18176 Federal Register / Vol. 73, No. 65 / Thursday, April 3, 2008 / Rules and Regulations 

effective date of this authorization until 

the timing and process for effective 

transfer to the State are mutually agreed 

upon. EPA and Virginia agree to 

coordinate the administration of permits 

in order to maintain consistency. 

EPA will not issue any more new 

permits or new portions of permits for 

the provisions included in this revised 

authorization after the effective date of 

this authorization. EPA will continue to 

implement and issue permits for HSWA 

requirements for which Virginia is not 

yet authorized. 

J. How Does This Action Affect Indian 

Country (18 U.S.C. 115) in Virginia? 

Virginia is not seeking authorization 

to operate the program on Indian lands, 

since there are no Federally-recognized 

Indian lands in Virginia. 

K. What is Codification and Is EPA 

Codifying Virginia’s Hazardous Waste 

Program as Authorized in This Rule? 

Codification is the process of placing 

the State’s statutes and regulations that 

comprise the State’s authorized 

hazardous waste program into the Code 

of Federal Regulations. We do this by 

referencing the authorized State rules in 

40 CFR part 272. We reserve the 

amendment of 40 CFR part 272, subpart 

VV for this authorization of Virginia’s 

revised program until a later date. 

L. Administrative Requirements 

The Office of Management and Budget 

has exempted this action from the 

requirements of Executive Order 12866 

(58 FR 51735, October 4, 1993), and 

therefore this action is not subject to 

review by OMB. This action authorizes 

State requirements for the purpose of 

RCRA 3006 and imposes no additional 

requirements beyond those imposed by 

State law. Accordingly, I certify that this 

action will not have a significant 

economic impact on a substantial 

number of small entities under the 

Regulatory Flexibility Act (5 U.S.C. 601 

et seq.). Because this action authorizes 

pre-existing requirements under State 

law and does not impose any additional 

enforceable duty beyond that required 

by State law, it does not contain any 

unfunded mandate or significantly or 

uniquely affect small governments, as 

described in the Unfunded Mandates 

Reform Act of 1995 (Pub. L. 104–4). For 

the same reason, this action would not 

significantly or uniquely affect the 

communities of Tribal governments, as 

specified by Executive Order 13175 (65 

FR 67249, November 9, 2000). In any 

case, Executive Order 13175 does not 

apply to this rule since there are no 

Federally recognized tribes in Region 3. 

This action will not have substantial 

direct effects on the States, on the 

relationship between the national 

government and the States, or on the 

distribution of power and 

responsibilities among the various 

levels of government, as specified in 

Executive Order 13132 (64 FR 43255, 

August 10, 1999), because it merely 

authorizes State requirements as part of 

the State RCRA hazardous waste 

program without altering the 

relationship or the distribution of power 

and responsibilities established by 

RCRA. This action also is not subject to 

Executive Order 13045 (62 FR 19885, 

April 23, 1997), because it is not 

economically significant and it does not 

make decisions based on environmental 

health or safety risks that may 

disproportionately affect children. This 

rule is not subject to Executive Order 

13211, ‘‘Actions Concerning Regulations 

That Significantly Affect Energy Supply, 

Distribution, or Use’’ (66 FR 28355 (May 

22, 2001)) because it is not a significant 

regulatory action under Executive Order 

12866. 

Under RCRA 3006(b), EPA grants a 

State’s application for authorization as 

long as the State meets the criteria 

required by RCRA. It would thus be 

inconsistent with applicable law for 

EPA, when it reviews a State 

authorization application, to require the 

use of any particular voluntary 

consensus standard in place of another 

standard that otherwise satisfies the 

requirements of RCRA. Thus, the 

requirements of section 12(d) of the 

National Technology Transfer and 

Advancement Act of 1995 (15 U.S.C. 

272 note) do not apply. As required by 

section 3 of Executive Order 12988 (61 

FR 4729, February 7, 1996), in issuing 

this rule, EPA has taken the necessary 

steps to eliminate drafting errors and 

ambiguity, minimize potential litigation, 

and provide a clear legal standard for 

affected conduct. EPA has complied 

with Executive Order 12630 (53 FR 

8859, March 15, 1988) by examining the 

takings implications of the rule in 

accordance with the Attorney General’s 

Supplemental Guidelines for the 

Evaluation of Risk and Avoidance of 

Unanticipated Takings issued under the 

executive order. This rule does not 

impose an information collection 

burden under the provisions of the 

Paperwork Reduction Act of 1995 (44 

U.S.C. 3501 et seq.). 

The Congressional Review Act, 5 

U.S.C. 801 et seq., as added by the Small 

Business Regulatory Enforcement 

Fairness Act of 1996, generally provides 

that before a rule may take effect, the 

agency promulgating the rule must 

submit a rule report, which includes a 

copy of the rule, to each House of the 

Congress and to the Comptroller General 

of the United States. EPA will submit a 

report containing this document and 

other required information to the U.S. 

Senate, the U.S. House of 

Representatives, and the Comptroller 

General of the United States prior to 

publication in the Federal Register. A 

major rule cannot take effect until 60 

days after it is published in the Federal 

Register. Although this action is not a 

‘‘major rule’’ as defined by 5 U.S.C. 

804(2), this action will be effective June 

2, 2008. 

List of Subjects in 40 CFR Part 271 

Environmental protection, 

Administrative practice and procedure, 

Confidential business information, 

Hazardous waste, Hazardous waste 

transportation, Indian lands, 

Intergovernmental relations, Penalties, 

Reporting and recordkeeping 

requirements. 

Authority: This action is issued under the 

authority of sections 2002(a), 3006 and 

7004(b) of the Solid Waste Disposal Act as 

amended 42 U.S.C. 6912(a), 6926, 6974(b). 

Dated: March 18, 2008. 

William T. Wisniewski, 

Acting Regional Administrator, EPA Region 

III. 

[FR Doc. E8–6724 Filed 4–2–08; 8:45 am] 

BILLING CODE 6560–50–P 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

Centers for Medicare & Medicaid 

Services 

42 CFR Parts 422 and 423 

[CMS–4133–F] 

RIN 0938–AP25 

Medicare Program; Modification to the 

Weighting Methodology Used To 

Calculate the Low-Income Benchmark 

Amount 

AGENCY: Centers for Medicare & 

Medicaid Services (CMS), HHS. 

ACTION: Final rule. 

SUMMARY: This final rule changes the 

weighting methodology used to 

calculate the low-income benchmark 

premium amount (benchmark) for 2009 

and thereafter. Under this final rule, the 

benchmark weighting methodology is 

adjusted so that the relative weights of 

the Medicare Advantage Prescription 

Drug (MA–PD) plan premiums and 

Prescription Drug Plan (PDP) plan 

premiums in the low-income 

benchmark premium amount reflect the 


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Federal Register / Vol. 73, No. 65 / Thursday, April 3, 2008 / Rules and Regulations 18177 

distribution of enrollment of 

beneficiaries eligible for the low-income 

subsidy in each plan. 

DATES: Effective Dates: These 

regulations are effective on May 31, 

2008. 

FOR FURTHER INFORMATION CONTACT: 

Deondra Moseley, (410) 786–4577. 

Meghan Elrington, (410) 786–8675. 

SUPPLEMENTARY INFORMATION: 

I. Background 

The beneficiary premiums for 

Prescription Drug Plans (PDPs) are 

based on an annual bidding process. 

Each year the beneficiary premium for 

a Part D plan can change as a result of 

this bidding process. In addition, each 

year, as required by statute, CMS 

recalculates the Federal Part D premium 

low-income subsidy (LIS) available to 

low-income beneficiaries based on the 

new premiums for plans in each region. 

As a result of these premium and 

subsidy changes, the premium for a Part 

D plan can be fully covered by the LIS 

in one year and not the following year. 

The amount of the premium subsidy 

available to LIS-eligible individuals 

cannot be calculated until after bids are 

submitted for the calendar year in 

question, because the subsidy amount is 

based on the bids that are submitted. 

Therefore, a PDP sponsor whose 

premium for LIS-eligible enrollees is 

currently zero does not know at the time 

its bid is submitted whether the 

premium that would result from its bid 

will be higher or lower than the 

premium subsidy amount. 

LIS-eligible individuals enrolled in a 

PDP that does not charge them a 

premium are faced with the possibility 

that the plan they are enrolled in will 

impose a premium during the next 

calendar year that would require them 

to make monthly payments. Section 

1860D–1(b)(1)(C) of the Social Security 

Act (the Act) mandates the initial 

enrollment of full-benefit dual eligible 

individuals not choosing a plan into a 

PDP where they would not pay a 

premium. It does not, however, require 

that individuals be reassigned to a plan 

that would not charge them a premium, 

if they would be required to pay a 

premium in their plan the following 

calendar year. Using our authority 

under Section 1860D–1(b)(1)(A) of the 

Act to, ‘‘establish a process for the 

enrollment, disenrollment, termination, 

and change of enrollment of Part D 

eligible individuals in prescription drug 

plans,’’ we have specified that LISeligible individuals facing the above 

situation may ‘‘elect’’ a PDP with no 

premium (to which they would be 

randomly assigned) by taking no action. 

We have referred to this process as our 

reassignment process. Beneficiaries 

eligible for the full low-income 

premium subsidy who have not chosen 

a plan on their own, including 

beneficiaries dually eligible for benefits 

under Titles XVIII and XIX of the Act, 

are subject to reassignment. 

Beneficiaries eligible for a partial 

premium subsidy are not subject to 

reassignment. 

For 2008, the number of beneficiaries 

reassigned to a different organization 

under this process varied widely by 

region, ranging from as few as 17 

beneficiaries to approximately 402,322 

beneficiaries. The average number of 

beneficiaries reassigned to an 

organization other than the one with 

which they were enrolled was 34,044 

per region. Alternatively, LIS 

beneficiaries can affirmatively elect to 

stay in their plan and begin paying a 

premium, or choose another plan with 

or without a premium. 

While the reassignment policy 

prevents an LIS-eligible individual who 

did not choose to elect a plan from 

being charged a premium, it disrupts 

continuity and stability in coverage. 

Individuals who are reassigned may 

have to change their pharmacy, get new 

copies of their prescription from their 

doctor, and determine whether they 

need a change in medications because 

the formulary might be different. 

Currently, under the demonstration 

project entitled, ‘‘Medicare 

Demonstration to Transition Enrollment 

of Low-Income Subsidy Beneficiaries’’

(established in 2007 and extended to 

2008), if the premium amount for a LISeligible individual in the above 

situation is lower than a specified ‘‘de 

minimis’’ amount, the individual would 

not be charged this de minimis amount, 

and could remain in his or her current 

plan without paying a premium. This 

demonstration also transitions the 

calculation of the low-income 

benchmark premium amount for a 

region from a method that weights the 

standardized Part D bids for PDPs 

equally to the statutory method required 

under the current regulation, which 

calculates the benchmarks by weighting 

the bids for PDPs and Medicare 

Advantage Prescription Drug (MA–PD) 

plans in that region based on each 

plan’s share of total Part D enrollment. 

While the evaluation for this 

demonstration project is still underway, 

we believe it has demonstrated the 

advantages of continuity of care and 

stability. 

In the proposed rule published on 

January 8, 2008, ‘‘Option for 

Prescription Drug Plans to Lower their 

Premiums for Low-income Subsidy 

Beneficiaries’’ (73 FR 1301), we 

proposed an approach to reducing the 

disruption caused by the re-assignment 

process. In that proposed rule, we 

proposed an approach that focused on 

the premiums that would be charged to 

LIS-eligible individuals in cases in 

which they would be subject to paying 

a premium if they stayed in the plan 

they were in. Specifically, we proposed, 

under certain circumstances, to give 

PDP Sponsors the option of setting a 

separate premium amount for such LISeligible individuals at the low-income 

benchmark amount. We expected this 

policy to reduce the number of 

beneficiaries who would have to be reassigned, and would ensure a choice of 

at least five no-premium plans for full 

LIS-eligible individuals in each region. 

Requirements for Issuance of 

Regulations 

Section 902 of the Medicare 

Prescription Drug, Improvement, and 

Modernization Act of 2003 (MMA) 

amended section 1871(a) of the Act and 

requires the Secretary, in consultation 

with the Director of the Office of 

Management and Budget, to establish 

and publish timelines for the 

publication of Medicare final 

regulations based on the previous 

publication of a Medicare proposed or 

interim final regulation. Section 902 of 

the MMA also states that the timelines 

for these regulations may vary but shall 

not exceed 3 years after publication of 

the preceding proposed or interim final 

regulation except under exceptional 

circumstances. 

This final rule responds to comments 

we received on provisions set forth in 

the January 8, 2008 proposed rule. In 

addition, this final rule has been 

published within the 3-year time limit 

imposed by section 902 of the MMA. 

Therefore, we believe that the final rule 

is in accordance with the Congress’

intent to ensure timely publication of 

final regulations. 

II. Analysis of the Proposed Rule and 

Responses to Public Comments 

We received 32 timely items of 

correspondence in response to the 

January 8, 2008 proposed rule. We 

received comments from a broad 

spectrum of commenters, including 

consumer groups, health plans and 

industry trade associations, and States. 

Approximately 13 comments were from 

consumer groups, 9 comments were 

from health plans and industry 

associations, 5 comments were from 

States, 3 comments were from 

pharmacists/providers, and 2 comments 

were from students. With a few 

exceptions, the commenters were 


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concerned that the proposed rule would 

not adequately address the reassignment 

issue, and suggested alternative 

approaches. Virtually all of these 

commenters recommended that, rather 

than adopting the proposed approach, 

we consider alternative methods for 

calculating the low-income benchmark 

premium amounts. The following is a 

summary of the public comments and 

our responses. 

Comment: Two commenters proposed 

that the low-income benchmark 

premium amounts be calculated by 

weighting each plan’s premium by its 

share of total LIS enrollment, rather 

than its share of total Part D enrollment. 

Response: Because section 1860D–

14(b)(2) of the Act requires only that the 

premium calculation be ‘‘weighted’’, we 

believe that the statute could reasonably 

be interpreted to permit this proposed 

weighting methodology, and in response 

to these comments we have determined 

that this approach more effectively 

addresses the LIS reassignment issue 

that the proposed rule was intended to 

address. Therefore, we are adopting this 

approach in our final rule instead of our 

originally proposed option for PDPs to 

reduce their premiums for full-subsidy 

eligible beneficiaries. 

Specifically, the benchmark amounts 

for each Part D region will be calculated 

as a weighted average of the Part D 

premium amounts for basic Part D 

coverage with the weight for each PDP 

and MA–PD plan equal to a percentage 

in which the numerator is equal to the 

number of LIS eligible beneficiaries 

enrolled in the Part D plan in the 

reference month and the denominator is 

equal to the total number of LIS eligible 

beneficiaries enrolled in PDP and MA–

PD plans (not including PACE, private 

fee-for-services plans or 1876 cost plans) 

in the reference month. 

Currently, CMS calculates the 

weighted portion of the low-income 

benchmark premium amount using a 

weighted average of the MA and PDP 

premiums that is based on total Part D 

enrollment. MA–PD sponsors can lower 

their Part D premiums through the 

application of Part C rebates. As a result, 

the Part D premiums for MA–PD plans 

tend to be lower than PDP premiums. In 

addition, the benchmark amounts tend 

to be significantly lower in regions with 

high MA–PD penetration than in other 

Part D regions. 

The lower benchmarks have 

contributed to large-scale reassignments 

of LIS beneficiaries in many of these 

regions. This is because the relatively 

low benchmarks result in many PDPs 

having a basic Part D premium that is 

not fully covered by the Federal 

premium subsidy. As noted above, CMS 

has reassigned full-subsidy beneficiaries 

in these PDPs to different, lowerpremium PDPs in order to avoid a 

financial hardship for these 

beneficiaries. 

The conclusion of the ‘‘Medicare 

Demonstration to Transition Enrollment 

of Low-Income Subsidy Beneficiaries,’’

will put increased downward pressure 

on the benchmarks in these regions with 

high MA–PD enrollment and upward 

pressure on the number of 

reassignments. Calculating the 

benchmark amounts using a weighted 

average based on LIS enrollment, 

however, will help stabilize the 

benchmarks in these regions. As noted 

above, Part D beneficiary premiums for 

PDPs tend to be higher than for MA–

PDs. In addition, PDPs tend to have a 

greater share of LIS enrollment because 

of auto and facilitated enrollment. As a 

result, weighting Part D plan premiums 

by total LIS enrollment gives greater 

weight to PDP premiums and tends to 

increase the benchmarks. As compared 

to the current regulatory formula, we 

estimate that this change in the 

methodology for calculating the 

benchmarks would have reduced the 

number of 2008 reassignments by 

approximately 850,000 LIS 

beneficiaries. This is significantly 

greater than the 200,000 reassignment 

reduction estimated for the policy 

proposed in the proposed rule. 

Comment: Many commenters 

expressed concerns about various 

features of the proposed policy and 

suggested clarifications or changes. 

Commenters asked CMS to describe the 

methodology for selecting participating 

sponsors and any contingencies. 

Commenters asked CMS to make the 

checkbox in the bid pricing tool (BPT) 

where PDP Sponsors were to indicate 

whether the plan will participate in the 

second premium visible and 

unambiguous. Commenters also asked 

whether certification and attestation 

requirements should be amended. In 

addition, commenters suggested 

changes including limiting plans’

financial losses by placing a cap on the 

amount by which the premium could be 

reduced for LIS beneficiaries and 

commented on the complexity of 

explaining the rule to beneficiaries. 

Response: We agree that the various 

features of the proposed rule would 

have needed clarification in the final 

rule. This final rule does not incorporate 

the option for PDP Sponsors to offer a 

reduced premium to full subsidy 

eligible individuals. The final rule takes 

a different approach and changes the 

weighting methodology used to 

calculate the low-income benchmark 

premium amount. This approach is 

relatively simple and transparent and 

does not raise the complexities of the 

dual premium policy in the proposed 

rule about which these commenters are 

concerned. 

Comment: Many commenters 

suggested that we continue with our de 

minimis policy, rather than adopt the 

policy in the proposed rule. 

Response: We believe that the 

methodology established in this final 

rule is a better approach to reducing 

reassignments than continuing with the 

de minimis policy as it directly 

addresses the benchmark disparities 

across regions. As stated in the 

proposed rule, we were concerned about 

an approach that permanently would 

employ a fixed dollar figure, and 

decided that a methodology under 

which the number is not known in 

advance would better preserve 

incentives for plans to submit a low bid. 

Comment: Many commenters 

suggested calculating the benchmark 

before applying Part C rebates to MA–

PD premiums. CMS currently calculates 

the low-income benchmark premium 

amount using MA–PD premiums after 

Part C rebates have been applied. 

Calculating the benchmarks using MA–

PD premiums before the application of 

rebates would increase the benchmark 

amounts in areas with high MA–PD 

penetration and in turn decrease the 

number of reassignments in these Part D 

regions, compared to the current 

regulation. Commenters argued that this 

is a better representation of the true 

drug cost for MA–PDs. Commenters 

believed that such an approach is 

permissible under the statute. 

Response: Section 1860D–14(b)(2) of 

the Act describes the calculation of the 

benchmark. The statute provides that for 

an MA–PD plan, CMS must use the 

weighted averages of the ‘‘portion of the 

MA monthly prescription drug 

beneficiary premium that is attributable 

to basic prescription drug benefits’’ to 

calculate the benchmark for each region. 

The Act states that the term ‘‘MA 

monthly prescription drug beneficiary 

premium’’ means, ‘‘the base beneficiary 

premium * * * as adjusted * * *, less 

the amount of rebate credited toward 

such amount * * *’’ CMS interprets the 

phrase ‘‘portion of the MA monthly 

prescription drug beneficiary premium 

that is attributable to basic prescription 

drug benefits’’ for an MA–PD plan to 

mean the base beneficiary premium 

adjusted for the difference between the 

bid and benchmark less the rebates. 

Therefore, we do not believe it is 

permissible under the statute to 

calculate the benchmarks with MA–PD 

premiums before the application of 

rebates. However, this regulation will 


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have a comparable effect on LIS 

reassignments to calculating the 

benchmarks using the MA–PD 

premiums that have not been reduced 

by rebates, and hence produces the 

outcome recommended by the 

commenters. 

Comment: Some commenters 

supported our alternative of allowing 

PDPs to waive the difference between 

the premium and the benchmark for full 

subsidy eligible beneficiaries. 

Commenters believed that CMS 

overestimated the impact this would 

have on bids as plans would be 

motivated to keep bids low in order to 

receive new auto-assignments. 

Response: We continue to believe that 

this option would have a negative 

impact on bid competition and bid 

integrity. As stated in the proposed rule, 

we did not choose this approach for two 

reasons. First, if the difference between 

the two amounts were too great, this 

would produce a significant disparity 

between the revenue needs assumed in 

the bid, and the revenue that would be 

received under the reduced premium, 

and undermine the integrity of the bid 

process. More importantly, if a PDP 

sponsor knew that it could be assured 

of reducing its premium for LIS-eligible 

individuals to the LIS amount no matter 

how much the premium produced by its 

bid exceeded this amount, this would 

greatly reduce existing incentives to bid 

as low as possible. In response to the 

commenters’ argument, we do not 

believe new auto-assignees would be 

enough incentive to keep bids low. 

Comment: Many commenters did not 

support the alternative in which CMS 

would change the current reassignment 

process so that beneficiaries would be 

informed of plans that offer a zero 

premium for full-subsidy eligible 

beneficiaries but would have to take 

action to change to such a plan. 

Commenters believed that based on 

their experience, placing the burden on 

beneficiaries to make the change would 

result in beneficiaries remaining in 

plans they cannot afford and would 

increase premium collection problems. 

Two commenters believed that CMS 

should implement this alternative, 

because it would be easier to address 

non-payment of premium issues than 

the issues with continuity of care that 

come with reassignment. 

Response: We agree with the 

commenters who opposed the 

alternative for the reasons stated in our 

proposed rule. We are concerned about 

charging beneficiaries a premium 

without them electing to pay it and the 

potential financial hardship for 

individual beneficiaries. 

Comment: Several commenters 

suggested changes to the reassignment 

process, such as reassigning on other 

than a random basis, extending 

reassignment to people who have 

elected a plan with no premium and 

improvements to the premium 

information provided to choosers. One 

commenter asked CMS to review 

formularies to ensure they do not 

discourage access for vulnerable 

beneficiaries. 

Response: We do not believe these 

changes would be appropriate. Congress 

has favored random assignment by 

specifying it in the case of initial 

assignment. We believe that it is 

appropriate to extend this to reassignment. It is not clear what the 

commenter means by reassigning people 

who have elected a plan with no 

premium, since they would have made 

an affirmative choice that we believe 

should be respected. We also believe 

that the information currently provided 

to beneficiaries on their choices is 

appropriate. Finally, we believe that 

beneficiaries are in the best position to 

make plan choices based on plan 

formularies. 

Comment: One commenter was 

concerned that the regulation would not 

come out in time for plans to use the 

information to model their bids. 

Response: We agree that Part D 

sponsors need to know how the LIS 

benchmarks will be calculated in order 

to prepare their Part D bids. Therefore, 

we are releasing this final rule before 

April 7, 2008, which is the beginning of 

the formal bid preparation period for 

2009. On April 7, 2008, CMS will 

release all other final Part D payment 

policy information for 2009 as part of 

the Announcement of CY 2009 

Medicare Advantage Capitation Rates 

and Medicare Advantage and Part D 

Payment Policies. This document is 

released annually by statute on the first 

Monday in April. With the release of the 

Rate Announcement and the publication 

of this final rule, Part D sponsors will 

have all the information on Part D 

payment policies that is needed from 

CMS to prepare their 2009 bids. 

III. Provisions of the Final Regulations 

As noted above, we believe that the 

statute can reasonably be interpreted to 

permit us to weight the premiums used 

for the benchmark calculation by total 

LIS enrollment for each plan. The 

calculation of the benchmarks is 

described in section 1860–14(b)(2) of 

the Act. The statute provides that we 

must take the ‘‘weighted average’’ of the 

premium amounts described to 

calculate the benchmarks. The term 

‘‘weighted average,’’ however, is not 

definitively defined. The statutory 

language reads as follows: 

(2) LOW-INCOME BENCHMARK 

PREMIUM AMOUNT DEFINED.—

(A) IN GENERAL.—For purposes of this 

subsection, the term ‘‘low-income benchmark 

premium amount’’ means, with respect to a 

PDP region in which—

(i) All prescription drug plans are offered 

by the same PDP sponsor, the weighted 

average of the amounts described in (B)(i) for 

such plans; or 

(ii) There are prescription drug plans 

offered by more than one PDP sponsor, the 

weighted average of amounts described in 

subparagraph (B) for prescription drug plans 

and MA–PD plans described in section 

1851(a)(2)(A)(i) offered in such region. 

(B) PREMIUM AMOUNTS DESCRIBED.—

The premium amounts described in this 

subparagraph are, in the case of—

(i) A prescription drug plan that is a basic 

prescription drug plan, the monthly 

beneficiary premium for such plan; 

(ii) A prescription drug plan that provides 

alternative prescription drug coverage the 

actuarial value of which is greater than that 

of standard prescription drug coverage, the 

portion of the monthly beneficiary premium 

that is attributable to basic prescription drug 

coverage; and 

(iii) An MA–PD plan, the portion of the 

MA monthly prescription drug beneficiary 

premium that is attributable to basic 

prescription drug benefits (described in 

section 1854(b)(2)(B)) * * * 

We historically have interpreted 

‘‘weighted average’’ to mean an average 

based on the plan’s share of total Part D 

enrollment. We believe that ‘‘weighted 

average’’ could also reasonably be 

interpreted to mean weighted based on 

the plan’s share of LIS enrollment, 

particularly given that the benchmarks 

are applicable to LIS beneficiaries only. 

The revised interpretation requires a 

change in the regulation. Therefore, we 

are revising § 423.780(b)(2) to provide 

for the low-income benchmark premium 

amount for a PDP region to be a 

weighted average of the premium 

amounts described in § 423.780(b)(2)(ii). 

The weight for each PDP and MA–PD 

plan will be equal to a percentage. The 

numerator will be the number of Part D 

LIS eligible individuals enrolled in the 

plan in a reference month (as defined in 

§ 422.258(c)(1)). The denominator will 

be equal to the total number of Part D 

LIS eligible individuals enrolled in all 

PDP and MA–PD plans (but not 

including PACE, private fee-for-service 

plans, or 1876 cost plans) in a PDP 

region in the reference month. We will 

include both partial and full-subsidy 

individuals in the weighting 

calculation. 

VI. Collection of Information 

Requirements 

This document does not impose 

information collection and 


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recordkeeping requirements. 

Consequently, it need not be reviewed 

by the Office of Management and 

Budget under the authority of the 

Paperwork Reduction Act of 1995. 

V. Regulatory Impact Statement 

A. Overall Impact 

We have examined the impact of this 

rule as required by Executive Order 

12866 (September 1993, Regulatory 

Planning and Review), the Regulatory 

Flexibility Act (RFA) (September 19, 

1980, Pub. L. 96–354), section 1102(b) of 

the Social Security Act, the Unfunded 

Mandates Reform Act of 1995 (Pub. L. 

104–4), Executive Order 13132 on 

Federalism, and the Congressional 

Review Act (5 U.S.C. 804(2)). 

Executive Order 12866 directs 

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). A regulatory impact 

analysis (RIA) must be prepared for 

major rules with economically 

significant effects ($100 million or more 

in any 1 year). This rule allows CMS to 

calculate the low-income premium 

benchmark amounts by weighting the 

premium amounts by total LIS 

enrollment for each plan in order to 

reduce the number of reassignments 

compared to the current regulatory 

framework. We believe this final rule 

will lead to additional Federal costs of 

approximately $90 million for calendar 

year (CY) 2009. The CY 2009 cost of $90 

million represents our best estimate of 

the cost of the final rule. Generally, our 

best estimates reflect an equal 

likelihood of being too high or too low. 

The estimated cost over the next 10 

fiscal years (2009 through 2018) is $1.68 

billion. The year-by-year impacts in 

millions of dollars are shown in Table 

1 below. The $90 million estimate above 

is for CY 2009. The table below 

summarizes the fiscal year (FY) costs. 

Yearly growth is due to an estimated 

increase in the number of enrollees in 

future years and increasing drug trends 

that cause higher estimated bids in 

future years. 

TABLE 1.—FEDERAL COSTS FOR FY 2009 THROUGH FY 2018 

Fiscal Year 

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2009–

2018 

Estimated Costs (in millions) ........... $60 $100 $120 $140 $150 $170 $190 $220 $250 $280 $1,680 

This rule does reach the economic 

threshold of $100 million in the outyears and thus is considered a major 

rule, as outlined by Executive Order 

12866. 

This cost is due to increased Federal 

premium subsidy payments, which are 

the result of generally increasing the 

low-income benchmarks. The higher 

benchmarks allow a greater number of 

low-income beneficiaries to remain in 

their current plan, rather than 

reassigning them to a lower cost plan. 

In each region, the low-income 

benchmark essentially functions as a 

ceiling for the Federal premium subsidy 

for low-income beneficiaries. That is, 

the Federal premium subsidy covers the 

full cost of the plan’s basic Part D 

premium for a full-subsidy beneficiary, 

up to the low-income benchmark 

amount. 

Weighting based on each plan’s share 

of LIS enrollment generally is expected 

to increase the low-income benchmarks. 

We estimated that, in 2008, if the lowincome benchmarks had been calculated 

based on LIS enrollment weighting 

(rather than based on total Part D 

enrollment weighting), the benchmarks 

would have been higher in 27 of the 34 

PDP regions. Generally, the higher the 

low-income benchmarks, the lower the 

number of LIS reassignments. This is 

because, under the higher benchmarks, 

more PDPs are likely to have premiums 

that are equal to or less than the lowincome benchmark and, as a result, will 

be fully covered by the premium 

subsidy. Low-income subsidy 

beneficiaries are able to remain in these 

PDPs and are not reassigned to other 

lower-premium PDPs. 

We expect this rule will reduce the 

administrative costs for plan sponsors 

associated with the reassignment of LIS 

beneficiaries. These costs include the 

production of new member 

informational materials by the new 

plan, increased staffing of call centers to 

field beneficiary questions, and costs 

associated with implementing transition 

benefits for new enrollees. 

Although there is no quantifiable 

monetary value to CMS to reducing 

reassignments, we feel this benefit is 

important, as it will increase program 

stability and continuity of care. The rule 

supports pharmacy and formulary 

consistency for the beneficiary. 

Particularly in regions with high MA–

PD penetration, this rule will reduce the 

year-to-year volatility in reassignments 

of LIS beneficiaries and will help avoid 

the disruption that is inherent anytime 

a beneficiary is switched from one plan 

to another. 

Based on the most recent bid results, 

we estimated that if the 2008 

benchmarks had been calculated using 

LIS enrollment weighting, there would 

have been approximately 850,000 fewer 

reassignments than if the benchmarks 

had been calculated using total Part D 

enrollment weighting. Then we 

determined the impact of the revised 

benchmarks and reassignments on 

program payments throughout the 

projection period. We do not explicitly 

project reassignments in future years. 

The expectation is that the net effect of 

future reassignments will result in 

projected cost levels comparable to the 

results of the reassignments modeled on 

the most recent bid results. 

The cost estimate assumes full 

enrollment weighting based on LIS 

enrollment for the calculations of the 

low-income benchmark premium 

amounts. The estimate was developed 

by applying this rule against the 2008 

bids and this impact was projected 

throughout the forecast period. The 

estimate does not anticipate any change 

in bidding strategies or outcomes but 

does include the effect on the level of 

administrative costs plan sponsors will 

include in their bids to account for their 

expected number of LIS beneficiary 

reassignments. 

The proposed rule estimated Federal 

savings of approximately $20 million 

per calendar year. However, the final 

rule estimates an additional $90 million 

in Federal costs for CY 2009. There are 

two reasons that the cost estimate has 

changed. First, the budget baseline has 

been updated since the issuance of the 

proposed rule. The Mid-Session Review 

baseline assumed the continuation of 

the $1 de minimis policy; the 

President’s 2009 Budget baseline does 

not. Because of the change in 

assumptions about the de minimis 


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Federal Register / Vol. 73, No. 65 / Thursday, April 3, 2008 / Rules and Regulations 18181 

policy, even if we had stayed with the 

five zero-premium organization policy 

in the proposed rule, the cost of the 

final rule would have changed from 

savings of approximately $20 million 

per year to costs of approximately $10 

million per year. Second, this final rule 

changes the weighting methodology 

used to calculate the low-income 

benchmark premium amount. As 

discussed in the rationale, CMS has 

changed the method for calculating the 

Federal premium subsidy for LIS 

beneficiaries so that the subsidy amount 

better reflects the premiums of plans in 

which LIS beneficiaries are enrolled. 

The final rule uses each plan’s share of 

LIS enrollment, rather than each plan’s 

share of total Part D enrollment, to 

weight each plan’s premium. This 

change results in fewer reassignments 

than the proposed rule (approximately 

670,000) and greater low-income 

premium subsidy costs. The 

relationship between reassignments and 

the premium subsidy is described 

above. 

The RFA requires agencies to analyze 

options for regulatory relief of small 

businesses. For purposes of the RFA, 

small entities include small businesses, 

nonprofit organizations, and small 

governmental jurisdictions. Most 

hospitals and most other providers and 

suppliers are small entities, either by 

nonprofit status or by having revenues 

of $6.5 million to $31.5 million in any 

1 year. Individuals and States are not 

included in the definition of a small 

entity. We are not preparing an analysis 

for the RFA because we have 

determined, and the Secretary certifies, 

that this regulation will not have a 

significant economic impact on a 

substantial number of small entities. 

In addition, section 1102(b) of the 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 analysis must conform to 

the provisions of section 604 of the 

RFA. For purposes of section 1102(b) of 

the Act, we define a small rural hospital 

as a hospital that is located outside of 

a Metropolitan Statistical Area for 

Medicare payment regulations and has 

fewer than 100 beds. We are not 

preparing an analysis for section 1102(b) 

of the Act because we have determined, 

and the Secretary certifies, that this 

regulation will not have a significant 

impact on the operations of a substantial 

number of small rural hospitals. 

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. 

That threshold level is currently 

approximately $130 million. This rule 

will have no consequential effect on 

State, local, or tribal governments in the 

aggregate, or by the private sector. 

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. 

Since this regulation does not impose 

any costs on State or local governments, 

the requirements of E.O. 13132 are not 

applicable. 

B. Anticipated Effects 

We have estimated the effect this 

regulation will have on the number of 

reassignments, the number of zeropremium plans available to full-subsidy 

eligible individuals in each region, and 

bid incentives. 

This rule will reduce the number of 

reassignments compared to the current 

regulatory framework. In 2008, under 

the provisions of the ‘‘Medicare 

Demonstration to Transition Enrollment 

of Low-Income Subsidy Beneficiaries’’, 

approximately 1.19 million LIS 

beneficiaries were reassigned to new 

Part D organizations. We estimated that 

if the 2008 benchmarks had been 

calculated under the current regulation 

(that is, full enrollment weighted using 

all enrollees), the number of LIS 

reassignments would have been 2.18 

million. Under the policy in the 

proposed rule, the number of 

reassignments would have declined by 

approximately 200,000 (compared to the 

current regulation) to 2.0 million. We 

estimate that, if the 2008 benchmarks 

had been calculated using the LIS 

weighting methodology in this final 

rule, the benchmarks would have been 

higher in 27 of the 34 regions and the 

number of reassignments would have 

been 1.33 million—approximately 

850,000 lower than under the current 

regulation. 

We estimate that this final rule, if 

implemented in 2008, would have 

reduced the benchmarks slightly in 

seven regions as compared to the 

current regulation. These regions tend to 

have low MA–PD penetration and a 

concentration of LIS beneficiaries in 

PDPs with relatively low premiums. The 

amount of the benchmark reduction was 

typically less than $0.50. In 2008, these 

benchmark reductions would have 

increased reassignments in total by less 

than 50,000. The 1.33 million estimate 

noted above is net of these increased 

reassignments. 

We estimate that this final rule, if 

implemented in 2008, would have 

increased the number of zero premium 

organizations available to beneficiaries 

in 20 of the 34 PDP regions. This is 

somewhat lower than the number of 

regions where the benchmarks would 

have been higher (27), because some 

regions did not have any new plans that 

landed under the benchmark with the 

new calculation. In addition, in 2008, 

this regulation would have resulted in at 

least five zero-premium organizations in 

every Part D region with the exception 

of one region, which would have had 

four zero-premium organizations. 

This approach maintains a strong 

incentive to bid low to keep and 

possibly add LIS beneficiaries. Absent 

the rule, there may be a ‘‘winner take 

all’’ outcome in certain regions with one 

organization acquiring all of the LIS 

beneficiaries in the region. It is difficult 

to predict what will happen in the 

absence of this rule, but we expect some 

organizations will be induced to bid 

even lower while other organizations 

will give up on this population and bid 

higher. 

C. Alternatives Considered 

As stated in the ‘‘Background’’ section 

of this final rule, we considered 

allowing PDP Sponsors to reduce their 

premium to the subsidy amount after it 

was established for LIS-eligible 

individuals without regard to the 

amount of their premium. We also 

considered allowing plans with 

premiums under a fixed dollar amount 

to reduce their low-income premiums to 

the premium subsidy amount (de 

minimis). We determined, however, that 

these options would undermine the 

integrity and competitiveness of the 

bidding process. 

We also considered changing our 

approach to reassignment to an 

approach that would allow LIS-eligible 

individuals to be informed of zeropremium PDP options for full-subsidy 

eligibles, but would remain in their 

current plan, regardless of the premium, 

if they take no action. Beneficiary 

advocacy groups were concerned about 

beneficiaries being charged a premium 

without electing to pay it. 

We also considered changing the 

regulation to calculate the benchmarks 

using MA–PD premiums before they 

have been reduced by Part C rebates. 

That approach, however, is not 

permitted under the statute. 

Finally, we considered the policy in 

the proposed rule itself, which was an 

option for PDP Sponsors in regions with 

less than five zero-premium PDPs to 


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18182 Federal Register / Vol. 73, No. 65 / Thursday, April 3, 2008 / Rules and Regulations 

offer a separate prescription drug 

premium amount for full subsidy 

eligible individuals subject to certain 

conditions. In response to comments 

received on the proposed rule, we 

determined that this approach did not 

address the reassignment issue as 

effectively as the LIS benchmark 

weighting approach recommended by 

commenters. 

D. Accounting Statement 

As required by OMB Circular A–4 

(available at http:// 

www.whitehouse.gov/omb/circulars/ 

a004/a-4.pdf), in Table 2 below, we 

have prepared an accounting statement 

showing the classification of the 

expenditures associated with the 

provisions of this final rule. This table 

provides our best estimate of the cost 

associated due to increased Federal lowincome premium subsidy payments, 

which are primarily the result of 

allowing a greater number of lowincome beneficiaries to remain in their 

current plan, rather than reassigning 

them to a lower cost plan. All 

expenditures are classified as costs to 

the Federal Government. 

TABLE 2.—ACCOUNTING STATEMENT: CLASSIFICATION OF ESTIMATED EXPENDITURES FOR THE MODIFICATION TO THE

WEIGHTING METHODOLOGY USED TO CALCULATE THE LOW-INCOME BENCHMARK AMOUNT, FINAL RULE

[$ Millions] 

Category: Monetized costs Costs 

Single Year CY 2009 ............................................................................................................................................................................... $90 

Annualized Monetized Costs Using 7% Discount Rate FY 2009–FY 2018 ........................................................................................... 155 .6 

Annualized Monetized Costs Using 3% Discount Rate FY 2009–FY 2018 ........................................................................................... 162 .6 

Undiscounted Cumulative Costs—FY 2009–FY 2018 ............................................................................................................................ 1,680 

Costs reflect transfers from the Federal Government to Health Plans. 

E. Conclusion 

This rule is estimated to result in an 

increased Federal cost of $90 million in 

CY 2009 and $1.68 billion over the next 

10 fiscal years (2009 through 2018). As 

explained above, these costs are 

primarily due to an increase in lowincome premium subsidy payments. 

This rule will not have a significant 

economic impact on a substantial 

number of small entities, so we are not 

preparing an analysis for the RFA. In 

addition, the regulation will not have a 

significant impact on the operations of 

a substantial number of small rural 

hospitals, so we are not preparing an 

analysis for section 1102(b) of the Act. 

The analysis above, together with the 

preamble, provides a Regulatory Impact 

Analysis as it qualifies as a major rule 

under Executive Order 12866. 

In accordance with the provisions of 

Executive Order 12866, this regulation 

was reviewed by the Office of 

Management and Budget. 

List of Subjects in 42 CFR Part 423 

Administrative practice and 

procedure, Emergency medical services, 

Health facilities, Health maintenance 

organizations (HMO), Medicare, 

Penalties, Privacy, Reporting and 

recordkeeping. 

■ For the reasons set forth in the 

preamble, the Centers for Medicare & 

Medicaid Services amends 42 CFR 

chapter IV as set forth below: 

PART 423—VOLUNTARY MEDICARE 

PRESCRIPTION DRUG BENEFIT 

■ 1. The authority citation for part 423 

continues to read as follows: 

Authority: Secs. 1102, 1860D–1 through 

1860D–42, and 1871 of the Social Security 

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

1395w–152, and 1395hh). 

Subpart P—Premium and Cost-Sharing 

Subsidies for Low-Income Individuals 

■ 2. Amend § 423.780 by revising 

paragraph (b)(2)(i) to read as follows: 

§ 423.780 Premium subsidy. 

* * * * * 

(b) * * * 

(2) * * * 

(i) The low-income benchmark 

premium amount for a PDP region is a 

weighted average of the premium 

amounts described in paragraph 

(b)(2)(ii) of this section, with the weight 

for each PDP and MA–PD plan equal to 

a percentage, the numerator being equal 

to the number of Part D low-income 

subsidy eligible individuals enrolled in 

the plan in the reference month (as 

defined in § 422.258(c)(1) of this 

chapter) and the denominator equal to 

the total number of Part D low-income 

subsidy eligible individuals enrolled in 

all PDP and MA–PD plans (but not 

including PACE, private fee-for-service 

plans or 1876 cost plans) in a PDP 

region in the reference month. 

* * * * * 

(Catalog of Federal Domestic Assistance 

Program No. 93.773, Medicare—Hospital 

Insurance; and Program No. 93.774, 

Medicare—Supplementary Medical 

Insurance Program) 

Dated: March 20, 2008. 

Kerry Weems, 

Acting Administrator, Centers for Medicare 

& Medicaid Services. 

March 27, 2008. 

Michael O. Leavitt, 

Secretary. 

[FR Doc. 08–1088 Filed 3–31–08; 4 pm] 

BILLING CODE 4120–01–P 

DEPARTMENT OF HOMELAND 

SECURITY 

Federal Emergency Management 

Agency 

44 CFR Part 62 

[Docket ID FEMA–2008–0001] 

RIN 1660–AA58 

National Flood Insurance Program 

(NFIP); Assistance to Private Sector 

Property Insurers; Write-Your-Own 

Arrangement 

AGENCY: Federal Emergency 

Management Agency, DHS. 

ACTION: Interim Rule. 

SUMMARY: This rule amends portions of 

the Federal Emergency Management 

Agency (FEMA), Federal Insurance 

Administration, Financial Assistance/ 

Subsidy Arrangement (Arrangement) 

between Write-Your-Own Companies 

(WYO Companies) and FEMA. The rule 

makes technical changes intended to 

assist WYO Companies by recognizing 

each party’s duties under the 

Arrangement and amends the way 

FEMA communicates changes to the 

Unallocated Loss Adjustment Expenses 


jlentini on PROD1PC65 with RULES