability 

and transparency. The three-way 

contracts used in the capitated financial 

alignment model require MMPs to 

establish enrollee advisory committees 

and/or recruit enrollees to governing 

boards to ensure plans regularly obtain 

enrollee input on issues of program 

management. These advisory 

committees often provide input on 

enrollee materials, access to covered 

services, outreach campaigns, and other 

topics. Not every advisory committee 

operates at the same level, and many 

MMPs have had to recalibrate their 

approaches to ensure robust 

participation over time, but all have 

made strides toward seeking out and 

incorporating enrollee feedback. We 

believe such mechanisms help MMPs 


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1852 Federal Register / Vol. 87, No. 8 / Wednesday, January 12, 2022 / Proposed Rules 

18MMP reported monitoring measure data. 

Measure data are provided for informational 

purposes only and do not constitute official 

evaluation results. Full measure specifications can 

be found in the reporting requirements documents, 

available at: https://www.cms.gov/MedicareMedicaid-Coordination/Medicare-and-MedicaidCoordination/Medicare-Medicaid-CoordinationOffice/FinancialAlignmentInitiative/ 

MMPInformationandGuidance/MMPReporting

Requirements.html. 

19Centers for Medicare & Medicaid Services. 

Enrollee Experiences in the Medicare-Medicaid 

Financial Alignment Initiative: Results through the 

2019 CAHPS Surveys. (October 2020) Retrieved 

from https://www.cms.gov/files/document/faicahps

results.pdf. 

20 Ibid. 

21CMS analysis of MMP and Medicare Advantage 

CAHPS data 2015–2019. 

22Congressional Budget Office. ‘‘Dual-Eligible 

Beneficiaries of Medicare and Medicaid: 

Characteristics, Health Care Spending, and Evolving 

Policies.’’ (June, 2013). Retrieved from: https://

www.cbo.gov/sites/default/files/113th-congress2013-2014/reports/44308dualeligibles2.pdf. This 

report classified Medicare enrollees as having a 

mental illness if they had a diagnosis from the 

previous year of schizophrenia; major depressive, 

bipolar, and paranoid disorders; or other major 

psychiatric disorders. 

23Medicaid and CHIP Payment and Access 

Commission. ‘‘Integration of Behavioral and 

Physical Health Services in Medicaid.’’ (March, 

2016). Retrieved from: https://www.macpac.gov/wpcontent/uploads/2016/03/Integration-of-Behavioraland-Physical-Health-Services-in-Medicaid.pdf. 

24RTI International, ‘‘Financial Alignment 

Initiative Massachusetts Once Care: Third 

Evaluation Report,’’ (April 2019), Retrieved from: 

https://innovation.cms.gov/files/reports/fai-mathirdevalrpt.pdf; RTI International, ‘‘Financial 

Alignment Initiative Michigan MI Health Link First 

Evaluation Report (Sept 2019), Retrieved from: 

https://innovation.cms.gov/files/reports/fai-mifirstevalrpt.pdf; RTI International, ‘‘Financial 

Alignment Initiative MyCare Ohio: First Evaluation 

Report ‘‘(Nov 15 2018), Retrieved from: https://

innovation.cms.gov/files/reports/fai-ohfirstevalrpt.pdf; RTI International, ‘‘Financial 

Alignment Initiative South Carolina Healthy 

Connections Prime: First Evaluation Report (Sept 

2019), Retrieved from: https://innovation.cms.gov/ 

files/reports/fai-sc-firstevalrpt.pdf. 

improve the experiences of dually 

eligible individuals. 

• Assessment processes are a vehicle 

for identifying and addressing unmet 

need, particularly those related to social 

determinants of health. MMPs are 

required to offer care coordination 

services to each beneficiary, including 

an HRA of the enrollee’s physical, 

psychosocial, and functional status 

which meet all minimum requirements 

for MA plans in section 1859(f)(5)(A)(ii) 

of the Act but often include additional 

elements to assess social risk factors. As 

of September 2020, MMPs had 

performed over 1.3 million HRAs, and 

in doing so identified significant unmet 

need among members, particularly 

related to food insecurity and housing 

instability.18 For example, we 

commonly learn of HRAs identifying 

people with no regular source of care, 

untreated chronic conditions, unsafe 

living conditions, and/or imminent 

eviction or homelessness. By identifying 

these unmet needs through the HRA 

process, MMPs are then able to address 

them with interventions from care 

coordinators, connections to community 

organizations, and by incorporating 

goals and actions into beneficiary care 

plans. 

• Medicare-Medicaid integration 

correlates with high levels of beneficiary 

satisfaction. MMP members report high 

levels of satisfaction with their MMPs 

through member experience surveys. 

When asked to rate their health plan on 

a scale from 0 to 10 (with 0 being the 

worst possible and 10 being the best 

possible), 91 percent of respondents 

rated their health plan and health care 

a 7 or higher in 2019, the most recent 

year for which data are available.19

Sixty-six percent of all respondents 

rated their MMP a 9 or 10 in 2019, up 

from 59 percent in 2016.20 These ratings 

have improved continuously (by five 

percentage points per year on average) 

since the MMPs started reporting such 

data in 2015 and are on par with ratings 

in the broader Medicare Advantage 

program.21

• Carving in Medicaid behavioral 

health benefits helps promote better 

coordination of behavioral health and 

physical health services. Behavioral 

health conditions are pervasive among 

dually eligible individuals. For 

example, nearly one-third of individuals 

who are dually eligible for Medicare and 

Medicaid have been diagnosed with a 

serious mental illness, such as 

schizophrenia, bipolar disorder, or 

major depressive disorder, a rate almost 

three times higher than for non-dually 

eligible Medicare beneficiaries.22

Fragmented physical and behavioral 

health care, delivered across multiple 

providers and funding sources, can 

decrease access to care and lead to poor 

health status.23 MMPs in all capitated 

demonstration States except for 

California and Michigan include 

Medicaid behavioral health benefits in 

their plan benefit package. In California, 

specialty mental health services and 

substance use disorder treatment 

covered by Medicaid are financed and 

administered by county behavioral 

health departments, and MMPs are 

required to coordinate with the counties 

for members served by both entities. 

Coordination between the MMPs and 

the counties has varied by county and 

has often been difficult; challenges 

include confusion for plans over 

county-level variation on which services 

are covered by the county or the MMP, 

limited behavioral health provider 

resources to participate in 

interdisciplinary care teams, and legal 

and communication barriers to sharing 

data between county providers and 

MMPs. 

• Integrated beneficiary 

communication materials can enhance 

the beneficiary experience. The 

Medicare and Medicaid programs have 

different, and sometimes inconsistent, 

requirements for how plans 

communicate with individuals. CMS 

and partnering States, however, require 

MMPs to provide a single set of 

integrated member materials designed to 

meet Federal and State requirements 

and convey information to members in 

a more streamlined fashion. CMS tested 

such materials with beneficiaries to 

maximize readability and 

understanding. 

• Effective joint oversight of 

integrated managed care products is 

possible. Through the FAI, we have 

shown it is possible to create a 

successful framework for joint State and 

CMS oversight and contract 

management. Contract management 

teams (CMTs) consisting of State 

Medicaid and CMS staff work hand in 

hand to assure compliance with the 

relevant Medicare, Medicaid, and State 

requirements and MMP three-way 

contract requirements, and to promote 

MMP performance in meeting the needs 

and preferences of beneficiaries. 

Through each CMT, State and CMS staff 

coordinate to jointly issue guidance and 

operational clarification and, as needed, 

may coordinate to issue joint CMS-State 

compliance actions. CMTs regularly 

meet with State ombudsman 

organizations, State-convened advisory 

groups, and may also meet with local 

stakeholders, such as beneficiary 

advocates, enabling more rapid 

problem-solving and real-time feedback 

on plan performance and beneficiary 

experience.24 CMS has also developed 

and refined audit protocols specific to 

three-way contracts between CMS, the 

States, and the MMPs, and CMS and 

State staff coordinate to avoid 

scheduling conflicting Medicare and 

Medicaid audits that can cause a plan to 

split resources between two regulators. 

Based on feedback from States and 

MMPs and our own experiences for the 

last eight years, we believe these joint 

oversight processes, along with having 

performance data specific to the local 

MMPs, have improved communications 

and driven performance improvement. 

• Integrated care and joint oversight 

provide a platform for quality 

improvement. The capitated model 

demonstrations have shown it is 


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Federal Register / Vol. 87, No. 8 / Wednesday, January 12, 2022 / Proposed Rules 1853 

25CMS analysis of the MMP performance on 

HEDIS data reported 2017–2019. 

26CMS analysis of Medicare Advantage 

performance on HEDIS data reported 2017–2019. 

27 Ibid. 

28Medicare Payment Advisory Committee. 

‘‘Chapter 9, Managed care plans for dual eligible 

beneficiaries.’’ In June 2018 Report to Congress: 

Medicare and Health Care Delivery System (June 

15, 2018). Retrieved from https://www.medpac.gov/ 

docs/default-source/reports/jun18_ch9_

medpacreport_sec.pdf?sfvrsn=0. 

29 Ibid. 

30Per MedPAC’s June 2018 report, as of June 

2017, 156,000 full-benefit dually eligible 

individuals were eligible to participate in FIDA, but 

only 4,708 individuals (3 percent) were enrolled 

among 14 MMPs. 

31Pursuant to Welfare and Institutions Code 

section 14132.277(d), for seven counties, DHCS 

only offered D–SNP contracts (that is, contracts 

between the State and the D–SNP that are required 

under 42 CFR 422.107 for an MA organization to 

offer a D–SNP) to plans that were approved as of 

1/1/13 and new enrollment into those D–SNPs is 

limited to beneficiaries not otherwise eligible for 

Medicare-Medicaid plans. The State also did not 

permit existing D–SNPs to expand service area into 

the seven counties. 

32Medicare Payment Advisory Committee. 

‘‘Chapter 9, Managed care plans for dual eligible 

beneficiaries.’’ In June 2018 Report to Congress: 

Medicare and Health Care Delivery System (June 

15, 2018). Retrieved from https://www.medpac.gov/ 

docs/default-source/reports/jun18_ch9_

medpacreport_sec.pdf?sfvrsn=0. 

33 Ibid. 

34As finalized in § 422.514 by the ‘‘Medicare 

Program; Contract Year 2021 Policy and Technical 

Changes to the Medicare Advantage Program, 

Medicare Prescription Drug Benefit Program, 

Medicaid Program, and Medicare Cost Plan 

Program’’ (85 FR 33796 through 33911) (hereinafter 

referred as the May 2020 final rule), CMS will no 

longer enter into a contract with a new D–SNP lookalike beginning in CY 2022 or an existing D–SNP 

look-alike beginning in CY 2023. 

35A. Kruse and M. Herman Soper. State Efforts 

to Integrate Care for Dually Eligible Beneficiaries: 

2020 Update. Center for Health Care Strategies, Inc., 

February 2020. Available at https://www.chcs.org/ 

media/State-Efforts-to-Integrate-Care-for-DuallyEligible-Beneficiaries_022720.pdf. 

possible to effectively incentivize 

innovation and investment for better 

serving the dually eligible population. 

MMPs and CMTs collaborate on 

continuous performance improvement. 

Like MA plans, MMPs report quality 

and performance data such as Consumer 

Assessment of Healthcare Providers and 

Systems (CAHPS) and Healthcare 

Effectiveness Data and Information Set 

(HEDIS) at the contract level. Because 

the MMP is the only plan under the 

three-way contract, CMS and the State 

have access to performance and quality 

data specific to each individual MMP. 

(This is similar to how States generally 

approach Medicaid managed care 

contracts and quality reporting. In 

contrast, a D–SNP may be one of many 

plan benefit packages under a single MA 

contract, making it difficult to get a true 

picture of a particular MA plan’s 

performance.) CMS routinely shares 

State and national performance data on 

CAHPS and HEDIS metrics with States 

and MMPs to identify high and low 

performing plans. Through the CMTs, 

State and CMS staff have worked with 

MMPs to identify specific quality 

metrics to drive performance 

improvement and have developed 

specific quality and performance 

improvement projects at an MMP and/ 

or demonstration level. These efforts 

have helped to drive significant yearover-year improvement in CAHPS and 

HEDIS measures. From 2016 to 2018, 

MMPs as a group improved performance 

on measures related to care coordination 

like Care for Older Adults (by an 

average of 17 percent across three 

separate measures) and Medication 

Reconciliation Post-Discharge (by 54 

percent), and on key outcome measures 

like Controlling High Blood Pressure (by 

16 percent) and Plan All-Cause 

Readmissions (17 percent reduction for 

beneficiaries age 65 and over).25

Compared to MA plans as a group, 

MMPs improved at a higher rate on 

these measures over the same time 

period. MA plans as a group improved 

by an average of 5 percent across the 

Care for Older Adults measures 

(although only D–SNPs report those 

measures) and by 32 percent on the 

Medication Reconciliation PostDischarge measure, while the Plan AllCause Readmissions measure had a 16 

percent reduction for beneficiaries age 

65 and over.26 Overall, MA plans saw 

no change to performance on the 

Controlling High Blood Pressure 

measure.27

• There is potential for market 

distortions in areas with multiple 

options targeting the same population. 

The MMP experience has shown that we 

can create a competitive market among 

MMPs with multiple choices for 

beneficiaries in the same service area 

and maintain high expectations for 

plans around care coordination and cost 

effectiveness. However, it has also 

shown the potential for beneficiary 

confusion and disruption in markets 

where MMPs are competing with other 

products targeting dually eligible 

individuals, including D–SNPs and, 

more recently, D–SNP look-alikes. For 

example, fully integrated D–SNPs (FIDE 

SNPs) served the same population as 

MMPs that were under New York’s 

Fully Integrated Dual Advantage (FIDA) 

capitated model demonstration and the 

FIDE SNPs were offered by the same 

parent organization as the MMPs, 

creating confusion among beneficiaries 

and providers about each program’s 

role.28 Differences in Medicare 

capitation payments gave parent 

organizations a financial incentive to 

prioritize enrollment in FIDE SNPs over 

MMPs.29 In addition to the financial 

challenges, the MMPs experienced low 

enrollment spread among a high number 

of MMPs 30 due to providers not 

wanting to meet prescriptive care 

coordination requirements and 

encouraging patients not to participate. 

In California, D–SNP look-alikes 

emerged following the State’s decision 

to limit eligibility for D–SNPs to 

beneficiaries not otherwise eligible for 

MMPs.31 In its June 2018 report to 

Congress, MedPAC describes broker 

commissions as another factor 

incentivizing enrollment in the D–SNP 

look-alike plans over the MMPs in 

States like California that prohibit 

MMPs from using brokers.32 For a more 

thorough discussion of market dynamics 

in New York and California, see 

MedPAC’s June 2018 report to 

Congress.33 For a more comprehensive 

review of D–SNP look-alike plans, see 

pages 9019–9021 in the February 2020 

proposed rule.34

• State investment is critical to 

successful implementation of integrated 

care either through MMPs or D–SNPs. 

True integration of Medicare and 

Medicaid requires long-term State 

participation. However, interest and 

capacity in pursuing integrated care for 

dually eligible individuals varies 

considerably from State to State, and 

sometimes from year to year. One of the 

many lessons from the MMP experience 

has been that standing up a 

demonstration of this scope requires 

significant State resources. However, 

even outside of MMPs, many of the 

features of integration also require 

significant State effort. States that have 

successfully utilized D–SNP contracts to 

integrate or align Medicare and 

Medicaid programmatic and 

administrative elements outside of the 

FAI have also invested in building State 

capacity, including establishing 

dedicated staff or contractors with 

Medicare knowledge and expertise, 

building technical capacity to integrate 

Medicare and Medicaid data, and 

creating analytic resources to support 

ongoing program operations and 

oversight.35 For example, to maximize 

integration opportunities, D–SNP 

members may also enroll in the same 

organization’s Medicaid plan. State 

investment in establishing enrollment 

and assignment processes to enable 

alignment of Medicare and Medicaid 

enrollment require upfront and ongoing 

monitoring resources. 


lotter on DSK11XQN23PROD with PROPOSALS2
1854 Federal Register / Vol. 87, No. 8 / Wednesday, January 12, 2022 / Proposed Rules 

36Centers for Medicare & Medicaid Services. 

(n.d.). Person & Family Engagement Strategy: 

Sharing with Our Partners. Retrieved from https:// 

www.cms.gov/Medicare/Quality-Initiatives-PatientAssessment-Instruments/QualityInitiativesGenInfo/ 

Downloads/Person-and-Family-EngagementStrategy-Summary.pdf. 

37Resources for Integrated Care and Community 

Catalyst, ‘‘Listening to the Voices of Dually Eligible 

Beneficiaries: Successful Member Advisory 

Councils’’, 2019. Retrieved from: https://

www.resourcesforintegratedcare.com/Member_

Engagement/Video/Listening_to_Voices_of_Dually_

Eligible_Beneficiaries. 

Since the outset of the FAI, our shared 

goal with State partners has been to 

develop models that promote greater 

Medicare-Medicaid integration that, if 

successful, could be implemented on a 

broader scale. Below we propose to 

incorporate into the broader MA 

program many of the MMP practices 

that successfully improved experiences 

for dually eligible individuals. 

2. Summary of D–SNP Proposals 

Related to MMP Characteristics 

Many of the proposals that follow 

would incorporate certain MMP policies 

into the regulations governing D–SNPs 

or, in several cases, certain types of D– 

SNPs. We describe those proposals in 

greater detail in this section of this 

proposed rule. Table 1 summarizes how 

our proposals relate to MMP policies. 

BILLING CODE 4120–01–P 

BILLING CODE 4120–01–C 

3. Enrollee Participation in Plan 

Governance (§ 422.107) 

CMS believes managed care plans 

derive significant value from engaging 

enrollees in defining, designing, 

participating in, and assessing their care 

systems.36 By soliciting and responding 

to enrollee input, plans can better 

ensure that policies and procedures are 

responsive to the needs, preferences, 

and values of enrollees and their 

families and caregivers. One of the ways 

managed care plans can engage dually 

eligible individuals is by including 

enrollees in plan governance, such as 

establishing enrollee advisory 

committees and placing enrollees on 

governing boards. Engaging enrollees in 

these ways seeks to keep enrollee and 

caregiver voices front and center in plan 

operations and can help plans achieve 

high-quality, comprehensive, and 

coordinated care.37 Federal regulations 

for other programs, such as the 

Programs of All-Inclusive Care for the 

Elderly and Medicaid managed care 

plans that cover long-term services and 

supports (LTSS) include requirements 

for stakeholder engagement and 

committees, including input from 

beneficiaries. We describe these 

requirements later in this section. 

Stakeholder engagement has been an 

important tenet of the FAI since its 

inception. As required by the three-way 

contracts between CMS, States, and 

MMPs, all MMPs established enrollee 

advisory committees. These enrollee 

advisory committees provide a 

mechanism for MMPs to solicit feedback 

directly from enrollees, assisting MMPs 

in identifying and resolving emerging 

issues, and ensuring they meet the 

needs of dually eligible individuals. 

While three-way contract terms differ by 

State, all three-way contracts require the 

enrollee advisory committees to meet at 

least quarterly, be comprised of 

enrollees, family members, and other 

caregivers that reflect the diversity of 

the demonstration population, and 

provide regular feedback to the MMP’s 

governing board. MMPs have flexibility 

in conducting these meetings, including 

determining how to recruit and train 

enrollees, number of participants, 


lotter on DSK11XQN23PROD with PROPOSALS2EP12JA22.004</GPH>

TABLE 1: PROPOSALS THAT WOULD APPLY MMP FEATURES INTO D-SNPs 

MMP Characteristic FIDE SNP HIDES~P Coonlination-onlv D-SNP 

Enrollee advisoiy committee Propose to require Propose same as FIDE Propose same as FIDE 

HRA to include social risk factors Propose to require Propose same as FIDE Propose same as FIDE 

Exclusively aligned enrollment Prowse to require starting 2025 - -

Capitation for LTSS and behavioral health Prowse to require starting 2025 - - Capitation for ~edicare cost-sharing Prowse to specify - -

Unified appeals & grievances' Propose to require starting 2025 for all - Propose to require for certain plans FIDE SNPs 

Continuation of Medicare benefits pending Propose to require starting 2025 for all - Propose to require for certain plans aooeal' FIDE SNPs 

Integrated member materials Propose to create a new pathway for Propose same as FIDE Propose same as FIDE States lo require for certain plans 

Contract only includes within-State plans limited 

lo dually eligible individuals 

Propose to create a new pathway for Propose same as FIDE Propose same as FIDE Quality data/ratings based solely on performance States to require for certain plans 

in contracts that only include within-State plans 

limited to duallv eligible individuals' 

Mechanisms for joint Federal-State oversight Propose to establish for States meeting Propose same as FIDE Propose same as FIDE orooosed criteria at 6 422.107(e) 

State HPMS access Propose to establish for States meeting Propose same as FIDE Propose same as FIDE proposed criteria at§ 422.107(e) 

NOTES: HPMS: Health Plan Management System; J ,TSS: long-term services and supports 

'The requirement for unified appeals and grievances is currently in place for those FIDE S"<Ps and HIDE SNPs that qualify as applicable 

integrated plans. as defined at§ 422.561. Our proposal to require exclusively aligned enrollment for FIDE SNPs would mean that all FIDE SNPs 

would be applicable integrated plans subject to the requirements for unified appeals and grievance systems. In addition, we propose to revise the 

definition of applicable integrated plans to extend requirements for unified appeals and grievance systems to a subset of coordination-only DSNPs. 

2The requirement for continuation of Medicare benefits pending appeal is codified at § 422.632 for those FIDE SNPs and HIDE SNPs that qualify 

as applicable integrated plans, as defined at § 422.561. Our proposal to require exclusively aligned enrollment for FIDE S"<Ps would mean that 

all FIDE SI\Ps would be applicable integrated plans subject to this requirement of a unified appeals system. 

3CMS calculates Star Ratings at the contract level. Star Ratings would become specific to plans serving dually eligible individuals where the MA 

contract is limited to a one or more D-SNPs. We do not propose to change the Star Ratings methods per se. (See 42 CFR 422.160 through 

422.166). 
Federal Register / Vol. 87, No. 8 / Wednesday, January 12, 2022 / Proposed Rules 1855 

38Resources for Integrated Care and Community 

Catalyst, ‘‘Member Engagement in Plan Governance 

Webinar Series’’, 2019. Retrieved from: https://

www.resourcesforintegratedcare.com/concepts/ 

member_engagement. 

39Resources for Integrated Care and Community 

Catalyst, ‘‘Listening to the Voices of Dually Eligible 

Beneficiaries: Successful Member Advisory 

Councils’’, 2019. Retrieved from: https://

www.resourcesforintegratedcare.com/Member_

Engagement/Video/Listening_to_Voices_of_Dually_

Eligible_Beneficiaries. 

40CMS, Medicare Advantage, Cost, PACE, Demo, 

and Prescription Drug Plan Contract Report— 

Monthly Summary Report (Data as of June 2021). 

Retrieved from: https://www.cms.gov/ResearchStatistics-Data-and-Systems/Statistics-Trends-andReports/MCRAdvPartDEnrolData/MonthlyContract-and-Enrollment-Summary-Report. 

discussion topics, and how feedback is 

disseminated and used. 

CMS’s contractor Resources for 

Integrated Care partnered with 

Community Catalyst, a non-profit 

advocacy organization, to offer a series 

of webinars and other written technical 

assistance to help enhance MMPs’ 

operationalization of these 

committees.38 In their work, the 

Resources for Integrated Care and 

Community Catalyst identified some 

practices leading to successful enrollee 

advisory committees. These include 

MMP efforts to— 

• Recruit enrollees through care 

coordinator referrals and community 

outreach events; 

• Listen to enrollee feedback; 

• Be responsive to enrollee feedback 

by identifying meaningful changes made 

because of comments shared and, if the 

plan is not able to implement a 

suggestion, providing a rationale; 

• Disseminate feedback to 

appropriate departments across the 

plan; 

• Promote consistent enrollee 

participation through supports like 

transportation to the committee 

meetings, meals, and a stipend; and 

• Provide ongoing training to 

enrollees to help them feel comfortable 

and empowered to provide feedback.39

In late 2018, Federal and State 

officials led conversations with MMPs 

to gain a better understanding of the 

enrollee advisory committees, 

promising practices, challenges, and 

how plans are using the feedback 

received from enrollees and caregivers. 

A significant number of MMPs reported 

value from having an advisory 

committee and that the committee 

contributes to operational 

improvements through: (1) 

Understanding challenges with 

community resources and potential gaps 

in services; (2) improving enrollee 

communications, including printed 

materials and the website 

enhancements; (3) identifying barriers to 

medication adherence and what 

adherence tools might be most useful to 

enrollees; and (4) improving delivery of 

non-emergency transportation, dental, 

vision, and over-the-counter benefits. A 

few MMPs reported a neutral value of 

the advisory committee meetings, citing 

benefits from enrollee feedback but also 

challenges in enrollee participation and 

willingness to engage on issues beyond 

their personal circumstances. Overall, 

though, the MMPs reported the 

committees provided a valuable 

perspective that shapes the plan’s 

approach to recovery, wellness, and 

overall access to health care as well as 

prioritize areas where additional 

assistance is needed for enrollees. 

More recently, MMPs have utilized 

enrollee advisory committees to gain 

insight into the effectiveness of specific 

enrollee materials. For example, some 

MMPs have shared redacted care plans 

with enrollee advisory committees for 

enrollee feedback. Other MMPs have 

shared draft influenza vaccination 

outreach materials with their enrollee 

advisory committees and used the 

quarterly meetings to discuss influenza 

prevention. During 2020 and 2021, 

MMPs have used these committees to 

discuss ways to educate enrollees about 

COVID–19 prevention and vaccines. We 

have had the opportunity to observe 

some of these meetings and found the 

dialogue between enrollees and their 

caregivers and the MMPs to be open and 

constructive, with all parties interested 

in sharing information, listening, and 

identifying solutions. Other programs 

overseen by CMS include similar 

committees or mechanisms for 

beneficiaries to provide feedback and 

have a role in plan administration. 

a. Participant Advisory Committees in 

PACE Organizations 

In addition to MMPs, Programs of AllInclusive Care for the Elderly (PACE) 

organizations, per § 460.62(b), must 

establish participant advisory 

committees to advise the PACE 

organization governing body on matters 

of concern to participants. The majority 

of the 51,000 PACE participants are 

dually eligible individuals.40

CMS initially required PACE 

organizations to establish consumer 

advisory committees as part of the 

Federal regulations codifying the PACE 

program in a November 1999 interim 

final rule with comment period (IFC) for 

PACE (64 FR 66234). The November 

1999 IFC noted that consumer 

participation through advisory 

committees is a ‘‘well accepted 

community organization vehicle to 

maximize the involvement of consumers 

in a program designed to serve them’’ 

and that through the use of a consumer 

advisory committee consumers are also 

‘‘likely to feel a greater stake in the 

operation of the program’’ (64 FR 

66242). The original regulation, codified 

at § 460.62, required PACE participants 

and participant representatives to 

comprise the majority of committee 

membership, but there was no Federal 

requirement relating to how frequently 

PACE organizations were required to 

convene the committees. 

In a December 2006 final rule (71 FR 

71244 through 71337), we made minor 

revisions to the PACE consumer 

advisory committee regulation text at 

§ 460.62, including changing the name 

to participant advisory committee (71 

FR 71265). We also clarified in the 

preamble that the final rule was not 

specifying the size of the participant 

advisory committee but that we 

expected each committee to be 

representative of the size and 

population of the PACE organization’s 

participants. 

The requirements at § 460.62 allow 

PACE organizations flexibility in 

determining the frequency, scope, and 

participation on these advisory 

committees. Through its many years of 

experience overseeing PACE 

organizations, CMS has learned that 

PACE organizations value the 

participant advisory committees as an 

important way to receive direct 

feedback from PACE participants to 

improve program policy and operations. 

Attendance at participant advisory 

committees may include PACE 

organization leadership, including 

executive directors and PACE center 

directors. Since PACE participants visit 

the PACE center at least once per week, 

feedback provided by PACE participants 

at the participant advisory committees 

is generally focused on challenges with 

transportation between the PACE center 

and their residences and preferences for 

meals and activities provided at the 

PACE center. Per § 460.62(c), PACE 

organizations must have a participant 

representative on their governing body. 

These participant representatives act in 

part as a liaison of the participant 

advisory committee to the PACE 

organization governing body and the 

participant advisory committee, 

presenting issues from the participant 

advisory committee to the governing 

body. The link between the participant 

advisory committee and the governing 

body helps to elevate issues raised by 

participants to PACE organization 

leadership. 


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1856 Federal Register / Vol. 87, No. 8 / Wednesday, January 12, 2022 / Proposed Rules 

41Resources for Integrated Care and Community 

Catalyst, ‘‘Engaging Members in Plan Governance’’, 

2019. Retrieved from: https://www.resources

forintegratedcare.com/node/433#PlanGov. 

b. Member Advisory Committees in 

Medicaid Managed Care Plans 

Medicaid managed care plans that 

cover long-term services and supports 

(LTSS) are also required to solicit active 

member and other stakeholder input 

through the use of a member advisory 

committee. Recognizing that stakeholder 

engagement is an important member 

protection and is critical to the success 

of Medicaid managed LTSS programs, 

CMS requires certain Medicaid managed 

care plans providing LTSS to establish 

and maintain a member advisory 

committee. Per 42 CFR 438.110, as 

adopted in the ‘‘Medicaid and 

Children’s Health Insurance Program 

(CHIP) Programs; Medicaid Managed 

Care, CHIP Delivered in Managed Care, 

and Revisions Related to Third Party 

Liability’’ final rule (81 FR 27655 

through 27658) (hereinafter referred to 

as the May 2016 final rule), when LTSS 

are covered under a risk contract 

between a State and a Medicaid 

managed care plan (that is a Medicaid 

managed care organization (MCO), 

prepaid inpatient health plan (PIHP), or 

prepaid ambulatory health plan 

(PAHP)), each Medicaid managed care 

plan must establish a member advisory 

committee. The committee must include 

at least a reasonably representative 

sample of the LTSS population, or other 

individuals representing those 

members, covered under the contract 

with the Medicaid managed care plan. 

CMS designed this requirement in a way 

that gives managed care plans covering 

LTSS flexibility to work with their 

stakeholder communities to establish 

the most effective member engagement 

process. 

c. Proposal for D–SNP Enrollee 

Advisory Committees 

We believe that the establishment and 

maintenance of an enrollee advisory 

committee is a valuable beneficiary 

protection to ensure that enrollee 

feedback is heard by D–SNPs and to 

help identify and address barriers to 

high-quality, coordinated care for dually 

eligible individuals. Therefore, we 

propose at § 422.107(f) that any MA 

organization offering one or more D– 

SNPs in a State must establish and 

maintain one or more enrollee advisory 

committees to solicit direct input on 

enrollee experiences. We also propose at 

§ 422.107(f) that the committee include 

a reasonably representative sample of 

individuals enrolled in the D–SNP(s) 

and solicit input on, among other topics, 

ways to improve access to covered 

services, coordination of services, and 

health equity for underserved 

populations. 

We propose to establish the new 

paragraph at § 422.107(f) under our 

authority at section 1856(b)(1) of the Act 

to establish in regulation other 

standards not otherwise specified in 

statute that are both consistent with Part 

C statutory requirements and necessary 

to carry out the MA program and our 

authority at section 1857(e) of the Act to 

adopt other terms and conditions not 

inconsistent with Part C as the Secretary 

may find necessary and appropriate. We 

believe that a requirement for an MA 

organization offering one or more D– 

SNPs to establish one or more enrollee 

advisory committees is not inconsistent 

with either the Part C statute or 

administration of the MA program. 

While current law does not impose such 

a requirement, our experience with 

existing requirements for MMPs and 

PACE demonstrates that the use of 

advisory committees improves plans’ 

ability to meet their enrollees’ needs by 

providing plans with a deeper 

understanding of the communities the 

plans serve and the challenges and 

barriers their enrollees face, as well as 

serving as a convenient mechanism to 

obtain enrollee input on plan policy and 

operational matters. Our experience also 

suggests that advisory committees 

complement other mechanisms for 

enrollee feedback—such as surveys, 

focus groups, and complaints—with 

most advisory committees featuring 

longer-term participation by enrollees 

who can share their lived experiences 

while also learning how to best advocate 

over time for broader improvements for 

all enrollees. We believe the 

performance of all D–SNPs would 

benefit from this new requirement. 

Further, this requirement would be 

consistent with the existing requirement 

at § 438.110 for Medicaid plans to 

establish member advisory committees 

when those Medicaid managed care 

plans cover LTSS. 

While we describe the proposed 

advisory committee at § 422.107(f) as an 

enrollee advisory committee consistent 

with the use of the term ‘‘enrollee’’ in 

MA regulations we note that ‘‘enrollee’’ 

under the proposed § 422.107(f) 

requirement for D–SNPs has the same 

meaning as ‘‘member’’ under the 

§ 438.110 requirement for Medicaid 

plans. 

We believe that D–SNPs should work 

with enrollees and their representatives 

to establish the most effective and 

efficient process for enrollee 

engagement. We expect the evolution 

and adoption of telecommunications 

technology, including as experienced 

during the COVID–19 public health 

emergency, will mean that the most 

effective modalities for enrollee input 

may change over time. Therefore, we 

choose not to propose Federal 

requirements as to the specific 

frequency, location, format, participant 

recruiting and training methods, or 

other parameters for these committees 

beyond certain minimum requirements. 

Further, our proposal includes 

flexibility for MA organizations in how 

they structure their enrollee advisory 

committee(s). Though we are choosing 

to be nonprescriptive on meeting 

frequency, location, format, enrollee 

recruitment, training, and other 

parameters, we encourage D–SNPs to 

adopt identified best practices 41 to 

ensure advisory committee meetings are 

accessible to all enrollees, including but 

not limited to enrollees with 

disabilities, limited literacy (including 

limited digital literacy), and lack of 

meaningful access technology and 

broadband. 

First, we propose that the MA 

organization offering one or more D– 

SNP(s) in a State must have one or more 

enrollee advisory committees that serve 

the D–SNP(s) offered by the MA 

organization in that State. Under our 

proposed rule, an MA organization 

would be able to choose between 

establishing one single enrollee advisory 

committee for one or multiple D–SNPs 

in that State or by establishing more 

than one committee in that State to meet 

proposed § 422.107(f). 

Second, we propose that the advisory 

committee must have a reasonably 

representative sample of enrollees of the 

population enrolled in the dual eligible 

special needs plan or plans, or other 

individuals representing those 

enrollees. By using the phrase 

‘‘representative sample’’ in the 

regulation text, we intend D–SNPs to 

incorporate multiple characteristics of 

the total enrollee population of the D– 

SNP(s) served by the enrollee 

committee, including but not limited to 

geography and service area, and 

demographic characteristics. An MA 

organization that offers separate D–SNPs 

in multiple counties in a State could 

decide to convene one enrollee advisory 

committee to solicit feedback across the 

membership of all these D–SNP plans as 

long as that committee’s participants 

reasonably represent the totality of the 

D–SNP membership. Alternatively, this 

MA organization could convene an 

enrollee advisory committee for each D– 

SNP in each county where the D–SNP 

is offered. The MA organization could 

also choose to implement a combination 


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42CMS Office of Minority Health, Health Equity 

Technical Assistance. Retrieved from: https://

www.cms.gov/About-CMS/Agency-Information/ 

OMH/equity-initiatives/Health-Equity-TechnicalAssistance. 

of the aforementioned approaches, such 

as establishing an enrollee advisory 

committee that solicits enrollees from a 

D–SNP offered in one county and 

establishing an enrollee advisory 

committee with enrollees representing 

D–SNPs offered in more than one 

county. For example, a MA organization 

that offers separate D–SNPs in Broward, 

Hillsborough, and Orange counties in 

Florida could establish one enrollee 

advisory committee that convenes 

membership representative of these 

distinct regions of Florida via virtual 

communications methods, or it could 

establish separate enrollee advisory 

committees in each county, or it could 

implement some combination of these 

approaches. Similarly, for MA 

organizations that offer separate D–SNPs 

serving full-benefit dually eligible 

individuals and partial-benefit dually 

eligible individuals in the same State, 

proposed § 422.107(f) provides 

flexibility for MA organizations to 

solicit enrollee input through one or 

more committees where separate 

committees might represent specific 

eligibility groups. Ensuring that the 

enrollee advisory committee is 

representative of the covered population 

of the D–SNP(s) that are served by the 

committee is key to achieving the goals 

of requiring an enrollee advisory 

committee. 

Finally, we propose that the advisory 

committee must, at a minimum, solicit 

input on ways to improve access to 

covered services, coordination of 

services, and health equity among 

underserved populations, which is a 

CMS priority aligned with Executive 

Order 13985 on Advancing Racial 

Equity and Support for Underserved 

Communities Through the Federal 

Government (January 20, 2021). CMS 

encourages D–SNPs to consider the 

CMS Office of Minority Health 

Disparities Impact Statement as a 

potential tool to improve health equity 

for underserved populations among 

their enrollment.42 Our proposal does 

not specify other responsibilities or 

obligations for the committee, but we 

encourage D–SNPs to solicit input from 

enrollees on other topics will be part of 

the committee’s responsibilities. 

Specifically, we propose the following 

amendments to § 422.107: 

• Revise the section heading from 

‘‘Special needs plans and dual eligible: 

Contract with State Medicaid Agency’’ 

to ‘‘Requirements for dual eligible 

special needs plans’’ to reflect how, as 

amended, § 422.107 will address D–SNP 

requirements, such as the enrollee 

advisory committee, in addition to the 

State Medicaid agency contracts and 

their content; and 

• Add new paragraph (f) to require 

that any MA organization offering one 

or more D–SNPs in a State must 

establish and maintain one or more 

enrollee advisory committees that serve 

the D–SNPs offered by the MA 

organization, with at least a reasonably 

representative sample of the population 

enrolled in the dual eligible special 

needs plan or plans, or other 

individuals representing those 

enrollees, and solicit input on, among 

other topics, ways to improve access to 

covered services, coordination of 

services, and health equity for 

underserved populations. 

An MA organization that offers one or 

more D–SNPs and offers (or is under a 

parent organization that offers) one or 

more Medicaid managed care plans that 

cover long term services and supports— 

including the MA organizations 

associated with all FIDE SNPs and most 

HIDE SNPs—would be subject to our 

proposal and § 438.110. In some 

circumstances, especially among FIDE 

SNPs and HIDE SNPs, we expect that 

organizations could meet the 

requirements in our proposal and 

§ 438.110 through one enrollee advisory 

committee. Section 438.110(b) requires 

the member advisory committees to 

include at least a reasonably 

representative sample of the LTSS 

populations covered, but it does not 

preclude the membership of other 

enrollees as well. Therefore, an advisory 

committee could, in some cases, be 

reasonably representative of both the 

LTSS population and the D–SNP, even 

if enrollment in the D–SNP is not 

limited to LTSS users. Some State 

Medicaid agency contracts, such as 

those in Idaho, Massachusetts, 

Minnesota, New Jersey, and 

Pennsylvania, already require member 

advisory committees for FIDE SNPs that 

operate in those States in compliance 

with § 438.110, because the MCOs 

affiliated with those FIDE SNPs cover 

LTSS. Therefore, based on our review of 

State Medicaid agency contracts, we 

expect that a number of FIDE SNPs and 

HIDE SNPs affiliated with Medicaid 

managed care plans that cover LTSS 

already operate enrollee advisory 

committees that would comply with our 

proposal and § 438.110. The proposed 

regulation permits an organization that 

operates a D–SNP that is affiliated with 

a Medicaid managed care plan to use 

one enrollee advisory committee to meet 

both the requirement under § 438.110 

and the requirement proposed at 

§ 422.107(f), when all the criteria in 

both regulations are met and the State 

permits this arrangement. In other 

circumstances, it may not be feasible for 

an organization to operate a single 

enrollee advisory committee that meets 

the requirements of our proposal and 

§ 438.110. Those organizations would 

need to operate multiple enrollee 

advisory committees. 

Our experience with MMPs 

establishing and maintaining enrollee 

advisory committees demonstrates that 

these plans have found the committees 

useful and carefully consider feedback 

provided by enrollees to inform plan 

decisions without prescriptive Federal 

requirements for the committees. As a 

result, we are not proposing specific 

prescriptive requirements for how D– 

SNPs must interact with and use these 

enrollee committees. However, we 

solicit comments on our proposal, 

including whether we should include 

more prescriptive requirements on how 

D–SNPs select enrollee advisory 

committee participants, training 

processes on creating and running a 

successful committee, the 

responsibilities of the enrollee advisory 

committees, and additional topics for 

enrollee input, and whether we should 

limit the enrollee advisory committee 

proposed at § 422.107(f) to a subset of 

D–SNPs. We also solicit comments on 

whether our approach to allow MA 

organizations to meet the requirements 

in proposed §§ 422.107(f) and 438.110 

through one enrollee advisory 

committee could dilute the § 438.110 

requirement by detracting from the 

focus on LTSS enrollees. Consistent 

with PACE, if our proposal is finalized, 

we would update the CMS audit 

protocols for D–SNPs to request 

documentation of enrollee advisory 

committee meetings. As we learn about 

the implementation experiences of these 

committees, if proposed § 422.107(f) is 

finalized, we would consider more 

prescriptive requirements in the future, 

if needed. 

4. Standardizing Housing, Food 

Insecurity, and Transportation 

Questions on Health Risk Assessment 

(§ 422.101) 

Section 1859(f)(5)(A)(ii)(I) of the Act 

requires each SNP to conduct an initial 

assessment and an annual reassessment 

of the individual’s physical, 

psychosocial, and functional needs 

using a comprehensive risk assessment 

tool that CMS may review during 

oversight activities, and ensure that the 

results from the initial assessment and 

annual reassessment conducted for each 

individual enrolled in the plan are 

addressed in the individual’s 


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43 In the CY 2016 Call Letter (an attachment to the 

Announcement of Calendar Year (CY) 2016 

Medicare Advantage Capitation Rates and Medicare 

Advantage and Part D Payment Policies) released on 

April 6, 2015, CMS encouraged SNPs to adopt the 

components in the CDC’s ‘‘A Framework for 

Patient-Centered Health Risk Assessments’’ tool but 

did not mandate their use. Specifically, CMS 

encouraged the use of elements that identify the 

medical, functional, cognitive, psychosocial and 

mental health care needs of enrollees. 

44Hugh Alderwick and Laura M. Gottlieb, 

‘‘Meanings and Misunderstandings: A Social 

Determinants of Health Lexicon for Health Care 

Systems: Milbank Quarterly,’’ Milbank Memorial 

Fund, November 18, 2019, https://

www.milbank.org/quarterly/articles/meanings-andmisunderstandings-a-social-determinants-of-healthlexicon-for-health-care-systems/. 

45See the ‘‘Medicare and Medicaid Programs: CY 

2020 Home Health Prospective Payment System 

Rate Update; Home Health Value-Based Purchasing 

Model; Home Health Quality Reporting 

Requirements; and Home Infusion Therapy 

Requirements’’ final rule (84 FR 39151 through 

39161) as an example. In the interim final rule with 

comment period (IFC) ‘‘Medicare and Medicaid 

Programs, Basic Health Program and Exchanges; 

Additional Policy and Regulatory Revisions in 

Response to the COVID–19 Public Health 

Emergency and Delay of Certain Reporting 

Requirements for the Skilled Nursing Facility 

Quality Reporting Program’’ (85 FR 27550 through 

27629), CMS delayed the compliance dates for these 

standardized patient assessment data under the 

Inpatient Rehabilitation Facility (IRF) Quality 

Reporting Program (QRP), Long-Term Care Hospital 

(LTCH) QRP, Skilled Nursing Facility (SNF) QRP, 

and the Home Health (HH) QRP due to the public 

health emergency. In the ‘‘CY 2022 Home Health 

Prospective Payment System Rate Update; Home 

Health Value-Based Purchasing Model 

Requirements and Model Expansion; Home Health 

and Other Quality Reporting Program 

Requirements; Home Infusion Therapy Services 

Requirements; Survey and Enforcement 

Requirements for Hospice Programs; Medicare 

Provider Enrollment Requirements; and COVID–19 

Reporting Requirements for Long-Term Care 

Facilities’’ final rule (86 FR 62240 through 62431), 

CMS finalized its proposals to require collection of 

standardized patient assessment data under the IRF 

QRP and LTCH QRP effective October 1, 2022, and 

January 1, 2023 for the HH QRP. 

46CMS Innovation Center, ‘‘Findings at a Glance: 

Accountable Health Communities: Evaluation of 

Performance Years 1–3 (2017–2020).’’ Retrieved 

from: https://innovation.cms.gov/data-and-reports/ 

2020/ahc-first-eval-rpt-fg. 

47CMS Innovation Center, ‘‘The Accountable 

Health Communities Health-Related Social Needs 

Screening Tool.’’ Retrieved from: https://

innovation.cms.gov/files/worksheets/ahcmscreeningtool.pdf. 

48There are now Logical Observation Identifiers 

Names and Codes (LOINC) terms available for the 

AHC HRSN Screening Tool, as of June 2021. For 

more information, see: https://loinc.org/loinc/ 

96777-8/. 

49RTI International, ‘‘Accountable Health 

Communities (AHC) Model Evaluation First 

Evaluation Report,’’ Dec 2020. Retrieved from: 

https://innovation.cms.gov/data-and-reports/2020/ 

ahc-first-eval-rpt. 

50Medicaid and CHIP Payment and Access 

Commission, ‘‘Report to Congress on Medicaid and 

CHIP,’’ June 2020. Retrieved from: https://

www.macpac.gov/wp-content/uploads/2020/06/ 

June-2020-Report-to-Congress-on-Medicaid-andCHIP.pdf. 

individualized care plan. We codified 

this requirement at § 422.101(f)(1)(i) as a 

required component of the D–SNP’s 

MOC. In practice, we allow each SNP to 

develop its own HRA, as long as it 

meets the statutory and regulatory 

requirements.43 In the final rule titled 

‘‘Medicare and Medicaid Programs; 

Contract Year 2022 Policy and 

Technical Changes to the Medicare 

Advantage Program, Medicare 

Prescription Drug Benefit Program, 

Medicaid Program, Medicare Cost Plan 

Program, and Programs of All-Inclusive 

Care for the Elderly’’ (86 FR 5864) 

(hereinafter referred to as the January 

2021 final rule), we noted that D–SNPs 

also receiving capitation for Medicaid 

services may combine their Medicarerequired HRA with a State Medicaidrequired HRA to reduce assessment 

burden for enrollees (86 FR 5879). 

Certain social risk factors can lead to 

unmet social needs that directly 

influence an individual’s physical, 

psychosocial, and functional status.44

This is particularly true for food 

insecurity, housing instability, and 

access to transportation. The following 

are examples of actions that CMS has 

taken since 2014 to address social risk 

through the identification and 

standardization of screening for risk 

factors: 

• IMPACT Act of 2014. The 

Improving Medicare Post-Acute Care 

Transformation Act of 2014 Section 2(a) 

(Pub. L. 113–185), hereinafter referred to 

as the IMPACT Act, amended the Social 

Security Act (the Act) by adding section 

1899B to the Act. Section 1899B(b)(1) of 

the Act requires, in part, that the 

Secretary require certain post-acute care 

(PAC) providers to submit standardized 

patient assessment data with respect to 

certain categories of data. CMS finalized 

several standardized patient assessment 

data requirements, including on social 

determinants of health.45

• Accountable Health Communities 

(AHC) Model. The AHC Model, which is 

being tested under section 1115A of the 

Act, tests whether systematically 

screening for health-related social needs 

and referrals to community-based 

organizations to resolve identified 

unmet needs will improve healthcare 

utilization and reduce costs. Over a fiveyear period, organizations implementing 

the AHC Model, known as Bridge 

Organizations, are screening 

community-dwelling Medicare and 

Medicaid beneficiaries to identify their 

health-related social needs and 

providing navigation assistance to 

connect those beneficiaries with 

community services.46 Some Bridge 

Organizations are also engaging key 

stakeholders in community-level 

continuous quality improvement 

activities to align the community service 

capacity with the community’s service 

needs. For purposes of the model, the 

CMS Innovation Center developed the 

AHC Health-Related Social Needs 

(HRSN) Screening Tool. The tool asks 

10 standardized questions that identify 

a patient’s HRSNs in five core domains: 

Housing instability, food insecurity, 

transportation problems, utility help 

needs, and interpersonal safety.47 48 The 

first AHC Model evaluation report, 

assessing model implementation from 

2017 to 2020,49 demonstrated high 

prevalence of social risk factors among 

eligible high-need beneficiaries. Food 

insecurity was the most commonly 

reported social risk factor. 

Many dually eligible individuals 

contend with multiple social risk factors 

such as food insecurity, homelessness, 

lack of access to transportation, and low 

levels of health literacy.50 Nonetheless, 

we have not previously required that 

SNP HRAs specifically collect 

information about these issues. We 

believe requiring SNPs to include 

standardized questions about social risk 

factors is appropriate in light of the 

impact these factors may have on health 

care and outcomes for the enrollees in 

these plans and that access to this 

information will better enable SNPs to 

design and implement effective models 

of care. 

We propose to amend 

§ 422.101(f)(1)(i) to require that all SNPs 

(chronic condition special needs plans, 

D–SNPs, and institutional special needs 

plans) include one or more standardized 

questions on the topics of housing 

stability, food security, and access to 

transportation as part of their HRAs. 

These questions will help SNPs gather 

the necessary information in order to 

conduct a comprehensive risk 

assessment of each individual’s 

physical, psychosocial, and functional 

needs as required at § 422.101(f)(1)(i) 

and will inform the development and 

implementation of each enrollee’s 

comprehensive individualized plan of 

care as required at § 422.101(f)(1)(ii). 

Rather than include the specific 

questions in regulation text, we propose 

that the questions be specified in subregulatory guidance. This would afford 

us some flexibility to modify questions 

to maintain consistency with 

standardized questions that are 

developed for other programs while still 

providing MA organizations with clear 

requirements; we intend to provide 

ample notice to MA organizations of any 

changes in the questions over time. 

Should we finalize our proposal, SNPs 

would comply with the new 

requirement added to § 422.101(f) by 


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51For more information, see: https://

www.healthit.gov/isa/taxonomy/term/1801/uscdiv2. 

52For the Accountable Health Communities 

Health-Related Social Needs Screening Tool, see 

https://innovation.cms.gov/files/worksheets/ahcmscreeningtool.pdf. The PAC assessment utilized the 

same transportation question as the AHC HRSN 

Tool. 

53Adapted from National Association of 

Community Health Centers and partners, National 

Association of Community Health Centers, 

Association of Asian Pacific Community Health 

Organizations, Association OPC, Institute for 

Alternative Futures. (2017). PRAPARE. http://

www.nachc.org/research-and-data/prapare/. 

54Adapted from Hager, E.R., Quigg, A.M., Black, 

M.M., Coleman, S.M., Heeren, T., Rose-Jacobs, R., 

Cook, J.T., Ettinger de Cuba, S.E., Casey, P.H., 

Chilton, M., Cutts, D.B., Meyers A.F., Frank, D.A. 

(2010). Development and Validity of a 2-Item 

Screen to Identify Families at Risk for Food 

Insecurity. Pediatrics, 126(1), 26–32. doi:10.1542/ 

peds.2009–3146. 

55National Association of Community Health 

Centers and partners, National Association of 

Community Health Centers, Association of Asian 

Pacific Community Health Organizations, 

Association OPC, Institute for Alternative Futures. 

(2017). PRAPARE. http://www.nachc.org/researchand-data/prapare/. 

56For more information, see: https://

www.cms.gov/Medicare/Compliance-and-Audits/ 

Part-C-and-Part-D-Compliance-and-Audits/ 

ProgramAudits. 

including in their HRAs the 

standardized questions on these topics 

that we would specify in sub-regulatory 

guidance. At a minimum, we intend to 

align selected questions with the Social 

Determinants of Health (SDOH) 

Assessment data element 51 established 

as part of the USCDI v2, when finalized 

and where applicable. 

While we are proposing that the 

regulation text specify that the wording 

of individual questions would be 

established through sub-regulatory 

guidance, we provide here examples of 

the questions on these topics used in 

other Medicare contexts to provide 

better context on the proposed 

requirement and to solicit public 

comment. These examples include the 

transportation question in the post-acute 

care patient/resident instruments and 

the housing and food insecurity 

questions from the AHC Model HRSN 

Screening Tool: 52

Housing. What is your living situation 

today? 53

• I have a steady place to live 

• I have a place to live today, but I am 

worried about losing it in the future 

• I do not have a steady place to live (I 

am temporarily staying with others, in 

a hotel, in a shelter, living outside on 

the street, on a beach, in a car, 

abandoned building, bus or train 

station, or in a park) 

Food. Some people have made the 

following statements about their food 

situation. Please answer whether the 

statements were OFTEN, SOMETIMES, 

or NEVER true for you and your 

household in the last 12 months. Within 

the past 12 months, you worried that 

your food would run out before you got 

money to buy more.54

• Often true 

• Sometimes true 

• Never true 

Within the past 12 months, the food 

you bought just didn’t last and you 

didn’t have money to get more. 

• Often true 

• Sometimes true 

• Never true 

Transportation. Has lack of 

transportation kept you from medical 

appointments, meetings, work, or from 

getting things needed for daily living? 55

• Yes, it has kept me from medical 

appointments or from getting my 

medications 

• Yes, it has kept me from non-medical 

meetings, appointments, work, or 

from getting things that I need 

• No 

Our proposal would result in SNPs 

having a more complete picture for each 

enrollee of the risk factors that may 

inhibit accessing care and achieving 

optimal health outcomes and 

independence. We believe that these 

questions are sufficiently related to and 

provide information on enrollees’ 

physical, psychosocial, and functional 

needs to be appropriate to include the 

HRA. Having knowledge of this 

information for each enrollee would 

better equip MA organizations to 

develop an effective plan of care for 

each enrollee that identifies goals and 

objectives as well as specific services 

and benefits to be provided. Our 

proposal would also equip SNPs with 

person-level information that would 

help them better connect enrollees to 

covered services (for example, nonemergency medical transportation, 

when capitated by Medicaid or covered 

as a supplemental benefit) and to social 

service organizations and public 

programs that can help resolve housing 

instability, food insecurity, 

transportation needs, or other 

challenges. Coordinating care along 

these lines is consistent with the 

obligations under § 422.112(b)(3) for MA 

organizations that offer coordinated care 

plans. 

We are not explicitly proposing that 

SNPs be accountable for resolving all 

risks identified in these assessment 

questions, but § 422.101(f)(1)(i) requires 

that the results from the initial and 

annual HRAs be addressed in the 

individualized care plan. Results of the 

HRAs do not require SNPs to provide 

housing or food insecurity supports, but 

having the results means that SNPs 

would need to consult with enrollees 

about their unmet social needs, which 

may include homelessness and housing 

instability, for example, in developing 

each enrollee’s care plan. A SNP could 

demonstrate this in several ways, 

consistent with its MOC. For example, 

a SNP may make a referral to an 

appropriate community partner, 

consistent with the individual’s goals 

and preferences, to assist in meeting 

these needs. The SNP may also adapt 

communication methods to fit the 

individual’s circumstances and take 

steps to maximize access to covered 

services that may meet the individual’s 

needs and preferences, especially for 

supplemental benefits that may help 

with housing instability, food 

insecurity, or transportation. 

SNPs currently report to CMS the 

number of completed HRAs, and, as part 

of the Medicare Part C Program Audit 

Protocols for SNP Care Coordination, we 

currently review a sample of HRAs and 

ICPs.56 However, we do not currently 

collect specific data elements from 

HRAs for all SNP enrollees, in part 

because the data elements vary from 

plan to plan. By standardizing certain 

data elements, our proposal would make 

those data elements available for 

collection by CMS from the SNPs for all 

enrollees. (States can also use their 

contracts with D–SNPs at § 422.107 to 

require reporting of these data elements 

in the HRA to the State or its designee.) 

While we continue to consider whether, 

how, and when we would have the 

SNPs actually report data to CMS, we 

believe having such information could 

help us to better understand the 

prevalence and trends in certain social 

risk factors across SNPs and further 

consider ways to support SNPs in 

promoting better outcomes for their 

enrollees. We believe standardizing 

these data elements could also 

eventually facilitate better data 

exchange among SNPs (such as when an 

individual changes SNPs). 

We understand that some States may 

separately require that Medicaid 

managed care plans collect similar 

information, potentially creating 

inefficiencies and added assessment 

burden on dually eligible individuals 

who are asked similar, but not identical 

information, in multiple HRAs. We 

believe that the benefit gained by all 

SNPs having standardized information 

about these social risk factors outweighs 

this potential risk. These questions 

build on other work across CMS. Where 

States are interested in requiring 


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57See Kushel MB, Gupta R, Gee L, Haas JS. 

Housing instability and food insecurity as barriers 

to health care among low-income Americans. J Gen 

Intern Med. 2006;21(1):71–7. doi: 10.1111/j.1525– 

1497.2005.00278.x. 

58For more information, see the U.S. Department 

of Veteran Affairs, VA National Center of 

Homelessness Among Veterans March 2014 

Research Brief ‘‘Using a Universal Screener to 

Identify Veterans Experiencing Housing Instability’’ 

at https://www.va.gov/HOMELESS/Universal_

Screener_to_Identify_Veterans_Experiencing_

Housing_Instability_2014.pdf. 

59For more information, see https://

www.cms.gov/Research-Statistics-Data-andSystems/Research/MCBS. 

60 Information from 2022 Landscape Source Files. 

Retrieved from https://www.cms.gov/Medicare/ 

Prescription-Drug-Coverage/Prescription

DrugCovGenIn. Excludes EGWPs. 61 Ibid. 

assessment questions, we recommend 

that States consider conforming to the 

standardized questions we implement 

for use under this proposed rule and, for 

integrated care programs, ensuring that 

plans do not need to ask the same 

enrollees similar or redundant 

questions. However, we also seek input 

from States about what questions they 

are using and how we can best 

minimize assessment burden while 

ensuring that SNPs and States are 

capturing actionable information on 

social risk factors. 

We are considering several 

alternatives to our proposal. We are 

considering requiring fewer or more 

assessment questions on additional 

topics related to social risk factors or 

different combinations of questions 

from the post-acute care patient/resident 

assessment instruments and AHC Model 

HRSN Screening Tool. For example, we 

are considering requiring that SNPs use 

the post-acute care patient/resident 

assessment instruments questions on 

health literacy (‘‘How often do you need 

to have someone help you when you 

read instructions, pamphlets, or other 

written material from your doctor or 

pharmacy?’’) and social isolation (‘‘How 

often do you feel lonely or isolated from 

those around you?’’). We believe these 

would provide valuable insight but are 

not proposing to require HRAs to 

include standardized questions in these 

areas out of parsimony. We focused on 

the proposed areas since there is a large 

evidence base suggesting they have a 

particularly significant influence on the 

physical, psychosocial, and functional 

needs of the enrollees.57 For example, 

our experience with the FAI 

demonstrations has shown that lack of 

transportation can have a large impact 

in securing needed health care services. 

Our proposal would not preclude SNPs 

from asking additional questions related 

to these areas as long as the minimum 

standardized questions (specified in 

CMS sub-regulatory guidance pursuant 

to the regulation) are included as part of 

the HRA. 

We considered soliciting comment in 

this preamble on different examples of 

questions on housing, food, and 

transportation other than the examples 

included above, such as the housingrelated questions from the U.S. 

Department of Veteran Affairs’ 

Homelessness Screening Clinical 

Reminder 58 or the housing-, food-, and 

transportation-related questions from 

the Medicare Current Beneficiary 

Survey.59 We also considered simply 

proposing that all HRAs address certain 

domains (for example, housing), 

without authorizing CMS to specify the 

standardized questions to be used. 

However, we believe the benefit of 

flexibility for SNPs is outweighed by the 

challenges posed by use of multiple 

different questions used by different 

SNPs across the country. Having 

different questions that touch on the 

same topics in different ways would 

pose difficulties for interoperability, 

comparability, and reporting on these 

risk factors. We are considering 

specifying that the new questions only 

apply to certain enrollees and not 

others. For example, we are considering 

whether the questions on housing 

insecurity would be relevant for 

enrollees in congregate housing. 

However, because people may move 

between settings, including from an 

institutional placement to the 

community, we believe that such a 

proposal would add complexity without 

obvious benefit. 

Finally, due to the processes 

associated with developing HRA tools, 

approval of MOCs, and MOC 

implementation, we would not enforce 

this requirement until contract year 

2024. However, we are also considering 

whether to have our proposed 

requirement take effect at a later date, 

such as contract year 2025, to allow MA 

organizations more time to work our 

proposed new questions into their 

existing SNP HRAs. We welcome 

comments on our proposal and these 

potential alternatives including adding 

questions regarding health literacy, 

social isolation, or other areas. We also 

welcome comments on when CMS 

would need to issue sub-regulatory 

guidance providing the specific 

questions to be included in the HRA to 

ensure that MA organizations would 

have sufficient time to incorporate the 

required questions. 

5. Refining Definitions for Fully 

Integrated and Highly Integrated D– 

SNPs (§§ 422.2 and 422.107) 

Dually eligible individuals have an 

array of choices for how to receive their 

Medicare coverage, including Original 

Medicare with a standalone prescription 

drug plan, non-SNP MA plans, multiple 

types of SNPs, and Programs of Allinclusive Care for the Elderly. Those 

choices can be complex and, for some, 

overwhelming. An average Medicare 

beneficiary will have access to 54 MA 

plans in 2022, excluding MMPs and 

PACE, compared to 39 MA plans in 

2020.60 In one extreme example, dually 

eligible individuals in Los Angeles have 

over 85 choices for Medicare coverage 

for 2022, including 70 MA plans, nine 

D–SNPs, two FIDE SNPs, and five 

MMPs—more Medicare options to 

choose from than Medicare-only 

beneficiaries.61

Our own terminology is complex too. 

While we have defined terms through 

rulemaking in § 422.2, there remains 

nuance and variation that may make it 

difficult for members of the public—and 

even the professionals who support 

them—to readily understand what may 

be unique about a certain type of plan 

or what a beneficiary can expect from 

any FIDE SNP, for example. We propose 

several changes to how we define FIDE 

SNPs and HIDE SNPs that we believe 

will ultimately help to differentiate 

various types of D–SNPs and clarify 

options for beneficiaries. Our proposals 

would lay the groundwork for potential 

future improvements to Medicare Plan 

Finder and other communications to 

help beneficiaries better understand 

their options for integrated coverage of 

Medicare and Medicaid benefits. 

a. Exclusively Aligned Enrollment for 

FIDE SNPs 

Section 422.2 defines the term ‘‘fully 

integrated dual eligible special needs 

plan,’’ most recently updated in the May 

2020 final rule. Under the current 

definition, FIDE SNPs are plans that: (i) 

Provide dually eligible individuals 

access to Medicare and Medicaid 

benefits under a single entity that holds 

both an MA contract with CMS and a 

Medicaid managed care organization 

(MCO) contract under section 1903(m) 

of the Act with a State Medicaid agency, 

(ii) under the capitated Medicaid 

managed care contract, provide 

coverage, subject to some limited 

flexibility for carve-outs, of primary 

care, acute care, behavioral health, and 

LTSS, and coverage of nursing facility 

services for a period of at least 180 days 

during the plan year; (iii) coordinate 

delivery of covered Medicare and 

Medicaid benefits using aligned care 

management and specialty care network 

methods for high-risk beneficiaries; and 


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62CY 2021 data is from CMS review of CY 2021 

State Medicaid agency contracts submitted by FIDE 

SNPs. 2016 data is from Verdier, J., A. Kruse, R. 

Lester, et al. 2016. State contracting with Medicare 

Advantage dual eligible special needs plans: Issues 

and options. Washington, DC: Integrated Care 

Resource Center. Retrieved from https://

www.integratedcareresourcecenter.com/sites/ 

default/files/ICRC_DSNP_Issues__Options.pdf. 

(iv) employ policies and procedures 

approved by CMS and the State to 

coordinate or integrate beneficiary 

communication materials, enrollment, 

communications, grievance and appeals, 

and quality improvement. 

The current definition of a FIDE SNP 

does not require that the MA contract 

limit enrollment to the individuals who 

are enrolled in the affiliated MCO. One 

benefit of FIDE SNP designation for the 

MA organization is that the MA plan 

may qualify for a frailty adjustment as 

part of CMS’s risk adjustment of its MA 

capitation payments under section 

1853(a)(1) of the Act and § 422.308(c); 

FIDE SNPs with a similar average level 

of frailty (as determined by the 

Secretary) as the PACE program may 

qualify for the frailty adjustment, which 

may result in increased aggregate 

payment from CMS. 

Section 422.2 also defines the term 

‘‘aligned enrollment’’ as referring to 

when a full-benefit dually eligible 

individual is an enrollee of a D–SNP 

and receives coverage of Medicaid 

benefits from the D–SNP or from a 

Medicaid MCO that is: (1) The same 

organization as the MA organization 

offering the D–SNP; (2) its parent 

organization; or (3) another entity that is 

owned and controlled by the D–SNP’s 

parent organization. When State policy 

limits a D–SNP’s membership to 

individuals with aligned enrollment, 

§ 422.2 refers to that condition as 

exclusively aligned enrollment. 

Exclusively aligned enrollment is an 

important design feature for maximizing 

integration of care for all the D–SNP’s 

enrollees. It facilitates the use of 

integrated beneficiary communication 

materials (because all beneficiaries in 

the D–SNP are also in the companion 

Medicaid MCO), clarifies overall 

accountability for outcomes and 

coordination of care, and makes feasible 

the requirement (effective January 1, 

2021) that the plan use unified 

grievance and appeals procedures for 

both Medicare and Medicaid benefits. 

All MMPs operate with exclusively 

aligned enrollment, and several States 

require exclusively aligned enrollment 

for FIDE SNPs that operate in the State 

by including this requirement in the 

State Medicaid agency contract that is 

required for D–SNPs by § 422.107(b). 

However, the current regulatory 

definition of FIDE SNP permits certain 

forms of unaligned enrollment between 

Medicare and Medicaid coverage. That 

is, a beneficiary may be in one parent 

organization’s FIDE SNP for coverage of 

Medicare services but a separate 

company’s Medicaid managed care plan 

(or in a Medicaid FFS program) for 

coverage of Medicaid services. 

In 2021, there are 69 FIDE SNPs in 12 

States, enrolling 264,146 beneficiaries as 

of January 2021.62 Fifty-seven of those 

69 FIDE SNPs have exclusively aligned 

enrollment. Only Arizona, 

Pennsylvania, and Virginia currently 

contract with FIDE SNPs without 

requiring exclusively aligned 

enrollment. 

We propose to amend the definition 

of ‘‘fully integrated dual eligible special 

needs plan’’ at § 422.2 with a new 

paragraph (5) that requires, for 2025 and 

subsequent years, that all FIDE SNPs 

have exclusively aligned enrollment. 

Our proposed change would move FIDE 

SNPs toward greater integration in the 

provision of Medicare and Medicaid 

benefits for dually eligible individuals 

and make the options available to these 

beneficiaries simpler to understand. 

Requiring all FIDE SNPs to have 

exclusively aligned enrollment would 

simplify the ways we, States, and 

benefit counselors communicate about 

FIDE SNPs by eliminating some of the 

confusing scenarios related to unaligned 

enrollment that our current definition 

permits. It would allow all enrollees to 

have their Medicare and Medicaid 

benefits explained under the FIDE SNP 

clearly, which is made more difficult 

when some enrollees are, but others are 

not, also enrolled in the affiliated 

Medicaid MCO. Our proposed change 

promotes higher levels of MedicareMedicaid integration by ensuring that 

that all FIDE SNPs can deploy 

integrated beneficiary communication 

materials and unify appeals and 

grievance procedures for all the 

Medicare and Medicaid benefits covered 

through the FIDE SNP and affiliated 

Medicaid MCO; such unified 

procedures are not feasible when some 

FIDE SNP members do not receive the 

Medicaid benefits from the same 

organization. 

Under our proposed definition, all 

FIDE SNPs would (1) be capitated for 

Medicaid services, with some 

permissible exceptions proposed at 

§ 422.107(g) and (h) and discussed later 

in this section, for all of their enrollees, 

and (2) based on meeting the definition 

of applicable integrated plans in 

§ 422.561, operate unified appeals and 

grievance processes and continue 

delivery of benefits during an appeal. 

Ultimately, we believe this change in 

the definition of a FIDE SNP will help 

simplify options and provide a better 

plan experience for dually eligible 

beneficiaries, as they will be able to 

receive all their covered Medicare and 

Medicaid benefits through one 

organization. 

In the absence of a State Medicaid 

policy change (to require or facilitate 

exclusively aligned enrollment) in 

Arizona, Pennsylvania, or Virginia, our 

proposal would result in 12 plans losing 

FIDE SNP status. However, our proposal 

would not prohibit those States and 

plans from operating as they currently 

do but would simply mean that the 

affected plans would be HIDE SNPs 

rather than FIDE SNPs beginning 

January 1, 2025. (A HIDE SNP is another 

type of D–SNP defined at § 422.2 which 

we describe in more detail in section 

II.A.5.d. of this proposed rule.) A 

consequence of this would be that these 

plans would not qualify for the frailty 

adjustment, as described in 

§ 422.308(c)(4); however, only six of the 

12 potentially-affected FIDE SNPs 

qualify for the frailty adjustment in 2021 

because only those six plans have a 

similar average level of frailty (as 

determined by the Secretary) as the 

PACE program. States may also choose 

to require, through their State Medicaid 

agency contracts under § 422.107, that 

MA organizations create separate plan 

benefit packages (that is, separate D– 

SNPs), with one for exclusively aligned 

enrollment and the other for unaligned 

enrollment, the former of which would 

meet our proposed criteria and allow 

the organization to maintain FIDE SNP 

status for a share of its current FIDE 

SNP enrollment while using one or 

more new, separate D–SNPs for the 

unaligned enrollment. MA organizations 

would need to submit a request to CMS 

for a crosswalk exception under 

§ 422.530(c)(4)(i), which we are 

proposing in section II.A.6.a. to 

redesignate from § 422.530(c)(4), for 

such enrollment transitions. 

Finally, because the definition of 

aligned enrollment is specific to fullbenefit dually eligible individuals, our 

proposal would newly preclude partialbenefit dually eligible individuals from 

enrolling in FIDE SNPs. Like with 

unaligned enrollees, enrollment of 

partial-benefit dually eligible 

individuals, who receive no Medicaid 

benefits other than coverage of Medicare 

premiums and—in some cases— 

Medicare cost-sharing, precludes a D– 

SNP from clearly communicating the 

Medicaid benefits available through the 

FIDE SNP or using unified appeals and 

grievance procedures for adjudication of 

both Medicare and Medicaid benefits. 

For CY 2021, however, no FIDE SNPs 


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63Under 1905(p)(1) of the Act, a QMB is an 

individual who is entitled to hospital insurance 

benefits under Part A of Medicare, with income not 

exceeding 100 percent of the Federal poverty level, 

and resources not exceeding three times the SSI 

limit, adjusted annually by the Consumer Price 

Index. For more information about QMB eligibility 

and benefits, see chapter 1, section 1.6.2.1 and 

Appendices 1.A and 1.B of the Manual for the State 

Payment of Medicare Premiums, found here: 

https://www.cms.gov/files/document/chapter-1- 

program-overview-and-policy.pdf. 

64For example, if the Medicare (or MA) rate for 

a service is $100, of which $20 is beneficiary 

coinsurance, and the Medicaid rate for the service 

is $90, the State would only pay $10. If the 

Medicaid rate is $80 or lower, the State would make 

no payment. This is often referred to as the ‘‘lesser 

of’’ policy. Under the ‘‘lesser of’’ policy, a State 

caps its payment of Medicare cost-sharing at the 

Medicaid rate for a particular service. 

65CMS Medicare-Medicaid Coordination Office, 

‘‘Data Analysis Brief: Medicare-Medicaid Dual 

Eligible Enrollment: 2006–2019’’. Retrieved from: 

https://www.cms.gov/files/document/medicare

medicaiddualenrollmenteverenrolledtrends

databrief.pdf. 

66See Chapter II, sections E.4 through E.6 of the 

Medicaid Third Party Liability Handbook at https:// 

www.medicaid.gov/medicaid/eligibility/downloads/ 

cob-tpl-handbook.pdf. 

67State Medicaid agencies and Medicaid 

managed care plans enter into a Coordination of 

Benefits Agreement (COBA) for the purpose of 

coordinating health insurance benefits and 

facilitating the proper payment of claims for 

beneficiaries enrolled in the original Medicare FFS 

program. Within the COBA, State Medicaid 

agencies and Medicaid managed care plans elect 

which COBA claims for CMS to transfer. For more 

information, see: https://www.cms.gov/Medicare/ 

Coordination-of-Benefits-and-Recovery/COBATrading-Partners/Coordination-of-BenefitsAgreements/Coordination-of-Benefits-Agreementpage. 

enroll partial-benefit dually eligible 

individuals. As such, we do not believe 

this would have any meaningful impact 

for plans currently operating as FIDE 

SNPs. Moving forward, we believe that 

the benefits to be achieved with FIDE 

SNPs having exclusively aligned 

enrollment for Medicare beneficiaries 

eligible for full Medicaid benefits, as 

proposed here, and the associated 

greater levels of integration in the 

provision and coverage of benefits and 

plan administration outweigh the 

potential negative effects for partialbenefit dually eligible individuals, who 

would be limited to enrollment in HIDE 

SNPs, coordination-only D–SNPs, other 

MA plans, or the original Medicare FFS 

program. 

b. Capitation for Medicare Cost-Sharing 

for FIDE SNPs and Solicitation of 

Comments for Applying to Other 

D–SNPs 

Section 1902(a)(10)(E) of the Act 

directs States to pay providers for 

Medicare coinsurance and deductibles 

for dually eligible individuals in the 

Qualified Medicare Beneficiary (QMB) 

program. Under section 1905(p)(3) of 

the Act, ‘‘Medicare cost-sharing’’ 

includes costs incurred with respect to 

a dually eligible individual in the QMB 

program,63 ‘‘without regard to whether 

the costs incurred were for items and 

services for which medical assistance 

[Medicaid] is otherwise available under 

the plan.’’ For QMBs, Medicare costsharing amounts include Medicare Parts 

A and B premiums, coinsurance, and 

deductibles, and at State option, 

Medicare Advantage (MA) premiums. 

Section 1902(n)(2) of the Act permits 

the State to limit payment for Medicare 

cost-sharing to the amount necessary to 

provide a total payment to the provider 

(including Medicare, Medicaid State 

plan payments, and third-party 

payments) equal to the amount a State 

would have paid for the service under 

the Medicaid State plan.64 About 8.8 

million dually eligible individuals are 

enrolled in the QMB program.65 Some 

States also elect to cover all Medicare 

cost-sharing for Medicare beneficiaries 

eligible for full Medicaid benefits who 

are not QMBs. This election means the 

State pays Medicare cost-sharing for a 

non-QMB full-benefit dually eligible 

individual even if the Medicare service 

is not covered under the Medicaid State 

plan. Absent such an election by the 

State, the State would pay the Medicare 

cost-sharing for non-QMB full-benefit 

dually eligible individual only if the 

Medicare service, such as inpatient 

hospitalization, is also covered under 

the Medicaid State plan. 66 Typically, 

States allow FIDE SNP enrollment of 

both QMB and non-QMB full-benefit 

dually eligible individuals. 

CMS automatically forwards claims 

under the original Medicare FFS 

program to State Medicaid agencies and 

other secondary payers to adjudicate the 

claims for payment of any Medicare 

cost-sharing.67 This automatic claims 

crossover process greatly reduces 

provider burden by eliminating the need 

for providers to submit separate claims 

to both Medicare and the State Medicaid 

agency, or a Medicaid managed care 

plan, such as a Medicaid MCO, prepaid 

inpatient health plan (PIHP), or prepaid 

ambulatory health plan (PAHP), as 

defined at § 438.2, for payment of 

Medicare cost-sharing when it is 

covered by Medicaid. For providers 

serving dually eligible individuals 

enrolled in MA plans, including FIDE 

SNPs, HIDE SNPs, and other D–SNPs, 

there is no guarantee of an automated 

crossover process to State Medicaid 

agencies or Medicaid managed care 

plans to process Medicaid payment of 

Medicare cost-sharing. This means the 

providers must submit claims to the MA 

plan, then determine the responsible 

State Medicaid agency or Medicaid 

managed care plan, and then submit 

another claim to the State Medicaid 

agency or Medicaid managed care plan 

for adjudication of the claims for 

Medicare cost-sharing. 

One way to alleviate provider burden 

and streamline claims processing is for 

the State Medicaid agency to make a 

capitated payment for Medicaid 

coverage of Medicare cost-sharing to the 

MA plan in which a dually eligible 

individual (specifically, a QMB or other 

dually eligible individual for which the 

State covers Medicare cost-sharing) is 

enrolled. When the State contract with 

the MA plan includes capitated 

payment for Medicaid coverage of 

Medicare cost-sharing, the provider 

submits one claim to the MA plan, and 

the MA plan adjudicates the claim for 

Medicare coverage of services and for 

Medicaid payment of Medicare costsharing without the provider submitting 

separate claims to the MA plan and the 

proper Medicaid entity (that is, State 

Medicaid agency or Medicaid managed 

care plan). Additionally, this 

arrangement reduces other potential 

obstacles, including determining the 

proper Medicaid entity to bill for 

Medicare cost-sharing, determining a 

beneficiary’s applicable coverage of 

Medicare cost-sharing (for example, in 

States that pay Medicare cost-sharing for 

Medicare beneficiaries eligible for full 

Medicaid benefits who are not QMBs), 

and the potential for improper QMB 

billing. 

We propose to specify in § 422.2 that 

FIDE SNPs are required to cover 

Medicare cost- sharing as defined in 

section 1905(p)(3)(B), (C) and (D) of the 

Act, without regard to how section 

1905(n) limits that definition to QMBs, 

as part of the FIDE SNP’s coverage of 

primary and acute care; this means that 

the proposed amendment would require 

FIDE SNPs to cover Medicare cost 

-sharing for both QMB and non-QMB 

full-benefit dually eligible FIDE SNP 

enrollees. We intend this revision to 

encompass all cost-sharing, whether it is 

in the form of coinsurance, copayments, 

or deductibles, for Medicare Part A and 

Part B benefits covered by the D–SNP. 

The current definition of a FIDE SNP at 

§ 422.2 requires a FIDE SNP’s capitated 

contract with the State Medicaid agency 

to provide coverage, consistent with 

State policy, of specified primary care, 

acute care, behavioral health, and LTSS, 

and provide coverage of nursing facility 

services for a period of at least 180 days 

during the plan year. Medicare covers 

most primary care and acute care 

services and Medicare is always the 

primary payer for any Medicare-covered 

services with Medicaid covering any 

Medicare cost-sharing in such cases. 


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68CMS Special Needs Plan Comprehensive 

Report, January 2021: https://www.cms.gov/ 

Research-Statistics-Data-and-Systems/StatisticsTrends-and-Reports/MCRAdvPartDEnrolData/ 

Special-Needs-Plan-SNPData#:∼:text=Special%20Needs%20

Plan%20%28SNP%29%20

Data%20%20%20,%20%202021-03%20%206%20

more%20rows%20. 

69CMS, Announcement of Calendar Year (CY) 

2020 Medicare Advantage Capitation Rates and 

Medicare Advantage and Part D Payment Policies 

and Final Call Letter, April 1, 2019. Retrieved from: 

https://www.cms.gov/Medicare/Health-Plans/ 

MedicareAdvtgSpecRateStats/Downloads/ 

Announcement2020.pdf. 

Under this proposal, a FIDE SNP would 

cover Medicare payment for primary 

care and acute care covered by Medicare 

and the Medicaid payment for any 

Medicare cost-sharing in such cases. In 

plan year 2021, all 69 FIDE SNPs 

include Medicare cost-sharing in their 

capitated contracts with the State 

Medicaid agency.68 Therefore, we do 

not expect our proposal to have any 

impact on existing FIDE SNPs. 

We chose to propose this change only 

for FIDE SNPs because FIDE SNPs are 

the only type of D–SNP that must cover 

Medicaid acute and primary care 

benefits and are better equipped, 

compared to other D–SNPs, to make 

improvements for coordination of 

benefits and adjudication of claims. 

This is especially true when capitation 

for Medicare cost-sharing is combined 

with a requirement for exclusively 

aligned enrollment (as proposed in 

section II.A.5.a. of this proposed rule to 

amend the FIDE SNP definition at 

§ 422.2). Under our proposal, a provider 

serving a dually eligible individual 

enrolled in a FIDE SNP with exclusively 

aligned enrollment would submit a 

single claim to the FIDE SNP for both 

Medicare and Medicaid coverage of the 

service; the FIDE SNP would adjudicate 

the claim for a covered service for any 

applicable Medicare payment, Medicaid 

payment, and Medicaid payment of 

Medicare cost-sharing. In this way, the 

proposed additions to the definition of 

FIDE SNPs at § 422.2 would ensure that 

all FIDE SNPs include elements— 

capitation for Medicare cost-sharing and 

exclusively aligned enrollment—that 

result in improved beneficiary and 

provider experiences. This proposal 

furthers the level of integration required 

for FIDE SNPs in a way that we believe 

would achieve those improved 

experiences. In other types of D–SNPs, 

such as HIDE SNPs, members may 

participate in the HIDE SNP for their 

Medicare benefits and an unaffiliated 

Medicaid managed care plan or the 

State Medicaid FFS program for their 

Medicaid acute and primary care 

benefits. When Medicare and Medicaid 

plan enrollment is unaligned, as it is in 

many HIDE SNPs, a provider serving a 

dually eligible individual enrolled in a 

HIDE SNP would submit a claim to the 

HIDE SNP for Medicare payment of the 

service, then submit a second claim to 

the Medicaid managed care plan or the 

State Medicaid program for Medicaid 

payment of the covered benefit. 

Our proposal does not include 

Medicare Parts A and B premiums in 

the requirement for FIDE SNPs to cover 

Medicare cost-sharing. We do not 

believe that it is necessary to require 

FIDE SNPs (or other D–SNPs) to pay 

premiums as there is a loss of efficiency 

and no additional integration of benefits 

to be achieved by having a State pay a 

capitation rate to an MA organization 

for the MA organization to cover 

Medicare premiums. The State 

Medicaid agency will continue to pay 

the Medicare Parts A and B premiums 

on behalf of dually eligible beneficiaries 

in accordance with §§ 406.26 and 

406.32(g) and part 407, subpart C, of the 

chapter. Therefore, we propose to 

specifically exclude payment of 

Medicare premiums as a coverage 

requirement for dually eligible 

beneficiaries enrolled in FIDE SNPs. 

In addition to our proposal for FIDE 

SNPs, we encourage States to include 

Medicaid coverage of Medicare Part A 

and Part B cost-sharing (other than 

Medicare premiums) for dually eligible 

individuals in their capitated contracts 

with all D–SNPs as a method of 

reducing provider burden and 

improving access. We considered 

proposing a requirement that all D– 

SNPs have a contract with States for 

capitation for Medicare cost-sharing. 

Unlike FIDE SNPs with our proposed 

requirement for exclusively aligned 

enrollment, applying a requirement to 

other D–SNPs raises a number of 

complicating, but we believe solvable, 

problems. In States that have capitated 

payment arrangements with Medicaid 

managed care plans to cover Medicaid 

primary and acute services and 

behavioral health, such coverage 

typically requires the Medicaid 

managed care plan to cover Medicare 

cost-sharing when Medicare covers the 

service. That means, when enrollment is 

not aligned between a D–SNP and the 

Medicaid managed care plan, the result 

is not a streamlined payment process for 

the provider. A contract with the D–SNP 

for capitated coverage of Medicare costsharing—and a carve-out of Medicare 

cost-sharing coverage from the Medicaid 

managed care contract—can put 

Medicare coverage of services and 

Medicaid coverage of Medicare costsharing under a single entity, but could 

be a complicated process for States to 

implement. For States without Medicaid 

managed care programs for dually 

eligible individuals, contracting (with 

capitation payments) with D–SNPs for 

coverage of Medicare cost-sharing can 

be a more straightforward process. We 

solicit feedback on the feasibility, 

implementation, estimated time to 

enact, and impact of requiring capitated 

Medicare cost-sharing for all D–SNPs to 

inform future rulemaking. 

In the CY 2020 Medicare Parts C and 

D Draft Call Letter, we requested 

comments on the ways to extend the 

benefits of the automatic claims 

crossover process for services provided 

to dually eligible individuals in MA 

plans and discussed those comments in 

the CY 2020 Medicare Parts C and D 

Final Call Letter.69 Commenters 

described the need for MA plans to have 

real-time Medicaid eligibility and 

enrollment data to facilitate better 

coordination of care and Medicare costsharing payment across MA plans and 

Medicaid MCOs. Therefore, we also 

considered proposing a requirement for 

States to provide real-time Medicaid 

managed care plan enrollment data to 

D–SNPs to enable better coordination 

between the D–SNP and the State and/ 

or Medicaid managed care plan. We 

chose not to propose a requirement at 

this time to allow more time for us to 

consider the operational challenges for 

States. We solicit feedback on the pros 

and cons of requiring State Medicaid 

data exchanges to provide real-time 

Medicaid FFS program and Medicaid 

managed care plan enrollment data with 

D–SNPs, and the impact of such a 

requirement on States, Medicaid 

managed care plans, D–SNPs, providers, 

and beneficiaries. 

c. Scope of Services Covered by FIDE 

SNPs 

(1) Need for Clarification of Medicaid 

Services Covered by FIDE SNPs 

CMS first defined the term ‘‘fully 

integrated dual eligible special needs 

plan’’, or FIDE SNP, at § 422.2 in the 

‘‘Medicare Program; Changes to the 

Medicare Advantage and the Medicare 

Prescription Drug Benefit Programs for 

Contract Year 2012 and Other Changes’’ 

final rule (76 FR 21432) (hereinafter 

referred to as the April 2011 final rule) 

to implement section 3205(b) of the 

Affordable Care Act (which amended 

section 1853(a)(1)(B)(vi) of the Act to 

add a frailty adjustment to the risk 

adjustment payments for certain FIDE 

SNPs). That definition provided that a 

FIDE SNP must have a capitated 

contract with a State Medicaid agency 

that includes coverage of specified 

primary, acute, and long-term care 


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benefits and services, consistent with 

State policy. We explained then that the 

term ‘‘consistent with State policy’’ 

recognizes the variability in the degree 

and extent to which Medicaid services 

are covered from one State to the next 

(76 FR 21444). Section 1859(f)(3)(D) of 

the Act, as added by section 164(c)(3)(D) 

of MIPPA, uses the phrase ‘‘consistent 

with State policy’’ to describe the 

Medicaid long-term care services that 

the D–SNP may include in its contract 

with the State Medicaid agency. As used 

in the definition of FIDE SNP, the term 

‘‘specifies’’ acknowledges that States 

vary in the degree in which Medicaid 

services are covered by the State under 

its Medicaid program (encompassing the 

Medicaid State plan and any waivers) 

by only requiring the FIDE SNP to cover 

those services specified by the State 

Medicaid agency as covered in its 

Medicaid program. Further, in the April 

2011 final rule (76 FR 21444), we 

explained that the FIDE SNP definition 

at § 422.2 requires the plan to provide 

all Medicaid-covered primary, acute, 

and long-term care services and 

supports (LTSS) to beneficiaries, and 

not some combination thereof. 

Despite this discussion in the 2011 

final rule that FIDE SNPs would provide 

all primary, acute, and long-term care 

services and benefits covered by the 

State Medicaid program, we did not 

operationalize review of State Medicaid 

agency contracts in that way. CMS 

determined D–SNPs to be FIDE SNPs 

even where the State carved out certain 

primary care, acute care, and LTSS 

benefits from the Medicaid coverage 

required from the D–SNP. In effect, we 

allowed States flexibility in the coverage 

provided by FIDE SNPs, not only to 

accommodate differences in the benefits 

covered under various State Medicaid 

programs but to accommodate 

differences in State contracting 

strategies for managed care broadly, and 

for FIDE SNPs in particular. In the April 

2019 final rule (84 FR 15706 through 

15707), we revised the FIDE SNP 

definition at § 422.2 to add Medicaid 

behavioral health services to the list of 

services that a FIDE SNP must include 

in its capitated contract with the State 

Medicaid agency. But, consistent with 

how we were operationalizing this 

definition, we explained that our 

amendment would allow plans to meet 

the FIDE SNP definition even where the 

State excluded Medicaid behavioral 

health services from the capitated 

contract. 

The way we have applied the 

definition of FIDE SNPs has not enabled 

us to ensure FIDE SNPs fully integrate 

Medicare and Medicaid services for 

dually eligible individuals, which was 

the goal of the April 2011 final rule. We 

propose to revise paragraph (2) of the 

definition of a FIDE SNP at § 422.2 to 

clearly specify which services and 

benefits must be covered under the FIDE 

SNP capitated contract with the State 

Medicaid agency, and thus bring fuller 

integration of Medicaid benefits to 

individuals enrolled in FIDE SNPs. Our 

proposal would revise paragraph (2) of 

the existing definition into paragraphs 

(2)(i) through (v), with each of the new 

paragraphs addressing specific coverage 

requirements. We believe the proposed 

requirements described in this section 

strike the appropriate balance between 

flexibility for variations in State 

Medicaid policy and our goal of 

achieving full integration in FIDE SNPs. 

In addition, as discussed more fully in 

section II.A.5.e., our proposed revision 

of the definition, in conjunction with a 

proposal to add § 422.107(g) and (h), 

includes flexibility for approval of some 

limited carve-outs of LTSS and 

behavioral health services. 

(2) Requiring FIDE SNPs To Cover All 

Medicaid Primary and Acute Care 

Benefits 

Primary and acute care benefits for 

dually eligible beneficiaries are 

generally covered by Medicare as the 

primary payer rather than Medicaid. We 

propose revisions to the FIDE SNP 

definition in paragraph (2)(i) of § 422.2 

to limit the FIDE SNP designation to D– 

SNPs that cover all primary care and 

acute care services and Medicare costsharing—to the extent such benefits are 

covered for dually eligible individuals 

in the State Medicaid program—through 

their capitated contracts with State 

Medicaid agencies. Our proposal here 

means that all primary and acute care 

services, including the Medicare costsharing covered by the State Medicaid 

program (as discussed earlier in section 

II.A.5.b. of this proposed rule) must be 

covered by the FIDE SNP under the 

MCO contract between the State and the 

organization that offers the FIDE SNP 

and the MCO. We seek comment on 

whether we should allow for specific 

carve-outs of some of these benefits and 

services. We welcome specific examples 

of primary and acute care benefits that 

are either currently carved out of FIDE 

SNP capitated contracts with State 

Medicaid agencies or should be carved 

out and request that comments include 

the reason for the existing and proposed 

future carve-outs. 

We are clarifying here that Medicaid 

non-emergency medical transportation 

(NEMT) as defined in § 431.53 is not a 

primary or acute care service included 

in the scope of this provision. We 

recognize that Medicaid NEMT is a 

critical service for dually eligible 

individuals to access primary and acute 

care services. However, we do not 

consider NEMT coverage to be required 

for FIDE SNPs under the current or 

proposed definition. We note that States 

are able to contract with their D–SNPs, 

or the affiliated Medicaid managed care 

plans, to cover NEMT. Such contracting 

might provide these plans with useful 

tools to facilitate access to care for their 

members and make it easier for States to 

coordinate Medicaid NEMT with 

overlapping services provided by D– 

SNPs as Medicare supplemental 

benefits. 

(3) Requiring FIDE SNPs To Cover 

Medicaid Home Health and Durable 

Medical Equipment 

We propose to require that, effective 

beginning in 2025, each FIDE SNP must 

cover additional Medicaid benefits to 

the full extent that those benefits are 

covered by the State Medicaid program. 

Those benefits we are proposing to add 

are home health services, as defined in 

§ 440.70, and durable medical 

equipment (DME) services, as defined in 

§ 440.70(b)(3). We believe that FIDE 

SNPs should be required to cover the 

Medicaid home health and DME 

benefits because home health and DME 

are critical services for dually eligible 

individuals, necessitate coordination 

due to being covered by both the 

Medicare and Medicaid programs, and 

are not clearly captured under other 

parts of the existing definition. Based on 

our review of State coverage 

requirements for Medicaid MCOs 

affiliated with FIDE SNPs, all current 

FIDE SNPs already cover Medicaid 

home health services and DME, so we 

do not expect this proposal to impact 

any existing FIDE SNPs. However, we 

propose that this change in the scope of 

required coverage by FIDE SNPs would 

not apply until 2025 in case there are 

other circumstances of which we are not 

aware that would necessitate additional 

time to adapt to our proposal. 

As such, we propose to add a new 

paragraph (2)(iv) of the FIDE SNP 

definition at § 422.2 related to scope of 

services to clarify that a FIDE SNP’s 

capitated contract with the State 

Medicaid agency must include all 

Medicaid home health services as 

defined at § 440.70. Also, we propose to 

add a new paragraph (2)(v) of the FIDE 

SNP definition at § 422.2 related to 

scope of services to clarify that a FIDE 

SNP’s capitated contract with the State 

Medicaid agency must include all 

Medicaid DME as defined at 

§ 440.70(b)(3). 


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70Congressional Budget Office. ‘‘Dual-Eligible 

Beneficiaries of Medicare and Medicaid: 

Characteristics, Health Care Spending, and Evolving 

Policies.’’ (June 2013). Retrieved from: https://

www.cbo.gov/sites/default/files/113th-congress2013-2014/reports/44308dualeligibles2.pdf. This 

report classified Medicare enrollees as having a 

mental illness if they had a diagnosis from the 

previous year of schizophrenia; major depressive, 

bipolar, and paranoid disorders; or other major 

psychiatric disorders. 

71 Integrated Care Resources Center, Working 

With Medicare Webinar, https://www.integrated

careresourcecenter.com/sites/default/files/ 

4.15.20%20WWM%20BH%20Slide%20Deck_

for%20508%20Review.pdf. 

72Medicaid and CHIP Payment and Access 

Commission. ‘‘Integration of Behavioral and 

Physical Health Services in Medicaid.’’ March 2016. 

Available at: https://www.macpac.gov/wp-content/ 

uploads/2016/03/Integration-of-Behavioral-andPhysical-Health-Services-in-Medicaid.pdf. 

73Unutzer, et al., Journal of the American 

Medical Association, ‘‘Collaborative Care 

Management of Late-life Depression in the Primary 

Care Setting: A Randomized Controlled Trial’’, 

December 11, 2002. Available at: https://

aims.uw.edu/resource-library/collaborative-caremanagement-late-life-depression-primary-caresetting-randomized. 

74Unutzer, et al., Journal of the American 

Medical Association, ‘‘Collaborative Care 

Management of Late-life Depression in the Primary 

Care Setting: A Randomized Controlled Trial’’, 

December 11, 2002. Available at: https://

aims.uw.edu/resource-library/collaborative-caremanagement-late-life-depression-primary-caresetting-randomized. 

75CMS Medicare-Medicaid Coordination Office, 

‘‘Additional Guidance on CY 2021 MedicareMedicaid Integration Requirements for Dual Eligible 

Special Needs Plans’’, January 17, 2020. Retrieved 

from: https://www.cms.gov/httpsedit

cmsgovresearch-statistics-data-andsystemscomputer-data-and-systemshpmshpmsmemos-archive/hpms-memo-5. 

76CMS review of CY 2021 State Medicaid agency 

contracts for FIDE SNPs. 

(4) Requiring FIDE SNPs To Cover 

Medicaid Behavioral Health Services 

Behavioral health needs are extensive 

among dually eligible individuals. 

Nearly one-third of individuals who are 

dually eligible for Medicare and 

Medicaid have been diagnosed with a 

serious mental illness, such as 

schizophrenia, bipolar disorder, or 

major depressive disorder, a rate almost 

three times higher than for non-dually 

eligible Medicare beneficiaries.70 Fullbenefit dually eligible individuals 

experience higher rates of bipolar 

disorder and are more likely to use at 

least one Medicare or Medicaid 

community mental health service than 

partial benefit dually eligible 

individuals.71 Fragmented physical and 

behavioral health care, delivered across 

multiple providers and funding sources, 

can decrease access to care and lead to 

poor health status.72 Some studies, such 

as the ‘‘Improving Mood—Promoting 

Access to Collaborative Treatment for 

Late-Life Depression’’ study, provide 

evidence that coordinated medical and 

behavioral health care lead to better 

behavioral health outcomes.73

We explained earlier in this section 

that, consistent with how we were 

operationalizing the FIDE SNP 

definition since first adopting it at 

§ 422.2 as established in the April 2011 

final rule, we have allowed plans to 

meet the FIDE SNP definition even 

where a State excluded Medicaid 

behavioral health services from the 

capitated contract with the State 

Medicaid agency. In the April 2019 final 

rule, we added behavioral health 

services to the list of benefits that a D– 

SNP must cover, consistent with State 

policy, to obtain the FIDE SNP 

designation. We stated that complete 

carve out of behavioral health by a State 

from the scope of the Medicaid coverage 

provided by a FIDE SNP would be 

permissible (84 FR 15706–15707). We 

believe that a revision to that policy is 

appropriate and propose to establish in 

a new paragraph (2)(iii) in the FIDE SNP 

definition at § 422.2 requiring that, for 

2025 and subsequent years, the 

capitated contract with the State 

Medicaid agency must include coverage 

of Medicaid behavioral health services. 

This proposal would require the 

Medicaid MCO that is offered by the 

same entity offering the FIDE SNP to 

cover all behavioral health services 

covered by the State Medicaid program 

for the enrollees in the FIDE SNP. Our 

proposal to require FIDE SNPs to cover 

Medicaid behavioral health services is 

consistent with sections 

1853(a)(1)(B)(iv) and 1859(f)(8)(D)(i)(II) 

of the Act. We propose the 2025 date to 

allow time for MA organizations and 

States to adapt to our proposal. 

Restricting FIDE SNP designation to 

plans capitated for Medicaid behavioral 

health services, as well as other benefits, 

has two advantages. First, it better 

comports with a common understanding 

of being ‘‘fully integrated’’—the term 

used in sections 1853(a)(1)(B)(iv) and 

1859(f)(8)(D)(i)(II) of the Act—because 

of the importance of behavioral health 

services for dually eligible individuals. 

Absent coverage of Medicaid behavioral 

health services, a FIDE SNP would be 

less able to effectively coordinate 

overlapping behavioral health services 

covered by Medicare and Medicaid and 

would have an incentive to steer 

beneficiaries toward Medicaid-covered 

services for which it is not financially 

responsible. Coverage of Medicaid 

behavioral health services also 

facilitates integrating behavioral health 

and physical health services, which can 

result in improved outcomes for dually 

eligible beneficiaries.74 In addition, our 

proposal would more clearly distinguish 

a FIDE SNP—which would have to 

cover both LTSS and behavioral health 

services—from a HIDE SNP—which 

must cover either LTSS or behavioral 

health services. This would reduce 

confusion among stakeholders. 

Since codifying the definition of HIDE 

SNP in the April 2019 final rule, we 

have received many questions from MA 

organizations and other stakeholders 

about the difference between a FIDE 

SNP and HIDE SNP, and we attempted 

to further explain the distinction in a 

January 17, 2020 Health Plan 

Management System memorandum 

titled, ‘‘Additional Guidance on CY 

2021 Medicare-Medicaid Integration 

Requirements for Dual Eligible Special 

Needs Plans’’ (January 2020 

memorandum).75 Requiring a FIDE SNP 

to include Medicaid behavioral health 

services, with the exception of limited 

carve-outs as proposed at § 422.107(h) 

and described in section II.A.5.e., would 

make the coordination continuum from 

HIDE SNP to FIDE SNP easier to explain 

and understand since HIDE SNP 

designation would allow for a carve-out 

in full or in part of either Medicaid 

behavioral health services or LTSS 

while FIDE SNP designation would 

allow for only limited carve-outs of 

Medicaid behavioral health services (or, 

as discussed in section II.A.5.e., of 

LTSS). As proposed, § 422.107(h) would 

permit limited exclusions from coverage 

of Medicaid behavioral health services 

by both FIDE SNPs and HIDE SNPs 

while treating those plans as providing 

coverage of the category of benefits. 

Under the proposal, the permissible 

carve-outs would be limited to a 

minority of beneficiaries eligible to 

enroll in the D–SNP and use Medicaid 

behavioral health services or constitute 

a small part of the total scope of 

behavioral health services for which 

Medicaid is generally the primary payer. 

Thus, under our proposal, FIDE SNPs 

would cover the vast majority of 

Medicaid behavioral health benefits and 

Medicaid LTSS benefits, and HIDE 

SNPs would cover the vast majority of 

Medicaid behavioral health benefits or 

Medicaid LTSS benefits (or potentially 

both categories of benefits). 

Most FIDE SNPs already have 

contracts with States to cover Medicaid 

behavioral health benefits, indicating 

that the market has already moved in 

this direction and relatively few FIDE 

SNPs would be impacted by our 

proposal. Our review of State Medicaid 

agency contracts for FIDE SNPs in CY 

2021 indicates that States include full 

coverage of Medicaid behavioral health 

services for 45 of the 69 FIDE SNPs.76

The FIDE SNPs with contracts that carve 


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77See https://www.cms.gov/files/document/ 

smacdsnpintegrationstatusesdata.xlsx. 

78New York State Department of Health, New 

York State Office of Mental Health, and New York 

State Office of Alcoholism and Substance Abuse 

Services, ‘‘Duals Integration: Adding Behavioral 

Health Services into Medicaid Advantage Plus,’’ 

December 2020. 

out Medicaid behavioral health include 

two FIDE SNPs in California, 17 FIDE 

SNPs in New York, and five FIDE SNPs 

in Pennsylvania.77 Based on a New York 

State Medicaid policy change, we 

expect FIDE SNPs in New York to cover 

Medicaid behavioral health services, 

effective January 1, 2023, so we do not 

anticipate our proposal will negatively 

impact FIDE SNPs in New York.78 If the 

remaining FIDE SNPs in California and 

Pennsylvania do not meet the proposed 

FIDE SNP definition at § 422.2, they 

may still meet the HIDE SNP definition 

proposed at § 422.2. We believe the 

benefit of restricting FIDE SNP 

designation to plans that cover 

Medicaid behavioral health services in 

the capitated contract with the State 

Medicaid agency outweighs the benefit 

of continuing to allow FIDE SNP 

designation for plans that do not cover 

these benefits. 

Increasing the minimum scope of 

services that FIDE SNPs must cover in 

an integrated fashion is consistent with 

how section 1859(f)(8)(D) of the Act 

identifies Medicaid LTSS and 

behavioral health services as key areas 

for the integration of services. While the 

statute generally describes the increased 

level of integration that is required by 

referring to coverage of behavioral 

health or LTSS or both, we believe that 

exceeding that minimum standard is an 

appropriate goal for FIDE SNPs. The 

most integrated D–SNPs—FIDE SNPs— 

should cover the broadest array of 

Medicaid-covered services, including 

the behavioral health treatment and 

LTSS that are so important to the dually 

eligible population. 

Further, increasing the minimum 

scope of services for FIDE SNPs is not 

inconsistent with section 

1853(a)(1)(B)(iv) of the Act, which states 

that such plans are fully integrated with 

capitated contracts with States for 

Medicaid benefits, including LTSS. 

While section 1853(a)(1)(B)(iv) does not 

specify coverage of behavioral health 

services, it does not exclude coverage of 

behavioral health services either given 

that the section speaks generally to FIDE 

SNPs having fully integrated contracts 

with States for Medicaid benefits. As 

discussed earlier in this section, 

behavioral health services are critical for 

dually eligible individuals and benefit 

from coordination with Medicare 

services and, we believe, coverage of 

Medicaid behavioral health benefits by 

a D–SNP is key to achieving fully 

integrated status. 

Specifically, we propose the following 

changes at paragraph (2) of the FIDE 

SNP definition at § 422.2 related to 

scope of services: 

• Strike the words ‘‘provides coverage 

consistent with State policy of’’ and 

replace them with ‘‘requires coverage of 

the following benefits, to the extent 

Medicaid coverage of such benefits is 

available to individuals eligible to enroll 

in a FIDE SNP in the State, except as 

approved by CMS under § 422.107(g) 

and (h)’’ to clarify the services the FIDE 

SNP must include in its capitated 

contract with the State Medicaid 

agency; 

• Redesignate to a new paragraph 

(2)(i) the requirement that a FIDE SNP’s 

capitated contract with the State 

Medicaid agency must include all 

primary care and acute care covered 

under the State Medicaid program, and 

newly specify that these contracts must 

include Medicare cost-sharing as 

defined in section 1905(p)(3)(B), (C), 

and (D) of the Act, without regard to the 

limitation of that definition to qualified 

Medicare beneficiaries; 

• Redesignate to a new paragraph 

(2)(ii) the requirement that a FIDE SNP’s 

capitated contract with the State 

Medicaid agency include all LTSS 

covered under State Medicaid policy, 

including coverage of nursing facility 

services for a period of at least 180 days 

during the plan year; 

• Add new paragraph (2)(iii) to 

require that a FIDE SNP’s capitated 

contract with the State Medicaid agency 

must include Medicaid behavioral 

health services for plan year 2025 and 

subsequent years; 

• Add new paragraph (2)(iv) to 

require that a FIDE SNP’s capitated 

contract with the State Medicaid agency 

must include all Medicaid home health 

services as defined at § 440.70 for plan 

year 2025 and subsequent years; and 

• Add new paragraph (2)(v) to require 

that a FIDE SNP’s capitated contract 

with the State Medicaid agency must 

include all Medicaid DME as defined at 

§ 440.70(b)(3) for plan year 2025 and 

subsequent years. 

d. Clarification of Coverage of Certain 

Medicaid Services by HIDE SNPs 

CMS first defined the term ‘‘highly 

integrated dual eligible special needs 

plan’’, or HIDE SNP, at § 422.2 in the 

April 2019 final rule. As currently 

defined at § 422.2, a HIDE SNP is a type 

of D–SNP offered by an MA 

organization that has—or whose parent 

organization or another entity that is 

owned and controlled by its parent 

organization has—a capitated contract 

with the Medicaid agency in the State 

in which the D–SNP operates that 

includes coverage of Medicaid LTSS, 

Medicaid behavioral health services, or 

both, consistent with State policy. As 

stated in the April 2019 final rule (84 FR 

15705), the HIDE SNP designation is 

consistent with section 

1859(f)(8)(D)(i)(II) of the Act that 

recognizes a level of integration that 

does not meet the requirements of the 

FIDE SNP with respect to the breadth of 

services provided under a Medicaid 

capitated contract with the State. 

We propose to update the HIDE SNP 

definition at § 422.2 consistent with 

proposed changes to the FIDE SNP 

definition described earlier in section 

II.A.5.c. of this proposed rule to more 

clearly outline the services HIDE SNPs 

must include in their contracts with 

State Medicaid agencies. Similar to our 

proposal for the revised FIDE SNP 

definition, we propose to move away 

from the current use of ‘‘coverage, 

consistent with State policy’’ language 

in favor of more clearly articulating the 

minimum scope of Medicaid services 

that must be covered by a HIDE SNP. 

Specifically, we propose the following 

at paragraph (2) of the HIDE SNP 

definition at § 422.2: 

• Strike the words ‘‘consistent with 

State policy, of long-term services and 

supports, behavioral health services, or 

both’’ and instead require a HIDE SNP 

to have a capitated contract with the 

State Medicaid agency that requires the 

HIDE SNP to cover, at a minimum, 

Medicaid long-term services and 

supports or Medicaid behavioral health 

services; 

• Reorganize paragraphs (1) and (2) 

into paragraphs (1)(i) and (ii) to outline 

that the capitated contract is between 

the State Medicaid agency and the MA 

organization or between the State 

Medicaid agency and the MA 

organization’s parent organization, or 

another entity that is owned and 

controlled by its parent organization; 

• Redesignate paragraph (2) into 

paragraphs (2)(i) and (ii) to state that the 

capitated contract requires coverage of 

LTSS, including community-based 

LTSS and some days of coverage of 

nursing facility services during the plan 

year, or behavioral health services to the 

extent Medicaid coverage of such 

services is available to individuals 

eligible to enroll in a HIDE SNP in the 

State; and 

• To redesignated paragraph (2), add 

the words ‘‘except as approved by CMS 

under § 422.107(g) or (h)’’ such that the 

HIDE SNP ‘‘requires coverage of the 

following benefits, to the extent 

Medicaid coverage of such benefits is 


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79CMS, ‘‘Additional Guidance on CY 2021 

Medicare-Medicaid Integration Requirements for 

Dual Eligible Special Needs Plans’’, January 17, 

2020. Retrieved from: https://www.cms.gov/ 

httpseditcmsgovresearch-statistics-data-andsystemscomputer-data-and-systemshpmshpmsmemos-archive/hpms-memo-5. 

available to individuals eligible to enroll 

in a HIDE SNP in the State, except as 

approved by CMS under § 422.107(g) or 

(h),’’ to clarify that the HIDE SNP must 

cover under its capitated Medicaid 

contract the full scope of the Medicaid 

benefit for the specified LTSS or 

Medicaid behavioral health services, 

except for limited carve-outs that CMS 

permits under proposed § 422.107(g) or 

(h); and 

• Add new paragraph (3) to require 

that the capitated Medicaid contract 

applies in the entire service area of the 

D–SNP for plan year 2025 and 

subsequent plan years. 

Later in this section, we describe in 

more detail our proposal to require the 

capitated contract applies in the entire 

service area for the D–SNP. Otherwise, 

our proposal is generally a 

reorganization and clarification of the 

scope of Medicaid benefits that must be 

covered by a HIDE SNP. 

e. Medicaid Carve-Outs and FIDE SNP 

and HIDE SNP Status 

As discussed earlier, we propose to 

require FIDE SNPs and HIDE SNPs to 

cover the full scope of the Medicaid 

coverage under the State Medicaid 

program of the categories of services 

that are specified as minimum 

requirements for these plans as outlined 

in sections II.A.5.c. and II.A.5.d. In both 

definitions, we propose that coverage of 

the full scope of the specified categories 

of Medicaid benefits is subject to an 

exception that may be permitted by 

CMS under § 422.107(g) or (h). We 

propose to codify at § 422.107(g) and 

(h), respectively, current CMS policy 

allowing limited carve-outs from the 

scope of Medicaid LTSS and Medicaid 

behavioral health services that must be 

covered by FIDE SNPs and HIDE SNPs. 

As discussed in section II.A.5.c.1. of this 

proposed rule, CMS has historically 

determined D–SNPs to be FIDE SNPs 

even where the State carved out certain 

primary care, acute care, LTSS, and 

behavioral health services from the 

Medicaid coverage furnished by the 

MCO offered by the FIDE SNP. CMS has 

similarly permitted carve-outs of the 

scope of Medicaid coverage furnished in 

connection with HIDE SNPs. We believe 

that codifying these policies would 

improve transparency for stakeholders 

and allow us to better enforce our 

policies to limit benefit carve-outs. 

Our proposal is consistent with the 

policy described in a memorandum 

CMS issued in January 2020,79 with 

some revisions to improve clarity and 

avoid misinterpretations of our policy 

that might result from language in the 

memorandum that differs in the allowed 

carve-outs for LTSS and behavioral 

health services. Like the memorandum, 

our proposal is designed to 

accommodate differences in State 

Medicaid policy—for example, the 

desire to retain delivery through the 

Medicaid FFS program of specific 

waiver services applicable to a small, 

specified population, or to retain 

coverage in the Medicaid FFS program 

for specific providers—without 

significantly undermining the level of 

Medicaid integration provided by HIDE 

SNPs and FIDE SNPs. While we 

generally favor integration and worry 

that Medicaid benefit carve-outs work 

against integration, we believe our 

proposal strikes a balance between the 

current realities of State managed care 

policy, applicable statutory provisions, 

and our implementation of those 

statutory provisions toward the goal of 

raising the bar on integration. 

Currently and under our proposal to 

revise the definition, a D–SNP may meet 

the criteria for designation as a HIDE 

SNP if it covers either Medicaid LTSS 

or Medicaid behavioral health services 

under a State Medicaid agency contract. 

The Medicaid contract may be between 

the State and either the legal entity 

providing the D–SNP, the parent 

organization of the D–SNP, or a 

subsidiary owned or controlled by the 

parent organization of the D–SNP. As 

discussed in the April 2019 final rule 

(84 FR 15705), the breadth of Medicaid 

LTSS coverage under a HIDE SNP does 

not have to be as broad as the coverage 

of Medicaid benefits provided by a FIDE 

SNP. For example, a HIDE SNP is not 

required to provide at least 180 days of 

nursing facility coverage during the plan 

year. If the HIDE SNP designation is 

based on coverage of Medicaid LTSS, 

such capitated coverage must include 

both of the following: Community-based 

LTSS, subject to permissible carve-outs, 

and institutional LTSS. Institutional 

LTSS must include coverage of nursing 

facility services with some days for 

which Medicaid coverage is primary 

but, in contrast to a FIDE SNP, may be 

less than 180 days each plan year. 

However, if a HIDE SNP designation is 

based on coverage of Medicaid 

behavioral health services, the HIDE 

SNP can cover some community-based 

and/or institutional LTSS or no LTSS. 

We currently grant FIDE SNP status 

despite Medicaid LTSS carve-outs of 

limited scope if such carved-out 

services (1) apply to a minority of the 

full-benefit dually eligible LTSS users 

eligible to enroll in the FIDE SNP who 

use long-term services and supports or 

(2) constitute a small part of the total 

scope of Medicaid LTSS provided to the 

majority of full-benefit dually eligible 

individuals eligible to enroll in the FIDE 

SNP who use Medicaid LTSS. Examples 

of permissible LTSS carve-outs for FIDE 

SNPs that apply to a minority of fullbenefit dually eligible LTSS users may 

include services specifically limited to 

individuals with intellectual or 

developmental disabilities, individuals 

with traumatic brain injury, or children. 

Carve-outs of specific Medicaid LTSS 

would be permissible if the carved-out 

services would typically only be a small 

component of the broad array of LTSS 

provided to the majority of Medicaid 

LTSS users eligible to enroll in the FIDE 

SNP. We would not, however, expect to 

approve carve-outs for LTSS services for 

a specific population—for example, 

individuals with intellectual or 

developmental disabilities—if 

enrollment in the FIDE SNP was limited 

to individuals with those disabilities. 

For example, personal emergency 

response systems or home modifications 

may be important supports for 

participants in a Medicaid home and 

community-based waiver program. 

However, those specific services would 

rarely constitute the preponderance of 

an enrolled dually eligible individual’s 

care plan because most individuals 

receiving such services also receive 

other types of in-home supports, such as 

personal care services. In contrast, we 

would not expect to approve carve-outs 

of in-home personal care or related 

services provided to older adults or 

people with disabilities even if such 

services were limited to individuals 

meeting a nursing home level of care. 

D–SNPs can currently obtain the 

HIDE SNP designation with limited 

carve-outs of Medicaid behavioral 

health services from their capitated 

contracts. A behavioral health services 

carve-out would be of limited scope if 

such service: (1) Applies primarily to a 

minority of the full-benefit dually 

eligible users of behavioral health 

services eligible to enroll in the HIDE 

SNP; or (2) constitutes a small part of 

the total scope of behavioral health 

services provided to the majority of 

beneficiaries eligible to enroll in the 

HIDE SNP. We specify that only a small 

part of the Medicaid behavioral health 

services may be carved out in order to 

ensure that the innovative services that 

many Medicaid programs provide to 

individuals with severe and moderate 


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1868 Federal Register / Vol. 87, No. 8 / Wednesday, January 12, 2022 / Proposed Rules 

80CMS has acknowledged this and encouraged 

MA organizations to align these service areas in 

guidance issued on January 17, 2020, regarding D– 

SNPs. See https://www.cms.gov/files/document/ 

cy2021dsnpsmedicaremedicaidintegration

requirements.pdf. 

81Medicare Payment Advisory Commission, 

‘‘Report to the Congress: Medicare and the Health 

Care Delivery System,’’ June 2019. Retrieved from: 

https://medpac.gov/docs/default-source/reports/ 

jun19_medpac_reporttocongress_sec.pdf. 

82MACPAC, Report to Congress on Medicaid and 

CHIP, ‘‘Chapter 6: Improving Integration for Dually 

Eligible Beneficiaries: Strategies for State Contracts 

with Dual Eigible Special Needs Plan,’’ June 2021. 

Retrieved at: https://www.macpac.gov/wp-content/ 

uploads/2021/06/June-2021-Report-to-Congress-onMedicaid-and-CHIP.pdf. 

mental illness are covered through the 

D–SNP or the affiliated Medicaid 

managed care plan. We believe that 

level of integrated coverage is a 

minimum standard for a D–SNP to be 

considered highly or fully integrated. It 

would be insufficient for a HIDE SNP or 

FIDE SNP to solely cover the counseling 

services where Medicare is primary. 

Examples of permissible carve-outs that 

apply to primarily a minority of fullbenefit dually eligible users of such 

services who are eligible to enroll in the 

HIDE SNP include school-based services 

for individuals under 21 years of age 

and court-mandated services. Examples 

of permissible carve-outs that constitute 

a small part of the total scope of 

Medicaid behavioral health services 

include inpatient psychiatric facilities 

and other residential services, such as 

payment of Medicare cost-sharing or 

coverage of days not covered by 

Medicare; substance abuse treatment, 

such as payment of Medicare costsharing or coverage of services not 

covered by Medicare; services provided 

by a Federal Qualified Health Center or 

Rural Health Clinic; and Medicaidcovered prescription drugs for treatment 

of behavioral health conditions. We 

believe such carve-outs would still 

allow FIDE SNPs and HIDE SNPs to 

meaningfully integrate Medicaid 

behavioral health coverage for their 

enrollees. We seek comment on whether 

we have struck the right balance in 

permitting such carve-outs, including 

for the examples cited previously. 

Specifically, we propose the following 

language at § 422.107: 

• Add new paragraph (g) to describe 

that a D–SNP may meet the FIDE SNP 

or HIDE SNP definition at § 422.2 even 

if the contract between the State and the 

plan carves out some Medicaid LTSS, as 

long as the carve-out, as approved by 

CMS, applies primarily to a minority of 

beneficiaries eligible to enroll in the 

D–SNP who use long-term services and 

supports or constitutes a small part of 

the total scope of Medicaid LTSS 

provided to the majority of beneficiaries 

eligible to enroll in the D–SNP; 

• Add new paragraph (h) to describe 

that a D–SNP may meet the FIDE SNP 

or HIDE SNP definition at § 422.2 even 

if the contract between the State and the 

plan carves out some Medicaid 

behavioral health services, as long as the 

carve-out, as approved by CMS, applies 

primarily to a minority of beneficiaries 

eligible to enroll in the D–SNP who use 

behavioral health services or constitutes 

a small part of the total scope of 

behavioral health services provided to 

the majority of beneficiaries eligible to 

enroll in the D–SNP; and 

• Redesignate paragraph (e) ‘‘Date of 

Compliance’’ as new paragraph (i) due 

to the proposed new paragraphs (e) 

through (h). 

We intend to administer this 

proposed regulation consistent with our 

current policy and therefore anticipate 

little disruption to occur because of this 

proposed change. 

f. Service Area Overlap Between FIDE 

SNPs and HIDE SNPs and Companion 

Medicaid Plans 

MA organizations can achieve greater 

integration when they maximally align 

their FIDE SNP and HIDE SNP service 

areas with the service areas of the 

affiliated Medicaid managed care plan 

(meaning the entities that offer capitated 

Medicaid benefits for the same members 

under a capitated contract with the 

State). Service area alignment also better 

comports with the minimum MedicareMedicaid integration standards 

established by section 50311(b) of the 

BBA of 2018, which amended section 

1859 of the Act and is codified at 

§ 422.2. 

Currently, under § 422.2, a D–SNP can 

meet the requirements to be designated 

as a FIDE SNP and HIDE SNP even if the 

service area within a particular State 

does not fully align with the service area 

of the companion Medicaid plan (or 

plans) affiliated with their 

organization.80 For FIDE SNP and HIDE 

SNP members outside the companion 

Medicaid plan’s service area, this lack of 

alignment does little to integrate 

Medicare and Medicaid benefits as the 

D–SNP member does not have the 

option to join the companion Medicaid 

plan. In its June 2019 report to Congress, 

MedPAC illustrated service area 

misalignment between D–SNPs and 

companion Medicaid managed LTSS 

plans, finding a significant number of 

D–SNP members not in the same service 

area as the D–SNP sponsor’s Medicaid 

managed LTSS offering.81 In its June 

2021 report to Congress, MACPAC 

recommended States use the State 

Medicaid agency contracts (required for 

D–SNPs by § 422.107(b)) to completely 

align service areas between a D–SNP 

and a Medicaid managed care plan to 

better integrate coverage and care.82 We 

believe requiring service area alignment 

in the definitions of FIDE SNP and HIDE 

SNP would encourage MA organizations 

and States to create better experiences 

for beneficiaries and move toward 

greater integration, which would be 

consistent with the amendments to 

section 1859(f) of the Act made by 

section 50311(b) of the BBA of 2018. 

Under our authority at section 

1859(f)(8)(D) of the Act to require that 

all D–SNPs meet certain minimum 

criteria for Medicare and Medicaid 

integration, we are proposing to amend 

the definitions of FIDE SNP and HIDE 

SNP at § 422.2. We propose to amend 

the FIDE SNP definition by adding new 

paragraph (6) and the HIDE SNP 

definition by adding new paragraph (3) 

to require that the capitated contracts 

with the State Medicaid agency cover 

the entire service area for the D–SNP for 

plan year 2025 and subsequent years. 

Requiring the service area of the 

Medicaid capitated contract to include 

at least the service area of the D–SNP 

contract allows all FIDE SNP and HIDE 

SNP enrollees to access both Medicare 

and Medicaid benefits from a single 

parent organization. These proposed 

changes to § 422.2 are in addition to the 

other edits proposed to the definitions 

of FIDE SNP and HIDE SNP at § 422.2 

as described in this proposed rule. 

Our proposal addresses an 

unintended loophole to the minimum 

D–SNP integration criteria we have 

adopted as part of the definitions of 

FIDE SNP and HIDE SNP: Where a D– 

SNP can qualify as either a FIDE SNP or 

HIDE SNP by only having a small 

portion of its members in the same 

service area as the companion Medicaid 

plan. Where the overlap in the service 

areas for the separate MA D–SNP 

contract and the Medicaid capitated 

contract is small, the opportunity for 

Medicare-Medicaid integration is 

similarly limited as only enrollees in 

that overlapping area have the potential 

to receive benefits from an integrated 

plan with both MA and Medicaid 

managed care plan contracts under a 

single parent organization. In such a 

FIDE SNP or HIDE SNP, the members 

without access to the companion 

Medicaid plan might not benefit even 

from the improved care coordination 

possible under the notification 

requirement at § 422.107(d) required for 

a D–SNP that is not a FIDE SNP or HIDE 

SNP if the State has not imposed that 

requirement. We do not believe that is 

consistent with the goals and purposes 


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83CMS, SNP Comprehensive report, June 2021. 

Retrieved at: https://www.cms.gov/researchstatistics-data-and-systemsstatistics-trends-andreportsmcradvpartdenroldataspecial-needs/snpcomprehensive-report-2021-06. 

84 Internal analysis based on data from: CMS, 

Monthly Enrollment by Contract, March 2021. 

Retrieved from: https://www.cms.gov/ResearchStatistics-Data-and-Systems/Statistics-Trends-andReports/MCRAdvPartDEnrolData/MonthlyEnrollment-by-Contract; CMS, Monthly Enrollment 

by Contract/Plan/State/County, March 2021. 

Retrieved from: https://www.cms.gov/ResearchStatistics-Data-and-Systems/Statistics-Trends-andReports/MCRAdvPartDEnrolData/MonthlyEnrollment-by-Contract-Plan-State-County; CMS, 

D–SNP Integration Levels for CY 2021. Retrieved 

from: https://www.cms.gov/files/document/ 

smacdsnpintegrationstatusesdata.xlsx; and service 

area information from State Medicaid agency 

websites. 

of increasing integration for D–SNPs as 

a whole or particularly for FIDE SNPs 

and HIDE SNPs, which are supposed to 

have more than a bare minimum level 

of integration. 

The proposal is not intended to limit 

State options for how they contract with 

managed care plans for their Medicaid 

programs, but to require the FIDE and 

HIDE SNPs to limit their MA service 

areas to areas within the service areas 

for the companion Medicaid plan. Our 

proposal would not limit the service 

area of the companion Medicaid plan to 

that of the D–SNP service area. 

Therefore, the companion Medicaid 

plan may have a larger service area than 

the D–SNP. States, in their contracting 

arrangements for Medicaid managed 

care programs, may wish to limit the 

service areas of the affiliated Medicaid 

managed care plans, but we recognize 

that States have other policy objectives 

better met with larger service areas in 

their Medicaid managed care programs. 

In plan year 2021, all FIDE SNPs meet 

the service area requirement being 

proposed. Most, but not all, HIDE SNPs 

also meet the proposed requirement. As 

of June 2021, there were 1,302,505 HIDE 

SNP members across 16 States in 186 

HIDE SNP plan benefit packages and 89 

contracts.83 In four States, 20 HIDE 

SNPs have service area gaps with their 

affiliated MCOs, leaving 97,004 

members in 174 counties with no 

corresponding Medicaid plan.84

Approximately half the D–SNPs with 

unaligned service area have over 50 

percent of their enrollment in the 

unaligned service area, and the vast 

majority of HIDE SNP members and 

counties with unaligned service areas 

are concentrated in one State and one 

parent organization. Therefore, we 

believe some HIDE SNPs have only met 

the D–SNP integration requirements for 

a fraction of their enrollment due to the 

unintended gap in integration that is 

created by a lack of service area 

alignment. 

If finalized, an MA organization 

impacted by our proposal would have 

several options. First, the organization 

can work with the State to expand their 

companion Medicaid plan service area 

to the full D–SNP service area, thus 

increasing the opportunity for integrated 

care and qualifying as a HIDE SNP 

under our proposal. Second, the MA 

organization can request to crosswalk 

enrollees (using the crosswalk exception 

currently at § 422.530(c)(4), which we 

are proposing to redesignate as 

§ 422.530(c)(4)(i) in section II.A.6.a.) 

from the existing D–SNP that includes 

the service area outside of the 

companion Medicaid plan service area 

into a new D–SNP; the end result is two 

separate D–SNPs, one which qualifies as 

a HIDE SNP (because it has the 

overlapping service area with the 

companion Medicaid plan and meets 

other requirements) and another D–SNP 

that, because it is neither a FIDE SNP 

nor a HIDE SNP, would need to meet 

the notification requirement at 

§ 422.107(d). Third, the MA 

organization can keep the existing 

service area for the existing D–SNP and 

contract with the State as a non-HIDE 

D–SNP by meeting the notification 

requirement at § 422.107(d). 

These options all require the MA 

organization to collaborate with the 

State Medicaid agency. We believe that 

a State currently engaged with MA 

organizations to integrate care through a 

HIDE SNP would likely be willing to 

work with the MA organization to come 

into compliance with the proposed rule. 

However, if the State was unwilling to 

engage with the MA organization, the 

MA organization would need to end the 

HIDE SNP plan benefit package in the 

unaligned service area. We seek 

comment on whether this proposal 

would likely result in additional, 

unintended disruption for current HIDE 

SNP membership, particularly if such 

unintended disruption is for more than 

the initial year of transition. We 

generally believe that the additional 

integration—and the benefits from 

higher integration—outweigh the 

limited disruption potentially caused by 

realignment of FIDE SNP and HIDE SNP 

service areas to meet this proposed 

requirement by 2025. 

We are considering an alternative of 

establishing a minimum percentage of 

enrollment or service area overlap 

between the D–SNP affiliated Medicaid 

plan and having FIDE SNPs and HIDE 

SNPs attest to meeting the minimum 

overlap requirement. That is, a D–SNP 

would qualify as a FIDE SNP or HIDE 

SNP if a minimum percentage of the 

D–SNP enrollment resides in the 

companion Medicaid plan (or plans) 

service area or if a minimum percentage 

of the D–SNP service area overlaps with 

the companion Medicaid plan (or 

plans). We are also considering an 

amendment to explicitly codify how the 

current requirements permit D–SNPs to 

be designated as a FIDE SNP or HIDE 

SNP even if their service area within a 

particular State does not fully align with 

the service area of the companion 

Medicaid plan (or plans). We are not 

proposing either of these alternative 

approaches because we believe these 

alternatives create greater operational 

complexity (in the case of establishing 

a minimum percentage overlap) and 

would fail to help us achieve our 

objectives of clarifying options for 

beneficiaries and creating better 

coordination of Medicare and Medicaid 

benefits for all enrollees of the FIDE 

SNP or HIDE SNP compared to current 

practice. We seek comment on these 

alternatives, including input on what an 

appropriate percentage threshold of 

overlap in the services areas should be, 

whether an attestation process would 

provide the necessary level of oversight, 

and whether the status quo, with a 

clarification in the regulation text, 

creates a sufficient level of integration 

for FIDE SNPs and HIDE SNPs. We are 

interested in comments on whether the 

alternatives create sufficient 

improvements in coordination of the 

Medicare and Medicaid benefits 

compared to current practice or if the 

alternatives would adequately address 

the policy goals outlined in this 

proposal. 

6. Additional Opportunities for 

Integration Through State Medicaid 

Agency Contracts (§ 422.107) 

Section 164 of MIPPA amended 

section 1859(f) of the Act to require that 

each D–SNP contract with the State 

Medicaid agency to provide benefits, or 

arrange for the provision of Medicaid 

benefits, to which an enrollee is 

entitled. Implementing regulations are 

codified at § 422.107. Notwithstanding 

this State contracting requirement for 

D–SNPs, section 164(c)(4) of MIPPA 

does not obligate a State to contract with 

a D–SNP, which therefore provides 

States with significant control over the 

availability of D–SNPs in their markets. 

The State’s discretion to contract with 

D–SNPs, combined with the State’s 

control over its Medicaid program, 

creates flexibility to require greater 

integration of Medicare and Medicaid 

benefits from the D–SNPs that operate 

in the State. For example, to develop 

products that integrate Medicare and 

Medicaid coverage, several states— 


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85 Verdier, J., Kruse, A., Sweetland Lester, R., 

Philip, A.M., and Chelminsky, D. State Contracting 

with Medicare Advantage Dual Eligible Special 

Needs Plans: Issues and Options (November 2016). 

Retrieved from https://www.integratedcareresource

center.com/sites/default/files/ICRC_DSNP_Issues__

Options.pdf; MACPAC, Report to Congress on 

Medicaid and CHIP, ‘‘Chapter 6: Improving 

Integration for Dually Eligible Beneficiaries: 

Strategies for State Contracts with Dual Eligible 

Special Needs Plan,’’ (June 2021). Retrieved from 

https://www.macpac.gov/wp-content/uploads/ 

2021/06/June-2021-Report-to-Congress-onMedicaid-and-CHIP.pdf. 

86Certain HEDIS measures are reported by SNPs 

at the PBP level and are available in public use files 

that can be used to review and assess D–SNP 

performance outside of CMS’s Quality Star Rating 

program. These PBP-level measures are used to 

calculate the Care for Older Adults measures in Star 

Ratings, but they are not used to calculate Star 

Ratings to compare performance across MA plans. 

The public use files are available at: https://

www.cms.gov/research-statistics-data-and-systems/ 

statistics-trends-and-reports/mcradvpartd

enroldata?redirect=/mcradvpartdenroldata. 

87The following memo outlines the policy for 

CY2020, which has been in effect for several years: 

CMS HPMS Memo, ‘‘Release of Notice of Intent to 

Apply for Contract Year 2021 Medicare Advantage 

(MA), Medicare-Medicaid Plans (MMP), and 

Prescription Drug Benefit (Part D) and Related CY 

2021 Application Deadlines’’, October 17, 2019. 

Retrieved from https://www.cms.gov/files/ 

document/2021-noia-partcpartd-mmp.pdf. 

88CMS, Contract Management Reports 2020, SNP 

Type and Subtype Report, August 7, 2020. 

89 Due to smaller enrollment compared to broader 

MA contracts, D–SNP-only contracts may 

experience sample size issues, such that certain 

including Arizona, Hawaii, Idaho, 

Massachusetts, Minnesota, New Jersey, 

Pennsylvania, and Tennessee—operate 

Medicaid managed care programs for 

dually eligible individuals in which the 

State requires that the Medicaid MCOs 

serving dually eligible individuals offer 

a companion D–SNP product. These 

States also require specific care 

coordination or data sharing activities in 

their contracts with D–SNPs.85

Even among States that have used the 

State Medicaid agency contract at 

§ 422.107 to promote integration, we 

believe there are additional 

opportunities to improve beneficiary 

experiences and health plan oversight. 

We propose addressing such 

opportunities in this section of this 

proposed rule. 

We propose a new paragraph (e) at 

§ 422.107 to describe conditions under 

which CMS would facilitate compliance 

with certain contract terms that States 

require of D–SNPs that operate in the 

State. Proposed paragraph (e)(1) 

provides that CMS will take the steps 

described in proposed paragraphs (e)(2) 

and (3) when a State Medicaid agency’s 

contracts with D–SNPs require 

exclusively alignment enrollment and 

require the D–SNPs to request MA 

contracts that only include one or more 

State-specific D–SNPs and that such D– 

SNPs use integrated member materials. 

We do not believe that proposed 

paragraph (e)(1), in and of itself, creates 

or limits opportunities already available 

to States to contract with D–SNPs. The 

primary purpose of proposed paragraph 

(e)(1) is to establish a pathway for States 

with parameters for how CMS will work 

with the State when the State wishes to 

require D–SNPs with exclusively 

aligned enrollment in that State to 

operate under D–SNP-only MA 

contracts and use specific integrated 

enrollee materials. The requirements 

described in proposed paragraph (e)(1) 

require work on the part of CMS to 

facilitate compliance by D–SNPs with 

the State’s requirements. Therefore, 

proposed paragraphs (e)(2) and (3) 

describe steps CMS would take when 

the conditions of proposed paragraph 

(e)(1) are met. 

a. Limiting Certain MA Contracts to D– 

SNPs 

Special needs plans, including D– 

SNPs, are currently included as separate 

plans, also known as ‘‘plan benefit 

packages (PBPs),’’ under the same 

contract number along with any other 

MA plans of the same product type (for 

example, health maintenance 

organization (HMO), preferred provider 

organization (PPO), etc.) offered by the 

legal entity that is the MA organization. 

MA organizations may offer multiple 

PBPs under the same contract number, 

and the plans under these contracts may 

have service areas in multiple States or 

regions. PBPs under one contract 

number may have very different benefit 

packages and serve different 

populations. MA organizations report 

medical loss ratios and certain quality 

measures—including many Star Ratings 

measures—at the contract level, which 

does not allow for differentiation of 

PBPs that are D–SNPs. While we 

capture some measures at the PBP level, 

unless a D–SNP is the only PBP in a 

contract, it is not possible to ascertain 

a full and complete picture of the 

quality performance (for example, 

CAHPS, HEDIS,86 Medicare Health 

Outcomes Survey (HOS), Star Ratings) 

of the D–SNP distinguished from other 

PBPs in the contract. Combining data 

from all PBPs offered under a contract, 

however, ensures that there is generally 

a large enough sample to administer 

CAHPS surveys and calculate HEDIS 

measures; CMS has discussed the 

possibility of collecting data and 

assigning Star Ratings at the plan level 

in the past, such as in the April 2018 

final rule (83 FR 16526 through 16528). 

Currently, §§ 422.162(b) and 423.182(b) 

provide for Star Ratings to be assigned 

at a contract level. 

It has been a long-standing CMS 

policy that CMS only award a legal 

entity one contract for each product 

type (for example, HMO, PPO, RPPO, 

etc.) it seeks to offer for all PBPs for the 

totality of the States.87 Under CMS’s 

administration of the MA program, 

SNPs and non-SNPs may be PBPs in the 

same contract(s) so long as they are the 

same product type (for example, SNP 

HMO and non-SNP HMO PBPs can be 

in the same contract, but a SNP HMO 

and non-SNP PPO would not be). 

Except under our existing authority in 

§ 422.550 where there is a change in 

ownership or for purposes of model 

tests under Section 1115A that utilized 

D–SNPs, CMS has not previously 

permitted MA organizations to create 

separate D–SNP contracts. If necessary, 

under §§ 422.504(k) and 423.504(e), 

CMS does have authority to sever 

specific PBPs from a contract and to 

deem a separate contract is in place for 

the severed PBP(s). 

The majority of D–SNPs are in 

contracts that include other non-SNP 

MA plans. Of the 276 D–SNP PBPs 

offered in CY 2021, only 88 (32 percent) 

are in D–SNP-only contracts.88 Given 

the important distinctions of D–SNPs in 

comparison to other MA plans, States 

and other stakeholders have expressed 

an interest in better understanding 

performance of these plans without data 

being combined with non-D–SNPs. 

Throughout our work with MMPs, we 

and our State partners benefited from 

having performance data that was 

specific to the MMP. 

Therefore, we are proposing to codify 

a pathway where if a State requires an 

MA organization to establish a contract 

that only includes one or more D–SNPs 

with exclusively aligned enrollment 

within a State, the MA organization may 

apply for such a contract using the 

existing MA application process. We do 

not anticipate this proposal would 

create a large volume of new contracts, 

because most States do not meet the 

prerequisite of requiring exclusively 

aligned enrollment, and—among those 

that do—some D–SNPs are already in 

D–SNP-only contracts. The proposed 

language at § 422.107(e)(1)(i) would give 

States the flexibility to require an MA 

organization to establish one or more D– 

SNP-only contracts, which would 

provide more transparency in D–SNP 

plan performance within States. For 

example, the Florida State Medicaid 

agency could allow an MA organization 

serving South Florida and the Florida 

Panhandle to establish one D–SNP-only 

contract for South Florida and a 

separate D–SNP-only contract for the 

Florida Panhandle.89


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quality measures (for example, HEDIS and CAHPS) 

may not have sufficient data to reliably report 

performance. States may want to consider this 

implication when contemplating whether to 

establish D–SNP-only contracts, particularly if a 

State wishes to further limit D–SNP-only contracts 

based on regions within the State. 

90Star Ratings for the new D–SNP-only contracts 

would be calculated in accordance with § 422.166. 

As described at § 422.166(d)(2)(vi), new D–SNPonly contracts that do not have sufficient data to 

calculate and assign ratings and do not meet the 

definition of low enrollment or new MA plans at 

§ 422.252 would be assigned Quality Bonus 

Payment ratings based on the enrollment-weighted 

average highest rating (as defined at § 422.162) of 

the parent organization’s other MA contract(s). 

Where States choose to use this 

opportunity, it would have several 

benefits. First, it would provide the 

State and the public with greater 

transparency on the quality ratings for 

the D–SNP, reflecting outcomes and 

experiences specific to dually eligible 

individuals in the State.90 This can help 

CMS and States better identify 

disparities between dually eligible and 

other beneficiaries and target 

interventions accordingly where the 

population covered by the D–SNP-only 

contract is of sufficient size to reliably 

report performance on quality measures 

and surveys. Second, it would improve 

transparency on financial experiences 

related to furnishing Medicare and 

Medicaid benefits because the contract’s 

medical loss ratio would reflect 

Medicare financial experience specific 

to dually eligible individuals in the 

State that are enrolled in a companion 

Medicaid MCO as well as the D–SNP 

because this proposal is limited to D– 

SNPs with exclusively aligned 

enrollment. Exclusively aligned 

enrollment, as defined in § 422.2, means 

the Medicaid MCO that furnishes 

Medicaid benefits is the same as the D– 

SNP, the D–SNP’s parent organization, 

or owned and controlled by the D– 

SNP’s parent organization. Third, it 

would allow a D–SNP to create a MOC 

that is specific to the State, which 

would facilitate review by the State and 

provide opportunities for greater 

customization of the MOC to the State’s 

Medicaid-related policies and priorities. 

Fourth, it would enable CMS to review 

and evaluate the provider network 

specific to the D–SNPs offered under 

that D–SNP-only contract. 

We describe at proposed 

§ 422.107(e)(2) how the CMS 

administrative steps to permit a new D– 

SNP-only contract would be initiated by 

receipt of a letter from the State 

Medicaid agency indicating its intention 

to include the contract requirements 

under § 422.107(e)(1) in its contract 

with specific MA organizations offering, 

or intending to offer, D–SNPs with 

exclusively aligned enrollment in the 

State. We will provide States with 

additional information on timelines and 

procedures in sub-regulatory guidance; 

we may also address our 

recommendations for best practices and 

identify considerations for States that 

are considering this. We would expect 

the following steps—which are 

consistent with current timeframes and 

procedures for submission of 

applications, bids and other required 

materials to CMS—to be taken if a State 

sought to include these requirements for 

the 2025 plan year: 

• Consistent with CMS 

recommendations, the State consults 

with CMS, MA organizations, and other 

stakeholders beginning in early 2023 on 

whether to add the requirements at 

§ 422.107(e)(1) to its State Medicaid 

agency contract. 

• Upon reaching a decision to 

proceed, the State would notify CMS (by 

letter) and the affected MA 

organizations by August 2023 to enable 

the MA organization and CMS to start 

the necessary steps. 

• Following existing timelines and 

procedures for applications, bids, and 

other annual submissions, and 

consistent with § 422.501(b), the 

impacted MA organizations would 

submit a Notification of Intent to CMS 

to apply for a new D–SNP-only contract 

in November of 2023 and an application 

for a new D–SNP-only contract 

(beginning January 2025) in February of 

2024. 

• CMS and the State would develop 

integrated SB, Formulary, and combined 

Provider and Pharmacy Directory model 

materials from January through June 

2024. 

• The impacted MA organizations 

would submit a bid for the D–SNP PBP 

in the new D–SNP-only contract per 

§ 422.254 by the first Monday in June 

2024. 

• The impacted MA organizations 

would not submit a bid in June 2024 for 

the D–SNP PBP that had been included 

in the non-D–SNP-only MA contract, 

indicating it is non-renewing the 

existing PBP. 

• The affected D–SNPs would submit 

their State Medicaid agency contracts, 

including the provisions described at 

§ 422.107(e)(1), in July of 2024 and the 

D–SNP’s request to use the proposed 

crosswalk exception at 

§ 422.530(c)(4)(ii) in June of 2024 to 

move enrollees from the non-renewing 

D–SNP to the new D–SNP offered under 

the D–SNP-only contract. 

• Subject to compliance with all Part 

C and Part D requirements, CMS would 

approve the new D–SNP PBP and its bid 

in the D–SNP-only contract for CY 2025 

in September 2024. 

• Dually eligible beneficiaries 

enrolled in non-renewing D–SNP PBPs 

could be crosswalked to the new D–SNP 

PBP in October 2024 for a January 1, 

2025 effective date if the MA 

organization requests the crosswalk 

exception proposed at § 422.530(c)(4)(ii) 

and it is approved by CMS. 

• The new D–SNP PBP into which 

individuals are crosswalked describes 

changes to the MA–PD benefits and 

provides information about the D–SNP 

PBP in the Annual Notice of Change, 

which must be sent consistent with 

§ 422.111(a), (d), and (e) for beneficiary 

receipt in early October 2024. 

Establishing D–SNP-specific contracts 

creates some new challenges. CMS 

would have added administrative 

burden to oversee a larger number of 

contracts. MA organizations would 

similarly experience new burdens, such 

as additional reporting to CMS, 

calculation of HEDIS measures, and 

administration of HOS and CAHPS 

surveys. We believe these costs are 

modest relative to the benefits. We 

solicit comments on other consequences 

that would flow from our proposal, both 

in terms of benefits for the MA 

organizations, States, and dually eligible 

individuals and potential unforeseen 

difficulties for these stakeholders. 

Finally, to avoid any significant 

beneficiary disruption, we propose a 

new crosswalk exception to allow MA 

sponsors to seamlessly move D–SNP 

members into any D–SNP-only contract 

created under this proposal. Our 

proposed crosswalk exception would 

apply only for movement between plans 

of the same product type (HMO, PPO, 

etc.) under the same parent organization 

for the following contract year when the 

new D–SNP is created under a new D– 

SNP-only contract based on a State 

requirement as described in proposed 

§ 422.107(e). It would allow transition to 

a D–SNP under a contract subject to 

proposed § 422.107(e) from a D–SNP 

that is non-renewing, has enrollees 

residing in the portion of the current 

service area impacted by the service 

area reduction, or has its eligible 

population newly restricted by a State 

contract. To add this new crosswalk 

exception, we propose redesignating the 

existing paragraph (c)(4) into new 

paragraphs (c)(4)(i) and (ii) in § 422.530. 

Under this proposal, the processes used 

for other crosswalk exceptions (for 

example, the notice to CMS and CMS’ 

review and approval of the crosswalk 

exception) would apply to this new 

crosswalk exception. 

We seek comment on this new 

proposed crosswalk exception and 

whether any additional beneficiary 

protections should apply. 


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91Because D–SNPs must offer Part D benefits, 

they are subject to both MA requirements in part 

422 and Part D requirements in part 423. See 

§§ 422.2 (definition of specialized MA plans for 

special needs individuals) and 422.500. 

92Refer to www.cms.gov/Regulations-andGuidance/Legislation/ 

PaperworkReductionActof1995 and 

www.govinfo.gov/content/pkg/FR-1995-08-29/pdf/ 

95-21235.pdf. 

93Refer to www.cms.gov/Medicare/PrescriptionDrug-Coverage/PrescriptionDrugCovContra/Part-DModel-Materials. 

b. Integrated Member Materials 

Communicating information to 

enrollees and potential enrollees is an 

important function of MA plans, Part D 

plans, and Medicaid managed care 

plans—and D–SNPs with exclusively 

aligned enrollment must comply with 

all of those rules.91 There are advantages 

for enrollees in D–SNPs with 

exclusively aligned enrollment in 

receiving one set of communications 

that integrates all of the required 

content, as discussed in more detail 

later in this section, so we are proposing 

a mechanism and some parameters to 

facilitate a State’s election to have D– 

SNPs with exclusively aligned 

enrollment use certain communications 

materials that integrate content about 

Medicare and Medicaid. Under this 

proposal, the applicable Medicaid 

managed care and MA requirements and 

standards would continue to apply to 

the integrated materials. As background, 

we discuss in this section some of the 

requirements for mandatory 

communications materials in the MA 

and Medicaid programs. 

CMS requires MA plans and Part D 

plans to furnish specific information to 

enrollees and potential enrollees, with 

some specific requirements outlined in 

§§ 422.111 and 423.128 and additional 

requirements at §§ 422.2261, 422.2267, 

423.2261, and 423.2267. For 

information that CMS deems vital to 

Medicare beneficiaries, including 

information related to enrollment, 

benefits, health, and rights, CMS may 

develop and provide materials or 

content for MA organizations and Part D 

sponsors in either standardized or 

model form. Standardized materials are 

subject to requirements of the 

Paperwork Reduction Act of 1995 (PRA) 

(44 U.S.C. 3501 et seq.) and the Office 

of Management and Budget (OMB) 

collection of information approval 

process no less than every 3 years.92

While MA organizations and Part D 

sponsors must use standardized 

materials and content in the form and 

manner CMS provides, CMS model 

materials and content are examples of 

how to convey information to 

beneficiaries. MA organizations and Part 

D sponsors may use CMS’s model 

materials or craft their own materials or 

content, provided the MA organization 

or Part D sponsor accurately conveys the 

vital information in the required 

material or content to the beneficiary 

and follows CMS’s order of content, 

when specified. In §§ 422.2267 and 

423.2267, we refer to such materials and 

content collectively as required 

materials. 

CMS also includes similar, minimum 

Federal requirements in § 438.10 for 

Medicaid managed care plans 

(including MCOs) to furnish certain 

materials and information to enrollees 

and potential enrollees in a manner that 

is easily understood and readily 

accessible (OMB control number 0938– 

0920). However, CMS does not create 

standardized or model materials for use 

by Medicaid managed care plans. States 

may create such required materials and 

have primary responsibility for ensuring 

that Medicaid managed care plans 

comply with the minimum information 

requirements in § 438.10 and any 

additional requirements imposed by the 

State. Among the materials that 

Medicaid managed care plans must 

distribute are enrollee handbooks, 

provider directories, and formularies. 

To allow MA organizations and Part 

D sponsors sufficient time to populate 

required materials with plan-specific 

information; submit them through the 

CMS Health Plan Management System 

(HPMS) for submission, or submission 

and approval, as applicable; translate 

them into any non-English language that 

is the primary language of at least 5 

percent of the individuals in the service 

area; and make them available to 

beneficiaries by the required dates 

indicated later in this section, CMS aims 

to issue required materials and 

instructions annually by the end of May 

for the following plan year. 

Among the required materials that 

MA organizations and Part D sponsors 

must provide to current and prospective 

members, and post to their websites by 

October 15 prior to the beginning of the 

plan year, are— 

• Evidence of Coverage (EOC), which 

is a standardized communications 

material that tells members how to get 

plan-covered health care services and 

prescription drugs and explains member 

rights and responsibilities. To comply 

with § 422.111(b)(2)(iii), CMS expects 

D–SNPs to modify language in the 

standardized EOC, as applicable, to 

address and include Medicaid benefits 

for which enrollees are eligible, and 

CMS permits D–SNPs to use further 

modifications to explain Medicaid 

benefits the D–SNP furnishes to its 

enrollees. Plans must send the EOC, or 

a notice informing enrollees how to 

access it electronically, to current 

enrollees by October 15 of each year and 

to new enrollees within 10 days of 

CMS’s confirmation of enrollment or the 

last day of the month prior to the 

enrollment effective date (whichever is 

later). The EOC is similar to the model 

enrollee handbook that States are 

required to develop for Medicaid MCOs 

to send under § 438.10(c)(4)(ii). 

• Annual Notice of Changes (ANOC), 

which is a standardized marketing 

material that provides information to 

current members about changes for the 

upcoming contract year. It identifies any 

changes to the plan’s health care 

services, prescription drugs, costsharing for MA benefits (including Part 

A and Part B benefits and supplemental 

benefits), and administrative items such 

as contract number or grievance and 

appeal procedures. D–SNPs may also 

modify language in the ANOC, as 

applicable, to address and include 

Medicaid changes. Plans must send the 

ANOC to current enrollees for receipt no 

later than September 30 of each year, 

except that enrollees with an October 1, 

November 1, or December 1 enrollment 

effective date must receive the ANOC 

within 10 calendar days from receipt of 

CMS confirmation of enrollment or by 

last day of month prior to effective date, 

whichever is later. 

• Summary of Benefits (SB), which is 

a model marketing material that 

provides prospective members a 

description of health care services and 

prescription drugs the plan will cover in 

the upcoming contract year. It helps 

individuals determine which plans best 

meet their needs. D–SNPs must describe 

or identify their Medicaid benefits, and 

FIDE SNPs and HIDE SNPs may display 

integrated benefits where applicable. 

Plans are not required to send SBs to all 

prospective members but, in our 

experience, many do and make the SB 

available by October 15 of each year. 

CMS permits distribution of marketing 

materials as early as October 1 of each 

year. 

• Formulary, which is a model 

communications material that includes 

the list of Medicare Part D drugs the 

plan covers when the drugs are 

medically necessary and filled at one of 

the plan’s network pharmacies. The 

formulary also includes information 

about plan-covered over-the-counter 

(OTC) drugs and non-drug OTC 

products, any mail-order procedures, 

and utilization management procedures 

such as prior authorizations, step 

therapy, or quantity limits that the plan 

requires.93 Plans must send the 

Formulary, or a notice informing how to 


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94Refer to www.cms.gov/Medicare/Health-Plans/ 

ManagedCareMarketing/Marketng

ModelsStandardDocumentsand

EducationalMaterial. 

95Refer to https://www.cms.gov/ResearchStatistics-Data-and-Systems/Computer-Data-andSystems/HPMS/HPMS-Memos-Archive-Annual. 

access it electronically, for current 

enrollees, for receipt by October 15 of 

each year, and to new enrollees within 

10 days of CMS’s confirmation of 

enrollment or the last day of the month 

prior to the enrollment effective date 

(whichever is later). 

• Provider Directory, which is a 

model communications material that 

lists the number, types, and addresses 

for the plan’s network providers and 

rules about access to providers, such as 

authorization and referral requirements. 

D–SNPs using this model may identify 

Medicare providers who also accept 

Medicaid.94 Plans must send the 

Provider Directory, or a notice 

informing how to access it 

electronically, for current enrollees, for 

receipt by October 15 of each year, and 

to new enrollees within 10 days of 

CMS’s confirmation of enrollment or the 

last day of the month prior to the 

enrollment effective date (whichever is 

later). 

• Pharmacy Directory, which is a 

model communications material that 

contains a list of the plan’s network 

pharmacies and contact information, 

including all retail, mail-order, home 

infusion, and long-term care options.95

Plans must send the Pharmacy 

Directory, or a notice informing how to 

access it electronically, for current 

enrollees for receipt by October 15 of 

each year, and to new enrollees within 

10 days of CMS’s confirmation of 

enrollment or the last day of the month 

prior to the enrollment effective date 

(whichever is later). 

CMS encourages D–SNPs to add 

related Medicaid information in the 

EOC, ANOC, SB, and Provider 

Directory. Further integrating Medicare 

and Medicaid information in these 

required materials, as well as in the 

Formulary and Pharmacy Directory, can 

improve beneficiary experiences by 

providing a more seamless description 

of health care coverage and enhancing 

the understanding of and satisfaction 

with the coverage both programs 

provide. 

CMS conducts studies to improve the 

effectiveness of the model and 

standardized beneficiary materials and 

content that we provide to MA and Part 

D plans for their use in communicating 

with enrollees and potential enrollees. 

To test materials, we conduct individual 

interviews with dually eligible 

individuals and desk reviews by 

contractors, CMS subject matter experts, 

and advocacy organizations. Since 2015, 

we have tested an integrated EOC, 

ANOC, SB, Formulary, and combined 

Provider and Pharmacy Directory. For 

example, a 2017 study focused on 

beneficiary assessment of the Provider 

and Pharmacy Directory. Beneficiaries 

consistently described the CMS model 

directory as ‘‘clear,’’ ‘‘simple,’’ and 

‘‘easy to read.’’ Beneficiaries also noted 

that the integrated version of the 

directory with the combined 

information on Medicare and Medicaid 

providers/pharmacies was 

comparatively better than separate 

Medicare and Medicaid directories they 

received from their current or previous 

insurance plans. We received similarly 

positive feedback from individuals with 

disabilities and from Spanish-speaking 

beneficiaries who tested a translated 

version. 

MMPs participating in the capitated 

financial alignment model and the 

Minnesota Senior Health Options 

(MSHO) plans in the Demonstration to 

Align Administrative Functions for 

Improvements in Beneficiary 

Experience use integrated versions of 

these required materials. In addition, 

since 2019, CMS has worked with 

Massachusetts, New Jersey, and the 

FIDE SNPs in each State to develop and 

annually update certain integrated 

materials that the States require and 

issue to these plans. For contract years 

2020 and 2021, we provided high-level 

assistance to New York as the State 

developed select integrated materials 

that its Medicaid Advantage Plus (MAP) 

plans could use. We are also working 

with California for contract year 2023 to 

develop integrated materials for those 

D–SNPs with exclusively aligned 

enrollment receiving Cal MediConnect 

members at the end of the California 

capitated FAI demonstration in 2022. 

For the D–SNPs we have worked 

with, CMS typically begins 

development of integrated national 

templates and State-specific models 

with the SB; a Formulary that contains 

Medicare Part D, Medicaid, and OTC 

drugs as well as non-drug OTC 

products; and one combined Medicare 

and Medicaid Provider and Pharmacy 

Directory. Starting with these materials 

has several advantages. First, these 

materials integrate key Medicare and 

Medicaid information, which dually 

eligible individuals can use to make 

more knowledgeable decisions about 

their health care choices. Second, the 

SB, Formulary, and Provider and 

Pharmacy Directory are required 

materials but are not standardized and, 

therefore, are not subject to the PRA 

clearance process, which often takes 

nine months or more to complete. In 

contrast, D–SNPs must use standardized 

materials, as discussed earlier, without 

modification to the language, content, 

format, or order of information except in 

a few, specific instances per § 422.2267. 

Third, the SB, Formulary, and Provider 

and Pharmacy Directory models are not 

lengthy or overly complex. They also 

offer opportunities for D–SNPs in 

different States with different Medicaid 

requirements to provide prospective and 

current dually eligible enrollees a more 

seamless presentation of essential 

information about their Medicare and 

Medicaid coverage. This can contribute 

to increased understanding of and 

satisfaction with the coverage both 

programs provide. 

To provide a more coordinated 

beneficiary experience, we propose at 

§ 422.107(e) to codify a pathway by 

which CMS would coordinate with a 

State that chooses to require, through its 

State Medicaid agency contract, that 

certain D–SNPs use an integrated SB, 

Formulary, and combined Provider and 

Pharmacy Directory (which would have 

to comply with §§ 422.111, 

422.2267(e)(11), 423.128, 423.2267(e), 

and 438.10(h)). Proposed § 422.107(e)(1) 

establishes factual circumstances that 

would commit CMS to certain actions 

under proposed paragraphs (e)(2) and 

(3). We anticipate that there would be 

operational and administrative steps at 

the CMS and State level that would be 

necessary before a D–SNP could 

implement integrated communications 

materials, such as collaboration and 

coordination by CMS and the State on 

potential template materials, 

identification of potential conflicts 

between regulatory requirements at 42 

CFR parts 422 and 423 and State law, 

and setting up a process for joint or 

coordinated review and oversight of the 

integrated materials. CMS annually 

reviews the contracts between States 

and D–SNPs that are required by 

§ 422.107(b) each July for the following 

plan year. There would generally be 

insufficient time for the necessary 

operational and administrative steps to 

implement integrated communications 

materials between the review of the 

contract and the dates by which 

communications materials must be 

provided to current enrollees and made 

available for prospective enrollees 

during the annual coordinated election 

period that begins October 15 each year. 

Therefore, proposed paragraph (e)(2) 

would require that CMS work in good 

faith with States upon receipt of a letter 

of intent regarding the State’s inclusion 

of a requirement for a D–SNP with 

exclusively aligned enrollment to use 


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integrated materials and apply for a D– 

SNP-only contract. We intend that these 

efforts include the work to develop 

model integrated materials before the 

State Medicaid agency contract 

submissions are due for the contract 

year for which the D–SNP would use 

the integrated materials. 

We do not intend through this 

proposal to significantly change 

timelines for plans to prepare materials 

nor do we intend to require any State to 

mandate that D–SNPs use integrated 

materials. We intend for this proposal to 

assure interested States that CMS would 

do its part to make it possible for D– 

SNPs to comply with State Medicaid 

agency contract terms to use materials 

that integrate Medicare and Medicaid 

content, including at a minimum the 

Summary of Benefits, Formulary, and 

combined Provider and Pharmacy 

Directory if a State Medicaid Agency 

seeks to require D–SNPs with 

exclusively aligned enrollment to 

perform as described at § 422.107(e). 

We are considering including the EOC 

and ANOC as part of the minimum 

scope of integrated materials identified 

in proposed § 422.107(e)(1)(ii). 

However, without yet navigating the 

PRA process for creating integrated 

versions of these materials, it may be 

better to re-assess integration of these 

materials at a later date. We welcome 

comments on this alternative and 

whether including these additional 

materials as part of the minimum scope 

of integration addressed in proposed 

§ 422.107(e)(1)(ii) would better further 

our goals or better suit the needs of 

States that may use the pathway we are 

proposing at § 422.107(e) to achieve 

more integration for certain D–SNPs. 

Either way, our proposal would not 

preclude CMS and States from 

collaborating on other integrated 

materials, including an integrated EOC 

or ANOC. As proposed, § 422.107(e) 

applies only when a State requires D– 

SNPs with exclusively aligned 

enrollment to use the minimum scope of 

integrated materials specified in 

paragraph (e)(1)(ii) and to seek CMS 

approval of D–SNP-only contracts. 

While we have proposed minimum 

parameters, a State that wishes to 

require D–SNPs with exclusively 

aligned enrollment to do more (for 

example, use additional integrated 

materials) may do so under this 

proposal. Further, we do not intend to 

prohibit or foreclose the possibility that 

CMS will work with States on other 

potential integration efforts that are not 

within the scope of § 422.107(e)(1). 

c. Joint State/CMS Oversight 

MA organizations receiving capitated 

payments through MA and from the 

State Medicaid agency must comply 

with different sets of Medicare and 

Medicaid requirements, including 

requirements imposed at the State level 

that are not identical to Federal 

minimum standards for Medicaid 

managed care plans in part 438. CMS 

and States have built separate 

infrastructure to monitor compliance 

with each set of requirements. This has 

three drawbacks related to integrated 

care approaches for dually eligible 

individuals. First, State regulators may 

be unaware of important compliance or 

performance problems related to the 

delivery of Medicare services or 

imposed on D–SNPs (or MA plans 

generally), and CMS may be unaware of 

important compliance or performance 

problems related to the delivery of 

Medicaid services, even when both 

parties are monitoring the same 

organization’s coverage of services to 

the same people. Second, State and 

CMS officials may pursue different 

performance improvement priorities 

applicable to the plan(s) that cover 

dually eligible individuals, even when 

the plan(s) are under the same parent 

organization and serving the same 

enrollees. Third, uncoordinated 

oversight by CMS and the States can 

create inefficiencies for health plans 

where regulators seek duplicative 

information or initiate Medicare and 

Medicaid audits at the same time. We 

propose to address these drawbacks by 

giving States the opportunity to 

collaborate with CMS on oversight 

activities for the specific D–SNPs that 

operate under the conditions described 

at proposed paragraph (e)(1). 

(1) State Access to the Health Plan 

Management System 

We propose in paragraph (e)(3)(i) a 

mechanism to address access by States 

to the CMS Health Plan Management 

System (HPMS) (or a successor system) 

to better coordinate State and CMS 

monitoring and oversight of D–SNPs 

that operate under the conditions 

described at proposed paragraph (e)(1). 

HPMS is web-enabled information 

system where health and drug plans, 

plan consultants, third party vendors, 

and pharmaceutical manufacturers work 

with CMS to fulfill the plan enrollment, 

operational, and compliance 

requirements of the MA and 

Prescription Drug programs. Our 

experience granting State access to 

HPMS through the FAI and a related 

demonstration in Minnesota suggest that 

HPMS access is a useful tool and that 

State access is without known 

problematic unintended consequences. 

Therefore, we propose that CMS would 

grant State access to HPMS, or any 

successor system, to facilitate 

monitoring and oversight for D–SNPs 

operating under the specific contract 

terms required by the State that are 

described in proposed paragraph (e)(1). 

Under our proposal, approved State 

Medicaid officials would be able to use 

HPMS to conduct a number of 

information sharing and oversight 

activities for these D–SNPs including, 

but not limited to, reviewing marketing 

materials, and viewing models of care, 

member complaints, plan benefits, 

formulary, network, and other basic 

contract management information. This 

access would allow State users the 

ability to directly view D–SNP 

information without requiring or asking 

the D–SNP to send the information to 

the States and would facilitate StateCMS communication on D–SNP 

performance because the State users 

would be able to review the same data 

and information available to CMS. MA 

organizations offering D–SNPs with 

exclusively aligned enrollment may 

benefit when it reduces the need for 

States to separately obtain the same 

information that is already available in 

HPMS. 

State access would be limited to 

approved users and subject to 

compliance with HHS and CMS policies 

and standards and with applicable laws 

in the use of HPMS data and the 

system’s functionality. Based on the 

current architecture of HPMS, approved 

State officials would only have access 

specific to information related to the 

MA contract(s) described in proposed 

paragraph (e)(1)(i). This proposal would 

not limit CMS’s discretion to make 

HPMS accessible in other circumstances 

not described in our proposal but would 

authorize State access, which would 

include access to information about the 

MA organization and the applicable D– 

SNP(s) and D–SNP-only contract, and 

information submitted by the MA 

organization through HPMS, under the 

specific circumstances described in the 

proposed regulation. We seek feedback 

on our proposal, including feedback 

from MA organizations about CMS 

providing approved State officials with 

access to HPMS as a means to share 

information as it relates to the 

provisions of this proposed rule. 

(2) State-CMS Coordination on Program 

Audits 

Proposed paragraph (e)(3)(ii) 

establishes that CMS would coordinate 

with State Medicaid officials on 

program audits. This coordination 


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96Medicare Advantage and Section 1876 Cost 

Plan Network Adequacy Guidance (Last updated: 

June 17, 2020). Retrieved at Medicare Advantage 

and Section 1876 Cost Plan Network Adequacy 

Guidance (cms.gov). 

97https://www.cms.gov/files/document/medicare

advantageandsection1876cost

plannetworkadequacyguidance6-17-2020.pdf. 

would include sharing major audit 

findings for State awareness related to 

D–SNPs subject to proposed paragraph 

(e)(1). 

CMS conducts audits of MA plans 

periodically to assess compliance with 

Federal requirements, including D–SNPspecific care coordination requirements. 

We believe that there are benefits for 

CMS, the State, and the MA 

organization to increasing coordination 

in connection with such audits. For 

example, providing State officials the 

opportunity to join the entrance and exit 

conference, as we have in the FAI and 

related demonstrations, has afforded 

greater transparency for State Medicaid 

officials into the Medicare-focused 

auditing process. Similarly, we would 

offer to work with States to attempt to 

avoid scheduling simultaneous State 

and Federal audits. For example, if State 

officials share a schedule of their 

planned Medicaid audits for MA 

organizations with contracts subject to 

proposed paragraph (e)(1) before CMS 

finalizes its audit schedule in October 

preceding the audit year, CMS may be 

able to adjust its program audit schedule 

to avoid overlapping audits. If a State 

official shares a schedule of planned 

audits with CMS after October, CMS 

could alternatively alert the State 

Medicaid agency if any of the State’s 

planned audits are scheduled to overlap 

with a CMS program audit. This process 

would reduce the risk of concurrent 

Medicare and Medicaid program audits, 

thereby reducing the risk that an MA 

organization is insufficiently responsive 

to auditors or its performance slips 

because it is managing concurrent 

audits. We currently have the ability to 

coordinate with State Medicaid agencies 

on audits, but we are proposing to 

codify how CMS would commit to 

coordination in situations where 

§ 422.107(e) applies. This would help in 

setting expectations for and provide 

clarity to stakeholders, especially State 

Medicaid agencies. While these 

activities are provided as examples, we 

do not intend to limit our discretion to 

coordinate with States in the audit 

process outside of the parameters in 

proposed § 422.107(e)(3)(ii); we would 

evaluate the extent of coordination in 

each circumstance relevant to the D– 

SNP-only contract established as a 

result of the State’s contract 

requirements described in paragraph 

(e)(1). 

(3) State Input on Provider Network 

Exceptions 

As part of implementing the proposed 

policy to coordinate on program audits 

and providing access to HPMS, CMS 

expects to use existing authority and 

flexibility as it pertains to the review of 

medical provider networks, particularly 

the review of network exceptions, to 

solicit and receive input from State 

Medicaid agencies. CMS requires all 

MA organizations to maintain a network 

of appropriate providers that is 

sufficient to provide adequate access to 

covered services. Currently, MA 

organizations submit their provider 

networks to CMS for review at the 

overall contract level on a triennial basis 

or when there is a triggering event such 

as an application or a significant 

provider/facility termination.96 As 

indicated in the Medicare Advantage 

and Section 1876 Cost Plan Network 

Adequacy Guidance,97 MA 

organizations are required to 

demonstrate network adequacy by 

submitting data for specific contracted 

provider and facility specialty types via 

the Network Management Module 

(NMM) of HPMS. To the extent an MA 

organization offers one or more D–SNPs, 

State Medicaid officials may be 

uniquely positioned to provide relevant 

information to CMS during our 

adjudication of certain network 

adequacy decisions, specifically when 

an MA organization seeks an exception 

to our network adequacy standards in 

§ 422.116. We are not proposing to 

adopt specific regulation text in 

§ 422.107(e)(3) regarding potential 

collaboration with State Medicaid 

agencies in connection with 

adjudicating requests for an exception to 

network adequacy requirements for D– 

SNPs that operate under the conditions 

described at proposed paragraph (e)(1) 

because a regulatory amendment is not 

necessary to support this process; 

however, our proposal here outlines 

how we expect this type of collaboration 

to work. 

When an MA plan fails to meet the 

specific network adequacy standards in 

§ 422.116(b) through (e), the MA plan 

may request an exception to these 

network adequacy criteria. Exceptions 

are limited to specific situations and 

conditions identified in § 422.116(f)(1) 

and, in considering whether to grant an 

exception, CMS considers whether 

current access to providers and facilities 

is different from the data CMS uses to 

evaluate network adequacy; whether 

there are factors present, as identified in 

§ 422.112(a)(10), that demonstrate that 

network access is consistent with or 

better than the original Medicare pattern 

of care; and whether approval of the 

exception is in the best interests of 

beneficiaries. State Medicaid agencies 

may have information and insight about 

such other factors that might be relevant 

in setting a standard for an acceptable 

health care delivery network in a 

particular service area. For example, 

State Medicaid agencies could provide 

information about the number and 

scope of providers enrolled and 

screened by the State Medicaid agency, 

local practice patterns, geographic 

barriers, or transportation dynamics. 

In this proposed rule, CMS is 

proposing to amend § 422.116(a)(1)(ii) to 

require compliance with network 

adequacy standards as part of an 

application for a new or expanding MA 

service area (see section II.C. of this 

proposed rule). In addition, CMS 

intends to reach out to States when a 

MA organization with a D–SNP contract 

described in § 422.107(e)(1) submits an 

exception request that does not meet the 

requirements at § 422.116(f)(1). In those 

instances, CMS may collaborate with 

the respective State to identify if there 

are other factors, as described at 

§ 422.112(a)(10), that may be relevant 

before making a determination on the 

exception request. We piloted a similar 

approach in the Financial Alignment 

Initiative and a related demonstration in 

Minnesota where States provided input 

to inform the exception review process. 

Collectively, our proposed paragraph 

(e)(3) at § 422.107 would improve 

Federal and State oversight of certain D– 

SNPs (and their affiliated Medicaid 

managed care plans) through greater 

information-sharing among government 

regulators. We have successfully tested 

these approaches in other circumstances 

and believe applying them under the 

conditions described in proposed 

paragraph (e)(1) would provide greater 

transparency to the regulated industry 

while assuring States that CMS will be 

a willing partner. We welcome 

comments on our proposals. 

d. Comment Solicitation on Financing 

Issues 

In Medicare and Medicaid, benefits 

funded by one payer (for example, 

behavioral health treatment funded by 

Medicaid) may generate savings for the 

other payer (for example, reduced 

emergency room and inpatient 

admissions funded by Medicare). For 

dually eligible beneficiaries, each payer 

has an incentive to provide benefits and 

focus spending in a manner that 

promotes its own cost saving, which 

may not be consistent with meeting 

beneficiaries’ overall needs. In the 

Financial Alignment Initiative, we tried 


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98For more information on the ratesetting 

methodology for the FAI capitated model, see Joint 

Rate-Setting Process for the Financial Alignment 

Initiative’s Capitated Model, available at: https://

www.cms.gov/files/document/capitatedmodelrate

settingprocess03192019.pdf. 

99Unless waived by CMS, MMPs are required to 

comply with Medicaid managed care requirements 

under 42 CFR part 438 and with MA requirements 

in Part C and Part D of Title XVIII of the Act and 

42 CFR parts 422 and 423. While (unlike MA plans) 

MMPs do not submit bids, the existing payment 

policies for each program generally apply to MMPs, 

including requirements related to actuarial 

soundness of Medicaid capitation rates and the 

MLR reporting required in both the Medicare and 

Medicaid programs. 

100 In the FAI capitated model, CMS waived 

section 1857(e) of the Act, which requires MA MLR 

remittances, insofar as such provisions were 

inconsistent with the methodology for determining 

MLRs for the demonstration. For more information, 

see the signed memoranda of understanding for 

capitated model demonstrations available at https:// 

www.cms.gov/Medicare-Medicaid-Coordination/ 

Medicare-and-Medicaid-Coordination/MedicareMedicaid-Coordination-Office/FinancialAlignment

Initiative/ApprovedDemonstrationsSignedMOUs. 

The MLR approach varies across capitated model 

demonstrations, with most demonstrations 

requiring remittances for MLRs below thresholds of 

85 to 87 percent, while the remaining 

demonstrations include other risk mitigation 

approaches, such as risk corridors, that provide the 

opportunity for recoupment of MMPs’ gains above 

specified thresholds. More information on such 

arrangements may be found in the MMP three-way 

contracts available at https://www.cms.gov/ 

Medicare-Medicaid-Coordination/Medicare-andMedicaid-Coordination/Medicare-MedicaidCoordination-Office/FinancialAlignmentInitiative/ 

CapitatedModel. 

101Summaries of the comments and CMS’s 

responses may be found in the 2013 Medicare 

Program; Medical Loss Ratio Requirements for the 

Medicare Advantage and the Medicare Prescription 

Drug Benefit Programs final rule (78 FR 31283). 

to solve for this financial misalignment 

through integrated financial approaches, 

including blending Medicare and 

Medicaid capitation payments 98 and 

evaluating integrated MedicareMedicaid medical loss ratios (MLRs).99

Based on this experience, we are 

assessing whether there are ways to take 

two elements of MMP financial 

methodology and apply to D–SNPs: (1) 

Integrated MLRs; and (2) consideration 

of the expected impact of benefits 

provided by MA organizations on 

Medicaid cost and utilization in the 

evaluation of Medicaid managed care 

capitation rates for actuarial soundness. 

We describe each in this section. 

MA organizations, including those 

offering FIDE SNPs and other integrated 

plans with both MA and Medicaid 

managed care plan contracts, separately 

report medical loss ratio (MLR) results 

for their Medicare experience (per 

subpart X of part 422) and, where 

applicable, their Medicaid experience 

(per § 438.8). MA organizations submit 

MLR reports in a timeframe and manner 

specified by CMS. As required by 

section 1857(e) of the Act, CMS collects 

remittances for MLRs below a minimum 

threshold of 85 percent; additionally, 

enrollment sanctions apply for MA 

contracts that fail to meet minimum 

MLR thresholds for three consecutive 

years, while contracts are terminated for 

those MA organizations that fail to meet 

these thresholds for 5 consecutive years. 

Medicaid managed care plans calculate 

and report their MLR experience for 

each contract year (per § 438.8), with 

actuarially sound rates set to achieve an 

MLR of at least 85 percent (per 

§ 438.4(b)(9)). Additional Medicaid MLR 

requirements vary at States’ discretion, 

including the option to impose 

remittance requirements. 

While the MA and Medicaid managed 

care MLR requirements are similar, they 

are not identical. Areas of difference 

include treatment of fraud reduction 

expenses, credibility adjustments, the 

level of detail reported, and use of MLR 

results in ratesetting. While these 

differences serve program purposes in 

the separate Medicare Advantage and 

Medicaid managed care programs, they 

can make it challenging to compare 

MLRs across programs and to evaluate 

the performance of a plan that integrates 

Medicare and Medicaid benefits. For 

example, an integrated plan may show 

a low MLR for Medicare Advantage and 

a high MLR for Medicaid managed care 

if it successfully delivers more 

community behavioral health treatment 

that results in fewer emergency room 

visits and hospitalizations. In this 

example, however, even if the aggregate 

payment amount across Medicare and 

Medicaid generally matches the 

combined cost of furnishing covered 

benefits to enrollees, both Medicare and 

Medicaid would potentially make 

adjustments. For example, if the 

Medicare MLR was below 85 percent, 

CMS would recoup funds from the plan. 

If the Medicaid MLR exceeds a 

reasonable maximum threshold that 

would account for reasonable 

administrative costs, the State would 

evaluate that when setting future 

capitation rates, the result of which may 

be to increase the Medicaid capitation 

rates in subsequent years. Further, as 

MA plans report MLR results at the 

contract level (not the plan level), MLR 

data specific to a particular FIDE SNP is 

not necessarily available. In contrast, 

MMPs report a combined Medicare and 

Medicaid MLR to CMS and States, with 

such reporting building off MA 

requirements, meeting Medicaid 

requirements, and offering a more 

complete picture of these integrated 

plans’ performance.100

In the rulemaking to implement the 

statutory requirement for an MLR for 

MA plans, CMS received comments 

requesting we allow the MLR for D– 

SNPs and FIDE SNPs to include 

Medicare and Medicaid costs and 

revenue, to better evaluate such plans’ 

performance and spending. 101 While 

we do not believe we have the statutory 

authority to include Medicaid 

experience as part of the Medicare MLR 

requirement, States may require 

additional data to be reported, including 

combined Medicare-Medicaid MLRs, in 

addition to the MLR reporting required 

by § 438.8. Such reporting would be in 

addition to, and not a substitute for, the 

required MA MLR under §§ 422.2400 

through 422.2490 and Medicaid 

managed care MLR under § 438.8. 

As described in section II.A.6.a., we 

propose at § 422.107(e) to make an 

option available through which States 

could require D–SNPs with exclusively 

aligned enrollment to operate under MA 

contracts that only include one or more 

D–SNPs that operate in that State. While 

such D–SNPs would still have to 

calculate and report separate Medicare 

and Medicaid MLRs under the 

applicable program requirements 

(absent a waiver), having a separate 

contract for certain D–SNPs would 

better equip States to evaluate MLRs 

and financial performance specific to 

that D–SNP product. Combining MA 

MLR information with corresponding 

Medicaid MLR data could potentially 

provide a more complete picture of plan 

financial performance in an integrated 

environment, as compared to what may 

be available currently. 

We are seeking feedback on the extent 

to which this approach would better 

allow States to evaluate the performance 

of integrated plans. We are also 

interested in feedback from 

stakeholders—including States, health 

plans, actuaries, and advocates—on the 

impact of separate Medicare and 

Medicaid MLR requirements on meeting 

integration goals, administrative burden 

for plans and others through separate 

MLR standards, and whether the current 

approach provides sufficient data for 

State decision making and policy 

development. 

Integrated plans serving dually 

eligible beneficiaries receive Medicaid 

capitation payments from States for 

coverage of Medicaid-covered services. 

These Medicaid managed care 

capitation rates are subject to actuarial 

soundness requirements under § 438.4. 

Several States limit enrollment in D– 

SNPs to achieve exclusively aligned 

enrollment in which all D–SNP 

enrollees are also in an affiliated 

Medicaid managed care plan, for which 

these 42 CFR part 438 actuarial 

soundness requirements apply. 


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102As described in the signed memoranda of 

understanding for capitated model demonstrations 

available at https://www.cms.gov/MedicareMedicaid-Coordination/Medicare-and-MedicaidCoordination/Medicare-Medicaid-CoordinationOffice/FinancialAlignmentInitiative/Approved

DemonstrationsSignedMOUs, ‘‘Assessment of 

actuarial soundness under 42 CFR 438.6, in the 

context of this Demonstration, should consider both 

Medicare and Medicaid contributions and the 

opportunities for efficiencies unique to an 

integrated care program. CMS considers the 

Medicaid actuarial soundness requirements to be 

flexible enough to consider efficiencies and savings 

that may be associated with Medicare. Therefore, 

CMS does not believe that a waiver of Medicaid 

actuarial soundness principles is necessary in the 

context of this Demonstration.’’ 

103The BBA of 2018 (Pub. L. 115–123) amended 

section 1852(a) of the Act to expand the types of 

supplemental benefits that may be offered by MA 

plans to chronically ill enrollees as of plan year 

2020, to specifically allow those ‘‘supplemental 

benefits that, with respect to a chronically ill 

enrollee, have a reasonable expectation of 

improving or maintaining the health or overall 

function of the chronically ill enrollee and may not 

be limited to being primarily health related 

benefits.’’ In addition, the ‘‘Medicare Program; 

Contract Year 2021 Policy and Technical Changes 

to the Medicare Advantage Program, Medicare 

Prescription Drug Benefit Program, and Medicare 

Cost Plan Program’’ which appeared in the Federal 

Register on June 2, 2020 (June 2020 final rule) 

finalized provisions to allow for plans to target 

other chronic conditions included in the Medicare 

Managed Care Manual. In the January 2021 final 

rule, CMS codified existing policy on supplemental 

benefits, including the criteria for a supplemental 

benefit, the expanded definition of ‘‘primarily 

health related,’’ and the reinterpreted uniformity 

requirements. 

In the FAI capitated model, CMS 

developed an approach to Medicaid 

actuarial soundness within the model to 

take into account the effects of Medicare 

payment for Medicare covered benefits, 

for which Medicaid is a secondary 

payer, as well as the opportunities for 

efficiencies in an integrated program, 

when developing the Medicaid 

capitation rates paid in the FAI 

model.102 Since we developed this 

approach, CMS has expanded options 

for MA plans to offer a broader array of 

supplemental benefits than available 10 

years ago.103 This change also expands 

the potential that MA supplemental 

benefits have an impact on lowering 

Medicaid costs because the MA 

supplemental benefit must be used first 

to pay for any items and services that 

are covered by both the MA plan and 

Medicaid. In some cases, MA plans may 

offer the types of community supports 

or LTSS that previously were only 

available through Medicaid. As a result, 

the MA supplemental benefit may 

replace or be used before using the 

Medicaid benefit, which would lower 

utilization and overall costs to cover 

Medicaid benefits when an integrated 

plan covers both Medicare and 

Medicaid services for the same 

enrollees. 

With this context and our FAI model 

experience, we believe that Medicaid 

managed care capitation rates can be 

actuarially sound as required by § 438.4 

when those rates are developed in a way 

that considers the impact of MA 

supplemental benefits and any Statespecific requirements in the State 

Medicaid agency contract, D–SNP MOC, 

or MMP contract on the costs and 

utilization of the Medicaid benefits 

covered by the Medicaid managed care 

capitation rates. MA supplemental 

benefits and State-specific D–SNP 

requirements may impact Medicaidrelated costs and utilization, and 

Medicaid rate setting could consider the 

impact on both: (1) Replacing costs that 

would otherwise be a Medicaid 

responsibility, as a primary impact; and 

(2) affecting expenditures on other 

Medicaid benefits, as a secondary 

impact. For example, intensive care 

coordination, covered by MA plans 

through supplemental benefits or as 

administrative expenses, could 

reasonably be expected to impact 

Medicaid costs by (a) reducing Medicaid 

care coordination costs directly; and (b) 

indirectly reducing Medicaid 

expenditures through lower Medicare 

cost-sharing as a result of preventing 

avoidable hospitalizations. We seek 

feedback on this interpretation, 

including from States, health plans, and 

actuaries, on the extent to which 

consideration of the impact of Medicarecovered benefits on costs and utilization 

of Medicaid services as described here 

advances integration goals and is 

consistent with actuarial standards of 

practice. We also request input on what 

information States, actuaries, and others 

would need to evaluate actuarial 

soundness under this approach. Finally, 

we solicit feedback on other options 

related to financing for integrated plans 

CMS should evaluate and consider for 

future rulemaking or sub-regulatory 

clarification. 

7. Definition of Applicable Integrated 

Plan Subject to Unified Appeals and 

Grievances Procedures (§ 422.561) 

In § 422.561, we propose to expand 

the universe of D–SNPs that are 

required to have unified grievance and 

appeals processes by revising the 

definition of an applicable integrated 

plan. The April 2019 final rule 

introduced the concept of applicable 

integrated plans, which we defined as 

FIDE SNPs and HIDE SNPs whose 

Medicare and Medicaid enrollment is 

exclusively aligned (meaning State 

policy limits a D–SNP’s enrollment to 

those whose Medicare and Medicaid 

enrollment is aligned as defined in 

§ 422.2) and the companion Medicaid 

MCOs for those D–SNPs, thereby 

making it feasible for these plans to 

implement unified grievance and 

appeals processes. We limited the 

universe of potential applicable 

integrated plans to FIDE SNPs and HIDE 

SNPs with exclusively aligned 

enrollment to ensure, first, that all 

enrollees are covered with the same 

scope of benefits and, second, that the 

plans implementing unified grievances 

and appeals offered a sufficiently 

substantial range of Medicaid benefits to 

make the unification of Medicare and 

Medicaid processes meaningful for 

beneficiaries and worthwhile for States 

and plans. 

Because the landscape of integrated 

plans has evolved in the past several 

years, we believe there are integrated D– 

SNPs other than FIDE SNPs and HIDE 

SNPs for which a unified grievance and 

appeals process is feasible and, 

therefore, we should require the unified 

process. Expanding the process to these 

plans would simplify the grievance and 

appeals steps for beneficiaries enrolled 

in these plans for their Medicare and 

Medicaid benefits and extend the 

protection of continuation of benefits 

pending appeal as described in 

§ 422.632 to additional beneficiaries. 

Section 50311(b) of the BBA of 2018 

amended section 1859(f)(8)(B) of the Act 

to direct establishment of procedures, to 

the extent feasible, unifying Medicare 

and Medicaid grievances and appeals. 

We believe that unified grievance and 

appeals procedures are feasible for the 

additional D–SNPs. Accordingly, we 

propose, effective January 1, 2023, to 

expand the definition of the term 

applicable integrated plan to include an 

additional type of D–SNP subject to the 

rule. 

We propose to include as applicable 

integrated plans certain combinations of 

Medicaid managed care plans and D– 

SNPs that are not FIDE SNPs or HIDE 

SNPs but meet three other conditions. 

First, State policy must limit the D– 

SNP’s enrollment to beneficiaries 

enrolled in an affiliated Medicaid 

managed care plan that provides the 

beneficiary’s Medicaid managed care 

benefits. Second, each enrollee’s 

Medicaid managed care benefits must be 

covered under a capitated contract 

between (1) the MA organization, the 

MA organization’s parent organization, 

or another entity that is owned and 

controlled by its parent organization 

and (2) a Medicaid MCO or the State 

Medicaid agency. Under our proposal, 

the definition of ‘‘applicable integrated 

plan’’ will include (1) a D–SNP that has, 

by State policy, fully aligned enrollment 

with an affiliated Medicaid plan owned 

by the same parent organization, where 


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104Retrieved from https://www.cms.gov/ 

Research-Statistics-Data-and-Systems/StatisticsTrends-and-Reports/MCRAdvPartDEnrolData/ 

Monthly-Contract-and-Enrollment-SummaryReport.html. 

105 Ibid. 

106See https://www.cms.gov/Medicare-MedicaidCoordination/Medicare-and-Medicaidthe affiliated Medicaid plan has a 

capitated contract with a Medicaid MCO 

to provide all of the beneficiary’s 

Medicaid managed care benefits (2) and 

its affiliated Medicaid plan. Third, the 

Medicaid coverage under the capitated 

contract must include primary care and 

acute care, including Medicare costsharing as defined in section 

1905(p)(3)(B), (C) and (D) of the Act, 

without regard to the limitation of that 

definition to qualified Medicare 

beneficiaries, and must include at least 

one of the following: Medicaid home 

health services, Medicaid durable 

medical equipment, or Medicaid 

nursing facility services. 

Where each of these conditions is 

met, enrollees receive all of their 

Medicare and Medicaid benefits that are 

available through managed care in the 

State through a D–SNP and affiliated 

Medicaid managed care plan. We 

believe such plans integrate a 

sufficiently broad range of Medicaid 

benefits so as to make unifying their 

grievance and appeals processes 

worthwhile. Our proposal would not 

change grievance and appeals processes 

for any Medicaid services not covered 

by the Medicaid managed care plan that 

is affiliated with the D–SNP where the 

three conditions are met. We anticipate 

our proposal would newly require 

unified appeals and grievances 

processes in a number of plans in 

California following the end of the 

California capitated financial alignment 

model demonstration. 

We propose to reorganize the 

definition of applicable integrated plan 

in § 422.561 by adding new subsections 

to the definition in § 422.561 to show 

separate definitions before and after 

January 1, 2023. The proposed 

definition after January 1, 2023, expands 

the universe of applicable integrated 

plans to include a D–SNP and affiliated 

Medicaid managed care plan that meets 

these three criteria. Under the proposed 

revisions to § 422.561, current 

paragraphs (1) and (2) will become 

paragraphs (2)(i)(A) and (B) and apply 

before January 1, 2023. Proposed new 

paragraph (2) of the definition will 

apply beginning January 1, 2023, and 

will include paragraphs (2)(i) and (ii). 

Proposed new paragraphs (2)(i)(A) and 

(B) include the current definition, and 

proposed new paragraph (2)(ii) includes 

the new category of D–SNPs and 

affiliated Medicaid managed care plans 

that would qualify as an applicable 

integrated plan. New proposed 

paragraph (2)(ii)(A) addresses 

enrollment requirements for the D–SNP, 

and new proposed paragraph (2)(ii)(B) 

addresses what types of contracting 

must be in place, and new proposed 

paragraph (2)(ii)(C) the minimum 

Medicaid benefits that must be covered 

by the capitated contract with the State 

Medicaid agency or contract with 

Medicaid MCO. Under our proposal, the 

definition of ‘‘applicable integrated 

plan’’ remains unchanged from the 

current definition for the period before 

January 1, 2023, and would include 

additional types of D–SNPs and 

affiliated Medicaid plans on and after 

January 1, 2023. 

8. Permitting MA Organizations With 

Section 1876 Cost Contract Plans To 

Offer Dual Eligible Special Needs Plans 

(D–SNPs) in the Same Service Area 

(§ 422.503(b)(5)) 

Section 1876(h) of the Act established 

reasonable cost reimbursement contracts 

or ‘‘cost contracts,’’ as defined at 

§ 417.401 as Medicare contracts under 

which CMS pays the health 

maintenance organization (HMO) or 

competitive medical plan (CMP) on a 

reasonable cost basis. Cost contracts 

arrange for Medicare services and 

provide members several flexibilities 

not offered to MA plan members, such 

as the ability to enroll in a plan that 

offers only Part B benefits and to receive 

health care services outside of the cost 

contract plan’s network of providers 

through original Medicare. As of 

January 2021, approximately 173,250 

beneficiaries were enrolled in seven cost 

contracts offered in nine States.104

Federal statute and regulation restrict 

cost contracts in several ways. First, as 

provided in section 1876(h)(5)(A) of the 

Act and § 417.402(b), CMS no longer 

enters into cost contracts. Second, CMS 

established a requirement, originally at 

§ 422.501(b)(4), that an entity seeking to 

contract as an MA organization must not 

accept new members under a cost 

contract plan in any area in which it 

seeks to offer an MA plan when 

implementing the original Part C 

requirements in the interim final rule 

titled ‘‘Medicare Program; 

Establishment of the Medicare+Choice 

Program’’ (HCFA–1030–IFC) (63 FR 

35014 through 35015; 35100) 

(hereinafter referred to as the June 1998 

final rule). CMS later moved this 

requirement to § 422.503(b)(5). The June 

1998 final rule stated that CMS 

established this prohibition to eliminate 

the potential for an organization to 

encourage higher cost members to enroll 

under its cost contract plan while 

healthy members were enrolled in its 

risk-based MA plan. Manipulating 

enrollment in this way would shift costs 

to the government away from the entity. 

Third, MIPPA and the Medicare 

Access and CHIP Reauthorization Act of 

2015 (Pub. L. 114–10) (hereinafter 

referred to as MACRA) amended section 

1876(h)(5)(C) of the Act by specifying 

that cost contract plans operating in 

service areas or portions of service areas 

with two MA plans meeting minimum 

enrollment requirements would be nonrenewed. Implementing regulations are 

codified at § 417.402(c) and went into 

effect at the end of CY 2018, leading to 

a significant decrease in cost contract 

enrollment.105

The prohibition on an entity 

accepting new enrollees in a cost 

contract plan while offering an MA plan 

in the same service area was amended 

in ‘‘Medicare Program; Contract Year 

2015 Policy and Technical Changes to 

the Medicare Advantage and the 

Medicare Prescription Drug Benefit 

Programs’’ (CMS–4159–F) (hereinafter 

referred to as the May 2014 final rule) 

to apply to: (1) A parent organization 

owning a controlling interest in a 

separate legal entity accepting new 

members under a cost contract plan, and 

(2) another separate legal entity owned 

by the same parent organization as the 

legal entity accepting new members 

under a cost contract plan (79 FR 29850; 

29959). An error in the amendment in 

the May 2014 final rule prevented this 

change from being correctly codified in 

the CFR. This error was corrected in the 

January 2021 final rule (86 FR 6099). 

As stated in the May 2014 final rule, 

CMS did not exempt entities with both 

cost contract plans and D–SNPs from 

the regulatory provision at 

§ 422.503(b)(5) because we did not 

believe that the Medicare premium and 

cost-sharing differences in cost contract 

plans and MA plans, including D–SNPs, 

necessarily reduced the incentives an 

organization may have for moving an 

individual from one of its plans to 

another. We also stated that D–SNPs, 

which frequently serve members with 

greater frailty and morbidity than the 

general Medicare population, may have 

an even greater incentive to move 

members to a cost contract plan. 

Since CMS finalized the policy in the 

2014 final rule, we have gained more 

experience relevant to this D–SNP 

policy decision through the 

Demonstration to Align Administrative 

Functions for Improvements in 

Beneficiary Experience conducted in 

partnership with the State of 

Minnesota.106 Three of the seven MA 


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Coordination/Medicare-Medicaid-CoordinationOffice/FinancialAlignmentInitiative/ 

Minnesota.html. 

107Anderson, W.L., Feng, Z., & Long, S.K. 

Minnesota Managed Care Longitudinal Data 

Analysis, prepared for the U.S. Department of 

Health and Human Services Assistant Secretary for 

Planning and Evaluation (ASPE) (March 31, 2016). 

Retrieved from https://aspe.hhs.gov/report/ 

minnesota-managed-care-longitudinal-dataanalysis. 

108One of the three entities offer a D–SNP and 

cost contract plan ceased offering a cost contract 

plan in the same market as its D–SNP in January 

2019. 

109CMS, ‘‘Data Analysis Brief: Managed Care 

Enrollment Trends among Dually Eligible and 

Medicare-only Beneficiaries, 2006 through 2019’’. 

March 2021. Retrieved from https://www.cms.gov/ 

files/document/managedcareenrollmenttrendsdata

brief.pdf. 

110For CY 2021, cost contract plans were offered 

in Colorado, Iowa, Illinois, Kansas, Minnesota, 

Nebraska, North Dakota, South Dakota, Wisconsin. 

organizations offering Minnesota D– 

SNPs participating in the 

demonstration—comprising almost 60 

percent of the demonstration 

enrollment—also sponsored cost 

contract plans in overlapping counties. 

To prevent disruption to the 

demonstration, we waived 

§ 422.503(b)(5) for these entities, using 

our authority under section 1115A of 

the Act. This waiver avoided the risk 

that these entities would, instead of 

closing the cost contract plans to new 

enrollment where the service areas 

overlapped with D–SNPs, non-renew 

their D–SNPs during the demonstration, 

which would undermine our ability to 

carry out successfully the model test. In 

addition, non-renewal of these D–SNPs 

could potentially have led to large-scale 

disenrollment from Minnesota Senior 

Health Options, a D–SNP and Medicaid 

MCO program with evidence of strongly 

favorable outcomes for dually eligible 

older adults.107

Although the waiver and model were 

not designed to test this specific issue, 

the waiver of § 422.503(b)(5) provided 

an opportunity to test whether creating 

an exception for D–SNPs would result 

in substantial shifts of D–SNP members 

to cost contract plans offered under the 

same parent organization. The 

Minnesota demonstration, which is 

focused on alignment of administrative 

procedures, did not change the 

incentives for shifting of members that 

was the rationale for § 422.503(b)(5). In 

the demonstration, we required that 

each of the affected D–SNPs report 

annually the number of D–SNP 

members who switched to the entity’s 

cost contract plan. If two percent or 

more of a D–SNP’s enrollment switched 

to the cost contract plan, CMS would 

further investigate enrollment patterns, 

potentially require corrective actions, 

and rescind the waiver. 

The results of this reporting have been 

instructive. In no year since the waiver 

was established has the number of D– 

SNP members switching to the affiliated 

cost contract plan approached the 2 

percent threshold. The two remaining 

D–SNPs with cost contract plans under 

the same parent organization 108 which 

had a combined December 2020 D–SNP 

enrollment of 19,168, reported a total of 

10 members switched to the affiliated 

cost contract plans during the 2020 plan 

year. The enrollment patterns for prior 

reporting periods are similar: only a 

small number of individuals switched 

from a D–SNP to a cost contract plan 

affiliated with the same entity. 

In addition to this reporting, we 

reviewed current enrollment data on all 

cost contract plans to see if the two 

parent organizations offering both a cost 

contract plan and a D–SNP in the 

demonstration have a higher enrollment 

of dually eligible individuals than in the 

cost contract plans without such 

affiliated D–SNPs. The average 

enrollment of dually eligible individuals 

across all cost contracts in December 

2020 was 3.6 percent, and ranged from 

1.62 percent to 12.2 percent. In 

comparison, about 20 percent of 

Medicare Advantage enrollees are 

dually eligible individuals.109 The two 

cost contracts operating in Minnesota 

that had affiliated D–SNPs were 

consistently on the low end of that 

range, with average enrollments of 

dually eligible individuals of 1.6 

percent and 3.5 percent respectively. 

These averages suggest that the 

availability of a D–SNP that shares a 

parent organization with a cost contract 

plan may decrease such likelihood of 

dually eligible individuals enrolling in 

a cost contract plan. 

The data from the Minnesota 

demonstration shows allowing both a 

D–SNP and a cost contract plan under 

the same parent organization has not 

resulted in a substantial number of 

members moving from the D–SNP to the 

cost contract plan. We believe that the 

number of such plan switches is likely 

minimal for the reasons outlined by the 

commenters in the May 2014 final rule: 

the premiums charged by cost plans are 

unattractive to low-income dually 

eligible individuals who have access to 

a D–SNP that charges no premium. 

We also note that the cost contract 

plans outside of the demonstration that 

had more than 5 percent dually eligible 

enrollment included cost contract plan 

options with zero-dollar premiums. This 

indicates that the typical cost contract 

plan premium functions as a deterrent 

to enrollment by full-benefit dually 

eligible individuals. 

Based on this evidence, we believe 

that allowing a parent organization to 

accept new enrollees in a cost contract 

plan it offers in the same service area as 

the entity offers a D–SNP or seeks to 

offer a new D–SNP will not undermine 

the policy goals that underlie 

§ 422.503(b)(5)—that is, prohibiting 

entities from steering high-cost members 

to their cost contract plans and lower 

cost members to their risk-bearing MA 

plans. In addition, creating an exception 

to § 422.503(b)(5) for D–SNPs would 

allow the entities in Minnesota that 

currently offer both D–SNPs (through 

the demonstration) and cost contract 

plans in the same market to continue 

enrollment in both plans after the end 

of the demonstration, thus avoiding 

potentially significant disruption to 

Medicare beneficiaries that would result 

from each MA organization’s nonrenewal of one of the two types of 

products. More broadly, the exception 

removes a regulatory barrier that, in 

Minnesota and several other States, can 

impede D–SNPs from entering a market 

where cost contract plans remain. 

Without a D–SNP, States have few 

options to integrate Medicare and 

Medicaid services and improve the 

experience of care for dually eligible 

individuals. In particular, removing this 

barrier would allow entities offering 

cost contract plans in rural markets in 

the nine States 110 where cost contract 

plans are currently offered, including 

markets without multiple MA plan 

alternatives, to work with those States to 

offer new D–SNPs, which could further 

State goals for integrating Medicare and 

Medicaid services. We anticipate that 

this flexibility would provide dually 

eligible individuals in those States new 

choices for integrated coverage. 

Therefore, we propose to revise 

paragraph § 422.503(b)(5)(i) and (ii) to 

allow an MA organization to offer a D– 

SNP and also— 

• Offer an 1876 reasonable cost plan 

that accepts new enrollees; 

• Share a parent organization with a 

cost contract plan that accepts new 

enrollees; 

• Be a subsidiary of a parent 

organization offering a cost contract 

plan that accepts new enrollees; or 

• Be a parent organization of a cost 

contract plan that accepts new 

enrollees. 

Should we finalize this proposal, we 

would monitor patterns of enrollment 

and disenrollment. To the extent we see 

any pattern that suggests that sponsors 

are persuading D–SNP members to 


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111CMS, ‘‘Addendum to the Parts C & D Enrollee 

Grievances, Organization/Coverage Determinations, 

and Appeals Guidance for Applicable Integrated 

Plans’’. Retrieved from: https://www.cms.gov/files/ 

document/dsnpartscdgrievancesdeterminations

appealsguidanceaddendum.pdf. 

112CMS, ‘‘Addendum to the Parts C & D Enrollee 

Grievances, Organization/Coverage Determinations, 

and Appeals Guidance for Applicable Integrated 

Plans’’. Retrieved from: https://www.cms.gov/files/ 

document/dsnpartscdgrievancesdeterminations

appealsguidanceaddendum.pdf. 

move into the cost plan, we would 

investigate and pursue corrective 

actions or additional rulemaking, 

potentially including the future 

rulemaking to remove or restrict the 

exemption proposed here. We seek 

comment on the proposed exception for 

D–SNPs and our process for monitoring 

for unintended consequences. 

We are considering more limited 

exceptions to the requirements at 

§ 422.503(b)(5) that may more closely fit 

our policy goals of removing regulatory 

obstacles to the availability of D–SNPs 

that could further Medicare-Medicaid 

integration. We are also considering 

whether additional limitations could 

guard against entities steering less 

healthy, higher cost enrollees toward 

their cost contract plans. Specifically, 

we are considering limiting the 

exception to: 

• D–SNPs designated as highly 

integrated D–SNPs (HIDE SNPs), as 

defined at § 422.2, which are capitated 

for Medicaid behavioral health or 

Medicaid long-term services and 

supports, or both; and to fully integrated 

D–SNPs (FIDE SNPs), as defined at 

§ 422.2, which are capitated for a 

comprehensive set of Medicaid longterm services and supports; 

• D–SNPs that only enroll full-benefit 

dually eligible individuals, who qualify 

for full Medicaid benefits, rather than 

D–SNPs that also enroll partial-benefit 

dually eligible individuals, who are 

only eligible for Medicaid coverage of 

Medicare premiums or cost-sharing; 

• D–SNPs that charge no beneficiary 

premium for individuals eligible for the 

full Part D low income subsidy; 

• D–SNPs that are affiliated with cost 

contract plans that charge premiums for 

enrollees eligible for the full Part D low 

income premium subsidy; or 

• Combinations of these types of 

D–SNPs. 

We are concerned that these 

alternatives would add complexity to 

the regulation that we do not believe is 

necessary to achieve our primary aim of 

removing regulatory barriers that 

impede the availability of new D–SNPs 

to integrate Medicare and Medicaid 

services and improve care for dually 

eligible individuals. However, we seek 

comment on whether inclusion of some 

or all of these additional alternative 

criteria in the revisions to 

§ 422.503(b)(5) would strengthen the 

overall policy. 

9. Requirements To Unify Appeals and 

Grievances for Applicable Integrated 

Plans (§§ 422.629, 422.631, 422.633, and 

422.634) 

In the final rule ‘‘Medicare and 

Medicaid Programs; Policy and 

Technical Changes to the Medicare 

Advantage, Medicare Prescription Drug 

Benefit, Programs of All-Inclusive Care 

for the Elderly (PACE), Medicaid FeeFor-Service, and Medicaid Managed 

Care Programs for Years 2020 and 

2021,’’ which appeared in the Federal 

Register on April 16, 2019, we 

established procedures for unified 

appeals and grievances and require 

certain D–SNPs and Medicaid MCOs to 

use them beginning in 2021 (84 FR 

15680). Section 50311 of the BBA of 

2018 amended section 1859 of the Act 

to add new requirements for D–SNPs to 

unify Medicare and Medicaid appeals 

and grievance procedures for integrated 

D–SNPs. 

We codified the regulations for 

unified appeal and grievance 

procedures §§ 422.629 through 422.634 

(84 FR 15720). These procedures apply 

to applicable integrated plans, which 

are defined at § 422.561 as FIDE SNPs 

and HIDE SNPs with exclusively 

aligned enrollment. We propose an 

amendment to the definition of 

applicable integrated plan in section 

II.A.7. of this proposed rule. These rules 

took effect for the 2021 plan year. Based 

on our initial implementation 

experience and feedback from 

stakeholders, we are proposing several 

adjustments, clarifications, and 

corrections to these regulations at 

§§ 422.629 through 422.634. We do not 

intend for these proposals to 

substantially change current policy. 

a. Providing Enrollees Information on 

Presenting Evidence and Testimony 

(§ 422.629(d)) 

We propose adding additional 

language to § 422.629(d) to codify in 

regulation a provision from existing subregulatory guidance.111 We propose to 

revise § 422.629(d) to require that, as 

part of its responsibilities pertaining to 

an enrollee’s presenting evidence for an 

integrated grievance or appeal, an 

applicable plan provide an enrollee 

with information on how evidence and 

testimony should be presented to the 

plan. While we believe this requirement 

is within the scope of the current 

requirement that applicable integrated 

plans inform enrollees of the limited 

timeframe for presenting evidence as 

stated in § 422.629(d) and otherwise 

provide enrollees with reasonable 

assistance in taking procedural steps 

related to grievances and appeals as 

required at §§ 422.562(a)(5) (applicable 

to D–SNPs) and 438.406(a) (applicable 

to Medicaid managed care plans), 

revision of the regulation text will 

clarify this. We believe that this 

proposed addition will ensure that 

enrollees better understand the process 

for submitting evidence and testimony 

to the plan so that their information is 

timely considered with their appeal. In 

addition, our proposal would reorganize 

§ 422.629(d) to improve the readability 

of the provision. 

b. Technical Correction (§ 422.629(k)) 

We propose technical changes to 

§ 422.629(k)(4)(ii) to correct a minor 

error from the April 2019 final rule. 

This paragraph references the integrated 

organization determination decision, 

however, the requirements in paragraph 

(k)(4) relate to integrated 

reconsideration determinations. 

Therefore, we are proposing to replace 

the word ‘‘organization’’ with 

‘‘reconsideration’’ and remove the word 

‘‘decision’’ from the end of the sentence 

in § 422.629(k)(4)(ii). 

c. Accommodate State Medicaid 

Representation Rules (§ 422.629(l)) 

At § 422.629(l)(1), we propose adding 

additional language to codify in 

regulation current sub-regulatory 

guidance 112 regarding the appointment 

of a representative. The Medicare Parts 

C & D Enrollee Grievances, 

Organization/Coverage Determinations, 

and Appeals Guidance, Section 20.2, 

lists several elements that should be 

included in an appointment of 

representation form. A State, in its 

Medicaid program, may have developed 

other forms or requirements for 

appointment of representation forms 

that are accepted in appeals cases. We 

propose to amend § 422.629(l)(1) to 

ensure that we are not restricting the 

means that an enrollee would otherwise 

have, outside of the integrated appeals 

process, to appoint a representative. We 

propose to add language to clarify that 

an enrollee’s representative includes 

any person authorized under State law. 

We propose to reorganize paragraph 

(l)(1) as part of this amendment. 

Specifically, we propose to revise 

paragraph (l)(1)(i) to list the enrollee 

and to revise paragraph (l)(1)(ii) to list 

the enrollee’s representative, including 

any person authorized under State law. 

We also propose to move the content of 

current paragraph (l)(1)(ii) that deals 

with rights of assignees to a new 


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§ 422.629(l)(4) as discussed in section 

II.A.9.d. of this proposed rule. 

d. Clarifying the Role of Assignees and 

Other Parties (§ 422.629(l)) 

In the April 2019 final rule, we 

finalized § 422.629(l)(1)(ii) to include 

assignees of the enrollee and other 

providers with appealable interests in 

the proceedings as individuals who 

could file an integrated grievance, 

request an integrated organization 

determination, or request an integrated 

reconsideration. In so doing, we 

inadvertently created confusion, 

particularly pertaining to the rights of 

non-contracted providers. Like 

contracted providers, non-contracted 

providers can request an initial 

integrated organization determination 

on behalf of an enrollee if they treat or 

intend to treat the enrollee; this is 

reflected in § 422.629(l)(1)(iv) and (l)(3) 

and is consistent with MA rules at 

§ 422.566(c)(1)(ii). However, our policy 

is that assignees (for example, a noncontracted provider to whom an 

enrollee has assigned their appeal 

rights) and other providers with 

appealable interests can only file an 

integrated reconsideration; assignees 

cannot file a grievance, and until the 

initial organization determination is 

completed, there is no enrollee interest 

to assign or other appealable interest at 

stake. This policy is also consistent with 

the MA rules which do not specifically 

allow anyone other than an enrollee to 

file a grievance (§ 422.564), and which 

require a provider to waive any right to 

payment from the enrollee for the 

service to be an assignee and a party to 

the organization determination 

(§ 422.574(b)) who is then able to file a 

request for a reconsideration under 

§ 422.578. We are therefore proposing to 

move the content of § 422.629(l)(1)(ii) to 

new paragraph (l)(4). As noted in 

section II.A.9.c. of this proposed rule, 

we propose to add new language at 

§ 422.629(l)(1)(ii) in its place addressing 

who can be an enrollee’s representative. 

In new paragraph (l)(4) we propose to 

clarify which individuals or entities can 

request an integrated reconsideration 

and are considered parties to the case 

but who do not have the right to request 

an integrated grievance or integrated 

organization determination. At 

proposed paragraph (l)(4)(i), we would 

permit an assignee of the enrollee (that 

is, a physician or other provider who 

has furnished or intends to furnish a 

service to the enrollee and formally 

agrees to waive any right to payment 

from the enrollee for that service) to 

request an integrated reconsideration. 

At proposed paragraph (l)(4)(ii), we 

would permit any other provider or 

entity (other than the applicable 

integrated plan) who has an appealable 

interest in the proceeding to request an 

integrated reconsideration. 

e. Timelines for Processing Payment 

Requests (§ 422.631) 

In the April 2019 final rule, we 

neglected to specify explicitly how the 

MA ‘‘prompt payment’’ rules at 

§ 422.520 governing payment of claims 

apply to applicable integrated plans. 

The MA organization determination 

timeline rules at § 422.568(c) state that 

the prompt payment rules at § 422.520 

govern the timeline for requests for 

payment. However, as finalized, 

§ 422.631 establishes the timelines for 

integrated reconsiderations in lieu of the 

timelines at § 422.568 but does not 

include a specific reference to the 

prompt payment rules at § 422.520 and 

does not include (in lieu of the rule in 

§ 422.520(c) that is applicable to all MA 

plans) a different rule for applicable 

integrated plans. As a result, we have 

received several questions from 

applicable integrated plans requesting 

that we clarify what timeline applies to 

processing payment requests. 

Accordingly, at § 422.631(d), we 

propose to add a new paragraph (d)(3) 

to require applicable integrated plans to 

process payment requests according to 

the prompt payment provisions set forth 

in § 422.520, which will mirror the 

current provision at § 422.568(c). We 

believe these prompt payment 

provisions are generally consistent with 

Medicaid prompt payment standards 

and therefore will not create any 

inconsistencies with State Medicaid 

policies in this area. We welcome 

comments on this issue. 

f. Clarifying Integrated Reconsideration 

Request (§ 422.633(e) and (f)) 

We are proposing changes to 

§ 422.633(e)(1) to clarify who may file a 

request for an expedited post-service 

integrated reconsideration (that is, one 

that is related to payment). Our proposal 

would clarify that an enrollee may 

request an expedited integrated 

reconsideration related to payment that 

can qualify as expedited, but a 

provider’s right to request an expedited 

integrated reconsideration on behalf of 

an enrollee is limited to pre-service 

integrated reconsideration requests. In 

the preamble to the April 2019 final 

rule, we noted that there may be rare 

circumstances in which a dually eligible 

enrollee’s financial need is so pressing 

that an enrollee’s reimbursement 

request meets the standard for 

expediting a post-service integrated 

reconsideration request. This was a 

departure from the MA rule at 

§ 422.584(a), and we intended to limit 

this option to requests filed by 

enrollees. As finalized, however, 

§ 422.633(e) does not distinguish 

between pre-service and post-service 

expedited requests filed by the enrollee 

and those filed by a provider on the 

enrollee’s behalf. 

During implementation of these new 

unified procedures, we received several 

comments pointing out that 

§ 422.633(e), as finalized, permits a 

provider to request an expedited postservice integrated reconsideration on 

behalf of an enrollee. This was not our 

intent, because a post-service case can 

only meet the expedited standard if the 

enrollee has already paid a provider and 

urgently needs reimbursement from the 

applicable integrated plan. We believe 

that a provider should not deliver a 

service, accept the enrollee’s payment, 

and then argue on the enrollee’s behalf 

that the enrollee needs an expedited 

decision on reimbursement. We also did 

not intend to place the burden on plans 

to accept such requests and assess 

whether the standard for expedited 

treatment is met when these postservice appeals are filed by providers. 

We are therefore proposing to specify in 

§ 422.633(e)(1)(i) that expedited postservice integrated reconsideration 

requests are limited to those requested 

by an enrollee, and in § 422.633(e)(1)(ii) 

that providers acting on behalf of an 

enrollee may only request pre-service 

expedited integrated reconsiderations. 

This proposed change aligns provider 

appeal rights with MA regulations 

which do not allow expedited integrated 

reconsideration determinations in cases 

where services or items have already 

been furnished (see § 422.584(a)). 

During implementation, we also 

received several questions from plans 

regarding the timeframe, at § 422.633(f), 

for applicable integrated plans to make 

integrated reconsideration 

determinations in cases involving 

payment requests from providers where 

the provider has obtained and filed a 

waiver of liability from the enrollee. In 

the April 2019 final rule, we required all 

integrated reconsiderations, including 

those involving requests for payment, be 

resolved within 30 days, which is 

consistent with Medicaid rules at 

§ 438.408(b)(2) but shorter than the 60 

days permitted under § 422.590(b)(1). In 

response to the sub-regulatory guidance 

issued subsequent to the April 2019 rule 

but before the effective date of the 

regulation, several plans commented 

that meeting a 30-day timeframe for all 

requests for payment would be difficult. 

We believe that the shorter 30-day 

timeframe is appropriate for beneficiary 

requests and consistent with Medicaid 


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113See https://www.cms.gov/medicare/healthplans/healthplansgeninfo/downloads/mc86c02.pdf. 

rules. However, we seek comment 

regarding whether allowing a 60-day 

timeframe for non-contracted provider 

payment requests where the provider 

has obtained a waiver of liability from 

the enrollee would simplify plan 

operations without adversely affecting 

beneficiaries or access to care. We also 

seek comment regarding whether 

adopting such a timeframe for noncontracted provider payment requests 

would conflict with any State-specific 

Medicaid rules or processes concerning 

provider appeals. 

Lastly, in response to several 

questions we have received since the 

regulation became effective regarding 

the availability of extensions for 

standard and expedited integrated 

reconsiderations, we are proposing at 

§ 422.633(f)(3) to add language to clarify 

that extensions of up to 14 days are 

available for any integrated 

reconsiderations (either standard and 

expedited) other than those regarding 

Part B drugs. In our proposal at 

§ 422.633(f)(3) we would exclude 

integrated reconsiderations about Part B 

drugs from the authority for extensions. 

This is consistent with current 

§ 422.633(f), which provides that 

integrated reconsidered determinations 

regarding Part B drugs must comply 

with the timelines governing Part B 

drugs established in §§ 422.584(d)(1) 

and 422.590(c) and (e)(2). Our current 

sub-regulatory guidance addresses this 

as well. 

g. Timeframes for Service Authorization 

After a Favorable Decision 

(§ 422.634(d)) 

We are proposing changes to 

§ 422.634(d) to clarify the requirements 

for how quickly an applicable integrated 

plan must authorize or provide a service 

after a favorable decision for an enrollee 

upon appeal. The current regulatory text 

includes timeframes for how quickly 

services must be put in place for an 

enrollee after receipt of a favorable 

decision on an integrated 

reconsideration or State fair hearing. 

The current regulation refers to 

timeframes specified in §§ 422.618 and 

422.619 for implementing decisions 

made by the IRE and additional entities 

on the Medicare side. In reviewing 

feedback received from applicable 

integrated plans, we believe that these 

requirements should more clearly 

describe timeframes for authorizing 

services in all situations where an 

applicable integrated plan’s decision is 

reversed. 

We propose reorganizing § 422.634(d) 

to more explicitly address each scenario 

that an applicable integrated plan will 

face when effectuating a reversal. In 

proposed paragraph (d)(1), we propose 

to address cases where the applicable 

integrated plan reverses its own 

decision in an appeal for services that 

were not furnished while the appeal 

was pending. We propose that an 

applicable integrated plan must 

authorize or provide the service as 

expeditiously as the enrollee’s condition 

requires and within the sooner of: (1) 72 

hours from the date of the reversed 

decision; or (2) 30 calendar days (7 

calendar days for a Part B drug) after the 

date that the applicable integrated plan 

received the integrated reconsideration 

request. 

This would be a slight change from 

the current requirements, which require 

applicable integrated plans to authorize 

or provide the service as expeditiously 

as the enrollee’s condition requires but 

not later than 72 hours from the date of 

the reversed decision. The current 72- 

hour rule is adopted from the Medicaid 

managed care rule at § 438.424(a). 

However, as applied in § 422.634(d), 

there is the possibility that in some 

cases an enrollee could wait longer for 

a determination to be effectuated by an 

applicable integrated plan than the 

enrollee would have to wait under the 

current MA regulation (§ 422.618(a)(1) 

and (3)), which requires effectuation no 

later than 30 calendar days after the MA 

plan receives the reconsideration 

request, or 7 calendar days for Part B 

drugs. If, for example, the applicable 

integrated plan reversed its decision on 

the 29th day after receiving the 

reconsideration request (for a request 

that is not a Part B drug), as allowed 

under § 422.633(f)(1), under the current 

text of § 422.634(d) it would still have 

another 72 hours to effectuate the 

determination. We also propose to 

include the Part B drug timeframe from 

§ 422.618(a)(3) in § 422.634(d)(1)(ii)(B) 

to ensure enrollees of applicable 

integrated plans get the same timely 

effectuation for these drugs; this is 

consistent with how current § 422.633(f) 

provides that integrated reconsidered 

determinations regarding Part B drugs 

must comply with the timelines 

governing reconsidered determinations 

regarding Part B drugs established in 

§§ 422.584(d)(1) and 422.590(c) and 

(e)(2), which apply to other MA plans. 

We believe our proposal better reflects 

the directive in section 1859(f)(8)(B)(ii) 

of the Act to adopt requirements that are 

most protective for enrollees. 

In proposed paragraph (d)(2), for the 

sake of clarity we propose to place in its 

own paragraph the requirement for the 

applicable integrated plan to authorize 

or provide a Medicaid-covered service 

no later than 72 hours from the date the 

plan is notified of a decision reversed by 

a State fair hearing. We propose no 

changes to this effectuation timeline. 

Lastly, we propose to add a new 

paragraph (d)(3) to require the same 

timelines for an applicable integrated 

plan to effectuate reversals by the 

Medicare independent review entity, an 

administrative law judge or attorney 

adjudicator at the Office of Medicare 

Hearings and Appeals, or the Medicare 

Appeals Council as apply to other MA 

plans at §§ 422.618 and 422.619. 

We request comment on whether the 

additional language provides clarity to 

applicable integrated plans on their 

responsibility to provide a service after 

an integrated organizational 

determination or integrated 

reconsideration is overturned. 

10. Technical Update to State Medicaid 

Agency Contract Requirements 

(§ 422.107) 

Section 422.107(c) lists minimum 

requirements for State Medicaid agency 

contracts. Paragraph (c)(6) requires that 

the contract document the verification 

of an enrollee’s eligibility for ‘‘both 

Medicare and Medicaid.’’ We propose to 

strike the reference to Medicare in 

paragraph (c)(6). All MA plans, 

including D–SNPs, already verify 

Medicare eligibility as part of accepting 

beneficiary coverage elections under 

§ 422.60. See also Chapter 2 of the 

Medicare Managed Care Manual for 

additional details.113 Therefore, it is not 

essential for the contract between the 

State Medicaid agency and the D–SNP 

to document how the D–SNP verifies 

Medicare eligibility. Functionally, our 

proposal would have no impact on the 

responsibilities of a plan to verify 

eligibility. However, it would remove a 

detail from the State Medicaid agency 

contract minimum requirements, thus 

simplifying our review of the contracts. 

11. Compliance With Notification 

Requirements for D–SNPs That 

Exclusively Serve Partial-Benefit Dually 

Eligible Beneficiaries (§ 422.107(d)) 

Section 50311(b) of the BBA of 2018 

amended section 1859 of the Act to add 

new requirements for D–SNPs beginning 

in 2021, including minimum integration 

standards and coordination of the 

delivery of Medicare and Medicaid 

benefits. We codified these minimum 

integration requirements in the April 

2019 final rule at § 422.2, stating that a 

D–SNP must either (i) be a HIDE SNP 

or FIDE SNP or (ii) meet the additional 

requirement specified in § 422.107(d) as 

required for its contract with the State 

Medicaid agency. When it applies, 


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114CMS Medicare-Medicaid Coordination Office, 

‘‘Additional Guidance on CY 2021 MedicareMedicaid Integration Requirements for Dual Eligible 

Special Needs Plans’’, January 17, 2020. Retrieved 

from: https://www.cms.gov/ 

httpseditcmsgovresearch-statistics-data-andsystemscomputer-data-and-systemshpmshpmsmemos-archive/hpms-memo-5. 

§ 422.107(d) requires that the D–SNP 

notify the State Medicaid agency, or 

individuals or entities designated by the 

State Medicaid agency, of hospital and 

skilled nursing facility (SNF) 

admissions for at least one group of 

high-risk full-benefit dually eligible 

individuals, as determined by the State 

Medicaid agency. We direct readers to 

the April 2019 final rule for a more 

detailed explanation of our intent and 

rationale for this approach (84 FR 15710 

through 15717). 

While implementing these minimum 

integration standards, CMS identified 

some MA organizations that have 

separate D–SNP PBPs for partial-benefit 

and full-benefit dually eligible 

individuals. Providing separate PBPs for 

full-benefit dually eligible individuals 

enables MA organizations to more 

clearly explain and coordinate the 

Medicaid benefits that those enrollees 

are entitled to receive. In addition, HIDE 

SNPs or FIDE SNPs that limit 

enrollment to full-benefit dually eligible 

individuals qualify to unify Medicare 

and Medicaid appeals and grievance 

processes under §§ 422.629 through 

422.634. MA organizations that have D– 

SNPs with a combination of full-benefit 

and partial-benefit dually eligible 

enrollees can choose to ‘‘split’’ the D– 

SNP into two plans to take advantage of 

these opportunities. We codified a 

crosswalk exception to facilitate this 

process at § 422.530(c)(4) in the January 

2021 final rule. (In section II.A.6.a., we 

are proposing to redesignate this 

crosswalk to § 422.530(c)(4)(i) in this 

proposed rule.) 

However, D–SNPs that only enroll 

partial-benefit dually eligible 

individuals (hereinafter referred to as 

‘‘partial-benefit-only D–SNPs’’) have no 

explicit pathway to meaningfully meet 

one of the three integration standards 

under § 422.2. In a partial-benefit-only 

D–SNP, no plan enrollees are eligible for 

the minimum set of Medicaid services 

that a D–SNP must cover to qualify as 

a HIDE SNP or FIDE SNP. Additionally, 

there are no full-benefit dually eligible 

individuals that the plan could identify 

for notification of hospital and SNF 

admissions (and no Medicaid services to 

coordinate post notification) as required 

by § 422.107(d). 

In lieu of requiring inclusion of this 

notification requirement in the State 

Medicaid agency contract for partialbenefit-only D–SNPs during the initial 

CY 2021 implementation of the D–SNP 

integration requirements, CMS issued 

guidance permitting an alternative in 

January 2020.114 The MAO offering the 

partial-benefit-only D–SNP would be 

considered as meeting the integration 

requirements in connection with the 

partial-benefit-only D–SNP provided 

that the MAO also offers a full-benefitonly D–SNP in the same State and 

under the same contract and that fullbenefit-only D–SNP meets the 

integration requirements in the 

definition of a D–SNP at § 422.2. 

We are proposing to codify this policy 

with the additional requirement that the 

service areas of the full-benefit-only D– 

SNP covers the entire service area of the 

partial-benefit-only D–SNP. That is, we 

propose revising § 422.107(d) to provide 

that partial-benefit-only D–SNPs are not 

required to meet the notification 

requirement in § 422.100(d) when the 

MA organization also offers a D–SNP 

with enrollment limited to full-benefit 

dually eligible individuals that meets 

the integration criteria at § 422.2 and is 

in the same State and service area and 

under the same parent organization. We 

propose to add this by reorganizing 

paragraph (d). The current provision in 

paragraph (d) would be redesignated as 

new paragraph (d)(1) and amended to 

reference exceptions listed in proposed 

paragraph (d)(2). Proposed paragraph 

(d)(2) provides that paragraph (d)(1) 

does not apply to any D–SNP that, 

under the terms of its contract with the 

State Medicaid agency, only enrolls 

beneficiaries that are not entitled to full 

medical assistance under a State plan 

under title XIX if the SNP operates 

under the same parent organization and 

in the same service area as a D–SNP 

limited only to full-benefit dually 

eligible individuals that meets the 

requirements at (d)(1). 

We believe our proposal is consistent 

with the minimum integration required 

by section 1859(f)(8) of the Act because 

it achieves the same level of 

coordination with State Medicaid 

agencies for partial-benefit dually 

eligible enrollees as would be achieved 

if there were one PBP including both 

full-benefit and partial-benefit dually 

eligible individuals. Additionally, for 

full-benefit dually eligible enrollees, the 

two-PBP structure facilitates a higher 

level of integration of Medicare and 

Medicaid benefits (for example, where 

the two-PBP structure would result in 

more applicable integrated plans with 

unified appeals processes). 

We do not anticipate any negative 

impact for beneficiaries or partialbenefit-only D–SNPs as a result of this 

proposed rule. For CY 2021, nine 

partial-dual-only D–SNP PBPs operate 

under the same MA contract and same 

service area as a full-benefit-only D– 

SNP. All nine operate in either Florida 

or Virginia. In CY 2021, one other 

Virginia D–SNP enrolled partial-benefit 

dually eligible individuals with a 

corresponding D–SNP for full-benefit 

dually eligible individuals under the 

same parent organization. The proposed 

changes to § 422.107(d) would allow 

these partial-benefit-only D–SNPs to 

continue as they are currently operating. 

12. Attainment of the Maximum Out-ofPocket (MOOP) Limit (§§ 422.100 and 

422.101) 

Section 1852(b)(1) of the Act prohibits 

discrimination by MA organizations on 

the basis of health status-related factors 

and directs that CMS may not approve 

an MA plan if CMS determines that the 

design of the plan and its benefits are 

likely to substantially discourage 

enrollment by certain MA eligible 

individuals. Under the authority of 

sections 1852(b)(1)(A), 1856(b)(1), and 

1857(e)(1) of the Act, CMS added 

§§ 422.100(f)(4) and (5) and 

422.101(d)(2) and (3), effective for 

coverage in 2011, to require all MA 

plans (including employer group waiver 

plans (EGWPs) and special needs plans 

(SNPs)) to establish limits on enrollee 

out-of-pocket cost-sharing for Parts A 

and B services that do not exceed the 

annual limits established by CMS (75 

FR 19709 through 19711). Section 

1858(b)(2) of the Act requires a limit on 

in-network and out-of-pocket expenses 

for enrollees in Regional Preferred 

Provider Organization (RPPO) MA 

plans. In addition, MA Local PPO 

(LPPO) plans, under § 422.100(f)(5), and 

RPPO plans, under section 1858(b)(2) of 

the Act and § 422.101(d)(3), are required 

to have two maximum out-of-pocket 

(MOOP) limits (also called catastrophic 

limits) established by CMS annually, 

including (a) an in-network and (b) a 

total catastrophic (combined) limit that 

includes both in-network and out-ofnetwork items and services covered 

under Parts A and B. After the MOOP 

limit is reached, the MA plan pays 100 

percent of the costs of items and 

services covered under Parts A and B. 

In the April 2011 final rule (76 FR 

21508), CMS established the approach 

MA organizations must use to track the 

enrollee’s progress toward the plan 

MOOP limit. Under this policy, the innetwork (catastrophic) and combined 

(total catastrophic) MOOP limits 

consider only the enrollee’s actual outof-pocket spending for purposes of 

tracking to the enrollee’s progress 

toward the plan MOOP limit. This 


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1884 Federal Register / Vol. 87, No. 8 / Wednesday, January 12, 2022 / Proposed Rules 

115Section 1902(n)(2) of the Act permits the State 

to limit payment for Medicare cost-sharing for 

QMBs to the amount necessary to provide a total 

payment to the provider (including Medicare, 

Medicaid State plan payments, and third-party 

payments) equal to the amount a State would have 

paid for the service under the Medicaid State plan. 

For example, if the Medicare (or MA) rate for a 

service is $100, of which $20 is beneficiary 

coinsurance, and the Medicaid rate for the service 

is $90, the State would only pay $10. If the 

Medicaid rate is $80 or lower, the State would make 

no payment. See Chapter II, sections E.4 through 

E.6 of the Medicaid Third Party Liability Handbook 

at https://www.medicaid.gov/medicaid/eligibility/ 

downloads/cob-tpl-handbook.pdf. 

approach also applies to D–SNPs. Thus, 

for any D–SNP enrollee, MA plans had 

the option to count only those amounts 

the individual enrollee is responsible 

for paying net of any State responsibility 

or exemption from cost-sharing toward 

the MOOP limit rather than the costsharing amounts for services the plan 

has established in its plan benefit 

package. As a result, in practice the 

MOOP limit does not cap the amount a 

State could pay for a dually eligible MA 

enrollee’s Medicare cost-sharing, nor 

does it cap the amount of Medicare costsharing that remains unpaid for 

providers serving dually eligible 

enrollees because of the prohibition on 

collecting Medicare cost-sharing from 

certain dually eligible individuals and 

the limits on State payments of 

Medicare cost-sharing under State 

lesser-of policies.115 Thus, MA plans are 

paying amounts for non-dually eligible 

enrollees that they do not pay for dually 

eligible enrollees, even when different 

enrollees use the same volume of 

services; States, in certain 

circumstances, pay cost-sharing for 

dually eligible enrollees that is 

otherwise covered by the MA plans for 

non-dually eligible enrollees; and 

providers serving dually eligible MA 

enrollees are systemically 

disadvantaged relative to providers 

serving non-dually eligible MA 

enrollees, which we believe may 

negatively affect access to Medicare 

providers for dually eligible enrollees. 

We propose to revise the regulations 

governing the MOOP limits for MA 

plans to require that all costs for 

Medicare Parts A and B services accrued 

under the plan benefit package, 

including cost-sharing paid by any 

applicable secondary or supplemental 

insurance (such as through Medicaid, 

employer(s), and commercial insurance) 

and any cost-sharing that remains 

unpaid because of limits on Medicaid 

liability for Medicare cost-sharing under 

lesser-of policy and the cost-sharing 

protections afforded certain dually 

eligible individuals, is counted towards 

the MOOP limit. This would ensure that 

once an enrollee, including a dually 

eligible individual with cost-sharing 

protections, has accrued cost-sharing 

(deductibles, coinsurance, or copays) 

that reaches the MOOP limit established 

by the plan (whether at the annual limit 

set by CMS under § 422.100(f) or some 

lesser amount), the MA plan must pay 

100 percent of the cost of covered 

Medicare Part A and Part B services. As 

a result, the State Medicaid agency and 

other secondary payers would no longer 

be billed for any Medicare cost-sharing 

for the remainder of the year. To ensure 

clarity in the regulation text for the 

policy on what costs are tracked for 

purposes of the MOOP limit, we are 

proposing to amend the regulations by 

adding § 422.100(f)(4)(i) and (f)(5)(iii) to 

specify that MA organizations are 

responsible for tracking out-of-pocket 

spending accrued by the enrollee, and 

must alert enrollees and contracted 

providers when the MOOP limit is 

reached. In addition, we are proposing 

to amend § 422.101(d)(4) to substitute 

‘‘accrued’’ for ‘‘incurred’’ in the 

description of how regional plans must 

track beneficiary out-of-pocket spending 

towards the MOOP limit. We intend this 

amendment to have only the substantive 

effect described here: That cost-sharing 

paid by any applicable secondary or 

supplemental insurance (such as 

through Medicaid) and any cost-sharing 

that remains unpaid because of limits 

on Medicaid liability for Medicare costsharing under lesser-of policy and the 

cost-sharing protections afforded certain 

dually eligible individuals, is counted 

towards the MOOP limit by MA plans. 

This proposal is not intended to and 

will not change how the word 

‘‘incurred’’ is otherwise used in the 

regulation. We believe that using a 

different term in the regulation text is 

appropriate to mark this change in 

policy from that first adopted in the 

April 2011 final rule. We note that the 

specific regulatory amendments may 

change if CMS publishes a final rule 

that addresses the MOOP limit 

provision from the proposed rule titled 

‘‘Medicare and Medicaid Programs; 

Contract Year 2021 and 2022 Policy and 

Technical Changes to the Medicare 

Advantage Program, Medicare 

Prescription Drug Benefit Program, 

Medicaid Program, Medicare Cost Plan 

Program, and Programs of All-Inclusive 

Care for the Elderly’’ which appeared in 

the Federal Register on February 18, 

2020 (85 FR 9002) (hereinafter referred 

to as the February 2020 proposed rule). 

We believe that this amendment is 

appropriate and necessary for several 

reasons. First, we believe this 

amendment will result in equal 

treatment under the MOOP limit for 

dually eligible MA enrollees compared 

to how Medicare-only enrollees are 

treated. Medicare-only MA enrollees 

receive the protection afforded by the 

MOOP limit after they have accrued 

cost-sharing under the MA plan benefit 

whether they have paid this cost-sharing 

or still owe their providers for some or 

all of the cost-sharing. In our 

experience, MA organizations do not 

impose additional cost-sharing liability 

above the MOOP limit on their 

Medicare-only enrollees if some of the 

pre-MOOP cost-sharing remains unpaid. 

Under our proposed amendment, dually 

eligible MA enrollees with unpaid costsharing due to limits on Medicaid 

payment of Medicare cost-sharing under 

State lesser-of policies would similarly 

receive 100 percent coverage of Parts A 

and B services under their MA plan 

after the MOOP limit was attained. In 

addition, dually eligible beneficiaries 

with Medicaid coverage that is 

secondary to Medicare would receive 

the same benefits from the MOOP as 

MA enrollees with employer or 

commercial insurance that is secondary 

to Medicare; in both cases, the Medicare 

cost-sharing counting towards the 

MOOP limit would be based on the outof-pocket costs accrued under the MA 

plan benefit without regard to whether 

secondary coverage pays parts or all of 

the Medicare cost-sharing for Parts A 

and B services used before attainment of 

the MOOP. 

Second, we believe this amendment 

will ensure that the providers serving 

dually eligible enrollees in MA plans 

receive the same benefit from the MOOP 

limit that providers receive when they 

serve Medicare-only MA enrollees, 

based on our understanding of how 

some MA plans pay providers after the 

MOOP limit is reached. Absent the 

revision we have proposed, a provider 

serving a dually eligible MA enrollee in 

a State that paid less than the full 

Medicare cost-sharing under the lesserof policy (the vast majority of States) 

would continue to receive less than the 

full MA rate negotiated between the MA 

organization and the provider for a Part 

A or Part B service even after costsharing adds up to more than the MOOP 

limit during the course of the plan year. 

Medicare cost-sharing protections for 

certain dually eligible individuals 

prohibit providers from billing any of 

that unpaid Medicare cost-sharing to the 

beneficiary. For a Medicare-only 

enrollee with similarly high medical 

expenses, the provider can, for example, 

work out a payment plan for unpaid 

Medicare cost-sharing accumulated 

before attainment of the MOOP with the 

assurance that the MOOP amount would 


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limit providers’ liability for unpaid 

Medicare cost-sharing. If the out-ofpocket costs that counts towards the 

MOOP limit are calculated similarly for 

dually eligible enrollees with Medicare 

cost-sharing protections, the providers 

would similarly know that there was a 

limit on the liability for unpaid 

Medicare cost-sharing that they must 

assume. We believe this proposal to 

revise the method that MA 

organizations must use to determine 

when the MOOP limit has been reached 

will mitigate existing provider payment 

disincentives related to serving dually 

eligible MA enrollees. As a result, the 

proposal may improve access to 

providers, including specialists, who 

currently limit the number of dually 

eligible MA enrollees they serve or 

decline to contract with D–SNPs. 

Third, our proposed amendments to 

§§ 422.100(f)(4) and (5) and 

422.101(d)(4) are consistent with the 

statutory requirement at section 

1902(a)(25)(G) of the Act that the State 

plan under title XIX must provide that 

the State prohibits any health insurer 

(including a group health plan, as 

defined in section 607(1) of the 

Employee Retirement Income Security 

Act of 1974, a self-insured plan, a 

service benefit plan, and a health 

maintenance organization), in enrolling 

an individual or in making any 

payments for benefits to the individual 

or on the individual’s behalf, from 

taking into account that the individual 

is eligible for or is provided medical 

assistance under Medicaid. The current 

method for calculating attainment of the 

MOOP explicitly takes into account the 

provision of medical assistance— 

specifically the payment of Medicare 

cost-sharing—by Medicaid in 

determining at what point the MA plan 

will begin paying 100 percent of costs 

for Medicare Parts A and B services. Our 

proposed amendments would ensure 

that the provision of Medicare costsharing assistance by the State is no 

longer considered in calculating 

attainment of the MOOP limit. In 

particular, this will ensure that D–SNPs 

that contract with State Medicaid 

agencies calculate attainment of the 

MOOP limit consistent with the 

Medicaid State plan requirements under 

the Act. 

Fourth, our investigations show that 

D–SNPs offered by MA organizations 

currently differ in how they determine 

if the MOOP limit has been attained. 

Some D–SNPs calculate attainment of 

the MOOP as we propose, by adding up 

all cost-sharing accrued under the plan 

benefit until the MOOP limit is attained 

and, for the remainder of the year, 

paying 100 percent of the costs of 

covered services. Other D–SNPs do not 

seem to count any cost-sharing accrued 

under the benefit toward the MOOP for 

dually eligible individuals with 

Medicare cost-sharing protections—the 

D–SNPs do not count any cost-sharing 

amounts paid by the State and 

apparently assume that all cost sharing 

that is not paid by the State is not billed 

to the dually eligible enrollee because of 

the cost-sharing protections these 

beneficiaries receive. As a result, the 

MOOP is never attained. Our proposed 

amendments would bring consistency to 

how MA organizations determine if the 

MOOP limit has been attained, since it 

is based entirely on the claims 

adjudicated by the MA organization 

regardless of the enrollee’s dual 

eligibility status. We believe this 

provides MA organizations with a 

straightforward method of determining 

when the MOOP limit has been attained 

based on claims data that the MA 

organization has in its possession. 

For illustrative purposes, we provide 

below an example of how our proposal 

would change payment for services 

delivered after attainment of the MOOP 

limit in a D–SNP with cost-sharing that 

mirrors Original Medicare cost-sharing 

and where all benefits received by the 

enrollee are from in-network providers. 

A D–SNP enrollee with unmanaged 

diabetes enters the hospital and has 

both legs amputated. After a lengthy 

hospital stay, followed by admission 

into a skilled nursing facility (SNF), the 

enrollee is discharged to her home with 

a power wheelchair. The enrollee also 

requires substantial follow-up care, 

including frequent visits with primary 

care and specialist physicians, physical 

and occupational therapy, wound care, 

and wheelchair modifications. The costsharing—inpatient charges, SNF per day 

charges, and the 20 percent coinsurance 

for the power wheelchair and follow-up 

care—has accrued to $7,550, the D– 

SNP’s MOOP limit, by June. Under the 

lesser-of policy, the State Medicaid 

payment policy caps total payment at 

the Medicaid rate for specific services, 

which resulted in payment of some of 

the hospital cost-sharing but none of the 

SNF per-day charges or the 20 percent 

coinsurance for the power wheelchair or 

follow-up services. As such, providers 

did not receive payment for the costsharing amounts from the MA plan, 

Medicaid, or the enrollee for the SNF, 

power wheelchair, or other follow-up 

services. 

Under our proposal, all of the costsharing, whether paid by Medicaid or 

unpaid, moves the beneficiary toward 

the $7,550 MOOP limit under the D– 

SNP’s benefit design, after which the D– 

SNP would pay 100 percent of its rate 

for all Medicare Part A and B services 

provided to the enrollee for the 

remainder of the year. Absent the 

implementation of our proposal, the 

enrollee would not have reached the 

MOOP limit in June, because the D–SNP 

did not count either the Medicaid 

payments of the cost-sharing amounts or 

unpaid cost-sharing (which providers 

are prohibited from collecting from the 

enrollee under Medicare rules) toward 

attainment of the MOOP limit. 

Therefore, the D–SNP would continue 

to deduct cost-sharing amounts from 

payment to providers and, due to the 

lesser-of policy, some providers would 

continue to not receive payment for the 

cost-sharing amount at all when 

furnishing services to the dually eligible 

enrollee. In our example, assuming the 

enrollee only receives Part B services 

after June, the providers of these 

services would receive only 80 percent 

of the total payment rate for the 

furnished services from the D–SNP, 

compared with the 100 percent 

providers would receive under our 

proposal. 

For the reasons described in this 

section, we propose to amend 

§§ 422.100(f)(4) and (5) and 

422.101(d)(4) to provide that MA 

organizations are responsible for 

tracking out-of-pocket spending accrued 

by the enrollee and must alert enrollees 

and contracted providers when the 

MOOP limit is reached. For purposes of 

this amendment, the term accrued 

includes Medicare cost-sharing 

obligations regardless of whether the 

enrollee or another party or entity pays 

and regardless whether the provider is 

permitted to collect the Medicare costsharing from the enrollee. 

13. Comment Solicitation on 

Coordination of Medicaid and MA 

Supplemental Benefits 

Section 422.107 requires each MA 

organization offering a D–SNP to have a 

contract with the State Medicaid agency 

that describes, among other things, the 

organization’s responsibility to 

coordinate Medicaid benefits. State 

Medicaid agencies have broad flexibility 

to include provisions in their D–SNP 

contracts. State Medicaid agencies may 

include provisions related to the MA 

supplemental benefits the D–SNP offers, 

how the MA organization shares 

information about those benefits, and 

processes for coordinating benefits 

across Medicare and Medicaid 

programs. 

In this proposed rule, we describe a 

number of ways that State Medicaid 

agencies can use their D–SNP contracts 

under § 422.107 to coordinate D–SNP 

supplemental benefits, including 


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116These examples also appeared in a May 27, 

2021 FAQ document at: https://www.cms.gov/files/ 

document/dsnpmedicaremedicaid

coordbenefitsfaqs.pdf. 

117See 42 CFR 438.5 regarding rate development 

standards for Medicaid managed care capitation 

rates. 

reductions in Medicare cost-sharing, 

with Medicaid benefits. How this 

coordination works varies based on 

whether or not the D–SNP, or an 

affiliated Medicaid MCO, is capitated by 

the State Medicaid agency to deliver 

Medicaid benefits, or whether those 

benefits are delivered through the 

Medicaid FFS program or an 

unaffiliated Medicaid MCO. We seek 

comments on the following examples 116

of potential coordination of Medicaid 

and MA supplemental benefits: 

• In some States, D–SNPs offer 

Medicare supplemental benefits that 

overlap with Medicaid benefits that the 

State covers on an FFS basis. Under 

section 1902(a)(25) of the Act, State 

Medicaid agencies that deliver these 

benefits must coordinate benefits with 

the D–SNP to ensure that Medicaid does 

not pay for benefits that are covered by 

the D–SNP as MA supplemental 

benefits. For example, a State could 

ensure that dually eligible enrollees use 

up the number of non-emergency 

medical transportation trips provided by 

the D–SNP (as supplemental benefits) 

before using the overlapping Medicaid 

transportation benefits. State Medicaid 

agencies can also use their contracts 

with D–SNPs to require these plans to 

take specific actions, such as instructing 

its network providers to bill the D–SNP 

before billing the Medicaid program or 

providing information on benefits or 

service use to the State or its Medicaid 

providers, to enable successful and 

more seamless coordination of benefits. 

• A D–SNP that is capitated by the 

State Medicaid agency to provide 

Medicaid benefits, such as dental 

services, can also provide dental 

services as a MA supplemental benefit, 

as long as the D–SNP (or its Medicaid 

MCO affiliate) is not paid twice, once by 

Medicare and once by Medicaid, for 

coverage of the identical benefit for the 

same enrollees in the same contract 

year. As noted previously, under section 

1902(a)(25) of the Act, Medicaid should 

not pay for a benefit that Medicare or an 

MA plan (or a third party) covers to the 

same extent for the same individual. 

This principle applies whether the 

benefits are paid for on an FFS or 

capitation basis. 

We also seek comment on other 

potential ways that D–SNPs and States 

can work together to coordinate 

Medicare and Medicaid benefits in 

order to improve D–SNP enrollee 

experiences and outcomes. 

State Medicaid agencies can use their 

contracts with D–SNPs under § 422.107 

to meet these requirements and ensure 

Medicaid funds provided to the D–SNP 

only pay for Medicaid benefits. These 

State contracts with D–SNPs, in 

combination with State Medicaid 

benefit design, can help create benefits 

that are in addition to Medicare benefits 

and complementary across programs. 

For example, a D–SNP that also has a 

Medicaid managed care contract could 

use both Medicare and Medicaid dollars 

to provide a benefit that, on an actuarial 

basis, equals the value of the benefit 

from the combination of both funding 

streams. The plan must be able to 

clearly identify, for Medicaid managed 

care rate setting purposes, claims that 

are payable under the Medicaid program 

after exhaustion of the Medicare benefit. 

In addition, § 422.254 requires the MA 

organization to comply with actuarial 

standards in developing and submitting 

bids, including bids for supplemental 

benefits. 

In all cases, the capitation rate for the 

Medicaid benefit must be actuarially 

sound and based on the cost of 

furnishing only the Medicaid-covered 

benefits (§§ 438.3(c) and (e); 438.4 

through 438.7). Similarly, the rebate 

allocated for the MA supplemental 

benefits must reflect the organization’s 

estimate of the revenue required to 

furnish the MA supplemental benefits 

only and provide the actuarial basis for 

the bid (§§ 422.252 through 422.256; 

422.266). 

Coordination of overlapping benefits 

works differently if the State Medicaid 

agency has a capitated contract with a 

different legal entity, such as a specialty 

dental plan or transportation vendor for 

services that overlap with the D–SNP’s 

supplemental benefits. As noted 

previously, Medicare or the MA plan is 

the primary payer whenever Medicare 

and Medicaid cover the same services. 

As such, the State Medicaid agency and 

its capitated vendor should take the 

steps necessary to avoid duplication of 

services or duplicate payment for 

services delivered as MA supplemental 

benefits. For example, the State can 

make an adjustment to the base data 

used for Medicaid rate development to 

address coordination of benefits, such as 

when both Medicare (or an MA plan) 

and Medicaid cover a benefit, to ensure 

Medicaid rate development 

appropriately accounts for Medicaid 

being the payer of last resort.117 One 

more advantage of integrated care— 

capitating the same organization for all 

services—over fragmentated care is 

elimination of the administrative 

burden of coordinating benefits and 

identifying the correct payments for the 

secondary coverage with each service 

and each processed claim. 

State Medicaid agencies have 

flexibility to determine whether a D– 

SNP supplemental benefit covered with 

Medicare funds substitutes for an 

identical Medicaid benefit, given that 

Medicare coverage is primary to 

Medicaid, with the Medicaid benefit not 

provided, or to coordinate the D–SNP 

benefit and Medicaid benefit to provide 

D–SNP enrollees with an enhanced 

benefit. For example, a State Medicaid 

agency can determine that the use of the 

D–SNP supplemental benefit covered 

with Medicare funds, such as coverage 

of two dental cleanings per year, will be 

provided first, with the same Medicaid 

benefit provided after the Medicare 

benefit has been exhausted, resulting in 

coverage of up to four cleanings a year, 

which is recommended in some cases. 

A State Medicaid agency may determine 

that provision of the Medicaid benefit in 

addition to the same benefit covered as 

a D–SNP supplemental benefit is not 

medically necessary or cost-effective, or 

coordinate the two benefits as in the 

example above if the State believes the 

additional benefits would improve the 

care and support received by dually 

eligible individuals through the two 

programs. The contract between the D– 

SNP and the State Medicaid agency 

required under § 422.107 can be used to 

document the above types of 

determinations, and instruct the D–SNP 

for how to coordinate Medicare Part A 

and B benefits, MA supplemental 

benefits, and Medicaid benefits, 

consistent with applicable law. 

A State Medicaid agency may use the 

agreement required by § 422.107 

between the State and the D–SNP to 

require a FIDE SNP to offer MA 

supplemental benefits that expand 

coverage of LTSS that are also covered 

under Medicaid (with the Medicaid 

coverage furnished by the FIDE SNP or 

its affiliated Medicaid MCO). For 

example, the State Medicaid agency 

may require the FIDE SNP to have 

coverage of an item or service that is 

only covered under Medicaid for certain 

beneficiaries by offering an MA 

supplemental benefit that— 

• Covers the item or service as a 

supplemental benefit (provided the 

requirements for supplemental benefits 

are met per section 1854(c) of the Act 

and 42 CFR 422.2 (definition of MA 

plan), 422.100(d), and other regulations) 

for enrollees who are not eligible to 

receive the item or benefit under 

Medicaid; or 


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118Under the ‘‘lesser of ’’ policy, a State caps its 

payment of Medicare cost-sharing at the Medicaid 

rate for a particular service. For example, if the 

Medicare (or MA) rate for a service is $100, of 

which $20 is beneficiary coinsurance, and the 

Medicaid rate for the service is $90, the State would 

only pay $10. If the Medicaid rate is $80 or lower, 

the State would make no payment. 

119Qualified Medicare Beneficiaries and full 

benefit Medicare beneficiaries have protections 

from being charged Medicare cost-sharing for 

Medicare Parts A and B services. See https://

www.cms.gov/files/document/medicaremedicaid

enrolleecategories.pdf for the protections that apply 

to different categories of dually eligible individuals. 

• Fills in gaps or provides coverage 

that exceeds the amount, duration, or 

scope of the Medicaid coverage of the 

item or service. 

All MA plans, including D–SNPs, 

must comply with uniformity 

requirements in designing and offering 

supplemental benefits under section 

1854(c) of the Act and §§ 422.2, 

422.100(d), and other regulations. CMS 

will consider the supplemental benefits 

as meeting the uniformity requirements 

in cases where some dually eligible 

individuals receive the benefit under 

the FIDE SNP’s Medicaid managed care 

contract while other enrollees receive 

the benefit as an MA supplemental 

benefit because they are not eligible for 

Medicaid benefits under State Medicaid 

eligibility criteria. We are considering 

whether an amendment to 

§ 422.100(d)(2) would be appropriate 

regarding this approach to uniformity 

for supplemental benefits when a FIDE 

SNP arranges supplemental benefits this 

way. We welcome comments on that 

issue. 

For example, a State can require, via 

the State’s contract with a FIDE SNP, 

that the FIDE SNP offer an MA 

supplemental benefit that covers home 

and community-based services for 

certain, but not all, enrollees, such as 

enrollees who either: (1) Meet the State 

Medicaid criteria to receive Medicaid 

home and community-based services 

but are on waiting lists (and therefore 

ineligible at the time to receive the 

Medicaid services); or (2) are not 

eligible for the Medicaid benefits, such 

as because the enrollees do not receive 

full Medicaid benefits (that is, partialbenefit dually eligible individuals) or do 

not meet State Medicaid criteria to 

receive home and community-based 

services. In this case, enrollees have 

access to medically necessary home and 

community-based services when their 

needs are similar, even though some 

may be funded as an MA supplemental 

benefit and others through Medicaid. 

Alternatively, a State Medicaid 

agency could contract with a FIDE SNP 

to use Medicare rebate dollars to pay for 

a supplemental benefit that the State 

wants the FIDE SNP to provide in 

addition to the Medicaid-funded benefit 

the FIDE SNP provides under its 

Medicaid managed care contract. For 

example, depending on the State 

Medicaid agency’s contracting and 

benefit design, a D–SNP could provide 

its enrollees with 2 total weeks of 

respite care even though the Medicaid 

benefit is limited to 1 week, by 

providing an MA supplemental benefit 

for respite care. The FIDE SNP would 

provide the first week of respite care— 

as an MA supplemental benefit—and 

the second week of respite care in its 

role as a Medicaid managed care plan 

(where Medicaid is the secondary 

payer). 

(a) Using the D–SNP MOC To 

Coordinate Medicaid Services 

Although not a supplemental benefit, 

the D–SNP MOC, required by 

§ 422.101(f), also provides a vehicle for 

State Medicaid agencies to work with 

D–SNPs to meet State goals to improve 

quality of care and address SDoH. State 

Medicaid agencies may work with D– 

SNPs with service areas in the State to 

include (and, through the State 

Medicaid agency contract at § 422.107, 

require inclusion of) specific elements 

in the MOC and how the D–SNP 

delivers covered items and services 

consistent with the MOC. There is no 

prohibition on a State Medicaid agency 

imposing specific requirements for the 

D–SNP MOC that are in addition to 

§ 422.101(f); compliance with the 

approved MOC is included in the D– 

SNP’s bid to provide basic benefits 

under § 422.101(f). For example, the 

State Medicaid agency contract under 

§ 422.107 could require the D–SNP to 

have specific community-based 

providers involved in development of 

individualized care plans, deploy nurse 

practitioners for in-home care for highrisk enrollees when in-home services 

are required by the individualized care 

plans, use health care providers (rather 

than plan staff) for care coordination 

functions, and/or set minimum payment 

amounts for such providers. 

(b) Coordinating Coverage of Medicare 

Cost-Sharing 

In general, the same prohibition on 

duplicate Medicare and Medicaid 

payments for identical benefits applies 

when a D–SNP covers MA supplemental 

benefits that reduce Medicare Parts A 

and B cost-sharing, such as deductibles 

and coinsurance, as described for 

overlapping coverage of other Medicaid 

and MA supplemental benefits. How it 

works depends on whether the State 

Medicaid agency pays for Medicare 

cost-sharing through the Medicaid FFS 

program or pays the D–SNP a capitated 

amount to cover the State’s obligation to 

pay MA cost-sharing. For example, if a 

D–SNP does not impose the Part B 

deductible but otherwise uses Part B 

cost-sharing for its coverage of Part B 

Medicare benefits, it would have the 

following effects: 

• It would reduce to $0 the amount 

the State Medicaid FFS program pays 

providers serving QMBs and other fullbenefit dually eligible enrollees in the 

D–SNP for the Part B deductible. 

• If the State pays the D–SNP (or its 

affiliate) for coverage of MA cost-sharing 

otherwise payable by the State, it would 

eliminate any cost for coverage of the 

Part B deductible from those payments 

to the plan. D–SNPs cannot receive 

duplicate payments for coverage of the 

Part B deductible—once, in the form of 

the capitated payments from the State 

for Medicaid coverage and again by 

including the cost of eliminating the 

Part B deductible in the supplemental 

benefits that are paid by the Medicare 

beneficiary rebate under section 1854(b) 

of the Act. 

Most States pay less than the full MA 

cost-sharing amount due to the 

application of a ‘‘lesser-of ’’ 118 payment 

method for MA cost-sharing, and some 

of these States capitate D–SNPs in their 

States to pay this ‘‘lesser-of ’’ amount to 

the provider. D–SNPs in these States 

can combine Medicaid capitated 

payments and Medicare rebate dollars to 

more fully cover MA cost-sharing—that 

is, the amount a dually eligible 

individual would pay if not subject to 

Medicare cost-sharing protections 119— 

provided that the State Medicaid 

capitation payment and MA bid do not 

both pay for the same costs. The amount 

paid using MA rebates must be based on 

the actuarial value of the reduction in 

Medicare cost-sharing that is part of the 

MA plan benefit design, and the State 

Medicaid capitation payment must be 

based on the actuarial value of Medicare 

cost-sharing paid for Medicare Parts A 

and B services under the ‘‘lesser-of ’’ 

payment method. The overall reduction 

in Medicare cost-sharing must be 

actuarially equivalent to the Medicare 

cost-sharing paid for by the Medicaid 

capitated payment plus the Medicare 

rebate dollars allocated to additional 

reductions in Medicare cost-sharing 

compared to the actuarial value of 

Medicare cost-sharing in the original 

Medicare FFS program. 

We seek comments on State and MA 

organization experiences and challenges 

in coordinating benefits, CMS guidance 

or regulations that may warrant 

clarification, and whether our current 

policies create any unintended obstacles 


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120ATI Advisory. New, Non-Medical 

Supplemental Benefits in Medicare Advantage in 

2021. May 2021. https://atiadvisory.com/wpcontent/uploads/2021/06/2021-SpecialSupplemental-Benefits-for-the-Chronically-Ill.pdf. 

121Centers for Medicare & Medicaid Services and 

Virginia Department of Medical Assistance 

Services. Commonwealth Coordinated Care (CCC) 

Phase-Out Plan. https://www.cms.gov/MedicareMedicaid-Coordination/Medicare-and-MedicaidCoordination/Medicare-Medicaid-CoordinationOffice/FinancialAlignmentInitiative/Downloads/ 

VAPhaseOutPlan.pdf. 

122Centers for Medicare & Medicaid Services and 

New York Department of Health. New York Fully 

Integrated Dual Advantage Demonstration PhaseOut Plan. September 2019. https://www.cms.gov/ 

Medicare-Medicaid-Coordination/Medicare-andMedicaid-Coordination/Medicare-MedicaidCoordination-Office/FinancialAlignmentInitiative/ 

Downloads/NYFIDAPhaseOutPlan.pdf. 

123California Department of Health Care Services. 

Expanding Access to Integrated Care for Dual 

Eligible Californians. March 2021. https://

www.dhcs.ca.gov/provgovpart/Documents/6422/ 

Expanding-Access-to-Integrated-Care-for-DualEligible-Californians-03-01-21.pdf. 

to accessing services among dually 

eligible beneficiaries. 

14. Converting MMPs to Integrated D– 

SNPs 

In the 10 years since the creation of 

the FAI, the integrated care landscape 

has changed substantially. Congress 

made D–SNPs permanent in 2018 and 

established, effective beginning in 2021, 

new minimum integration standards 

and directed the establishment of 

unified appeals and grievance 

procedures (which we tested through 

the MMPs). Changes in MA policy have 

also created a level of benefit flexibility 

that did not previously exist outside of 

the capitated model demonstrations, 

with MA plans increasingly offering 

supplemental benefits that address 

social determinants of health and longterm services and supports.120 These 

factors, in combination with the 

proposals discussed earlier in this 

proposed rule, offer the opportunity to 

implement integrated care at a much 

broader scale than existed when MMPs 

were first created. As a result, should 

we finalize the proposals in this rule 

that facilitate or require greater 

integration, we would work with the 

states participating in the capitated 

financial alignment model during CY 

2022 to develop a plan for converting 

MMPs to integrated D–SNPs. 

The process for converting MMPs to 

integrated D–SNPs would depend in 

part on each State’s circumstances. 

States may choose to use the 

opportunities under our proposed 

§ 422.107(e) to structure the integrated 

D–SNP products to replicate key 

features of MMPs. Interested States, in 

consultation with local stakeholders, 

could submit letters as described at 

proposed § 422.107(e)(2) indicating 

intent to include contract requirements 

under § 422.107(e)(1) and take steps 

toward including those new terms in 

their contracts with D–SNPs. 

Concurrently, the interested States 

would also notify the MMP sponsors via 

the transition plan required in the threeway contracts. The organizations 

offering the MMPs would submit a 

notice of intent to apply and 

corresponding application for an MA 

contract, along with the D–SNP 

application specific to the integrated 

product as part of the annual MA 

application process, as described in 

section II.A.6.a. of this proposed rule. 

These States would work together with 

CMS to take the administrative steps 

necessary to maintain several of the 

integrated processes developed as part 

of the capitated model demonstrations, 

as discussed in the previous proposals 

(for example, integrated materials, 

unified appeals and grievances, 

enrollment processes to support 

exclusively aligned enrollment, etc.). 

States would develop new or revise 

existing State Medicaid agency contracts 

with integrated D–SNP sponsors to 

reflect State-specific Medicaid-related 

policies and priorities. Concurrently, 

States may need to attain appropriate 

Medicaid authorities to preserve 

integration through Medicaid managed 

care plans or may need to use existing 

Medicaid authorities to restructure 

Medicaid managed care contracts. 

Incorporating successful elements 

from MMPs into D–SNPs, using the 

processes and new requirements 

proposed in this rule, while phasing out 

MMPs as separate managed care 

products, would streamline and 

strengthen integrated care options for 

dually eligible individuals. It would 

allow CMS, States, and plan sponsors to 

concentrate quality improvement 

resources on a smaller number of 

products focused on dually eligible 

individuals. Now that Congress has 

permanently authorized SNPs, it would 

offer greater stability to States and 

sponsors and signal a longer term 

commitment to integration to 

stakeholders, including advocates, 

providers, and plans, than we could 

offer under time-limited model tests. It 

would also alleviate States and plans of 

the additional administrative burden 

associated with a demonstration, 

potentially freeing up additional 

resources that could be reinvested in 

refining and enhancing integrated care. 

We intend to continue—focusing now 

on D–SNPs—many of the technical 

assistance and quality improvement 

activities that we initially developed for 

MMPs, including— 

• Learning communities; 

• Direct work with beneficiary 

advocates and other stakeholders; 

• Targeted efforts to improve 

outcomes and reduce disparities; and 

• Capacity building on topics like 

person centeredness, disabilitycompetent care, dementia, and 

behavioral health. 

Converting MMPs into integrated D– 

SNPs would not be without downsides. 

While the aforementioned proposals, if 

finalized, would create mechanisms and 

new requirements to replicate much of 

the programmatic or administrative 

integration found in MMPs, other 

aspects of integration would be lost, 

including financing provisions (such as 

integrated risk mitigation and medical 

loss ratio calculations) and the ability to 

conduct passive enrollment at scale. 

States may also no longer have access to 

the same funding we provide to support 

ombudsman and options counseling as 

part of the current model tests. It may 

also be challenging to replicate the 

integrated enrollment processes utilized 

for MMPs if States no longer process all 

enrollments, and it is possible that we 

would lose some integration in 

beneficiary communications materials, 

particularly enrollment notices, in the 

process. In addition, converting MMPs 

to integrated D–SNPs also means 

transitioning the over 400,000 

individuals currently being served by 

MMPs, and there is risk for beneficiary 

confusion and disruption of services 

and care coordination during such a 

transition. 

In order to mitigate any disruptions 

that could result from converting MMPs 

to D–SNPs, we intend to work closely 

with States and other stakeholders to 

ensure the transition is as seamless as 

possible for MMP enrollees. To that end, 

we are considering use of our authority 

under section 1115A of the Act to 

facilitate the transition of MMP 

enrollees to D–SNPs operated by the 

same parent organization, subject to 

State approval, unless enrollees choose 

otherwise. This will minimize 

disruption of services and ensure 

continuity of care to the greatest extent 

possible. We already have experience 

with similar transitions at the end of the 

Virginia 121 and New York MMP 

demonstrations 122 and are working 

closely with the California Department 

of Health Care Services and MMPs to 

facilitate such a transition when the Cal 

MediConnect demonstration concludes 

at the end of 2022.123 We seek comment 

on this contemplated approach to 

working with States to convert MMPs to 

integrated D–SNPs. 


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B. Special Requirements During a 

Disaster or Emergency (§ 422.100(m)) 

In the February 12, 2015, final rule 

titled, ‘‘Medicare Program; Contract 

Year 2016 Policy and Technical 

Changes to the Medicare Advantage and 

the Medicare Prescription Drug Benefit 

Programs’’ (80 FR 7959) (hereinafter 

referred to as the 2015 final rule), CMS 

finalized a new paragraph (m) in 

§ 422.100 to codify and clarify an MA 

organization’s responsibilities when 

health plan services are affected by 

disasters or emergencies, including 

public health emergencies (PHEs), to 

ensure that MA enrollees continue to 

have access to care when normal 

business operations are disrupted and to 

ensure out-of-network providers are 

informed of the terms of payment for 

furnishing services to affected enrollees 

during disasters or emergencies. During 

the Coronavirus 2019 Disease (COVID– 

19) PHE, we received questions about 

the applicability of the special 

requirements at § 422.100(m), which 

prompted us to review the regulation 

and the laws related to the declaration 

of disasters and emergencies. In light of 

this review, we are proposing changes to 

clarify potential ambiguities in the 

regulation text, to further clarify the 

basis for determining the end of an MA 

organization’s obligations to comply 

with special requirements during a 

disaster or emergency and to codify our 

previous guidance. Specifically, we are 

proposing to revise § 422.100(m) to 

more clearly specify when MA 

organizations must begin ensuring 

access to covered benefits by meeting 

the requirements in paragraphs (m)(1)(i) 

through (iv) and when MA 

organizations are permitted to stop 

meeting those requirements. 

Section 1852(d) of the Act requires 

MA organizations to provide continued 

availability of and access to covered 

benefits, including making medically 

necessary benefits available and 

accessible 24 hours a day and 7 days a 

week; the ability to limit coverage to 

benefits received from a plan’s network 

of providers is contingent on fulfilling 

this obligation. When a disaster or 

emergency occurs, enrollees may have 

trouble accessing services through 

network providers or sometimes must 

physically relocate to locations that are 

outside of their MA plan’s service area. 

Currently, § 422.100(m) requires MA 

organizations to ensure access, at innetwork cost sharing, to covered 

services even when furnished by 

noncontracted providers when 

disruption in their MA plan’s service 

area during a state of disaster or 

emergency impedes enrollees’ ability to 

access covered healthcare services from 

contracted providers. Consistent with 

uniformity requirements for MA plans 

at § 422.100(d) and other regulations, 

these special requirements must be 

uniformly provided to similarly situated 

enrollees who are affected by the state 

of disaster or emergency. 

First, we propose to amend the 

regulation to explicitly limit the 

application of the special requirements 

to when there is a disruption in access 

to health care. In the 2015 final rule, we 

stated in the preamble that the 

regulations at § 422.100(m) were added 

to require MA organizations to ensure 

access, at in-network cost sharing, to 

covered services even when furnished 

by noncontracted providers ‘‘when a 

disruption of care in the service area 

impedes enrollees’ ability to access 

contracted providers and/or contracted 

providers’ ability to provide needed 

services.’’ (80 FR 7953) We propose to 

revise § 422.100(m)(1) to include that 

there must also be a disruption of access 

to health care in addition to a disaster 

or emergency declaration for the MA 

organization to be required to ensure 

access to covered benefits consistent 

with the special requirements described 

in § 422.100(m)(1). We propose to define 

‘‘disruption of access to health care’’ for 

purposes of these special requirements 

by adding a new paragraph (m)(6); as 

proposed, a ‘‘disruption of access to 

health care’’ for the purpose of 

§ 422.100(m) is an interruption or 

interference in access to health care 

throughout the service area such that 

enrollees do not have the ability to 

access contracted providers or 

contracted providers do not have the 

ability to provide needed services 

causing MA organizations to fail to meet 

the prevailing patterns of community 

health care delivery in the service area 

under § 422.112(a). The intent of these 

modifications is to clarify that if there 

is a current state of disaster or 

emergency that is not contributing to a 

disruption in health care services, then 

MA organizations would not be required 

to follow the requirements at 

§ 422.100(m)(1)(i)–(iv). During a state of 

disaster or emergency, MA 

organizations must continue to meet 

MA access and availability requirements 

consistent with the normal prevailing 

community pattern of health care 

delivery in the areas where the network 

is being offered. During a state of 

disaster or emergency, disruptions 

caused by the disaster or emergency 

may prevent contracted providers from 

providing services to enrollees. If 

enough contracted providers are 

unavailable to enrollees, then the MA 

plan would not have enough contracted 

providers consistent with the normal 

prevailing community pattern of health 

care delivery in the service area. Per the 

proposed definition, this would indicate 

that there is a disruption in access to 

health care in the service area, and MA 

organizations would be required to 

follow the special requirements at 

§ 422.100(m)(1). This definition is not 

intended to be limited to physical 

barriers to access (such as electrical 

outages or transportation difficulties 

caused by hurricanes or wildfires) but to 

be broad enough to encompass any 

interruption or interference caused by a 

disaster or emergency such as a lack of 

available hospital beds or quarantine 

restrictions. Therefore, under our 

proposal, when a disaster or emergency 

interrupts that level of access to and 

availability of services, MA 

organizations must ensure access by 

covering basic and supplemental 

benefits furnished at non-contracted 

facilities; waiving, in full, requirements 

for gatekeeper referrals where 

applicable; providing in-network cost 

sharing even if the enrollee uses out-ofnetwork providers; and making changes 

that benefit the enrollee effective 

immediately without the 30-day 

notification requirement at 

§ 422.111(d)(3). Limits in other 

regulations, such as §§ 422.204(b)(3) and 

422.220 through 422.224, on which 

healthcare providers may furnish 

benefits remain in place and are not 

eliminated by § 422.100(m). 

In the definition, we refer to the 

normal prevailing community pattern of 

health care delivery in the service area 

as it usually is when a state of disaster 

or emergency does not exist, not the 

prevailing community pattern of health 

care delivery in the service area during 

the state of disaster or emergency. 

During a state of disaster or emergency, 

it is possible that access to health care 

will be disrupted affecting more than 

MA enrollees, including access to care 

for enrollees in commercial plans and 

Original Medicare. To provide an 

extreme example, an MA organization 

could indicate that they are meeting the 

prevailing community pattern of health 

care delivery when all of the primary 

care providers in the service area are 

closed due to a state of disaster, and 

they are therefore meeting the standard 

because everyone in the service area, no 

matter the type of insurance they have, 

cannot access primary care providers. 

As explained above, this would not be 

acceptable, as CMS is measuring the 

prevailing community pattern of health 

care by reference to the pre-disaster 

period. Under the proposed regulation, 


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124https://governor.hawaii.gov/wp-content/ 

uploads/2016/02/160212_EmergencyProclamation_

Dengue.pdf. 

125https://www.govinfo.gov/content/pkg/FR2017-10-06/pdf/2017-21649.pdf. 

126https://www.cms.gov/About-CMS/AgencyInformation/Emergency/Downloads/Puerto-Ricoand-US-Virgin-Islands-PHE-Determination.pdf. 

MA organizations would be required to 

ensure access for their enrollees by 

complying with the special 

requirements listed at § 422.100(m)(1)(i) 

through (iv). While we consider the 

standard to be the normal prevailing 

community pattern of health care 

delivery, we understand this standard 

broadly in the context of disasters and 

emergencies. Some examples that would 

constitute a disruption in access to 

health care include physical barriers to 

accessing health care such as road 

disruptions or electrical outages, as well 

as other barriers to accessing health care 

such as provider offices being closed 

due to quarantine requirements from the 

Centers for Disease Control and 

Prevention (CDC) or state or local health 

departments, or hospitals beds being 

unavailable as occurred during the 

COVID–19 pandemic. This list is not 

intended to be exhaustive as many 

unforeseen circumstances may arise 

during states of disaster or emergencies 

that may cause enrollees to have trouble 

accessing services through normal 

channels or force them to move to safer 

locations that are outside of their plans’ 

service areas. A disruption in access to 

health care could include disruptions in 

access to Medicare Part A or Part B 

services or to supplemental benefits 

offered by the plan, or any combination 

of those. Our proposal is intended to be 

broad and to focus on actual access to 

and availability of services for enrollees 

in a service area affected by a disaster 

or emergency. Whether the MA plan 

network continues to meet evaluation 

standards specified in § 422.116 is not 

the only relevant consideration. For 

example, regarding a hospital with beds 

or other equipment unavailable to treat 

additional patients (as has occurred 

during COVID–19 pandemic), the 

hospital remains part of the MA 

organization’s network, and therefore 

the network may be consistent with 

CMS’s network adequacy standards for 

MA plan, but enrollees would not be 

able to access the hospital and may need 

to go to out-of-network providers to 

access their covered benefits. Similarly, 

physical barriers that enrollees may 

experience during a disaster or 

emergency (road closures, flooding, etc.) 

may affect enrollees unevenly, 

preventing some enrollees from 

accessing in-network providers. The 

provider may be part of the MA 

organization’s network and therefore the 

network may meet the time and distance 

evaluation standards in § 422.116 and 

appear to be capable of furnishing 

services consistent with the prevailing 

community pattern of health care, but 

some enrollees may experience 

difficulty accessing that provider to 

obtain needed health services. Further, 

if an enrollee had to leave their home to 

move to a safer location due to a disaster 

or emergency, the MA organization may 

still have a network that meets the 

prevailing community pattern of health 

care in the service area of the enrollee’s 

home, but the enrollee may not be able 

to access health care in their safer 

location without being able to access 

out-of-network care. We request 

comments from stakeholders on our 

proposed definition to determine 

whether there are circumstances CMS is 

not considering or additional standards 

that we should be using to identify 

when a disruption of access to health 

care is occurring. 

We propose to add a disruption of 

access to health care as a condition that 

must be met before the special 

requirements in § 422.100(m)(1) apply 

in order to ensure that this regulation is 

not overly broad and is appropriately 

tailored to address our concerns that 

MA enrollees have adequate access to 

medically necessary care and are not 

unduly restricted to the MA plan’s 

network of providers. As an illustrative 

example of a situation where a 

disruption of access to health care was 

not present even though a state of 

emergency was in effect, the Governor 

of Hawaii issued a state of emergency 124

to fight the Zika virus in February of 

2016. This state of emergency did not 

require all MA organizations operating 

in Hawaii to comply with the 

requirements at § 422.100(m)(1) because 

all provider offices were operating as 

usual, contracted providers continued 

in their ability to provide needed 

services, and enrollees did not face 

barriers in accessing needed services. 

The Opioid PHE, which began in 2017, 

is another example where there is a 

declared PHE by the Secretary that has 

been ongoing, but it does not necessarily 

constitute a disruption of access to 

health care. However, in 2017, 

Hurricane Maria in Puerto Rico led to 

substantial issues with access to covered 

services for MA enrollees. In connection 

with the Hurricane Maria, there was a 

Presidential declaration of a major 

disaster under the Stafford Act on 

September 20, 2017 125 and a Public 

Health Emergency declaration by the 

Secretary as of September 17, 2017.126

Under our proposal, MA organizations 

would be required to meet the special 

requirements at § 422.100(m)(1) for the 

duration of similar disasters and 

emergencies where access to covered 

benefits is disrupted. 

Under this proposal, we propose that 

MA organizations would be initially 

responsible for evaluating whether there 

is a disruption of access to health care 

under § 422.100(m). We believe MA 

organizations are best positioned to 

evaluate if a state of disaster or 

emergency is disrupting access to health 

care for enrollees in their service area. 

MA organizations would know the 

status of their in-network providers (for 

example, whether they are operational 

or not, how many beds are filled, etc.) 

and would be in communication with 

their providers as issues at the 

provider’s facilities or with an MA 

organization’s enrollees arise. MA 

organizations should be guided by the 

explanations here, including the 

examples, as well as their particular and 

detailed knowledge and understanding 

of their enrollees, service areas, and 

networks, to reasonably assess if there is 

a disruption in access to health care in 

the service area. CMS expects that MA 

organizations should be aware of these 

and other facts regarding access to 

health care in the service areas where 

they offer plans, and should be able to 

evaluate those facts and apply the 

standard in the regulation to know 

when they must comply with the 

special requirements at § 422.100(m). 

CMS will closely monitor access during 

disasters or emergencies to ensure MA 

organizations are applying the standard 

in § 422.100(m)(1) correctly and 

complying with this regulation to avoid 

any disruptions in access to care. As we 

monitor, we will evaluate whether and 

when the standard in § 422.100(m)(1) as 

proposed to be amended here is met. If 

CMS discovers that there are problems 

with access for enrollees, we will direct 

MA organizations in an affected area to 

comply with § 422.100(m), but we 

reiterate that an MA organization should 

be able to apply the standard in the 

regulation to the relevant facts related to 

a potential disruption in access to care 

during a disaster or emergency in order 

for the MA organization to know when 

compliance is required. MA 

organizations are required to meet the 

network adequacy requirements at 

§§ 422.112(a) and 422.116 at all times to 

ensure enrollees have sufficient access 

to covered benefits. MA organizations 

that fail to meet network adequacy 

requirements must ensure access to 

specialty care by permitting enrollees to 

see out-of-network specialists at the 

individual enrollee’s in-network cost 


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sharing level under § 422.112(a)(3). In 

addition, MA organizations may need to 

make alternate arrangements if the 

network of primary care providers is not 

sufficient to ensure access to medically 

necessary care under § 422.112(a)(2). 

This proposal would not change these 

existing and continuing regulatory 

requirements. 

Similar to what we have seen during 

the COVID–19 PHE, CMS expects that 

there will be situations where there is a 

disruption of access to health care for 

some period of time during a disaster or 

emergency but not at other times. Under 

our proposed regulation, MA 

organizations would follow the special 

requirements imposed by 

§ 422.100(m)(1) for 30 days after the 

disruption of access to health care ends 

while the disaster or emergency is 

ongoing and for 30 days after the end of 

the disaster or emergency if the 

disruption of access to health care, as 

defined in § 422.100(m)(6), continues 

until the end of the disaster or 

emergency. MA organizations may also 

find that at later time period during the 

same disaster or emergency, there is 

another disruption of access to health 

care and therefore that the MA 

organization must again follow the 

special requirements imposed by 

§ 422.100(m)(1). We also recognize that 

there may be circumstances when a 

state of disaster or emergency is 

declared for an area containing multiple 

service areas (for example, the entire 

United States), but the disaster or 

emergency may unequally affect the 

various service areas contained in the 

larger area for which it is declared. It 

may be that some service areas 

experience a disruption of access to 

health care, but other service areas do 

not, or that the disruption in care ends 

for certain service areas but continues in 

others. Under our proposed regulation, 

in situations where a disruption of 

access to health care ends in a particular 

service area, but the state of disaster or 

emergency continues to be in effect for 

an area that includes that particular 

service area, the special requirements 

imposed by § 422.100(m)(1) would be in 

effect for the service areas in which 

there is a disruption of access to health 

care (until 30 days after the disruption 

of access to health care ends) and would 

not be in effect for services in which 

there has not been any disruption of 

access to health care. 

We are also proposing two technical 

changes to our regulations at 

§ 422.100(m)(2) to correct some 

numbering issues that occurred in the 

2015 final rule. First, we are proposing 

to move the text from the fourth-level 

paragraph at (m)(2)(ii)(A) to the thirdlevel paragraph at (m)(2)(ii), which 

currently does not have text associated 

with it. As amended, the regulation at 

§ 422.100(m)(2)(ii)(A) would state that 

the Secretary of Health and Human 

Services (hereinafter referred to as the 

Secretary) may declare a PHE under 

section 319 of the Public Health Service 

Act. Second, we are proposing to 

remove the fourth-level paragraph at 

(m)(2)(ii)(B) because this paragraph only 

provides information about the 

Secretary’s section 1135 waiver 

authority which is not an authority 

under which the Secretary may declare 

PHEs. In addition to these technical 

changes, we are proposing several 

clarifying revisions to our language in 

§ 422.100(m) to ensure that we are 

consistently referring to disasters and 

emergencies. Currently, the language 

sometimes refers only to disasters (as in 

the introductory text to paragraphs 

(m)(1) and (2)), but also refers to 

disasters and public health emergencies 

(as in the text to paragraphs (m)(3) and 

(4) and (m)(5)(i)). We therefore propose 

to update the language throughout to 

reference disasters and emergencies 

with the aim of being consistent in that 

we refer to the various types of 

declarations listed at § 422.100(m)(2). 

Lastly, we are proposing revisions to 

clarify the basis for determining when 

MA organizations are no longer required 

to comply with the special requirements 

for a disaster or emergency. We are 

proposing to modify the text at 

§ 422.100(m)(3) to clarify that it refers to 

the end of the special requirements for 

a state of disaster or emergency 

stipulated at § 422.100(m)(1), not to the 

end of the state of disaster or emergency 

itself. We are also proposing to add a 30- 

day transition period to § 422.100(m)(3). 

Our current regulation at 

§ 422.100(m)(3)(iii) provides a period of 

30 days from the initial declaration for 

the special requirements imposed by 

§ 422.100(m)(1) to be in effect if the 

initial declaration of the disaster or 

emergency does not contain a specific 

end date or if the official or authority 

that declared the disaster or emergency 

does not separately identify a specific 

end date, and CMS has not indicated an 

end date to the disaster or emergency. 

This means that, under the current 

regulation, there is usually a 30-day 

minimum period during which MA 

plans are providing access to covered 

benefits with the additional beneficiary 

protections specified in paragraphs 

(m)(1)(i) through (iv), unless an explicit 

announcement of the end of the disaster 

or emergency has been declared. We 

believe that having a minimum period 

for these protections is important and 

appropriate. A transitional period from 

when an MA organization must comply 

with the access requirements in 

§ 422.100(m)(1) to normal coverage rules 

will protect enrollees who need time 

and assistance from the MA 

organization to find a contracted 

provider after having been treated by a 

non-contracted provider during the 

disaster or emergency. We intend for 

this period to serve as a protection for 

enrollees so they are not immediately 

responsible for the total cost of services 

received from a non-contracted provider 

that they have been seeing for a period 

of time due to the state of disaster or 

emergency. MA organizations may also 

find a transitional period helpful if they 

must contract with additional providers 

or otherwise make changes to their 

network to assist with the return to 

normal operations. We therefore 

propose to revise the regulation text at 

§ 422.100(m)(3) to require a 30-day 

transition period after the points in time 

identified in the regulation for the end 

of the special requirements. 

Specifically, we propose to revise 

paragraph (m)(3) to provide that the 

applicability of the special requirements 

for a disaster or emergency in 

paragraphs (m)(1)(i) through (iv) end 30 

days after the latest of the events 

specified in paragraph (m)(3)(i) or (ii) 

occur (that is, the latest end date in a 

case where there are multiple disasters/ 

emergencies) or end 30 days after the 

condition specified in paragraph 

(m)(3)(iii) occurs (that is, there is no 

longer a disruption of access to health 

care). 

In the 2015 final rule, we finalized 

three circumstances as determining the 

end of the special requirements for a 

disaster or PHE in the regulations at 

§ 422.100(m)(3). First, as currently 

provided in § 422.100(m)(3)(i), the 

source that declared the disaster or PHE 

declares an end to it. As explained in 

§ 422.100(m)(2), disasters or 

emergencies may be declared by the 

President of the United States under the 

Robert T. Stafford Disaster Relief and 

Emergency Assistance Act (Stafford Act) 

or the National Emergencies Act, by the 

Secretary who may declare a PHE under 

section 319 of the Public Health Service 

Act, or by Governors of States or 

Protectorates. We intend paragraph 

(m)(3)(i) to address circumstances when 

the initial declaration contains a 

specific end date or when the official or 

authority who declared the disaster or 

emergency separately identifies a 

specific end date. We are proposing to 

revise § 422.100(m)(3)(i) to address 

situations that may arise where there is 

more than one declaration of a disaster 


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or emergency at the same time for the 

same service area(s). This proposed 

revision clarifies that MA organizations 

must follow the special requirements 

until the latest applicable end date 

when multiple declarations apply to the 

same geographic area by specifying that 

all sources that declared a disaster or 

emergency that include the service area 

have declared an end. For example, if a 

Governor of a State declares a state of 

disaster or emergency and the President 

also later declares a state of disaster, 

both the state and federal disasters must 

be declared at an end to trigger 

§ 422.100(m)(3)(i). If the President’s 

disaster declaration ends after 20 days, 

but the Governor maintains the state of 

disaster for 30 days, then the special 

requirements imposed by 

§ 422.100(m)(1) would apply for MA 

plans in that area through the end of the 

emergency declared by the Governor, 

plus an additional 30 days for the 

transition period we are also proposing. 

Second, the regulation currently 

provides that CMS may declare an end 

to the state of disaster or PHE per 

§ 422.100(m)(3)(ii). Upon review, we 

intended for this regulation text to refer 

to the Secretary’s authority, which is 

consistent with the current practice of 

the Secretary to declare an end to PHEs. 

However, since the Secretary is already 

considered a source under 

§ 422.100(m)(3)(i), we believe that 

modifying this requirement to refer to 

the Secretary is unnecessary and 

therefore we propose to remove this 

text. 

Third, our current regulation at 

§ 422.100(m)(3)(iii) addresses 

circumstances where a state of disaster 

or PHE is declared with no end date 

identified. Because § 422.100(m)(3) 

provides that the end of the emergency 

or state of disaster ends when ‘‘any’’ of 

the three listed, if the declaration 

disaster or emergency timeframe has not 

been identified by the authority or 

official who declared the disaster or 

emergency and CMS has not indicated 

an end date to the disaster or 

emergency, MA plans should resume 

normal operations 30 days from the 

initial declaration. However, this does 

not properly account for how 

declarations of disasters or emergencies 

may be renewed with continued 

disruptions to access to health care 

services for enrollees. Further, our 

experiences with declarations of 

disasters and emergencies have 

demonstrated that the 30-day timeframe 

for the special requirements in 

§ 422.100(m)(1)(i) through (iv) may not 

be enough time to address concerns 

about enrollees being able to access 

benefits during disasters or emergencies, 

especially in cases where a disaster or 

emergency declaration has been 

renewed. There are circumstances 

where a 30-day time period does not 

cover the full length of a declared 

disaster or emergency and the current 

regulation is not well suited to ensure 

access for enrollees during the entire 

period of a disaster or emergency. For 

example, a PHE declared by the 

Secretary under section 319 of the 

Public Health Service Act is in effect for 

90 days unless the Secretary terminates 

it earlier, and the Secretary may renew 

the declaration at the end of the 90-day 

period. 

We propose to revise 

§ 422.100(m)(3)(ii) to address when no 

end date is identified under 

§ 422.100(m)(3)(i); in such cases, the 

applicability of the special requirements 

ends 30 days after the expiration of the 

declared disaster or emergency and any 

deadline for renewing the state of 

disaster or emergency. This 

modification clarifies that when a state 

of disaster or emergency is declared 

without an end date, § 422.100(m)(1) 

will continue to apply for the entire 

duration of the declared disaster or 

emergency, as determined under the 

relevant authority under which it was 

declared, if a disruption of access to 

health care continues. Stafford Act 

declarations do not have a defined end 

date. When the President declares a 

national emergency under the National 

Emergencies Act, the declaration of a 

national emergency lasts for a year 

unless terminated earlier by the 

Presidential proclamation or a joint 

resolution of Congress. The President 

can renew the declaration for 

subsequent one-year periods. When the 

Secretary declares a PHE under section 

319 of the Public Health Service Act, it 

lasts for 90 days unless the Secretary 

terminates it earlier, and it can be 

renewed for 90-day periods. For 

example, if the Secretary declared a PHE 

under section 319 of the Public Health 

Service Act, then the end date of the 

PHE would be in 90 days, unless 

renewed. If the Secretary chose to 

declare an end before the 90-day period 

ended, then the public health 

emergency would end according to the 

declared end date. CMS does not have 

the expertise to know whether all state 

declarations of emergency have a 

defined end date. Therefore, we are not 

proposing specific time periods but are 

proposing to amend § 422.100(m)(3)(ii) 

to account for extensions or renewals of 

declarations of the type identified in 

paragraph (m)(2). 

Lastly, we propose to add the 

disruption of access to health care as a 

limitation under revised 

§ 422.100(m)(3)(iii) to indicate that the 

special requirements associated with a 

state of disaster or emergency may end 

when the disruption of access to health 

care ends, even if one of the 

circumstances in § 422.100(m)(3)(i) or 

(ii) to end the state of disaster or 

emergency has not yet occurred. 

We intend to continue to issue 

subregulatory guidance as appropriate 

for MA organizations to explain how 

§ 422.100(m) works, both through the 

HPMS system and through the CMS 

Current Emergencies web page at: 

https://www.cms.gov/About-CMS/ 

Agency-Information/Emergency/EPRO/ 

Current-Emergencies/CurrentEmergencies.-page. Further, we note 

that the Secretary may exercise the 

waiver authority under section 1135 of 

the Social Security Act during an 

emergency period (defined in Section 

1135(g) of the Act), which exists when 

the President declares a disaster or 

emergency pursuant to the National 

Emergencies Act or the Stafford Act, 

and the Secretary declares a PHE 

pursuant to section 319 of the Public 

Health Service Act. Under the 

Secretary’s section 1135 waiver 

authority, CMS may authorize DME and 

A/B Medicare Administrative 

Contractors (MACs) to pay for Part Ccovered services furnished to MA 

enrollees and seek reimbursement from 

MA organizations for those health care 

services, retrospectively. Detailed 

guidance and requirements for MA 

organizations under the section 1135 

waiver, including timeframes associated 

with those requirements and 

responsibilities, would be posted on the 

Department of Health and Human 

Services website, (https://www.hhs. 

gov/) and the CMS website (https://

www.cms.hhs.gov/). MA organizations 

are expected to check these sites 

frequently during such disasters and 

emergencies. 

We propose the following changes to 

our regulations at § 422.100(m): 

• Revise § 422.100(m)(1) to state that 

when a disaster or emergency is 

declared as described in § 422.100(m)(2) 

and there is disruption of access to 

health care as described in 

§ 422.100(m)(6), an MA organization 

offering an MA plan must, until one of 

the conditions described in 

§ 422.100(m)(3) of this section occurs, 

ensure access to benefits as described in 

§ 422.100(m)(1)(i)–(iv). 

• Revise § 422.100(m)(2) to refer to 

emergencies and disasters. 

• Move the current text of 

§ 422.100(m)(2)(ii)(A) to 

§ 422.100(m)(2)(ii). 

• Remove § 422.100(m)(2)(ii)(B). 


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• Revise § 422.100(m)(3) to specify to 

the end of the applicability of the 

special requirements rather than to the 

end of the disaster or emergency. 

• Revise § 422.100(m)(3) to add a 

transition period of 30 days after the 

earlier of the conditions described in 

§ 422.100(m)(3)(i) and (ii) occurs or after 

the condition described in 

§ 422.100(m)(3)(iii) occurs; during the 

transition, MA organizations must 

continue to comply with 

§ 422.100(m)(1). 

• Revise § 422.100(m)(3)(i) to clarify 

that MA organizations must follow the 

special requirements until all of the 

sources that declared a disaster or 

emergency in the service area declare it 

ended. 

• Revise § 422.100(m)(3)(ii) to state 

that no end date was identified in 

§ 422.100(m)(3)(i) of this section, and all 

applicable disasters or emergencies have 

ended, including through expiration of 

the declaration or any renewal of such 

declaration. 

• Revise § 422.100(m)(3)(iii) to state 

that the special requirements identified 

in § 422.100(m)(1) of this section may 

also end if the disruption in access to 

health care services ends. 

• Revise § 422.100(m)(4) to refer to 

disasters and emergencies. 

• Revise § 422.100(m)(5)(i) to refer to 

disasters and emergencies. 

• Add a new paragraph at 

§ 422.100(m)(6) to define ‘‘disruption of 

access to health care’’ as an interruption 

or interference throughout the service 

area such that enrollees do not have 

ability to access contracted providers or 

contracted providers do not have the 

ability to provide needed services, 

resulting in MA organizations failing to 

meet the normal prevailing patterns of 

community health care delivery in the 

service area under § 422.112(a). 

C. Amend MA Network Adequacy Rules 

by Requiring a Compliant Network at 

Application (§ 422.116) 

In the ‘‘Medicare Program; Contract 

Year 2021 Policy and Technical 

Changes to the Medicare Advantage 

Program, Medicare Prescription Drug 

Benefit Program, and Medicare Cost 

Plan Program’’ final rule, which 

appeared in the Federal Register on 

June 2, 2020 (85 FR 33796) (hereinafter 

referred to as the June 2020 final rule), 

CMS codified, with some modifications, 

our network adequacy criteria and 

access standards (previously outlined in 

sub-regulatory guidance) under a new 

regulation at § 422.116. Section 

1852(d)(1) of the Act permits an MA 

organization to limit the providers from 

which an enrollee may receive covered 

benefits provided that the MA 

organization, among other standards, 

makes such benefits available and 

accessible in the service area with 

reasonable promptness. Using our 

authority under the statute to 

implement, interpret and enforce these 

requirements, we finalized § 422.116 

setting forth specific requirements. The 

provisions at § 422.116 outline 

standards for measuring network 

adequacy and access under a contracted 

provider network in accordance with 

requirements and standards in section 

1852(d)(1) of the Act and in 

§§ 422.112(a) and 422.114(a)(1) of our 

regulations. In addition, the regulation 

codified our then-existing policy, that 

CMS does not deny an application 

based on the evaluation of the 

applicant’s network for a new or 

expanding service area. Under our 

policy at the time of the June 2020 final 

rule and § 422.116(a)(2), an applicant is 

required to attest that it has an adequate 

network for access and availability of 

applicable provider and facility types at 

the time of the application for a new or 

expanding service area. 

We are proposing to amend 

§ 422.116(a)(1)(ii) to require compliance 

with applicable network adequacy 

standards set forth in § 422.116 as part 

of an application for a new or expanding 

service area. As indicated in the June 

2020 final rule, we currently rely on our 

existing triennial network review 

process and timeline to evaluate 

compliance with network adequacy 

standards for organizations applying for 

a new or expanding service area. As 

discussed in the June 2020 final rule, we 

removed network adequacy reviews 

from the application process beginning 

in 2018 for contract year 2019. While 

the process of reviewing provider 

networks as part of the triennial review 

has thus far been adequate and efficient 

operationally, we have also experienced 

unintended consequences as discussed 

further in this section, and are therefore 

proposing to improve our oversight and 

effectiveness of network adequacy 

reviews for initial applicants and 

services area expansion (SAE) 

applicants by requiring provider 

network reviews at the time of such MA 

applications. 

Currently, consistent with 

§ 422.116(a)(1)(i) and our application 

process, applicants must attest that they 

meet provider network standards, but 

do not have to demonstrate that they 

meet CMS network requirements before 

submitting a bid for the following 

contract year. CMS’s experience has 

shown that since adopting the 

attestation-only approach for the 2019 

contract year, organizations are 

requesting to remove a county (or 

multiple counties) from their service 

area (that is, service area reduction) after 

bids are submitted because the 

organization realizes that it does not 

have a sufficient network for the entire 

service area. For example, five 

organizations have requested to make 

changes to the service area of a total of 

10 plans after bid submission deadlines 

since 2019. 

Bid integrity is a priority for CMS. A 

request by an organization to make 

service area reductions related to 

provider networks after bid submission 

calls into question the completeness and 

accuracy of the bid(s). The provider 

network is an important consideration 

in preparing the bid submission. 

Permitting the MA organization to make 

changes to the bid submission because 

of the inability to meet network 

adequacy, which is reviewed after the 

first Monday in June (the bid deadline), 

would subsequently allow the MA 

organization to introduce revised 

information into the bidding process. 

The introduction of this revised 

information after the first Monday in 

June implies that the initial bid 

submission was not complete, timely, or 

accurate. Requiring the submission of 

networks for review as part of the 

application will mitigate this issue, as 

the application review is complete 

before bids are due. 

Furthermore, network adequacy 

reviews are a critical component for 

confirming that access to care is 

available for enrollees. Our network 

evaluations ensure that we are 

monitoring networks and requiring 

organizations to provide sufficient 

access to providers and facilities 

without placing undue burden on 

enrollees seeking covered services. 

Adding network reviews back to the 

application process will help ensure 

overall bid integrity, result in improved 

product offerings, and protect 

beneficiaries. 

After we adopted the current policy, 

failures detected during network 

reviews were not a basis to deny an 

application and CMS expected plans to 

cure deficiencies and meet network 

adequacy standards once coverage 

began on January 1 of the following 

year. In analyzing the network adequacy 

review determinations for the years 

since removing network adequacy 

requirements from the application, we 

have observed a pattern across these 

network review outcomes: 

Organizations continue to have failures 

in their networks even after the contract 

is operational. For example, we found 

that 19 initial applicants who submitted 

provider and facility Health Service 

Delivery (HSD) tables since contract 


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1894 Federal Register / Vol. 87, No. 8 / Wednesday, January 12, 2022 / Proposed Rules 

127https://www.cms.gov/files/document/ 

medicareadvantageandsection1876cost

plannetworkadequacyguidance6-17-2020.pdf. 

128https://www.cms.gov/Medicare/Health-Plans/ 

MedicareAdvtgSpecRateStats/Announcements-andDocuments. 129https://www.cms.gov/files/document/cy-2022- 

medicare-part-c-application-updated-1-12- 

2021.pdf. 

year 2019 continued to have 

deficiencies upon review of their 

networks once the MA plans were 

operational. By changing the process 

and reviewing the provider networks as 

part of the application, CMS will be able 

to better understand whether the 

failures are due to the timing of the 

reviews, which we hope the 10- 

percentage point credit, discussed later, 

will account for, or whether they are 

failures that the organization cannot 

cure. Establishing and maintaining an 

adequate provider network capable of 

providing medically necessary covered 

services to enrollees is fundamental to 

participation in the MA program. 

Our current process and 

§ 422.116(a)(1)(i) do not prohibit us, 

when evaluating an application, from 

considering information related to an 

organization’s previous failure to 

comply with a MA contract due to 

previous failures associated with access 

to services or network adequacy 

evaluations resulting in intermediate 

sanction or civil money penalty under 

to Part 422 Subpart O, with the 

exception of a sanction imposed under 

§ 422.752(d). This will continue to be 

applicable to our evaluation of initial or 

SAE applications. The changes we are 

proposing, to require compliance with 

network adequacy standards during the 

application process, will help us assess 

which organizations are not capable of 

meeting CMS standards in a given 

service area. As a result, we are 

proposing to broaden our ability to 

safeguard the MA program by 

permitting evaluations of network 

adequacy in connection with review 

and approval of applications for new 

and expanding service areas. This 

ability will help us avoid approving 

organizations that could have issues 

providing access to care in these new or 

expanded service areas. 

We have found that the current timing 

of the network adequacy reviews impact 

applicants’ ability to make timely 

decisions regarding the service area in 

which they intend to provide coverage. 

The operational process for conducting 

network adequacy reviews is outlined in 

the ‘‘Medicare Advantage and Section 

1876 Cost Plan Network Adequacy 

Guidance’’.127 The guidance currently 

directs initial and SAE applicants to 

upload their HSD tables containing 

pending service areas into the Health 

Plan Management System (HPMS) 

Network Management Module (NMM) 

in mid-June for CMS review. 

Regulations under § 422.254(a)(1) 

require organizations to submit bids no 

later than the first Monday in June of 

each year and authorize CMS to impose 

sanctions or choose not to renew an 

existing contract if the bid is not 

complete, timely and accurate. CMS has 

issued guidance to remind MA 

organizations of this obligation that bids 

be complete and accurate at the time of 

submission, such as in the CY 2014 

through CY 2020 Final Call Letters 

(provided as attachments to the annual 

Rate Announcements 128) and the CY 

2022 MA Technical Instructions, 

released in an HPMS memo on May 12, 

2021. Providing organizations with 

network adequacy determinations ahead 

of the bid deadline (within the 

application timeline) will provide them 

the opportunity to make decisions 

regarding their intended service areas 

before submitting bids. This practice 

would also help mitigate operational 

issues CMS has experienced related to 

requests for service area changes after 

the deadline has passed, as these kinds 

of requests may affect the MA 

organization’s submissions on the bid 

pricing tool. For these reasons, we are 

proposing to revise paragraph (a)(1)(ii) 

of § 422.116 to require an applicant for 

a new or expanding service area to 

demonstrate compliance with § 422.116 

and to explicitly authorize CMS to deny 

an application on the basis of an 

evaluation of the applicant’s network for 

the new or expanding service area. 

We are also proposing to add new 

regulation text at § 422.116(d)(7) to 

provide applicants with a temporary 10- 

percentage point credit towards the 

percentage of beneficiaries residing 

within published time and distance 

standards for all of the combinations of 

county designations and provider/ 

facility types specified in 42 CFR 

422.116(d), for the proposed contracted 

network for a new service area or a 

service area expansion (SAE). Current 

CMS procedures (see ‘‘The Part C— 

Medicare Advantage and 1876 Cost Plan 

Expansion and 1876 Cost Plan 

Expansion Application’’ 129) require 

completed applications to be submitted 

by mid-February. We understand that 

organizations may have difficulties 

meeting this timing for submission of a 

full provider network that the proposed 

change in § 422.116(a)(1)(i) would 

require. We previously separated the 

network adequacy reviews from the 

application process due to the potential 

challenge of applicants securing a full 

provider network almost a year in 

advance of the contract becoming 

operational. In order to provide 

flexibility to organizations as they build 

their provider networks, we propose to 

allow the 10-percentage point credit 

towards the percentage of beneficiaries 

residing within published time and 

distance standards for the contracted 

network in the pending service area, at 

the time of application and for the 

duration of the application review. At 

the beginning of the applicable contract 

year (that is, January 1), the 10- 

percentage point credit would no longer 

apply, and plans would need to be in 

full compliance for the entire service 

area. This aspect of our proposal will 

balance the burden on applicants of 

having network contracts in place close 

to a year before the beginning of the 

coverage year with the need to ensure 

that the MA plans available to enrollees 

have adequate networks for furnishing 

covered benefits. 

Under our proposal, initial and 

service area expansion applicants 

starting with the contract year 2024 

application cycle would be required to 

submit their proposed contracted 

networks during the application 

process. Applicants would upload their 

HSD tables to the NMM by the 

application deadline, and CMS would 

generally follow the current operational 

processes for network reviews, which 

includes an opportunity to submit 

exception requests as outlined in 

§ 422.116(f). The disposition of the 

exception request would be 

communicated as part of the 

opportunity to remedy defects found in 

the application under § 422.502(c)(2). 

Applicants for SAEs who are also due 

for a triennial review would be required 

to submit their pending service area 

during the application process, and 

their existing network service areas 

separately, during the triennial review 

in mid-June. 

For these reasons, we propose the 

following changes to § 422.116: 

• Revise § 422.116(a)(1)(ii) provide 

that beginning for contract year 2024, an 

applicant for a new or expanding 

service area must demonstrate 

compliance with this section as part of 

its application for a new or expanding 

service area and CMS may deny an 

application on the basis of an evaluation 

of the applicant’s network for the new 

or expanding service area. 

• Add a new paragraph at 

§ 422.116(d)(7), with the heading, ‘‘New 

or expanding service area applicants.’’ 

to provide that beginning for contract 

year 2024, an applicant for a new or 

expanding service area receives a 10- 

percentage point credit towards the 


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130We use the start date of the incident period 

to determine which year of Star Ratings could be 

affected, regardless of whether the incident period 

lasts until another calendar year. 

131The HEDIS measures derived from the HOS 

include Monitoring Physical Activity, Reducing the 

Risk of Falling, and Improving Bladder Control. 

percentage of beneficiaries residing 

within published time and distance 

standards for the contracted network in 

the pending service area, at the time of 

application and for the duration of the 

application review. At the beginning of 

the applicable contract year, this credit 

no longer applies and if the application 

is approved, the MA organization must 

be in full compliance with the section. 

D. Part C and Part D Quality Rating 

System 

1. Background 

CMS develops and publicly posts a 5- 

star rating system for Medicare 

Advantage (MA) and Part D plans based 

on the requirement to disseminate 

comparative information, including 

information about quality, to 

beneficiaries under sections 1851(d) and 

1860D–1(c) of the Act and the collection 

of different types of quality data under 

section 1852(e) of the Act. The Star 

Rating system for MA and Part D plans 

is used to determine quality bonus 

payment (QBP) ratings for MA plans 

under section 1853(o) of the Act and the 

amount of beneficiary rebates under 

section 1854(b) of the Act. Cost plans 

under section 1876 of the Act are also 

included in the MA and Part D Star 

Rating system, as codified at 

§ 417.472(k). We use different data 

sources to measure quality and 

performance of contracts, such as CMS 

administrative data, surveys of 

enrollees, information provided directly 

from health and drug plans, and data 

collected by CMS contractors. Various 

regulations require plans to report on 

quality improvement and quality 

assurance and to provide data which 

help beneficiaries compare plans (for 

example, §§ 417.472(j) and (k), 

422.152(b), 423.153(c), and 423.156). 

The methodology for the Star Ratings 

system for the MA and Part D programs 

is codified at §§ 422.160 through 

422.166 and 423.180 through 423.186. 

The Star Ratings are generally based 

on measures of performance during a 

period that is 2 calendar years before the 

year for which the Star Ratings are 

issued; for example, 2023 Star Ratings 

will generally be based on performance 

during 2021. For some measures, such 

as the cross-sectional measures 

collected through the Health Outcomes 

Survey (HOS), Star Ratings are based on 

performance up to 3 calendar years 

prior to the Star Ratings year. For 

example, the HOS survey administered 

in 2021 asks about care received (for 

example, whether a healthcare provider 

advised the member to start, increase, or 

maintain their level of exercise or 

physical activity) in the 12 months prior 

to the survey’s administration—that is a 

period of time covering parts of the 2020 

and 2021 calendar years—and the data 

are used for the 2023 Star Ratings. 

In the interim final rule titled 

‘‘Medicare and Medicaid Programs; 

Policy and Regulatory Revisions in 

Response to the COVID–19 Public 

Health Emergency’’ (85 FR 19230) 

published in the Federal Register on 

April 6, 2020 with a March 31, 2020 

effective date (hereafter referred to as 

the ‘‘March 31st COVID–19 IFC’’), we 

adopted a series of changes to the 2021 

and 2022 Star Ratings to address the 

disruption to data collection and impact 

on performance for the 2020 

measurement period posed by the 

public health emergency (PHE) for 

COVID–19. The Star Ratings changes 

adopted in that rule addressed both the 

needs of health and drug plans and their 

providers to curtail certain data 

collections and to adapt their current 

practices in light of the PHE for COVID– 

19 and the need to care for the most 

vulnerable patients, such as the elderly 

and those with chronic health 

conditions. As explained in the March 

31st COVID–19 IFC, we expected to see 

changes in measure-level scores for the 

2020 measurement period due to 

COVID–19-related healthcare 

utilization, reduced or delayed nonCOVID–19 care due to advice to patients 

to delay routine and/or elective care, 

and changes in non-COVID–19 inpatient 

utilization. The March 31st COVID–19 

IFC made some adjustments to account 

for potential changes in measure-level 

scores. (See 85 FR 19269 through 19275 

for a description of the various 

adjustments.) 

The March 31st COVID–19 IFC 

amended, as necessary, certain 

calculations for the 2021 and 2022 Part 

C and D Star Ratings to address the 

expected impact of the PHE for COVID– 

19 on data collection and performance 

in 2020 that were immediately apparent. 

As the PHE for COVID–19 progressed in 

2020 with ultimately all areas across the 

country eligible for Star Ratings disaster 

adjustments for extreme and 

uncontrollable circumstances under the 

current regulations (§§ 422.166(i) and 

423.186(i)) for the 2022 Star Ratings, it 

became apparent that a modification to 

the existing disaster policy was required 

in order to calculate cut points for nonCAHPS measures for the 2022 Star 

Ratings. We adopted regulations for how 

Star Ratings would be calculated in the 

event of extreme and uncontrollable 

circumstances in the final rule 

‘‘Medicare and Medicaid Programs; 

Policy and Technical Changes to the 

Medicare Advantage, Medicare 

Prescription Drug Benefit, Programs of 

All-Inclusive Care for the Elderly 

(PACE), Medicaid Fee-For-Service, and 

Medicaid Managed Care Programs for 

Years 2020 and 2021,’’ published in the 

Federal Register in April 2019 (84 FR 

15680), hereafter referred to as the April 

2019 final rule. Under §§ 422.166(i)(9)(i) 

and (i)(10)(i) and 423.186(i)(7)(i) and 

(i)(8)(i), the numeric scores for contracts 

with 60 percent or more of their 

enrollees living in FEMA-designated 

Individual Assistance areas at the time 

of the extreme and uncontrollable 

circumstance are excluded from: (1) The 

measure-level cut point calculations for 

non-CAHPS measures; and (2) the 

performance summary and variance 

thresholds for the reward factor. The 60 

percent rule does not apply to the 

calculation of cut points for CAHPS 

measures because those measures do not 

use the clustering methodology; thus, 

CAHPS measures were not impacted by 

this issue. Up until the 2022 Star 

Ratings, disasters for which any Star 

Rating adjustments had been made were 

localized, and the 60 percent rule had 

removed scores from only a small 

fraction of contracts (that is, less than 5 

percent of contracts on average). For 

most measures, the extreme and 

uncontrollable circumstance adjustment 

applies for disasters from 2 years prior 

to the Star Ratings year (that is, a 

disaster that begins 130 during the 2020 

measurement period results in a disaster 

adjustment for the 2022 Star Ratings). 

For Part C measures derived from the 

HOS survey, the disaster adjustment is 

delayed an additional year due to the 

timing of the survey and 1 year recall 

period. In the April 2019 final rule (84 

FR 15772 through 15773), we 

specifically gave the example of how 

HOS and HEDIS–HOS measures 131 for 

the 2023 Star Ratings would be adjusted 

for contracts affected by an extreme and 

uncontrollable circumstances in 2020. 

We explained how the delay for HOS 

measures due to the follow-up 

component of HOS and the adjustment 

for an extreme and uncontrollable 

circumstance would be to the Star 

Ratings for the year after the completion 

of the follow-up HOS survey (that is 

administered 2 years after the baseline 

HOS survey). 

Due to the unique circumstances 

surrounding the PHE for COVID–19 in 

which all contracts operational in 2020 

qualified for the extreme and 

uncontrollable circumstance 


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adjustments, we created special rules for 

the 2022 Star Ratings to be able to 

calculate non-CAHPS measure-level cut 

points and codified these special rules 

at §§ 422.166(i)(11) and 423.186(i)(9). 

Although the CAHPS surveys and 

HEDIS data collection were not 

completed in 2020 (we did conduct the 

HOS survey in 2020 on a later schedule 

than usual), CAHPS surveys and HEDIS 

data collection completed in 2021 

would reflect performance by plans in 

2020 during the COVID–19 PHE and 

would be used in the 2022 Star Ratings. 

In the interim final rule titled ‘‘Medicare 

and Medicaid Programs, Clinical 

Laboratory Improvement Amendments 

(CLIA), and Patient Protection and 

Affordable Care Act; Additional Policy 

and Regulatory Revisions in Response to 

the COVID–19 Public Health 

Emergency’’ (85 FR 54820), published in 

the Federal Register and effective on 

September 2, 2020 (hereinafter referred 

to as the ‘‘September 2nd COVID–19 

IFC’’), we revised the disaster policy 

rules for calculating the non-CAHPS 

measure-level cut points for the 2022 

Star Ratings so we would be able to 

calculate the 2022 Star Ratings for these 

measures (85 FR 54844–47). The 

September 2nd COVID–19 IFC also 

modified the calculation of the 

performance summary and variance 

thresholds for the reward factor so as 

not to exclude the numeric values for 

affected contracts with 60 percent or 

more of their enrollees in FEMAdesignated Individual Assistance areas 

at the time of the extreme and 

uncontrollable circumstance from the 

determination of the performance 

summary and variance thresholds. 

These changes ensured that CMS was 

able to calculate measure-level cut 

points for those measures that qualified 

for the disaster adjustment for the 2022 

Star Ratings; calculate measure-level 

2022 Star Ratings; apply the ‘‘higher of’’ 

policy for non-CAHPS measures as 

described at §§ 422.166(i)(3)(iv), 

(i)(4)(v), (i)(5), and (i)(6)(i) and (iv) and 

423.186(i)(3) and (i)(4)(i) and (iv); 

calculate the reward factor; and 

ultimately calculate 2022 overall and 

summary Star Ratings. 

We intend to address the changes and 

comments we received in response to 

the March 31st COVID–19 IFC and the 

September 2nd COVID–19 IFC in a 

future final rule. We are proposing here 

a specific provision for 2023 Star 

Ratings for measures derived from the 

HOS data collection administered in 

2020. 

2. Measures Calculated From the HOS 

Survey 

In response to the September 2nd 

COVID–19 IFC, some commenters asked 

for clarification about the measures that 

come from the HOS survey and when 

the disaster policy would be applied in 

light of how HOS measures receive 

adjustment after an extreme and 

uncontrollable circumstance. A few 

commenters asked, based on previous 

logic for disasters and HOS measures, 

whether we anticipated that the 

impacted HOS data collection period 

would not be until 2021 and the ‘‘higher 

of’’ methodology would be applicable to 

reporting year 2023 for HOS measures. 

Another commenter noted that using the 

2020 Star Ratings as an example, the 

contracts affected by 2018 disasters 

received the ‘‘higher of’’ logic for most 

measures; however, the HOS and 

HEDIS–HOS measures used the ‘‘higher 

of’’ logic only for contracts affected by 

2017 disasters. The commenter stated if 

this timing applies to 2020 disasters, the 

HOS and HEDIS–HOS measures will 

receive the higher of current or prior 

year measure-level Star Ratings in the 

2023 Star Ratings. The commenters 

asked for clarification since the 

September 2nd COVID–19 IFC adopted 

a regulatory change to the 60 percent 

rule for only the 2022 Star Ratings. We 

are proposing here to address the HOS 

measures used in the 2023 Star Ratings. 

As described in the 2019 final Part C 

and D rule (CMS–4185–F) (84 FR 15772 

through 15773), for measures derived 

from the HOS survey, the disaster policy 

adjustment is for 3 years after the 

extreme and uncontrollable 

circumstance. Thus, we noted in the 

preamble to that rule that the 2023 Star 

Ratings would adjust measures derived 

from the HOS survey for 2020 extreme 

and uncontrollable circumstances. (85 

FR 15772 through 15773) Based on the 

comments received and the timing of 

the HOS administration, we propose to 

amend § 422.166(i) to specifically 

address the 2023 Star Ratings, for 

measures derived from the 2021 HOS 

survey only, by adding § 422.166(i)(12) 

to remove the 60 percent rule for 

affected contracts. This amendment 

would ensure that we are able to 

calculate the Star Ratings cut points for 

the three HEDIS measures derived from 

the HOS survey and are able to include 

these measures in the determination of 

the performance summary and variance 

thresholds for the reward factor for the 

2023 Star Ratings. Without removing the 

60 percent rule for HEDIS measures 

derived from the HOS survey, we would 

not be able to calculate these measures 

for the 2023 Star Ratings or include 

them in the 2023 reward factor 

calculation. By removing the 60 percent 

rule, all affected contracts (that is, 

contracts affected by the 2020 COVID– 

19 pandemic) with at least 25 percent of 

their enrollees in Individual Assistance 

areas at the time of the disaster will 

receive the higher of the 2022 or 2023 

Star Rating (and corresponding measure 

score) for each of the HEDIS measures 

collected through the HOS survey as 

described at § 422.166(i)(3)(iv). 

As a reminder, in a Health Plan 

Management System memorandum 

issued on August 5, 2021 (‘‘Medicare 

Health Outcomes Survey (HOS) 

Outcome Measures Moved to Display 

for 2022 and 2023 Star Ratings’’), we 

explained that due to the pervasive way 

in which COVID–19 has undermined 

and continues to undermine the validity 

of the two HOS outcome measures for 

the 2020 and 2021 follow-up 

measurement periods, CMS will 

calculate the 2022 and 2023 Star Ratings 

without the use of the two measures, 

Improving or Maintaining Physical 

Health and Improving or Maintaining 

Mental Health. This decision was made 

applying the standard in § 422.164(b). 

E. Past Performance (§§ 422.502, 

422.504, 423.503, and 423.505) 

CMS has an obligation to ensure the 

organizations in which we contract with 

will be able to provide health care 

services to beneficiaries in a highquality manner. We do not want 

organizations entering into or expanding 

in MA that have shown to be poor 

performers. Currently, if an organization 

meets all of the requirements in CMS’ 

application, CMS approves the 

application. However, the application 

requirements do not look at an 

organization’s prior performance in 

existing contracts. Therefore, if an 

organization fails to provide key 

services or administers the program 

poorly, their application for a new 

contract or a service area expansion 

would still be approved. Allowing poor 

performers into the Part C and Part D 

programs puts beneficiaries at risk for 

inadequate health care services and 

prescription drugs. To avoid poor 

performers from entering or expanding, 

CMS first addressed this issue in the 

MA and Part D program regulations in 

2005. CMS has established, at 

§§ 422.502(b) and 423.503(b), that we 

may deny an application submitted by 

an organization seeking an MA or Part 

D contract, including for a service area 

expansion, if that organization has 

failed to comply with the requirements 

of a previous MA or Part D contract. In 

the April 2011 final rule (75 FR 19684 

through 19686), we completed 


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rulemaking that placed limits on the 

period of contract performance that 

CMS would review (that is, 14 months 

preceding the application deadline) and 

established that CMS would evaluate 

contract compliance through a 

methodology that would be issued 

periodically through sub-regulatory 

guidance. In the April 2018 final rule 

(83 FR 16638 through 16639), we 

reduced the review period to 12 months. 

In the January 2021 final rule (86 FR 

5864), we established that CMS would 

only have the authority to deny 

applications based on an organization’s 

past performance if an organization was 

subject to an intermediate sanction and/ 

or failed to maintain a fiscally sound 

operation during the performance 

review period. Up until the January 

2021 final rule (86 FR 5864) CMS issued 

a sub-regulatory methodology consisting 

of eleven areas of poor performance, 

including negative net worth and being 

under intermediate sanctions during the 

performance timeframe. The prior 

methodology assigned ‘‘performance 

points’’ to organizations for each area 

the organization failed (for example, had 

a negative net worth resulted in a 

performance point). If the total number 

of performance points reached CMS’ 

threshold the organization’s application 

would be denied based on past 

performance. Historically, only a 

handful of applications have been 

denied based on prior past performance, 

with three denials since 2017. The low 

number of denials has not impacted 

access to MA plans nor do we believe 

expanding the bases for denials will 

impact access. In fact, the average 

number of plans that a beneficiary has 

access to has been increasing since 2015 

with approximately 99.7% of 

beneficiaries currently having access to 

an MA plan. In addition, 97.7 of eligible 

beneficiaries will have access to ten or 

more plans for CY 2022. 

As stated in the January 2021 final 

rule, CMS’ overall policy with respect to 

past performance remains the same. We 

have an obligation to ensure MA 

organizations and Part D sponsors can 

fully manage their current contracts and 

books of business before expanding. 

CMS may deny applications based on 

past contract performance in those 

instances where the level of previous 

non-compliance is such that granting 

additional MA or Part D business to the 

responsible organization would pose a 

high risk to the success and stability of 

the MA and Part D programs and their 

enrollees. 

The January 2021 final rule limited 

the bases for denial based on past 

performance to intermediate sanctions 

and failure to maintain fiscal soundness. 

In this proposed rule, CMS seeks to 

expand the bases for application denial 

to include Star Ratings history, 

bankruptcy proceedings, and certain 

CMS compliance actions. CMS also 

proposes to codify the types of 

compliance notices which will be used 

as a factor in CMS’ review of an 

organization’s past performance. These 

notices are Notices of Non-Compliance 

(NONCs), Warning Letters (WLs), and 

Corrective Action Plans (CAPs). 

We propose to codify the new bases 

for application denial based on past 

contract performance as paragraphs 

(b)(1)(i)(C)—Bankruptcy filing or under 

bankruptcy proceedings, (b)(1)(i)(D)— 

low Star Ratings, and (b)(1)(i)(E)— 

Compliance Actions. We also propose to 

codify CMS’ compliance actions which 

are NONCs, WLs, and CAPs in 

§§ 422.504(m) and 423.505(n). We are 

not proposing to add a recent history of 

Civil Money Penalties (CMPs) as a basis 

for a past performance application 

denial at this time, but we will consider 

it in future rulemaking. Therefore, we 

are soliciting comments on how best to 

incorporate CMPs into CMS’ 

methodology used to deny applications 

based on prior contract performance. 

We are also proposing to correct a few 

technical issues identified since the 

final rule was published in January 

2021. Specifically, we are proposing to 

correct a drafting error in 

§ 422.502(b)(1)(i)(A) that did not include 

enrollment sanctions based on medical 

loss ratios (MLRs) as a basis for an 

application denial. Section 

423.503(b)(1)(i)(A) already provides for 

the denial of an application if the 

organization failed to meet MLR 

requirements and was prohibited from 

enrolling new members pursuant to 

§ 423.2410(c). The technical correction 

would revise § 422.502(b)(1)(i)(A) to 

also provide for the denial of an 

application if the organization failed to 

meet MLR requirements and was 

prohibited from enrolling pursuant to 

§ 422.2410(c). The new 

§ 422.502(b)(1)(i)(A) would read as 

follows, ‘‘. . . was subject to the 

imposition of an intermediate sanction 

under subpart O of this part or a 

determination by CMS to prohibit the 

enrollment of new enrollees pursuant to 

§ 422.2410(c), with the exception of a 

sanction imposed under § 422.752(d).’’ 

Secondly, we are proposing to correct a 

minor technical error in 

§ 423.503(b)(1)(i)(A) to remove the word 

‘‘to’’ when referencing subpart O. The 

revised sentence would read ‘‘. . . was 

subject to the imposition of an 

intermediate sanction under subpart O 

of this part or a determination by CMS 

to prohibit the enrollment of new 

enrollees pursuant to § 423.2410(c).’’ 

Finally, we are proposing to modify 

§§ 422.502(b)(1) and 423.503(b)(1) by 

deleting ‘‘. . . or fails to complete a 

corrective action plan during the 12 

months preceding the deadline 

established by CMS for the submission 

of contract qualification 

applications. . .’’ References to CAPs in 

§§ 422.502(b)(1) and 423.503(b)(1) were 

codified more than 15 years ago. Since 

the original provisions, CMS’ corrective 

action process has changed and is no 

longer a reason, by itself, to deny an 

application. Our current review for past 

performance does not view incomplete 

CAPs as a sole basis for denying an 

application. Nor does CMS intend to 

deny an application on the sole basis of 

an incomplete CAP. Therefore, we 

propose to remove the references in 

§§ 422.502(b)(1) and 423.503(b)(1). 

As stated previously, we propose to 

include in §§ 422.502(b)(1)(i)(C) and 

423.503(b)(1)(i)(C), as a reason for 

application denial, organizations that 

have filed for bankruptcy or are 

currently in bankruptcy proceedings. 

Currently, we have the authority to deny 

an application for organizations that fail 

to maintain a fiscally sound operation 

during the performance period. Failure 

to maintain a fiscally sound operation 

results in enrollees being at risk of not 

being able to obtain needed medical 

resources if the organization cannot or 

will not pay its providers. Similar to 

being fiscally unsound, an organization 

that will potentially be declared 

bankrupt may result in beneficiaries not 

having access to needed services as 

providers may terminate contracts when 

the plan fails to pay for their services or 

items. Since bankruptcy may result in 

the closure of an organization’s 

operations, permitting an organization 

to expand while under bankruptcy 

proceedings is not in the best interest of 

the MA or Part D program. Based on 

this, we believe that any organization 

that has filed or is in bankruptcy 

proceedings should not be permitted to 

expand their current service area or 

enter into a new contract. 

We are also seeking to include, in 

§§ 422.502(b)(1)(i)(D) and 

423.503(b)(1)(i)(D), a recent history of 

low Star Ratings as a reason for 

application denial. We are proposing 

that CMS would deny an application for 

a new contract or a service area 

expansion from any organization that 

received 2.5 or fewer Stars. We 

previously proposed that low Star 

Ratings would be the basis for an 

application denial but decided not to 

finalize that proposal in the January 

2021 final rule. In responses to 

comments to the January 2021 final rule, 


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we stated that a history of 3 consecutive 

years of low Star Ratings permits CMS 

to terminate an organization’s contract, 

so we previously concluded it was not 

necessary to include one year of low 

ratings as a basis for a past performance 

application denial. However, we have 

re-evaluated our position, as discussed 

below, and believe that a history of one 

year of low Star Ratings merits an 

application denial. 

CMS’ Star Ratings are provided to 

beneficiaries to help them make 

informed health care choices. Moreover, 

MA organizations and Part D sponsors 

are required by §§ 422.504(b)(17) and 

423.505(b)(26) to maintain summary 

MA and/or Part D Star Ratings of at least 

3 Stars. Contracts that have 2.5 or less 

Stars are considered to be ‘‘low 

performers.’’ Regulations at 

§§ 422.510(a)(4) and 423.509(a)(4) 

permit CMS to terminate a contract for 

having less than 3 Stars for three 

consecutive years in a row for Part C 

summary ratings or for having less than 

3 Stars for three consecutive years in a 

row for Part D summary ratings. Such a 

termination carries with it an exclusion 

from future MA or Part D application 

approvals for 38 months under 

§§ 422.502(b)(3) and 423.503(b)(3), a 

more significant consequence than the 

1-year application denial we are 

discussing in this proposed rule. We 

have concluded that providing for an 

application denial based on a 1-year 

history of low Star Ratings is consistent 

with CMS’ current practice of graduated 

enforcement. Furthermore, CMS does 

not want to provide an organization at 

risk of being terminated in 2 years, 

based on its Star Ratings history, with 

an opportunity to expand. Expansion 

would put more beneficiaries at risk of 

losing their health care coverage if an 

organization cannot improve its Star 

Ratings. As a note, terminating contracts 

based on Star Ratings rarely occurs, 

with the last termination being prior to 

2016. Based on this, CMS is seeking to 

include one year of low Star Ratings as 

a reason to deny new applications or 

applications for service area expansions. 

Finally, we are proposing to codify 

our practice of issuing compliance 

notices in §§ 422.504(m) and 423.505(n). 

CMS is also proposing, in 

§§ 422.502(b)(1)(i)(E) and 

423.503(b)(1)(i)(E), to include the 

receipt of specific types of compliance 

notices as a reason to deny new 

applications or applications for service 

area expansions. 

Prior to the January 2021 final rule, 

CMS included compliance letters as a 

category in our sub-regulatory past 

performance methodology. This 

methodology included NONCs, WLs, 

Warning Letters with Business Plans, 

and CAPs. These notices are CMS’ 

formal way of recording an 

organization’s failure to comply with 

statutory and/or regulatory requirements 

as well as providing notice to the 

organization to correct their deficiencies 

or risk further compliance and 

enforcement actions. In §§ 422.504(m) 

and 423.505(n), we are codifying 

NONCs, WLs, and CAPs as types of 

CMS compliance actions. CMS has been 

issuing compliance notices for more 

than 10 years. Based on our experience, 

we have decided that Warning Letters 

with Business Plans are no longer 

necessary. NONCs, WL, and CAPs are 

sufficient to record non-compliance that 

does not yet warrant stronger 

enforcement action. Based on this, we 

will not codify Warning Letters with 

Business Plans as a type of compliance 

action. 

Of these three types of notices, 

Requests for CAPs are the most serious 

of the notice types. CMS issues these 

notices pursuant to §§ 422.510(c) and 

423.509(c), which require CMS to afford 

non-compliant organizations the 

opportunity to develop and implement 

a corrective action plan prior to 

terminating an MA or Part D contract. 

CMS may request CAPs for a one-time 

egregious error or an organization’s 

continued failure to correct previously 

identified deficiencies. The noncompliance resulting in a CAP request 

usually has beneficiary impact, such as 

failure to process appeals timely or 

marketing misrepresentation. In cases 

where CMS requests a CAP where there 

is no beneficiary impact, the majority 

are for continued non-compliance with 

requirements. 

WLs are an intermediate level of 

compliance action, between a NONC 

and a CAP. WLs, similar to CAPs, are 

issued for more egregious instances of 

non-compliance or continued noncompliance. However, the egregiousness 

or continued non-compliance, at the 

time of the notice, would not warrant a 

request for a CAP. Examples include 

continued failure to timely send 

Explanation of Benefits, multiple cost/ 

benefit errors on required beneficiary 

communication documents, and 

instances of unsolicited marketing. 

NONCs are the lowest form of a 

compliance action issued by CMS. 

These notices are issued for the least 

egregious failures. These failures are 

often a first-time offense, affect a small 

number/percentage of beneficiaries, or 

issues that have no beneficiary impact. 

Examples may include failure to submit 

and/or attest to agent/broker 

compensation data or failure to upload 

or correctly upload marketing materials. 

In determining the level of severity of 

a compliance action, CMS considers 

whether an organization self-reported 

the non-compliance. CMS considers 

items self-reported when CMS would 

not have otherwise known about the 

issue. In cases where we direct 

organizations to take a specific action, 

such as reviewing and reporting errors 

in Summary of Benefits (SB) and 

Evidence of Coverage (EOC) documents, 

CMS does not consider this selfreporting. 

As mentioned above, self-reporting 

can affect the level of compliance action 

issued. CMS reviews the organization’s 

non-compliance and whether the 

organization self-reported the issue or 

CMS found the issue through means 

such as, complaint reviews, notification 

by a State entity, or a review of 

requested data. Based on the issue 

involved, CMS determines the 

appropriate level of compliance that 

should be issued, such as a WL or a 

NONC. If the organization did selfreport, CMS will consider lowering the 

level of compliance (for example, 

issuing a NONC instead of a WL). 

However, CMS is not required to lower 

the level of compliance action if the 

issue was self-reported. This is 

especially the case with respect to 

NONCs, where the non-compliance is 

significant enough to warrant a NONC 

even if self-reported. 

We propose to assign points to each 

type of compliance action based on the 

type of notice and then apply a 

compliance action threshold to 

determine if the application should be 

denied. The following points would be 

assigned: CAP—6 points, WL—3 points, 

NONC—1 point. CMS will then total the 

points accrued for each organization, 

and those who are at or above a 

specified threshold may have 

applications for new contracts or service 

area expansions denied on the basis of 

past performance. 

CMS is proposing a threshold of 13 

compliance action points. CMS would 

have the right to deny applications from 

any organization who scored 13 or more 

compliance action points. This would 

be the equivalent of just over two CAPs. 

We believe any organization whose 

performance is such that two CAPs and 

a NONC are issued or a combination of 

compliance actions that add up to 13 

points should not be permitted to 

expand. In determining this threshold, 

we reviewed compliance actions taken 

from 2017 through November 2021. In 

the review of this data no more than 

three organizations, out of over three 

hundred organizations, scored 13 or 

more compliance action points in any 

one year. When looking at a percentile, 


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based on historical data, an organization 

would need be in the top 2% of plans 

based on compliance action points to 

accrue 13 compliance action points. We 

solicit comments on alternative 

methodologies for considering 

compliance notices, such as calculating 

outlier performance based on 

percentages. 

For these reasons, we propose to 

revise §§ 422.502(b), 422.504(m), 

423.503(b), and 422.505(n) to read as set 

out in the regulatory text. 

F. Marketing and Communications 

Requirements on MA and Part D Plans 

To Assist Their Enrollees (§§ 422.2260 

and 423.2260, 422.2267, and 423.2267) 

Sections 1851(h) and (j) of the Act 

provide a structural framework for how 

MA organizations may market to 

beneficiaries and direct CMS to adopt 

standards related to the review of 

marketing materials and limitations on 

marketing activities. Section 1860D– 

1(b)(1)(B)(vi) of the Act directs that the 

Secretary use rules similar to and 

coordinated with the MA rules at 

section 1851(h) of the Act for approval 

of marketing material and application 

forms for Part D plan sponsors. Section 

1860D–4(l) of the Act applies certain 

prohibitions under section 1851(h) of 

the Act to Part D sponsors in the same 

manner as such provisions apply to MA 

organizations. In addition, sections 

1852(c) and 1860D–4(a) of the Act 

provide that MA organizations and Part 

D sponsors must disclose specific types 

of information to each enrollee. Based 

on the aforementioned authorities, CMS 

promulgated regulations related to 

marketing and mandatory disclosures by 

MA organizations and Part D sponsors 

in 42 CFR part 422, subpart C (at 

§ 422.111) and subpart V; as well as 42 

CFR part 423, subpart C (at § 423.128) 

and subpart V. These regulations 

include the specific standards and 

prohibitions in the statute as well as 

standards and prohibitions promulgated 

under the statutory authority granted to 

the agency. Additionally, under 42 CFR 

417.428, most marketing requirements 

in subpart V of part 422 apply to section 

1876 cost plans. Because these 

proposals are applicable to MA 

organizations, Part D plan sponsors and 

cost plans, we collectively refer to these 

entities as ‘‘plans.’’ Finally, CMS has 

authority to adopt additional contract 

terms for cost plans (section 

1876(i)(3)(D)), MA plans (section 

1857(e)(1)), and Part D plans (section 

1860D–12(b)(3)(D) of the Act) where 

such terms are not inconsistent with the 

Medicare statute and that we determine 

are necessary and appropriate. 

In the January 2021 final rule (86 FR 

5864), we codified much of the 

communications and marketing 

guidance previously found in the 

Medicare Communications and 

Marketing Guidelines (MCMG). In this 

proposed rule, we propose to codify 

additional guidance from the MCMG 

that was not part of the January 2021 

final rule related to member ID card 

standards, the limited access to 

preferred cost sharing pharmacies 

disclaimer, plan website instructions on 

how to appoint a representative, and the 

website posting of enrollment 

instructions and forms. In addition, we 

are proposing several new 

communications and marketing 

requirements aimed at further 

safeguarding Medicare beneficiaries, 

including reinstating the requirement 

that plans include a multi-language 

insert with specified required materials. 

Finally, we are proposing requirements 

to address concerns associated with 

third-party marketing activities. 

1. Required Materials and Content 

Under § 422.111(i), MA plans must 

issue and reissue (as appropriate) 

member identification cards that 

enrollees may use to access covered 

services under the plan. Likewise, under 

1860D–4(b)(2)(A) of the Act and 

§ 423.120(c)(1), a Part D plan sponsor 

must issue a card or other type of 

technology that its enrollees may use to 

access negotiated prices for covered Part 

D drugs. Currently, CMS guidance for 

additional ID card standards resides in 

the MCMG. We are proposing to codify 

existing guidance for ID card 

requirements under §§ 422.2267(e)(30) 

and 423.2267(e)(32). In addition, we 

will renumber the remaining required 

content beginning with the Federal 

Contracting statement, currently at 

§§ 422.2267(e)(30) and 423.2267(e)(32). 

In the January 2021 final rule, when 

codifying several other required 

disclaimers previously provided in the 

MCMG, Appendix 2, at §§ 422.2267(e) 

and 423.2267(e), CMS inadvertently left 

out the disclaimer for Part D sponsors 

with limited access to preferred cost 

sharing pharmacies. The disclaimer 

provides important safeguards for 

Medicare beneficiaries enrolled in Part 

D plans that only provide access to 

preferred cost sharing through a limited 

number of pharmacies by alerting these 

beneficiaries that the preferred costs 

may not be available at the pharmacy 

they use, and by providing information 

to these beneficiaries about how to 

access the list of pharmacies offering 

prescription drugs at a preferred cost in 

the beneficiary’s area. We therefore 

propose to codify the requirements for 

this disclaimer at § 423.2267(e)(40). We 

also note that, as required under 

§ 422.500, MA plans that offer the Part 

D benefit must comply with Part 423 

rules. 

2. Website Requirements 

The regulations at §§ 422.111(h)(2) 

and 423.128(d)(2) require plans to have 

an internet website and include 

requirements regarding posted content. 

In the January 2021 final rule, we 

codified additional requirements for 

plan websites at §§ 422.2265 and 

423.2265 based on section 70.1.3 

(Required Content) of the MCMG. In 

doing so, we inadvertently failed to 

include the requirement that plans post 

instructions about how to appoint a 

representative and include a link to a 

downloadable version of the CMS 

Appointment of Representative Form 

(Control Number 0938–0950)), as well 

as enrollment instructions and forms. 

We propose to include these two 

requirements under §§ 422.2265(b)(13), 

423.2265(b)(14), 422.2265(b)(14), and 

423.2265(b)(15), respectively. 

3. Multi-Language Insert 

The multi-language insert (MLI) is a 

standardized document that informs the 

reader that interpreter services are 

available in Spanish, Chinese, Tagalog, 

French, Vietnamese, German, Korean, 

Russian, Arabic, Italian, Portuguese, 

French Creole, Polish, Hindi, and 

Japanese; the 15 most common nonEnglish languages in the United States. 

Beginning in 2012, the Medicare 

Marketing Guidelines (MMG) required 

plans to include the MLI with the 

Summary of Benefits (SB), Annual 

Notice of Change (ANOC)/Evidence of 

Coverage (EOC), and the enrollment 

form (most recently in section 30.5.1 of 

the 2017 MMG, issued on June 10, 

2016). The issuance of the MLI was 

independent of the translation 

requirements for any non-English 

language that is the primary language of 

at least 5 percent of the individuals in 

a plan benefit package (PBP) service 

area, as currently required under 

§§ 422.2267(a)(2) and 423.2267(a)(2). 

However, the MLI guidance in the MMG 

did require plans to also include the 

required statement in any language that 

met the 5 percent threshold but was not 

already included on the MLI. 

On May 18, 2016, the Office for Civil 

Rights (OCR) published a final rule (81 

FR 31375) implementing section 1557 of 

the Patient Protection and Affordable 

Care Act (PPACA) (Pub. L. 111–148). 

Section 1557 of the PPACA provides 

that an individual shall not be excluded 

from participation in, be denied the 

benefits of, or be subjected to 


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discrimination on the grounds 

prohibited under Title VI of the Civil 

Rights Act of 1964, 42 U.S.C. 2000d et 

seq. (race, color, national origin), Title 

IX of the Education Amendments of 

1972, 20 U.S.C. 1681 et seq. (sex 

(including pregnancy, sexual 

orientation, and gender identity)), the 

Age Discrimination Act of 1975, 42 

U.S.C. 6101 et seq. (age), or Section 504 

of the Rehabilitation Act of 1973, 29 

U.S.C. 794 (disability), under any health 

program or activity, any part of which 

is receiving federal financial assistance; 

any health program or activity 

administered by the Department; or any 

program or activity administered by any 

entity established under Title I of the 

Act. Part of OCR’s final rule included 

the requirement that all covered entities 

include taglines with all ‘‘significant 

communications’’. The sample tagline 

provided by the Department consisted 

of a sentence stating ‘‘ATTENTION: If 

you speak [insert language], language 

assistance services, free of charge, are 

available to you. Call 1–xxx–xxx–xxxx 

(TTY: 1–xxx–xxx–xxxx).’’ in the top 15 

languages spoken in a state or states. 

Because of the inherent duplication 

with the MLI, CMS issued an HPMS 

email on August 25, 2016 removing the 

MLI. On June 14, 2019, OCR published 

a proposed rule that, among other 

actions, proposed to repeal the 

requirement that notices and taglines be 

provided with all significant 

communications (84 FR 27846). Finally, 

on June 19, 2020, OCR published a final 

rule that finalized the repeal of the 

notice and tagline requirements while 

requiring that a covered entity take 

reasonable steps to ensure meaningful 

access to its programs or activities by 

LEP individuals (85 FR 37160, 37210, 

37245). 

In the February 2020 proposed rule, 

CMS proposed an availability of nonEnglish translations disclaimer. The 

disclaimer consists of the statement 

‘‘ATTENTION: If you speak [insert 

language], language assistance services, 

free of charge, are available to you. Call 

1–XXX–XXX–XXXX (TTY: 1–XXX– 

XXX–XXXX).’’ We proposed that the 

disclaimer be required in all nonEnglish languages that met the five 

percent threshold for language 

translation under §§ 422.2267(a)(2) and 

423.2267(a)(2). In addition, when 

applicable, we proposed the disclaimer 

be added to all required materials under 

§§ 422.2267(e) and 423.2267(e). 

However, we did not finalize the 

proposed disclaimer in January 2021 

final rule. In doing so, we stated that 

CMS believed future rulemaking 

regarding non-English disclaimers, if 

appropriate, was best addressed by 

OCR, as those requirements would be 

HHS-wide instead of limited to CMS. 

We also stated that deferring to OCR’s 

oversight and management of any 

requirements related to non-English 

disclaimers is in the best interest of the 

Medicare program. 

It is important to note that none of the 

actions impacting the various 

notifications of interpreter services 

changed the requirement that plans 

must provide these services under 

applicable law. Plans have long been 

required to provide interpreters when 

necessary to ensure meaningful access 

to limited English proficient 

individuals, consistent with existing 

civil rights laws. In fact, in the January 

2021 final rule, CMS codified call center 

requirements under §§ 422.111(h)(1)(iii) 

and 423.128(d)(1)(iii) that requires 

interpreter services be provided to nonEnglish speaking and limited English 

proficient (LEP) individuals at no cost. 

In the months following the 

publication of the January 2021 final 

rule, we have gained additional insight 

regarding the void created by the lack of 

any notification requirement associated 

with the availability of interpreter 

services for Medicare beneficiaries. The 

U.S. Census Bureau’s 2019 American 

Community Survey (ACS) 1-year 

estimates show that 12.2 percent of 

individuals sixty-five and older speak a 

language other than English in the home 

(https://data.census.gov/cedsci/

table?q=language&tid=ACSST

1Y2019.S1603). CMS considers the 

materials required under §§ 422.2267(e) 

and 423.2267(e) to be vital to the 

beneficiary decision making process. 

Providing a notification for beneficiaries 

with limited English proficiency that 

translator services are available provides 

a clear path for this portion of the 

population to properly understand and 

access their benefits. We have also 

reviewed Complaint Tracking Module 

(CTM) cases related to ‘‘language’’ and 

found that several cases report 

beneficiary confusion stemming from 

not fully understanding materials based 

on a language barrier. In retrospect, we 

now believe that solely relying on the 

requirements delineated in OCR’s 2020 

rulemaking for covered entities to 

convey the availability of interpreter 

services is insufficient for the MA, cost 

plan, and Part D programs and is not in 

the best interest of Medicare 

beneficiaries who are evaluating 

whether to receive their Medicare 

benefits through these plans and who 

are enrolled in these plans. We believe 

it is counterproductive to have 

regulatory requirements for interpreter 

services without an accompanying 

requirement to inform beneficiaries that 

the service is available. 

We are proposing to reinstitute a 

requirement to use the MLI under 

§§ 422.2267(e)(31) and 423.2267(e)(33). 

Similar to the previously required 

version, the MLI will state ‘‘We have 

free interpreter services to answer any 

questions you may have about our 

health or drug plan. To get an 

interpreter, just call us at [1–xxx–xxx– 

xxxx]. Someone who speaks [language] 

can help you. This is a free service.’’ in 

the 15 most common non-English 

languages in the United States. In 

addition, we propose to require plans to 

also include the required statement in 

any language that meets the five percent 

threshold for a plan’s service area, as 

currently required under 

§§ 422.2267(a)(2) and 423.2267(a)(2) for 

translation of required materials, when 

not currently on the standardized MLI. 

Finally, we propose to require the MLI 

to be included with all required 

materials listed in §§ 422.2267(e) and 

423.2267(e). If OCR were in the future 

to finalize broader or more robust 

requirements associated with interpreter 

services than what CMS is proposing 

and plans adopted those broader or 

more robust OCR requirements, CMS 

will consider plans compliant with the 

MLI requirements we have proposed in 

this rule. 

4. Third-Party Marketing Organizations 

As most recently expressed in an 

October 8, 2021 HPMS memo, we have 

become increasingly concerned with the 

activities of third-party marketing 

organizations (TPMOs) and the impact 

of those activities on Medicare 

beneficiaries. We have seen a significant 

increase in third party marketing (for 

example, television ads, direct mailers) 

in the past few years. In addition, we 

have seen a significant increase in 

marketing related complaints from 

beneficiaries directly attributed to the 

activities of TPMOs. In fact, when 

comparing 2020 to the first eleven 

months of 2021, marketing based CTM 

complaints have more than doubled. We 

believe the increase in complaints is 

attributed to third-party advertising that 

misleads beneficiaries and results in 

them contacting third-parties to find out 

how they can get the advertised 

benefits. Based on the CTM data, CMS 

also has reviewed several sales and 

enrollment call recordings between 

TPMO staff and beneficiaries. Many of 

these calls demonstrate that 

beneficiaries are confused by these 

TPMOs, including confusion regarding 

who they are speaking to, what plans 

the TPMOs represent, and that the 

beneficiary may be unaware that they 


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are enrolling into a new plan during 

these phone conversations. CMS 

acknowledges that in some instances 

TPMOs can serve a role in helping 

beneficiaries find a plan that best meets 

their needs. However, CMS believes 

additional regulatory oversight is 

required to protect Medicare 

beneficiaries from bad actors in this 

space and to ensure that Medicare 

health and drug plans are appropriately 

overseeing and maintaining 

responsibility for the entities that 

conduct marketing and, potentially, 

enrollment activities on their behalf. 

Therefore, CMS believes additional 

regulatory oversight is required to 

protect Medicare beneficiaries from 

confusing and potentially misleading 

activities. CMS is proposing several 

updates to various sections of parts 422 

and 423, subpart V. 

We first propose to define TPMOs in 

§§ 422.2260 and 423.2260 as being 

organizations that are compensated to 

perform lead generation, marketing, 

sales, and enrollment related functions 

as a part of the chain of enrollment, that 

is the steps taken by a beneficiary from 

becoming aware of a plan or plans to 

making an enrollment decision. In 

addition, the proposed definition 

includes that TPMOs may be first tier, 

downstream or related entity (FDRs), as 

defined under §§ 422.504(i) and 

423.505(i), but TPMOs may also be 

other businesses which are customers of 

an MA or Part D plan or customers of 

an MA or Part D plan’s FDRs. CMS is 

specifically seeking comments from 

stakeholders regarding the proposed 

TPMO definition and whether it is 

sufficiently broad to capture the scope 

of the types of entities that may be in 

a position of marketing Medicare health 

and drug plans. 

We next propose a required 

standardized disclaimer be used by 

TPMOs, in §§ 422.2267(e)(41) and 

423.2267(e)(41), that states ‘‘We do not 

offer every plan available in your area. 

Any information we provide is limited 

to those plans we do offer in your area. 

Please contact Medicare.gov or 1–800– 

MEDICARE to get information on all of 

your options.’’ MA organizations and 

Part D sponsors will need to ensure that 

any TPMO with which they do 

business, either directly or indirectly, 

utilizes this disclaimer were 

appropriate. MA organizations and Part 

D sponsor may ensure TPMO’s 

adherence with these requirements 

through contractual arrangements, 

review of materials or other appropriate 

oversight methods available to the MA 

organization or Part D sponsor such as 

complaint reviews or audits. Statements 

from TPMOs such as ‘‘we will help pick 

the best plan for you’’ are misleading to 

beneficiaries as they generally mean the 

TPMO’s help will be limited to the 

plans they offer. For those TPMOs who 

truly offer every option in a given 

service area, the disclaimer will not be 

required. We propose the disclaimer to 

be prominently displayed on the 

TPMO’s website and marketing 

materials, including all print materials 

and television advertising that meet the 

definition of marketing. We also 

propose requiring the disclaimer be 

provided verbally, electronically, or in 

writing, depending on how the TPMO is 

interacting with the beneficiary. In cases 

where the TPMO is providing 

information through telephonic means, 

this disclaimer must be provided within 

the first minute of the call. We believe 

the disclaimer will help to reduce the 

type of beneficiary confusion CMS 

observed when we listened to TPMObased sales calls. 

Finally, we are proposing new TPMO 

oversight responsibilities in §§ 422.2274 

and 423.2274, covering agent, broker, 

and other third-party requirements. The 

proposed requirements will fall under a 

newly created §§ 422.2274(g) and 

423.2274(g), with the heading ‘‘TPMO 

oversight,’’ and will work in 

conjunction with the current FDR 

requirements, when applicable, in 

§§ 422.504(i) and 423.505(i). We 

propose that, as a part of their oversight 

responsibilities, plans that do business 

with a TPMO, either directly or 

indirectly through an FDR, are 

responsible for ensuring that the TPMO 

adheres to any requirements that apply 

to the plan. In doing so, we are making 

it clear that an MA or Part D plan cannot 

purchase the services of a TPMO, and 

thereby evade responsibilities for 

compliance. This proposal includes 

those instances where the TPMO does 

not contract either directly with the MA 

organization or the Part D sponsor or 

indirectly with a plan’s FDR, but where 

the plan or its FDR purchases leads or 

otherwise receives leads directly or 

indirectly from a TPMO. We believe it 

is the responsibility of the MA 

organization or Part D sponsor to have 

knowledge of how and from where leads 

or enrollments are obtained. We believe 

this requirement is necessary to address 

the types of confusing and potentially 

misleading activities that, as previously 

discussed, CMS understands to have 

resulted in hundreds of Complaint 

Tracking Module complaints related to 

TPMOs identified by CMS from 2020 

and 2021. In order to ensure 

beneficiaries are enrolled in the plan 

that best meets their needs, MA 

organizations and Part D sponsors must 

have knowledge and oversee all leads 

and enrollments. We also propose to 

require plans (and their FDRs), in their 

contracts, written arrangements, or 

agreements with TPMOs, to require 

TPMOs to disclose to the plan any 

subcontracted relationships used for 

marketing, lead generation, and 

enrollment; require sales calls with 

beneficiaries to be recorded in their 

entirety; and have TPMOs report to 

plans any staff disciplinary actions 

associated with Medicare beneficiary 

interaction on a monthly basis. We 

believe these proposed reporting 

requirements will ensure that plans are 

made aware of all activities associated 

with the chain of enrollment. 

In addition, we are proposing 

beneficiary notifications associated with 

TPMO lead generating activities. In our 

experience, lead generating activities are 

typically conducted by a TPMO who 

uses advertisements containing 

information regarding MA or Part D 

plans or programs as a means of enticing 

beneficiaries to respond, for example by 

calling an ‘‘800’’ number seen on TV or 

in a direct mail piece. When a 

beneficiary responds, their information 

is collected and becomes a ‘‘lead’’ that 

can then be provided to a licensed agent 

or broker, typically based on 

renumeration, who can complete an 

enrollment. CMS has received a number 

of complaints from partners such as 

state regulators, State Health Insurance 

Assistance Programs (SHIPs), and 

Senior Medicare Patrol (SMP) who have 

expressed concerns that beneficiaries 

are being contacted directly by agents 

and brokers without having knowledge 

of how the agent had their contact 

information. We have also received a 

number of CTM cases where 

beneficiaries have expressed similar 

concerns. Based on our review of these 

cases, it seems clear that it is not a case 

of unsolicited telephonic contact, which 

is currently prohibited under 

§§ 422.2264(a)(2)(iv) and 

423.2264(a)(2)(iv); rather it is a case of 

a beneficiary filling out a business reply 

card or responding to an advertisement 

that does not make it clear that doing so 

will result in being contacted by an 

agent or broker. We are proposing to 

require that plans ensure that TPMOs 

conducting lead generating activities 

must inform the beneficiary that his or 

her information will be provided to a 

licensed agent for future contact, or that 

the beneficiary is being transferred to a 

licensed agent who can enroll him or 

her into a new plan. We believe this 

requirement will help to eliminate 

beneficiary confusion by making the 


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role of lead generating TPMOs more 

transparent. 

Overall, we believe the proposed 

requirements associated with TPMOs 

will result in greater plan oversight of 

TPMOs, and in turn, result in a more 

positive beneficiary experience as it 

relates to learning about plan choices to 

best meet their health care needs. We 

also believe the proposed requirements, 

if implemented, would complement and 

strengthen existing requirements. For 

example, under §§ 422.2262(a)(1)(iii) 

and 423.2262(a)(1)(iii), plans must not 

engage in activities that could mislead 

or confuse Medicare beneficiaries. As 

previously discussed, we are concerned 

this requirement is not being met as it 

applies to certain TPMO activities 

performed on behalf of plans or in 

connection with marketing for plans. 

MA organizations and Part D sponsors 

are ultimately responsible for the 

marketing and enrollment activities 

done by them or on their behalf, 

ensuring that marketing is not 

misleading or confusing. The proposed 

disclaimers and notifications will 

ensure that beneficiaries are more 

informed. Moreover, the more robust 

reporting requirements and oversight 

proposed will create a better mechanism 

for plans to be made aware when 

beneficiary related issues to arise. 

To reiterate and summarize, the 

proposed new and revised regulatory 

sections and their content are as 

follows: 

• Sections 422.2260 and 423.2260 are 

revised to add a definition for Third 

Party Marketing Organization (TPMO). 

• Sections 422.2265(b)(13) and 

423.2265(b)(14) are revised to add 

instructions on how to appoint a 

representative and to add enrollment 

instructions and forms. 

• Sections 422.2267(e)(30) and 

423.2267(e)(32) are revised to add the 

Member ID card and requirements for 

the card as a model document. 

• Sections 422.2267(e)(31) and 

423.2267(e)(33) are revised to add the 

Multi-Language Insert. 

• Sections 422.2267(e)(41) and 

423.2267(e)(41) are revised to add the 

Third-Party Marketing disclaimer. 

• Section 423.2267(e)(40) is revised to 

add the Limited Access to Preferred 

Cost Sharing disclaimer. 

• Sections 422.2274 and 423.2274 are 

revised to apply MA and Part D 

oversight to TPMOs. 

G. Proposed Regulatory Changes to 

Medicare Medical Loss Ratio Reporting 

Requirements and Release of Part C 

Medical Loss Ratio Data (§§ 422.2460, 

422.2490, and 423.2460) 

1. Background 

Section 1103 of Title I, Subpart B of 

the Health Care and Education 

Reconciliation Act (Pub. L. 111–152) 

amended section 1857(e) of the Act to 

add a medical loss ratio (MLR) 

requirement to Medicare Part C (MA 

program). An MLR is expressed as a 

percentage, generally representing the 

percentage of revenue used for patient 

care rather than for such other items as 

administrative expenses or profit. 

Because section 1860D–12(b)(3)(D) of 

the Act incorporates by reference the 

requirements of section 1857(e) of the 

Act, these MLR requirements also apply 

to the Medicare Part D program. In the 

May 23, 2013 Federal Register, we 

published a final rule titled ‘‘Medicare 

Program; Medical Loss Ratio 

Requirements for the Medicare 

Advantage and the Medicare 

Prescription Drug Benefit Programs’’ (78 

FR 31284) (hereinafter referred to as the 

May 2013 Medicare MLR final rule), we 

codified the MLR requirements for MA 

organizations and Part D prescription 

drug plan sponsors (‘‘Part D sponsors’’) 

(including organizations offering cost 

plans that offer the Part D benefit) in the 

regulations at 42 CFR part 422, subpart 

X, and part 423, subpart X. 

Generally, the MLR for each MA and 

Part D contract reflects the ratio of costs 

(numerator) to revenues (denominator) 

for all enrollees under the contract. For 

an MA contract, the MLR reflects the 

percentage of revenue received under 

the contract spent on incurred claims 

for all enrollees, prescription drug costs 

for those enrollees in MA plans under 

the contract offering the Part D benefit, 

quality initiatives that meet the 

requirements at § 422.2430, and 

amounts used to reduce Part B 

premiums. The MLR for a Part D 

contract reflects the percentage of 

revenue received under the contract 

spent on incurred claims for all 

enrollees for Part D prescription drugs, 

and on quality initiatives that meet the 

requirements at § 423.2430. The 

percentage of revenue that is used for 

other items such as administration, 

marketing, and profit is excluded from 

the numerator of the MLR (see 

§§ 422.2401 and 423.2401; 

422.2420(b)(4) and 423.2420(b)(4); 

422.2430(b) and 423.2430(b)). 

For contracts for 2014 and later, MA 

organizations and Part D sponsors are 

required to report their MLRs and are 

subject to financial and other sanctions 

for failure to meet the statutory 

requirement that they have an MLR of 

at least 85 percent (see §§ 422.2410 and 

423.2410). The statute imposes several 

levels of sanctions for failure to meet the 

85 percent minimum MLR requirement, 

including remittance of funds, a 

prohibition on enrolling new members, 

and ultimately, contract termination. 

The minimum MLR requirement creates 

incentives for MA organizations and 

Part D sponsors to reduce administrative 

costs, such as marketing costs, profits, 

and other uses of the revenue received 

by plan sponsors, and helps to ensure 

that taxpayers and enrolled beneficiaries 

receive value from Medicare health and 

drug plans. 

Section 1001(5) of the Patient 

Protection and Affordable Care Act 

(Pub. L. 111–148), as amended by 

section 10101(f) of the Health Care and 

Education Reconciliation Act (Pub. L. 

111–152), also established a new MLR 

requirement under section 2718 of the 

Public Health Service Act that applies to 

issuers of employer group and 

individual market private insurance. We 

will refer to the MLR requirements that 

apply to issuers of private insurance as 

the ‘‘commercial MLR rules.’’ 

Regulations implementing the 

commercial MLR rules are published at 

45 CFR part 158. 

We propose here modifications to the 

MLR reporting requirements in the 

Medicare Part C and Part D programs 

and to the regulation that governs the 

release of Part C MLR data. 

2. Proposal To Reinstate Detailed MLR 

Reporting Requirements (§§ 422.2460 

and 423.2460) 

Each year, MA organizations and Part 

D sponsors submit to CMS data 

necessary for the Secretary to determine 

whether each MA or Part D contract has 

satisfied the minimum MLR 

requirement under sections 1857(e)(4) 

and 1860D–12(b)(3)(D) of the Act. In the 

May 2013 Medicare MLR final rule (78 

FR 31284) that established the Medicare 

MLR regulations, CMS codified at 

§§ 422.2460 and 423.2460 that, for each 

contract year, each MA organization and 

Part D sponsor must submit an MLR 

Report to CMS that included the data 

needed by the MA organization or Part 

D sponsor to calculate and verify the 

MLR and remittance amount, if any, for 

each contract such as the amount of 

incurred claims, expenditures on 

quality improving activities, non-claims 

costs, taxes, licensing and regulatory 

fees, total revenue, and any remittance 

owed to CMS under § 422.2410 or 

§ 423.2410. 

To facilitate the submission of MLR 

data, CMS developed a standardized 


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132The average number of contracts subject to the 

MLR requirement was 608 per year for CYs 2014– 

2016 and 565 per year for CYs 2017–2019. 

MLR Report template that MA 

organizations and Part D sponsors were 

required to populate with their data and 

upload to the Health Plan Management 

System (HPMS), starting with contract 

year (CY) 2014 MLR reporting, which 

occurred in December 2015. Based on 

the data entered by the MA organization 

or Part D sponsor for each component of 

the MLR numerator and denominator, 

the MLR reporting software would 

calculate an unadjusted MLR for each 

contract. The MLR reporting software 

would also calculate and apply the 

credibility adjustment provided for in 

§§ 422.2440 and 423.2440, based on the 

number of member months entered into 

the MLR Report, in order to calculate 

the contract’s adjusted MLR and 

remittance amount (if any). In addition 

to the numerical fields used to calculate 

the MLR and remittance amount, the 

MLR Report template included narrative 

fields in which MA organizations and 

Part D sponsors provided detailed 

descriptions of the methods used to 

allocate expenses, including how each 

specific expense met the criteria for the 

expense category to which it was 

assigned. 

In developing the MLR reporting 

format, CMS attempted to model it on 

the tools used to report commercial 

MLR data. This was in keeping with a 

general policy of attempting to align the 

Medicare MLR requirements with the 

commercial MLR requirements to limit 

the burden on organizations that 

participate in both markets, and to make 

commercial and Medicare MLRs as 

comparable as possible for comparison 

and evaluation purposes. We also cited 

this policy when we amended our 

regulations to authorize the public 

release of the Part C and Part D MLR 

data that we collect for a contract year 

under §§ 422.2460 and 423.2460; we 

noted that the release of Medicare MLR 

data aligned with disclosures of MLR 

data that issuers of commercial health 

plans submit each year as required by 

section 2718 of the Public Health 

Service Act (81 FR 46162, 46405). 

In the proposed rule titled ‘‘Medicare 

Program; Contract Year 2019 Policy and 

Technical Changes to the Medicare 

Advantage, Medicare Cost Plan, 

Medicare Fee-for-Service, the Medicare 

Prescription Drug Benefit Programs, and 

the PACE Program’’ (82 FR 56459), 

which appeared in the Federal Register 

on November 28, 2017 (hereinafter 

referred to as the November 2017 

proposed rule), we proposed to modify 

the MLR reporting requirements by 

significantly reducing the amount of 

MLR data that MA organizations and 

Part D sponsors submit to CMS on an 

annual basis, starting with CY 2018. As 

part of an initiative to reduce the 

regulatory burden for MA organizations 

and Part D sponsors, we proposed to 

revise the MLR reporting requirements 

so that MA organizations and Part D 

sponsors would no longer be required to 

report the underlying data needed to 

calculate and verify the MLR and 

remittance amount, if any, for each 

contract; instead, they would only have 

to report each contact’s MLR and the 

remittance amount, if any. 

We received numerous comments on 

our proposed changes to the MLR 

reporting requirements in the November 

2017 proposed rule, which we 

addressed in the final rule titled 

‘‘Medicare Program; Contract Year 2019 

Policy and Technical Changes to the 

Medicare Advantage, Medicare Cost 

Plan, Medicare Fee-for-Service, the 

Medicare Prescription Drug Benefit 

Programs, and the PACE Program’’ (83 

FR 16440), which appeared in the April 

16, 2018 Federal Register (hereinafter 

referred to as the April 2018 final rule). 

Although MA organizations and Part D 

plan sponsors generally supported the 

proposed reduction in the amount of 

MLR data they would be required to 

submit on an annual basis, some 

commented that they did not expect 

their MLR reporting burden to be 

significantly reduced since they would 

still be required to collect and analyze 

the same information in order to 

calculate the MLR percentage and 

remittance amount. In response to 

comments that contended that we 

would be unable to conduct meaningful 

compliance oversight with the minimal 

amount of MLR data that we proposed 

to collect, we noted our continued 

authority under § 422.2480 or 

§ 423.2480 to conduct selected audit 

reviews of the data reported under 

§§ 422.2460 and 423.2460 for purposes 

of determining that remittance amounts 

under §§ 422.2410(b) and 423.2410(b) 

were calculated and reported accurately 

and sanctions under §§ 422.2410(c) and 

423.2410(c) were appropriately applied. 

We expressed our belief that we could 

continue to effectively oversee MA 

organizations’ and Part D sponsors’ 

compliance by relying solely on audits 

(83 FR 16675) and finalized the 

proposed changes to the MLR reporting 

requirements at §§ 422.2460 and 

423.2460. As a result, for CY 2018 and 

subsequent contract years, MA 

organizations and Part D sponsors are 

only required to report each contact’s 

MLR and the remittance amount, if any. 

In light of subsequent experience 

overseeing the administration of the 

Medicare MLR program while the 

simplified MLR reporting requirements 

have been in effect, and after further 

consideration of the potential impacts 

on beneficiaries and costs to the 

government and taxpayers when CMS 

has limited access to detailed MLR data, 

we have reconsidered the changes to the 

MLR reporting requirements that were 

finalized in the April 2018 final rule. 

We have come to recognize the 

limitations of our current approach to 

MLR compliance oversight, in which we 

do not collect the information needed to 

verify that a contract’s MLR has been 

calculated accurately, except in the 

small number of cases that we can 

feasibly audit each year. For these 

reasons, which are discussed later in 

greater detail, we are proposing to 

reinstate the detailed MLR reporting 

requirements that were in effect for CYs 

2014 through 2017. In addition, we are 

proposing to collect additional data on 

certain categories of expenditures, and 

to make conforming changes to our data 

collection tools. 

One of the factors that has prompted 

us to reconsider our earlier decision to 

eliminate the detailed MLR reporting 

requirements is the increase both in the 

amount of remittances that MA 

organizations and Part D sponsors have 

reported owing, and in the number of 

contracts that failed to meet the MLR 

requirement, in the years since we 

changed the MLR reporting 

requirements. At the time we issued the 

November 2017 proposed rule to 

eliminate the detailed MLR reporting 

requirements, MA organizations and 

Part D sponsors had submitted MLR 

data only for CYs 2014 through 2015, 

when total annual remittances for all 

contracts averaged $29.6 million, and an 

average of 16 contracts failed to meet 

the minimum MLR requirement. Taking 

into account the preliminary CY 2016 

MLR data that was available to CMS at 

the time we issued the April 2018 final 

rule, annual average remittances for CYs 

2014 through 2016 totaled $91.8 

million, and an annual average of 21 

contracts failed to meet the MLR 

requirement. Thereafter, for CYs 2017 

through 2019, the average amount of 

annual remittances more than doubled 

to $204.9 million, and the average 

number of contracts that failed to meet 

the MLR requirement nearly doubled to 

40 contracts per year, even as the 

average number of contracts subject to 

the MLR requirement declined 

slightly.132

As MLR remittances have grown in 

scale and failure to meet the MLR 

requirement has become more common, 

the potential impact of errors that skew 


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the MLR calculation also has grown 

beyond what our early experience 

administering the MLR requirements 

had led us to expect when we 

eliminated the detailed reporting 

requirement. This has become clear to 

us not only through observation and 

analysis of industry-wide changes in 

remittances, but also through anecdotal 

incidents. For example, in 2021, CMS 

was notified by an MA organization that 

it had discovered an error in one of its 

processes for determining the amount 

that it spent on prescription drugs, 

which caused the organization to 

miscalculate the MLR for 33 of its MLR 

submissions for CYs 2016 through 2018. 

For one contract, this resulted in the 

MA organization overstating its MLR for 

CY 2018 by 1.1 percent; when the error 

was corrected, it was determined that 

the contract—which the parent 

organization originally reported as 

having met the MLR requirement—had 

in fact failed to meet the MLR 

requirement, and as a result the 

organization was required to remit an 

additional $4 million to CMS for that 

contract alone. 

Although it is possible that 

calculation errors such as in the above 

example only affect a handful of 

contracts, and therefore have limited 

impacts on the overall amount of 

remittances, we are mindful of how 

when CMS collected detailed MLR data 

pursuant to the reporting requirements 

that were in effect for CYs 2014 through 

2017, we frequently detected potential 

errors or omissions in the reported data. 

When these issues were brought to the 

attention of the MA organization or Part 

D sponsor that submitted the data with 

a request to explain or correct the data, 

the MA organization or Part D sponsor 

often found it necessary to submit a 

corrected MLR Report that included 

changes to figures used to calculate the 

MLR. 

In Table 2, information on the MLR 

submissions for CYs 2014 through CY 

2017 (the contract years for which MA 

organizations and Part D plan sponsors 

reported detailed MLR data that CMS 

collected for CYs 2014 through 2017) is 

shown alongside information on the 

MLR submissions for CYs 2018 through 

2019 (the contract years for which CMS 

collected minimal MLR data consistent 

with current §§ 422.2460 and 423.2460). 

Specifically, for each time period, the 

table shows the percentage of contracts 

that were flagged for potential errors 

during desk reviews and the percentage 

of contracts that submitted revisions to 

correct errors in the original MLR filing 

that had an impact on the MLR 

calculation. The percentage of contracts 

that submitted revised MLR data to 

correct errors in the original MLR 

calculation includes plan-initiated (that 

is, self-disclosed) resubmissions in 

addition to resubmissions resulting from 

desk reviews. 

As the table indicates, although we 

stopped collecting detailed MLR data 

for contract years after CY 2017, we 

have continued to perform desk reviews 

of the submitted data, although, due to 

the limited amount of information we 

receive, these are largely confined to 

confirming that, for contracts that 

reported failing to meet the 85 percent 

MLR requirement for a contract year and 

owing a remittance to CMS, the amount 

that the MA organization or Part D 

sponsor indicates it is required to remit 

is consistent with what we would 

expect based on the reported MLR and 

our records of the contract’s revenues 

for the contract year. Given that we 

collect very little MLR data from MA 

organizations and Part D sponsors under 

current §§ 422.2460 and 423.2460, and 

the consequently limited nature of our 

current desk reviews, it is unsurprising 

that fewer contracts were flagged as 

potentially containing erroneous data 

for CYs 2018 and 2019 relative to CYs 

2014 through 2017. We acknowledge 

that there may be valid explanations for 

the decline in the number of contracts 

that had to correct their MLR 

calculations, such as MA organizations 

and Part D sponsors gaining familiarity 

with the requirements for calculating 

their MLRs (although we would have 

expected any such decreases to be 

observed in the initial years of MLR 

reporting). However, we believe that the 

steep decline since CY 2017 in the 

number of contracts that revised and 

resubmitted their MLR data raises 

questions about whether errors or 

omissions affecting the calculation of 

the MLR that might have been flagged 

by CMS or discovered by MA 

organizations and Part D sponsors as a 

result of MLR desk reviews under the 

prior regulations are now simply going 

undetected. This, in turn, has led us to 

reconsider whether the savings we 

estimated would result from minimizing 

the MLR reporting requirements 

outweigh the potential cost of allowing 

errors that might have been discovered 

via desk reviews of the detailed MLR 

data to go undetected. 

We believe the potential for costly 

errors in the MLR calculation should be 

a concern not only for the government, 

but also for MA organizations and Part 

D sponsors, for although it is possible 

that some may have overstated their 

MLRs and remitted lower amounts than 

were actually owed, it is also possible 

that others may have understated their 

MLRs and overpaid remittances. With 

respect to contract years for which MA 

organizations and Part D sponsors have 

reported the limited amount of MLR 

data they are required to submit under 

current §§ 422.2460 and 423.2460 (that 

is, CYs 2018 and 2019), we have been 


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TABLE 2. COMPARISON OF PERCENTAGE OF CONTRACTS FLAGGED 

AND PERCENTAGE OF CONTRACTS THAT SUBMITTED CORRECTIONS THAT 

AFFECTED MLR CALCULATION UNDER FORMER AND CURRENT REPORTING 

REQUIREMENTS 

CYs 2014 to 2017 CYs 2018 to 2019 

(former MLR reporting ( current MLR reporting 

requirements) requirements) 

% of contracts flagged during desk reviews 63%to 87% 1%to2% 

% of contracts that submitted corrections to 18%to 37% 2%to 5% 

errors that affected MLR calculation 
Federal Register / Vol. 87, No. 8 / Wednesday, January 12, 2022 / Proposed Rules 1905 

133The April 2018 final rule (83 FR 16715) 

estimated that the change in the MLR reporting 

requirements that CMS finalized for CYs 2018 and 

subsequent contract years would result in annual 

savings of $1,446,417 per year ($490,000 to the 

government and $904,884 to MA organizations and 

Part D sponsors). 

made aware only of MLR calculation 

errors that resulted in the MA 

organization or Part D plan sponsor 

reporting that the MLR as originally 

reported for a contract was higher than 

the actual MLR, which in some cases 

led to CMS collecting remittance 

amounts that were lower than the 

amounts that were actually owed. 

However, with respect to contract years 

for which we collected detailed MLR 

data and conducted desk reviews (that 

is, CYs 2014 through 2017), MA 

organizations and Part D sponsors that 

were contacted about suspected errors 

in their MLR calculations would often, 

in the course of examining issues 

flagged by CMS, inform us that they had 

discovered that they had made other 

mistakes, which when corrected caused 

the MLR for the contract to increase. 

CMS could invoke its audit authority 

under §§ 422.2480 and 423.2480 to 

require MA organizations and Part D 

sponsors to validate the data necessary 

to calculate MLRs, so that CMS is able 

to determine that that the MLRs and 

remittance amounts under 

§§ 422.2410(b) and 423.2410(b) and 

sanctions under §§ 422.2410(c) and (d) 

and 423.2410(c) and (d) were accurately 

calculated, reported, and applied. As 

previously noted, CMS stated in the 

April 2018 final rule that we believed 

we could continue to effectively oversee 

MA organizations’ and Part D sponsors’ 

compliance by relying solely on audits 

(83 FR 16674). In response to comments 

that expressed concern that the audit 

burden would increase once we started 

relying on audits to monitor 

compliance, we stated that we did not 

expect that the changes to the MLR 

reporting requirements would cause 

MLR audits to be more burdensome 

than the MLR audits that were 

conducted in previous years. However, 

our response was based on an 

assessment that the burden associated 

with each individual audit would not 

increase, as we did not intend to change 

our MLR audit methodology. Upon 

further reflection, we believe that we 

would need to greatly expand the 

number of audits we conduct if we were 

to rely on them as our sole means of 

validating the accuracy of MLR 

reporting. Given the minimal data we 

currently receive from MA organizations 

and Part D sponsors, we would need to 

conduct comparatively resource heavy 

audits in order to identify potentially 

costly errors in the calculation of the 

MLR and remittance amount, including 

errors that would have been flagged 

systematically during the desk review 

process. We believe that the increased 

cost to the government and the aggregate 

burden across all of the additional MA 

organizations and Part D sponsors 

selected for audits would negate the 

savings that the April 2018 final rule 

estimated would result from the changes 

to the MLR reporting requirements.133

Furthermore, as we have continued to 

administer the MLR reporting 

requirements, we have come to 

recognize the limits and potential risks 

of an oversight approach that requires 

CMS to conduct time-consuming audits 

as the primary mechanism for 

identifying any errors that might impact 

the calculation of the MLR, and to 

appreciate the unique advantages of 

using desk reviews of detailed MLR data 

to identify outliers, anomalies, and 

omissions in the reported data that 

might indicate errors in the MLR 

calculation. An audit-only oversight 

approach is potentially problematic in 

the context of CMS’ review of the MLR 

submissions that MA organizations and 

Part D sponsors are required to submit 

in advance of the general MLR filing 

deadline when one of their contracts 

fails to meet the minimum MLR 

requirement for two or more 

consecutive contract years. CMS 

requires that the MLR data for such 

contracts be reported early so that we 

have time to implement, prior to the 

open enrollment period, enrollment 

sanctions for any contract that fails to 

meet the MLR threshold for 3 or more 

consecutive years and contract 

termination for any contract that fails to 

meet the MLR threshold for 5 

consecutive years. In the May 2013 

Medicare MLR final rule (78 FR 31296), 

we explained that we were adopting this 

policy because, if we were to implement 

enrollment and termination sanctions 

after the start of the annual open 

enrollment period, this would create 

disruptions for beneficiaries who are 

newly enrolled in plans under a 

contract that is subject to enrollment 

sanctions, or all beneficiaries enrolled 

in plans under a contract that is subject 

to termination. We have typically 

required that these early MLR 

submissions be submitted to CMS in 

late July, a little more than 2 months 

before open enrollment begins. 

Given the brief amount of time 

between when CMS receives these early 

MLR data submissions and the date 

when open enrollment begins, and the 

risk of disruption to beneficiaries if it is 

determined after open enrollment 

begins that a contract for which an early 

MLR submission was required failed to 

meet the MLR requirement for a third or 

fifth consecutive year, we believe it is 

particularly important that early MLR 

filers submit to CMS detailed MLR data, 

which can then be analyzed to quickly 

and independently identify potential 

errors in the MLR calculation. We 

believe this will reduce the likelihood 

that CMS will learn that a contract must 

be placed under the statutorily required 

sanctions at a time when enforcing 

those sanctions will force beneficiaries 

to enroll in another MA plan or in 

Medicare fee-for-service (FFS). 

Although that particular concern could 

perhaps be addressed by only requiring 

that early filers submit detailed MLR 

reports, that would not address the 

concerns raised in the preceding 

discussion about the potential cost to 

the government of uncollected 

remittances, or to MA organizations and 

Part D sponsors due to overpayment of 

remittances, when MLR calculation 

errors go undetected. The MLR data 

submitted for CYs 2014 through 2017 

does not indicate that contracts that had 

to early report their MLR data made up 

a significant portion of the contracts that 

submitted MLR data that later had to be 

revised to correct errors that impacted 

the MLR calculation. We discuss the 

concerns about potential errors in early 

filers’ MLR submissions to further 

illustrate the potential consequences of 

CMS not receiving detailed MLR data, 

which we did not fully appreciate when 

we adopted the current MLR reporting 

requirements. We clarify that we believe 

this concern makes it necessary that all 

MA organizations and Part D sponsors 

submit detailed MLR data that CMS can 

use to identify suspected errors that 

might affect the MLR calculation in a 

timely manner, and without having to 

rely on audits or self-disclosures. 

In addition to the factors we have 

already discussed, we believe it is 

appropriate that we reevaluate our 

alignment with the commercial MLR 

rules. This is particularly true as it 

relates to the policy considerations that 

underlay our rulemaking to authorize 

the public release of the MLR data that 

MA organizations and Part D sponsors 

submit to us on an annual basis, as 

codified in our regulations at 

§§ 422.2490 and 423.2490. The analysis 

in the November 2017 proposed rule did 

not consider the benefits CMS 

associated with the release of Part C and 

Part D MLR data to the public, which 

we had enumerated the previous year in 

the proposed rule titled ‘‘Medicare 

Program; Revisions to Payment Policies 

Under the Physician Fee Schedule and 


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Other Revisions to Part B for CY 2017; 

Medicare Advantage Pricing Data 

Release; Medicare Advantage and Part D 

Medical Loss Ratio Data Release; 

Medicare Advantage Provider Network 

Requirements; Expansion of Medicare 

Diabetes Prevention Program Model’’ 

(81 FR 46162), which appeared in the 

Federal Register on July 15, 2016 

(hereinafter referred to as the CY 2017 

PFS proposed rule). In that proposed 

rule, we stated that the release of Part 

C and Part D MLR data could lead to 

research into how managed care in the 

Medicare population differs from and is 

similar to managed care in other 

populations (such as the individual and 

group markets) where MLR data is also 

released publicly, and could inform 

future administration of these programs 

(81 FR 46396). We further stated that the 

release of this data would promote 

accountability in the MA and Part D 

programs, by making MLR information 

publicly available for use by 

beneficiaries who are making 

enrollment choices and by allowing the 

public to see whether and how 

privately-operated MA and Part D plans 

administer Medicare—and 

supplemental—benefits in an effective 

and efficient manner (81 FR 46397). 

Notably, in the final rule titled 

‘‘Medicare Program; Revisions to 

Payment Policies Under the Physician 

Fee Schedule and Other Revisions to 

Part B for CY 2017; Medicare Advantage 

Bid Pricing Data Release; Medicare 

Advantage and Part D Medical Loss 

Ratio Data Release; Medicare Advantage 

Provider Network Requirements; 

Expansion of Medicare Diabetes 

Prevention Program Model; Medicare 

Shared Savings Program Requirements’’ 

(81 FR 80170), which appeared in the 

November 15, 2016 Federal Register 

(hereinafter referred to as the CY 2017 

PFS final rule), in response to comments 

that requested that CMS release only the 

MLR percentage for a contract, CMS 

expressly rejected that approach 

because releasing only the minimum 

amount of MLR data for MA and Part D 

contracts would not align with CMS’ 

release of the detailed MLR data 

submitted by commercial plans (see 81 

FR 80439). However, when we amended 

§§ 422.2460 and 423.2460 to scale back 

the MLR reporting requirements starting 

with CY 2018 MLR reporting, we did 

not indicate that we had subsequently 

concluded that MLR data would not 

provide this value to the public, nor did 

we acknowledge that a direct 

consequence of CMS ending the 

detailed MLR reporting requirements, 

was that our release of Medicare MLR 

data would no longer align with the 

release of commercial MLR data, as we 

would only be releasing the MLR 

percentage and remittance amount (if 

any) for MA and Part D contracts, 

starting with MLR data submitted for CY 

2018. Given this background, in 

proposing to reinstate the detailed MLR 

reporting requirements, we believe it is 

appropriate that we reaffirm our 

position that the public release of Part 

C and Part D MLR data provides value 

to the public both by increasing market 

transparency and improving beneficiary 

choice. We believe that the value in 

CMS releasing to the public detailed 

MLR data in accordance with 

§§ 422.2490 and 423.2490, and in 

alignment with the disclosure of 

commercial MLR data, provides further 

support for our proposal to require MA 

organizations and Part D sponsors to 

submit such detailed data to us on an 

annual basis, starting with MLR 

reporting for CY 2023. 

3. Proposed Changes to Medicare MLR 

Reporting Regulations, Data Collection 

Instrument, and Regulations 

Authorizing Release of Part C MLR Data 

(§§ 422.2460, 422.2490, and 423.2460) 

As noted throughout this section of 

this proposed rule, we are proposing to 

reinstate the MLR reporting 

requirements that were in effect for CYs 

2014 through 2017, with some 

modifications. Our proposed revisions 

to the regulation text would amend 

paragraph (a) of §§ 422.2460 and 

423.2460 so that they are essentially as 

they were prior to the elimination of the 

detailed MLR reporting requirements as 

finalized in the April 2018 final rule. 

However, we propose to further amend 

§ 422.2460(a) so that the regulation text 

explicitly provides that the MLR report 

submitted to CMS includes amounts 

paid for incurred claims for covered 

services (both Medicare benefits and 

supplemental benefits) and prescription 

drugs. 

Under our proposed amendments, 

paragraph (a) of § 422.2460 would state 

that, except as provided in paragraph 

(b), for each contract year, each MA 

organization must submit to CMS, in a 

timeframe and manner that we specify, 

a report that includes the data needed 

to calculate and verify the MLR and 

remittance amount, if any, for each 

contract, including the amount of 

incurred claims for Medicare-covered 

benefits, supplemental benefits, and 

prescription drugs; expenditures on 

quality improving activities; non-claims 

costs; taxes; licensing and regulatory 

fees; total revenue; and any remittance 

owed to CMS under § 422.2410. We 

propose similar amendments to 

paragraph (a) of § 423.2460, except 

§ 423.2460(a) as proposed would refer to 

‘‘incurred claims for covered drugs,’’ 

would omit any mention of ‘‘covered 

services (both Medicare-covered 

benefits and supplemental benefits),’’ 

and would refer to the remittance owed 

to CMS under § 423.2410. In addition, 

we propose to revise paragraph (b) of 

both §§ 422.2460 and 423.2460 to 

specify that the limited MLR data 

collection requirements under that 

paragraph only apply to MLR reporting 

for CYs 2018 through 2022. 

In connection with our proposal to 

reinstate the detailed MLR reporting 

requirements, starting with MLR 

reporting for CY 2023, we intend to 

require MA organizations and Part D 

sponsors to submit their MLR data to 

CMS using the MLR Reporting Tool that 

was used to report MLR data for CYs 

2014 through 2017. In the years since 

CMS discontinued development of the 

MLR Reporting Tool, we have received 

multiple requests to continue updating 

and making this software publicly 

available so that it can be used as an aid 

for calculating MLRs in accordance with 

the current regulations and guidance. 

We agree that the use of CMS-developed 

MLR reporting software will help MA 

organizations and Part D sponsors to 

calculate their MLRs accurately. 

Although the MLR reporting software is 

unable to prevent all errors that might 

cause MLRs to be calculated incorrectly, 

particularly errors resulting from users 

entering erroneous data, we believe that 

MLR calculation errors are less likely to 

occur, and less likely to go unnoticed 

when they do occur, when MA 

organizations and Part D sponsors input 

the data elements for the MLR 

calculation into a standardized data 

collection tool that performs the 

mathematical operations to compute the 

MLR, including any applicable 

credibility adjustment, and contains 

built-in validation checks. In addition, 

we believe that we can further improve 

the usefulness of the software if MA 

organizations and Part D sponsors also 

submit to CMS the information entered 

into the MLR Reporting Tool and used 

to calculate the MLR for a contract. As 

part of our desk review process, we 

generate reports that identify specific 

issues flagged during desk reviews and 

whether any corrections to the reported 

data were necessary, which we can 

analyze to identify areas where we can 

improve the reporting guidance and 

validations in order to prevent errors in 

MLR submissions. As the agency 

responsible for developing the 

requirements for calculating and 

reporting MLR data, receiving and 

processing MLR data submissions, and 


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identifying compliance issues, we 

believe that CMS is uniquely positioned 

to use feedback generated through the 

submission and review of MLR data to 

learn about the various types of errors 

that may affect MA organizations’ and 

Part D sponsors’ MLR calculations, and 

to make changes both in our guidance 

and in the data collection tool itself that 

can prevent or steer MA organizations 

and Part D sponsors away from making 

certain errors that are known to have 

affected the MLR calculations of other 

MA organizations and Part D sponsors. 

If our proposal to amend our 

regulations to require reporting of 

detailed MLR data is finalized, we 

intend to make three types of changes to 

the MLR Reporting Tool, which we list 

below: 

First, we will revise the MLR 

Reporting Tool’s formulas to incorporate 

changes to the MLR calculation that 

have been finalized since CMS stopped 

developing the MLR Reporting Tool 

after CY 2017 MLR Reports were 

submitted. These include changes in the 

treatment of fraud reduction expenses to 

remove the cap on these amounts. We 

will add categories for fraud reduction 

expenses and medication therapy 

management programs in the section for 

Activities that Improve Healthcare 

Quality, consistent with changes in the 

April 2018 final rule that redefined 

these categories of expenditures as 

quality improvement activities (83 FR 

16670 through 16673). 

Second, we will separate out certain 

items that are currently consolidated 

into or otherwise accounted for in 

existing lines of the MLR Reporting 

Tool. Thus, we intend to separate out 

low-income cost-sharing subsidy 

amounts, which were previously 

subtracted from the MLR numerator and 

excluded from the denominator, into an 

information-only line in the MLR 

Reporting Tool’s numerator section, 

which will serve as a reminder to Part 

D sponsors that this amount needs to be 

subtracted from the numerator, and 

which we believe will provide more 

accountability in ensuring this amount 

has been accurately determined. 

Third, we will separate out the 

current line for claims incurred during 

the contract year covered by the MLR 

Report into separate lines for benefits 

covered by Medicare Parts A and B, 

certain additional supplemental benefits 

(that is, benefits not covered by Parts A, 

B, or D and meeting the criteria in 

§ 422.100(c)(2), but excluding 

supplemental benefits that extend or 

reduce the cost sharing for items and 

services covered under Parts A and B), 

and Part D prescription drug benefits. 

As noted previously, in the CY 2017 

PFS proposed rule, we explained that 

we believed the public release of Part C 

and Part D MLR data would allow the 

public to see whether and how 

privately-operated MA and Part D plans 

administer Medicare—and 

supplemental—benefits in an effective 

and efficient manner (see 81 FR 46396 

and 46397). To date, CMS has not 

separated out Medicare-covered and 

supplemental benefits into separate 

lines of the MLR Reporting Tool. 

We intend to require MA 

organizations to report all expenditures 

for Medicare-covered benefits, including 

extended A/B coverage (by which we 

mean, for example, coverage of 

additional days during an inpatient 

stay) and cost-sharing reductions (by 

which we mean the value of the 

difference between the cost sharing 

under Medicare FFS and the plan’s cost 

sharing), on the same line of the MLR 

Reporting Tool, based on our 

assumption that it would be exceedingly 

difficult for MA organizations to 

separately identify and track spending 

on extended coverage of original 

Medicare benefits and cost-sharing 

reductions. We solicit comment on 

whether this is a reasonable assumption 

and whether the MLR Reporting Tool 

should instead mirror how MA bids are 

submitted under § 422.254(b). 

Regarding additional supplemental 

benefits (supplemental benefits meeting 

the criteria in § 422.100(c)(2) but 

excluding supplemental benefits that 

extend or reduce the cost sharing for 

items and services covered under Parts 

A and B), we intend to have MA 

organizations report these expenditures 

on multiple lines of the MLR Reporting 

Tool, which would represent different 

types or categories of supplemental 

benefits. Requiring MA organizations to 

account for their supplemental benefit 

expenditures by benefit type or benefit 

category will provide more transparency 

into how the MLR is being calculated, 

and it will assist CMS in verifying the 

accuracy of the MLR calculation, 

particularly with respect to 

expenditures related to categories of 

supplemental benefits that MA 

organizations must already separately 

report to CMS for purposes of bid 

development. In addition, we believe 

that the public release of information on 

supplemental benefit spending by 

benefit type or category may be helpful 

to beneficiaries who wish to make their 

enrollment decisions based on a 

comparison of the relative value of the 

supplemental benefits actually provided 

by different MA organizations. We are 

not proposing to require separate 

reporting of Part D supplemental benefit 

expenditures (that is, they will continue 

to be reported combined with other Part 

D expenditures). 

In developing these additional 

supplemental benefit categories, we 

recognize that requiring MA 

organizations to separately report 

expenditures that they might not 

already be separately tracking, or that 

they are tracking using categories other 

than the ones listed in the MLR 

Reporting Tool, could create an 

additional burden. Accordingly, where 

different supplemental benefits are 

conventionally regarded as falling into 

the same category of benefit offering (for 

example, a comprehensive dental 

benefit might include both extractions 

and dental diagnostic services), 

although these can be treated as separate 

benefit offerings in the PBP, we grouped 

those benefits together under the same 

category (for example, ‘‘Dental’’). 

Based on these considerations, we 

intend to expand the MLR reporting 

requirements beyond what was required 

under the detailed MLR reporting 

requirements that were in effect for CYs 

2014 through 2017, to include 

expenditures related to the following 

categories of supplemental benefits: 

• Dental 

• Vision 

• Hearing 

• Transportation 

• Fitness Benefit 

• Worldwide Coverage/Visitor Travel 

• Over the Counter (OTC) Items 

• Remote Access Technologies 

• Meals 

• Routine Foot Care 

• Out-of-Network Services 

• Acupuncture Treatments 

• Chiropractic Care 

• Personal Emergency Response System 

(PRS) 

• Health Education 

• Smoking and Tobacco Cessation 

Counseling 

• All Other Primarily Health Related 

Supplemental Benefits 

• Non-Primarily Health Related Items 

and Services that are Special 

Supplemental Benefits for the 

Chronically Ill (SSBCI) (as defined in 

§ 422.102(f)) 

We believe that expenditures for 

dental, vision, and hearing should be 

separately reported because, in addition 

to being among the most widely-offered 

types of supplemental benefits, the 

amounts reported in the MLR Reporting 

Tool for each of those benefit types 

could be compared to the expenditures 

for each of those benefit types that are 

included in the base period experience 

section and the expected expenditures 

in the projected section of the Bid 

Pricing Tool (BPT). We believe reporting 


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expenditures related to the additional 

types and categories of supplemental 

benefits previously listed will increase 

accountability for the accuracy of the 

amounts used in the MLR calculation, 

and CMS will be able to analyze the 

reported data for indicators of potential 

inaccuracies, such as by flagging 

outliers for follow-up inquiries. 

In compiling the previous list of 

supplemental benefit types and 

categories, we took into consideration 

the percentage of MA plans that offer 

each type of supplemental benefit in the 

most recent year for which data on plan 

benefit packages is available (that is, CY 

2022), so that the lines we add to the 

MLR Reporting Tool are more likely to 

allow for comparison of MA 

organizations’ expenditures on types of 

supplemental benefits that are widely 

offered. In addition, in deciding 

whether to require separate reporting of 

the expenditures for a particular 

supplemental benefit type, we 

considered the percentage of contracts 

that currently offer that supplemental 

benefit under just one plan, as we 

believe expenditures associated with 

benefits offered under only one plan 

under a contract would constitute planlevel data, which CMS proposes to 

exclude from public release of MLR data 

consistent with the exclusions for MLR 

data reported at the plan level and 

information submitted for contracts 

consisting of a single plan (see 

§ 422.2490(b)(2)). Based on our review 

of the percentage of plans offering each 

type of supplemental benefit, and the 

percentage that are offered under only 

one plan under a contract, we are not 

proposing to require separate reporting 

of expenditures for supplemental 

benefit types or categories offered by 

less than 10 percent of all MA plans in 

2021. The exception is SSBCI that are 

not primarily health related, which we 

include because we believe this 

information will help us assess the 

impact of our 2021 rule change that 

allows all amounts paid for covered 

services to be included in the MLR 

numerator as incurred claims (prior to 

this rule change, only amounts paid ‘‘to 

providers’’—which is defined in § 422.2 

in terms of the provision of healthcare 

items and services—for covered services 

could be included in incurred claims, 

which would have excluded, for 

example, pest control). 

We solicit comment on whether the 

list of supplemental benefit types and 

categories would be appropriate 

breakouts for separating out 

supplemental benefit expenditures in 

the MLR Reporting Tool. We are 

interested in feedback that addresses 

whether we should increase or decrease 

the number of types or categories of 

supplemental benefits, as well as 

suggestions for alternative categories or 

for consolidating the above benefit types 

or categories into larger categories. 

As the preceding discussion suggests, 

we intend to use our authority under 

§§ 422.2490 and 423.2490 to release to 

the public the Part C and Part D MLR 

data we propose to collect, including 

the additional data we propose to 

collect on supplemental benefit 

expenditures, to the same extent that we 

released the information we formerly 

collected under the MLR reporting 

requirements in effect for CYs 2014 

through 2017. Consistent with 

§§ 422.2490(c) and 423.2490(c), the 

release of the MLR data we propose to 

collect for a contract year will occur no 

sooner than 18 months after the end of 

the applicable contract year, and will be 

subject to the exclusions in 

§§ 422.2490(b) and 423.2490(b). As 

previously noted, we propose to amend 

§ 422.2490(b)(2) by adding new 

paragraph (b)(2)(ii), which would 

exclude from release data on amounts 

that are reported as expenditures for a 

specific type of supplemental benefit, 

where the entire amount that is reported 

represents costs incurred by the only 

plan under the contract that offers that 

benefit. For example, if only one plan 

under a contract offers Dental X-rays as 

a supplemental benefit, and 

expenditures for that benefit are the 

only amounts reported on that line of 

the MLR Reporting Tool, we would 

exclude the entire amount reported on 

that line from our public data release. 

However, if only one plan under a 

contract covers Dental X-rays, and 

another plan under that same contract is 

the only plan under the contract that 

covers Extractions, expenditures for 

both benefits would be reported in the 

Dental line in the MLR Reporting Tool, 

and that combined amount (assuming 

both plans had expenditures in the 

Dental category) would not be excluded 

from our public data release. We believe 

data regarding supplemental benefit 

expenditures is only sensitive to the 

extent that the data reveals plan-level 

expenditures for a specific benefit 

offered under a single plan, and that 

these concerns do not exist when 

expenditures for multiple types of 

supplemental benefits or from multiple 

plans are included in the same line of 

the MLR Reporting Tool. We solicit 

comment on this proposed exclusion, 

including any suggestions for how we 

would implement this exclusion (for 

example, by adding check boxes next to 

the applicable lines in the MLR 

Reporting Tool, where users would add 

a check mark if their expenditures for 

the supplemental benefit type or 

category in the line by the checkbox 

represented expenditures for a single 

plan and single benefit type), and 

whether additional exclusions should 

be added to our MLR data release 

regulations. We solicit comment on 

whether there is additional sensitivity 

around expenditures for supplemental 

benefits generally or for any types of 

supplemental benefits in particular, 

such that public release of data 

concerning those expenditures would be 

harmful. 

4. Proposed Technical Change to MLR 

Reporting Regulations (§§ 422.2460 and 

423.2460) 

In addition to our proposal to 

reinstate the detailed MLR reporting 

requirements that were in effect for CYs 

2014 through 2017, with some 

modifications, and to add new data 

fields to our MLR Reporting Tool as 

described in the previous section of this 

preamble, we propose to make a 

clarifying amendment to our MLR 

reporting regulations. 

Currently, §§ 422.2460(d) and 

423.2460(d) state that the MLR is 

reported once, and is not reopened as a 

result of any payment reconciliation 

process. We propose to amend this 

paragraph to note that it is subject to an 

exception in new paragraph (e), which 

as proposed would provide that, with 

respect to an MA organization (in the 

case of proposed § 422.2460(e)) or Part 

D sponsor (in the case of proposed 

§ 423.2460(e)) that has already 

submitted to CMS the MLR report or 

MLR data submission for a contract for 

a contract year, paragraph (d) does not 

prohibit resubmission of the MLR report 

or MLR data for the purpose of 

correcting the prior MLR report or data 

submission. Proposed paragraph (e) 

would also provide that such 

resubmission must be authorized or 

directed by CMS, and upon receipt and 

acceptance by CMS, will be regarded as 

the contract’s MLR report or data 

submission for the contract year for 

purposes of part 422, subpart X, and 

part 423, subpart X. 

We characterize this as a clarifying 

amendment, as we believe it is clear 

from the discussion in the May 2013 

Medicare MLR final rule that the 

provision stating that the MLR will be 

reported once, and will not be reopened 

as a result of any payment reconciliation 

process, was intended to codify the 

policy decision that the MLR for a 

contract year should be based on the 

contract year revenue figure available at 

the time of reporting, and should not be 

subject to change if the contract year 


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Federal Register / Vol. 87, No. 8 / Wednesday, January 12, 2022 / Proposed Rules 1909 

revenues increase or decrease through 

adjustments that take place in a future 

year. We note that the discussion of this 

policy appears in both the proposed and 

final rules under the heading 

‘‘Projection of Net Total Revenue’’ (78 

FR 12435; 78 FR 31292). The MLR final 

rule discusses how our policy not to 

reopen the MLR due to any payment 

reconciliation process is consistent with 

our view that the MLR should reflect 

how an MA organization or Part D plan 

sponsor decided to apportion the 

revenue it actually received for the 

contract year between patient care and 

quality improvement and other costs (78 

FR 31293). The Medicare MLR final rule 

explains that we assume that MA 

organizations and Part D plan sponsors 

likely do not make their decisions about 

how to use the funds that are available 

to them based on an assumption that 

their revenue will be reduced or 

increased in a future year as a result of 

a future audit or reconciliation that 

changes the final Medicare payment 

amount. We believe that taking such 

future revenue adjustments into account 

would not be useful for assessing how 

a plan chose to allocate its available 

revenues. 

In addition to our remarks in the 2013 

Medicare MLR proposed and final rules, 

we believe it is clear based on other 

provisions in our MLR regulations that 

we have never intended to prohibit 

ourselves from collecting, or taking into 

account, additional or corrected MLR 

data that is submitted to address 

deficiencies or inaccuracies in the 

annual MLR submission required under 

§§ 422.2460 and 423.2460. For example, 

when MLR data submitted under 

§ 422.2460 (for MA contracts) or 

§ 423.2460 (for Part D contracts), 

calculations, or any other MLR 

submission required under our MLR 

regulations is found to be materially 

incorrect or fraudulent, under 

§§ 422.2480(d) and 423.2480(d), CMS is 

required to recoup the appropriate 

remittance amount. It would be unduly 

burdensome and time-consuming for 

both CMS and the relevant MA 

organization or Part D sponsor if, in lieu 

of requiring the MA organization or Part 

D sponsor to correct its MLR 

submission, CMS had to collect the MA 

organization’s or Part D sponsor’s 

relevant financial records, contracts, 

and other types of supporting 

documentation so the agency could 

calculate the correct MLR for a contract. 

That being the case, if CMS could not 

require the submission of corrected 

MLR data when deficiencies are found, 

whether by CMS or by the MA 

organization or Part D sponsor, CMS’ 

ability to enforce the statutory MLR 

sanctions (codified in our regulations at 

§§ 422.2410(c) through (d) and 

423.2410(c) through (d)) would be 

undermined. In addition, because our 

MLR data release regulations at 

§§ 422.2490 and 423.2490 provide that 

CMS releases to the public the data 

collected under §§ 422.2460 and 

423.2460, if CMS could not require or 

allow resubmission of MLR data 

submitted under those regulations in 

order to correct errors in the original 

filing, it would be necessary for CMS to 

either release data that is known to 

contain errors, which could mislead 

beneficiaries who wish to use the MLR 

data to assess the relative value of 

Medicare health and drug plans, or to 

remove the erroneous data, which 

would create gaps in the dataset and 

limit the usefulness of MLR data as a 

resource for facilitating public 

evaluation of the MA and Part D 

programs (see 81 FR 46396 and 46397). 

The proposed amendments to 

§§ 422.2460 and 423.2460 are consistent 

with our longstanding practice, which 

dates back to when CMS first began 

collecting Part C and Part D MLR data 

(for CY 2014) in December 2015, of 

allowing MA organizations and Part D 

sponsors to resubmit their MLR Data 

Forms for a contract year in order to 

correct errors and omissions in the 

original MLR filing without treating that 

resubmission as a reporting of the MLR 

for purposes of §§ 422.2460(d) and 

423.2460(d). To date, CMS has accepted 

resubmission of MLR data submitted for 

a contract year without penalty up until 

the point when we collect remittances 

for contracts that have failed to meet the 

minimum MLR requirement for that 

contract year. CMS has typically 

collected remittances for a contract year 

through an adjustment to MA 

organizations’ and Part D sponsors’ 

monthly payments for July in the year 

that is 2 years after the contract year that 

is the subject of the MLR filing (for 

example, remittances based on CY 2015 

MLR reporting were collected in July 

2017). We have also required that MA 

organizations and Part D sponsors 

resubmit MLR data if it is determined 

that the original MLR submission 

contained errors that affected the 

calculation of the MLR or remittance 

amount after this date, although in such 

cases CMS reserves the right to issue 

sanctions as authorized by 

§§ 422.2480(d)(3) and 423.2480(d)(3). In 

deciding whether to issue sanctions, we 

will consider factors such as whether 

the error in the MLR filing was selfdisclosed by the MA organization or 

Part D sponsor, whether the error 

appears to be the result of intentional 

misrepresentation, and whether any 

beneficiary harm (including disruptions 

to enrollment) occurred as a result of the 

error. 

H. Pharmacy Price Concessions in the 

Negotiated Price (§ 423.100) 

1. Introduction 

Under Medicare Part D, Medicare 

makes partially capitated payments to 

private insurers, also known as Part D 

sponsors, for covering prescription drug 

benefits for Medicare beneficiaries. 

Often, the Part D sponsor or its 

pharmacy benefit manager (PBM) 

receives compensation after the pointof-sale that serves to lower the final net 

amount paid by the sponsor to the 

pharmacy for the drug. Under Medicare 

Part D, this post point-of-sale 

compensation is called Direct and 

Indirect Remuneration (DIR) and is 

factored into CMS’s calculation of final 

Medicare payments to Part D plans. DIR 

includes rebates from manufacturers, 

administrative fees above fair market 

value, price concessions for 

administrative services, legal 

settlements affecting Part D drug costs, 

pharmacy price concessions, drug costs 

related risk-sharing settlements, or other 

price concessions or similar benefits 

offered to some or all purchasers from 

any source (including manufacturers, 

pharmacies, enrollees, or any other 

person) that would serve to decrease the 

costs incurred under the Part D plan 

(see § 423.308). 


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1910 Federal Register / Vol. 87, No. 8 / Wednesday, January 12, 2022 / Proposed Rules 

134CMS collects DIR data under collection 

approved under OMB control number 0938–0964 

(CMS–10174) (‘‘Collection of Prescription Drug 

Event Data from Contracted Part D Providers for 

Payment’’). CMS does not release publicly the DIR 

data that we collect. The one exception was a 

highly summarized release of certain 2014 DIR data 

related to manufacturer rebates: https://

www.cms.gov/Research-Statistics-Data-andSystems/Statistics-Trends-and-Reports/ 

Information-on-Prescription-Drugs/PartD_Rebates. 

135Sponsors report all DIR to CMS annually by 

category at the plan level. DIR categories include: 

Manufacturer rebates, administrative fees above fair 

market value, price concessions for administrative 

services, legal settlements affecting Part D drug 

costs, pharmacy price concessions, drug costs 

related risk-sharing settlements, etc. 

Total DIR reported by Part D sponsors 

has been growing significantly in recent 

years. The data Part D sponsors submit 

to CMS as part of the annual reporting 

of DIR134 show that pharmacy price 

concessions (generally referring to all 

forms of discounts, direct or indirect 

subsidies, or rebates that a pharmacy 

pays to a Part D sponsor to reduce the 

costs incurred under Part D plans by 

Part D sponsors), net of all pharmacy 

incentive payments, have grown faster 

than any other category of DIR135

received by sponsors and PBMs. This 

means that pharmacy price concessions 

now account for a larger share than ever 

before of reported DIR and a larger share 

of total gross drug costs in the Part D 

program. In 2020, pharmacy price 

concessions accounted for about 4.8 

percent of total Part D gross drug costs 

($9.5 billion), up from 0.01 percent ($8.9 

million) in 2010. As shown in Table 3, 

the growth in pharmacy price 

concessions from 2010 to 2020 has been 

a continuous upward trend with the 

exception of 2011. 

BILLING CODE 4120–01–P 

BILLING CODE 4120–01–C 

The data show that pharmacy price 

concessions, net of all pharmacy 

incentive payments, grew more than 

107,400 percent between 2010 and 

2020. The data also show that much of 

this growth occurred after 2012, when 

the use by Part D sponsors of 

performance-based payment 

arrangements with pharmacies became 

increasingly prevalent. Part D sponsors 

and their contracted PBMs have been 

increasingly successful in recent years 

in negotiating price concessions from 

network pharmacies. Such price 

concessions are negotiated between 

pharmacies and sponsors or their PBMs, 

independent of CMS, and are often tied 

to the pharmacy’s performance on 

various measures defined by the 

sponsor or its PBM. Performance-based 

pharmacy price concessions, net of all 

pharmacy incentive payments, 

increased, on average, nearly 170 

percent per year between 2012 and 2020 

and now comprise the second largest 

category of DIR received by sponsors 

and PBMs, behind only manufacturer 

rebates. 

While manufacturer rebates (a nonpharmacy price concession) account for 

the largest category of DIR, given the 

large growth in pharmacy price 

concessions that has resulted from the 

increased use of performance-based 

pharmacy payment arrangements, CMS 

is focusing on policy proposals in this 

section that would be applicable to 

pharmacy price concessions, and not 

non-pharmacy price concessions. 

Further, section 90006 of the 

Infrastructure Investment and Jobs Act 

(Pub. L. 117–58, November 15, 2021) 

prohibits the Secretary from 

implementing, administering, or 

enforcing the provisions of the final rule 


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TABLE 3: PHARMACY PRICE CONCESSIONS BY YEAR (2010-2020) 

Total Pharmacy 

Contract Price 

Year Concessions %Change 

2010 $ 8,869,347 -

2011 $ 8,582,354 -3.2% 

2012 $ 68,086,163 693.3% 

2013 $ 228,573,206 235.7% 

2014 $ 538,421,239 135.6% 

2015 $ 1,719,179,214 219.3% 

2016 $ 2,125,460,000 23.6% 

2017 $ 4,001,741,355 88.3% 

2018 $ 6,339,517,817 58.4% 

2019 $ 8,130,024,785 28.2% 

2020 $ 9,535,197,775 17.3% 

Source: Summary Direct and Indirect Remuneration Report Data, 2010-2020. 
Federal Register / Vol. 87, No. 8 / Wednesday, January 12, 2022 / Proposed Rules 1911 

published by the Office of the Inspector 

General of the Department of Health and 

Human Services on November 30, 2020, 

and titled ‘‘Fraud and Abuse; Removal 

of Safe Harbor Protection for Rebates 

Involving Prescription Pharmaceuticals 

and Creation of New Safe Harbor 

Protection for Certain Point-of-Sale 

Reductions in Price on Prescription 

Pharmaceuticals and Certain Pharmacy 

Benefit Manager Service Fees’’ (85 FR 

76666) (hereinafter referred to as the 

rebate rule) prior to January 1, 2026. 

While CMS has independent statutory 

authority, pursuant to section 1860D– 

2(d)(1)(B) of the Act, to regulate the 

application of non-pharmacy price 

concessions to negotiated price, given 

the existing moratorium on 

implementation of the rebate rule and 

the differences between performancebased pharmacy payment arrangements 

and non-pharmacy price concessions, 

we are following an incremental 

approach and only proposing policies 

related to pharmacy price concessions at 

this time. 

The negotiated price is the primary 

basis by which the Part D benefit is 

adjudicated, as it is used to determine 

plan, beneficiary, manufacturer (in the 

coverage gap), and government cost 

obligations during the course of the 

payment year, subject to final 

reconciliation following the end of the 

coverage year. Under the current 

definition of ‘‘negotiated prices’’ at 

§ 423.100, negotiated prices must 

include all price concessions from 

network pharmacies except those that 

cannot reasonably be determined at the 

point-of-sale. However, because 

performance adjustments typically 

occur after the point-of-sale, they are not 

included in the price of a drug at the 

point-of-sale. 

Through comments received from the 

pharmacy industry in response to our 

Request for Information on pharmacy 

price concessions (included in the 

proposed rule titled ‘‘Medicare Program; 

Contract Year 2019 Policy and 

Technical Changes to the Medicare 

Advantage, Medicare Cost Plan, 

Medicare Fee-for-Service, the Medicare 

Prescription Drug Benefit Programs, and 

the PACE Program’’ (82 FR 56419 

through 56428), which appeared in the 

Federal Register on November 28, 2017 

(hereinafter referred to as the November 

2017 proposed rule)), and our 

solicitation for comments on the 

potential policy approach for including 

pharmacy price concessions in the 

negotiated price discussed in the 

proposed rule titled ‘‘Modernizing Part 

D and Medicare Advantage To Lower 

Drug Prices and Reduce Out-of-Pocket 

Expenses’’ (83 FR 62174 through 

62180), which appeared in the Federal 

Register on November 30, 2018 

(hereinafter referred to as the November 

2018 proposed rule), and sponsorreported DIR data, we further 

understand that the share of 

pharmacies’ reimbursements that is 

contingent upon their performance 

under such arrangements has grown 

steadily each year. Further, sponsors 

and PBMs have been recouping 

increasing sums from network 

pharmacies after the point-of-sale 

(pharmacy price concessions) for ‘‘poor 

performance,’’ sums that are far greater 

than those paid to network pharmacies 

after the point-of-sale (pharmacy 

incentive payments) for ‘‘high 

performance.’’ When pharmacy price 

concessions received by Part D sponsors 

are not reflected in lower drug prices at 

the point-of-sale and are instead used to 

reduce plan liability, beneficiaries 

generally see lower premiums, but they 

do not benefit through a reduction in 

the amount they must pay in costsharing. Thus, beneficiaries who utilize 

drugs end up paying a larger share of 

the actual cost of a drug. Moreover, 

when the point-of-sale price of a drug 

that a Part D sponsor reports on a 

prescription drug event (PDE) record as 

the negotiated price does not include 

such discounts, the negotiated price of 

each individual prescription is rendered 

less transparent and less representative 

of the actual cost of the drug for the 

sponsor. 

President Biden’s Executive Order 

(E.O.) 14036, ‘‘Promoting Competition 

in the American Economy’’ (86 FR 

36987), section 5 (‘‘Further Agency 

Responsibilities’’), called for agencies to 

consider how regulations could be used 

to improve and promote competition 

throughout the prescription drug 

industry. Because variation in the 

treatment of pharmacy price 

concessions by Part D sponsors may 

have a negative effect on the 

competitive balance under the Medicare 

Part D program, and given the 

programmatic impacts laid out above 

and the charge from the E.O., CMS is 

proposing changes that would 

standardize how Part D sponsors apply 

pharmacy price concessions to 

negotiated prices at the point-of-sale. 

At the time the Part D program was 

established, we believed, as discussed 

in the January 2005 final rule (70 FR 

4244), that market competition would 

encourage Part D sponsors to pass 

through to beneficiaries at the point-ofsale a high percentage of the price 

concessions they received, and that 

establishing a minimum threshold for 

the price concessions to be applied at 

the point-of-sale would only serve to 

undercut these market forces. However, 

actual Part D program experience has 

not matched expectations in this regard. 

In recent years, less than 2 percent of 

plans have passed through any price 

concessions to beneficiaries at the pointof-sale. We now understand that 

sponsors may face market incentives to 

not apply price concessions at the pointof-sale because of the advantages that 

accrue to sponsors in terms of lower 

premiums (also an advantage for 

beneficiaries). Pharmacy price 

concessions reduce plan costs, and 

having the concessions not be applied at 

the point-of-sale reduces plan costs and 

plan premiums at the expense of the 

beneficiary having lower cost sharing at 

the point-of-sale, thus shifting some of 

the net costs to the beneficiary via 

higher cost sharing. We believe that Part 

D sponsors are incentivized to have 

lower premiums versus lower cost 

sharing because anecdotal evidence 

suggests beneficiaries focus more on 

premiums instead of cost sharing when 

choosing plans. 

For this reason, as part of the 

November 2017 proposed rule, we 

published a ‘‘Request for Information 

Regarding the Application of 

Manufacturer Rebates and Pharmacy 

Price Concessions to Drug Prices at the 

Point of Sale’’ (82 FR 56419 through 

56428). We solicited comment on 

whether CMS should require that the 

negotiated price at the point-of-sale for 

a covered Part D drug must include all 

price concessions that the Part D 

sponsor could potentially collect from a 

network pharmacy for any individual 

claim for that drug. Of the many timely 

comments received, the majority were 

from pharmacies, pharmacy 

associations, and beneficiary advocacy 

groups that supported the adoption of 

such a requirement claiming that it 

would: (1) Lower beneficiary out-ofpocket drug costs (especially critical for 

beneficiaries who utilize high cost 

drugs); (2) stabilize the operating 

environment for pharmacies (by creating 

greater transparency and allegedly 

making the minimum reimbursement on 

a per-claim level more predictable); and 

(3) standardize the way in which plan 

sponsors and their PBMs treat pharmacy 

price concessions. Some commenters— 

mostly Part D sponsors and PBMs— 

were against such a policy, claiming 

that it would limit their ability to 

incentivize quality improvement from 

pharmacies. In the November 2018 

proposed rule, we solicited comment on 

a potential policy approach under 

which all pharmacy price concessions 

received by a plan sponsor for a covered 

Part D drug, including contingent price 


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1912 Federal Register / Vol. 87, No. 8 / Wednesday, January 12, 2022 / Proposed Rules 

136From 2018 to 2020, pharmacy price 

concessions increased by 50.4% while all other DIR 

increased by 23.5%. 

concessions paid after the point-of-sale, 

would be included in the negotiated 

price (83 FR 62177). Specifically, we 

considered adopting a new definition 

for the term ‘‘negotiated price’’ at 

§ 423.100, which would mean the 

lowest amount a pharmacy could 

receive as reimbursement for a covered 

Part D drug under its contract with the 

Part D plan sponsor or the sponsor’s 

intermediary. In the final rule titled 

‘‘Modernizing Part D and Medicare 

Advantage to Lower Drug Prices and 

Reduce Out-of-Pocket Expenses,’’ which 

appeared in the Federal Register on 

May 23, 2019 (84 FR 23867), we noted 

that we received over 4,000 comments 

on this potential policy approach, 

indicated that we would continue 

studying the issue, and left the existing 

definition of ‘‘negotiated prices’’ in 

place. 

To address concerns about the lack of 

transparency in the performance 

measures used to evaluate pharmacy 

performance, in the February 2020 

proposed rule (85 FR 9002), we 

proposed to amend the regulatory 

language at § 423.514(a) to establish a 

requirement for Part D sponsors to 

disclose to CMS the pharmacy 

performance measures they use to 

evaluate pharmacy performance, as 

established in their network pharmacy 

agreements. We explained in the 

proposed rule that, once collected, we 

would publish the list of pharmacy 

performance measures in order to 

increase public transparency. In the 

final rule titled, ‘‘Medicare and 

Medicaid Programs; Contract Year 2022 

Policy and Technical Changes to the 

Medicare Advantage Program, Medicare 

Prescription Drug Benefit Program, 

Medicaid Program, Medicare Cost Plan 

Program, and Programs of All-Inclusive 

Care for the Elderly,’’ which appeared in 

the Federal Register on January 19, 

2021 (86 FR 5684), we finalized the 

proposed amendment to § 423.514(a), 

such that, starting January 1, 2022, Part 

D sponsors will be required to disclose 

their pharmacy performance measures 

to CMS. 

After considering the comments 

received on the November 2018 

proposed rule, and in light of more 

recent data indicating that pharmacy 

price concessions have continued to 

grow at a faster rate than any other 

category of DIR,136 effective for contract 

year 2023, we propose to amend 

§ 423.100 to define the term ‘‘negotiated 

price’’ to ensure that the prices available 

to Part D enrollees at the point-of-sale 

are inclusive of all pharmacy price 

concessions. First, we propose to delete 

the current definition of ‘‘negotiated 

prices’’ (in the plural) and add a 

definition of ‘‘negotiated price’’ (in the 

singular) to make clear that a negotiated 

price can be set for each covered Part D 

drug. We believe this approach 

accommodates the different approaches 

to applying price concessions under 

sponsor and PBM payment 

arrangements with pharmacies, which 

may provide for price concessions to be 

applied uniformly as a percentage 

adjustment to the price for all Part D 

drugs dispensed by a pharmacy or have 

price concessions differ on a drug-bydrug basis. In addition, defining 

‘‘negotiated price’’ in the singular is 

consistent with the regulations for the 

coverage gap discount program, which 

define the term ‘‘negotiated price’’ at 

§ 423.2305, and it is compatible with 

our existing regulations, which at times 

refer to the ‘‘negotiated price’’ for a 

specific drug rather than ‘‘negotiated 

prices’’ for multiple drugs. Second, we 

propose to define ‘‘negotiated price’’ as 

the lowest possible reimbursement a 

network pharmacy will receive, in total, 

for a particular drug, taking into account 

all pharmacy price concessions. 

2. Background 

Section 1860D–2(d)(1) of the Act 

requires that a Part D sponsor provide 

beneficiaries with access to negotiated 

prices for covered Part D drugs. Under 

the definition of ‘‘negotiated prices’’ at 

§ 423.100, the negotiated price is the 

price paid to the network pharmacy or 

other network dispensing provider for a 

covered Part D drug dispensed to a plan 

enrollee that is reported to CMS at the 

point-of-sale by the Part D sponsor. This 

point-of-sale price is used to calculate 

beneficiary cost-sharing. More broadly, 

the negotiated price is the primary basis 

by which the Part D benefit is 

adjudicated, as it is used to determine 

plan, beneficiary, manufacturer (in the 

coverage gap), and government liability 

during the course of the payment year, 

subject to final reconciliation following 

the end of the coverage year. 

Under current law, Part D sponsors 

can, for the most part, choose whether 

to reflect in the negotiated price the 

various price concessions they or their 

intermediaries receive from all sources, 

not just pharmacies. Specifically, 

section 1860D–2(d)(1)(B) of the Act 

requires that negotiated prices ‘‘shall 

take into account negotiated price 

concessions, such as discounts, direct or 

indirect subsidies, rebates, and direct or 

indirect remunerations, for covered part 

D drugs . . . .’’ Part D sponsors are 

allowed, but generally not required, to 

apply rebates and other price 

concessions at the point-of-sale to lower 

the price upon which beneficiary costsharing is calculated. Under the existing 

definition of negotiated prices at 

§ 423.100, however, negotiated prices 

must include all price concessions from 

network pharmacies that can reasonably 

be determined at the point-of-sale. 

To date, very few price concessions 

have been included in the negotiated 

price at the point-of-sale. All pharmacy 

and other price concessions that are not 

included in the negotiated price must be 

reported to CMS as DIR at the end of the 

coverage year using the form required 

by CMS for reporting Summary and 

Detailed DIR (OMB control number 

0938–0964). These data on price 

concessions are used in our calculation 

of final plan payments, which, under 

section 1860D–2(d)(1)(B) of the Act, are 

required to be based on costs actually 

incurred by Part D sponsors, net of all 

applicable DIR. Reinsurance payments 

under section 1860D–15(b) of the Act, 

and risk sharing payments and 

adjustments under section 1860D– 

15(e)(2) of the Act are also required to 

be based on costs actually incurred by 

Part D sponsors. In addition, pursuant to 

section 1860D–2(d)(2) of the Act, Part D 

sponsors are required to disclose the 

aggregate negotiated price concessions 

made available to the sponsor by a 

manufacturer which are passed through 

in the form of lower subsidies, lower 

monthly beneficiary prescription drug 

premiums, and lower prices through 

pharmacies and other dispensers. 

When price concessions are applied 

to reduce the negotiated price at the 

point-of-sale, some of the concession 

amount is apportioned to reduce 

beneficiary cost-sharing. In contrast, 

when price concessions are applied 

after the point-of-sale, as DIR, the 

majority of the concession amount 

accrues to the plan, and the remainder 

accrues to the government. For further 

discussion on this matter, please see the 

CMS Fact Sheet from January 19, 2017 

‘‘Medicare Part D Direct and Indirect 

Remuneration,’’ found on the CMS 

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

newsroom/fact-sheets/medicare-part-ddirect-and-indirect-remuneration-dir. 

As discussed later in this section of this 

proposed rule, pharmacy price 

concessions applied as DIR can lower 

plan premiums and increase plan 

revenues, result in cost-shifting to 

certain beneficiaries (in the form of 

higher cost-sharing) and the government 

(through higher reinsurance and lowincome cost-sharing subsidies), and 

obscure the true costs of prescription 

drugs for consumers and the 

government. 


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Federal Register / Vol. 87, No. 8 / Wednesday, January 12, 2022 / Proposed Rules 1913 

137By contrast, during this same period (2010– 

20), the average premium for a single individual in 

the commercial market grew by about 4 percent per 

year. See Kaiser Family Foundation 2020 Health 

Benefits Annual Survey, Page 40, https://

Files.kff.org/Attachment/Report-Employer-HealthBenefits-2020-Annual-Survey.pdf. 

138Plan Payment Data, 2010–19, available at 

https://www.cms.gov/Medicare/MedicareAdvantage/Plan-Payment/Plan-Payment-Data.html. 

139Michele Heisler et al., ‘‘The Health Effects of 

Restricting Prescription Medication Use Because of 

Cost,’’ Med Care, 2004 Jul;42(7):626–634, available 

at https://www.ncbi.nlm.nih.gov/pubmed/ 

15213486. 

140Peter Bach, ‘‘Limits on Medicare’s Ability to 

Control Rising Spending on Cancer Drugs,’’ New 

England Journal of Medicine 2009, 360:626–633, 

available at https://www.nejm.org/doi/full/10.1056/ 

NEJMhpr0807774. 

141Sonya Blesser Streeter et al., ‘‘Patient and Plan 

Characteristics Affecting Abandonment of Oral 

Oncolytic Prescriptions,’’ Journal of Oncology 

Practice 2011, 7(3S):46s–51s, available at http://

ascopubs.org/doi/full/10.1200/jop.2011.000316. 

a. Premiums and Plan Revenues 

The main benefit to a Part D 

beneficiary of price concessions applied 

as DIR at the end of the coverage year 

(and not to the negotiated price at the 

point-of-sale) is a lower plan premium. 

A sponsor must factor into its plan bid 

an estimate of the expected DIR for the 

upcoming payment year. That is, in the 

bid the sponsor must lower its estimate 

of plan liability by a share of the 

projected DIR, which has the effect of 

reducing the price of coverage under the 

plan. Under the current Part D benefit 

design, applying price concessions after 

the point-of-sale as DIR reduces plan 

liability (and thus premiums) more than 

applying price concessions at the pointof-sale. 

Therefore, to the extent that plan bids 

reflect accurate DIR estimates, the 

pharmacy and other price concessions 

that Part D sponsors and their PBMs 

negotiate, but do not include in the 

negotiated price at the point-of-sale, put 

downward pressure on plan premiums, 

as well as the government’s subsidies of 

those premiums. The average Part D 

basic beneficiary premium grew at an 

average rate of only about 1 percent per 

year between 2010 and 2020 137 and the 

average basic premium actually paid by 

beneficiaries has declined each year 

since 2017 as sponsors projected in their 

bids that DIR growth will outpace the 

growth in projected gross drug costs 

each year. The average Medicare direct 

subsidy paid by the government to cover 

a share of the cost of coverage under a 

Part D plan has also declined, by an 

average of 11.7 percent per year between 

2010 and 2019, partly for the same 

reason.138

However, any DIR a sponsor receives 

that is above the projected amount 

factored into its plan bids increases 

revenues and contributes to plan profits, 

without necessarily being reflected in 

lower premiums. The risk-sharing 

construct established under the Part D 

statute at section 1860D–15(e) of the Act 

allows sponsors to retain as plan profit 

the majority of all plan revenues above 

the bid-projected amount. Given that 

plan bids, and, thus, plan revenues, are 

based on cost projections, the plan’s 

actual experience may yield unexpected 

losses (when bid-based payments to 

plans—plan revenues—fall short of 

actual plan costs) or unexpected savings 

(when plan revenues exceed actual plan 

costs) for Part D sponsors. In order to 

limit Part D sponsors’ exposure to 

unexpected drug expenses and the 

government’s exposure to 

overpayments, Medicare shares risk 

with sponsors on the drug costs covered 

by their plan bids, using symmetrical 

risk corridors to cover or recoup a share 

of unexpected losses or savings. 

Under the Part D risk corridors, if a 

plan’s actual drug costs are within +/¥ 

5 percent of the drug costs estimated in 

its bid, the plan assumes all of the losses 

or savings. If its costs are more than 5 

percent above or below its bid, the 

government assumes a growing share of 

the losses or savings, and the plan 

assumes the remainder. Any unexpected 

losses or savings that a plan assumes 

affect its final profit margin. Thus, when 

a plan underestimates the amount of 

DIR that it will receive, any additional 

amount of DIR constitutes additional 

plan revenues. In the event that overall 

plan revenues exceed the amount 

projected in the plan sponsor’s bid, the 

sponsor is permitted to retain most, if 

not all, of the excess amount, assuming 

that the sponsor has met the minimum 

MLR requirement. Our analysis of Part 

D plan payment and cost data indicates 

that in recent years, DIR amounts that 

Part D sponsors and their PBMs actually 

received have consistently exceeded 

bid-projected amounts, by an average of 

0.6 percent and as much as 3 percent as 

a share of gross drug costs from 2010 to 

2020. 

Due to the relative premium and other 

advantages that price concessions 

applied as DIR, including pharmacy 

price concessions, offer sponsors over 

lower point-of-sale prices, sponsors can 

have an incentive to opt for higher 

negotiated prices in exchange for higher 

DIR and, where price concessions are in 

the form of percentage-based fees, to 

prefer a higher net cost drug over a 

cheaper alternative. This may put 

upward pressure on Part D program 

costs and shift costs from the Part D 

sponsor to beneficiaries who utilize 

drugs in the form of higher cost-sharing 

and to the government through higher 

reinsurance and low-income costsharing subsidies. 

b. Cost-Shifting 

Beneficiary cost-sharing is generally 

calculated as a percentage of the 

negotiated price. When pharmacy price 

concessions and other price concessions 

are not reflected in the negotiated price 

at the point-of-sale (that is, are applied 

instead as DIR at the end of the coverage 

year), beneficiary cost-sharing increases, 

covering a larger share of the actual cost 

of a drug. Although this is especially 

true when a Part D drug is subject to 

coinsurance, it is also true when a drug 

is subject to a copayment because Part 

D rules require that the copayment 

amount be at least actuarially equivalent 

to the coinsurance required under the 

defined standard benefit design. For 

more than half of Part D beneficiaries 

who utilize drugs and thus incur costsharing expenses, this means, on 

average, higher overall out-of-pocket 

costs, even after accounting for the 

premium savings tied to higher DIR. For 

the millions of low-income beneficiaries 

whose out-of-pocket costs are 

subsidized by Medicare through the 

low-income cost-sharing subsidy, those 

higher costs are borne by the 

government. See the lowest possible 

reimbursement example later in this 

section of this proposed rule for an 

example of the effect the proposed 

change to the definition of negotiated 

price would have on the determination 

of beneficiary cost-sharing. 

This potential for cost shifting to 

beneficiaries grows increasingly 

pronounced as pharmacy price 

concessions increase as a percentage of 

gross drug costs and continue to be 

applied outside of the negotiated price. 

Numerous research studies suggest that 

higher cost-sharing can impede 

beneficiary access to necessary 

medications, which leads to poorer 

health outcomes and higher medical 

care costs for beneficiaries and Medicare 

overall.139 140 141 Moreover, higher cost 

sharing can negatively impact all 

beneficiaries, not just those who are low 

income. While most low-income 

beneficiaries are insulated from this 

cost-shifting due to statutorily limited 

copayments, low-income subsidy (LIS) 

Level 4 beneficiaries pay 15 percent 

coinsurance in the initial coverage limit, 

which in an environment where the 

negotiated price does not include all 

pharmacy price concessions could be 

cost-prohibitive for this population. 

Additionally, those beneficiaries who 

narrowly miss the LIS eligibility criteria 

are particularly vulnerable to such cost 

shifting. Given this, we believe it is 


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important to weigh the effects of current 

Part D policies, and the trade-offs 

between higher cost-sharing versus 

lower plan premiums, on beneficiaries’ 

access to affordable prescription drugs. 

Finally, beneficiaries progress through 

the four phases of the Part D benefit as 

their total gross drug costs and costsharing obligations increase. Because 

both of these values are calculated based 

on the negotiated prices reported at the 

point-of-sale, when pharmacy price 

concessions are not applied at the pointof-sale, the higher negotiated prices 

result in more rapid movement of Part 

D beneficiaries through the Part D 

benefit phases. This, in turn, shifts more 

of the total drug spend into the 

catastrophic phase, where Medicare 

liability is at 80 percent (paid as 

reinsurance) and plan liability is at 15 

percent (which is much lower than the 

75 percent plan liability for drugs in the 

initial phase and generic drugs in the 

coverage gap phase; plan liability with 

respect to ‘‘applicable drugs’’ in the 

coverage gap phase is 5 percent). With 

such cost-shifting to the government 

under current rules, Part D sponsors 

may have weak incentives, and, in some 

cases no incentive, to lower prices at the 

point-of-sale. See the Regulatory Impact 

Analysis in section V.D.8. of this 

proposed rule for a discussion of cost 

impacts to beneficiaries, the 

government, and plan sponsors of 

requiring all pharmacy price 

concessions to be included in the 

negotiated price at the point-of-sale. 

c. Transparency and Competition 

The significant growth in pharmacy 

price concessions in recent years and 

inconsistency in how pharmacy price 

concessions are treated by different Part 

D sponsors (that is, they are applied to 

the point-of-sale price to differing 

degrees or estimated and factored into 

plan bids with varying degrees of 

accuracy) has resulted in plans that are 

not consistent with each other with 

respect to the aggregate share of drug 

costs covered by the plan versus the 

beneficiary. Moreover, the disparate 

ways that Part D sponsors manage 

pharmacy price concessions reduces 

transparency of the point of sale cost to 

the beneficiary and can increase 

beneficiary confusion. For example, a 

beneficiary facing a choice between a 

plan offering a 10 percent coinsurance 

tier versus a plan offering $50 copay for 

a given drug, would have difficulty 

assessing the true cost at the point of 

sale and, as a result, may inadvertently 

select the more costlier option. This 

undermines beneficiaries’ ability to 

make meaningful price comparisons and 

efficient choices when considering the 

combined cost sharing and premiums 

plans offer when choosing a plan. 

Second, if a sponsor’s bid is based on 

an estimate of net plan liability that is 

lowered because the sponsor has been 

applying pharmacy price concessions as 

DIR at the end of the coverage year 

rather than using them to reduce the 

negotiated price at the point-of-sale, it 

follows that the sponsor may be able to 

submit a lower bid than a competitor 

that applies pharmacy price concessions 

at the point-of-sale. This lower bid 

results in a lower plan premium, which 

could allow the sponsor to capture 

additional market share. The 

competitive advantage accruing to one 

sponsor over another in this scenario 

stems only from a technical difference 

in how plan costs are reported to CMS. 

Therefore, the opportunity for 

differential treatment of pharmacy price 

concessions could result in bids that are 

not comparable and in premiums that 

are not valid indicators of relative plan 

efficiency. 

3. Proposed Changes to the Definition of 

Negotiated Price (§ 423.100) 

As previously discussed, Part D 

sponsors and PBMs have been 

recouping increasing sums from 

network pharmacies after the point-ofsale in the form of pharmacy price 

concessions. We addressed concerns 

about these pharmacy payment 

adjustments when we established the 

existing requirements for negotiated 

price reporting in the May 2014 final 

rule (79 FR 29844). In that rule, we 

amended the definition of ‘‘negotiated 

prices’’ at § 423.100 to require Part D 

sponsors to include in the negotiated 

price at the point-of-sale all pharmacy 

price concessions and incentive 

payments to pharmacies—with an 

exception, intended to be narrow, that 

allowed the exclusion of contingent 

pharmacy payment adjustments that 

cannot reasonably be determined at the 

point-of-sale (the reasonably determined 

exception). However, when we 

formulated these requirements in 2014, 

the most recent year for which DIR data 

was available was 2012, and we did not 

anticipate the growth of performancebased pharmacy payment arrangements 

that we have observed in subsequent 

years. 

We now understand that the 

reasonably determined exception we 

currently allow applies more broadly 

than we had initially envisioned 

because of the shift by Part D sponsors 

and their PBMs towards contingent 

pharmacy payment arrangements. As 

suggested by numerous stakeholders in 

response to the Request for Information 

in the November 2017 proposed rule (82 

FR 56419 through 56428), nearly all 

performance-based pharmacy payment 

adjustments may be excluded from the 

negotiated price on the grounds that 

they cannot reasonably be determined at 

the point-of-sale. Specifically, several 

stakeholders have suggested to us that 

sponsors apply the reasonably 

determined exception to all 

performance-based pharmacy payment 

adjustments. These stakeholders assert 

that the amount of these adjustments, by 

definition, is contingent upon 

performance measured over a period of 

time that extends beyond the point-ofsale and, thus, cannot be known in full 

at the point-of-sale. Therefore, 

performance-based pharmacy payment 

adjustments cannot ‘‘reasonably be 

determined’’ at the point-of-sale as they 

cannot be known in full at the point-ofsale. These assertions are supported by 

the information plan sponsors report to 

CMS as part of the annual DIR reports. 

As a result, the reasonably determined 

exception prevents the current policy 

from having the intended effect on price 

transparency, consistency (by reducing 

differential reporting of pharmacy 

payment adjustments by sponsors), and 

beneficiary costs. 

Given the predominance of the use of 

performance-contingent pharmacy 

payment arrangements by plan 

sponsors, we do not believe that the 

existing requirement that pharmacy 

price concessions be included in the 

negotiated price can be implemented in 

a manner that achieves the goals 

previously discussed: Meaningful price 

transparency, consistent application of 

all pharmacy payment concessions by 

all Part D sponsors, and preventing costshifting to beneficiaries and taxpayers. 

Therefore, to establish a requirement 

that accomplishes these goals while 

better reflecting current pharmacy 

payment arrangements, we propose to 

delete the existing definition of the term 

‘‘negotiated prices’’ at § 423.100 and add 

a definition of the term ‘‘negotiated 

price’’ at § 423.100 to mean the lowest 

amount a pharmacy could receive as 

reimbursement for a covered Part D drug 

under its contract with the Part D 

sponsor or the sponsor’s intermediary 

(that is, the amount the pharmacy 

would receive net of the maximum 

possible reduction that could result 

from any contingent pharmacy payment 

arrangement). Specifically, as noted 

previously, we propose to delete the 

current definition of ‘‘negotiated prices’’ 

(in the plural) and to add a new 

definition of ‘‘negotiated price’’ (in the 

singular) in order to make clear that a 

negotiated price can be set for each 

covered Part D drug, and the amount of 


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pharmacy price concessions may differ 

on a drug-by-drug basis. Our proposed 

definition of negotiated price would 

specify that the negotiated price for a 

covered Part D drug must include all 

pharmacy price concessions and any 

dispensing fees, and exclude additional 

contingent amounts (such as incentive 

fees) if these amounts increase prices. 

Under our proposal, we would not 

change Part D sponsors’ ability to passthrough other, non-pharmacy price 

concessions and other direct or indirect 

remuneration amounts (for example, 

legal settlement amounts and risksharing adjustments) to enrollees at the 

point-of-sale. These proposed 

provisions are discussed in the 

following sections. 

Requiring that all pharmacy price 

concessions be included in the 

negotiated price, as proposed, will lead 

to more accurate comparability of drug 

prices, Part D bid pricing, and plan 

premiums. This increased level of 

accuracy should center the beneficiary 

by allowing them to better compare 

between plans’ cost sharing and 

premiums, so that beneficiaries are able 

to identify the plan that best meets their 

individual needs. Moreover, when 

negotiated prices and plan premiums 

more accurately reflect relative plan 

efficiencies, there would not be unfair 

competitive advantages accruing to one 

sponsor over another based on a 

technical difference in how costs are 

reported. In short, because Part D is a 

market-based approach to delivering 

prescription drug benefits, and relies on 

healthy market competition, we believe 

the proposed changes to cost reporting 

could make the Part D market more 

competitive and efficient by allowing 

for a more consistent, accurate, ‘‘apples 

to apples’’ comparison of prices in the 

market. 

a. All Pharmacy Price Concessions 

In this proposed rule, we propose to 

adopt a new definition of ‘‘negotiated 

price’’ at § 423.100 that would include 

all pharmacy price concessions received 

by the plan sponsor for a covered Part 

D drug. The proposed definition would 

omit the reasonably determined 

exception, meaning that all price 

concessions from network pharmacies, 

negotiated by Part D sponsors and their 

contracted PBMs, would have to be 

reflected in the negotiated price that is 

made available at the point-of-sale and 

reported to CMS on a PDE record, even 

when such price concessions are 

contingent upon performance by the 

pharmacy. 

Section 1860D–2(d)(1)(B) of the Act 

requires that negotiated prices ‘‘shall 

take into account negotiated price 

concessions, such as discounts, direct or 

indirect subsidies, rebates, and direct or 

indirect remunerations, for covered part 

D drugs . . . .’’ We have previously 

interpreted this language to mean that 

some, but not all, price concessions 

must be applied to the negotiated price 

(see, for example, 70 FR 4244 and 74 FR 

1511). Although we continue to believe 

that the prior interpretation of ‘‘take into 

account’’ was permissible, we believe 

that our initial interpretation may have 

been overly definitive with respect to 

the intended meaning of ‘‘take into 

account.’’ We believe that a proper 

reading of the statute supports requiring 

that all pharmacy price concessions be 

applied at the point-of-sale. As 

proposed, requiring that all pharmacy 

price concessions be applied at the 

point-of-sale would ensure that 

negotiated prices ‘‘take into account’’ at 

least some price concessions and, 

therefore, would be consistent with and 

permitted by the plain language of 

section 1860D–2(d)(1)(B) of the Act. 

The regulatory change we propose to 

adopt changes the reporting 

requirements for Part D sponsors; it does 

not affect what sponsors may arrange in 

their contracts with network pharmacies 

regarding payment adjustments after the 

point-of-sale. We clarify this point 

because in comments on the solicitation 

in the November 2018 proposed rule (83 

FR 62179) regarding a potential policy 

approach under which all pharmacy 

price concessions received by a plan 

sponsor for a covered Part D drug would 

be included in the negotiated price at 

the point-of-sale, some commenters 

posited that CMS requiring that all 

pharmacy price concessions be passed 

through at the point-of-sale, as opposed 

to being reported as DIR, would violate 

the statutory ‘‘non-interference clause,’’ 

at section 1860D–11(i) of the Act, which 

specifies that ‘‘the Secretary . . . may 

not interfere with the negotiations 

between drug manufacturers and 

pharmacies and PDP sponsors.’’ We 

disagree. Mandating that all pharmacy 

price concessions be included in the 

negotiated price at the point-of-sale does 

not interfere with the negotiations 

between plan sponsors, their PBMs, and 

pharmacies. Contracts between sponsors 

or their PBMs and pharmacies can 

continue to provide for performancebased payment adjustments. The 

requirement that pharmacy price 

concessions be passed through to the 

point-of-sale price only directly impacts 

the price that is used to determine 

beneficiary cost-sharing and the 

information that is populated and 

reported on the PDE record, but it does 

not dictate the amount that is ultimately 

paid to the pharmacy or the timing of 

payments and adjustments. 

b. Lowest Possible Reimbursement 

To effectively capture all pharmacy 

price concessions at the point-of-sale 

consistently across sponsors, we 

propose to require that the negotiated 

price reflect the lowest possible 

reimbursement that a network pharmacy 

could receive from a particular Part D 

sponsor for a covered Part D drug. 

Under this approach, the price reported 

at the point-of-sale would need to 

include all price concessions that could 

potentially flow from network 

pharmacies, as well as any dispensing 

fees, but exclude any additional 

contingent amounts that could flow to 

network pharmacies and thus increase 

prices over the lowest possible 

reimbursement level, such as incentive 

fees. That is, if a performance-based 

payment arrangement exists between a 

sponsor and a network pharmacy, the 

point-of-sale price of a drug reported to 

CMS would need to equal the final 

reimbursement that the network 

pharmacy would receive for that drug 

under the arrangement if the pharmacy’s 

performance score were the lowest 

possible. If a pharmacy is ultimately 

paid an amount above the lowest 

possible reimbursement (such as in 

situations where a pharmacy’s 

performance under a performance-based 

arrangement triggers a bonus payment 

or a smaller penalty than that assessed 

for the lowest level of performance), the 

difference between the negotiated price 

reported to CMS on the PDE record and 

the final payment to the pharmacy 

would need to be reported as negative 

DIR as part of the annual report on DIR 

following the end of the year. For an 

illustration of how negotiated prices 

would be reported under such an 

approach, see the lowest cost 

reimbursement example provided later 

in this section of this proposed rule. 

By requiring that sponsors assume the 

lowest possible pharmacy performance 

when reporting the negotiated price, we 

would be prescribing a standardized 

way for Part D sponsors to treat the 

unknown (final pharmacy performance) 

at the point-of-sale under a 

performance-based payment 

arrangement, which many Part D 

sponsors and PBMs have identified as 

the most substantial operational barrier 

to including such concessions at the 

point-of-sale. We believe, based on the 

overwhelming support received from 

commenters on the Request for 

Information in the November 2017 

proposed rule and the potential change 

to the definition of negotiated price 

discussed in the November 2018 


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proposed rule, that this is the best 

approach to achieve our goals, as noted 

previously, of—(1) consistency 

(standardized reporting of negotiated 

prices and DIR); (2) preventing costshifting to beneficiaries; and (3) price 

transparency for beneficiaries, the 

government, and other stakeholders. 

Regarding consistency in reporting, 

we believe that the proposed 

requirement that the negotiated price 

reflect the lowest possible 

reimbursement that a network pharmacy 

could receive from a particular Part D 

sponsor for a covered Part D drug 

would, if implemented, provide a 

clearer reporting standard for Part D 

sponsors relative to the requirements in 

place today, which require Part D 

sponsors to assess which types of 

pharmacy payment adjustments fall 

under the reasonably determined 

exception. We expect this increased 

clarity would reduce sponsor burden in 

terms of the resources necessary to 

ensure compliance. Finally, we believe 

that requiring all pharmacy price 

concessions be included in the 

negotiated price at the point-of-sale 

would improve the quality of drug 

pricing information available across Part 

D plans and thus improve market 

competition and cost efficiency under 

Part D. 

Requiring the negotiated price to 

reflect the lowest possible pharmacy 

reimbursement as proposed would 

move the negotiated price closer to the 

final reimbursement for most network 

pharmacies under current pharmacy 

payment arrangements, and thus closer 

to the actual cost of the drug for the Part 

D sponsor. We have learned from the 

DIR data reported to CMS and feedback 

from numerous stakeholders that 

pharmacies rarely receive an incentive 

payment above the original 

reimbursement rate for a covered claim. 

We gather that performance under most 

arrangements dictates only the 

magnitude of the amount by which the 

original reimbursement is reduced, and 

most pharmacies do not achieve 

performance scores high enough to 

qualify for a substantial, if any, 

reduction in penalties. 

Finally, we propose that all 

contingent incentive payments (that is, 

an amount that is paid to the pharmacy 

instead of a price concession from the 

pharmacy) be excluded from the 

negotiated price. As noted previously, 

we understand that such incentive 

payments are rare. Furthermore, even in 

those instances in which a pharmacy 

may qualify for such a payment, 

including the amount of any contingent 

incentive payments to pharmacies in the 

negotiated price would make drug 

prices appear higher at a ‘‘high 

performing’’ pharmacy, which receives 

an incentive payment, than at a ‘‘poor 

performing’’ pharmacy, which is 

assessed a penalty, and would also 

reduce price transparency. This pricing 

differential could create a perverse 

incentive for beneficiaries to choose a 

‘‘lower performing’’ pharmacy for the 

advantage of a lower price. 

Additionally, Part D sponsors and their 

intermediaries previously asserted in 

public comments on the 2017 and 2018 

rules that network pharmacies lose 

motivation to improve performance 

when all performance-based 

adjustments are required to be reported 

up-front. Revising the negotiated price 

definition as proposed would mitigate 

this concern by allowing sponsors and 

their intermediaries to motivate network 

pharmacies to improve their 

performance with the promise of future 

incentive payments that would increase 

pharmacy reimbursement from the level 

of the lowest possible reimbursement 

per claim. Further, we emphasize that 

the proposed changes would not require 

pharmacies to be paid in a certain way; 

rather we would be requiring 

standardized reporting to CMS of drug 

prices at the point-of-sale. 

c. Lowest Possible Reimbursement 

Example 

To illustrate how Part D sponsors and 

their intermediaries would report costs 

under our proposal, we provide the 

following example. Suppose that under 

a performance-based payment 

arrangement between a Part D sponsor 

and its network pharmacy, the sponsor 

will implement one of three scenarios: 

(1) Recoup 5 percent of its total Part Drelated payments to the pharmacy at the 

end of the contract year for the 

pharmacy’s failure to meet performance 

standards; (2) recoup no payments for 

average performance; or (3) provide a 

bonus equal to 1 percent of total 

payments to the pharmacy for high 

performance. For a drug that the 

sponsor has agreed to pay the pharmacy 

$100 at the point-of-sale, the pharmacy’s 

final reimbursement under this 

arrangement would be: (1) $95 for poor 

performance; (2) $100 for average 

performance; or (3) $101 for high 

performance. Under the current 

definition of negotiated prices, the 

reported negotiated price is likely to be 

$100, given the reasonably determined 

exception for contingent pharmacy 

payment adjustments. However, under 

the proposed definition, for all three 

performance scenarios, the negotiated 

price reported to CMS on the PDE 

record at the point-of-sale for this drug 

would be $95, or the lowest 

reimbursement possible under the 

arrangement. Thus, if a plan enrollee 

were required to pay 25 percent 

coinsurance for this drug, then the 

enrollee’s costs under all scenarios 

would be 25 percent of $95, or $23.75, 

which is less than the $25 the enrollee 

would pay today (when the negotiated 

price is likely to be reported as $100). 

Finally, any difference between the 

reported negotiated price and the 

pharmacy’s final reimbursement for this 

drug would be reported as DIR at the 

end of the coverage year. Under this 

requirement, the sponsor would report 

$0 as DIR under the poor performance 

scenario ($95 minus $95), ¥$5 as DIR 

under the average performance scenario 

($95 minus $100), and ¥$6 as DIR 

under the high-performance scenario 

($95 minus $101), for every covered 

claim for this drug purchased at this 

pharmacy. 

d. Additional Considerations 

In order to implement the proposed 

change, we would leverage existing 

reporting mechanisms to confirm that 

sponsors are appropriately applying 

pharmacy price concessions at the 

point-of-sale. Specifically, we would 

likely use the estimated rebates at pointof-sale field on the PDE record to also 

collect the amount of point-of-sale 

pharmacy price concessions. We also 

would likely use fields on the Summary 

and Detailed DIR Reports to collect final 

pharmacy price concession data at the 

plan and national drug code (NDC) 

levels. Differences between the amounts 

applied at the point-of-sale and amounts 

actually received, therefore, would 

become apparent when comparing the 

data collected through those means at 

the end of the coverage year. To 

implement the proposed change at the 

point-of-sale, Part D sponsors and their 

PBMs would load revised drug pricing 

tables that reflect the lowest possible 

reimbursement into their claims 

processing systems that interface with 

contracted pharmacies. 

e. Negotiated Prices of Applicable Drugs 

in the Coverage Gap 

The negotiated price of an applicable 

drug is also the basis by which 

manufacturer liability for discounts in 

the coverage gap is determined. Section 

1860D–14A(g)(6) of the Act provides 

that, for purposes of the coverage gap 

discount program, the term ‘‘negotiated 

price’’ has the meaning it was given in 

§ 423.100 as in effect as of the 

enactment of the Patient Protection and 

Affordable Care Act (PPACA), except 

that it excludes any dispensing fee for 

the applicable drug. Under that 

definition, which is codified in the 


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coverage gap discount program 

regulations at § 423.2305, the negotiated 

price is the amount the Part D sponsor 

(or its intermediary) and the network 

dispensing pharmacy (or other network 

dispensing provider) have negotiated as 

the amount such network entity will 

receive, in total, for a covered Part D 

drug, reduced by those discounts, direct 

or indirect subsidies, rebates, other 

price concessions, and direct or indirect 

remuneration that the Part D sponsor 

has elected to pass through to Part D 

enrollees at the point-of-sale, and net of 

any dispensing fee or vaccine 

administration fee for the applicable 

drug. 

In the November 2018 proposed rule 

(83 FR 62179), we solicited comment on 

whether to require sponsors to include 

pharmacy price concessions in the 

negotiated price in the coverage gap. 

Under such an approach, the negotiated 

price of the applicable drug for purposes 

of determining manufacturer coverage 

gap discounts, would include all 

pharmacy price concessions as in all 

other phases of the Part D benefit under 

the proposed revision to the definition 

of negotiated price at § 423.100. Because 

the statutory definition of negotiated 

price for purposes of the coverage gap 

discount program references price 

concessions that the Part D sponsor has 

elected to pass through at the point-ofsale, we explained that we did not 

believe it would be appropriate to 

require sponsors to include all price 

concessions in the negotiated price for 

purposes of the coverage gap discount 

program. However, we indicated our 

belief that there would be authority 

under the statute to require sponsors to 

include all pharmacy price concessions 

in the negotiated price for purposes of 

the coverage gap discount program 

because such concessions necessarily 

affect the amount that the pharmacy 

receives in total for a particular 

applicable drug. We also noted that 

pharmacy price concessions account for 

only a share of all price concessions a 

sponsor might receive. Thus, even if a 

plan sponsor were required to include 

all pharmacy price concessions in the 

negotiated price of an applicable drug at 

the point-of-sale, the plan sponsor must 

still make an election as to how much 

of the overall price concessions 

(including non-pharmacy price 

concessions) it receives will be passed 

through at the point-of-sale. 

In the November 2018 proposed rule, 

we also sought comment on an 

alternative approach under which Part 

D sponsors would determine how much 

of pharmacy price concessions to pass 

through at the point-of-sale for 

applicable drugs in the coverage gap, 

and beneficiary, plan, and manufacturer 

liability would be calculated using this 

alternate definition of negotiated price. 

The majority of the comments that 

addressed the possible inclusion of 

pharmacy price concessions in the 

negotiated price of applicable drugs in 

the coverage gap expressed support for 

applying the same definition of 

negotiated price in all phases of the Part 

D benefit, as they believed maintaining 

the same definition for all phases of the 

benefit would provide more 

transparency and consistency at the 

point-of-sale, minimize beneficiary 

confusion, and avoid the operational 

challenges of having two different rules 

for applying pharmacy price 

concessions to applicable drugs in the 

coverage gap versus other phases of the 

Part D benefit. Some commenters 

disagreed with our assessment that CMS 

has the legal authority to require that all 

pharmacy price concessions be included 

in the negotiated price of applicable 

drugs in the coverage gap, as they felt 

this was at odds with the reference to 

‘‘price concessions that the Part D 

sponsor had elected to pass-through to 

Part D enrollees at the point-of-sale’’ in 

the regulatory definition of ‘‘negotiated 

price’’ at § 423.100 as in effect when the 

PPACA was enacted. Commenters noted 

that if CMS were to adopt the alternative 

approach under which sponsors would 

be required to include pharmacy price 

concessions in the negotiated price for 

applicable drugs in all phases of the Part 

D benefit other than the coverage gap, it 

would be necessary for CMS to issue 

very specific guidance explaining how 

to operationalize different definitions of 

‘‘negotiated price’’ for the coverage gap 

versus the non-coverage gap phases of 

the Part D benefit. 

Although we continue to believe that 

section 1860D–14A(g)(6) of the Act 

would not preclude us from revising the 

definition of negotiated price at 

§ 423.2305 to require Part D sponsors to 

apply all pharmacy price concessions 

for applicable drugs at the point-of-sale, 

we are not proposing to adopt such a 

mandate at this time. As demonstrated 

in the Regulatory Impact Analysis of 

this proposed rule (sections IV.D.8. and 

IV.E.2.), allowing plans flexibility with 

respect to the treatment of pharmacy 

price concessions for applicable drugs 

in the coverage gap will moderate 

increases to beneficiary premiums and 

government costs. 

In summary, under our proposed 

approach, for non-applicable drugs in 

the coverage gap, and during the noncoverage gap phases of the Part D 

benefit for applicable drugs, claims 

would be adjudicated using the 

negotiated price determined using the 

lowest possible reimbursement to the 

pharmacy. In contrast, for applicable 

drugs during the coverage gap, plans 

would have the flexibility to determine 

how much of the pharmacy price 

concessions to pass through at the 

point-of-sale, and beneficiary, plan, and 

manufacturer liability in the coverage 

gap would be calculated using this 

alternate negotiated price. Based on 

comments we received on the November 

2018 proposed rule, we anticipate that 

if CMS adopts the proposed approach, 

we will need to provide technical or 

operational guidance to Part D sponsors 

regarding the calculation of the gap 

discount, PDE reporting, and straddle 

claim processing. We solicit comment 

on whether there are other topics CMS 

will need to address in new guidance if 

we finalize the proposed approach. We 

also request that commenters with 

concerns about the feasibility of 

sponsors having two different rules for 

applying pharmacy price concessions to 

applicable drugs in the coverage gap 

versus other phases of the Part D benefit 

provide detailed explanations of their 

concerns, with specificity and 

examples. 

In addition, we solicit comment on 

whether, as an alternative to our 

proposed approach, we should require 

that Part D sponsors apply pharmacy 

price concessions to the negotiated price 

of applicable drugs in the coverage gap. 

As noted above, we believe that such a 

requirement would also be consistent 

with section 1860D–14A(g)(6) of the 

Act. 

4. Pharmacy Administrative Service 

Fees 

As noted in the November 2018 

proposed rule (83 FR 62179 and 62180), 

we are aware that some sponsors and 

their intermediaries believe certain fees 

charged to network pharmacies—such 

as ‘‘network access fees,’’ 

‘‘administrative fees,’’ ‘‘technical fees,’’ 

and ‘‘service fees’’—represent valid 

administrative costs and, thus, do not 

believe such fees should be treated as 

price concessions. However, pharmacies 

and pharmacy organizations report that 

they do not receive anything of value for 

such administrative service fees other 

than the ability to participate in the Part 

D plan’s pharmacy network. 

Thus, we restate the conclusion we 

provided in the May 2014 final rule (79 

FR 29877): When pharmacy 

administrative service fees take the form 

of deductions from payments to 

pharmacies for Part D drugs dispensed 

to Part D beneficiaries, they clearly 

represent charges that offset the 

sponsor’s or its intermediary’s operating 

costs under Part D. We believe that if 


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the sponsor or its intermediary 

contracting organization wishes to be 

compensated for these services and have 

those costs treated as administrative 

costs, such costs should be accounted 

for in the administrative costs of the 

Part D bid. If instead these costs are 

deducted from payments made to 

pharmacies for purchases of Part D 

drugs, such costs are price concessions 

and must be treated as such in Part D 

cost reporting. This is the case 

regardless of whether the deductions are 

calculated on a per-claim basis. 

The regulations governing the Part D 

program require that price concessions 

be fully disclosed. If not reported at all, 

these amounts would result in another 

form of so-called PBM spread in which 

inflated prices contain a portion of costs 

that should be treated as administrative 

costs. That is, even if these amounts did 

represent costs for services rendered by 

an intermediary organization for the 

sponsor, then these costs would be 

administrative service costs, not drug 

costs, and should be treated as such. 

Failure to report these costs as 

administrative costs in the bid would 

allow a sponsor to misrepresent the 

actual costs necessary to provide the 

benefit and thus to submit a lower bid 

than necessary to reflect its revenue 

requirements (as required at section 

1860D–11(e)(2)(C) of the Act and at 

§ 423.272(b)(1) of the regulations) 

relative to another sponsor that 

accurately reports administrative costs 

consistent with CMS instructions. 

5. Defining Price Concession (§ 423.100) 

Section 1860D–2(d)(1)(B) of the Act 

stipulates that the negotiated price shall 

take into account negotiated price 

concessions, such as discounts, direct or 

indirect subsidies, rebates, and direct or 

indirect remunerations, for covered Part 

D drugs. Section 1860D–2(d)(2) of the 

Act further requires that Part D sponsors 

disclose to CMS the aggregate negotiated 

price concessions by manufacturers that 

are passed through in the form of lower 

subsidies, lower monthly beneficiary 

premiums, and lower prices through 

pharmacies and other dispensers. While 

‘‘price concession’’ is a term important 

to the adjudication of the Part D 

program, it has not yet been defined in 

the Part D statute or in Part D 

regulations and subregulatory guidance. 

Therefore, to avoid confusion among 

Part D sponsors and other stakeholders 

of the Part D program resulting from 

inconsistent terminology, we propose to 

add a regulatory definition for the term 

‘‘price concession’’ at § 423.100 that is 

consistent with how that term is used in 

paragraphs (d)(1)(B) and (d)(2) of section 

1860D–2 of the Act. 

In considering how to define price 

concession, we believe it is important to 

define the term in a broadly applicable 

manner, while maintaining clarity. 

Accordingly, we propose to define price 

concession to include all forms of 

discounts, direct or indirect subsidies, 

or rebates that serve to reduce the costs 

incurred under Part D plans by Part D 

sponsors. The proposed definition 

would note that price concessions 

include but are not limited to discounts, 

chargebacks, rebates, cash discounts, 

free goods contingent on a purchase 

agreement, coupons, free or reducedprice services, and goods in kind. 

We believe the proposed approach 

would be consistent with the statute, 

support consistent accounting by Part D 

sponsors of amounts that are price 

concessions, and ensure that certain 

forms of discounts are not 

inappropriately excluded from being 

considered price concessions. An 

alternative would be not to define 

‘‘price concession’’ at all. However, this 

option would not support consistent 

accounting of amounts that are price 

concessions among Part D sponsors, 

which we believe is particularly 

important in light of the proposed 

change to the definition of negotiated 

price. 

We note that adopting the proposed 

definition of price concession would not 

affect the way in which price 

concessions must be accounted for by 

Part D sponsors in calculating costs 

under a Part D plan. Defining the term 

‘‘price concession’’ as proposed would 

not require the renegotiation of any 

contractual arrangements between a 

sponsor and its contracted entities. 

Therefore, the proposed definition of 

price concession has no impact under 

the federal requirements for Regulatory 

Impact Analyses. 

III. Requests for Information 

A. Request for Information: Prior 

Authorization for Hospital Transfers to 

Post-Acute Care Settings During a 

Public Health Emergency 

We are committed to ensuring that 

hospitals, post-acute care facilities 

(including long-term care hospitals 

(LTCHs), inpatient rehabilitation 

facilities (IRFs), and skilled nursing 

facilities (SNFs)), physicians, and MA 

organizations have the tools necessary 

to provide access to appropriate care to 

patients without unnecessary delay 

during a public health emergency (PHE). 

Throughout 2020 during the 

Coronavirus Disease 2019 Public Health 

Emergency (COVID–19 PHE), we 

consistently issued guidance to address 

permissible flexibilities for MA 

organizations as part of an ongoing 

effort to help MA enrollees, and the 

health care systems that serve them, 

avoid delays and disruptions in care. 

We recognize that any delays or 

disruptions in care that might transpire 

within the MA program could have a 

ripple effect and also negatively impact 

the timely provision of appropriate care 

to patients covered under payer systems 

external to MA (for example, employersponsored insurance). Additionally, we 

recognize the positive impact that 

payers in general can have through the 

adoption of flexibilities that support 

hospitals’ ability to effectively manage 

resources when a hospital experiences a 

substantial uptick in hospitalizations. 

As a result of the guidance and 

clarification that we issued throughout 

2020, a large proportion of MA 

organizations opted to relax or 

completely waive their prior 

authorization requirements with respect 

to patient transfers between hospitals 

and post-acute care facilities during 

plan year 2020, consistent with our 

guidance encouraging flexibility to 

ensure access to care. However, as the 

PHE continued into 2021, many MA 

organizations reinstated prior 

authorization requirements, which some 

stakeholders reported contributed to 

capacity issues and delays in care 

within hospital acute care settings. For 

example, one stakeholder reported that 

only 5 percent of intensive care unit 

(ICU) beds were open in their state 

during the month of August 2021, and 

stated that the scarcity of available beds 

could be mitigated if more MA 

organizations reinstated waivers on 

prior authorization requirements for 

patient transfers. Another stakeholder 

reported that it was not uncommon for 

a hospital to wait up to 3 business days 

to receive a decision from an MA 

organization for a request for a patient 

transfer—a delay which prevented 

hospitals from moving patients to the 

next appropriate care setting in a timely 

manner and forced the unnecessary use 

of acute-care beds. The same 

stakeholder reported that a high rate of 

initial denials from MA organizations 

also contributed to delays in patient 

transfer. We acknowledge our 

responsibility to ensure that our 

programs’ policies do not hinder access 

to care, especially during a public 

health emergency. Therefore, in 

response to these reports and the uptick 

in COVID–19 hospitalizations across the 

country, we are seeking information 

from stakeholders in order to assess the 

impact of MA organizations’ use of prior 

authorization or other utilization 

management criteria during certain 


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PHEs. Through this request for 

information (RFI), CMS seeks additional 

information from all affected 

stakeholders, especially MA 

organizations, hospitals, post-acute care 

facilities, professional associations, 

states, and patient advocacy groups 

regarding the effects of both the 

relaxation of and reinstatement of prior 

authorizations on patient transfers 

during a PHE. 

We remain mindful of the impact the 

MA program’s policies have on the 

health care system as a whole, and 

strongly encourage MA organizations to 

continuously re-assess the need for 

flexibilities in their utilization 

management practices. We note that 

with regard to prior authorization and 

other utilization management practices, 

we permit MA organizations the choice 

to uniformly waive or relax plan prior 

authorization requirements at any time 

in order to facilitate access to care, even 

in the absence of a disaster, declaration 

of a state of emergency, or PHE. 

Generally, MA organizations are 

required to ensure that enrollees are 

notified of changes in plan rules of this 

type in accordance with § 422.111(d); 

however, when the provisions under 

§ 422.100(m)(1) go into effect during a 

disaster or emergency as they did during 

the COVID–19 PHE, MA organizations 

are permitted to immediately implement 

plan changes that benefit enrollees, 

including a waiver of prior 

authorization requirements, without the 

30-day notification requirement at 

§ 422.111(d)(3). 

We invite the public to submit 

comments for consideration as CMS 

assesses the impact of MA 

organizations’ prior authorization 

requirements for patient transfer on a 

hospital’s ability to effectively manage 

resources and provide appropriate and 

timely care during a PHE. The primary 

objective of this RFI is for us to glean 

information from stakeholders about the 

effects of MA organizations’ prior 

authorization requirements for patient 

transfers on a hospital’s ability to 

furnish the appropriate care to patients 

in a timely manner in the context of a 

PHE. This is a general RFI related to 

prior authorizations on patient transfers 

during any PHE. While many 

commenters may choose to provide 

information in the context of the 

COVID–19 PHE, we welcome and 

encourage commenters to provide 

information in the context of any PHE. 

Responses to this RFI may include, 

but are not limited to the following: 

• The overall impact of both the 

relaxation and reinstatement of prior 

authorization requirements for patient 

transfer by MA organizations on the 

provision of appropriate patient care in 

hospital systems. 

• The overall impact of both the 

relaxation and reinstatement of prior 

authorization requirements for patient 

transfer on MA organizations. 

• Wait times for receiving a response 

from an MA organization about the 

authorization of a patient transfer. 

• Information pertaining to industry 

guidelines that are used to inform prior 

authorization, including the extent to 

which such guidelines are evidencebased, the degree of transparency that 

exists for such guidelines, and the 

extent to which such guidelines are 

standardized. 

• With respect to MA organizations, 

the denial rates and associated burden, 

including rates at which denials are 

upheld and overturned, for prior 

authorizations for patient transfer from 

hospitals to post-acute care facilities. 

• Any consequences of delayed 

patient transfer from hospitals to postacute care facilities. 

• Recommendations for how CMS 

can accommodate hospital systems that 

face capacity issues through policy 

changes in the MA program. 

• Examples of any contrast in a state’s 

policies for payers (for example, 

Medicaid managed care) with respect to 

prior authorizations for patient transfer 

that do not pertain to MA organizations, 

and the effects of such policies on 

hospitals systems’ ability to effectively 

manage resources. 

We request that all respondents 

provide complete, clear, and concise 

comments that include, where 

practicable, data and specific examples. 

B. Request for Information: Building 

Behavioral Health Specialties Within 

MA Networks 

CMS is dedicated to ensuring that MA 

beneficiaries have access to provider 

networks sufficient to provide covered 

services in accordance with our 

standards described in section 

1852(d)(1) of the Act and in 

§§ 422.112(a) and 422.114(a)(1). 

Accordingly, CMS strengthened 

network adequacy rules for MA plans by 

codifying our network adequacy 

standards at § 422.116 through the June 

2020 final rule. 

Currently, we require MA 

organizations to submit data for 

behavioral health providers, specifically 

psychiatry (provider-specialty type) and 

inpatient psychiatric facility services 

(facility-specialty type), using the 

Health Service Delivery (HSD) tables. 

The HSD tables are submitted to CMS 

during an organization’s formal network 

review and are utilized to demonstrate 

compliance with network adequacy 

standards. The HSD tables must list 

every provider and facility with a fully 

executed contract in the organization’s 

network, and are uploaded to the Health 

Plan Management System (HPMS) for an 

automated review. MA plans must have 

sufficient providers with a certain time 

and distance of 85 or 90 percent of 

beneficiaries residing the plan’s service 

area, depending on the type of counties 

in the service area, under § 422.116. We 

also encouraged plans to provide more 

choices for enrollees to access care 

using telehealth for certain specialties, 

including psychiatry, through our 

policy under § 422.116(d)(5), while 

maintaining enrollees’ right to access in 

person care for these specialty types. To 

encourage and account for telehealth 

providers in contracted networks, 

§ 422.116(d)(5) provides MA plans a 10- 

percentage point credit towards the 

percentage of beneficiaries that reside 

within published time and distance 

standards when the plan includes in its 

network telehealth providers for certain 

specialties. However, despite requiring a 

minimum number of behavioral health 

providers and encouraging use of 

telehealth providers, CMS understands 

that MA organizations may experience 

difficulties when building an adequate 

network of behavioral health providers. 

In order to increase our understanding 

of issues related to access to behavioral 

health specialties for enrollees in MA 

plans, we are interested in comments 

from industry stakeholders related to 

the challenges MA organizations face 

when building an adequate network of 

behavioral health providers for MA 

plans. Therefore, we invite comment 

from interested stakeholders regarding 

these issues. Comments for this RFI can 

include, but are not limited to: 

• Challenges related to a lack of 

behavioral health provider supply in 

certain geographic regions for 

beneficiaries, health plans, and other 

stakeholders; 

• Challenges related to accessing 

behavioral health providers for enrollees 

in MA health plans, including wait 

times for appointments; 

• The extent to which a behavioral 

health network affects a beneficiary’s 

decision to enroll in an MA health plan; 

• Challenges for behavioral health 

providers to establish contracts with 

MA health plans; 

• Providers’ inability or 

unwillingness to contract with MA 

plans, including issues related to 

provider reimbursement; 

• Opportunities to expand services 

for the treatment of opioid addiction 

and substance use disorders; 

• The overall impact of potential 

CMS policy changes as it relates to 


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network adequacy and behavioral health 

in MA health plans, including in rural 

areas that may have provider shortages; 

• Suggestions from industry 

stakeholders on how to address issues 

with building adequate behavioral 

health networks within MA health 

plans. 

C. Request for Comment on Data 

Notification Requirements for 

Coordination-Only D–SNPs 

(§ 422.107(d)) 

Section 50311(b) of the BBA of 2018 

amended section 1859(f) of the Act by 

creating a new paragraph (8)(D)(i)(I) to 

require that the Secretary establish 

additional integration requirements for 

D–SNPs’ contracts with State Medicaid 

agencies. In the April 2019 final rule, 

we implemented section 

1859(f)(8)(D)(i)(I) of the Act by 

establishing at § 422.107(d) that any D– 

SNP that is not a FIDE SNP or HIDE 

SNP is subject to an additional 

contracting requirement effective 

January 1, 2021. Under this new 

requirement for the contract that is 

required between the D–SNP and the 

State Medicaid agency, the D–SNP is 

required to notify the State Medicaid 

agency, or individuals or entities 

designated by the State Medicaid 

agency, of hospital and skilled nursing 

facility (SNF) admissions for at least one 

group of high-risk full-benefit dual 

eligible individuals, as determined by 

the State Medicaid agency. 

These data notification requirements 

have only been in effect for a few 

months, all of which coincided with the 

COVID–19 public health emergency. 

Through this proposed rule we invite 

MA organizations, States, and other 

stakeholders to submit comments on 

their experience implementing the data 

notification requirements thus far and 

any suggested improvements for CMS 

consideration in future rulemaking. 

D. Collection of Information 

Requirements 

This proposed rule contains several 

requests for information. In accordance 

with the implementing regulations of 

the Paperwork Reduction Act of 1995 

(PRA), specifically 5 CFR 1320.3(h)(4), 

this general solicitation is exempt from 

the PRA. Facts or opinions submitted in 

response to general solicitations of 

comments from the public, published in 

the Federal Register or other 

publications, regardless of the form or 

format thereof, provided that no person 

is required to supply specific 

information pertaining to the 

commenter, other than that necessary 

for self-identification, as a condition of 

the agency’s full consideration, are not 

generally considered information 

collections and therefore not subject to 

the PRA. 

We note that these RFIs are issued 

solely for information and planning 

purposes; they do not constitute a 

Request for Proposals (RFPs), 

applications, proposal abstracts, or 

quotations. These RFIs do not commit 

the U.S. Government to contract for any 

supplies or services or make a grant 

award. Further, we are not seeking 

proposals through these RFIs and will 

not accept unsolicited proposals. 

Respondents are advised that the U.S. 

Government will not pay for any 

information or administrative costs 

incurred in response to these RFIs; all 

costs associated with responding to 

these RFIs will be solely at the 

interested party’s expense. We note that 

not responding to these RFIs does not 

preclude participation in any future 

procurement, if conducted. It is the 

responsibility of the potential 

respondents to monitor these RFI 

announcements for additional 

information pertaining to these requests. 

In addition, we note that we will not 

respond to questions about the policy 

issues raised in these RFIs. 

We will actively consider all input as 

we develop future plans and policies. 

We may or may not choose to contact 

individual respondents. Such 

communications would be for the sole 

purpose of clarifying statements in the 

respondents’ written responses. 

Contractor support personnel may be 

used to review responses to these RFIs. 

Responses to this notice are not offers 

and cannot be accepted by the 

Government to form a binding contract 

or issue a grant. Information obtained as 

a result of these RFIs may be used by the 

Government for program planning on a 

non-attribution basis. Respondents 

should not include any information that 

might be considered proprietary or 

confidential. These RFIs should not be 

construed as a commitment or 

authorization to incur cost for which 

reimbursement would be required or 

sought. All submissions become U.S. 

Government property and will not be 

returned. In addition, we may publicly 

post the public comments received, or a 

summary of those public comments. 

IV. Collection of Information 

Requirements 

Under the Paperwork Reduction Act 

of 1995 (PRA) (44 U.S.C. 3501 et seq.) 

we are required to provide 60-day notice 

in the Federal Register and solicit 

public comment before a ‘‘collection of 

information’’ requirement is submitted 

to the Office of Management and Budget 

(OMB) for review and approval. For the 

purposes of the PRA and this section of 

the preamble, collection of information 

is defined under 5 CFR 1320.3(c) of 

OMB’s implementing regulations. 

In order to fairly evaluate whether an 

information collection should be 

approved by OMB, section 3506(c)(2)(A) 

of the PRA 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. 

We are soliciting public comment on 

each of these issues for the following 

sections of this document that contain 

information collection requirements. 

A. Wage Data 

To derive mean costs, we are using 

data from the most current U.S. Bureau 

of Labor Statistics’ (BLS’s) National 

Occupational Employment and Wage 

Estimates for all salary estimates 

(https://www.bls.gov/oes/current/oes_

nat.htm), which, at the time of drafting 

of this rule, provides May 2020 wages. 

In this regard, Table 4 presents BLS’ 

mean hourly wage along with our 

estimated cost of fringe benefits and 

overhead (calculated at 100 percent of 

salary), and our adjusted hourly wage. 

TABLE 4—NATIONAL OCCUPATIONAL EMPLOYMENT AND WAGE ESTIMATES

Occupation title Occupation 

code 

Mean hourly 

wage 

($/hr) 

Fringe benefits 

and overhead 

($/hr) 

Adjusted 

hourly wage 

($/hr) 

Business Operation Specialists, All Other ....................................................... 13–1198 40.53 40.53 81.06 

Compliance Officers ........................................................................................ 13–1041 36.35 36.35 72.70 

Computer and Information Systems Managers ............................................... 11–3021 77.76 77.76 155.52 


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TABLE 4—NATIONAL OCCUPATIONAL EMPLOYMENT AND WAGE ESTIMATES—Continued 

Occupation title Occupation 

code 

Mean hourly 

wage 

($/hr) 

Fringe benefits 

and overhead 

($/hr) 

Adjusted 

hourly wage 

($/hr) 

Lawyer ............................................................................................................. 23–1011 71.59 71.59 143.18 

Software and Web Developers ........................................................................ 15–1250 52.86 52.86 105.72 

As indicated, we are adjusting our 

employee hourly wage estimates by a 

factor of 100 percent to account for 

fringe benefits and overhead costs that 

vary from employer to employer and 

because methods of estimating these 

costs vary widely from study to study. 

We believe that doubling the hourly 

wage to estimate total cost is a 

reasonably accurate estimation method. 

B. Proposed Information Collection 

Requirements (ICRs) 

The following ICRs are listed in the 

order of appearance within section II. of 

this proposed rule. 

1. ICRs Regarding Enrollee Participation 

in Plan Governance (§ 422.107) 

The proposed requirement and 

burden for D–SNPs to create one or 

more enrollee advisory committees will 

be submitted to OMB for review under 

control number 0938–TBD (CMS– 

10799). At this time, the control number 

has yet to be determined, but it will be 

assigned by OMB upon their clearance 

of this proposed rule’s collection of 

information request. OMB will set out 

an expiration date upon their approval 

of the final rule’s collection of 

information request. 

The proposed requirement and 

burden for D–SNPs to update audit 

protocols to require documentation of 

the enrollee advisory committees will be 

submitted to OMB for review under 

control number 0938–1395 (CMS– 

10717). 

a. Creating One or More Enrollee 

Advisory Committees 

At § 422.107(f), we propose that any 

MA organization offering a D–SNP must 

establish one or more enrollee advisory 

committees at the State level or other 

service area level in the State to solicit 

direct input on enrollee experiences. We 

also propose at § 422.107(f) that the 

committee include at least a reasonably 

representative sample of the population 

enrolled in the dual eligible special 

needs plan, or plans, or other 

individuals representing those enrollees 

and solicit input from these individuals 

or their representatives on, among other 

topics, ways to improve access to 

covered services, coordination of 

services, and health equity for 

underserved populations. 

The burden of establishing and 

maintaining an enrollee advisory 

committee is variable due to the 

flexibilities MA organizations would 

have to implement the proposed 

requirements. We believe that D–SNPs 

should work with enrollees and their 

representatives to establish the most 

effective and efficient process for 

enrollee engagement, and therefore, we 

chose not to propose the specific: (1) 

Frequency; (2) location; (3) format; (4) 

participant recruiting and training 

methods; (5) number of committees (for 

example, one committee at the State 

level to serve all of the MA 

organization’s D–SNPs in that State or 

more than one committee); (6) 

utilization of existing committees which 

would meet the requirements of both 

§§ 438.110 and 422.107(f) (we expect 

this approach to be used by FIDE and 

HIDE SNPs); (7) use and adoption of 

telecommunications technology; and (8) 

other parameters. Instead, the only 

requirements proposed in this rule for 

an MA organization offering one or 

more D–SNPs in a State would be to 

establish and maintain one or more 

enrollee advisory committees that serve 

the D–SNPs offered by the MA 

organization and for that committee to 

solicit input on, among other topics, 

ways to improve access to covered 

services, coordination of services, and 

health equity for underserved 

populations. The enrollee advisory 

committee must include at least a 

reasonably representative sample of the 

population enrolled in the D–SNP(s), or 

other individuals representing those 

enrollees. The enrollee advisory 

committee may also advise managed 

care plans under title XIX of the Act 

offered by the same parent organization 

as the MA organization offering a D– 

SNP. 

To determine the burden for MA 

organizations to establish the proposed 

enrollee advisory committees, we 

reviewed two estimates from similar 

committees. 

First, the May 2016 final rule (81 FR 

27778) estimated it will take 6 hours 

annually for a business operations 

specialist to establish and maintain the 

LTSS member advisory committee 

requirement codified at § 438.110 for 

Medicaid managed care plans. 

Second, in 2021 we conducted an 

informal survey of the three South 

Carolina MMPs under the capitated FAI 

demonstration that are required to 

conduct meetings quarterly and highly 

value their advisory committees. The 

MMPs surveyed estimated an annual 

average of 240 hours (or 60 hours per 

meeting) to recruit members and 

establish and maintain the committee. 

We expect these efforts to include 

outreach and communication to 

members, developing meeting agendas, 

scheduling participation of presenters, 

preparing meeting materials, identifying 

meeting location and technology, D– 

SNP staff attendance at the meeting, and 

disseminating enrollee feedback to D– 

SNP and MA organization staff. 

Due to the variety of flexibilities in 

creating the proposed enrollee advisory 

committee, detailed in the opening 

paragraph of this ICR, we expect the 

average time and annual cost for a MA 

organization to establish and hold an 

enrollee advisory committee meeting to 

be somewhere between 6 hours 

estimated for the requirement at 

§ 438.110 and 240 hours as reported by 

MMPs. We believe this large difference 

in the time spent comes from two 

sources: (1) the requirement that the 

committee created by MMPs meet 

quarterly rather than annually and (2) 

MMPs find value in their committees 

and have invested more staff and 

resources to recruit enrollees, and 

prepare for and hold meetings. For 

example, MMPs often provide 

transportation to meetings, 

refreshments, and nominal incentives 

for participation, none of which is 

required by the capitated FAI 

demonstration or this proposed rule. We 

have used a 40-hour estimate and the 

services of a business compliance officer 

to assess burden with the understanding 

that a wide variety of approaches would 

probably be used. 

Each MA organization offering one or 

more D–SNPs in a State would decide 

how to establish an enrollee advisory 

committee based on the MA 

organization’s approach to obtaining 

maximal input from enrollees leading to 

the highest quality enrollee experience. 

Because of this wide variability, we 


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142See https://www.cms.gov/Medicare/ 

Compliance-and-Audits/Part-C-and-Part-DCompliance-and-Audits/ProgramAudits. 

143See https://www.cms.gov/Medicare/ 

Compliance-and-Audits/Part-C-and-Part-DCompliance-and-Audits/ProgramAudits. 

solicit stakeholder comments on our 

assumptions and burden estimates. 

For purposes of this proposed rule for 

establishing an enrollee advisory 

committee, we are estimating each MA 

organization would spend 40 hours at a 

cost of $3,242 (40 hr × $81.06/hr for a 

business operation specialist). 

We believe all FIDE SNPs and HIDE 

SNPs that provide LTSS currently have 

an enrollee advisory committee since 

they have a Medicaid managed care 

plan that must comply with § 438.110. 

Of the 596 D–SNP PBPs for CY 2021, we 

estimate 478 do not have a 

corresponding Medicaid managed care 

plan that provides LTSS. Several of 

these D–SNP PBPs are in the same State 

and under the same contract, which 

means only one enrollee advisory 

committee is necessary to meet the 

proposed requirement. Therefore, we 

estimate MA organizations operating D– 

SNPs will need to establish 260 new 

enrollee advisory committees. 

Thus, the aggregate minimal annual 

burden for MA organizations operating 

D–SNPs to meet the proposed 

requirements of § 422.107(f) is 10,400 

hours (260 new committees × 40 hr per 

committee) at a cost of $843,024 (10,400 

hr × $81.06/hr). As stated above, the 

proposed requirement and burden will 

be submitted to OMB for review under 

control number 0938–TBD (CMS– 

10799). 

b. Updates to Audit Protocols 

As noted in section II.A.3. of this 

proposed rule, we anticipate updating 

the CMS SNP Care Coordination audit 

protocols 142 for MA organizations 

offering one or more D–SNPs to require 

documentation, such as a committee 

member list and meeting minutes, of the 

enrollee advisory committee meetings. 

Currently, control number 0938–1395 

(CMS–10717) estimates the audit 

protocol and data request burden at 701 

hours per MA organization at an average 

hourly cost of $87.00/hr, totaling 

$60,987 per MA organization (701 hr × 

$87.00/hr). We believe MA 

organizations offering D–SNPs would 

retain a committee member list and 

meeting minutes as part of customary 

business practices; therefore, we do not 

believe reporting this documentation on 

the enrollee advisory committee would 

impact our currently approved 701 hr 

audit protocol estimate. 

While we do not anticipate any 

changes to our active time estimates, if 

this proposal is finalized we would 

revise the SNP Care Coordination audit 

protocol prior to the effective date of the 

rule to provide stakeholders the ability 

to comment on the contents of the 

document. The CMS–10717 package 

would be made available to the public 

for review/comment under the standard 

PRA process which includes the 

publication of 60- and 30-day Federal 

Register notices and the posting of the 

collection of information documents on 

our PRA website. 

2. ICRs Regarding Standardizing 

Housing, Food Insecurity, and 

Transportation Questions on Health 

Risk Assessment (§ 422.101) 

The following proposed HRA 

question changes will be submitted to 

OMB for review under control number 

0938–TBD (CMS–10799). At this time, 

the control number has yet to be 

determined, but it will be assigned by 

OMB upon their clearance of this 

proposed rule’s collection of 

information request. OMB will set out 

an expiration date upon their approval 

of the final rule’s collection of 

information request. 

The proposed changes to our SNP 

audit protocols will be submitted to 

OMB for review under control number 

0938–1395 (CMS–10717). Subject to 

renewal, the control number is currently 

set to expire on May 31, 2024. It was last 

approved on May 8, 2021, and remains 

active. 

a. Added HRA Questions 

As described in section II.A.4. of this 

proposed rule, we propose requiring 

that SNPs include specific questions on 

housing stability, food security, and 

access to transportation specified in 

sub-regulatory guidance as part of their 

HRAs. This proposal, if finalized, would 

result in SNPs having a more complete 

picture of the risk factors that may 

inhibit beneficiaries from accessing care 

and achieving optimal health outcomes 

and independence. We do not believe 

that collecting this information would 

require any additional efforts from SNPs 

outside of customary updates to the 

HRA tools. Due to the current 

requirement at § 422.101(f) that the HRA 

include an assessment of the 

individual’s physical, psychosocial, and 

functional needs, we believe that many 

SNPs are already including questions 

related to housing stability, food 

security, and access to transportation in 

their HRA tools. Therefore, if this 

proposal is adopted, most SNPs would 

revise their HRA tools to use our 

standardized questions. If a SNP is not 

already asking these questions, we do 

not predict the addition of questions on 

these three topics would lengthen the 

time to administer a typical HRA. 

CMS does not currently collect 

specific data elements from HRAs for all 

SNP enrollees. By standardizing HRA 

questions in our proposed rule, CMS 

would be able to collect those specific 

data elements; however, CMS will not 

be collecting data elements from the 

HRA as part of this collection of 

information. 

We estimate a one-time burden (over 

the next three years) for the parent 

organizations offering SNPs to update 

their HRA tools in their care 

management systems and adopt our 

standardized questions on housing 

stability, food security, and access to 

transportation. It is possible that we 

would change the standardized 

questions in the future, thereby making 

the burden of our proposal more than a 

one-time burden. However, we have no 

plans at this point to change the 

standardized questions once we 

establish them. Therefore, we are unable 

to reliably estimate the additional 

burden in subsequent years. 

We assume that each parent 

organization with one or more SNPs 

would update the care management 

system where an enrollee’s HRA 

responses are recorded. We believe that 

it would take a software programmer 3 

hours at $105.72/hr to update the care 

management system resulting in a cost 

of $317 (3hr × $105.72/hr) per parent 

organization. For CY 2021, there are 123 

parent organizations with a SNP PBP. In 

aggregate, we estimate a one-time 

burden for updating the HRA tool of 369 

hr (123 parent organizations × 3 hr) at 

a cost of $39,011 (369 hr × $105.72/hr). 

After the finalization and 

implementation of our proposed rule, 

we will reassess the impact of future 

updates to these HRA questions. As 

stated above, the proposed requirements 

and burden will be submitted to OMB 

for review under control number 0938– 

TBD (CMS–10799). 

b. Updates to Audit Protocols 

The proposed change to the HRA 

would also require an update to the 

CMS SNP Care Coordination audit 

protocols 143 that ensure the completed 

HRA includes the assessment of housing 

stability, food security, and access to 

transportation. Currently, audit protocol 

and data request burden are estimated at 

701 hours per MA organization at an 

average hourly cost of $84.00/hr, 

totaling $58,884 per MA organization. 

We do not believe the changes to SNP 

audit protocols would add more time to 

the 701-hour audit protocol estimate as 


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we are adding a confirmation that the 

SNP’s HRA includes the proposed 

changes as part of the SNP Care 

Coordination Audit protocols. 

While we do not anticipate any 

changes to our active time estimates, if 

this proposal is finalized, we would 

revise the audit protocol documents 

prior to the effective date of the rule to 

provide stakeholders the ability to 

comment on the contents of the 

document. The CMS–10717 package 

would be made available to the public 

for review/comment under the standard 

PRA process which includes the 

publication of 60- and 30-day Federal 

Register notices and the posting of the 

collection of information documents on 

our PRA website. 

As stated in section II.A.4. of this 

proposed rule, CMS will consider 

collecting data from the SNPs on 

responses to the specified HRA 

questions. However, we are not 

proposing such requirements at this 

time. We welcome comment on our 

assumptions regarding the collection of 

information burden for this proposal. 

3. ICRs Related to Refining Definitions 

for Fully Integrated and Highly 

Integrated D–SNPs (§ 422.2) 

The following proposed changes will 

be submitted to OMB for review under 

control number 0938–TBD2 (CMS– 

10796). At this time, the control number 

has yet to be determined, but it will be 

assigned by OMB upon their clearance 

of this proposed rule’s collection of 

information request. OMB will set out 

an expiration date upon their approval 

of the final rule’s collection of 

information request. 

As described in section II.A.5. of this 

proposed rule, we propose several 

changes to the definitions of FIDE SNPs 

and HIDE SNPs at § 422.2 that we 

believe will ultimately help to 

differentiate various types of D–SNPs 

and clarify options for beneficiaries and 

stakeholders. Our proposal for the FIDE 

SNP definition requires these plans to 

have exclusively aligned enrollment, 

cover Medicare cost-sharing, and cover 

the Medicaid benefits of home health, 

DME, and behavioral health through a 

capitated contract with the State 

Medicaid agency. We propose to require 

that each FIDE SNP’s and HIDE SNP’s 

capitated contract with the State 

Medicaid agency apply to the entire 

service area for the D–SNP for plan year 

2025 and subsequent years. We also 

propose to codify existing policy 

outlined in sub-regulatory guidance to 

permit, subject to CMS approval, 

specific limited benefit carve-outs for 

FIDE SNPs and HIDE SNPs through the 

State Medicaid agency contract 

submission process. 

Due to the proposed changes in the 

definition of FIDE SNP and HIDE SNP, 

a D–SNP may need to update its 

contract with the State Medicaid agency 

to come into compliance with the 

proposed changes at § 422.2. The 

currently approved annual burden 

estimate for updating the State Medicaid 

agency contract is 30 hours per D–SNP 

as described in OMB control number 

0938–0753 (CMS–R–267). While the 

proposed changes may result in a onetime change to the contract, we believe 

the changes to the contract language 

would be relatively minor (even though 

the changes are substantive in nature) 

and part of routine updates to contracts 

such as changes of dates. We also 

believe that the contract changes would 

be subsumed in the 30-hour burden 

estimate for updating the contract 

annually. Therefore, we do not estimate 

our proposed changes to these 

definitions at § 422.2 would impact our 

currently approved annual 30 hr 

contracting burden estimate for D–SNPs. 

The proposed changes to the FIDE 

SNP and HIDE SNP definitions may 

change how D–SNPs attest when 

submitting their State Medicaid agency 

contract to CMS. The burden is 

currently estimated under OMB control 

number 0938–0935 (CMS–10237). We 

do not estimate D–SNPs would 

experience an increase in their per 

response time or effort to submit the 

State Medicaid agency contract to CMS. 

However, if proposed changes to the 

FIDE and HIDE definitions are finalized, 

then we would update the content of the 

collection of information to reflect the 

changes to § 422.2. If this proposal is 

finalized, we would revise the 5.11 D– 

SNP State Medicaid Agency Contract 

Matrix and 5.12 D–SNP State Medicaid 

Agency Contract Matrix documents 

connected to control number 0938–0935 

(CMS–10237) and move these 

documents to control number 0938– 

TBD2 (CMS–10796). We believe 

including these forms in a separate 

OMB control number 0938–TBD2 

(CMS–10796) exclusively for the D–SNP 

State Medicaid agency contracts is more 

operationally consistent with the 

collection of information required from 

MA organizations. 

a. Service Area Overlap Between HIDE 

SNPs and Companion Medicaid Plans 

Besides the updates to the documents 

currently under control number 0938– 

0935 (CMS–10237) described in this 

section, section II.A.5.f. of this proposed 

rule would require the service area of a 

FIDE SNP or HIDE SNP to overlap with 

companion Medicaid plans; therefore, 

the 20 HIDE SNPs that have service area 

gaps with their affiliated MCOs would 

make a business decision regarding how 

to comply with the requirement in 

addition to updating the State Medicaid 

agency contract with the D–SNP. We 

believe that only one-third of the 20 

impacted D–SNPs, or 7 D–SNPs, would 

choose to remain a HIDE SNP. The 

remaining 13 D–SNPs would contract 

with the State as a non-HIDE D–SNP 

and not incur additional burden. 

A D–SNP that wishes to remain a 

HIDE SNP would submit a new D–SNP 

PBP for the service area that does not 

overlap with the D–SNP’s companion 

Medicaid plan during the annual bid 

submission process (OMB control 

number 0938–0763 (CMS–R–262)). 

Also, under the annual bid submission 

process, the existing HIDE SNP would 

reduce their MA service area to that 

which overlaps with the companion 

Medicaid plan. 

The currently approved annual 

burden estimate for D–SNPs to update 

PBPs is 35.75 hours per MA contract as 

described in OMB control number 

0938–0763 (CMS–R–262). We do not 

estimate D–SNPs would experience an 

increase in their response time or effort 

to submit the bid to CMS. 

Alternatively, to remain a HIDE SNP, 

the MA organization can work with the 

State Medicaid agency to expand the 

service area of the companion Medicaid 

plan to align with the D–SNP service 

area. However, State Medicaid 

procurement time frames and 

contracting strategies may not provide 

the 20 D–SNPs impacted by the 

proposed the opportunity to expand the 

service area of the companion Medicaid 

plan in CY2025. 

In section II.A.5.f. of this proposed 

rule, we discuss alternatives to the 

proposed changes to the FIDE SNP and 

HIDE SNP definitions regarding service 

area overlap with the companion 

Medicaid plan. For example, we are 

considering requiring a minimum level 

of service area overlap for the FIDE SNP 

or HIDE SNP and the companion 

Medicaid plans rather than full overlap. 

We request comment on how these 

alternatives may change the estimates 

for impacted D–SNPs if they were 

finalized. 

4. ICRs Related to Additional 

Opportunities for Integration Through 

State Medicaid Agency Contracts 

(§ 422.107) 

As described in section II.A.6. of this 

proposed rule, we propose to add a new 

paragraph (e) at § 422.107 to describe 

conditions through which States may 

require certain contract terms for D– 

SNPs and how CMS would facilitate 


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144HPMS, Contract Management Reports 2020, 

SNP Type and Subtype Report, August 7, 2020. 

compliance with those contract terms. 

Proposed paragraph (e)(1) would allow 

States, through the State Medicaid 

agency contract with D–SNPs, to require 

that certain D–SNPs with exclusively 

aligned enrollment (a) establish MA 

contracts that only include one or more 

D–SNPs within a State, and (b) integrate 

materials and notices for enrollees. A 

more detailed discussion of the 

proposed requirements and associated 

burden follows: 

a. State Medicaid Agency Contract 

Requirements 

The following proposed changes will 

be submitted to OMB for review under 

control number 0938–TBD2 (CMS– 

10796). At this time, the control number 

has yet to be determined, but it will be 

assigned by OMB upon their clearance 

of this proposed rule’s collection of 

information request. OMB will set out 

an expiration date upon their approval 

of the final rule’s collection of 

information request. 

For States that opt to require the 

contract requirements at proposed 

§ 422.107(e), States and plans would be 

required to modify the existing State 

Medicaid agency contract. These 

modifications would document the D– 

SNP’s responsibility to only enroll 

dually eligible individuals who receive 

coverage of Medicaid benefits from the 

D–SNP, integrate member materials, and 

request that CMS establish an MA 

contract limited to D–SNPs within the 

State. 

(1) State Burden 

Section 1903(a)(7) of the Act requires 

the Federal government to pay a match 

rate for administrative expenses. Since 

cost is split between the State Medicaid 

agency and the Federal government, we 

split in half the total costs, half of which 

the States incur and half of which the 

Federal government incurs, associated 

with administering the Medicaid 

program. The Federal government’s cost 

is presented in the RIA section of this 

rule (see section V.D.3). 

For each State Medicaid agency, it 

would take a total of 24 hours at 

$143.18/hr for State staff to update the 

State Medicaid agency’s contract with 

the D–SNPs in its market to address the 

changes in this proposed rule. This 

estimate includes the cost to negotiate 

with the D–SNPs on contract changes 

and engage with CMS to ensure contract 

changes meet the proposed 

requirements at § 422.107(e). 

Based on our experience, we expect 

that each State Medicaid agency will 

establish uniform contracting 

requirements for all D–SNPs operating 

in their market. We are uncertain of the 

exact number of States that would opt 

to require these proposed contract 

changes over the course of the first 3 

years after the effective date (contract 

years 2025 to 2027). Based on our 

previous work with States as part of the 

capitated FAI demonstration and 

implementing the D–SNP integrations 

requirements established by the BBA of 

2018, we estimate as few as five and as 

many as 20 States may opt to make 

these changes in their contracts with D– 

SNPs and their administration of their 

programs. Based on the number of 

States currently collaborating with CMS 

on Medicare and Medicaid integration 

and the States likely to transition from 

MMP-based to D–SNP-based integrated 

care approaches, we believe there will 

be 12 states that implement this rule in 

the first 3 years. We further expect these 

12 States to implement this one-time 

change during the first year it is 

effective. 

Section 1903(a)(7) of the Act requires 

the Federal government to pay half the 

States’ administrative costs. Therefore, 

for purposes of the COI we interpret that 

the states will incur costs for only 12 

hours (0.5 × 24 hours); the other 12 

hours of work are paid for by the 

Federal government and therefore we 

account for these other 12 hours in the 

RIA. This division of the 24 hours into 

two 12-hour parts is also consistent with 

COI requirements that aggregate 

amounts reflect hour and wage/hr 

burden. Thus, the cost to each State 

would be $1,718 per State (1 State × 12 

hr × $143.18/hr). The aggregate burden 

to 12 States would be 144 hours (12 

States × 12 hours/State) at an aggregate 

one-time cost of $20,618 (144 hr × 

$143.18/hr). After this first-year onetime requirement is satisfied, and given 

the uncertainty involved in estimating 

State behavior, we are estimating zero 

burden in subsequent years on States. 

As mentioned previously, the other 

half of the burden will be presented in 

the RIA. 

(2) MA Organization Burden 

For the initial year, we expect each 

affected D–SNP would take 8 hours at 

$143.18/hr for a lawyer to update the 

contract with the State Medicaid agency 

to reflect the revised and new 

provisions proposed in this rule at 

§ 422.107(e). Based on our assumptions 

of States likely to opt to require the 

proposed contract changes, we estimate 

between 40 to 80 MA organizations 

would be impacted in the first three 

years. Since we are uncertain of which 

extreme to use, we use the average, 60 

MA organizations per year. We further 

expect the updates to be done in the 

first year these regulations are effective. 

In aggregate we estimate a one-time 

burden of 480 hours (60 MA 

organizations × 8 hr) at a cost of $68,726 

(480 hr × $143.18/hr). 

b. Limiting Certain Medicare Advantage 

Contracts to D–SNPs 

The following proposed changes 

regarding additional Part C application 

respondents will be submitted to OMB 

for review under control number 0938– 

0935 (CMS–10237). Subject to renewal, 

the control number is currently set to 

expire on January 31, 2024. It was last 

approved on January 19, 2021 and 

remains active. 

The following proposed changes 

regarding additional Part D application 

respondents will be submitted for OMB 

approval under control number 0938– 

0936 (CMS–10137). Subject to renewal, 

the control number is currently set to 

expire on July 31, 2024. It was last 

approved on July 27, 2021 and remains 

active. 

We propose at § 422.107(e) to codify 

a pathway by which States would 

require and CMS would permit MA 

organizations—through the existing MA 

application process—to establish MA 

contracts that only include one or more 

D–SNPs with exclusively aligned 

enrollment within a State. This action 

would allow dually eligible individuals 

to ascertain the full quality performance 

of a D–SNP and better equip States to 

work with their D–SNPs to improve 

health equity. 

We note that creating a new D–SNPonly contract would have several 

downstream collection of information 

impacts for an MA organization that are 

captured under the two aforementioned 

control numbers, the most immediate of 

which is the MA organization would 

need to complete a new application for 

Parts C and D. 

Our estimate is that 60 D–SNPs will 

be impacted by our proposed changes to 

§ 422.107(e). Currently, 32 percent of D– 

SNPs are in D–SNP-only contracts; 144

therefore, we estimate that 19 of the 60 

D–SNPs (60 D–SNPs × 0.32) impacted 

would already have a D–SNP-only 

contract and not need to submit a new 

Part C and D application. The remaining 

41 D–SNPs (60—19 D–SNPs) would 

need to submit both a new Part C and 

a new Part D application. 

The burden for an initial Part C 

application for a SNP is currently 

approved by OMB under control 

number 0938–0935 (CMS–10237) at 10 

hours at $72.70/hr for a compliance 

officer to review instructions and 

complete the proposal (including 


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submission) at a cost of $727 per 

contract (10 hr × $72.70/hr). Under this 

proposed rule, the currently approved 

burden for one-time Part C applications 

would increase by 410 hours (10 hr × 41 

D–SNPs) and $29,807 (410 hr × $72.70/ 

hr). 

The burden for an initial Part D 

application for an MA–PD plan is 

currently approved by OMB under 

control number 0938–0936 (CMS– 

10137) at 6.41 hours for a compliance 

officer to review instructions and 

complete the proposal (including 

submission) at a cost of $466 per 

contract (6.41 hr × $72.70/hr). The 

aggregate one-time burden for 41 D– 

SNPs to complete an initial Part D 

application for an MA–PD plan is 263 

hours (6.41 hr × 41 affected D–SNPs) at 

a cost of $19,120 (263 hr × 72.70/hr). 

We acknowledge there may be 

additional downstream collection of 

information impacts for new contracts 

related to Part C and D reporting and 

CMS monitoring at the contract level. 

For example, MA organizations would 

experience additional reporting to CMS, 

calculation of HEDIS measures, and 

administration of HOS and CAHPS 

surveys. We are uncertain of the extent 

of the additional burden incurred for 

reporting as a separate contract. We 

request comments on these impacts for 

a new contract under an already existing 

MA organization and if they should be 

included in our estimates. 

c. Integrated Member Materials 

As described in section II.A.6.b. of 

this proposed rule, to provide a more 

coordinated beneficiary experience, we 

propose at § 422.107(e) to codify a 

pathway by which States and CMS 

would collaborate to establish model 

materials when a State chooses to 

require through its State Medicaid 

agency contract that certain D–SNPs use 

an integrated SB, Formulary, and 

combined Provider and Pharmacy 

Directory. Proposed § 422.107(e)(1)(ii) 

establishes factual circumstances that 

would commit CMS to certain actions 

under paragraphs (e)(2) and (3). 

We do not estimate any additional 

burden for States or plans to implement 

integrated member materials at 

proposed § 422.107(e) due to existing 

State efforts to work with Medicaid 

managed care plans to comply with 

information requirements at § 438.10 

and to work with D–SNPs to populate 

Medicaid benefits for Medicare member 

materials. Since requirements imposed 

on the Federal government are not 

subject to the PRA, we describe costs to 

the Federal government’s burden to 

develop integrated member materials in 

section V.D.3.a. of this preamble. 

5. ICRs Related to Definition of 

Applicable Integrated Plan Subject to 

Unified Appeals and Grievances 

Procedures (§ 422.561) 

The following proposed changes 

would be submitted to OMB for review 

under control number 0938–TBD2 

(CMS–10796). At this time, the control 

number has yet to be determined, but it 

will be assigned by OMB upon their 

clearance of this proposed rule’s 

collection of information request. OMB 

will set out an expiration date upon 

their approval of the final rule’s 

collection of information request. In 

§ 422.561, we propose to expand the 

universe of D–SNPs with unified 

grievance and appeals processes by 

revising the definition of the term 

‘‘applicable integrated plan,’’ which 

establishes the scope of plans that are 

subject to the requirement to use those 

unified processes. Unified grievance 

and appeals processes were originally 

limited to FIDE SNPs and HIDE SNPs; 

however, after our implementation 

experience, we believe that there are 

models of integrated D–SNPs other than 

FIDE SNPs and HIDE SNPs that are also 

amenable to the unified grievance and 

appeals processes. 

If finalized, additional D–SNPs would 

be implementing the unified grievance 

and appeals procedures under 

§§ 422.629 through 422.634. We 

anticipate that the D–SNPs impacted by 

this rule would be D–SNPs in California 

with exclusively aligned enrollment, 

including those plans receiving Cal 

MediConnect members at the end of the 

California capitated FAI demonstration. 

Consistent with our currently 

approved burden estimates, we continue 

to estimate a one-time burden for each 

new applicable integrated plan to 

update its policies and procedures to 

reflect the new integrated organization 

determination and grievance procedures 

under § 422.629. We anticipate this task 

would take a business operation 

specialist 8 hours at $81.06/hr. In 

aggregate, we estimate a one-time 

burden of 104 hours (8 hr × 13 D–SNPs) 

at a cost of $8,430 (104 hr × $81.06/hr). 

While new D–SNPs would use the 

CMS–10716 denial notice at OMB 

control number 0938–1386 rather than 

the CMS–10003 MA denial notice under 

OMB control number 0938–0829, 

neither of the notices nor burden 

estimates would be revised as a result of 

this rule’s proposal. As indicated above, 

the rule’s proposed changes will be 

submitted to OMB under control 

number 0938– TBD2 (CMS–10796). 

The CMS–10716 denial notice 

required under § 422.631(d)(1) includes 

information about the determination, as 

well as information about the enrollee’s 

appeal rights for both Medicare and 

Medicaid covered benefits. Though 

integrating information on Medicare and 

Medicaid appeal rights would be a new 

requirement for the impacted D–SNPs, 

we note that the timeframe for sending 

a notice and the content of the notice 

are largely the same as the current 

requirements in Medicaid (§ 438.404(b)) 

and MA (§ 422.572(e)); therefore, 

impacted D–SNPs are not incurring 

additional burden to send the 

notification. Setting out such burden 

would be duplicative. 

6. ICRs Related to Attainment of the 

Maximum Out-of-Pocket (MOOP) Limit 

(§§ 422.100 and 422.101) 

As described in section II.A.12. of this 

proposed rule, we are proposing a 

revision to which costs accumulate 

toward the MOOP limit for dually 

eligible enrollees with cost-sharing 

protections under § 422.101 for MA 

regional plans and § 422.100(f)(4) and 

(5) for all other MA plans. CMS 

proposes that all costs for Medicare 

Parts A and B services accrued under 

the plan benefit package, including costsharing paid by any applicable 

secondary or supplemental insurance 

(such as through Medicaid, employer(s), 

and commercial insurance) and any 

cost-sharing that remains unpaid 

because of limits on Medicaid liability 

for Medicare cost-sharing under lesserof policy and the cost-sharing 

protections afforded certain dually 

eligible individuals, is counted towards 

the MOOP limit. This would ensure that 

once an enrollee, including a dually 

eligible individual with cost-sharing 

protections, has accrued cost-sharing 

(deductibles, coinsurance, or copays) 

that reaches the MOOP limit, the MA 

plan must pay 100 percent of the cost 

of covered Medicare Part A and Part B 

services. MA plans are currently 

tracking all costs accrued as part of 

preparing to submit an accurate plan 

benefit package bid (OMB control 

number 0938–0763 (CMS–R–262)); 

therefore, this proposal does not add 

additional requirements or burden. 

This proposal would update current 

guidance governing MA organization 

bid requirements, which are captured 

under our active OMB control number 

0938–0763 (CMS–R–262). We do not 

believe there is additional material 

burden resulting to plans that would 

arise from the proposed changes. As 

such, non-PRA related burden can be 

found in section V.D.4 of this preamble. 


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145https://www.cms.gov/research-statistics-dataand-systemsstatistics-trends-andreportsmcradvpartdenroldatamonthly/contractsummary-2021-09. 

7. ICRs Related to Network Adequacy 

(§ 422.116(a)(i)(ii) and (d)(7)) 

The following proposed changes, 

although carrying no burden, will be 

submitted to OMB for review under 

control number 0938–1346 (CMS– 

10636). 

In this rule we propose to require 

compliance with CMS’ network 

adequacy standards for initial and 

service area expansion (SAE) applicants 

as part of the MA application process. 

Therefore, our proposal would require 

that initial and SAE provider networks 

be submitted and reviewed in February 

instead of June (with plans being 

reviewed for the triennial review). 

Consequently, the number of reviews 

and the amount of work is the same; 

rather, it is being re-distributed. 

8. ICRs Related to the Disclaimer for 

Preferred Pharmacy (§ 423.2267(e)(40)) 

The following proposed disclaimer 

changes carry no burden. Section 

423.2267(e)(40) would require Part D 

sponsors to insert CMS standard 

disclaimer on materials that mention 

preferred pharmacies. The burden 

associated with this requirement would 

be the time and effort to copy the 

disclaimer on plan documents during 

document creation. While these 

requirements are subject to the PRA, we 

believe the associated burden is exempt 

from the PRA in accordance with 5 CFR 

1320.3(c)(2). We believe that the time, 

effort, and financial resources to comply 

with the information collection 

requirements would be incurred by 

persons in the normal course of their 

activities and therefore considered to be 

usual and customary business practice. 

This disclaimer is currently described 

in CMS’s sub-regulatory guidance, the 

MCMG, and would be codified in this 

proposed regulation. The disclaimer 

provides an important safeguard to 

Medicare beneficiaries enrolled in a Part 

D plan that only provide access to 

preferred cost sharing through a limited 

number of pharmacies by alerting them 

that the preferred costs may not be 

available at the pharmacy they use, as 

well as providing information on how to 

access the list of pharmacies offering 

prescription drugs as a preferred cost in 

the beneficiary’s area. 

9. ICRs Related to Member Identification 

Cards (§§ 422.2267(e)(30) and 

423.2267(e)(32)) 

The following proposed changes carry 

no burden. Although subject to PRA, 

Member Identification Cards are exempt 

since the issuance of Medicare 

Identification Cards is a normal and 

customary practice throughout the 

insurance industry. Health plans, 

whether commercial, through Medicare 

or Medicaid, or Original Fee-For-Service 

issue cards that inform providers of the 

enrollees insurance. Based on the 

exemption we will not be submitting 

this to OMB for review. 

This proposal is a codification of 

previously issued sub-regulatory 

guidance in the MCMG defining 

standards for member identification 

cards issued by MA plans and Part D 

plan sponsors. 

CMS created this subregulatory 

guidance to reduce Medicare beneficiary 

confusion through bringing consistency 

to member ID card requirements by 

applying standards so that ID cards from 

plan to plan contained the same 

information in the same locations. 

The member identification card 

standard provided in the previously 

issued sub-regulatory guidance was 

created using an industry standard for 

ID cards; these industry standards 

reflected best practices and 

consequently plans found the 

previously issued sub-regulatory 

guidance implementable with minimal 

burden. Because of the minimal burden, 

plans would have no incentive to avoid 

using them. Additionally, we have 

received no enrollee complaints on 

member cards since issuing the subregulatory guidance. 

Because of the reasons listed 

previously, we believe plans are 

following the standards described in 

this subregulatory guidance and 

therefore no further burden is imposed 

by codifying these standards in 

regulation. 

10. ICRs Related to the Creation of a 

One-Page Multilanguage Insert 

(§§ 422.2267(e)(31) and 423.2267(e)(33)) 

The following proposed changes 

would be submitted to OMB for review 

under control number 0938–TBD2 

(CMS–10802). At this time, the control 

number has yet to be determined, but it 

will be assigned by OMB upon their 

clearance of this proposed rule’s 

collection of information request. OMB 

will set out an expiration date upon 

their approval of the final rule’s 

collection of information request. This 

provision requires that plans add in 

their postings or mailings of CMS 

required materials a one-page document 

written in the top 15 non-English 

languages in the U.S. informing 

enrollees that interpreter services are 

available at no cost. 

We previously required plans to 

provide this document to enrollees. 

However, based on section 1557 of the 

Affordable Care Act, the Office for Civil 

Rights (OCR) created their own version. 

Because of the inherent duplication 

between CMS’ MLI requirement and 

OCR’s requirement, CMS issued an 

HPMS email on August 25, 2016, that 

removed the MLI requirement. OCR 

later vacated their requirement, leaving 

a gap. Consequently, we are proposing 

to require that MA plans and Part D 

plan sponsors provide the one-page 

document. 

In estimating the burden of this onepage document we assume plans have 

retained their templates consistent with 

the record retention requirements at 

§ 422.504(e)(4). Consequently, there is 

no burden to create the template, as 

plans will either use their existing 

templates or a template that will be 

provided by CMS to new plans based on 

the previously created MLI without 

change. 

The cost of placing an extra page on 

the plan’s web page is incurred by plans 

as part of their normal course of 

fluctuating business activities and hence 

excluded from the PRA (5 CFR 

1320.3(b)(2)). For those beneficiaries 

who request a paper copy, the proposed 

regulations require sending it with other 

CMS required materials (§§ 422.2267(e) 

and 423.2267(e)). We believe it is 

reasonable to assume that adding one 

page (at 0.1696 ounces) to a bulk 

mailing cost is de minimis and therefore 

does not create additional postage costs. 

Similar estimates have been made in 

previous final rules where we identified 

the major burden as paper and toner. 

We have checked the following 

assumptions of cost and beneficiary 

interest in receiving paper copies found 

in the April 2018 final rule (83 FR 

16695), and found them to still be 

reliable for the purpose of this proposed 

rule. 

A 10-ream box (of 5,000 sheets) of 

paper costs approximately $50. Hence 

the cost per sheet is $50/5,000 sheets = 

$0.01 per page. 

Standard toner cartridges which last 

for about 10,000 pages also cost $50. 

Hence the cost per sheet is $50/10,000 

= $0.005 per page. 

Thus, the total paper and toner cost is 

$0.015 per page. 

As of September 2021, there are 52 

million beneficiaries enrolled in MA PD 

or stand-alone PDP plans.145

Of these 52 million beneficiaries we 

estimate that two fifths or 20,800,000 

beneficiaries (52 million beneficiaries × 

0.40) will request paper copies. 

It follows that the aggregate cost of 

providing one extra sheet of paper is 


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$312,000 (20,800,000 enrollees × 

$0.015/sheet). 

There is no labor cost. Had we 

assumed that each extra sheet will incur 

postage costs we would have to add 

about $43,333 (52 million enrollees × 2⁄5

requesting paper copies × 1⁄6 once per 

sheet × 1⁄16 ounces per pound × $0.20/ 

pound). However, it is not clear the 

extent to which every sheet will bear a 

cost. We solicit stakeholder input on all 

assumptions including the estimate that 

40 percent of enrollees request paper 

copies and that the major costs are 

paper and toner. 

11. ICRs Related to Third-Party 

Marketing Organizations (TPMOs) 

Agent (§§ 422.2260, 422.2267(e)(41), 

422.2274(g), 423.2260, 423.2267(e)(41), 

and 423.2274(g)) 

The following proposed disclaimer 

changes carry no burden submitted to 

OMB for review. Sections 422.2260, 

422.2267(e)(41), 422.2274(g), 423.2260, 

423.2267(e)(41), and 423.2275(g) would 

require MA organizations and Part D 

sponsors to insert CMS standard 

disclaimer on materials created by Third 

Party Marketing Organizations and 

would require MA organizations and 

Part D sponsor update training 

materials. The burden associated with 

this requirement would be the time and 

effort to copy the disclaimer on 

marketing materials during document 

creation. While these requirements are 

subject to the PRA, we believe the 

associated burden is exempt from the 

PRA in accordance with 5 CFR 

1320.3(c)(2). We believe that the time, 

effort, and financial resources to comply 

with the information collection 

requirements would be incurred by 

persons in the normal course of their 

activities and therefore considered to be 

usual and customary business practice. 

The major cost associated with these 

requirements is the burden of updating 

policies and training. We note that 

many TPMOs such as field marketing 

organizations (FMOs), or other 

companies that a plan uses for 

marketing, lead generation, and 

enrollment functions already perform 

similar training in order to ensure 

compliance with their FDR 

requirements. 

We estimate that it would take a 

business operation specialist 2 hours at 

$81.06/hr for a one-time update of 

procedures and training at a cost of $162 

($81.06/hr × 2 hr) per contract. In 

aggregate the one-time burden for 961 

current contracts is 1,922 hours (2 hr × 

961 contracts) at a cost of $155,797 

(1,922 hr × $81.06/hr). 

The major update is procedures and 

training. The burden of adding just one 

itm to the required disclosures is not 

being estimated since it is part of the 

normal varying disclosures done and as 

such is exempt from the PRA (5 CFR 

1320.3(b)(2)). 

12. ICRs Related to the Medicare MLR 

Reporting Requirements (§§ 422.2460 

and 423.2460) 

The proposed changes to the 

Medicare MLR Reporting Requirements 

will be submitted to OMB for review 

under control number 0938–1232 

(CMS–10476). 

In section II.G.2. of this proposed rule, 

we note that under current §§ 422.2460 

and 423.2460, for each contract year, 

MA organizations and Part D sponsors 

must report to CMS only the MLR and 

the amount of any remittance owed to 

us for each contract with credible or 

partially credible experience. For each 

non-credible contract, MA organizations 

and Part D sponsors are required to 

report only that the contract is noncredible. In this rule, our proposed 

amendments to §§ 422.2460 and 

423.2460 would increase the MLR 

reporting burden by requiring that MA 

organizations and Part D sponsors 

report, for each contract year, the data 

needed to calculate and verify the MLR 

and remittance amount, if any, for each 

contract, such as the amount of incurred 

claims for Medicare-covered benefits, 

supplemental benefits, and prescription 

drugs; expenditures on quality 

improving activities; non-claims costs; 

taxes; licensing and regulatory fees; total 

revenue; and any remittance owed to 

CMS under § 422.2410 or § 423.2410. 

Our analysis of the estimated 

administrative burden related to the 

MLR reporting requirements is based on 

the average number of MA and Part D 

contracts subject to the reporting 

requirements for each contract year. For 

contract years (CYs) 2014 to 2020, the 

average number of such contracts is 601. 

The total number of MA and Part D 

contracts is relatively stable year over 

year. 

Another amount used in our 

calculations is the total number of hours 

spent on administrative work related to 

the Medicare MLR requirements that 

applied with respect to MLR reporting 

for contract years CY 2014 through CY 

2017. In the information collection 

request that was previously approved by 

OMB under 0938–1232 (CMS–10476), 

CMS estimated that, on average, MA 

organizations and Part D sponsors 

would spend 47 hours per contract on 

administrative work related to Medicare 

MLR reporting, including: Collecting 

data, populating the MLR reporting 

forms, conducting internal review, 

submitting the reports to the Secretary, 

and conducting internal audits. This 47- 

hour figure was also used in the final 

rule titled ‘‘Medicare Program; Contract 

Year 2019 Policy and Technical 

Changes to the Medicare Advantage, 

Medicare Cost Plan, Medicare Fee-forService, the Medicare Prescription Drug 

Benefit Programs, and the PACE 

Program’’ (83 FR 16701), which 

appeared in the Federal Register on 

April 16, 2018 (hereinafter referred to as 

the April 2018 final rule), and revised 

the MLR reporting requirements that 

apply with respect to MLR reporting for 

CY 2018 and subsequent contract years, 

and it will be used in this proposed 

rule. 

In calculating burden, we contrast the 

proposed requirements with those in the 

April 2018 final rule, which revised the 

MLR reporting requirements for all MA 

and Part D contracts, and the June 2020 

final rule (84 FR 33796, 33850), which 

added a deductible-based adjustment to 

the MLR calculation for MA medical 

savings account (MSA) contracts. In 

reviewing the April 2018 final rule, we 

identified an overestimation in the 

calculations. 

To explain the overestimation and to 

account for it in our burden calculation 

for this proposed rule, we present three 

tables: One table for the estimates of 

hourly burden per contract included in 

the April 2018 final rule, which 

established the current MLR reporting 

requirements (Table 5); a second table 

for our revised estimates of hourly 

burden in the April 2018 final rule 

(Table 6); and a third table for our 

estimates of the hourly burden of the 

proposed changes to the MLR reporting 

requirements. Having the calculated 

hourly burden per contract, we can then 

estimate dollar burden per contract and 

also aggregate hourly and dollar burden 

per contract. 

We believe that presenting these 3 

tables will aid the reader in navigating 

a set of calculations that are 

complicated by (1) the contrast between 

the burden estimate for the current MLR 

reporting requirements, as published in 

the April 2018 final rule, and our 

revised burden estimate for the current 

reporting requirements, which we 

provide here, and (2) the contrast 

between our revised burden estimate for 

the current reporting requirements and 

our burden estimate for the proposed 

reporting requirements. To provide 

further clarity, we number each row in 

the tables with a row ID so that 

appropriate narrative can be tied to 

overall calculation. For this reason, we 

initially focus on hourly burden. Once 

the hourly burden of this proposed rule 

is established, we calculate the per 


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contract and aggregate hourly and dollar 

burden. 

In the April 2018 final rule (83 FR 

16701), we estimated that it would take 

an MA organization or Part D sponsor 

11.5 hours to complete the MLR 

reporting form that was used to collect 

MLR data for CYs 2014 through 2017. 

We explained that we developed this 

estimate by considering the amount of 

time it would take an MA organization 

or Part D sponsor to complete each of 

the following tasks: 

• Review the MLR report filing 

instructions and external materials 

referenced therein and to input all 

figures and plan-level data in 

accordance with the instructions. 

• Draft narrative descriptions of 

methodologies used to allocate 

expenses. 

• Perform an internal review of the 

MLR report form prior to submission. 

• Upload and submit the MLR report 

and attestation. 

• Correct or provide explanations for 

any suspected errors or omissions 

discovered by CMS or our contractor 

during initial review of the submitted 

MLR report. 

The calculations for hourly burden 

per contract that were included in the 

April 2018 final are summarized in 

Table 5. 

The following explanations apply to 

the rows in Table 5: 

Row(1): The 47-hour figure, as 

explained in the opening paragraphs of 

this ICR, is CMS’ estimate for the total 

amount of time MA organizations and 

Part D sponsors would spend per 

contract on administrative work related 

to Medicare MLR reporting when the 

MLR was reported using the MLR form 

for CYs 2014 through 2017, including: 

Collecting data, populating the MLR 

reporting form, conducting internal 

review, submitting the report to the 

Secretary, and conducting internal 

audits. 

Row (2): The 11.5-hour burden is the 

portion of the burden in Row (1) that the 

April 2018 final rule assumed was 

associated with completing the MLR 

form used for CYs 2014 through 2017. 

This burden is discussed in the 

paragraph immediately preceding Table 

5. 

Row (3): 35.5 hours, the 

administrative burden associated with 

the MLR requirements, excluding the 

April 2018 final rule’s estimate of the 

burden for completing and submitting 

the MLR form used for CYs 2014 

through 2017. This number represents 

the difference between total per contract 

burden, 47 hours, and the form burden 

per contract, 11.5 hours. 

Row (4): Estimated burden to 

complete the current MLR data form, 

which is vastly simplified and is 

estimated to take only a half-hour to 

complete. 

Row (5): The total burden per 

contract, as written in the 2018 and 

2020 rule, and as adjusted for the 

current number of contracts is 36.00 

(35.5 hours non-form burden + 0.5 

hours current form burden). 

After further consideration, we 

believe that the April 2018 final rule 

overstated the burden of completing the 

detailed MLR reporting form because it 

did not take into account the number of 

MA organizations and Part D sponsors 

that were actually required to provide 

explanations for suspected errors or 

omissions discovered by CMS or our 

contractor during initial review of the 

submitted MLR report. Unlike the first 

four tasks previously listed (the first 

four of the bullets immediately listed 

prior to Table 5), the need to correct or 

provide explanations for errors and 

omissions discovered by CMS or our 

contractor during desk reviews and 

estimated at 11.5 hours (row (2)) was 

not applicable to all plans when our 

detailed MLR data reporting 

requirements were in effect. 

Based on the percentage of contracts 

per CY (for CYs 2014 through 2017) for 

which the annual MLR filing was 

flagged for potential errors during desk 

reviews, the number of MA 

organizations and Part D sponsors that 

were required to correct or explain 

suspected errors during desk reviews, 

and a review of the correspondence 

between such organizations or sponsors 

and CMS or our contractor, we estimate 

the last task previously listed (to correct 

or provide explanations for suspected 

errors or omissions flagged in desk 

reviews) would take an MA organization 

or Part D sponsor an average of 3 hours 

per affected contract, depending on the 

number and complexity of issues that 


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TABLE 5: TIME PER CONTRACT USED IN APRIL 2018 FINAL RULE (HOURS) 

Row Item Estimate Notes 

ID 

(1) Total administrative burden (assuming use 47 Estimate used in former approved 

ofMLR form for CYs 2014-2017) (hr) Information Collection Request that 

included MLR form used for CY s 2014-

2017 

(2) Original estimate of burden for 11.5 Assumption in April 2018 final rule 

completing MLR form used for CY s about amount of time needed to complete 

2014-2017 (hr) MLR form used for CY s 2014-2017 

(3) Burden for administrative tasks other than 35.5 (3)=(1 )-(2) 

completing MLR form (hr) 

(4) Estimate of burden for completing current 0.5 Assumption in April 2018 final rule 

MLR form (hr) 

(5) Total administrative burden for current 36 (5)=(3)+(4) 

MLR form (hr) 
Federal Register / Vol. 87, No. 8 / Wednesday, January 12, 2022 / Proposed Rules 1929 

required additional explanation, 

whether the MA organization or Part D 

sponsor had to recalculate any of the 

figures included in its original MLR 

submission, and whether the MA 

organization or Part D sponsor had to 

submit a corrected MLR Report to 

address any of the errors or omissions 

in its original submission. 

This refinement to our prior 11.5-hour 

time estimate does not affect our 

estimate that MA organizations and Part 

D sponsors spent 47 hours per contract 

on administrative work under the MLR 

reporting requirements in effect for CYs 

2014 through 2017 (Row (1) in Table 5). 

Instead, it causes the estimated time to 

complete the detailed MLR reporting 

form to decrease from 11.5 hours to 

10.75 hours (Row (2) in Table 5 and 

Row (7) in Table 6), with the remaining 

administrative tasks now estimated as 

taking the other 36.25 hours (47 

hours¥10.75 hours). (Row (8) in Table 

6). Table 6 presents a revision of Table 

5 with the primary change being 

replacing 11.5 (Row (2) in Table 5) with 

10.75 (row (7) in Table 6), with the other 

rows following by computation. Table 6 

also differs from Table 5 is the addition 

of the per contract burden of calculation 

of the MSA deductible factor. This is 

explained in the narrative to Table 6. 

We now explain row (10), calculation 

of the deductible factor. In the June 

2020 final rule, CMS estimated that it 

would take 5 minutes (1⁄12 hour) to 

calculate and verify the deductible 

factor for an MSA contract. At the time 

of the 2020 rule, there were 8 MSA 

contracts. As of 2021, there are only 4 

MSA contracts. However, the 

calculations presented in Table 6 are per 

contract, not aggregate. Thus, the hourly 

burden for calculation of the MSA 

deductible factor adjusted for the 

number of current contracts is 0.00055 

hours (1⁄12 hour per contract × 4 MSA 

contracts divided by 601 total 

contracts). We round to 5 decimal 

places because if we had rounded to two 

decimal places the burden would be 0. 

This burden is eliminated under the 

current proposal because the software 

tool that will be used to report the 

detailed MLR data that CMS proposes 

will now calculate and apply the 

deductible factor, making it unnecessary 

for MA organizations to perform this 

calculation. The sole purpose of 

discussing this burden here is to 

illustrate the flow of logic in 

determining hourly burden as written in 

the previous rules. 

This proposed rule introduces three 

items affecting per contract hourly 

burden. First, as noted in section II.G.3. 

of this proposed rule, if the proposed 

changes to the MLR reporting 

requirements are finalized, CMS expects 

to resume development of the MLR 

reporting software, and to update the 

data collection fields and built-in 

formulas so that the MLR reporting 

software calculates the MLR consistent 

with all amendments to the MLR 

regulations that CMS has finalized since 

CY 2017. In making these updates, CMS 

would revise the programming of the 

MLR reporting software so that it 

automatically calculates and applies the 

appropriate deductible factor for MA 

MSA contracts, as determined under 

§ 422.2440. Because MA organizations 

would no longer be responsible for 

calculating the deductible factor, the 

burden associated with performing that 

calculation would be eliminated. 

Second, as discussed in section II.G.2. 

of this proposed rule, CMS proposes to 

reinstate the detailed MLR reporting 

requirements in effect for CYs 2014 

through 2017. 

Third, we propose to require that MA 

organizations provide more detailed 

information on the portion of the 

incurred claims component of the MLR 

numerator that represents expenditures 

for supplemental benefits. As discussed 


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TABLE 6: TIME PER CONTRACT IN APRIL 2018 FINAL RULE REVISED (HOURS) 

Row 

ID Item Estimate Notes 

Total administrative burden 

(assuming use ofMLR form 

(6) for CYs 2014-2017) (hr) 47 (1) 

Revised estimate of burden for 

completing MLR form used Reduced from original 11. 5 hr 

(7) for CYs 2014-2017 (hr) 10.75 estimate 

Burden for administrative 

tasks other than completing 

(8) MLR form (hr) 36.25 (8)=(6)-(7) 

Estimate of burden for 

(9) completing current form (hr) 0.5 (4) 

Burden per contract of 

calculation of MSA deductible 

Burden for calculation of factor. This is explained in the 

(10) MSA deductible factor (hr) 0.00055 narrative below. 

Total administrative burden 

(11) for current MLR form (hr) 36.75055 (11)=(8)+(9)+(10) 
1930 Federal Register / Vol. 87, No. 8 / Wednesday, January 12, 2022 / Proposed Rules 

in section II.G.3. of this proposed rule, 

to collect this information, we intend to 

add 18 additional fields to the MLR 

Report template in which MA 

organizations would enter their total 

expenditures for different types or 

categories of supplemental benefits. We 

also anticipate adding narrative fields in 

which users would describe the 

methodologies used to allocate 

supplemental benefit expenditures. 

In total, we estimate that the addition 

of these fields, as well as an 

information-only field in which MA 

organizations and Part D sponsors 

would enter the low-income cost 

sharing subsidy amount that they 

deducted when calculating the amount 

of prescription drug costs to include in 

the MLR report, would increase the 

number of fields that would require user 

input and validation by approximately 

one-third, or 33.3 percent. We believe 

this increase would cause a proportional 

increase in the amount of time needed 

both to complete and submit the MLR 

Report to CMS, and to perform the data 

collection activities that make up the 

remaining portion of the 47 hours per 

contract that we previously estimated 

MA organizations and Part D sponsors 

would spend on administrative work 

related to the MLR reporting 

requirements. 

However, because the new 

supplemental benefits fields do not 

affect the MLR reporting burden for 

sponsors of standalone Part D contracts, 

we calculate the MLR reporting burden 

separately for MA contracts and 

standalone Part D contracts. Thus, we 

estimate the burden to stand-alone Part 

D contracts would only increase 5 

percent. 

To aggregate this increase on a percontract level, we take a weighted 

average of the 33 percent increase and 

the 5 percent increase. The weights 

correspond to the percentage of 

contracts that represent MA contracts 

(about 89 percent) and standalone Part 

D contracts (about 11 percent). This 

aggregate net increase per contract is 

29.92 percent (89% × 33% + 11% × 5%). 

The computations are presented in 

Table 7. As previously indicated, it is 

simpler to use one aggregate figure 

(29.92 percent) for all contracts rather 

than estimate each contract type 

separately and then adding them 

together. 

BILLING CODE 4120–01–P 


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Row 

ID 

(12) 

(13) 

(14) 

TABLE 7: CALCULATION OF (WEIGHTED) AVERAGE INCREASE IN TIME PER 

CONTRACT 

Product of 

Increase and 

Percent Increase Percent 

of for new (weight) of 

Contract Type contracts fields contract type Notes 

Rounded to 4 decimal places. 

Rounding to two decimal 

Stand-alone prescription drug places would make this 1, a 

contracts 11% 5% 0.55% misleading increase. 

Rounded to 4 decimal places 

MA (including MA-PD and for consistency with previous 

MSA) contracts 89% 33% 29.37% row. 

Aggregate burden increase 

per contract 29.92% (14)=(12)+(13) 
Federal Register / Vol. 87, No. 8 / Wednesday, January 12, 2022 / Proposed Rules 1931 

Table 8 incorporates these three 

proposed changes—removing the 

deductible factor calculation burden, 

reinstating the form used for MLR 

reporting for CYs 2014 through 2017, 

and increasing the fields in the form— 

to arrive at a final hourly burden per 

contract, and then calculates dollar 

burden per contract as well as aggregate 

burden (hourly and dollar) for all 

contracts. The rows of Table 8 are 

explained in the narrative following the 

table. The following presents 

explanations of the rows in Table 8. 

• Rows (15)–(17) are identical to rows 

(6)–(8). This provides the per-contract 

administrative hours on non-form items 

connected with the MLR provisions 

before adding the form-related burdens. 

• Row (18): The 0.5 hours in Row (9) 

is replaced by the 10.75 hours in Row 

(16) since this proposed rule requires 

returning to the detailed form used for 

MLR reporting for CYs 2014 through 

2017 whose cost is estimated in Row (7). 

• Row (19): Row (10), the time for 

calculation of the MSA deductible 

factor, is replaced with 0 hours, since 

the proposal would entail having CMSdeveloped software automatically 

calculate and apply the deductible 

factor. 

• Row (20): The total hourly burden 

per contract, 47 hours, reflecting 

returning to the detailed form used for 

CY 2014 through 2017 MLR reporting 

and removal of calculation of the MSA 

deductible factor (but not yet reflecting 

additional fields) is obtained by adding 

10.75 (form burden) + 36.25 (non-form 

burden), (Rows (17) and (18)). 

• ROW (21): The total hourly burden 

per contract, 61.1 hours under the 

current proposal, is obtained by 

increasing the 47 hours (Row (20)) by 

29.92 percent, which is the weighted 

effect of adding new fields (Row (14)). 

(61.1 = 47 + 29.92 percent × 47). 

• Row (22): The current contract 

burden of 36.75055 hours is obtained 

from Row (11). The five decimal places 

assure that the effect of the provision on 

MSAs is not removed. 

• Row (23): The average increase in 

burden (hours) due to the proposed 

regulation of 24.34945 is obtained by 

subtracting from the total burden under 

the proposed regulation of 61.1 hours on 

Row (21) the current burden of 36.75055 

hours on Row (22). 

• Row (24): The $155.52/hr wage is 

obtained from the wage table. 

• Row (25): The increased contract 

burden ($) $3,787 on Row (25) is 

obtained by multiplying the average 

increase in burden (hours) of 24.34945 

on Row (23) by the wages per hour 

($155.52) on Row (24). 


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TABLE 8: BURDEN (AGGREGATE and PER CONTRACT) 

Row 

ID Item Burden Notes 

(15) Total administrative burden (hr) per contract 47 (6) 

Revised (2018 rule) burden (hr) per contract 

(16) for then current form 10.75 (7) 

Admin burden (hr) per contract for non-form 

(17) items 36.25 (17)=(8) or (17)=(15)-(16) 

Per contract burden for return to form used for Removal of current form; return to form used 

(18) CYs 2014-2017 10.75 for CYs 2014-2017 (See row (7)) 

Per contract burden for calculation of Software now automatically calculates the 

(19) deductible factor for MSA contracts (hr) 0 MSA deductible factor 

Per contract revised hourly burden (hr) for 

return to form used for CY s 2014-2017 and 

removal of calculation of MSA deductible 

(20) factor 47 (20)=(17)+(18) 

Per contract burden (hr) for proposed form 

(21) with new fields, this proposed rule 61.1 (21)=(20)+(14)*(20) 

(22) Current per contract burden (hr) 36.75055 (22) = (11) 

(23) Average increase (hours)/contract 24.34945 (23) = (21) - (22) 

(24) Wage/hr $155.52 Wage Table 

Per contract burden($) for proposed form, this 

(25) rule, with new fields $3,787 (25)=(24)*(23) 

Number of current contracts affected by MLR Estimate explained in opening paragraph of 

(26) provisions 601 this ICR 

Aggregate burden (hr), all contracts, with new 

(27) fields, this rule 14,634 (27)=(26)*(23) 

Aggregate burden ($), all contracts, with new 

(28) fields, this rule $2,275,880 (28)=(27)*(24) 
1932 Federal Register / Vol. 87, No. 8 / Wednesday, January 12, 2022 / Proposed Rules 

• Row (26): The total number of 

contracts is presented in the opening 

paragraphs of this ICR. 

• Row (27): The aggregate increase in 

burden (hours) across all contracts of 

14,634 is obtained by multiplying the 

601 contracts (Row (26)) by the per 

contract increase in burden (hours) of 

24.34945 on Row (23). 

• Row (28): The aggregate increase in 

burden ($) across all contracts, 

$2,275,880, is obtained by multiplying 

the increase in burden (hours) of 14,634 

on Row (27) by the wages per hour on 

Row (24). 

We estimate that MA organizations 

and Part D sponsors will incur minimal 

one-time start-up costs associated with 

developing processes for capturing the 

necessary data, as they should already 

have been allocating their expenses by 

line of business and contract in order to 

comply with our current regulations 

regarding the calculation of the MLR, 

and they should already have been 

tracking their supplemental benefit 

expenditures for purposes of bid 

development. We estimate that MA 

organizations and Part D sponsors will 

incur ongoing annual costs relating to 

data collection, populating the MLR 

reporting form, conducting an internal 

review, submitting the MLR reports to 

the Secretary, and conducting internal 

audits. 

Table 9 summarizes the relevant 

calculations in traditional COI format as 

one combined line item. 

The average burden per contract as 

given on Row (25) of Table 8 is $3,787. 

We note that this is a weighted average. 

Stakeholders may be interested in a 

more careful analysis based on contract 

type. We do this for 3 types of contracts. 

MA MSA contracts have reduced 

burden since the new software 

automatically calculates the deductible 

factor and uses that to adjust the 

applicable credibility factor, relieving 

them of the need to perform this 

calculation and adjustment on their 

own. 

For each MA contract (including MA– 

PD and MA MSA contracts), we 

estimate, on average, 25.92 hours of 

additional burden at an additional cost 

of $4,032. Row (11) (which excludes the 

burden on Row (10) associated with 

calculating the MSA deductible factor) 

shows the current hour burden to be 

36.75 hours. (The removal of the 

0.00055 hours has negligible effect and 

is appropriate for the majority of 

contracts which are non-MSAs). Row 

(20) shows that the new burden without 

considering the additional fields is 47 

hours. Row (13) shows that this would 

result in 62.67 hours total burden (47 

hours × 1.33 due to increased fields). 

Comparing the 62.67 total burden under 

the proposed MLR reporting 

requirement with the 36.75 hours under 

the current reporting requirements 

shows an increase in burden of 25.92 

hours (62.67¥36.75) at a cost of $4,031 

(25.92 hours × $155.52/hr). 

For Part D contracts, we estimate 12.6 

additional hours of burden at an 

additional cost of $1,960. As in the 

preceding analysis for MA contracts, 

Row (11) (which excludes burden on 

Row (10) associated with calculating the 

MSA deductible factor) shows the 

current hour burden to be 36.75 hours. 

Row (20) shows that the new burden 

without taking into effect the new fields 

is 47 hours. Row (12) shows a 5 percent 

increase for new fields for Part D 

contracts, such that this would result in 

a total burden of 49.35 hours (47 hours 

+ 47 hours × 5 percent). Thus, there is 

an additional hour burden of 12.6 hours 

(49.35 hours¥36.75 hours) at an 

additional cost of $1,960 (12.6 hours × 

$155.52/hr) per contract. 

ICRs Related to Pharmacy Price 

Concessions in the Part D Negotiated 

Price (§ 423.100) 

The proposed requirement and 

burden for Part D Sponsors to 

implement provisions related to 

pharmacy price concessions, discussed 

below, will be submitted to OMB for 

review under control number 0938– 

0982 (CMS–10174), as needed. 

This provision would require that Part 

D sponsors apply all pharmacy price 

concessions to the point of sale price in 

all phases of the Part D benefit 

excluding for applicable drugs 

dispensed to applicable beneficiaries in 

the coverage gap. Under this proposal, 

beneficiaries would see lower prices at 

the pharmacy point-of-sale and on Plan 

Finder, beginning immediately in the 

year the policy would take effect, 2023. 

We anticipate that this proposed change 

would require Part D sponsors to make 

certain system changes related to the 

calculation of the amounts they report 

in one or two fields in the PDE data 

collection form. We anticipate that this 

would cause sponsors to incur one-time 

administrative costs. 

To estimate the administrative costs 

associated with submission of PDE data, 

we consider the following factors: (1) 

The number of plan sponsors (or 

sponsors’ intermediaries) submitting 

data; (2) the amount of data that must 

be submitted; and (3) the time required 

to complete the data processing and 

transmission transactions. This 

information is summarized in Table 10. 

Throughout the narrative, the row 

references refer to this Table. 

Number of Part D Contracts 

(Respondents): The average number of 

Part D contracts per year (Row (B)) is 

856 (based on 2019–2021 internal CMS 

data). 

PDE Data Submission: The number of 

prescription drug events (PDE) for 2020 

is 1.5 billion (Row (C)). The average 

number of Part D contracts for the past 

3 years (2019–2021) is 856 (Row (B)). To 

compute the average number of 

responses per respondent, that is, the 

number of PDEs per contract (D), we 

divide the average number of PDEs per 

year (Row C) by the average number of 

contracts (Row B). This computation 

leads to an average of 1,752,336.45 

PDEs/contract (Row (D)) (1.5 billion 

divided by 856). A similar computation 

shows that the average number of PDEs 

per Part D enrollee is 30.5 (1.5 billion 


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TABLE 9: BURDEN ASSOCIATED WITH THE MLR PROVISIONS 

Responses Time per 

Total Hourly Number of Annual Total Cost Respondent Respondents per Response Time Labor Cost ($) Respondent (hours) (hours) ($/hr) 

Contracts subject to 

ML.R reporting 

requirement 601 1 24.34945 14,634 155.52 2,275,880 
Federal Register / Vol. 87, No. 8 / Wednesday, January 12, 2022 / Proposed Rules 1933 

PDE (Row (C)) divided by 49,229,626 

enrollees (as of November 2021) (Row 

(A)). 

Time Required to Process Data: The 

third factor that contributes to the 

burden estimate for submitting PDE data 

depends upon the time and effort 

necessary to complete data transaction 

activities. Since our regulations require 

Part D sponsors to submit PDE data to 

CMS that can be linked at the individual 

level to Medicare Part A and Part B data 

in a form and manner similar to the 

process provided under § 422.310, the 

data transaction timeframes will be 

based on risk adjustment and 

prescription drug industry experiences. 

Moreover, our PDE data submission 

format only supports electronic formats. 

The drug industry’s estimated average 

processing time for electronic data 

submission is 1 hour for 500,000 records 

(Row F). The drug industry further 

estimates that on average it costs 

$35.50/hr (for 2020) to process PDEs 

(Row E). 

Using these numbers, we can compute 

individual contract and aggregate 

burden. 

It would take 3.5 hours (Row G) on 

average for each respondent (contract) to 

process its 1,752,336.45 PDEs at a rate 

of 500,000 per hour (1,752,336.45 PDEs 

per contract (Row D) divided by 

500,000/hr (Row (F)). The aggregate 

hours to process all 1.5 billion claims is 

therefore 2,996 hours (Row H) (3.5 

hours/contract Row (G) × 856 contracts 

(Row (B)). 

The average cost per contract (Row (I)) 

is $124.25 (3.5 hours (Row G) × $35.50/ 

hr (Row E)). The aggregate one-time cost 

for all contracts is $106,358 (Row J), 

which can be obtained either by 

multiplying total hours (2,996 (Row (H)) 

by total contracts (856 (Row (B)) or by 

multiplying the cost per contract 

($124.25 (Row I)) by the number of 

contracts (856 (Row B)). 

C. Summary of Proposed Information 

Collection Requirements and Associated 

Burden Estimates 


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Row ID 

A 

B 

C 

D 

E 

F 

G 

H 

I 

J 

TABLE 10: ESTIMATED ADMINISTRATIVE COSTS RELATED TO 

SUBMISSION OF PRESCRIPTION DRUG EVENT (PDE) DATA 

Item Estimate Source/Derivation Descriotion 

Number of Part D Enrollees 

49,229,626 Internal CMS Data as of November 2021 

Average Number of 

Number of respondents 856 Internal CMS Data Contracts 2019-2021 

Total responses 1,500,000,000 Internal CMS data PD Es per year 

Average responses per 

resoondent 1,752,336.45 (C) I (B) Average PDEs per contract 

Drug industry's 

estimated cost/hr 

of electronic Cost/hr of processing PD Es 

Wage oer hour (Non labor) $35.50/hr processing electronically 

Drug industry's 

estimated average 

processing volume Number of Electronic PDEs 

500,000 per hour processed per hour 

Number of hours needed to 

Hours/respondent 3.5 (D) I (F) process one contract's PDEs 

Total hours to process all 

A1nrre1Iate hours 2 996 (G) X (8) contracts 

Cost per contract to process 

Cost per respondent $124.25 (G) X (E) PDEs 

Either (H) x (E) or 

Total cost all contracts 106 358 (I) X (B) Total cost for all contracts 
BILLING CODE 4120–01–C 


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TABLE 11. SUMMARY OF ANNUAL INFORMATIO COLLECTION REQUIREMENTS AND 

Regulation OMBControl 

Section in Part No.(CMSID Number of 

42 of the C:FR Item No.) Respondent Respondents 

422.107([) Solicit committee 0938-INSERT DSNPS 260 members (CMS-10799) 

422.101 Update HR.A System 0938-INSERT SNP Parent Organiz.ations 123 (CMS-10799) 

422.107(e) Update Contracts with 0938-INSERT State 12 D-SNPs (CMS-10796) 

422.107(e) Uodate Contracts 0938-0935 DSNPS 60 

422.107(e)(l) Part C Contracts with 0938--0935 DSNPS 41 onlvD SNPS 

422.107(e)(l) Part D Contracts with 0938--0936 DSNPS 41 univ D SNPS 

422.561 Uptlaw Contracts 0938-INSERT DSNPS 13 (CMS-10796) 

422.2267(0)(31) 1 pager multi- 1':IA Plans and Part D and 0938-lNSEKf 961 

423.2267(c){33)) lanaguage insert Sponsors 

422.2274(g) and Update policies on 3nl 0938-INSERT MA Plans 961 423.2274(g) oartv marketing 

422.2460 and lv!LR 0938-1232 MA and Part D Contracts 601 423.2460 

423.100 Part D Pharmacy Price 0938-0982 Part D Sponsors 856 Concessions 

Totals 1 096 

NOTES: 

*For States, bmdens, reflect 50 percent reduction to Federal ~atching program (hours are halved) 

.. Includes MA only, MA PD, and PDP plans. 

Ho

Labo

Time per Total o

Responses per Total Response Time Repo

Respondent Resnon!ile& (hours) (hours) (

I 260 40 10,400 

1 123 3 369 

1 12 12• 144 

1 60 8 480 

1 41 10 410 

1 41 6.41 263 1 13 8 104 

21,644 20,800,000 0 0 

1 961 2 1,922 

1 601 24.34945 14,634 

1,752,336 1,500,000,000 3.5 2,996 

Varies Varies 31 722 
Federal Register / Vol. 87, No. 8 / Wednesday, January 12, 2022 / Proposed Rules 1935 

D. Submission of Comments 

We have submitted a copy of this rule 

to OMB for its review of the rule’s 

proposed information collection 

requirements and burden. The 

requirements are not effective until they 

have been approved by OMB. 

To obtain copies of the supporting 

statement and any related forms for the 

proposed collections previously 

discussed, please visit CMS’s website at 

https://www.cms.gov/Regulations

andGuidance/Legislation/Paperwork

ReductionActof1995/PRAListing.html, 

or call the Reports Clearance Office at 

(410) 786–1326. 

We invite public comments on the 

proposed information collection 

requirements and burden. If you wish to 

comment, please submit your comments 

electronically as specified in the DATES

and ADDRESSES sections of this 

proposed rule and identify the rule 

(CMS–4192–P) and where applicable 

the ICR’s CFR citation, CMS ID number, 

and OMB control number. 

V. Regulatory Impact Statement 

A. Statement of Need 

This proposed rule would revise the 

MA and Part D program regulations to 

improve transparency in, and oversight 

of, these programs and to revise 

regulations to improve the integration of 

Medicare and Medicaid programs for 

individuals enrolled in dual eligible 

special needs plans (D–SNPs). This 

proposed rule would also revise 

regulations related to MA and Part D 

plans, D–SNPs, other special needs 

plans, and cost contract plans. 

Additional proposed revisions would 

implement changes related to 

requirements during disasters or public 

emergencies, past performance, MLR 

reporting, pharmacy price concessions, 

marketing and communications, Star 

Ratings, and network adequacy. 

Through proposals that apply to D– 

SNPs, we intend to improve beneficiary 

experiences, by amplifying the voices of 

dually eligible individuals in health 

plan governance and operations by 

requiring an enrollee advisory 

committee and requiring assessment of 

certain social risk factors. Additionally, 

our proposals will improve partnership 

with States through better Federal-State 

collaboration on oversight and 

performance improvement activities and 

establishing new pathways for CMS and 

States to collaborate to integrate care for 

dually eligible individuals. 

The proposed past performance 

proposals hold plans more accountable 

for their performance under MA and 

Part D and protect the best interest of 

the Medicare program by preventing 

those with poor past performance from 

entering new MA or Part D applications 

or service area expansions. The 

proposed Star Ratings provisions allow 

CMS to calculate 2023 Star Ratings for 

three Healthcare Effectiveness Data and 

Information Set measures that are based 

on the Health Outcomes Survey; due to 

the COVID–19 PHE in place nationwide 

during 2020, applying the 60 percent 

rule in the current regulations would 

result in removal of all contracts from 

threshold calculations and CMS would 

be unable to calculate ratings for these 

three measures. 

Due to a rule change that took effect 

with CY 2018 MLR reporting, MA 

organizations and Part D sponsors only 

submit to CMS the MLR percentage and 

amount of any remittance that must be 

repaid to CMS for failure to meet the 85 

percent minimum MLR requirement. 

CMS is proposing to change our 

regulations to reinstate the former 

requirement for MA organizations and 

Part D sponsors to submit the 

underlying information needed to 

calculate, and verify the accuracy of, the 

MLR and remittance amount. We 

believe reinstating this detailed data 

submission requirement and the desk 

review process will allow us to detect 

errors in the MLR calculation which can 

result in significant losses to the 

government. 

We are proposing to delete the 

existing definition of ‘‘negotiated 

prices’’ at § 423.100 and to adopt a new 

definition for the term ‘‘negotiated 

price’’ at § 423.100, which we are 

proposing to define as the lowest 

amount a pharmacy could receive as 

reimbursement for a covered Part D drug 

under its contract with the Part D plan 

sponsor or the sponsor’s intermediary 

(that is, the amount the pharmacy 

would receive net of the maximum 

negative adjustment that could result 

from any contingent pharmacy payment 

arrangement and before any additional 

contingent payment amounts, such as 

incentive fees). To implement the 

proposed change at the point-of-sale, 

Part D sponsors and their PBMs would 

load revised drug pricing tables 

reflecting the lowest possible 

reimbursement into their claims 

processing systems that interface with 

contracted pharmacies. This proposed 

provision would reduce out-of-pocket 

prescription drug costs, improve price 

transparency and market competition 

under the Part D program. 

We have proposed to clarify our 

regulations regarding the special 

requirements for disasters and 

emergencies at § 422.100(m) to address 

stakeholder concerns about the end of a 

disaster or emergencies and to codify 

previous guidance. We also proposed 

updates to them to allow smoother 

transitions for enrollees who during a 

disaster or emergency may have been 

obtaining services from out-of-network 

providers. 

B. Overall Impact 

We have examined the impacts of this 

rule as required by Executive Order 

12866 on Regulatory Planning and 

Review (September 30, 1993), Executive 

Order 13563 on Improving Regulation 

and Regulatory Review (January 18, 

2011), the Regulatory Flexibility Act 

(RFA) (September 19, 1980, Pub. L. 96– 

354), section 1102(b) of the Social 

Security Act, section 202 of the 

Unfunded Mandates Reform Act of 1995 

(March 22, 1995; Pub. L. 104–4), 

Executive Order 13132 on Federalism 

(August 4, 1999), and the Congressional 

Review Act (5 U.S.C. 804(2)). 

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). Section 3(f) of Executive Order 

12866 defines a ‘‘significant regulatory 

action’’ as an action that is likely to 

result in a rule: (1) Having an annual 

effect on the economy of $100 million 

or more in any 1 year, or adversely and 

materially affecting a sector of the 

economy, productivity, competition, 

jobs, the environment, public health or 

safety, or state, local or tribal 

governments or communities (also 

referred to as ‘‘economically 

significant’’); (2) creating a serious 

inconsistency or otherwise interfering 

with an action taken or planned by 

another agency; (3) materially altering 

the budgetary impacts of entitlement 

grants, user fees, or loan programs or the 

rights and obligations of recipients 

thereof; or (4) raising novel legal or 

policy issues arising out of legal 

mandates, the President’s priorities, or 

the principles set forth in the Executive 

order. 

A regulatory impact analysis (RIA) 

must be prepared for major rules with 

significant regulatory action/s and/or 

with economically significant effects 

($100 million or more in any 1 year). 

Based on our estimates, OMB’s Office of 

Information and Regulatory Affairs has 

determined this rulemaking is 

‘‘economically significant’’ as measured 

by the $100 million threshold. While 

the total annualized costs for this rule 

are about $3.5 million a year, as 

indicated in Table 20, the net transfers 


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1936 Federal Register / Vol. 87, No. 8 / Wednesday, January 12, 2022 / Proposed Rules 

146North American Industry Classification 

System (2017). Retrieved from: https://

www.census.gov/eos/www/naics/2017NAICS/2017_

NAICS_Manual.pdf. https://www.sba.gov/sites/ 

default/files/2019-08/SBA%20Table%20

of%20Size%20Standards_Effective%20

Aug%2019%2C%202019.pdf. 

from the Trust Fund to enrollees and 

manufacturers exceed $100 million 

annually. Accordingly, we have 

prepared a Regulatory Impact Analysis 

that to the best of our ability presents 

the costs and benefits of the rulemaking. 

Section 202 of the Unfunded 

Mandates Reform Act of 1995 also 

requires that agencies assess anticipated 

costs and benefits before issuing any 

rule whose mandates require spending 

in any 1 year of $100 million in 1995 

dollars, updated annually for inflation. 

In 2021, that threshold is approximately 

$158 million. This rule will not 

mandate on an unfunded basis any 

requirements for State, local, or tribal 

governments nor would it result in 

expenditures by the private sector 

meeting that threshold in any 1 year. 

Executive Order 13132 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. 

Under Executive Order 13132, this 

proposed rule will not significantly 

affect the States. It follows the intent 

and letter of the law and does not usurp 

State authority beyond what the Act 

requires. This rule describes the 

processes that must be undertaken by 

CMS, the States, and D–SNPs in order 

to implement and administer the 

requirements of the MA program. In 

accordance with the provisions of 

Executive Order 12866, this proposed 

rule was reviewed by OMB. 

If regulations impose administrative 

costs on reviewers, such as the time 

needed to read and interpret this 

proposed rule, then we should estimate 

the cost associated with regulatory 

review. As of November 2021, there are 

962 contracting organizations with CMS 

(which includes MA, MA–PD, and PDP 

contracts). Additionally, there are 55 

state Medicaid Agencies, and 300 

Medicaid MCOs. We also expect a 

variety of other organizations to review 

(for example, consumer advocacy 

groups, major PBMs). A reasonable 

maximal number is 1,500 total entities 

who will review this rule. We note that 

other assumptions are possible. We 

assume each organization will designate 

two people to read the rule. 

Using the BLS wage information for 

medical and health service managers 

(code 11–9111), we estimate that the 

cost of reviewing this proposed rule is 

$114.24 per hour, which includes 100 

percent increase for fringe benefits and 

overhead costs (https://www.bls.gov/ 

oes/current/oes_nat.htm). Assuming an 

average reading speed, we estimate that 

it will take approximately 8 hours for 

each person to review this entire 

proposed rule. For each person that 

reviews this proposed rule, the 

estimated cost is therefore $900 (8 hours 

× $114.24). Therefore, we estimate that 

the maximum total cost of reviewing 

this entire proposed rule is $2.7 million 

($900 × 1,500 entities × 2 reviewers/ 

entity). 

We note that this analysis assumed 

two readers per contract. Some 

alternatives include assuming one 

reader per parent organization. Using 

parent organizations instead of contracts 

will reduce the number of reviewers. 

However, we expect it is more 

reasonable to estimate review time 

based on the number of contracting 

organizations because a parent 

organization might have local reviewers 

assessing potential region-specific 

effects from this proposed rule. 

C. Regulatory Flexibility Act (RFA) 

Executive Order 13272 requires that 

HHS thoroughly review rules to assess 

and take appropriate account of their 

potential impact on small business, 

small governmental jurisdictions, and 

small organizations (as mandated by the 

RFA). If a proposed rule may have a 

significant economic impact on a 

substantial number of small entities, 

then the proposed rule must discuss 

steps taken, including alternatives, to 

minimize burden on small entities. The 

RFA does not define the terms 

‘‘significant economic impact’’ or 

‘‘substantial number.’’ The Small 

Business Administration (SBA) advises 

that this absence of statutory specificity 

allows what is ‘‘significant’’ or 

‘‘substantial’’ to vary, depending on the 

problem that is to be addressed in the 

rulemaking, the rule’s requirements, and 

the preliminary assessment of the rule’s 

impact. Nevertheless, HHS typically 

considers a ‘‘significant’’ impact to be 3 

to 5 percent or more of the affected 

entities’ costs or revenues. 

For purposes of the RFA, we estimate 

that many affected payers are small 

entities as that term is used in the RFA, 

either by being nonprofit organizations 

or by meeting the SBA definition of a 

small business. For purposes of the 

RFA, small entities include small 

businesses, nonprofit organizations, and 

small governmental jurisdictions. The 

North American Industry Classification 

System (NAICS) is used to classify 

businesses by industry and is used by 

the United States, Canada, and Mexico. 

While there is no distinction between 

small and large businesses among the 

NAICS categories, the SBA develops 

size standards for each NAICS 

category.146 Note that the most recent 

update to the NAICS classifications 

went into effect for the 2017 reference 

year. The latest size standards are for 

2019. 

As can be seen from the Summary of 

Annual Information Collection 

Requirements and Burden table (Table 

11) in section IV.C. of this proposed 

rule, as well as Table 20 of this section, 

on average, the net cost to each plan to 

implement all provisions is significantly 

below $10,000 (The annualized cost 

over 10 years of $3.5 million divided by 

the number of contracts, about 1,000, is 

significantly below $10,000). 

Additionally, not all provisions apply to 

all plans. We do not believe this to be 

excessive burden even to small entities. 

Nevertheless, a more complete analysis 

is provided immediately below 

supporting the position that burden is 

not excessive. 

Although States are also affected by 

these provisions, States are not 

classified as small entities and in any 

event the burden as just indicated is 

small. 

The relevant NAICS category is Direct 

Health and Medical Insurance Carriers, 

NAICS 524114, with a $41.5 million 

threshold for ‘‘small size,’’ with 75 

percent of insurers having under 500 

employees meeting the definition of 

small business. 

MA organizations and Medicaid 

managed care plans have their costs 

funded by the Federal government or 

State and therefore there is no 

significant burden. We discuss the 

details of this in this section. This 

discussion will establish that there is no 

significant burden to a significant 

number of entities from this proposed 

rule for these provisions. 

1. Medicare Advantage 

Each year, MA plans submit a bid for 

furnishing Part A and B benefits and the 

entire bid amount is paid by the 

government to the plan if the plan’s bid 

is below an administratively set 

benchmark. If the plan’s bid exceeds 

that benchmark, the beneficiary pays the 

difference in the form of a basic 

premium (note that a small percentage 

of plans bid above the benchmark, 

whereby enrollees pay a basic premium, 

thus this percentage of plans is not 

‘‘significant’’ as defined by the RFA and 

as justified below). 


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MA and MA–PD plans can also offer 

supplemental benefits, that is, benefits 

not covered under Original Medicare (or 

under Part D). These supplemental 

benefits are paid for through enrollee 

premiums, extra government payments 

or a combination. Under the statutory 

payment formula, if the bid submitted 

by a Medicare Advantage plan for 

furnishing Part A and B benefits is 

lower than the administratively set 

benchmark, the government pays a 

portion of the difference to the plan in 

the form of a ‘‘beneficiary rebate.’’ The 

rebate must be used to provide 

supplemental benefits (that is, benefits 

not covered under Original Medicare) 

and/or lower beneficiary Part B or Part 

D premiums. Some examples of these 

supplemental benefits include vision, 

dental, hearing, fitness and worldwide 

coverage of emergency and urgently 

needed services. 

To the extent that the government’s 

payments to plans for the bid plus the 

rebate exceeds costs in Original 

Medicare, those additional payments 

put upward pressure on the Part B 

premium which is paid by all Medicare 

beneficiaries, including those in 

Original Medicare who do not have the 

supplemental coverage available in 

many MA plans. 

Part D plans, including MA–PD plans, 

submit bids and those amounts are paid 

to plans through a combination of 

Medicare funds and beneficiary 

premiums. In addition, for enrolled lowincome beneficiaries Part D plans 

receive government funds to cover most 

of premium and cost sharing amounts 

those beneficiaries would otherwise 

pay. 

Thus, the cost of providing services 

by these insurers is funded by a variety 

of government funding and in some 

cases by enrollee premiums. As a result, 

MA and Part D plans are not expected 

to incur burden or losses since the 

private companies’ costs are being 

supported by the government and 

enrolled beneficiaries. This lack of 

expected burden applies to both large 

and small health plans. 

Small entities that must comply with 

MA regulations, such as those in this 

proposed rule, are expected to include 

the costs of compliance in their bids, 

thus avoiding additional burden, since 

the cost of complying with any final 

rule is funded by payments from the 

government and, if applicable, enrollee 

premiums. 

For Direct Health and Medical 

Insurance Carriers, NAICS 524114, MA 

plans estimate their costs for the 

upcoming year and submit bids and 

proposed plan benefit packages. Upon 

approval, the plan commits to providing 

the proposed benefits, and CMS 

commits to paying the plan either—(1) 

the full amount of the bid, if the bid is 

below the benchmark, which is a ceiling 

on bid payments annually calculated 

from Original Medicare data; or (2) the 

benchmark, if the bid amount is greater 

than the benchmark. 

If an MA plan bids above the 

benchmark, section 1854 of the Act 

requires the MA plan to charge enrollees 

a premium for that amount. Historically, 

only two percent of plans bid above the 

benchmark, and they contain roughly 

one percent of all plan enrollees. The 

CMS threshold for what constitutes a 

substantial number of small entities for 

purposes of the RFA is 3 to 5 percent. 

Since the number of plans bidding 

above the benchmark is two percent, 

this is not considered substantial for 

purposes of the RFA. 

The preceding analysis shows that 

meeting the direct cost of this proposed 

rule does not have a significant 

economic impact on a substantial 

number of small entities, as required by 

the RFA. 

There are certain indirect 

consequences of these provisions which 

also create impact. We have already 

explained that 98 percent of the plans 

bid below the benchmark. Thus, their 

estimated costs for the coming year are 

fully paid by the Federal government. 

However, the government additionally 

pays the plan a ‘‘beneficiary rebate’’ 

amount that is an amount equal to a 

percentage (between 50 and 70 percent 

depending on a plan’s quality rating) 

multiplied by the amount by which the 

benchmark exceeds the bid. The rebate 

is used to provide additional benefits to 

enrollees in the form of reduced costsharing or other supplemental benefits, 

or to lower the Part B or Part D 

premiums for enrollees. (Supplemental 

benefits may also partially be paid by 

enrollee premiums.) It would follow 

that if the provisions of this proposed 

rule cause the MA bid to increase and 

if the benchmark remains unchanged or 

increases by less than the bid does, the 

result would be a reduced rebate and, 

possibly fewer supplemental benefits, or 

higher premiums for the health plans’ 

enrollees. However as noted above, the 

number of plans bidding above the 

benchmark to whom this burden applies 

do not meet the RFA criteria of a 

significant number of plans. 

It is possible that if the provisions of 

this rule would otherwise cause bids to 

increase, plans will reduce their profit 

margins, rather than substantially 

change their benefit package. This may 

be in part due to market forces; a plan 

lowering supplemental benefits even for 

1 year may lose its enrollees to 

competing plans that offer these 

supplemental benefits. Thus, it can be 

advantageous to the plan to temporarily 

reduce profit margins, rather than 

reduce supplemental benefits. 

2. Medicaid 

We include Medicaid in this section 

since it is relevant to the proposed 

change to the applicable integrated plan 

(AIP) definition at § 422.561. At 

§ 422.561, we propose to expand the 

universe of D–SNPs that are required to 

have unified grievance and appeals 

processes by revising the definition of 

an applicable integrated plan. Section 

50311(b) of the BBA of 2018 amended 

section 1859(f)(8)(B) of the Act to direct 

establishment of procedures, to the 

extent feasible, unifying Medicare and 

Medicaid grievances and appeals. The 

April 2019 final rule introduced the 

concept of applicable integrated plans, 

which we defined as FIDE SNPs and 

HIDE SNPs whose Medicare and 

Medicaid enrollment is exclusively 

aligned (meaning State policy limits a 

D–SNP’s enrollment to those whose 

Medicare and Medicaid enrollment is 

aligned as defined in § 422.2) and the 

companion Medicaid MCOs for those 

D–SNPs, thereby making it feasible for 

these plans to implement unified 

grievance and appeals processes. We 

believe that unified grievance and 

appeals procedures are feasible for the 

additional D–SNPs. While we are not 

imposing new Medicaid requirements, 

the proposed AIP definition change 

would expand the universe of Medicaid 

managed plans subject to the unified 

appeals and grievances provisions 

codified in the April 2019 final rule. 

However, the burden imposed by this 

proposed rule on Medicaid managed 

care plans is the one-time requirement 

to update their grievance and appeals 

procedures, which as estimated in Table 

11, is a one-time cost of $8,430. 

Consequently, the Secretary has 

determined that this proposed rule will 

not have a significant impact on 

Medicaid managed care plans. 

Therefore, the Secretary has certified 

that this proposed rule will not have a 

significant economic impact on a 

substantial number of small entities. 

Based on the above, we conclude that 

the requirements of the RFA have been 

met by this proposed rule. 

3. Rural Hospitals 

Section 1102(b) of the Social Security 

Act requires us to prepare a regulatory 

impact analysis if a rule may have a 

significant impact on the operations of 

a substantial number of small rural 

hospitals. This rule however is directed 

to plans and enrollees. Providers 


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1938 Federal Register / Vol. 87, No. 8 / Wednesday, January 12, 2022 / Proposed Rules 

147Resources for Integrated Care and Community 

Catalyst, ‘‘Member Engagement in Plan Governance 

Webinar Series’’, 2019. Retrieved from: https://

www.resourcesforintegratedcare.com/concepts/ 

member_engagement. 

148See the locality pay tables for 2021 at https:// 

www.opm.gov/policy-data-oversight/pay-leave/ 

salaries-wages/2021/general-schedule/. 

149CMS Special Needs Plan Comprehensive 

Report, January 2021. Retrieved from: https://

www.cms.gov/Research-Statistics-Data-andSystems/Statistics-Trends-and-Reports/ 

MCRAdvPartDEnrolData/Special-Needs-Plan-SNPData#:∼:text=Special%20

Needs%20Plan%20%28SNP%29%20

Data%20%20%20,%20%202021-03%20%206%20

more%20rows%20. 

including hospitals receive the 

contracted rate or at least the original 

Medicare rate depending on whether the 

providers are contracted or not. 

Consequently, the Secretary has 

certified that this proposed rule will not 

have a significant economic impact on 

a substantial number of small entities. 

D. Anticipated Effects 

1. Enrollee Participation in Plan 

Governance (§ 422.107) 

As described in section II.A.3. of this 

proposed rule, at § 422.107(f), we 

propose that any MA organization 

offering a D–SNP must establish one or 

more enrollee advisory committees at 

the State level or other service area level 

in the State to solicit direct input on 

enrollee experiences. We also propose at 

§ 422.107(f) that the committee include 

a reasonably representative sample of 

individuals enrolled in the D–SNP(s) 

and solicit input on, among other topics, 

ways to improve access to covered 

services, coordination of services, and 

health equity for underserved 

populations. This proposal intends to 

ensure enrollees are engaged in 

defining, designing, participating in, 

and assessing their care systems. 

Section IV.B.1. presents the collection of 

information burden for this provision. 

To support D–SNPs in establishing 

enrollee advisory committees that meet 

the objective of this proposed rule in 

achieving high-quality, comprehensive, 

and coordinated care for dually eligible 

individuals, CMS would provide 

technical assistance to D–SNPs to share 

engagement strategies and other best 

practices. CMS can leverage the body of 

technical assistance developed for 

MMPs. For example, the CMS contractor 

Resources for Integrated Care partnered 

with Community Catalyst, a non-profit 

advocacy organization, to offer a series 

of webinars and other written technical 

assistance to help enhance MMPs’ 

operationalization of these 

committees.147 CMS will be able to 

realize efficiencies by repurposing and 

building on these resources. Based on 

the existing technical assistance 

contracts held by CMS, we estimate an 

annual cost to the federal government of 

$15,000. 

2. Refining Definitions for Fully 

Integrated and Highly Integrated D– 

SNPs (§ 422.2) 

We have presented a discussion of 

collection of information burden 

associated with this provision in section 

IV.B.3. of this proposed rule. In this 

section, we describe the impacts of our 

proposed definition changes of: (1) 

Requiring exclusively aligned 

enrollment for FIDE SNPs; (2) capitation 

of Medicare cost-sharing; (3) clarifying 

the scope of services covered by a FIDE 

or HIDE; (4) Medicaid carve-outs; and 

(5) requiring service area overlap with 

the corresponding Medicaid plan. We 

anticipate all proposed changes to the 

definition of FIDE SNP and HIDE SNP 

will result in additional time for CMS 

staff to review D–SNPs’ contracts with 

State Medicaid agencies. We estimate 

that a GS level 13, step 5 (GS–13–5), 

employee will take an additional 20 

minutes per State to confirm the 

contract meets the updated definitions. 

For CY 2022, 21 States have FIDE SNPs, 

HIDE SNPs, or both. Therefore, we 

estimate that the proposed rule would 

result in 7 hours (20 minutes × 21 State 

contracts) of additional work for a GS– 

13–5 Federal employee. The 2021 

hourly wage for a GS–13–5 Federal 

employee for the Baltimore Washington 

Area, which is close to the average 

hourly wage over all localities, is 

$56.31.148 We allow 100 percent for 

fringe benefits and overtime, increasing 

the hourly wage to $112.62. Thus, the 

expected additional annual cost for 

reviewing the contract is $788. 

a. Exclusively Aligned Enrollment for 

FIDE SNPs 

Under the proposal to require 

exclusively aligned enrollment for FIDE 

SNPs described in section II.A.5.a. of 

this proposed rule, we note that 12 D– 

SNPs may lose FIDE SNP status and no 

longer qualify for the frailty adjustment 

described in section 1853(a) of the Act 

and the regulation at § 422.308(c)(4). Of 

these 12 FIDE SNPs, six are currently 

receiving the frailty adjustment. We 

believe that these six FIDE SNPs are 

likely to have exclusively aligned 

enrollment by CY 2025 as only a small 

fraction of their current enrollment is 

currently unaligned and there are 

multiple options through which MA 

organizations can meet the proposed 

requirement. Therefore, we do not 

believe the proposal will result in a 

significant reduction of Medicare 

payments from FIDE SNPs losing the 

frailty adjustment. 

b. Capitation for Medicare Cost-Sharing 

for FIDE SNPs 

We do not anticipate any cost 

transfers from the State to FIDE SNPs 

resulting from the proposals at § 422.2 

to require that the capitated contract 

with the State Medicaid agency for a 

FIDE SNP must include coverage of 

Medicare cost-sharing (that is, payment 

by Medicaid of Medicare cost-sharing 

for the dually eligible individual), 

where applicable, and Medicaid 

behavioral health services. Currently, all 

69 FIDE SNPs include coverage of 

Medicare cost-sharing in their capitated 

contracts with the State Medicaid 

agency.149 As noted in section II.A.5.b. 

of this proposed rule, most FIDE SNPs 

already include Medicaid behavioral 

health benefits in their capitated 

contracts with the State Medicaid 

agency. The remaining FIDE SNPs in 

California and Pennsylvania that do not 

currently cover Medicaid behavioral 

health benefits would likely become 

HIDE SNPs under the definition 

proposed at § 422.2. These impacted D– 

SNPs would not experience a direct 

impact on costs when becoming a HIDE 

SNP as benefits covered by the impacted 

D–SNP would not change. Nor would 

impacted D–SNPs experience a change 

to revenue, as none of the impacted D– 

SNPs receive the frailty adjustment. 

3. Additional Opportunities for 

Integration Through State Medicaid 

Agency Contracts (§ 422.107) 

As described in section II.A.6. of this 

proposed rule, we propose a new 

paragraph (e) at § 422.107 to describe 

conditions through which States may 

require certain contract terms for D– 

SNPs and how CMS would facilitate 

compliance with those contract terms. 

This proposal allows States to further 

promote integration using the State 

Medicaid agency contract with D–SNPs, 

with the goal of improving beneficiary 

experiences and health plan oversight. 

Proposed paragraph (e)(1) applies only 

for State Medicaid agency contracts 

through which the State requires 

exclusively alignment enrollment, as 

defined in § 422.2, and establishes that 

States may choose to require and CMS 

would permit MA organizations— 

through the existing MA application 

process—to establish MA contracts that 

only include one or more State-specific 

D–SNPs and require that all such D– 

SNPs use integrated member materials. 


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a. State Medicaid Agency Contract 

Requirements 

Section IV.B.4. of this proposed rule 

describes the total cost for the State to 

update the State Medicaid agency’s 

contract with the D–SNPs in its market 

to address the changes in this proposed 

rule and consult with CMS to ensure 

contract changes meet the proposed 

requirements at § 422.107(e). Half of the 

cost ($20,618) could be claimed by the 

State as Federal financial participation 

for administrative costs of the Medicaid 

program, born by the Federal 

government. In addition to updating the 

State Medicaid agency contract, a State 

choosing to further integration through 

proposed § 422.107(e) would need to 

determine readiness and make changes 

to State policy. The State’s time and cost 

for adopting this proposed rule would 

depend on the State’s current level of 

integration. For example, 11 States 

currently have a policy for exclusively 

aligned enrollment, and Massachusetts, 

New Jersey, and New York have worked 

with CMS to integrate some member 

materials. These States that have taken 

steps toward integration may use less 

time and resources to take advantage of 

the new processes proposed at 

§ 422.107(e) than States just beginning 

to integrate Medicare and Medicaid 

using D–SNPs. Given the uncertainty 

involved in estimating State behavior 

and levels of existing integration, we are 

not estimating any additional burden 

outside of updating the State Medicaid 

agency contract with D–SNPs. We 

request comment on what State 

resources are needed to use the pathway 

for requiring or achieving higher 

integration and collaboration with CMS 

as described in proposed § 422.107(e) in 

a State with limited D–SNP integration 

(for example, a State with no FIDE SNPs 

or HIDE SNPs). 

b. Limiting Certain MA Contracts to D– 

SNPs 

We propose at § 422.107(e) to codify 

a pathway that would result, in certain 

circumstances, in contracts that only 

include one or more D–SNPs with 

exclusively aligned enrollment within a 

State. Because Star Ratings are reported 

at the contract level, having a contract 

with only the D–SNPs in a particular 

State would allow dually eligible 

individuals in that State to ascertain the 

full quality performance of a D–SNP and 

better equip States to work with their D– 

SNPs to improve health equity. 

We describe the collection of 

information burden for MA 

organizations resulting from 

establishing a D–SNP-only contract in 

section IV.B.4.b. of this proposed rule. 

However, the additional Part C and D 

applications necessary to create separate 

contracts covering only D–SNPs in a 

particular state also result in additional 

Federal costs. While the collection of 

information packages lay out the 

Federal burden to process Part C and D 

applications, they do not list out the 

cost per contract application. We 

estimate the additional contract 

submissions for D–SNP only contracts 

would at most cost an additional 

$50,000 in labor burden for the Federal 

government annually. 

We note impacted D–SNP contracts 

may have changes to their quality bonus 

payments (QBP), as the new contract’s 

payment will initially be calculated 

from the parent organization’s 

enrollment-weighted average quality 

rating and eventually only on the 

performance under the new contract. 

We are unable to predict if QBPs will 

increase or decrease for these MA 

organizations due to separating D–SNPs 

from the original contracts into separate 

contracts. 

c. Integrated Member Materials 

As described in section II.A.6.b. of 

this proposed rule, to provide a more 

coordinated beneficiary experience, we 

propose at § 422.107(e) to codify a 

pathway by which States and CMS 

would collaborate to establish model 

materials when a State chooses to 

require through its State Medicaid 

agency contract that certain D–SNPs use 

an integrated SB, Formulary, and 

combined Provider and Pharmacy 

Directory. Proposed § 422.107(e)(1) 

establishes factual circumstances that 

would commit CMS to certain actions 

under paragraphs (e)(2) and (3). 

In section IV.B.4.c. of this proposed 

rule, we note that we do not intend 

through this proposal to significantly 

change timelines for D–SNPs to prepare 

materials, nor do we intend to mandate 

that States require D–SNPs to use 

integrated materials. We do not estimate 

any additional costs for States or plans 

to implement integrated member 

materials as proposed at § 422.107(e) 

due to existing State efforts to work with 

Medicaid managed care plans to comply 

with information requirements at 

§ 438.10 and to work with D–SNPs to 

populate Medicaid benefits for Medicare 

member materials. Our proposal, if 

finalized, would simply assure 

interested States that, under the 

conditions of proposed paragraph (e), 

CMS would do its part to make it 

possible for D–SNPs to comply with 

State Medicaid agency contract terms 

for D–SNP-only contracts and integrated 

enrollee materials. Further, States 

already work with Medicaid managed 

care plans to comply with information 

requirements at § 438.10 and to work 

with D–SNPs to populate Medicaid 

benefits for Medicare member materials. 

Therefore, we do not estimate any 

additional burden for States or plans to 

implement integrated member materials 

as proposed at § 422.107(e). 

We anticipate costs to CMS will be 

similar to past work done to collaborate 

with States to improve the integration 

and effectiveness of beneficiary 

materials. To test materials, we 

conducted individual interviews with 

dually eligible individuals and desk 

reviews by contractors, CMS subject 

matter experts, and advocacy 

organizations. Since 2015, we have 

tested an integrated EOC, ANOC, SB, 

Formulary, and combined Provider and 

Pharmacy Directory. 

We estimate that each of the model 

documents under proposed 

§ 422.107(e)—the SB, Formulary, and 

combined Provider and Pharmacy 

Directory—will require 40 hours of 

work from CMS staff (a GS–13–5 

Federal employee) working at $112.62/ 

hr. The projected cost to the Federal 

government for 120 hours (40 hours × 3 

documents) of a GS–13–5 employee is 

$13,500. 

In our experience, a desk review from 

a contractor is approximately $10,000 

per document and a study of the 

documents consisting of dually eligible 

individuals interviews costs $25,000 per 

document. Therefore, we anticipate the 

contractor costs for integrated member 

materials to be $105,000 ($10,000 × 3 

documents + $25,000 × 3 documents). 

Therefore, the total cost to the Federal 

Government of our proposal on 

integrating member materials is 

$118,500. 

d. Joint State/CMS Oversight 

In section II.A.6.c. of this proposed 

rule, we discuss our proposals at 

§ 422.107(e)(3) to better coordinate State 

and CMS monitoring and oversight of 

D–SNPs that operate under the 

conditions described at proposed 

paragraph (e)(1). These coordination 

mechanisms include sharing relevant 

plan information, coordinating program 

audits, and consulting on network 

exception requests. We cannot estimate 

the cost of uncoordinated State and 

federal oversight, but we believe this 

provision would result in a reduction in 

administrative burden for D–SNPs. 

States will have the ability to determine 

what level of resources is needed for 

their related work, and we believe States 

likely to elect to use the pathway 

described in proposed § 422.107(e) 

would already have resources invested 

in coordinating care between MCOs and 


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D–SNPs and would otherwise make 

choices that avoid significant increases 

in State burden. 

At paragraph (e)(3)(i), we propose that 

CMS would grant State access to HPMS, 

or any successor system, to facilitate 

monitoring and oversight for a D–SNP 

with exclusively aligned enrollment in 

an MA contract that only includes one 

or more D–SNPs operating within the 

State. Our proposal would require the 

State officials and employees accessing 

HPMS to comply with applicable laws 

and CMS policies and standards for 

access to that system, including keeping 

information confidential and 

maintaining system security. This 

access would allow State users the 

ability to directly view D–SNP 

information without requiring or asking 

the D–SNP to send the information to 

the States and would facilitate StateCMS communication on D–SNP 

performance since more people are able 

to review the data and information. MA 

organizations may benefit when it 

reduces the need for States to separately 

obtain the same information that is 

already available in HPMS. 

Providing this HPMS access to State 

users would require HPMS contractors 

to update several modules, including 

user access and coding changes needed 

to implement the necessary access. 

HPMS contractors estimated that there 

would be a one-time update costing 

approximately $750,000. 

4. Attainment of the Maximum Out-ofPocket (MOOP) Limit (§§ 422.100 and 

422.101) 

As described in section II.A.12. of this 

proposed rule, CMS proposes a revision 

to which costs are tracked and 

accumulate toward the MOOP limit for 

dually eligible enrollees in MA plans 

under § 422.101 for MA regional plans 

and § 422.100(f)(4) and (5) for all other 

MA plans. Our proposal would result in 

MA organizations that, under current 

policy, rarely or never pay cost-sharing 

above the MOOP limit for dually 

eligible enrollees being held responsible 

for payment of cost-sharing amounts 

above the MOOP limit. As a result, our 

proposal may lead to an increase in the 

plan bids relative to the benchmark for 

dually eligible individuals who would 

receive the same cost-sharing protection 

provided by the MOOP that is now 

afforded non-dually eligible individuals. 

However, in the short term, as we note 

above, MA organizations may prefer to 

reduce their profit margins, rather than 

substantially raise their bids and 

thereby reduce the rebate dollars 

available for supplemental benefits. 

Specifically, CMS proposes that all 

cost-sharing for Medicare Parts A and B 

services accrued under the plan benefit 

package, including cost-sharing paid by 

any applicable secondary or 

supplemental insurance (such as 

through Medicaid, employer(s), and 

commercial insurance) and any costsharing that remains unpaid because of 

limits on Medicaid liability for 

Medicare cost-sharing under the lesserof policy and the cost-sharing 

protections afforded certain dually 

eligible individuals, is counted towards 

the MOOP limit. This would ensure that 

once an enrollee, including a dually 

eligible individual with cost-sharing 

protections, has accrued cost-sharing 

(deductibles, coinsurance, or copays) 

that reaches the MOOP limit, the MA 

plan must pay 100 percent of the cost 

of covered Medicare Part A and Part B 

services. As a result, the State Medicaid 

agency would no longer be responsible 

for any Medicare cost-sharing for the 

remainder of the year. In addition, 

providers serving dually eligible MA 

enrollees with Medicare cost-sharing 

above the MOOP limit would be fully 

reimbursed for this cost-sharing for the 

remainder of the year. Now, some of 

that cost-sharing is unpaid because of 

limits on State payment of Medicare 

cost-sharing and prohibitions on 

collection of Medicare-cost sharing from 

certain dually eligible beneficiaries. We 

believe this proposed change to the costsharing that MA organizations must use 

to determine when the MOOP limit has 

been reached will mitigate existing 

provider payment disincentives related 

to serving dually eligible MA enrollees. 

As a result, the proposal may improve 

access to providers, including 

specialists, who currently limit the 

number of dually eligible MA enrollees 

they serve or decline to contract with D– 

SNPs. However, we are unable to 

quantify the extent to which any 

improved access would affect utilization 

of services by dually eligible MA 

enrollees and thereby affect Medicare 

spending. 

Our proposal would increase the 

amount of MA organization payments to 

providers serving dually eligible 

individuals enrolled in MA plans after 

the MOOP limit is reached. As a result, 

our proposal may lead to an increase in 

the plan bids relative to the benchmark 

for dually eligible individuals who 

would receive the same cost-sharing 

protection provided by the MOOP that 

is now afforded non-dually eligible 

individuals. 

To estimate the costs of the proposal, 

we started with CY2022 bid data to 

estimate the Medicare cost-sharing 

accrued by dually eligible beneficiaries 

with cost-sharing protections (full 

benefit dually eligible individuals and 

QMB enrollees) above the mandatory 

MOOP level ($7,550 in 2022). We 

estimated the cost of Medicare costsharing above this MOOP level to be on 

average $22.99 per person per month. 

Then we multiplied this amount by 41 

percent to reflect the portion of dually 

eligible enrollees in MA organizations 

that already accrue cost sharing towards 

the MOOP level to arrive at $9.43 as the 

additional per person per month bid 

cost. Based on projected MA enrollment 

of dually eligible beneficiaries and other 

factors described in this section, this 

proposal would result in additional 

payments from MA organizations to 

health care providers serving high cost 

dually eligible MA enrollees, 

represented in the annual MA bid costs 

shown in column 2 of Table 12. 

Only a portion of the projected higher 

MA organization bids for MOOP 

benefits represent higher costs to 

Medicare. MA rebates are calculated as 

an average of 68 percent of the 

difference between the bids and 

benchmarks. The additional cost to the 

Medicare Trust Funds is estimated to be 

the remaining 32 percent increase in 

bids. After reflecting the change in 

rebates, the per member per month cost 

to Medicare of the proposed policy is 32 

percent of $9.43, or $3. 

To project annual costs, we used 

projected enrollment by dually eligible 

beneficiaries in MA plans, as well as 

Trustee’s Report USPCC cost and 

utilization trends. We also projected 

annual increases in the mandatory 

MOOP amounts under current 

regulations. The cost to Medicare based 

on our proposed changes would be 

partly offset by the savings to Medicaid 

for payment of Medicare cost-sharing 

over the MOOP limit for dually eligible 

individuals. While some State Medicaid 

agencies may save as much as the 

projected increase in bid costs per 

dually eligible MA enrollee in their 

State, the savings from this proposal 

will likely be less for most States. The 

majority of States have a ‘‘lesser-of’’ 

policy, under which the State caps its 

payment of Medicare cost-sharing so 

that the sum of Medicare payment and 

cost-sharing does not exceed the 

Medicaid rate for a particular service. 

We estimate that, based on average 

differences in State Medicaid and 

Medicare provider contracted rates, 39 

percent of the costs of MOOP coverage 

under our proposal represents Medicaid 

savings. Of those savings, 57 percent 

accrue to the Federal government based 

on the average FMAP rate of 57 percent. 

Those annual savings are shown in 

column 4 of Table 12. 

Finally, 25 percent of the additional 

Medicare costs that represent Part B 


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Federal Register / Vol. 87, No. 8 / Wednesday, January 12, 2022 / Proposed Rules 1941 

costs (Part B accounts for 60 percent of 

the costs of Parts A and B benefits 

provided by Medicare Advantage 

organizations) are offset by beneficiary 

premiums for Part B, as shown in 

column 6 of Table 12. The total Federal 

costs of the proposal, net of Federal 

Medicaid savings and the Part B 

premium offset are shown in column 7 

of Table 12. 

We note that there is uncertainty 

inherent in this analysis. In using the 

bid data, we made some assumptions 

about the extent to which MA 

organizations are already counting all 

cost-sharing in the plan benefit, 

including amounts paid by Medicaid 

programs, towards the MOOP limit. In 

addition, MA organizations may prefer 

to reduce their gain/loss margins, rather 

than substantially change their benefit 

package, when rebates are reduced in 

the short term. However, our estimate of 

the added bid benefit costs does not 

assume that MA organizations will 

absorb any portion of these costs by 

reducing their gain/loss margins. 

BILLING CODE 4120–01–P 

BILLING CODE 4120–01–C 

No additional goods or services are 

being created. Rather, the money that 

States would pay or that would remain 

unpaid for Parts A and B services is now 

being paid by the plans and hence by 

the Trust Fund. Hence these amounts 

are considered transfers from the Trust 

Fund to the States. 

5. Special Requirements During a 

Disaster or Emergency (§ 422.100(m)) 

We are not scoring the proposed 

revisions to § 422.100(m) Special 

Requirements during a Disaster or 

Emergency. As stated in the February 

12, 2015 final rule (80 FR 7953), we 

recognize that disasters can create 

unavoidable disruptions and increased 

costs for MA organizations. Our primary 

goal during a disaster is the provision of 

continued and uninterrupted access to 

medically necessary plan-covered 

services for all enrollees. Our intention 

is to facilitate achievement of this goal 

by ensuring that plans facilitate 

increased access to providers from 

whom enrollees in the disaster area may 

seek high quality services at in-network 

cost-sharing. We do not believe that 

these temporary and unusual episodes 

of increased access will incentivize 

enrollees in a negative way or result in 

significant cost increases for affected 

MA organizations. We believe this is 

still relevant as most of our proposed 

revisions clarify our current policy. 

More detailed arguments for not scoring 

are presented below after a discussion of 

the proposal. 

Our proposed amendments to 

§ 422.100(m) include codifying our 


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TABLE 12: 10-YEARAGGREGATE PROJECTED COSTS (MILLIONS$) FROM 

PROPOSED MOOP PROVISION* 

Additional 

Bid Benefit 

Costs for 

MA 

Organization Total Federal Medicare Impact 

s for Cost Medicare- Savings to Costs of 

Sharing Only Medicaid minus PartB MOOP 

Above the Benefit fromMOOP Medicaid Premium Provisio 

Year MOOP Costs Provision Savings Offsets n 

(3) = 32% (4) =39% * (5) = (3) - (6) = 60% * (7) = (5) 

(1) (2) * (2) 57% * (2) (4) 25% *(3) - (6) 

2023 805.8 257.9 179.1 78.7 38.7 40.0 

2024 879.5 281.4 195.5 85.9 42.2 43.7 

2025 963.2 308.2 214.1 94.1 46.2 47.9 

2026 1,052.5 336.8 234.0 102.8 50.5 52.3 

2027 1,145.8 366.7 254.7 111.9 55.0 56.9 

2028 1,279.2 409.3 284.4 125.0 61.4 63.6 

2029 1,391.1 445.2 309.2 135.9 66.8 69.1 

2030 1,502.2 480.7 333.9 146.8 72.1 74.7 

2031 1,619.7 518.3 360.1 158.2 77.7 80.5 

2032 1,730.6 553.8 384.7 169.1 83.1 86.0 

Total 

s 12,369.5 3,958.2 2,749.7 1,208.5 593.7 614.8 

*Explanatory equations in the second row of the table are further elaborated on in the narrative. 
1942 Federal Register / Vol. 87, No. 8 / Wednesday, January 12, 2022 / Proposed Rules 

current practice of imposing the special 

requirements at § 422.100(m)(1) on MA 

organizations only when there is a 

disruption of access to health care as 

stated in the preamble to the February 

12, 2015 final rule (80 FR 7953) and in 

our responses to inquiries. We receive 

many questions and inquiries during a 

disaster or emergency so we believe this 

has been fully complied with; because 

we are clarifying through notice and 

comment rulemaking, these 

clarifications may result in enhanced 

compliance with this requirement and 

may contribute to reduced costs. 

Consequently, we do not believe the 

disruption of access proposal has an 

impact because it is already complied 

with. 

We also proposed adding a transition 

period of 30 days between a disaster or 

emergency ending and the end of the 

special requirements to § 422.100(m)(3). 

We do not believe these provisions 

would create impact. Some MA 

organizations may already allow 

flexibilities to enrollees following a 

disaster or emergency, such as a 

transition period to allow additional 

time for enrollees to return to innetwork providers. Additionally, many 

plans have experience with disasters or 

other changes in cost that arise 

annually. The nature of the business 

cycle shows that plans may experience 

losses due to disasters or emergencies in 

certain years, which may be offset with 

profits in the following years. Although 

the cost burden for a longer disaster or 

emergency is different than that for a 

shorter disaster, our recent experience 

with the COVID–19 PHE shows that 

CMS is aware of this cost burden and as 

each specific situation develops, is 

responding with certain flexibilities. 

For these reasons, we are not further 

scoring the special requirements during 

a disaster or emergency provision. 

6. Provisions Relating to Past 

Performance (§§ 422.504 and 423.505) 

We propose to update the past 

performance measures at 42 CFR 

422.504 and 423.505 in order to better 

ensure CMS’ capacity to limit new 

applications and applications for service 

area expansions by low performers 

when these new plans and/or service 

area expansions would not be in the 

best interest of the Medicare program. 

• To perform the calculations, we 

estimate— 

++ 2 staff at the GS 13–5 level 

working at $112.62/hr would have to 

perform a total of 24 hours of work (12 

hours for each staff); and 

++ 2 staff at the GS 14–9 level 

working at $148.74/hr would have to 

perform 10 hours of work. 

• To notify plans, we estimate that 1 

staff at the GS–13–5 level working at 

$112.62/hr will have to perform 3 hours 

of work. 

The aggregate annual cost to the 

government is therefore $4,528. 

7. Proposed Revisions to the Medical 

Loss Ratio Reporting Requirements 

(§§ 422.2460 and 423.2460) 

Our proposal to reinstate the detailed 

MLR reporting requirements in effect for 

CYs 2014 through 2017, and to require 

separate reporting of amounts spent on 

supplemental benefits, would impose 

additional costs on the Federal 

Government. 

The paperwork burden associated 

with these provisions, $2.3 million, is 

estimated in section IV.B.12. of this 

proposed rule, and is included in the 

summary table below. There is also 

additional anticipated impact to the 

Federal Government. Most of the impact 

will arise from projections of future 

increases or decreases in MLR 

remittances, which are amounts that 

were originally paid from CMS to MA 

organizations or Part D sponsors, which 

they have to return to CMS (although 

the remittances go to the Treasury 

General Fund and not the Medicare 

Trust Funds from which they 

originated). 

If our proposal to reinstate and add to 

the detailed MLR reporting 

requirements is finalized, we will pay a 

contractor to perform desk reviews and 

analyses of the reported data in order to 

identify omissions or suspected 

inaccuracies and to communicate its 

findings to MA organizations and Part D 

sponsors in order to resolve potential 

compliance issues. In the Regulatory 

Impact Analysis for the April 2018 final 

rule in which we eliminated the 

detailed MLR reporting requirements, 

we assumed that by significantly 

reducing the amount of MLR data that 

MA organizations and Part D sponsors 

would be required to report to CMS 

annually starting with CY 2018, we had 

also eliminated the need for CMS to 

continue paying a contractor 

approximately $390,000 each year in 

connection with desk reviews of the 

detailed MLR reports. However, the 

April 2018 final rule indicated that the 

entire amount we paid to our desk 

review contractor would no longer be 

necessary once we stopped collecting 

detailed MLR data on an annual basis. 

This has not been the case, as in the 

years since we scaled back the reporting 

requirements, we have continued to find 

value in having our contractor perform 

MLR-related administrative tasks. Prior 

to CY 2018, the funding for these 

administrative tasks was included in the 

$390,000 figure that the April 2018 final 

rule identified as representing payment 

for desk reviews only. These 

administrative tasks include sending 

reminders to MA organizations and Part 

D Sponsors to submit their MLR data 

and attestations by the applicable 

deadlines, following up with MA 

organizations and Part D sponsors about 

their questions regarding their MLR 

submissions, and triaging 

communications to CMS so that matters 

requiring additional input from us are 

brought to our attention timely. CMS 

currently pays the contractor 

approximately $230,000 per year to 

perform these services. 

We anticipate that, if the proposed 

detailed MLR reporting requirements 

are finalized and CMS resumes 

conducting desk reviews of the detailed 

MLR data, we will increase the amount 

that we pay our contractor for desk 

reviews and MLR-related administrative 

services so that the total payment 

amount is approximately equal to the 

total amount we paid to our contractor 

for those services prior to the 

elimination of the detailed MLR 

reporting requirements (that is, 

$390,000). In other words, we expect 

that we will need to pay our contractor 

an additional $160,000 per year to 

perform MLR desk reviews of the 

detailed MLR data that CMS is 

proposing to require MA organizations 

and Part D sponsors to submit to us on 

an annual basis, starting with CY 2023. 

In addition, CMS currently pays a 

contractor $300,000 each year for 

software development, data 

management, and technical support 

related to MLR reporting. The 

Regulatory Impact Analysis for the April 

2018 final rule estimated that we would 

be able to reduce this amount by 

$100,000 because we would no longer 

need to maintain and update the MLR 

reporting software with validation 

features, to receive certain data extract 

files, or to provide support for desk 

review functionality. However, contrary 

to our expectations, since CY 2018, CMS 

has continued to require technical 

support related to submission of the 

MLR Data Forms, such that, even 

without requiring significant updates to 

the MLR reporting software, we have 

continued to pay a contractor $300,000 

for data management and technical 

support services. We anticipate that we 

will continue to pay this amount for 

software development, data 

management, and technical support 

related to MLR reporting if the proposed 

changes to the MLR reporting 

requirements are finalized. 

Table 14 presents expected additional 

payments (transfers) from MA 


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Federal Register / Vol. 87, No. 8 / Wednesday, January 12, 2022 / Proposed Rules 1943 

organizations and Part D sponsors to the 

Treasury arising because they are 

projected to pay more in MLR 

remittances to the Treasury. These 

additional payments are transfers since 

no goods or services are being created. 

The impact to the Medicare Trust Funds 

is $0. 

Based on internal CMS data, the raw 

average of total remittances for CYs 

2014–2019 is $153 million. As 

discussed in section II.G.2. of this 

proposed rule, when CMS collected 

detailed MLR data pursuant to the 

reporting requirements that were in 

effect for CYs 2014–2017, the desk 

review contractor frequently detected 

potential errors or omissions in the 

reported data, which were brought to 

the attention of the MA organization or 

Part D sponsor that submitted the data, 

with a request to explain or correct the 

data. This process often resulted in the 

MA organization or Part D sponsor 

finding it necessary to resubmit the 

contract’s MLR Report after revising the 

figures in the Report or attaching 

supplementary materials to explain 

details of its expense allocation 

methodology. A summary of the MLR 

remittances for the initial MLR 

submission versus the final MLR 

submission for CYs 2014–2017 can be 

found in the table below. These 4 years 

represent the time period when detailed 

MLR data was submitted to CMS and 

subjected to desk reviews. 

The percent change in MLR 

remittances increased on average 6.7 

percent between the initial and final 

MLR submissions during the MLR desk 

review periods for CYs 2014–2017. We 

anticipate that, if finalized, the 

proposed amendments to §§ 422.2460 

and 423.2460 would increase future 

remittance amounts by an average of 6.7 

percent due to CMS receiving detailed 

MLR data and conducting desk reviews 

of the detailed MLR data. 

To estimate the amount of additional 

remittances under the proposed 

regulations, we evaluated the MLR for 

those contracts that failed to meet the 85 

percent minimum MLR requirement for 

CYs 2016–2019. The MLR remittances 

for CYs 2014 and 2015 were much lower 

than those for the more recent years and 

so these older years were excluded from 

the base period that is used to project 

future remittances. For CYs 2016 and 

2017, we examined the MLR prior to 

desk reviews, or in the Initial MLR 

Submission. For CYs 2018 and 2019, 

when there were not desk reviews of 

detailed MLR data, we examined the 

finalized total MLR remittances. The 

average remittances for these years (CYs 

2016 and 2017 prior to desk reviews and 

CYs 2018 and 2019) equaled $204.0 

million. In order to project the increase 

in remittances for CYs 2023–2032, the 

$204.0 million was inflated using 

estimated enrollment and per capita 

increases based on Tables IV.C1. and 

IV.C3. of the 2021 Medicare Trustees 

Report, with ordinary inflation (Table 

II.D1. of the 2021 Medicare Trustees 

Report) carved out of the estimates. We 

continued to assume that remittance 

amounts would increase by 6.7 percent 

for the entire projection period due to 

the restatement of desk reviews of 

detailed MLR data, after the application 

of enrollment and per capita increases. 

Table 14 is based on data from the 

Office of the Actuary, some of which 

may be found in the annual Trustees 

Report. The calculations started with a 

$13.7 million additional cost to MA 

organizations and Part D sponsors in CY 

2019 (This amount is not shown in the 

table which is a 10 year table starting 

from CY 2023). The cost in each 

successive contract year is obtained by 

adding the MA enrollment increases 

expressed as a percentage in column (2), 

then adding the average annual per 

capita increase in expenditures, 

expressed as a percentage in column (3), 

and then dividing by ordinary inflation 

expressed as a percentage column (4). 

The calculations can be illustrated 

starting with the CY 2023 net cost ($20.3 

million) and deriving the $21.5 million 

CY 2024 cost. We have $20.3 million *(1 

+ 3.8%) * (1 + 4.8%)/(1 + 2.5%) = $21.5 

million. 


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TABLE 13: CHANGE IN MLR REMITTANCES BETWEEN INITIAL AND 

FINAL MLR SUBMISSION 

Initial MLR Final MLR Percent 

Contract Year (CY) Submission Submission Change Change 

2014 36,884,719 37,074,217 189,498 0.5% 

2015 28,128,535 22,064,688 (6,063,847) -27.5% 

2016 200,308,358 242,402,915 42,094,557 17.4% 

2017 223,244,933 222,058,179 (1,186,754) -0.5% 

2014-2017 488,566,545 523,599,999 35,033,454 6.7% 

2018 92,639,916 94,502,390 1,862,474 ----- 2019 298,124,406 298,124,406 ----- ----- Average (2016-2019): 1 204,045,022 ----- ----- 1 The average remittance is calculated using the initial MLR submission for CY s 2016 and 2017 and the final MLR 

submission for CYs 2018 and 2019. 
1944 Federal Register / Vol. 87, No. 8 / Wednesday, January 12, 2022 / Proposed Rules 

8. Pharmacy Price Concessions in the 

Part D Negotiated Price (42 CFR 

423.100) 

As discussed in section II.H.3. of this 

proposed rule, at § 423.100, we propose 

to adopt a new definition of ‘‘negotiated 

price’’ to include all pharmacy price 

concessions received by the plan 

sponsor for a covered Part D drug, and 

to reflect the lowest possible 

reimbursement a network pharmacy 

will receive, in total, for a particular 

drug. As part of this proposal, we first 

propose to delete the current definition 

of ‘‘negotiated prices’’ (in the plural) 

and add a definition of ‘‘negotiated 

price’’ (in the singular) to make clear 

that a negotiated price can be set for 

each covered Part D drug, and the 

amount of the pharmacy price 

concessions may differ on a drug by 

drug basis. Then, we propose a 

definition of ‘‘negotiated price’’ that is 

intended to ensure that the prices 

available to Part D enrollees at the point 

of sale are inclusive of all pharmacy 

price concessions. The proposed 

requirement to apply pharmacy price 

concessions to the negotiated price at 

the point-of-sale would apply in all 

phases of the Part D benefit except with 

respect to applicable drugs dispensed to 

applicable beneficiaries in the coverage 

gap. 

Plan sponsors may attempt to mitigate 

the effects from this change by 

modifying their benefits, such as making 

more frequent use of copay structures 

rather than coinsurance. There are 

limits to how much this can change, 

however, given that they must maintain 

actuarial equivalence to the defined 

standard design, where lower prices 

would result in lower cost sharing. 

The proposal would have several 

impacts on prescription drug costs for 

government, beneficiaries, Part D 

sponsors, and manufacturers. Tables 15 

and 16 summarize these impacts, which 

are discussed in more detail in the 

narrative that follows. We note that this 

proposal would also have one-time 

administrative costs for Part D sponsors. 

This cost is discussed in the Collection 

of Information section of this proposed 

rule. 

a. Impact on Prescription Drug Costs for 

Government, Beneficiaries, Part D 

Sponsors, and Manufacturers 

Table 16 summarizes the 10-year 

impacts we have modeled for requiring 

that sponsors apply all pharmacy price 

concessions to the negotiated price in 

all phases of the Part D benefit except 

for applicable drugs in the coverage gap. 

We estimate a modest potential indirect 

effect on pharmacy payment as a result 

of pharmacies’ independent business 

decisions. Specifically, our estimates 

assume that pharmacies will seek to 

retain 2 percent of the existing 

pharmacy price concessions they 

negotiate with plan sponsors and other 

third parties to compensate for pricing 

risk and differences in cash flow and we 

assume that these business decisions 

will result in a slight increase in 

pharmacy payments of 0.1–0.2 percent 

of Part D gross drug cost. We solicit 

comment on the potential indirect 

impact estimates of the pharmacy price 

concessions provision included in this 

rule. Table 16 reflects 10-year row sums 

of Table 15. For example, the second 

row of Table 15 lists a $33.1 billion 

savings to beneficiaries. The row header 

references row (I) of Table 15. The sum 

of the numbers in row (I) of Table K4 

is $33.1 (1.7+1.9 . . . +5.7 = 33.1). 

Throughout this narrative, quantitative 

aspects of the discussion may be found 

in the corresponding labeled rows of 

Table 16. 

Under this proposal, we anticipate 

that beneficiaries would see lower 

prices at the pharmacy point-of-sale and 

on Plan Finder for most drugs, 

beginning immediately in the year the 

proposed change would take effect 

(2023). (This is summarized in Table 16 

in the row ‘‘Beneficiary Costs’’ which 

reflects a sum of the rows ‘‘Cost 

sharing’’ and ‘‘Premiums.’’ Lower pointof-sale prices would result directly in 

lower cost-sharing costs for non-lowincome beneficiaries, and on average we 

expect these cost-sharing decreases 


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TABLE 14: MLR COST (TRANSFERS) FROM MA ORGANIZATIONS AND 

PART D SPONSORS (MILLIONS) TO THE TREASURY 

Average 

Annual Per Net Cost 

MA Capita (Savings) 

Contact Enrollment Increase in Ordinary ($ 

Year Increase Expenditures Inflation millions) 

(1) (2) (3) (4) (5) 

2023 4.1% 4.8% 2.5% 20.3 

2024 3.8% 4.8% 2.5% 21.5 

2025 3.7% 5.4% 2.5% 22.9 

2026 3.6% 5.4% 2.5% 24.4 

2027 3.3% 5.3% 2.5% 25.9 

2028 3.1% 5.5% 2.5% 27.5 

2029 2.8% 5.5% 2.5% 29.1 

2030 2.6% 4.4% 2.5% 30.4 

2031 2.3% 7.2% 2.4% 32.6 

2032 1.8% 4.9% 2.4% 34.0 

Totals 268.6 
Federal Register / Vol. 87, No. 8 / Wednesday, January 12, 2022 / Proposed Rules 1945 

would exceed the premium increases. 

While the amounts will vary depending 

on an individual beneficiary’s 

prescriptions, plan sponsor benefits, 

and contractual arrangements, we 

expect more than half of the non-lowincome, non-employer group 

beneficiaries to see lower total costs, 

inclusive of cost-sharing decreases and 

premium increases. For example, a 

beneficiary who takes no medications 

will probably see a premium increase 

and no cost-sharing decreases, whereas 

a beneficiary who takes several 

medications each month is likely to see 

cost-sharing decreases that are greater 

than the premium increase. For lowincome beneficiaries, whose out-ofpocket costs are funded through 

Medicare’s low-income cost-sharing 

payments, cost-sharing savings resulting 

from lower point-of-sale prices would 

accrue to the government.) Plan 

premiums would likely increase as a 

result of the proposed change to the 

definition of negotiated price—if 

pharmacy price concessions are 

required to be passed through to 

beneficiaries at the point of sale as 

proposed, fewer such concessions could 

be apportioned to reduce plan liability 

in the bid, which would have the effect 

of increasing the cost of coverage under 

the plan. At the same time, the 

reduction in cost-sharing obligations for 

the average beneficiary would be large 

enough to lower their overall out-ofpocket costs. The increasing cost of 

coverage under Part D plans as a result 

of pharmacy price concessions being 

applied at the point of sale as proposed 

would likely have a more significant 

impact on Government costs, which 

would increase overall due to the 

significant growth in Medicare’s direct 

funding of plan premiums and lowincome premium payments. 

Partially offsetting the increase in 

direct funding and low-income 

premium payment costs for the 

government would be decreases in 

Medicare’s reinsurance and low-income 

cost-sharing payments. Decreases in 

Medicare’s reinsurance payments result 

when lower negotiated prices slow 

down the progression of beneficiaries 

through the Part D benefit and into the 

catastrophic phase, and when the 

Government’s 80 percent reinsurance 

payments for allowable drug costs 

incurred in the catastrophic phase are 

based on lower negotiated prices. 

Similarly, low-income cost-sharing 

payments would decrease if beneficiary 

cost-sharing obligations decline due to 

the reduction in prices at the point of 

sale. Finally, the slower progression of 

beneficiaries through the Part D benefit 

would also have the effect of reducing 

aggregate manufacturer gap discount 

payments as fewer beneficiaries would 

enter the coverage gap phase or progress 

entirely through it. 

These impacts assume that the 

proposed definition of ‘‘negotiated 

price’’ would apply for all Part D drugs 

in all phases of the Part D benefit, 

except for applicable drugs in the 

coverage gap. While this exclusion 

would increase the complexity of the 

point-of-sale transaction, pharmacies 

and PBMs have experience with similar 

elements of the program today, such as 

accounting for the coverage gap 

discount program. Given the 

significance of these amounts to overall 

premiums and their competitive 

position, we expect that pharmacy price 

concessions after the point of sale will 

remain in place during the coverage gap. 

The alternative section demonstrates 

how requiring the price concessions in 

the coverage gap could lead to larger 

premium increases, which would not be 

desirable for plan sponsors. 

BILLING CODE 4120–01–P 


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TABLE 15*: IMPACT (BILLIONS) OF CONCESSIONS EXCLUDES APPLICATION TO APPLICA

COVERAGE GAP 

Label Item/Year 2023 2024 2025 2026 2027 2028 2029 

- - - - - - 

(A) Gross Drug Cost (GDCC) $14.4 $15.8 $17.2 $19.0 $20.9 $22.9 $25.

Drug Cost Covered by Plan (Supplemental and - - - - - - 

(B) non-Part D) CCP $10.5 $11.6 $12.7 $13.6 $14.6 $15.6 $16.(C) OOP including Gap Discount -$3.9 -$4.2 -$4.6 -$5.4 -$6.3 -$7.2 -$8.3 

(D) General Premium Payment $4.8 $5.2 $5.6 $6.3 $7.0 $7.8 $8.

(E) Reinsurance -$1.4 -$1.6 -$1.7 -$1.7 -$1.7 -$1.7 -$1.

(F) LIS Cost-Sharing -$1.2 -$1.3 -$1.4 -$1.7 -$2.1 -$2.4 -$2.

(G) LIS Premium $0.2 $0.2 $0.2 $0.3 $0.3 $0.4 $0.

(H) Total Government $2.3 $2.5 $2.7 $3.1 $3.6 $4.0 $4.

(I) Enrollee Cost Sharing -$1.7 -$1.9 -$2.0 -$2.4 -$2.8 -$3.3 -$3.

(J) Enrollee Premiums $0.6 $0.7 $0.7 $0.9 $1.0 $1.2 $1.

(K) Total Enrollee Costs -$1.1 -$1.2 -$1.3 -$1.5 -$1.8 -$2.1 -$2.

(L) Total Benefits 2.9 3.2 3.5 4.0 4.6 5.2 5.

(M) Gap Discount -$0.9 -$1.0 -$1.1 -$1.2 -$1.4 -$1.5 -$1.

*Negative numbers indicate savings. Positive numbers indicate costs. Row totals are found in Table 16. 
Federal Register / Vol. 87, No. 8 / Wednesday, January 12, 2022 / Proposed Rules 1947 

E. Alternative Analysis 

The major drivers of cost and transfers 

in this rule include the MLR and Part D 

pharmacy price concessions provisions. 

The aggregate impact of each of these 

over 10 years exceeds $100 million. 

Alternative analysis is provided below 

for these provisions. 

1. Proposed Alternatives Related to the 

Medical Loss Ratio Reporting 

Requirements (42 CFR 422.2460, 

423.2460) 

As an alternative to our proposal to 

reinstate and add to the detailed MLR 

reporting requirements in effect for CYs 

2014–2017, we considered continuing to 

collect minimal MLR data, as required 

under current §§ 422.2460 and 

423.2460, and to use our authority 

under §§ 422.2480 and 423.2480 to 

require that entities selected for MLR 

audits provide us with more detailed 

MLR data, and with any underlying 

records that can be used to substantiate 

amounts included in the calculation of 

each contract’s MLR and the amount of 

any remittance owed to CMS. In 

addition to their primary function as a 

mechanism for obtaining information 

that can be used to validate audited MA 

organizations’ and Part D sponsors’ 

compliance with the applicable 

requirements for calculating and 

reporting MLR information to CMS, we 

believe that audits are in general wellsuited for examining matters such as 

where and how calculation errors occur, 

and identifying areas where we might be 

able to reduce the incidence of errors 

through revisions to our regulations and 

guidance. By contrast, desk reviews of 

detailed MLR data are more useful for 

quickly reviewing large amounts of data 

in order to identify possible errors or 

omissions that might affect the MLR 

calculation, and for identifying marketwide trends in how MA organizations 

and Part D sponsors might be adjusting 

their expenditures in response to rule or 

policy changes that affect how MLRs are 

calculated. Given CMS’ interest in better 

understanding how MA organizations 

and Part D sponsors’ are calculating 

their MLRs in general, and in flagging 

areas where calculation errors might be 

impacting the MLR calculation so that 

they can be addressed promptly, we 

decided that our goals would be better 

served if we were to require MA 

organizations and Part D sponsors to 

report detailed MLR data to us directly, 

and to subject that data to desk reviews, 

rather than to attempt to collect the 

same or similar MLR data using our 

audit authority. 

An additional reason we chose at this 

time not to rely solely on MLR audits to 

identify errors in MA organizations’ and 

Part D sponsors’ MLR submissions is 

that we believe this approach would 

result in a greater burden for the Federal 

government and cumulatively across all 

MA organizations and Part D sponsors 

than would the proposed reinstatement 

of the detailed MLR reporting 

requirements. We note that, in the April 

2018 final rule, CMS indicated that we 

did not believe that eliminating the 

detailed MLR reporting requirements 

would weaken MLR compliance 

oversight, and in connection with this 

we noted that had not changed our 

authority under § 422.2480 or 

§ 423.2480 to conduct selected audit 

reviews of the data reported under 

§§ 422.2460 and 423.2460 for purposes 

of determining that remittance amounts 

under §§ 422.2410(b) and 423.2410(b) 

and sanctions under §§ 422.2410(c) and 

(d) and 423.2410(c) and (d) were 

accurately calculated, reported, and 

applied (73 FR 16675). However, in that 

rule, we did not account for the 

increased cost to CMS, or the additional 

cumulative burden across all MA 

organization and Part D sponsors, if we 

were to scale up our MLR audit 

operations to a sufficient degree to 

perform effective compliance oversight 

in the absence of detailed MLR 

reporting requirements. 

Based on CMS’ historical costs in 

auditing MLRs, we estimate that 

individual audits would cost the 

government approximately $71,000 per 

audit. We anticipate that, in order to 

effectively monitor MLR compliance 

using audits, we would need to audit 

one-third of MA and Part D contracts, or 

an average of 194 contracts per year, at 

a cost of approximately $13.8 million 

per year. By contrast, we estimate that 

the proposed reinstatement of the 

detailed MLR reporting requirements 

would result in a relatively small 

increase in burden for MA organizations 

and Part D sponsors, as we expect that 

they would already need to be tracking 

most of the information included in the 


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TABLE 16*: TOTAL IMPACTS FOR 2023 THROUGH 2032 WITHOUT 

APPLICATION TO APPLICABLE DRUGS IN COVERAGE GAP 

Total Per Member-Per- Percent 

(in billions) Year 2023-2032111 Change 

Beneficiary Costs (K) ($21.30) ($36.66) -2% 

Cost Sharing (I) ($33.10) ($57.03) -6% 

Premium (J) $11.80 $20.37 5% 

Government Costs $40.00 $69.17 3% 

Direct Payment (D) $76.70 $132.47 83% 

Reinsurance (E) ($15.80) ($27.27) -2% 

LI Cost-Sharing (F) ($24.40) ($42.15) -5% 

LI Premium (G) $3.50 $6.13 7% 

Manufacturer Gap Discount (M) ($14.60) ($25.19) -6% 

*Negative numbers indicate savings; positive numbers equal costs. Minor discrepancies between the sums 

in Tables 15 and 16 are due to rounding. 

Note: These values represent the annualized average impacts divided by the average total Part D projected 

enrollees. Actual impacts will vary depending on beneficiary status and plan. 
1948 Federal Register / Vol. 87, No. 8 / Wednesday, January 12, 2022 / Proposed Rules 

detailed MLR Report template in order 

to calculate their MLRs in accordance 

with current requirements. 

2. Proposed Alternatives Related to 

Pharmacy Price Concessions in the Part 

D Negotiated Price (§ 423.100) 

As discussed in section II.H.3. of this 

proposed rule, we propose to adopt a 

new definition of ‘‘negotiated price’’ to 

include all pharmacy price concessions 

received by the plan sponsor for a 

covered Part D drug, and to reflect the 

lowest possible reimbursement a 

network pharmacy will receive, in total, 

for a particular drug. 

In the analysis provided in section 

IV.D.8. of this proposed rule, we 

estimate the impact of our proposal to 

require application of pharmacy price 

concessions to the negotiated price at 

the point-of-sale in all phases of the Part 

D benefit except with respect to 

applicable drugs in the coverage gap. In 

this alternative analysis, we consider 

the added impact of requiring 

application of pharmacy price 

concessions to the negotiated price of 

applicable drugs in the coverage gap 

also. 

Table 17 shows the increased savings 

to enrollees. Ten-year total savings to 

enrollees increase 37 percent from $21.3 

billion as indicated in Table 16 to $29.1 

billion. As explained in the previous 

narratives, the total savings to enrollees 

accounts for both cost-sharing savings 

and expected premium increases. 

Table 18 shows increased savings to 

pharmaceutical manufacturers if 

pharmacy price concessions are applied 

to applicable drugs in the coverage gap. 

As can be seen, savings to 

manufacturers increase by 23 percent 

since as presented in Table 16, the 

savings are $14.6 billion without 

application in the coverage gap while 

with application to applicable drugs in 

the coverage gap the savings are $17.9 

billion. 

Table 19 shows the impact to the 

Government. The Federal expenditures 

increase 27 percent, from the $40.0 

billion presented in Table 16 without 

application in the coverage gap, to $50.7 

billion if the pharmacy price 

concessions are applied to the point-ofsale price of applicable drugs in the 

coverage gap. As explained in the 

narrative of section IV.D.8. of this 

proposed rule, the total Government 

cost reflects four separate components 

including direct payments, reinsurance, 

low income cost-sharing payments, and 

low-income premium payments. We 

note, that this $50.7 billion is a transfer. 

More specifically, the identical Rx that 

was formerly paid for by enrollees is 

now being paid for by the Government. 


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TABLE 17. TOTAL IMPACTS TO ENROLLEES FOR 2023 THROUGH 2032 WITH 

APPLICATION TO APPLICABLE DRUGS IN COVERAGE GAP 

Total Total 

With Without 

Year 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 Gap 

Beneficiary Costs (in billions) $0.0 -$1.6 -$1.7 -$1.8 -$2.2 -$2.5 -$2.9 -$3.3 -$3.8 -$4.3 -$4.9 -$29.1 

Cost-Sharing $0.0 -$2.4 -$2.6 -$2.8 -$3.3 -$3.8 -$4.4 -$5.1 -$5.8 -$6.6 -$7.5 -$44.3 

Premium $0.0 $0.8 $0.9 $1.0 $1.1 $1.3 $1.5 $1.8 $2.0 $2.3 $2.6 $15.2 . . .. *Negative numbers md1cate savmgs; positive numbers md1cate costs. Numbers are m b,lhons of$ 

TABLE 18: TOTAL IMPACTS TO l\'IANUFACTURERS FOR 2023 THROUGH 2032 

WITH APPLICATION IN COVERAGE GAP 

Year 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 

Manufacturer Gap Discount (in billions) $0.0 -$1.1 -$1.3 -$1.4 -$1.5 -$1.7 -$1.8 -$2.0 -$2.2 -$2.4 . . *Negative numbers md1cate savmgs; positive numbers md1cate costs. Numbers are m billions of dollars ($) . 

TABLE 19: TOTAL IMPACTS TO GOVERNMENT FOR 2023 THROUGH 2032 WITH 

APPLICATION TO APPLICABLE DRUGS IN THE COVERAGE GAP 

TOTAL 

With 

2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 Gap 

Government Costs 

(in billions) $0.0 $2.9 $3.3 $3.5 $4.0 $4.5 $5.1 $5.8 $6.4 $7.2 $8.0 $50.7 

Direct Payments $0.0 $6.1 $6.7 $7.2 $8.1 $8.9 $9.9 $10.9 $12.0 $132 $14.5 $97.6 

Reinsurance $0.0 -$1.7 -$1.9 -$2.1 -$2.1 -$2.1 -$2.0 -$2.0 -$1.9 -$1.8 -$1.7 -$19.3 

LI Cost-Sharing $0.0 -$17 -$1.8 -$1.9 -$2.3 -$2.7 -$3.2 -$3.7 -$4.3 -$4.9 -$5.6 -$32.2 

LIPremilll11 $0.0 $0.3 $0.3 $0.3 $0.4 $0.4 $0.5 $0.5 $0.6 $0.7 $0.7 $4.6 .. . . *Negative nwnbers md1cate savmgs; positive numbers md1cate costs, Numbers are m b1lltons of dollars($) . 

Total 

With 

2032 Gap 

-$2.6 -$17.9 

Total 

Without 

Gap 

$40.00 

$76.70 

-$15.80 

-$24.40 

$3.50 

Gap 

-$21.3 

-$33.1 

$11.8 

Total 

Without 

Gap 

-$14.6 
Federal Register / Vol. 87, No. 8 / Wednesday, January 12, 2022 / Proposed Rules 1949 

F. Accounting Statement and Table 

In accordance with OMB Circular A– 

4, Table 20 depicts an accounting 

statement summarizing the assessment 

of the benefits, costs, and transfers 

associated with this regulatory action. 

Table 20 is based on the summary of 

costs presented in Tables 21 and 22. 

Tables 21 and 22 reflect all costs in both 

the COI and RIA sections. This 

summary table allocates impact by year 

and by whether it is a cost or transfer 

(no provisions of this rule have a 

savings impact). In all tables, costs are 

expressed as positive amounts. 

However, in the transfer row negative 

numbers correspond to payments by the 

government (which in the provisions of 

this rule may come from the Treasury or 

Medicare Trust Fund) while positive 

numbers indicate savings. There are 5 

transfers in this rule: The MOOP 

provision is a cost to the Medicare Trust 

Fund (TF) (the corresponding gain to 

States and providers of duals in equal 

amounts is not shown in Tables 21 and 

22). The MLR provision is a savings to 

the Treasury (the corresponding loss in 

equal amount to the plans is not shown 

in the Tables 21 and 22). The pharmacy 

price concessions provision incurs a 

cost to the Medicare Trust Fund, and 

savings to enrollees and manufacturers. 

However, there is a small difference 

between what the Trust Fund pays and 

what beneficiaries and manufacturers 

gain. The difference is due to the 

assumption that pharmacies will seek to 

retain a small portion of the current DIR 

to compensate for differences in cash 

flow and pricing risk. Therefore, Tables 

21 and 22 list separately the impacts on 

the Trust Fund, the enrollees, and the 

manufacturers. However, the row ‘‘Total 

transfers from the Trust Fund’’ only 

reflects the sum of the Trust Fund 

payments for the pharmacy price 

concessions provision and the MOOP 

provision (it does not offset this amount 

by the savings to enrollees and 

manufacturers) Similarly, Table 20 

reflects annualized transfers to the 

Treasury and annualized transfers from 

the Trust Fund for the MOOP and 

pharmacy price concessions provision 

but these annualized amounts do not 

reflect the savings to enrollees and 

manufacturers. Thus, complete detailed 

amounts on all provisions may be found 

in Tables 21 and 22. 


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TABLE 20: ACCOUNTING STATEMENT (MILLIONS OF DOLLARS) 

Estimate at Estimate at 

7% 3% 

(In 2022 (In 2022 

Category Dollars) Dollars) Years Covered Affected Stakeholders 

Net Annualized 3.5 3.5 CYs 2023-2032 MA organizations, Part D sponsors, and 

Monetized Cost contractors for the Federal Government 

The transfers in this row combine: (i) transfers 

arising from the pharmacy price concessions 

Net transfers from provision from the Medicare Trust Fund to plan 

the Medicare Trust CYs 2023-2032 enrollees and pharmaceutical manufacturers; and 

Fund (ii) transfers arising from the MOOP provision 

from the Medicare Trust Fund to States and 

(3790.0) (3930.1) providers of duals. 

Transfers to the The transfers in this row arising from the MLR 

United States 26.0 26.5 CYs 2023-2032 provision are from MA organizations and Part D 

Treasury sponsors to the United States Treasury. 

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TABLE 21: SUMMARY TABLE OF COSTS and TRANSFERS BY PROVISION AND YEAR (MIL

2023 2023 2024 2024 2025 2025 2026 20

Cost Transfers Cost Transfers Cost Transfers Cost Tran

Total Costs 2.4 2.5 4.8 3.6 Total transfers to the United States Treasury 20.3 21.5 22.9 Total Transfers from the Medicare Trust Fund (2,340.0) (2,543.7) (2,747.9) (3,1

MOOP (40.0) (43.7) (47.9) 

Enrollee Advisory Committee 0.9 0.9 

HRA 0.0 HIDE, FIDE Definition 0.0 D-SNP contracts 1.0 Past Performance 0.0 

Unified Appeals/Grievances 0.0 

Third Party Marketing 0.2 

Marketing Multi-lanaguage insert 0.3 0.3 MLR Paperwork 2.3 2.3 2.3 2.3 MLR Treasury 20.3 21.5 22.9 MLR Contractor 0.2 0.2 0.2 0.2 R.x cost to TF (2,300.00) (2,500.00) (2,700.00) (3,10

Rx Savings Enrollees 1,100.0 1,200.0 1,300.0 1,Rx Savings Manufacturers 900.0 1,000.0 1,100.0 1,

NOTE: Entries of SO.O reflect rounding to tenths of a million. However, the sum of these numbers adds a total of about $0.1 million and hence these numbers were included

the corresponding numhers in the Summary COT tahle hy 1,000,000. Positive numhers in the cost columns represent costs. In the transfer columns, positive numhers reflect 

costs. 
BILLING CODE 4120–01–C 


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TABLE 22: SUMMARY TABLE OF COSTS AND TRANSFERS BY PROVISION AND YEAR (

DOLLARS) 

2028 2028 2029 2029 2030 2030 2031 2031 20

Costs Transfers Cost Transfers Cost Transfers Cost Transfers Co

Total Costs 3.6 3.6 3.6 3.6 

Total transfers to the United States Treasury 27.5 29.1 30.4 32.6 

Total Transfers from the Medicare Trust Flllld (4,063.6) (4,569.1) (5,174.7) (5,780.5) 

MOOP (63.6) (69.1) (74.7) (80.5) 

Enrollee Advisory Committee 0.9 0.9 0.9 0.9 

HRA HIDE, FIDE Definition 

D-SNP contracts 

Past Perfonnance 

Unified Appeals/Grievances 

Third Party Markt:ling 

Marketing Multi-lanaguage insert 0.3 0.3 0.3 0.3 MLR Papetwork 2.3 2.3 2.3 2.3 

MLR Treasury 27.5 29.1 30.4 32.6 

MLR Contractor 0.2 0.2 0.2 0.2 

Rx cost to Tll (4,000.00) (4,500.00) (5,100.00) (5,700.00) 

Rx Savings Enrollees 2,100.00 2,500.00 2,800.00 3,200.00 

Rx Savings Manufacturers 1,500.00 1,600.00 1,800.00 1,900.00 
1952 Federal Register / Vol. 87, No. 8 / Wednesday, January 12, 2022 / Proposed Rules 

F. Conclusion 

The previous analysis, together with 

the preceding preamble, provides an 

RIA. This rule at an annual cost of $ 3.5 

million, during the first 10 years after 

implementation, provides efficiencies 

and improves marketing and 

communications, past performance 

measures, Star Ratings, network 

adequacy, medical loss ratio reporting, 

requirements during disasters or public 

emergencies, D–SNP program, MOOP, 

as well as cost-efficiencies to enrollees 

for prescription drugs. Additionally, 

there are a variety of transfers to and 

from the Federal Government (the 

Medicare Trust Fund and the United 

States Treasury) which in aggregate will 

increase dollar spending by $3.8 to $3.9 

billion annually. We estimate that this 

rule generates $2.4 million in 

annualized costs, discounted at 7 

percent relative to year 2016, over an 

infinite time horizon. 

In accordance with the provisions of 

Executive Order 12866, this proposed 

rule was reviewed by the Office of 

Management and Budget. 

VI. Response to Comments 

Because of the large number of public 

comments we normally receive on 

Federal Register documents, we are not 

able to acknowledge or respond to them 

individually. We will consider all 

comments we receive by the date and 

time specified in the DATES section of 

this preamble, and, when we proceed 

with a subsequent document, we will 

respond to the comments in the 

preamble to that document. 

Chiquita Brooks-LaSure, 

Administrator of the Centers for 

Medicare & Medicaid Services, 

approved this document on December 

14, 2021. 

List of Subjects 

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 requirements. 

For the reasons set forth in the 

preamble, the Centers for Medicare & 

Medicaid Services proposes to amends 

42 CFR chapter IV as set forth below: 

PART 422—MEDICARE ADVANTAGE 

PROGRAM 

■ 1. The authority citation for part 422 

continues to read as follows: 

Authority: 42 U.S.C. 1302 and 1395hh. 

■ 2. Section 422.2 is amended by— 

■ a. In the definition of ‘‘Fully 

integrated dual eligible special needs 

plan’’: 

■ i. Revising paragraphs (2) and (3); 

■ ii. Removing the period at the end of 

paragraph (4) and adding a semicolon in 

its place; and 

■ iii. Adding paragraphs (5) and (6); and 

■ b. Revising the definition of ‘‘Highly 

integrated dual eligible special needs 

plan’’. 

The revisions and additions read as 

follows: 

§ 422.2 Definitions. 

* * * * * 

Fully integrated dual eligible special 

needs plan * * * 

(2) Whose capitated contract with the 

State Medicaid agency requires coverage 

of the following benefits, to the extent 

Medicaid coverage of such benefits is 

available to individuals eligible to enroll 

in a fully integrated dual eligible special 

needs plan (FIDE SNP) in the State, 

except as approved by CMS under 

§ 422.107(g) and (h): 

(i) Primary care and acute care, 

including Medicare cost-sharing as 

defined in section 1905(p)(3)(B), (C), 

and (D) of the Act, without regard to the 

limitation of that definition to qualified 

Medicare beneficiaries. 

(ii) Long-term services and supports, 

including coverage of nursing facility 

services for a period of at least 180 days 

during the plan year. 

(iii) For plan year 2025 and 

subsequent years, behavioral health 

services. 

(iv) For plan year 2025 and 

subsequent years, home health services 

as defined in § 440.70. 

(v) For plan year 2025 and subsequent 

years, durable medical equipment as 

defined in § 440.70(b)(3); 

(3) That coordinates the delivery of 

covered Medicare and Medicaid 

services using aligned care management 

and specialty care network methods for 

high-risk beneficiaries; 

* * * * * 

(5) For plan year 2025 and subsequent 

years, that has exclusively aligned 

enrollment; and 

(6) For plan year 2025 and subsequent 

years, whose capitated contract with the 

State Medicaid agency covers the entire 

service area for the dual eligible special 

needs plan. 

* * * * * 

Highly integrated dual eligible special 

needs plan means a dual eligible special 

needs plan offered by an MA 

organization that provides coverage of 

Medicaid benefits under a capitated 

contract that meets the following 

requirements— 

(1) The capitated contract is between 

the State Medicaid agency and— 

(i) The MA organization; or 

(ii) The MA organization’s parent 

organization, or another entity that is 

owned and controlled by its parent 

organization. 

(2) The capitated contract requires 

coverage of the following benefits, to the 

extent Medicaid coverage of such 

benefits is available to individuals 

eligible to enroll in a highly integrated 

dual eligible special needs plan (HIDE 

SNP) in the State, except as approved by 

CMS under § 422.107(g) or (h): 

(i) Long-term services and supports, 

including community-based long-term 

services and supports and some days of 

coverage of nursing facility services 

during the plan year; or 

(ii) Behavioral health services; and 

(3) For plan year 2025 and subsequent 

years, the capitated contract covers the 

entire service area for the dual eligible 

special needs plan. 

* * * * * 

■ 3. Section 422.100 is amended by— 

■ a. Adding paragraphs (f)(4)(i) and (ii) 

and (f)(5)(iii); 

■ b. Revising paragraphs (m)(1) 

introductory text, (m)(2) introductory 

text, (m)(3) and (4), and (m)(5)(i); and 

■ c. Adding paragraph (m)(6). 

The additions and revisions read as 

follows: 

§ 422.100 General requirements. 

* * * * * 

(f) * * * 

(4) * * * 

(i) Tracking of deductible and 

catastrophic limits and notification. MA 

plans are required to track the 

maximum out-of-pocket limit described 

in paragraph (f)(4) of this section based 

on accrued out-of-pocket beneficiary 

costs for original Medicare covered 

services, and are also required to notify 

members and health care providers 

when the limit has been reached. 

(ii) [Reserved] 

(5) * * * 

(iii) MA plans are required to track 

the maximum out-of-pocket limit 

described in paragraph (f)(5) of this 

section based on accrued out-of-pocket 

beneficiary costs for original Medicare 

covered services, and are also required 

to notify members and health care 

providers when the limit has been 

reached. 

* * * * * 


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Federal Register / Vol. 87, No. 8 / Wednesday, January 12, 2022 / Proposed Rules 1953 

(m) * * * 

(1) Access to covered benefits during 

disasters or emergencies. When a 

disaster or emergency is declared as 

described in paragraph (m)(2) of this 

section and there is disruption of access 

to health care as described in paragraph 

(m)(6) of this section, an MA 

organization offering an MA plan must, 

until one of the conditions described in 

paragraph (m)(3) of this section occurs, 

ensure access to covered benefits in the 

following manner: 

* * * * * 

(2) Declarations of disasters or 

emergencies. A declaration of a disaster 

or emergency will identify the 

geographic area affected by the event 

and may be made as one of the 

following: 

* * * * * 

(3) End of the special requirements for 

the disaster or emergency. An MA 

organization must continue furnishing 

access to benefits as specified in 

paragraphs (m)(1)(i) through (iv) of this 

section for 30 days after the conditions 

described in paragraph (m)(3)(i) or (ii) of 

this section occur with respect to all 

applicable emergencies or after the 

condition described in paragraph 

(m)(3)(iii) of this section occurs, 

whichever is earlier: 

(i) All sources that declared a disaster 

or emergency that include the service 

area declare an end. 

(ii) No end date was identified as 

described in paragraph (m)(3)(i) of this 

section, and all applicable emergencies 

or disasters declared for the area have 

ended, including through expiration of 

the declaration or any renewal of such 

declaration. 

(iii) There is no longer a disruption of 

access to health care as defined in 

paragraph (m)(6) of this section. 

(4) MA plans unable to operate. An 

MA plan that cannot resume normal 

operations by the end of the disaster or 

emergency as described in paragraph 

(m)(3)(i) or (ii) of this section must 

notify CMS. 

(5) * * * 

(i) Indicate the terms and conditions 

of payment during the disaster or 

emergency for non-contracted providers 

furnishing benefits to plan enrollees 

residing in the affected service area(s). 

* * * * * 

(6) Disruption of access to health care. 

A disruption of access to health care for 

the purpose of paragraph (m) of this 

section is an interruption or interference 

throughout the service area such that 

enrollees do not have the ability to 

access contracted providers or 

contracted providers do not have the 

ability to provide needed services to 

enrollees resulting in MA plans failing 

to meet the normal prevailing patterns 

of community health care delivery in 

the service area under § 422.112(a). 

■ 4. Section 422.101 is amended by— 

■ a. In paragraph (d)(4), removing the 

word ‘‘incurred’’ and adding in its place 

the word ‘‘accrued’’. 

■ b. Revising paragraph (f)(1)(i). 

The revision reads as follows: 

§ 422.101 Requirements relating to basic 

benefits. 

* * * * * 

(f) * * * 

(1) * * * 

(i) Conduct a comprehensive initial 

health risk assessment of the 

individual’s physical, psychosocial, and 

functional needs as well as annual 

health risk reassessment, using a 

comprehensive risk assessment tool that 

CMS may review during oversight 

activities, and ensure that the results 

from the initial assessment and annual 

reassessment conducted for each 

individual enrolled in the plan are 

addressed in the individuals’ 

individualized care plan as required 

under paragraph (f)(1)(ii) of this section. 

Beginning in 2024, the comprehensive 

risk assessment tool must include 

standardized questions specified by 

CMS in subregulatory guidance as 

follows: 

(A) One or more questions on housing 

stability. 

(B) One or more questions on food 

security. 

(C) One or more questions on access 

to transportation. 

* * * * * 

■ 5. Section 422.107 is amended by— 

■ a. Revising the section heading and 

paragraphs (c)(6) and (d); 

■ b. Redesignating paragraph (e) as 

paragraph (i); and 

■ c. Adding new paragraph (e) and 

paragraphs (f) through (h). 

The revisions and additions read as 

follows: 

§ 422.107 Requirements for dual eligible 

special needs plans. 

* * * * * 

(c) * * * 

(6) The verification of an enrollee’s 

Medicaid eligibility. 

* * * * * 

(d) Additional minimum contract 

requirement. (1) For any dual eligible 

special needs plan that is not a fully 

integrated or highly integrated dual 

eligible special needs plan, except as 

specified in paragraph (d)(2) of this 

section, the contract must also stipulate 

that, for the purpose of coordinating 

Medicare and Medicaid-covered 

services between settings of care, the 

SNP notifies, or arranges for another 

entity or entities to notify, the State 

Medicaid agency, individuals or entities 

designated by the State Medicaid 

agency, or both, of hospital and skilled 

nursing facility admissions for at least 

one group of high-risk full-benefit dual 

eligible individuals, identified by the 

State Medicaid agency. The State 

Medicaid agency must establish the 

timeframe(s) and method(s) by which 

notice is provided. In the event that a 

SNP authorizes another entity or entities 

to perform this notification, the SNP 

must retain responsibility for complying 

with the requirement in this paragraph 

(d)(1). 

(2) For a dual eligible special needs 

plan that, under the terms of its contract 

with the State Medicaid agency, only 

enrolls beneficiaries who are not 

entitled to full medical assistance under 

a State plan under title XIX of the Act, 

paragraph (d)(1) of this section does not 

apply if the SNP operates under the 

same parent organization and in the 

same service area as a dual eligible 

special needs plan limited to 

beneficiaries with full medical 

assistance under a State plan under title 

XIX of the Act that meets the 

requirements at paragraph (d)(1) of this 

section. 

(e) Additional opportunities in certain 

integrated care programs. (1) CMS 

facilitates operationalization as 

described in paragraphs (e)(2) and (3) of 

this section if a State Medicaid agency 

requires MA organizations offering dual 

eligible special needs plans with 

exclusively aligned enrollment to do 

both of the following: 

(i) Apply for, and seek CMS approval 

to establish and maintain, one or more 

MA contracts that only include one or 

more dual eligible special needs plans 

with a service area limited to that State. 

(ii) Use required materials that 

integrate Medicare and Medicaid 

content, including at a minimum the 

Summary of Benefits, Formulary, and 

combined Provider and Pharmacy 

Directory that meets MA requirements 

consistent with § 422.2267(e) and 

§§ 423.2267(e) and 438.10(h) of this 

chapter. 

(2) The requirements, processes, and 

procedures applicable to dual eligible 

special needs plans and the MA 

program, including for applications, 

bids, and contracting procedures under 

§§ 422.250 through 422.530, remain 

applicable. Because implementation of 

the contract provisions described in 

paragraph (e)(1) of this section may 

require administrative steps that cannot 

be completed between reviewing the 

contract and the start of the plan year, 

CMS begins good faith work following 


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receipt of a letter from the State 

Medicaid agency indicating intent to 

include the provisions described in 

paragraph (e)(1) of this section in a 

future contract year and collaborate 

with CMS on implementation. 

(3) When the conditions of paragraph 

(e)(1) of this section are met— 

(i) Following a State request, CMS 

grants access for State Medicaid agency 

officials to the Health Plan Management 

System (HPMS) (or its successor) for 

purposes of oversight and informationsharing related to the MA contract(s) 

described in paragraph (e)(1)(i) of this 

section, as long as State Medicaid 

agency officials agree to protect the 

proprietary nature of information to 

which the State Medicaid agency may 

not otherwise have direct access. State 

access to the Health Plan Management 

System (or its successor) is subject to 

compliance with HHS and CMS policies 

and standards and with applicable laws 

in the use of HPMS data and the 

system’s functionality. CMS may 

terminate a State official’s access to the 

Health Plan Management System (or its 

successor) if any policy is violated or if 

information is not adequately protected; 

and 

(ii) CMS coordinates with States on 

program audits, including informationsharing on major audit findings and 

coordination of audits schedules for the 

D–SNPs subject to paragraph (e)(1) of 

this section. 

(f) Enrollee advisory committee. Any 

MA organization offering one or more 

D–SNPs in a State must establish and 

maintain one or more enrollee advisory 

committees that serve the D–SNPs 

offered by the MA organization in that 

State. 

(1) The enrollee advisory committee 

must include at least a reasonably 

representative sample of the population 

enrolled in the dual eligible special 

needs plan or plans, or other 

individuals representing those 

enrollees, and solicit input on, among 

other topics, ways to improve access to 

covered services, coordination of 

services, and health equity for 

underserved populations. 

(2) The enrollee advisory committee 

may also advise managed care plans that 

serve D–SNP enrollees under title XIX 

of the Act offered by the same parent 

organization as the MA organization 

offering the D–SNP. 

(g) Permissible carve-outs of long-term 

services and supports for FIDE SNPs 

and HIDE SNPs. A plan meets the FIDE 

SNP or HIDE SNP definition at § 422.2, 

even if its contract with the State 

Medicaid agency for the provision of 

services under title XIX of the Act has 

carve-outs of long-term services and 

supports, as approved by CMS, that— 

(1) Apply primarily to a minority of 

the beneficiaries eligible to enroll in the 

dual eligible special needs plan who use 

long-term services and supports; or 

(2) Constitute a small part of the total 

scope of long-term services and 

supports provided to the majority of 

beneficiaries eligible to enroll in the 

dual eligible special needs plan. 

(h) Permissible carve-outs of 

behavioral health services for FIDE 

SNPs and HIDE SNPs. A plan meets the 

FIDE SNP or HIDE SNP definition at 

§ 422.2, even if its contract with the 

State Medicaid agency for the provision 

of services under title XIX of the Act has 

carve-outs of behavioral health services, 

as approved by CMS, that— 

(1) Apply primarily to a minority of 

the beneficiaries eligible to enroll in the 

dual eligible special needs plan who use 

behavioral health services; or 

(2) Constitute a small part of the total 

scope of behavioral health services 

provided to the majority of beneficiaries 

eligible to enroll in the dual eligible 

special needs plan. 

* * * * * 

■ 6. Section 422.116 is amended by 

revising paragraph (a)(1)(ii) and adding 

paragraph (d)(7) to read as follows: 

§ 422.116 Network adequacy. 

(a) * * * 

(1) * * * 

(ii) Beginning with contract year 2024, 

an applicant for a new or expanding 

service area must demonstrate 

compliance with this section as part of 

its application for a new or expanding 

service area and CMS may deny an 

application on the basis of an evaluation 

of the applicant’s network for the new 

or expanding service area. 

* * * * * 

(d) * * * 

(7) New or expanding service area 

applicants. Beginning with contract year 

2024, an applicant for a new or 

expanding service area receives a 10- 

percentage point credit towards the 

percentage of beneficiaries residing 

within published time and distance 

standards for the contracted network in 

the pending service area, at the time of 

application and for the duration of the 

application review. At the beginning of 

the applicable contract year, this credit 

no longer applies and if the application 

is approved, the MA organization must 

be in full compliance with this section. 

* * * * * 

■ 7. Section 422.166 is amended by 

adding paragraph (i)(12) to read as 

follows: 

§ 422.166 Calculation of Star Ratings. 

* * * * * 

(i) * * * 

(12) Special rules for the 2023 Star 

Ratings only. For the 2023 Star Ratings 

only, for measures derived from the 

Health Outcomes Survey only, CMS 

does not apply the provisions in 

paragraph (i)(9) or (10) of this section 

and CMS does not exclude the numeric 

values for affected contracts with 60 

percent or more of their enrollees in the 

FEMA-designated Individual Assistance 

area at the time of the extreme and 

uncontrollable circumstance from the 

clustering algorithms or from the 

determination of the performance 

summary and variance thresholds for 

the Reward Factor. 

* * * * * 

■ 8. Section 422.502 is amended by 

revising paragraphs (b)(1) introductory 

text and (b)(1)(i) to read as follows: 

§ 422.502 Evaluation and determination 

procedures. 

* * * * * 

(b) * * * 

(1) Except as provided in paragraphs 

(b)(2) through (4) of this section, if an 

MA organization fails during the 12 

months preceding the deadline 

established by CMS for the submission 

of contract qualification applications to 

comply with the requirements of the 

Part C program under any current or 

prior contract with CMS under title 

XVIII of the Act, CMS may deny an 

application based on the applicant’s 

failure to comply with the requirements 

of the Part C program under any current 

or prior contract with CMS even if the 

applicant currently meets all of the 

requirements of this part. 

(i) An applicant may be considered to 

have failed to comply with a contract for 

purposes of an application denial under 

paragraph (b)(1) of this section if during 

the applicable review period the 

applicant does any of the following: 

(A) Was subject to the imposition of 

an intermediate sanction under subpart 

O of this part or a determination by 

CMS to prohibit the enrollment of new 

enrollees in accordance with 

§ 422.2410(c), with the exception of a 

sanction imposed under § 422.752(d). 

(B) Failed to maintain a fiscally sound 

operation consistent with the 

requirements of § 422.504(b)(14). 

(C) Filed for or is currently in State 

bankruptcy proceedings. 

(D) Received 2.5 or less on CMS Star 

Ratings, as identified in § 422.166. 

(E) Met or exceeded 13 points for 

compliance actions. 

(1) CMS determines the number of 

points each MA organization 

accumulated during the performance 


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period for compliance actions based on 

the following point values: 

(i) Each corrective action plan issued 

during the performance period under 

§ 422.504(m) counts for 6 points. 

(ii) Each warning letter issued during 

the performance period under 

§ 422.504(m) counts for 3 points. 

(iii) Each notice of noncompliance 

issued during the performance period 

under § 422.504(m) counts for 1 point. 

(2) CMS adds all the point values for 

each MA organization to determine if 

any organization meets CMS’ identified 

threshold. 

* * * * * 

■ 9. Section 422.503 is amended by 

revising paragraphs (b)(5)(i) and (ii) to 

read as follows: 

§ 422.503 General provisions. 

* * * * * 

(b) * * * 

(5) * * * 

(i) Not accept, or share a corporate 

parent organization owning a 

controlling interest in an entity that 

accepts, new enrollees under a section 

1876 reasonable cost contract in any 

area in which it seeks to offer an MA 

plan that is not a dual eligible special 

needs plan. 

(ii) Not accept, or be either the parent 

organization owning a controlling 

interest of or subsidiary of an entity that 

accepts, new enrollees under a section 

1876 reasonable cost contract in any 

area in which it seeks to offer an MA 

plan that is not a dual eligible special 

needs plan. 

* * * * * 

■ 10. Section 422.504 is amended by 

revising paragraph (m) to read as 

follows: 

§ 422.504 Contract provisions. 

* * * * * 

(m) Issuance of compliance actions 

for failure to comply with the terms of 

the contract. The MA organization 

acknowledges that CMS may take 

compliance actions as described in this 

section or intermediate sanctions as 

defined in subpart O of this part. 

(1) CMS may take compliance actions 

as described in paragraph (m)(3) of this 

section if it determines that the MA 

organization has not complied with the 

terms of a current or prior Part C 

contract with CMS. 

(i) CMS may determine that an MA 

organization is out of compliance with 

a Part C requirement when the 

organization fails to meet performance 

standards articulated in the Part C 

statutes, regulations in this chapter, or 

guidance. 

(ii) If CMS has not already articulated 

a measure for determining 

noncompliance, CMS may determine 

that an MA organization is out of 

compliance when its performance in 

fulfilling Part C requirements represents 

an outlier relative to the performance of 

other MA organizations. 

(2) CMS bases its decision on whether 

to issue a compliance action and what 

level of compliance action to take on an 

assessment of the circumstances 

surrounding the noncompliance, 

including all of the following: 

(i) The nature of the conduct. 

(ii) The degree of culpability of the 

MA organization. 

(iii) The adverse effect to beneficiaries 

which resulted or could have resulted 

from the conduct of the MA 

organization. 

(iv) The history of prior offenses by 

the MA organization or its related 

entities. 

(v) Whether the noncompliance was 

self-reported. 

(vi) Other factors which relate to the 

impact of the underlying 

noncompliance or the lack of the MA 

organization’s oversight of its operations 

that contributed to the noncompliance. 

(3) CMS may take one of three types 

of compliance actions based on the 

nature of the noncompliance. 

(i) Notice of non-compliance. A notice 

of non-compliance may be issued for 

any failure to comply with the 

requirements of the MA organization’s 

current or prior Part C contract with 

CMS, as described in paragraph (m)(1) 

of this section. 

(ii) Warning letter. A warning letter 

may be issued for serious and/or 

continued non-compliance with the 

requirements of the MA organization’s 

current or prior Part C contract with 

CMS, as described in paragraph (m)(1) 

of this section and as assessed in 

accordance with paragraph (m)(2) of this 

section. 

(iii) Corrective action plan. (A) 

Corrective action plans are requested for 

particularly serious or continued noncompliance with the requirements of the 

MA organization’s current or prior Part 

C contract with CMS, as described in 

paragraph (m)(1) of this section and as 

assessed in accordance with paragraph 

(m)(2) of this section. 

(B) CMS issues a corrective action 

plan if CMS determines that the MA 

organization has repeated or not 

corrected noncompliance identified in 

prior compliance actions, has 

substantially impacted beneficiaries or 

the program with its noncompliance, or 

must implement a detailed plan to 

correct the underlying causes of the 

noncompliance. 

* * * * * 

■ 11. Section 422.530 is amended by 

revising paragraph (c)(4) to read as 

follows: 

§ 422.530 Plan crosswalks. 

* * * * * 

(c) * * * 

(4) When— 

(i) A renewing D–SNP has another 

new or renewing D–SNP, and the two 

D–SNPs are offered to different 

populations, enrollees who are no 

longer eligible for their current D–SNP 

may be moved into the other new or 

renewing D–SNP offered by the same 

MA organization if they meet the 

eligibility criteria for the new or 

renewing D–SNP and CMS determines it 

is in the best interest of the enrollees to 

move to the new or renewing D–SNP in 

order to promote access to and 

continuity of care for enrollees relative 

to the absence of a crosswalk exception. 

For the crosswalk exception in this 

paragraph (c)(4), CMS does not permit 

enrollees to be moved between different 

contracts; or 

(ii) An MA organization creates a new 

MA contract when required by a State 

as described in § 422.107(e), eligible 

enrollees may be moved from the 

existing D–SNP that is non-renewing, 

reducing its service area, or has its 

eligible population newly restricted by 

a State, to a D–SNP offered under the D– 

SNP-only contract, which must be of the 

same plan type operated by the same 

parent organization. 

* * * * * 

■ 12. Section 422.561 is amended by 

revising the definition of ‘‘Applicable 

integrated plan’’ to read as follows: 

§ 422.561 Definitions. 

* * * * * 

Applicable integrated plan means 

either of the following: 

(1) Before January 1, 2023. (i) A fully 

integrated dual eligible special needs 

plan with exclusively aligned 

enrollment or a highly integrated dual 

eligible special needs plan with 

exclusively aligned enrollment; and 

(ii) The Medicaid managed care 

organization, as defined in section 

1903(m) of the Act, through which such 

dual eligible special needs plan, its 

parent organization, or another entity 

that is owned and controlled by its 

parent organization covers Medicaid 

services for dually eligible individuals 

enrolled in such dual eligible special 

needs plan and such Medicaid managed 

care organization. 

(2) On or after January 1, 2023. (i)(A) 

A fully integrated dual eligible special 

needs plan or highly integrated dual 

eligible special needs plan with 

exclusively aligned enrollment; and 


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(B) The Medicaid managed care 

organization, as defined in section 

1903(m) of the Act, through which such 

dual eligible special needs plan, its 

parent organization, or another entity 

that is owned and controlled by its 

parent organization covers Medicaid 

services for dually eligible individuals 

enrolled in such dual eligible special 

needs plan and such Medicaid managed 

care organization; or 

(ii) A dual eligible special needs plan 

and affiliated Medicaid managed care 

plan where— 

(A) The dual special needs plan, by 

State policy has enrollment limited to 

those beneficiaries enrolled in a 

Medicaid managed care organization as 

described in paragraph (2)(ii)(B) of this 

definition; 

(B) There is a capitated contract 

between the MA organization, the MA 

organization’s parent organization, or 

another entity that is owned and 

controlled by its parent organization; 

and 

(1) A Medicaid agency; or 

(2) A Medicaid managed care 

organization as defined in section 

1903(m) of the Act that contracts with 

the Medicaid agency; and 

(C) Through the capitated contract 

described in paragraph (2)(ii)(B) of this 

definition, Medicaid benefits including 

primary care and acute care, including 

Medicare cost-sharing as defined in 

section 1905(p)(3)(B), (C), and (D) of the 

Act, without regard to the limitation of 

that definition to qualified Medicare 

beneficiaries, and at a minimum, home 

health services as defined in § 440.70 of 

this chapter, durable medical equipment 

as defined in § 440.70(d)(3) of this 

chapter, or nursing facility services are 

covered for the enrollees. 

* * * * * 

■ 13. Section 422.629 is amended by— 

■ a. Revising paragraph (d); 

■ b. In paragraph (k)(4)(ii), removing the 

phrase ‘‘integrated organization 

determination decision’’ and adding in 

its place the phrase ‘‘integrated 

reconsideration determination’’; 

■ c. Revising paragraph (l)(1); and 

■ d. Adding paragraph (l)(4). 

The revisions and addition read as 

follows: 

§ 422.629 General requirements for 

applicable integrated plans. 

* * * * * 

(d) Evidence. The applicable 

integrated plan must do the following: 

(1) Provide the enrollee— 

(i) A reasonable opportunity, in 

person and in writing, to present 

evidence and testimony and make legal 

and factual arguments for integrated 

grievances, and integrated 

reconsiderations; and 

(ii) Information on how evidence and 

testimony should be presented to the 

plan. 

(2) Inform the enrollee of the limited 

time available for presenting evidence 

sufficiently in advance of the resolution 

timeframe for appeals as specified in 

this section if the case is being 

considered under an expedited 

timeframe for the integrated grievance 

or integrated reconsideration. 

* * * * * 

(l) * * * 

(1) The following individuals or 

entities can request an integrated 

grievance, integrated organization 

determination, and integrated 

reconsideration, and are parties to the 

case: 

(i) The enrollee. 

(ii) The enrollee’s representative, 

including any person authorized under 

State law. 

* * * * * 

(4) The following individuals or 

entities may request an integrated 

reconsideration and are parties to the 

case: 

(i) An assignee of the enrollee (that is, 

a physician or other provider who has 

furnished or intends to furnish a service 

to the enrollee and formally agrees to 

waive any right to payment from the 

enrollee for that service). 

(ii) Any other provider or entity (other 

than the applicable integrated plan) who 

has an appealable interest in the 

proceeding. 

■ 14. Section 422.631 is amended by 

adding paragraph (d)(3) to read as 

follows: 

§ 422.631 Integrated organization 

determinations. 

* * * * * 

(d) * * * 

(3) Timeframe for requests for 

payment. The applicable integrated plan 

must process requests for payment 

according to the ‘‘prompt payment’’ 

provisions set forth in § 422.520. 

* * * * * 

■ 15. Section 422.633 is amended by 

revising the section heading and 

paragraphs (e)(1) and (f)(3)(i) 

introductory text to read as follows: 

§ 422.633 Integrated reconsiderations. 

* * * * * 

(e) * * * 

(1) Applicable integrated plans must 

accept requests to expedite integrated 

reconsiderations from either of the 

following: 

(i) An enrollee. 

(ii) A provider, making the request on 

behalf of an enrollee, that is not a 

request for expedited payment. 

* * * * * 

(f) * * * 

(3) * * * 

(i) The applicable integrated plan may 

extend the timeframe for resolving any 

integrated reconsideration other than 

those concerning Part B drugs by 14 

calendar days if— 

* * * * * 

■ 16. Section 422.634 is amended by 

revising paragraph (d) to read as 

follows: 

§ 422.634 Effect. 

* * * * * 

(d) Services not furnished while the 

appeal is pending. (1) If an applicable 

integrated plan reverses its decision to 

deny, limit, or delay services that were 

not furnished while the appeal was 

pending, the applicable integrated plan 

must authorize or provide the disputed 

services promptly and as expeditiously 

as the enrollee’s health condition 

requires but no later than the earlier 

of— 

(i) 72 hours from the date it reverses 

its decision; or 

(ii)(A) With the exception of a Part B 

drug, 30 calendar days after the date the 

applicable integrated plan receives the 

request for the integrated 

reconsideration (or no later than upon 

expiration of an extension described in 

§ 422.633(f)); or 

(B) For a Part B drug, 7 calendar days 

after the date the applicable integrated 

plan receives the request for the 

integrated reconsideration. 

(2) For a Medicaid benefit, if a State 

fair hearing officer reverses an 

applicable integrated plan’s integrated 

reconsideration decision to deny, limit, 

or delay services that were not 

furnished while the appeal was 

pending, the applicable integrated plan 

must authorize or provide the disputed 

services promptly and as expeditiously 

as the enrollee’s health condition 

requires but no later than 72 hours from 

the date it receives notice reversing the 

determination. 

(3) Reversals by the Part C 

independent review entity, an 

administrative law judge or attorney 

adjudicator at the Office of Medicare 

Hearings and Appeals, or the Medicare 

Appeals Council must be effectuated 

under same timelines applicable to 

other MA plans as specified in 

§§ 422.618 and 422.619. 

* * * * * 

■ 17. Section 422.2260 is amended by 

adding the definition of ‘‘Third-party 

marketing organization (TPMO)’’ in 

alphabetical order to read as follows: 

§ 422.2260 Definitions. 

* * * * * 


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Third-party marketing organization 

(TPMO) means organizations who are 

compensated to perform lead 

generation, marketing, sales, and 

enrollment related functions as a part of 

the chain of enrollment (the steps taken 

by a beneficiary from becoming aware of 

an MA plan or plans to making an 

enrollment decision). TPMOs may be a 

first tier, downstream or related entity 

(FDRs), as defined under § 422.504(i), 

but may also be entities that are not 

FDRs but provide services to customers 

including an MA plan or an MA plan’s 

FDR. 

■ 18. Section 422.2265 is amended by 

adding paragraphs (b)(13) and (14) to 

read as follows: 

§ 422.2265 Websites. 

* * * * * 

(b) * * * 

(13) Instructions on how to appoint a 

representative including a link to the 

downloadable version of the CMS 

Appointment of Representative Form 

(CMS Form–1696). 

(14) Enrollment instructions and 

forms. 

* * * * * 

■ 19. Section 422.2267 is amended by— 

■ a. Redesignating paragraphs (e)(30) 

through (38) as paragraphs (e)(32) 

through (40). 

■ b. Adding new paragraphs (e)(30) and 

(31) and paragraph (e)(41). 

The additions read as follows: 

§ 422.2267 Required materials and 

content. 

* * * * * 

(e) * * * 

(30) Member ID card. The member ID 

card is a model communications 

material that plans must provide to 

enrollees as required under § 422.111(i). 

The member ID card— 

(i) Must be provided to new enrollees 

within ten calendars days from receipt 

of CMS confirmation of enrollment or 

by last day of month prior to effective 

date, whichever is later; 

(ii) Must include the plan’s— 

(A) Website address; 

(B) Customer service number (the 

member ID card is excluded from the 

hours of operations requirement under 

§ 422.2262(c)(1)(i)); and 

(C) Contract/PBP number; 

(iii) Must include, if issued for a PPO 

and PFFS plan, the phrase ‘‘Medicare 

limiting charges apply.’’; 

(iv) May not use a member’s Social 

Security number (SSN), in whole or in 

part; 

(v) Must be updated whenever 

information on a member’s existing card 

changes; in such cases an updated card 

must be provided to the member; and 

(vi) Is excluded from the translation 

requirement under paragraph (a)(2) of 

this section. 

(31) Multi-language insert (MLI). This 

is a standardized communications 

material which states, ‘‘We have free 

interpreter services to answer any 

questions you may have about our 

health or drug plan. To get an 

interpreter, just call us at [1–xxx–xxx– 

xxxx]. Someone who speaks [language] 

can help you. This is a free service.’’ in 

the following languages: Spanish, 

Chinese, Tagalog, French, Vietnamese, 

German, Korean, Russian, Arabic, 

Italian, Portuguese, French Creole, 

Polish, Hindi, and Japanese. 

(i) Additional languages that meet the 

5-percent service area threshold, as 

required under paragraph (a)(2) of this 

section, must be added to the MLI used 

in that service area. A plan may also opt 

to include in the MLI any additional 

language that do not meet the 5-percent 

service area threshold, where it 

determines that this inclusion would be 

appropriate. 

(ii) The MLI must be provided with 

all required materials under paragraph 

(e) of this section. 

(iii) The MLI may be included as a 

part of the required material or as a 

standalone material in conjunction with 

the required material. 

(iv) When used as a standalone, the 

MLI may include organization name and 

logo. 

(v) When mailing multiple required 

materials together, only one MLI is 

required. 

(vi) The MLI may be provided 

electronically when a required material 

is provided electronically as permitted 

under paragraph (d)(2) of this section. 

* * * * * 

(41) Third-party marketing 

organization disclaimer. This is 

standardized content. The disclaimer 

consists of the statement ‘‘We do not 

offer every plan available in your area. 

Any information we provide is limited 

to those plans we do offer in your area. 

Please contact Medicare.gov or 1–800– 

MEDICARE to get information on all of 

your options.’’ The MA organization 

must ensure that the disclaimer is as 

follows: 

(i) Used by any TPMO, as defined 

under § 422.2260, that sells plans on 

behalf of more than one MA 

organization unless the TPMO sells all 

commercially available MA plans in a 

given service area. 

(ii) Verbally conveyed within the first 

minute of a sales call. 

(iii) Electronically conveyed when 

communicating with a beneficiary 

through email, online chat, or other 

electronic means of communication. 

(iv) Prominently displayed on TPMO 

websites. 

(v) Included in any marketing 

materials, including print materials and 

television advertisements, developed, 

used or distributed by the TPMO. 

■ 20. Section 422.2274 is amended by 

revising the section heading and adding 

paragraph (g) to read as follows: 

§ 422.2274 Agent, broker, and other thirdparty requirements. 

* * * * * 

(g) TPMO oversight. In addition to any 

applicable FDR requirements under 

§ 422.504(i), when doing business with 

a TPMO, either directly or indirectly 

through a downstream entity, MA plans 

must implement the following as a part 

of their oversight of TPMOs: 

(1) When a TPMO is not otherwise an 

FDR, the MA organization is responsible 

for ensuring that the TPMO adheres to 

any requirements that apply to the MA 

plan. 

(2) Contracts, written arrangements, 

and agreements between the TPMO and 

an MA plan, or between the TPMO and 

an MA plan’s FDR, must ensure the 

TPMO: 

(i) Discloses to the MA organization 

any subcontracted relationships used for 

marketing, lead generation, and 

enrollment. 

(ii) Records all calls with beneficiaries 

in their entirety, including the 

enrollment process. 

(iii) Reports to plans monthly any 

staff disciplinary actions associated 

with beneficiary interaction to the plan. 

(iv) Uses the TPMO disclaimer as 

required under § 422.2267(e)(41). 

(3) Ensure that the TPMO, when 

conducting lead generating activities, 

either directly or indirectly for an MA 

organization, must, when applicable: 

(i) Disclose to the beneficiary that his 

or her information will be provided to 

a licensed agent for future contact. This 

disclosure must be provided as follows: 

(A) Verbally when communicating 

with a beneficiary through telephone. 

(B) In writing when communicating 

with a beneficiary through mail or other 

paper. 

(C) Electronically when 

communicating with a beneficiary 

through email, online chat, or other 

electronic messaging platform. 

(ii) Disclose to the beneficiary that he 

or she is being transferred to a licensed 

agent who can enroll him or her into a 

new plan. 

■ 21. Section 422.2460 is amended by 

revising paragraphs (a), (b) introductory 

text, and (d) and adding paragraph (e) to 

read as follows: 


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§ 422.2460 Reporting requirements. 

(a) Except as provided in paragraph 

(b) of this section, for each contract year, 

each MA organization must submit to 

CMS, in a timeframe and manner 

specified by CMS, a report that includes 

the data needed by the MA organization 

to calculate and verify the medical loss 

ratio (MLR) and remittance amount, if 

any, for each contract under this part, 

including the amount of incurred claims 

for original Medicare covered benefits, 

supplemental benefits, and prescription 

drugs; total revenue; expenditures on 

quality improving activities; non-claims 

costs; taxes; licensing and regulatory 

fees; and any remittance owed to CMS 

under § 422.2410. 

(b) For contract years 2018 through 

2022, each MA organization must 

submit to CMS, in a timeframe and 

manner specified by CMS, the following 

information: 

* * * * * 

(d) Subject to paragraph (e) of this 

section, the MLR is reported once, and 

is not reopened as a result of any 

payment reconciliation processes. 

(e) With respect to an MA 

organization that has already submitted 

to CMS the MLR report or MLR data 

required under paragraph (a) or (b) of 

this section, respectively, for a contract 

for a contract year, paragraph (d) of this 

section does not prohibit resubmission 

of the MLR report or MLR data for the 

purpose of correcting the prior MLR 

report or data submission. Such 

resubmission must be authorized or 

directed by CMS, and upon receipt and 

acceptance by CMS, is regarded as the 

contract’s MLR report or data 

submission for the contract year for 

purposes of this subpart. 

■ 22. Section 422.2490 is amended by 

redesignating paragraph (b)(2) as 

paragraph (b)(2)(i) and adding paragraph 

(b)(2)(ii) to read as follows: 

§ 422.2490 Release of Part C MLR data. 

* * * * * 

(b) * * * 

(2) * * * 

(ii) Amounts that are reported as 

expenditures for a specific type of 

supplemental benefit, where the entire 

amount that is reported represents costs 

incurred by the only plan under the 

contract that offers that benefit. 

* * * * * 

PART 423—VOLUNTARY MEDICARE 

PRESCRIPTION DRUG BENEFIT 

■ 23. The authority citation for part 423 

continues to read as follows: 

Authority: 42 U.S.C. 1302, 1306, 1395w– 

101 through 1395w–152, and 1395hh. 

■ 24. Section 423.100 is amended by 

removing the definition of ‘‘Negotiated 

prices’’ and adding in alphabetical order 

definitions for ‘‘Negotiated price’’ and 

‘‘Price concession’’ to read as follows: 

§ 423.100 Definitions. 

* * * * * 

Negotiated price means the price for 

a covered Part D drug that— 

(1) The Part D sponsor (or other 

intermediary contracting organization) 

and the network dispensing pharmacy 

or other network dispensing provider 

have negotiated as the lowest possible 

reimbursement such network entity will 

receive, in total, for a particular drug; 

(2) Meets all of the following: 

(i) Includes all price concessions (as 

defined in this section) from network 

pharmacies or other network providers; 

(ii) Includes any dispensing fees; and 

(iii) Excludes additional contingent 

amounts, such as incentive fees, if these 

amounts increase prices; and 

(3) Is reduced by non-pharmacy price 

concessions and other direct or indirect 

remuneration that the Part D sponsor 

passes through to Part D enrollees at the 

point of sale. 

* * * * * 

Price concession means any form of 

discount, direct or indirect subsidy, or 

rebate received by the Part D sponsor or 

its intermediary contracting 

organization from any source that serves 

to decrease the costs incurred under the 

Part D plan by the Part D sponsor. 

Examples of price concessions include 

but are not limited to: Discounts, 

chargebacks, rebates, cash discounts, 

free goods contingent on a purchase 

agreement, coupons, free or reducedprice services, and goods in kind. 

* * * * * 

■ 25. Section 423.503 is amended by 

revising the section heading and 

paragraphs (b)(1) introductory text and 

(b)(1)(i) to read as follows: 

§ 423.503 Evaluation and determination 

procedures. 

* * * * * 

(b) * * * 

(1) Except as provided in paragraphs 

(b)(2) through (4) of this section, if a Part 

D plan sponsor fails during the 12 

months preceding the deadline 

established by CMS for the submission 

of contract qualification applications to 

comply with the requirements of the 

Part D program under any current or 

prior contract with CMS under title 

XVIII of the Act CMS may deny an 

application based on the applicant’s 

failure to comply with the requirements 

of the Part D program under any current 

or prior contract with CMS even if the 

applicant currently meets all of the 

requirements of this part. 

(i) An applicant may be considered to 

have failed to comply with a contract for 

purposes of an application denial under 

paragraph (b)(1) of this section if during 

the applicable review period the 

applicant: 

(A) Was subject to the imposition of 

an intermediate sanction under subpart 

O of this part, or a determination by 

CMS to prohibit the enrollment of new 

enrollees under § 423.2410(c). 

(B) Failed to maintain a fiscally sound 

operation consistent with the 

requirements of § 423.505(b)(23). 

(C) Filed for or is currently under 

state bankruptcy proceedings. 

(D) Received 2.5 or less on CMS Star 

Ratings, as identified in § 423.186. 

(E) Met or exceeded 13 points for 

compliance actions. 

(1) CMS determines the number of 

points each Part D plan sponsor 

accumulated during the performance 

period for compliance actions based on 

the following point values: 

(i) Each corrective action plan issued 

during the performance period under 

§ 423.505(n) counts for 6 points. 

(ii) Each warning letter issued during 

the performance period under 

§ 423.505(n) counts for 3 points. 

(iii) Each notice of noncompliance 

issued during the performance period 

under § 423.505(n) counts for 1 point. 

(2) CMS adds all the point values for 

each Part D plan sponsor to determine 

if any organization meets CMS’ 

identified threshold. 

* * * * * 

■ 26. Section 423.505 is amended by 

revising paragraph (n) to read as 

follows: 

§ 423.505 Contract provisions. 

* * * * * 

(n) Issuance of compliance actions for 

failure to comply with the terms of the 

contract. The Part D plan sponsor 

acknowledges that CMS may take 

compliance actions as described in this 

section or intermediate sanctions as 

defined in subpart O of this part. 

(1) CMS may take compliance actions 

as described in paragraph (n)(3) of this 

section if it determines that the Part D 

plan sponsor has not complied with the 

terms of a current or prior Part D 

contract with CMS. 

(i) CMS may determine that a Part D 

plans sponsor is out of compliance with 

a Part D requirement when the 

organization fails to meet performance 

standards articulated in the Part D 

statutes, regulations in this chapter, or 

guidance. 

(ii) If CMS has not already articulated 

a measure for determining 


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noncompliance, CMS may determine 

that a Part D plan sponsor is out of 

compliance when its performance in 

fulfilling Part D requirements represents 

an outlier relative to the performance of 

other Part D plan sponsors. 

(2) CMS bases its decision on whether 

to issue a compliance action and what 

level of compliance action to take on an 

assessment of the circumstances 

surrounding the noncompliance, 

including all of the following: 

(i) The nature of the conduct. 

(ii) The degree of culpability of the 

Part D plan sponsor. 

(iii) The adverse effect to beneficiaries 

which resulted or could have resulted 

from the conduct of the Part D plan 

sponsor. 

(iv) The history of prior offenses by 

the Part D plan sponsor or its related 

entities. 

(v) Whether the noncompliance was 

self-reported. 

(vi) Other factors which relate to the 

impact of the underlying 

noncompliance or the lack of the Part D 

plan sponsor’s oversight of its 

operations that contributed to the 

noncompliance. 

(3) CMS may take one of three types 

of compliance actions based on the 

nature of the noncompliance. 

(i) Notice of non-compliance. A notice 

of non-compliance may be issued for 

any failure to comply with the 

requirements of the Part D plan 

sponsor’s current or prior Part D 

contract with CMS, as described in 

paragraph (n)(1) of this section. 

(ii) Warning letter. A warning letter 

may be issued for serious and/or 

continued non-compliance with the 

requirements of the Part D plan 

sponsor’s current or prior Part D 

contract with CMS, as described in 

paragraph (n)(1) of this section and as 

assessed in accordance with paragraph 

(n)(2) of this section. 

(iii) Corrective action plan. (A) 

Corrective action plans are issued for 

particularly serious and/or continued 

non-compliance with the requirements 

of the Part D plan sponsors’ current or 

prior Part D contract with CMS, as 

described in paragraph (n)(1) of this 

section and as assessed in accordance 

with paragraph (n)(2) of this section. 

(B) CMS issues a corrective action 

plan if CMS determines that the Part D 

plan sponsor has repeated or not 

corrected noncompliance identified in 

prior compliance actions, has 

substantially impacted beneficiaries or 

the program with its noncompliance, 

and/or must implement a detailed plan 

to correct the underlying causes of the 

noncompliance. 

* * * * * 

■ 27. Section 423.2260 is amended by 

adding the definition of ‘‘Third-party 

marketing organization (TPMO)’’ in 

alphabetical order to read as follows: 

§ 423.2260 Definitions. 

* * * * * 

Third-party marketing organization 

(TPMO) are organizations who are 

compensated to perform lead 

generation, marketing, sales, and 

enrollment related functions as a part of 

the chain of enrollment (the steps taken 

by a beneficiary from becoming aware of 

a Part D plan or plans to making an 

enrollment decision). TPMOs may be a 

first tier, downstream or related entity 

(FDRs), as defined under § 422.504(i) of 

this chapter, but may also be entities 

that are not FDRs but provide services 

to customers including an Part D 

sponsor or an Part D sponsor’s FDR. 

■ 28. Section 423.2265 is amended by 

adding paragraphs (b)(14) and (15) to 

read as follows: 

§ 423.2265 websites. 

* * * * * 

(b) * * * 

(14) Instructions on how to appoint a 

representative including a link to the 

downloadable version of the CMS 

Appointment of Representative Form 

(CMS Form-1696). 

(15) Enrollment instructions and 

forms. 

* * * * * 

■ 29. Section 423.2267 is amended by— 

■ a. Redesignating paragraphs (e)(32) 

through (37) as paragraphs (e)(34) 

through (39); and 

■ b. Adding new paragraphs (e)(32) and 

(33) and paragraphs (e)(40) and (41). 

The additions read as follows: 

§ 423.2267 Required materials and 

content. 

* * * * * 

(e) * * * 

(32) Member ID card. The member ID 

card is a model communications 

material that plans must provide to 

enrollees as required under 

§ 423.128(d)(2). The member ID card— 

(i) Must be provided to new enrollees 

within 10 calendars days from receipt of 

CMS confirmation of enrollment or by 

last day of month prior to effective date, 

whichever is later; 

(ii) Must include the Part D 

sponsor’s— 

(A) Website address; 

(B) Customer service number (the 

Member ID card is excluded from the 

hours of operations requirement under 

§ 423.2262(c)(1)(i)); and 

(C) Contract/PBP number; 

(iii) Must include, if issued for a 

preferred provider organization (PPO) 

and PFFS plan, the phrase ‘‘Medicare 

limiting charges apply.’’; 

(iv) May not use a member’s Social 

Security number (SSN), in whole or in 

part; 

(v) Must be updated whenever 

information on a member’s existing card 

changes; in such cases an updated card 

must be provided to the member; and 

(vi) Is excluded from the translation 

requirement under paragraph (a)(2) of 

this section. 

(33) Multi-language insert (MLI). This 

is a standardized communications 

material which states, ‘‘We have free 

interpreter services to answer any 

questions you may have about our 

health or drug plan. To get an 

interpreter, just call us at [1-xxx-xxxxxxx]. Someone who speaks [language] 

can help you. This is a free service.’’ in 

the following languages: Spanish, 

Chinese, Tagalog, French, Vietnamese, 

German, Korean, Russian, Arabic, 

Italian, Portuguese, French Creole, 

Polish, Hindi, and Japanese. 

(i) Additional languages that meet the 

5-percent service area threshold, as 

required under paragraph (a)(2) of this 

section, must be added to the MLI used 

in that service area. A plan may also opt 

to include in the MLI any additional 

language that do not meet the 5-percent 

service area threshold, where it 

determines that this inclusion would be 

appropriate. 

(ii) The MLI must be provided with 

all required materials under paragraph 

(e) of this section. 

(iii) The MLI may be included as a 

part of the required material or as a 

standalone material in conjunction with 

the required material. 

(iv) When used as a standalone, the 

MLI may include organization name and 

logo. 

(v) When mailing multiple required 

materials together, only one MLI is 

required. 

(vi) The MLI may be provided 

electronically when a required material 

is provided electronically as permitted 

under paragraph (d)(2) of this section. 

* * * * * 

(40) Limited access to preferred cost 

sharing pharmacies. This is 

standardized content that must— 

(i) Be used on all materials 

mentioning preferred pharmacies when 

there is limited access to preferred 

pharmacies; and 

(ii) Include the following language 

‘‘<insert organization/plan name>’s 

pharmacy network includes limited 

lower-cost, preferred pharmacies in 

<insert geographic area type(s) and 

state(s) for which plan is an outlier)>. 

The lower costs advertised in our plan 


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materials for these pharmacies may not 

be available at the pharmacy you use. 

For up-to-date information about our 

network pharmacies, including whether 

there are any lower-cost preferred 

pharmacies in your area, please call 

<insert Member Services phone number 

and TTY> or consult the online 

pharmacy directory at <insert 

website>.’’ 

(41) Third-party marketing 

organization disclaimer. This is 

standardized content. The disclaimer 

consists of the statement ‘‘We do not 

offer every plan available in your area. 

Any information we provide is limited 

to those plans we do offer in your area. 

Please contact Medicare.gov or 1–800– 

MEDICARE to get information on all of 

your options.’’ The Part D sponsor must 

ensure that the disclaimer is as follows: 

(i) Used by any TPMO, as defined 

under § 423.2260, that sells plans on 

behalf of more than one Part D sponsor 

unless the TPMO sells all commercially 

available Part D plans in a given service 

area. 

(ii) Verbally conveyed within the first 

minute of a sales call. 

(iii) Electronically conveyed when 

communicating with a beneficiary 

through email, online chat, or other 

electronic means of communication. 

(iv) Prominently displayed on TPMO 

websites. 

(v) Included in any TPMO marketing 

materials, including print materials and 

television advertising. 

■ 30. Section 423.2274 is amended by 

revising the section heading and adding 

paragraph (g) to read as follows: 

§ 423.2274 Agent, broker, and other thirdparty requirements. 

* * * * * 

(g) TPMO oversight. In addition to any 

applicable FDR requirements under 

§ 423.505(i), when doing business with 

a TPMO, either directly or indirectly 

through a downstream entity, Part D 

sponsor must implement the following 

as a part of their oversight of TPMOs: 

(1) When TPMOs is not otherwise an 

FDR, the Part D sponsor is responsible 

for ensuring that the TPMO adheres to 

any requirements that apply to the Part 

D sponsor. 

(2) Contracts, written arrangements, 

and agreements between the TPMO and 

a Part D plan, or between a TPMO and 

a Part D plan’s FDR, must ensure the 

TPMO: 

(i) Discloses to the plan any 

subcontracted relationships used for 

marketing, lead generation, and 

enrollment. 

(ii) Record all calls with beneficiaries 

in their entirety, including the 

enrollment process. 

(iii) Report to plans monthly any staff 

disciplinary actions associated with 

beneficiary interaction to the plan. 

(iv) Use the TPMO disclaimer as 

required under § 423.2267(e)(41). 

(3) Ensure that the TPMO, when 

conducting lead generating activities, 

either directly or indirectly for a Part D 

sponsor, must, when applicable: 

(i) Disclose to the beneficiary that his 

or her information will be provided to 

a licensed agent for future contact. This 

disclosure must be provided: 

(A) Verbally when communicating 

with a beneficiary through telephone; 

(B) In writing when communicating 

with a beneficiary through mail or other 

paper; and 

(C) Electronically when 

communicating with a beneficiary 

through email, online chat, or other 

electronic messaging platform. 

(ii) When applicable, disclose to the 

beneficiary that he or she is being 

transferred to a licensed agent who can 

enroll him or her into a new plan. 

■ 31. Section 423.2460 is amended by 

revising paragraphs (a), (b) introductory 

text, and (d) and adding paragraph (e) to 

read as follows: 

§ 423.2460 Reporting requirements. 

(a) Except as provided in paragraph 

(b) of this section, for each contract year, 

each Part D sponsor must submit to 

CMS, in a timeframe and manner 

specified by CMS, a report that includes 

the data needed by the Part D sponsor 

to calculate and verify the medical loss 

ratio (MLR) and remittance amount, if 

any, for each contract under this part, 

including the amount of incurred claims 

for prescription drugs, total revenue, 

expenditures on quality improving 

activities, non-claims costs, taxes, 

licensing and regulatory fees, and any 

remittance owed to CMS under 

§ 423.2410. 

(b) For contract years 2018 through 

2022, each Part D sponsor must submit 

to CMS, in a timeframe and manner 

specified by CMS, the following 

information: 

* * * * * 

(d) Subject to paragraph (e) of this 

section, the MLR is reported once, and 

is not reopened as a result of any 

payment reconciliation processes. 

(e) With respect to a Part D sponsor 

that has already submitted to CMS the 

MLR report or MLR data required under 

paragraph (a) or (b) of this section, 

respectively, for a contract for a contract 

year, paragraph (d) of this section does 

not prohibit resubmission of the MLR 

report or MLR data for the purpose of 

correcting the prior MLR report or data 

submission. Such resubmission must be 

authorized or directed by CMS, and 

upon receipt and acceptance by CMS, is 

regarded as the contract’s MLR report or 

data submission for the contract year for 

purposes of this subpart. 

Dated: January 4, 2022. 

Xavier Becerra, 

Secretary, Department of Health and Human 

Services. 

[FR Doc. 2022–00117 Filed 1–6–22; 4:15 pm] 

BILLING CODE 4120–01–P 


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