2023-07115.pdf

of entitlement grants, user fees, or loan programs or the rights and obligations of recipients thereof; or (4) raising novel legal or policy issues arising out of legal mandates, the Presidents priorities, or the principles set forth in the Executive Order. Based on our estimates, OMBs Office of Information and Regulatory Affairs has determined this rulemaking is significant per section 3(f)(1) as measured by having an annual effect of $100 million or more in any 1 year, and hence also a major rule under Subtitle E of the Small Business Regulatory Enforcement Fairness Act of 1996 (also known as the Congressional Review Act). Accordingly, we have prepared a Regulatory Impact Analysis that to the best of our ability presents the costs and benefits of the rulemaking. Section 202 of UMRA also requires that agencies assess anticipated costs and benefits before issuing any rule whose mandates require spending in any 1 year of $100 million in 1995 dollars, updated annually for inflation. In 2022, that threshold is approximately $177 million. This final rule is not anticipated to have an unfunded effect on State, local, or Tribal governments, in the aggregate, or on the private sector of $177 million or more. Executive Order 13132 establishes certain requirements that an agency must meet when it promulgates a final rule that imposes substantial direct requirement costs on State and local governments, preempts State law, or otherwise has federalism implications. Since this final rule does not impose any substantial costs on State or local governments, preempt State law or have federalism implications, the requirements of Executive Order 13132 are not applicable. If regulations impose administrative costs on reviewers, such as the time needed to read and interpret this final rule, then we should estimate the cost associated with regulatory review. There are currently 795 contracts (which includes MA, MAPD, and PDP contracts), 55 State Medicaid Agencies, and 300 Medicaid MCOs. We also expect a variety of other organizations to review (for example, consumer advocacy groups, major PBMs). We expect that each organization will designate one person to review the rule. A reasonable maximal number is 2,000 total reviewers. We note that other assumptions are possible. Using the BLS wage information for medical and health service managers (code 119111), we estimate that the cost of reviewing this final rule is $115.22 per hour, including fringe benefits, overhead, and other indirect costs (http://www.bls.gov/oes/current/ oes_nat.htm). Assuming an average reading speed, we estimate that it will take approximately 19 hours for each person to review this final rule. For each entity that reviews the rule, the estimated cost is therefore $2,200 (19 hours  $115.22). Therefore, we estimate that the maximum total cost of reviewing this final rule is $5.3 million ($2,200  2,000 reviewers). However, we expect that many reviewers, for example pharmaceutical companies and PBMs, will not review the entire rule but just the sections that are relevant to them. We expect that on average (with fluctuations) 10 percent of the rule will be reviewed by an individual reviewer; we therefore estimate the total cost of reviewing to be $0.5 million. Note that this analysis assumes one reader per contract. Some alternatives include assuming one reader per parent organization. Using parent organizations instead of contracts will reduce the number of reviewers. However, we believe it is likely that review will be performed by contract. The argument for this is that a parent organization might have local reviewers assessing potential region-specific effects from this final rule. In accordance with the provisions of Executive Order 12866, this final rule was reviewed by OMB. C. Impact on Small Businesses Regulatory Flexibility Analysis (RFA) The RFA, as amended, requires agencies to analyze options for regulatory relief of small businesses if a rule has a significant impact on a substantial number of small entities. For purposes of the RFA, small entities include small businesses, nonprofit organizations, and small governmental jurisdictions. We proposed a wide range of policies in the proposed rule. These policies codify, modify, and update current guidance governing MA organization bid requirements. This rule has several affected stakeholders. They include: (1) MA organizations such as HMOs, local and regional PPOs, MSAs, PFFS and Part D sponsors, PACE plans, and Stand Alone Part D plans (PDP) (2) providers, including institutional providers, outpatient providers, clinical laboratories, and pharmacies; and (3) enrollees. Some descriptive data on these stakeholders are as follows: Pharmacies and Drug Stores, NAICS 446110, have a $30 million threshold for small size with 88 percent of pharmacies, those with under 20 employees, considered small. Direct Health and Medical Insurance Carriers, NAICS 524114, have a $41.5 million threshold for small size, with 75 percent of insurers having under 500 employees meeting the definition of small business. Several Medicare Advantage plans (about 3040 VerDate Sep<11>2014 21:20 Apr 11, 2023 Jkt 259001 PO 00000 Frm 00197 Fmt 4701 Sfmt 4700 E:\FR\FM\12APR2.SGM 12APR2ddrumheller on DSK120RN23PROD with RULES222316 Federal Register / Vol. 88, No. 70 / Wednesday, April 12, 2023 / Rules and Regulations percent) are not-for-profit resulting in a small entity status. Ambulatory Health Care Services, NAICS 621, including about 2 dozen subspecialties, including Physician Offices, Dentists, Optometrists, Dialysis Centers, Medical Laboratories, Diagnostic Imaging Centers, have a threshold ranging from $8 to $35 million (Dialysis Centers, NAICD 621492, have a $41.5 million threshold). Almost all firms are big, and this also applies to sub-specialties. For example, for Physician Offices, NAICS 621111, receipts for offices with under 9 employees exceed $34 million. Hospitals, NAICS 622, including General Medical and Surgical Hospitals, Psychiatric and Substance Abuse Hospitals, Specialty Hospitals have a $41.5 million threshold for small size, with half of the hospitals (those with between 20500 employees) considered small. Skilled Nursing Facilities (SNFs), NAICS 623110, have a $30 million threshold for small size, with half of the SNFs (those with under 100 employees) considered small. We are certifying that this FC does not have a significant economic impact on a substantial number of small entities. To explain our position, we explain certain operational aspects of the Medicare program. Each year, MA plans, including Part D sponsors, submit a bid for furnishing Part A and B benefits and the entire bid amount is paid by the government to the plan if the plans bid is below an administratively set benchmark. If the plans bid exceeds that benchmark, the beneficiary pays the difference in the form of a basic premium (note that a small percentage of plans bid above the benchmark, whereby enrollees pay basic premium, thus this percentage of plans is not significant as defined by the RFA and as justified in this section of this rule). The costs of stand-alone Part D plans, PDPs, is also covered by the Medicare Trust Fund. PACE plans have their costs covered by both the Medicare Trust Fund as well as the States they negotiate with. MA plans and Part D Sponsors can also offer enhanced benefits, that is, benefits not covered under Original Medicare. These enhanced benefits are paid for through enrollee premiums, extra government payments or a combination. Under the statutory payment formula, if the bid submitted by an MA plan (including Part D sponsors) for furnishing Part A and B benefits is lower than the administratively set benchmark, the government pays a portion of the difference to the plan in the form of a rebate. The rebate must be used to provide supplemental benefits (that is, benefits not covered under Original Medicare) and or/lower beneficiary Part B or Part D premiums. Some examples of these supplemental benefits include vision, dental, and hearing, fitness and worldwide coverage of emergency and urgently needed services. To the extent that the governments payments to plans for the bid plus the rebate exceeds costs in Original Medicare, those additional payments put upward pressure on the Part B premium which is paid by all Medicare beneficiaries, including those in Original Medicare who do not have the additional health services available in many MA plans. Part D plans, including MAPD plans, submit bids and those amounts are paid to plans through a combination of Medicare funds and beneficiary premiums. In addition, for enrolled low- income beneficiaries, Part D plans receive special government payments to cover most of premium and cost sharing amounts those beneficiaries would otherwise pay. Thus, the cost of providing services by these insurers is funded by a variety of government funding and in some cases by enrollee premiums. As a result, MA plans, Part D plans, Prescription Drug Plans, and PACE plans are not expected to incur burden or losses since the private companies costs are being supported by the government and enrolled beneficiaries. This lack of expected burden applies to both large and small health plans. Small entities that must comply with MA regulations, such as those in this final rule, are expected to include the costs of compliance in their bids, thus avoiding additional burden, since the cost of complying with any final rule is funded by payments from the government and, if applicable, enrollee premiums. For the insurance plans classified in category Direct Health and Medical Insurance Carriers, NAICS 524114, which include MA plans, Part D sponsors, standalone PDPs, and PACE plans, the plans estimate their costs for the upcoming year and submit bids and proposed plan benefit packages. Upon approval, the plan commits to providing the proposed benefits, and CMS commits to paying the plan either(1) the full amount of the bid, if the bid is below the benchmark, which is a ceiling on bid payments annually calculated from original Medicare data; or (2) the benchmark, if the bid amount is greater than the benchmark. If an MA plan or Part D sponsor bids above the benchmark, section 1854 of the Act requires the MA plan to charge enrollees a premium for that amount. Historically, only 2 percent of plans bid above the benchmark, and they contain roughly 1 percent of all plan enrollees. The CMS threshold for what constitutes a substantial number of small entities for purposes of the RFA is 3 to 5 percent. Since the number of plans bidding above the benchmark is 2 percent, this is not considered substantial for purposes of the RFA. Note that PACE plans while not submitting bids (except for Part D) in the same sense as MA plans, estimate their costs and these amounts are covered by a combination of funding from the Trust Fund and the States in which they operate. The preceding analysis shows that meeting the direct cost of this final rule does not have a significant economic impact on a substantial number of small entities, as required by the RFA. Besides the direct costs, as previously discussed, are certain indirect consequences of these provisions which also create impact. We have already explained that 98 percent of MA plans (including MAPD plans) bid below the benchmark. Thus, their estimated costs for the coming year are fully paid by the Federal Government. However, the government additionally pays the plan a beneficiary rebate amount that is an amount equal to a percentage (between 50 and 70 percent depending on a plans quality rating) multiplied by the amount by which the benchmark exceeds the bid. The rebate is used to provide additional benefits to enrollees in the form of reduced cost-sharing or other supplemental benefits, or to lower the Part B or Part D premiums for enrollees. (Supplemental benefits may also partially be paid by enrollee premiums.) However, as noted previously, the number of plans bidding above the benchmark to whom this burden applies do not meet the RFA criteria of a significant number of plans. It is possible that if the provisions of this rule would otherwise cause bids to increase, plans will reduce their profit margins, rather than substantially change their benefit package. This may be in part due to market forces; a plan lowering supplemental benefits even for 1 year may lose its enrollees to competing plans that offer these supplemental benefits. Thus, it can be advantageous to the plan to temporarily reduce profit margins, rather than reduce supplemental benefits. We note that we do not have definitive data on this. Plans do not report to CMS the strategies behind their bids. More specifically, when supplemental benefits are reduced, we VerDate Sep<11>2014 21:20 Apr 11, 2023 Jkt 259001 PO 00000 Frm 00198 Fmt 4701 Sfmt 4700 E:\FR\FM\12APR2.SGM 12APR2ddrumheller on DSK120RN23PROD with RULES222317 Federal Register / Vol. 88, No. 70 / Wednesday, April 12, 2023 / Rules and Regulations 171Indeed, see similar discussion in previous regulatory impact analyses: https://www.federalregister.gov/documents/2022/05/09/ 2022-09375/medicare-program-contract-year-2023- policy-and-technical-changes-to-the-medicare- advantage-and and https://www.federalregister.gov/ documents/2022/04/14/2022-07642/medicare- program-maximum-out-of-pocket-moop-limits-and- service-category-cost-sharing-standards. have no way of knowing the cause for this reduction, whether it be new provisions, market forces, or other causes. Notably, it may be inappropriate to consider the relevant regulatory impacts (and thus the profit considerations) as temporary because the issuance of a series of regulations sustains