[Federal Register Volume 63, Number 12 (Tuesday, January 20, 1998)]
[Proposed Rules]
[Pages 2920-2926]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-1381]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Health Care Financing Administration

42 CFR Chapter IV

[HCFA-1014-NC]
RIN 0938-AI45


Medicare Program: Request for Public Comments on Implementation 
of the Medicare+Choice Program, and Notice of Timeframes for Submission 
of Applications for Contracts

AGENCY: Health Care Financing Administration (HCFA), HHS.

ACTION: Notice of intent to regulate; solicitation of comments.

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SUMMARY: The Balanced Budget Act of 1997 (BBA) establishes a new 
Medicare+Choice program. Under this program, eligible individuals may 
elect to receive Medicare benefits through enrollment in one of an 
array of private health plans that contract with us.
    The BBA directs the Secretary to publish by June 1, 1998, 
regulations establishing standards for the Medicare+Choice program. We 
have already received comments and inquiries from the public on a 
number of issues associated with the Medicare+Choice program. This 
document solicits further public comments on issues related to 
implementation of the Medicare+Choice program. We intend to consider 
these comments as we develop an interim

[[Page 2921]]

final rule to implement the Medicare+Choice program.
    This document also includes preliminary information regarding 
application procedures for organizations that intend to contract with 
us to participate in the Medicare+Choice program.
    This document also informs the public of a meeting to discuss the 
Medicare+Choice program.

DATES: We request that comments be submitted on or before February 19, 
1998.

ADDRESSES: Mail written comments (1 original and 3 copies) to the 
following address: Health Care Financing Administration, Department of 
Health and Human Services, Attention: HCFA-1014-NC, P.O. Box 26688, 
Baltimore, MD 21207.
    If you prefer, you may deliver your written comments (1 original 
and 3 copies) to one of the following addresses:

Room 309-G, Hubert H. Humphrey Building, 200 Independence Avenue, SW., 
Washington, DC 20201, or
Room C5-09-26, 7500 Security Boulevard, Baltimore, MD 21244-1850

    Comments may also be submitted electronically to the following e-
mail address: hcfa1014nc.hcfa.gov. E-mail comments must include the 
full name and address of the sender and must be submitted to the 
referenced address in order to be considered. All comments must be 
incorporated in the e-mail message because we may not be able to access 
attachments. Because of staffing and resource limitations, we cannot 
accept comments by facsimile (FAX) transmission. In commenting, please 
refer to file code HCFA-1014-NC. Comments received timely will be 
available for public inspection as they are received, generally 
beginning approximately 3 weeks after publication of a document, in 
Room 309-G of the Department's offices at 200 Independence Avenue, SW., 
Washington, DC, on Monday through Friday of each week from 8:30 a.m. to 
5 p.m. (phone: (202) 690-7890).

FOR FURTHER INFORMATION CONTACT: Medicare+Choice Regulation Team, (410) 
786-7660.

SUPPLEMENTARY INFORMATION:

I. Background

A. General

    Medicare historically has consisted of two primary parts: Hospital 
insurance, also known as ``Part A,'' and supplementary medical 
insurance, also known as ``Part B.'' Part A is generally provided 
automatically to persons age 65 and over who are entitled to social 
security or railroad retirement board benefits. Similarly, individuals 
who have received either of these benefits based on their disability, 
for a period of at least 24 months, are also entitled to Part A 
benefits. Health care services covered under Part A include: inpatient 
hospital care, skilled nursing facility care, home health agency care, 
and hospice care.
    Part B benefits are available to almost all resident citizens age 
65 and over; certain aliens age 65 or over; and disabled beneficiaries 
who are entitled to Part A. Part B coverage is optional and requires 
payment of a monthly premium. Part B covers physician services (in both 
hospital and nonhospital settings) and services furnished by certain 
nonphysician practitioners. It also covers certain other services, 
including: clinical laboratory tests, durable medical equipment, most 
supplies, diagnostic tests, ambulance services, prescription drugs that 
cannot be self-administered, certain self-administered anticancer 
drugs, some other therapy services, certain other health services, and 
blood not supplied by Part A.

B. The Balanced Budget Act of 1997

    Subsequent to its initial enactment in 1965, the Medicare program 
has been subject to numerous legislative and administrative changes. 
However, one of the most significant changes results from the August 5, 
1997 enactment of the Balanced Budget Act of 1997 (BBA), Public Law 
105-33. Section 4001 of the BBA adds a new Part C to the Medicare 
program, by establishing sections 1851 through 1859 of the Social 
Security Act. The new Part C is known as ``Medicare+Choice.'' Section 
4002 of the BBA establishes transitional rules for the current Medicare 
health maintenance organization (HMO) program; and section 4006 
establishes special rules for Medicare+Choice medical savings accounts. 
Prior to the BBA, Medicare beneficiaries could choose between receiving 
their Medicare benefits on a fee-for service basis or enrolling in an 
HMO with a Medicare contract. In the latter case, the beneficiary 
selects a specific HMO or competitive medical plan (CMP) within a 
service area for Medicare-covered health care services. This selected 
plan coordinates all of the Medicare-covered health care services for 
the beneficiary and receives a per-person payment from Medicare that is 
predetermined. Under the new Medicare+Choice program, the 
beneficiaries' options have been expanded to include provider-sponsored 
organizations (PSOs), preferred provider organizations (PPOs), private 
fee-for-service plans, and, for those who qualify, religious fraternal 
benefit society plans. In addition, up to 390,000 beneficiaries 
nationwide (and prior to the year 2003) may elect a new Medical Savings 
Account (MSA) option. A Medicare+Choice MSA is a tax-exempt trust 
created to pay the qualified medical expenses of the account holder. A 
beneficiary who elects the MSA option will receive a catastrophic 
health care policy paid by Medicare. Any difference between the MSA 
plan insurance premium and the amount that Medicare would have paid if 
the beneficiary had elected Medicare+Choice coverage under any of the 
other options will be deposited into the beneficiary's MSA.
    Under Medicare+Choice, plans with which we contract must have 
quality programs that stress outcomes, create utilization protocols, 
assess consumer satisfaction, and monitor high-risk and high-volume 
services. In addition, all plans, other than non-network MSAs and 
certain private fee-for-service plans, must provide for external 
review. Each Medicare+Choice plan must provide Medicare members all 
benefits (other than hospice care) that are available under Parts A and 
B. In the case of an MSA plan, however, these benefits are not provided 
until after a catastrophic deductible amount has been satisfied.
    The law sets forth provisions relating to the following topics:
    <bullet> Eligibility, election, and enrollment.
    <bullet> Benefits and beneficiary protections.
    <bullet> Organizational relationships with participating providers.
    <bullet> Payments to Medicare+Choice organizations.
    <bullet> Premiums.
    <bullet> Organizational and financial requirements for 
Medicare+Choice organizations.
    <bullet> Establishment of standards.
    <bullet> Contract requirements.
    Additional information about the Medicare+Choice program is 
available on our Internet site (http://www.hcfa.gov).

C. Issues and Questions To Be Resolved

    As stated earlier, we are required to publish regulations 
implementing the Medicare+Choice program by June 1, 1998. The statute 
provides that these regulations may be issued as an interim final rule. 
We intend to use this mechanism and will formally request comments on 
our policies at that time.
    We have already received comments and inquiries from the public on 
a number of issues associated with the

[[Page 2922]]

Medicare+Choice program. However, to ensure that we receive the full 
range of public opinion, we are using this notice as a vehicle to 
request public suggestions on specific policy issues that are detailed 
in the following sections. In addition, at this time, we encourage the 
public to comment on any other relevant Medicare+Choice program policy 
areas, with the exception of comments on Federal solvency standards for 
PSOs. (A discussion of PSO solvency standard policy decisions and 
implementation issues and a request for public comment were contained 
in a notice published on September 23, 1997 (62 FR 49649).) We will 
consider public comments that are received timely as we develop the 
interim final rule, but we will not otherwise issue a separate set of 
responses to those comments. We request that commenters provide a brief 
summary of any detailed comments. Also, commenters should, whenever 
possible, identify the relevant section or subsection of the BBA or of 
the Social Security Act. Note that in the following sections, citations 
to the law are to sections of the Social Security Act as established by 
the BBA.
1. Information for Informed Choice
    One of the objectives of the Medicare+Choice program is to expand 
Medicare beneficiaries' options for health care. In order to ensure 
that beneficiaries have the appropriate information necessary to choose 
from the various Medicare+Choice options, section 1851(d) of the Act 
requires that we collect and disseminate information on the coverage 
options available. For example, the statute requires that, prior to 
each open season, we provide a notice to Medicare-eligible individuals 
that includes a list of the Medicare+Choice plans, a comparison of plan 
options that includes information on benefits and premiums, a general 
description of the benefits under the original Medicare fee-for-service 
program, and other general information. The statute also requires, at 
1851(e)(3)(D), that, during November 1998, we provide for an 
educational and publicity campaign to inform Medicare+Choice eligible 
individuals about the availability of Medicare+Choice plans and the 
Medicare fee-for-service option. The statute further requires that we 
maintain a toll-free number for inquiries regarding Medicare+Choice 
options and an Internet site providing information on Medicare+Choice 
options. As we begin the information collection process, and analyze 
how best to provide information to beneficiaries, we ask that 
interested parties respond to the following questions:
    <bullet> What are the most effective ways to communicate 
Medicare+Choice information to beneficiaries, individuals, advocates, 
ombudsmen, providers, and other groups that have need of and will use 
this information?
    <bullet> How can we reduce confusion for beneficiaries who also 
receive health care information from other sources, for example, from 
employers who offer retiree coverage or Federal purchasers such as the 
Federal Employees Health Benefit Plan, the Department of Defense, and 
sellers of health care insurance products?
    <bullet> How can the information programs best recognize the 
special needs of certain populations, such as beneficiaries with 
disabilities?
2. Enrollment/Disenrollment Process
    Under section 1851(e) of the Act, we are charged with establishing 
a process, including the format and procedures, through which 
Medicare+Choice elections are made. According to section 1851(e), a 
beneficiary's enrollment in a Medicare+Choice option is initially made 
at the time the individual becomes entitled to Part A and enrolled in 
Part B. Beneficiaries may change their Medicare+Choice plan election 
during continuous open enrollment periods through the year 2001. After 
2001, beneficiaries are locked in to their Medicare+Choice election for 
defined time periods, except for special election periods under certain 
circumstances. The process must permit a beneficiary to make enrollment 
and disenrollment elections by filing a form with the Medicare+Choice 
organization. The statute also permits, at section 1851(g), that a 
Medicare+Choice organization may terminate an individual's election 
with respect to a Medicare+Choice plan that it offers if (1) required 
premiums are not paid on a timely basis, (2) the individual has engaged 
in disruptive behavior, or (3) the plan is terminated with respect to 
all individuals residing in the area in which the individual resides. 
We request comments related to the election and enrollment procedures 
in general, and the Medicare+Choice organization's ability to disenroll 
a beneficiary. For example--
    <bullet> Should our standards be specific with regard to each of 
the factors; for example, timeframes for timely payment of premiums or 
a definition for ``disruptive''? Should we require a mechanism for 
appealing termination of a beneficiary's enrollment ``for cause''?
3. Medicare+Choice Enrollment Demonstrations
    Section 4018 of the BBA requires that we conduct a 3-year 
demonstration project to evaluate the use of a third-party contractor 
to conduct the Medicare+Choice plan enrollment and disenrollment 
functions. We are soliciting comments on how this demonstration could 
be designed. For example--
    <bullet> What constitutes an enrollment or disenrollment 
``function''? Is it distributing applications, collecting applications, 
processing applications, providing benefits counseling, ascertaining 
reasons for disenrollment, or other activities?
    <bullet> What functions should the contractor perform?
    <bullet> What exactly are the tasks involved in enrollment/
disenrollment?
    <bullet> What would be the most desirable/efficacious processes for 
enrollment/disenrollment from the perspective of the beneficiaries and 
plans?
    <bullet> What is a demonstration ``area''?
    <bullet> Should all Medicare+Choice plans in the demonstration area 
be involved in the demonstration? If not, which ones should be exempt?
    <bullet> What requirements under Medicare Part C, if any, is the 
Secretary likely to have to waive in order for the demonstration to 
work?
    <bullet> Should a single, standard form be used for enrollment?
    <bullet> What standards should be used to monitor the performance 
of the contractor, given that enrollment in Medicare+Choice plans is 
voluntary and that disenrollment may be due to various causes? Should 
any of these standards be tied to contractor payment?
    <bullet> What would constitute ``substantial compliance'' with the 
performance standards?
    <bullet> What criteria should we use to select the third-party 
contractor?
4. Post-Stabilization Coverage
    Section 1852(d)(2) of the Act authorizes us to develop policies to 
ensure coordination of care and appropriate payment between 
Medicare+Choice organizations and out-of-plan providers after the 
beneficiary's medical condition is determined to be stable. We are 
particularly interested in comments about the following issues:
    <bullet> Should we specify which provider is responsible for 
developing a plan of care to appropriately maintain the beneficiary's 
health, or should this be negotiated between the emergency providers 
and the plan providers?
    <bullet> Should we establish a requirement that the Medicare+Choice 
plan respond

[[Page 2923]]

to an emergency service provider's request for approval/authorization 
within a certain period of time? If so, what should that time period 
be?
    <bullet> Should we require that Medicare+Choice plans make 
available a central contact for emergency providers to call for 
authorization and medical history data?
    <bullet> Finally, with regard to post-stabilization benefits and 
coverage, our primary objective is to ensure that Medicare enrollees 
are held harmless in payment disputes between the Medicare+Choice plans 
and the non-network service provider. What are the most appropriate 
standards to accomplish this goal?
5. Grievances, Organization Determinations and Reconsiderations
    Appropriate and meaningful appeals and grievance procedures for the 
resolution of individual enrollee complaints about their health care 
are among the most important beneficiary protections in the 
Medicare+Choice program. Section 1852(g) requires that all 
Medicare+Choice organizations have procedures for making determinations 
regarding whether an enrollee is entitled to receive specific health 
services. The organization must provide for reconsideration of adverse 
coverage determinations at the request of the enrollee within a time 
period specified by us, but not later than 60 days after the date of 
the receipt of the request for reconsideration. However, the 
Medicare+Choice organization must have in place procedures for 
expedited reconsiderations under certain circumstances.
    We are soliciting comments with regard to these protections. For 
example--
    <bullet> Should guidelines for a grievance process be established?
    <bullet> What is an appropriate timeframe for a reconsideration of 
a nonexpedited determination?
    <bullet> Should plans be able to subcontract organization 
determinations and reconsiderations to subcontractors?
    <bullet> Should Medicare+Choice plans be required to continue 
coverage during the reconsideration process?
    <bullet> Should reductions in care be subject to the 
reconsideration process?
6. Provider Rights in Medicare+Choice Plans
    Section 1852(b)(2) provides that a Medicare+Choice organization may 
not discriminate with respect to participation, reimbursement, or 
indemnification as to any provider that is acting within the scope of 
the provider's license or certification under applicable State law, 
solely on the basis of the license or certification. The statute 
provides, however, that this prohibition is not to be construed to 
prohibit a plan from including providers only to the extent necessary 
to meet the needs of the plan's enrollees or from establishing any 
measure designed to maintain quality and control costs consistent with 
the responsibilities of the plan.
    In addition, provider rights set forth in section 1852(j) include 
the right of health care professionals to advise Medicare beneficiaries 
of possible medical procedures, treatments, or care, regardless of 
whether benefits for the treatment or care are provided under the plan. 
Section 1852(j) also establishes certain provider protections, 
including the physician's right to written notice of a Medicare+Choice 
plan's decision to exclude him or her from participation in the plan 
and provides that a process for appealing such a decision be 
established. We would like to obtain general comments about the scope 
of the various provider protection requirements. In addition, we would 
like comments regarding the following:
    <bullet> What procedures should Medicare+Choice plans be required 
to put in place to ensure that providers are notified of adverse 
participation decisions?
    <bullet> In a case where multiple types of providers or 
practitioners can provide a specific service, how should we interpret 
the anti-discrimination provision at section 1852(b)?
7. Encounter Data Collection
    The payment standards and methodology contained in the new Part C 
anticipate an eventual transition from a payment based on Medicare fee-
for-service utilization and cost, to a payment adjusted for the 
individual medical conditions of the enrolled population--a process 
known as risk adjustment. In response to the requirement that inpatient 
hospital encounter data be collected from health plans for services on 
or after July 1, 1997, we have developed instructions concerning 
collection of inpatient hospital encounter data for hospitals, plans, 
and contractors. Many questions, however, remain about non-inpatient 
encounter data. For example--
    <bullet> What information systems issues do organizations face when 
asked to submit non-inpatient hospital encounter data?
    <bullet> What are appropriate transmission mechanisms for 
collection of non-inpatient hospital encounter data? Should they vary 
by type of plan, by size of plan, or by type of data collected?
    <bullet> What issues do organizations face relating to the 
transmission of non-inpatient hospital encounter data, especially 
regarding the frequency and the methodology of transmission? Under what 
circumstances and for what purposes are such data currently being 
generated? How could we coordinate our data collection efforts with 
ongoing activities?
    In addition to a January 28, 1998 general meeting (discussed in 
section II. of this notice), we are considering holding a public 
meeting specifically regarding the collection of hospital encounter 
data that will be used for the implementation of risk adjustment for 
payment of health plans. Individuals and organizations interested in 
attending such a meeting should write to Cynthia Tudor, HCFA Center for 
Health Plans and Providers, Room C3-15-06, 7500 Security Blvd., 
Baltimore, MD 21244, or by Internet at ``C<a href="/cdn-cgi/l/email-protection#661213020914260e05000748010910"><span class="__cf_email__" data-cfemail="9febeafbf0eddff7fcf9feb1f8f0e9">[email protected]</span></a>'' (please 
specify ``Encounter Data Meeting'' in the Subject line).
8. Private Fee-for-Service Plans
    One of the new Medicare+Choice health care options for 
beneficiaries is the ``private fee-for-service (PFFS)'' plan. These 
plans are defined at 1859(b)(2). Private fee-for-service plans must 
meet most of the same requirements as other Medicare+Choice plans and 
will be capitated on a full risk basis in exchange for providing 
enrollees with the full package of Medicare benefits. Unlike 
coordinated care Medicare+Choice plan options however, PFFS plans are 
expressly prohibited from placing the provider at financial risk or 
from varying payment based on utilization experience. PFFS plans must 
pay all service providers (regardless of contracting status) on a fee-
for-service basis. We request public comments expressing opinions on 
the most effective implementation of the unique PFFS plan program 
requirements, including, but not limited to the following topics:
    Section 1852(j) states that a provider furnishing covered services 
to PFFS plan enrollees must be treated as if the provider had a direct 
contract with the PFFS if, before furnishing the services, the provider 
is informed of or given a reasonable opportunity to obtain information 
about the terms and conditions of payment for these services. We are 
soliciting comments on appropriate standards to determine when a 
provider has an implied contract under section 1852(j). For example--
    <bullet> What notification requirements, if any, must be met by the 
PFFS plan or

[[Page 2924]]

the provider in order to establish a de facto contracting arrangement?
    With regard to ``fee-for-service payment'' as specified in the 
statute--
    <bullet> Could the definition of these payments include bundled 
provider fees, or global fees?
    <bullet> What should be the enrollee's responsibility for payment 
of claims?
    <bullet> As with other Medicare+Choice options, should providers in 
PFFS plans be prohibited from billing beneficiaries in most cases?
    PFFS plans must meet substantially different requirements than 
other Medicare+Choice plans with regard to utilization review 
requirements and enrollee premiums. We are interested in the public's 
perception of the most effective ways to implement statutory 
requirements that apply certain utilization review standards to these 
entities. For example--
    <bullet> How should utilization protocols based on standards of 
medical practice be defined?
    <bullet> Should PFFS plans that use utilization review to determine 
medical necessity be required to include limitation on liability as a 
mechanism to protect PFFS plan enrollees against liability for full 
payment when they did not know or have reason to know that the PFFS 
would deny the services as being not medically necessary?
    <bullet> How can these entities be able to comply with the access 
standards in section 1852? That is, to what extent are Medicare+Choice 
program access requirements met by establishment of a health service 
delivery network?
9. Medical Savings Accounts
    As part of the Medicare+Choice program implementation, we are 
establishing procedures for a maximum of 390,000 beneficiaries to 
enroll under an MSA option in accordance with section 1851. Under the 
MSA option, a beneficiary's Medicare capitated payment rate will be 
used to purchase a MSA high deductible health insurance plan meeting 
certain standards. An MSA plan must pay for at least all Medicare-
covered items and services after the enrollee meets the annual 
deductible, which for 1999 cannot exceed $6,000. The difference between 
the individual's capitated payment rate and the insurance premium will 
be placed in an MSA designated by the enrollee. These funds can then be 
used by the individual to meet medical expenses under the insurance 
deductible, they can be allowed to accrue from year to year, or they 
can be withdrawn for nonmedical expenses subject to applicable tax and 
penalty rules.
    We are requesting input from the public regarding the appropriate 
standards for MSA insurers and account managers. For example--
    <bullet> What types of information should potential MSA insurers be 
required to submit to us as part of the application process?
    <bullet> What other standards and requirements should approved MSA 
entities meet for monitoring and evaluation purposes?
10. Other Issues
    We are also interested in receiving responses to the following 
questions:
    <bullet> A Medicare+Choice contract may include more than one plan. 
We view this as permitting an entity to offer more than one 
Medicare+Choice product (for example, an HMO and an PPO) as well as 
allowing a national contract. How can these contracts be structured to 
facilitate the application and approval process, including the need for 
multiple State licenses?
    <bullet> What standards for out-of-area dialysis should apply?
    <bullet> How should accrediting bodies be treated for purposes of 
deeming that a plan meets standards for internal quality review, 
external quality review, and confidentiality of records?
    <bullet> Under what circumstances should we waive independent 
external review for plans with an excellent record of quality and other 
performance?
    <bullet> How should State agreements to monitor and enforce 
Medicare+Choice requirements be structured?
    <bullet> What procedures or requirements for a hearing for the 
organization prior to termination of its contract should we establish?
    <bullet> How should Medicaid-only plans be treated for 
Medicare+Choice purposes? For example, how should we define ``licensed 
under State law as a risk-bearing entity eligible to offer health 
insurance or health benefits coverage in [a] State'' (section 
1855(a)(1))?

II. Timelines and Procedures for Participation in the 
Medicare+Choice Program

    The following discussion applies to Medicare+Choice applications 
and to Medicare risk contract applications submitted in calendar year 
1998 for contracts with an effective date of on or before January 1, 
1999. We will discuss application requirements for subsequent 
contracting periods in subsequent HCFA policy notices.
    It should also be noted that we will submit, as required, the three 
applications and related information collection requirements, that is, 
the adjusted community rate (ACR) proposal and the Medicare+Choice and 
PSO applications, referenced in this notice to the Office of Management 
and Budget (OMB) for emergency Paperwork Reduction Act (PRA) approval, 
prior to implementation. A Federal Register notice will be published 
soliciting public comment on each of the proposed information 
collections submitted for emergency PRA approval. Although the notices 
will allow the public only an abbreviated public comment period, the 
maximum approval period of an emergency approval is 6 months. Once, we 
have obtained the required OMB approval, we will resubmit the approved 
information collections to OMB for reapproval under the routine PRA 
approval process. As part of the routine process, we will publish two 
consecutive Federal Register notices, soliciting public comment for a 
total of 90 days, on the reapproval of the collections.
    We plan to apply the following procedures to organizations that 
submit applications for new risk contracts under section 1876. In 
accordance with the BBA, we may not enter into any new risk contracts 
under section 1876 after publication of the interim final rule. 
Therefore, all applications for risk contracts under section 1876 that 
are not approved prior to the publication of the interim final rule 
(regardless of when submitted) will automatically be reviewed under the 
Medicare+Choice contracting standards, and organizations will need to 
submit a supplemental application as discussed below.

Adjusted Community Rate Proposals

    Section 1854(a) requires that Medicare+Choice organizations submit 
ACR proposals for Medicare+Choice plans by May 1st of the calendar year 
prior to the benefit year in question. This statutory requirement does 
not apply, however, to entities that have not yet been certified as 
Medicare+Choice organizations under the interim final rule to be 
published by June 1. The June 1 regulation will establish ACR deadlines 
that apply when the statutory May 1 deadline does not apply. In 1999 
and thereafter, organizations that apply for new contracts will be 
required to submit their ACR proposals by May 1st. Risk contractors 
that have contracts in effect prior to May 1, 1998 should submit ACRs 
by May 1, 1998 in order to ensure timely processing.
    Applicants for risk contracts whose applications are not approved 
before the publication of the interim final rule will be reviewed as 
applicants for Medicare+Choice contracts. Because we

[[Page 2925]]

will publish payment rates for 1999 on March 1, 1998, these applicants 
must resubmit their ACR proposals to cover the proposed contract 
period. The contract period must cover all of calendar year 1999 and 
may include a period of time involving 1998. However, persons are not 
required to comply with the information collection requirements 
associated with the ACR proposal until OMB, PRA emergency approval has 
been obtained.

Application Process for Medicare+Choice Plans

    We encourage organizations that wish to participate in the 
Medicare+Choice program to submit their applications as soon as 
possible and no later than August 1, 1998. Although our goal is to 
process applications in a timely manner, we cannot guarantee that 
complete applications submitted by August 1, 1998 will be approved for 
an effective date of January 1, 1999; let alone for those applications 
submitted after August 1. We may experience delays in processing 
applications, as current resources are reassigned to respond to the 
requirements of the Medicare+Choice program.
    This section applies to State-licensed organizations. The 
procedures for PSOs that seek Federal waiver of the State licensure 
requirement are discussed in a subsequent section. Upon receipt of a 
State-licensed candidate's application for a Medicare+Choice contract, 
we will immediately review the application to determine whether the 
responses and documentation are complete. If we identify incomplete 
responses, we will allow only 60 days for the applicant to submit the 
necessary information. We will consider an application that, for any 
reason, is not complete after the 60-day period to be nonresponsive, 
and we will return it to the applicant. Once we determine that an 
application is complete, we will initiate an extensive review of the 
data, including a site visit for most plans. We will provide applicants 
a 15-day time period in which to provide any information required as a 
result of the site visit.
    Note that an approved organization must be ready to enroll and 
serve beneficiaries on the first day that the contract becomes 
effective. To ensure that new applicants are approved in time for the 
contract to be implemented by January 1, 1999, we plan to establish a 
two-step process whereby new contractors may submit a core application 
at any time prior to publication of the final interim rule and then 
submit a supplemental application after the interim final rule is 
published. The core application will be similar to the current 
application for a risk contract. At present, we expect that it will 
contain the following information:
    <bullet> Medicare+Choice option (HMO, State-licensed PSO, MSA, 
etc.).
    <bullet> General information: description of plan, brief history, 
banking information, board of directors, management staff, geographic 
region, and other pertinent data for the Medicare product.
    <bullet> Organization and contract information: type of legal 
entity, State authority to operate, organizational charts, and 
management contracts.
    <bullet> Health services delivery network: detailed description of 
delivery system, Medicare subscriber agreements, evidence of coverage, 
membership information, and quality assurance systems.
    <bullet> Financial information: certified audits, financial 
projections, and all information necessary to demonstrate a fiscally-
sound operation.
    <bullet> Marketing information: marketing plans, projections, and 
enrollment assumptions.
    <bullet> Any additional information to support the Medicare+Choice 
application.
    The core application package will be available on our Internet web 
site (http://www.hcfa.gov) on or about February 1, 1998. Additional 
information regarding the core application process can be obtained by 
writing to us at--HPPAG, Field Liaison Staff, Health Care Financing 
Administration, Center for Health Plans and Providers, Health Plan 
Purchasing and Administration Group, 7500 Security Blvd., 03-18-13 
South Building, Baltimore, MD 21244-1850. Alternatively, you may call 
the Health Plan Purchasing and Administration Group (HPPAG) at 410-786-
7623.
    ACR instructions will also be available beginning February 1, 1998 
on the Internet or from the above address. However, persons are not 
required to comply with the information collection requirements 
associated with the core Medicare+Choice application and ACR proposal 
until OMB, PRA emergency approval has been obtained.

Supplemental Medicare+Choice Application Process

    Our plans are that Medicare+Choice applicants that submit a core 
application must complete the application process by submitting a 
supplemental application. The supplemental application will cover 
provisions that are specific to the Medicare+Choice program as 
specified by the interim final rule, including the fiscal solvency 
standards for PSOs, which are scheduled to be published on April 1, 
1998. The supplemental application will also solicit plan specific 
information relevant to each of the different types of Medicare+Choice 
program options (for example, PSO, PFFS, MSA). The supplemental 
applications will be available beginning June 1, 1998, when the interim 
final rule is published. The application will be available from our 
Internet web site or from HPPAG at the above address. Persons are not 
required to comply with the information collection requirements 
associated with the Medicare+Choice supplemental application until OMB, 
PRA emergency approval has been obtained.

Federal Waiver of State Licensure Requirement for PSOs

    Consistent with current policy, only applications that have 
obtained State licenses will be approved for Medicare+Choice contracts. 
The only exception to this requirement are PSOs, which are allowed to 
request waivers of the State licensure requirement as specified by BBA. 
In accordance with section 1855(a)(2), PSO applicants may request 
waivers of the State licensure requirement under any of the following 
circumstances:
    <bullet> The State failed to act on a timely basis, that is, within 
90 days of its receipt of a substantially complete application.
    <bullet> The denial of the application was based on discriminatory 
treatment. The ground for approval of such a waiver on the basis of 
discriminatory treatment is that the State has denied a licensing 
application and (1) the standards or review process imposed by the 
State as a condition of approval of the license imposes any material 
requirements, procedures, or standards (other than solvency 
requirements) to such organizations that are not generally applicable 
to other entities engaged in a substantially similar business, or (2) 
the State requires the organization, as a condition of licensure, to 
offer any product or plan other than a Medicare+Choice plan.
    <bullet> The denial was based on application of solvency 
requirements. With respect to waiver applications filed on or after the 
date of publication of solvency standards under section 1856(a), the 
ground for approval of the waiver application on this basis is that the 
State denied the licensing application based (in whole or in part) on 
the organization's failure to meet applicable solvency requirements and 
(1) the requirements are not the same as the solvency standards 
established under section 1856(a), or (2) the State has imposed a 
condition of approval of the license documentation or

[[Page 2926]]

information requirements relating to solvency or other material 
requirements, procedures, or standards relating to solvency that are 
different from the requirements, procedures, and standards applied by 
us under section 1856(d)(2).
    Once a prospective Medicare+Choice contractor submits documentation 
that one or more of the above conditions has been met, we have 60 days 
to grant or deny the waiver application. A separate application for 
PSOs seeking a waiver from State licensure will be available on or 
about February 15, 1998, on our Internet web site or from HPPAG at the 
address given above. This application will include the waiver forms as 
well as the contract application and all definitions. In addition, 
solvency standards for PSOs seeking a waiver will be available on April 
1, 1998. PSOs requesting a waiver that submitted an application prior 
to April 1 will be required to submit a supplemental application 
showing how they meet the solvency standards. However, persons are not 
required to comply with the information collection requirements 
associated with the PSO application until OMB, PRA emergency approval 
has been obtained.
    In accordance with the provisions of Executive Order 12866, this 
notice was reviewed by the Office of Management and Budget.

Information Campaign

    To assist Medicare beneficiaries' decision-making process relative 
to new Medicare+Choice health care options, we will incorporate 
information on newly-approved plans into our plan comparison database. 
This database will contain information on all existing and new plans, 
except for MSAs. Plan comparison information will be posted on the 
Internet and will be updated at least quarterly. Thus, newly-approved 
plans will be entered into the plan comparison database at the next 
update cycle.

February 4, 1998 Public Meeting

    In addition to seeking written comments from the public, we will 
hold a public meeting on Wednesday, February 4, 1998 from 9 a.m. to 3 
p.m. in our auditorium at 7500 Security Boulevard, Baltimore, Maryland. 
The purpose of this meeting will be to discuss issues and concerns from 
plans, providers, beneficiaries, and other interested parties on the 
requirements and implementation of the Medicare+Choice program. The 
agenda for this meeting will be posted on our Internet web site. 
Further information can be obtained from Rondalyn Kane at (202) 690-
7874.

(Secs. 1851 through 1857, 1859, 1876, and 1877 of the Social 
Security Act (Secs. 4001, 4002, and 4006 of Pub.L. 105-33, 42 U.S.C. 
1395l and 1395mm))

    Dated: December 23, 1997.
Nancy-Ann Min DeParle,
Adminstrator, Health Care Financing Administration.
[FR Doc. 98-1381 Filed 1-16-98; 8:45 am]
BILLING CODE 4120-01-P


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