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Proposed Rule

Medicare Program; Contract Year 2019 Policy and Technical Changes to the Medicare Advantage, Medicare Cost Plan, Medicare Fee-for-Service, the Medicare Prescription Drug Benefit Programs, and the PACE Program

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Start Preamble Start Printed Page 56336

AGENCY:

Centers for Medicare & Medicaid Services (CMS), HHS.

ACTION:

Proposed rule.

SUMMARY:

This proposed rule would revise the Medicare Advantage program (Part C) regulations and Prescription Drug Benefit program (Part D) regulations to implement certain provisions of the Comprehensive Addiction and Recovery Act (CARA) and the 21st Century Cures Act; improve program quality, accessibility, and affordability; improve the CMS customer experience; address program integrity policies related to payments based on prescriber, provider and supplier status in Medicare Advantage, Medicare cost plan, Medicare Part D and the PACE programs; provide a proposed update to the official Medicare Part D electronic prescribing standards; and clarify program requirements and certain technical changes regarding treatment of Medicare Part A and Part B appeal rights related to premiums adjustments.

DATES:

To be assured consideration, comments must be received at one of the addresses provided below, no later than 5 p.m. on January 16, 2018.

ADDRESSES:

In commenting, please refer to file code CMS-4182-P. Because of staff and resource limitations, we cannot accept comments by facsimile (FAX) transmission.

You may submit comments in one of four ways (please choose only one of the ways listed):

1. Electronically. You may submit electronic comments on this regulation to http://www.regulations.gov. Follow the “Submit a comment” instructions.

2. By regular mail. You may mail written comments to the following address ONLY: Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-4182-P, P.O. Box 8013, Baltimore, MD 21244-8013.

Please allow sufficient time for mailed comments to be received before the close of the comment period.

3. By express or overnight mail. You may send written comments to the following address ONLY: Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-4182-P, Mail Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.

4. By hand or courier. Alternatively, you may deliver (by hand or courier) your written comments ONLY to the following addresses prior to the close of the comment period:

a. For delivery in Washington, DC—Centers for Medicare & Medicaid Services, Department of Health and Human Services, Room 445-G, Hubert H. Humphrey Building, 200 Independence Avenue SW., Washington, DC 20201.

(Because access to the interior of the Hubert H. Humphrey Building is not readily available to persons without Federal government identification, commenters are encouraged to leave their comments in the CMS drop slots located in the main lobby of the building. A stamp-in clock is available for persons wishing to retain a proof of filing by stamping in and retaining an extra copy of the comments being filed.)

b. For delivery in Baltimore, MD—Centers for Medicare & Medicaid Services, Department of Health and Human Services, 7500 Security Boulevard, Baltimore, MD 21244-1850.

If you intend to deliver your comments to the Baltimore address, call telephone number (410) 786-7195 in advance to schedule your arrival with one of our staff members.

Comments erroneously mailed to the addresses indicated as appropriate for hand or courier delivery may be delayed and received after the comment period.

For information on viewing public comments, see the beginning of the SUPPLEMENTARY INFORMATION section.

Start Further Info

FOR FURTHER INFORMATION CONTACT:

Theresa Wachter, (410) 786-1157, Part C Issues.

Marie Manteuffel, (410) 786-3447, Part D Issues.

Kristy Nishimoto, (206) 615-2367, Beneficiary Enrollment and Appeals Issues.

Raghav Aggarwal, (410) 786-0097, Part C and D Payment Issues.

Vernisha Robinson-Savoy, (267) 970-2395, Part C and D Compliance Issues.

Frank Whelan, (410) 786-1302, Preclusion List Issues.

Shelly Winston, (410) 786-3694, Part D E-Prescribing Program.

End Further Info End Preamble Start Supplemental Information

SUPPLEMENTARY INFORMATION:

Inspection of Public Comments: All comments received before the close of the comment period are available for viewing by the public, including any personally identifiable or confidential business information that is included in a comment. We post all comments received before the close of the comment period on the following Web site as soon as possible after they have been received: http://www.regulations.gov. Follow the search instructions on that Web site to view public comments.

Comments received timely will also be available for public inspection as they are received, generally beginning approximately 3 weeks after publication of a document, at the headquarters of the Centers for Medicare & Medicaid Services, 7500 Security Boulevard, Baltimore, Maryland 21244, Monday through Friday of each week from 8:30 a.m. to 4 p.m. To schedule an appointment to view public comments, phone 1-800-743-3951.

Table of Contents

I. Executive Summary

A. Purpose

B. Summary of the Major Provisions

1. Implementation of the Comprehensive Addiction and Recovery Act of 2016 (CARA) Provisions

2. Updating the Part D E-Prescribing Standards (§ 423.160)

3. Revisions to Timing and Method of Disclosure Requirements

4. Preclusion List

a. Part D

b. Part C

C. Summary of Costs and Benefits

II. Provisions of the Proposed Regulations

A. Supporting Innovative Approaches to Improving Quality, Accessibility, and Affordability

1. Implementation of the Comprehensive Addiction and Recovery Act of 2016 (CARA) Provisions

a. Medicare Part D Drug Management Programs

b. Stakeholder Input Informing This Notice of Proposed Rulemaking

c. Integration of CARA and the Current Part D Opioid DUR Policy and OMS

(1) Current Part D Opioid DUR Policy and OMS

(2) Proposed Requirements for Part D Drug Management Programs (§§ 423.100, 423.153)

(i) Definitions (§ 423.100)

(A) Definition of “Potential At-Risk Beneficiary” and “At-Risk Beneficiary” (§ 423.100)

(B) Definition of “Frequently Abused Drug”, “Clinical Guidelines”, “Program Size”, and “Exempted Beneficiary” (§ 423.100)

(ii) Requirements of Drug Management Programs (§§ 423.153, 423.153(f)))

(iii) Written Policies and Procedures (§ 423.153(f)(1))

(iv) Case Management/Clinical Contact/Prescriber Verification (§ 423.153(f)(2))Start Printed Page 56337

(v) Limitations on Access to Coverage for Frequently Abused Drugs (§ 423.153(f)(3))

(vi) Requirements for Limiting Access to Coverage for Frequently Abused Drugs (§ 423.153(f)(4))

(vii) Beneficiary Notices and Limitation of the Special Enrollment Period (§§ 423.153(f)(5), 423.153(f)(6), 423.38)

(A) Initial Notice to Beneficiary and Sponsor Intent To Implement Limitation on Access to Coverage for Frequently Abused Drugs (§ 423.153(f)(5))

(B) Limitation on the Special Enrollment Period for LIS Beneficiaries With an At-Risk Status (§ 423.38)

(C) Second Notice to Beneficiary and Sponsor Implementation of Limitation on Access to Coverage for Frequently Abused Drugs by Sponsor (§ 423.153(f)(6))

(D) Alternate Second Notice When Limit To Access to Coverage for Frequently Abused Drugs by Sponsor Will Not Occur (§ 423.153(f)(7))

(E) Timing of Notices (§ 423.153(f)(8))

(F) Exceptions to Timing of the Notices (§ 423.153(f)(8))

(viii) Provisions Specific to Limitation on Access to Coverage of Frequently Abused Drugs to Selected Pharmacies and Prescribers (§ 423.153(f)(4) and (f)(9) Through (13))

(A) Special Requirement To Limit Access to Coverage of Frequently Abused Drugs to Selected Prescriber(s) (§ 423.153(f)(4))

(B) Selection of Pharmacies and Prescribers (§ 423.153(f)(9) Through (13))

(1) Beneficiary Preferences (§ 423.153(f)(9))

(2) Exception to Beneficiary Preferences (§ 423.153(f)(10))

(3) Reasonable Access (§§ 423.100, 423.153(f)(11), 423.153(f)(12))

(4) Confirmation of Pharmacy and Prescriber Selection (§ 423.153(f)(13))

(ix) Drug Management Program Appeals (§§ 423.558, 423.560, 423.562, 423.564, 423.580, 423.582, 423.584, 423.590, 423.602, 423.636, 423.638, 423.1970, 423.2018, 423.2020, 423.2022, 423.2032, 423.2036, 423.2038, 423.2046, 423.2056, 423.2062, 423.2122, and 423.2126)

(x) Termination of a Beneficiary's Potential At-Risk or At-Risk Status (§ 423.153(f)(14))

(xi) Data Disclosure and Sharing of Information for Subsequent Sponsor Enrollments (§ 423.153(f)(15))

(xii) Summary

2. Flexibility in the Medicare Advantage Uniformity Requirements

3. Segment Benefits Flexibility

4. Maximum Out-of-Pocket Limit for Medicare Parts A and B Services (§§ 422.100 and 422.101)

5. Cost Sharing Limits for Medicare Parts A and B Services (§§ 417.454 and 422.100)

6. Meaningful Differences in Medicare Advantage Bid Submissions and Bid Review (§§ 422.254 and 422.256)

7. Coordination of Enrollment and Disenrollment Through MA Organizations and Effective Dates of Coverage and Change of Coverage (§§ 422.66 and 422.68)

8. Passive Enrollment Flexibilities To Protect Continuity of Integrated Care for Dually Eligible Beneficiaries (§ 422.60(g))

9. Part D Tiering Exceptions (§§ 423.560, 423.578(a) and (c))

a. Background

b. General Rules

c. Limitations on Tiering Exceptions

d. Alternative Drugs for Treatment of the Enrollee's Condition

e. Approval of Tiering Exception Requests

f. Additional Technical Changes and Corrections

10. Establishing Limitations for the Part D Special Election Period (SEP) for Dually Eligible Beneficiaries (§ 423.38)

11. Medicare Advantage and Part D Prescription Drug Plan Quality Rating System

a. Introduction

b. Background

c. Basis, Purpose and Applicability of the Quality Star Ratings System

d. Definitions

e. Contract Ratings

f. Contract Consolidations

g. Data Sources

h. Adding, Updating, and Removing Measures

i. Measure Set for Performance Periods Beginning on or After January 1, 2019

j. Improvement Measures

k. Data Integrity

l. Measure-Level Star Ratings

m. Hierarchical Structure of the Ratings

n. Domain Star Ratings

o. Part C and D Summary Ratings

p. Overall Rating

q. Measure Weights

r. Application of the Improvement Measure Scores

s. Reward Factor (Formerly Referred to as Integration Factor)

t. Categorical Adjustment Index

u. High and Low Performing Icons

v. Plan Preview of Star Ratings

w. Technical Changes

12. Any Willing Pharmacy Standards Terms and Conditions and Better Define Pharmacy Types (§§ 423.100, 423.505)

a. Any Willing Pharmacy Required for All Pharmacy Business Models

b. Revise the Definition of Retail Pharmacy and To Add a Definition of Mail-Order Pharmacy

c. Treatment of Accreditation and Other Similar Any Willing Pharmacy Requirements in Standard Terms and Conditions

d. Timing of Contracting Requirements

13. Changes to the Days' Supply Required by the Part D Transition Process

14. Expedited Substitutions of Certain Generics and Other Midyear Formulary Changes (§§ 423.100, 423.120, and 423.128)

15. Treatment of Follow-On Biological Products as Generics for Non-LIS Catastrophic and LIS Cost Sharing

16. Eliminating the Requirement To Provide PDP Enhanced Alternative (EA) to EA Plan Offerings With Meaningful Differences (§ 423.265)

17. Request for Information Regarding the Application of Manufacturer Rebates and Pharmacy Price Concessions to Drug Prices at the Point of Sale

B. Improving the CMS Customer Experience

1. Restoration of the Medicare Advantage Open Enrollment Period (§§ 422.60, 422.62, 422.68, 423.38, and 423.40)

2. Reducing the Burden of the Compliance Program Training Requirements (§§ 422.503 and 423.504)

3. Medicare Advantage Plan Minimum Enrollment Waiver (§ 422.514(b))

4. Revisions to Timing and Method of Disclosure Requirements (§§ 422.111 and 423.128)

5. Revisions to Parts 422 and 423, Subpart V, Communication/Marketing Materials and Activities

a. Revising the Scope of Subpart V To Include Communications and Communications Materials

b. Amending the Regulatory Definition of Marketing and Marketing Materials

c. Prohibition of Marketing During the Open Enrollment Period

d. Technical Changes to Other Regulatory Provisions as a Result of the Changes to Subpart V

6. Lengthening Adjudication Timeframes for Part D Payment Redeterminations and IRE Reconsiderations (§§ 423.590 and 423.636)

7. Elimination of Medicare Advantage Plan Notice for Cases Sent to the IRE (§ 422.590)

8. E-Prescribing and the Part D Prescription Drug Program; Updating Part D E-Prescribing Standards

a. Legislative Background

b. Regulatory History

c. Proposed Adoption of NCPDP SCRIPT Version 2017071 as the Official Part D E-Prescribing Standard, Retirement of NCPDP SCRIPT 10.6, Implementing Related Conforming Changes Elsewhere in § 423.160 and Correction of a Typographical Error Which Occurred When NCPDP SCRIPT 10.6 Was Initially Adopted

9. Reduction of Past Performance Review Period for Applications Submitted by Current Medicare Contracting Organizations (§§ 422.502 and 423.503)

10. Part D Prescriber Preclusion List

a. Background

(1) 2014 Final Rule

(2) 2015 Interim Final Rule

(3) Preparations for Enforcement of Prescriber Enrollment Requirement

b. Proposed Provisions

(1) Prescriber NPI Validation on Part D Claims

(a) Provisions of § 423.120(c)(5)

(b) Medicare Access and CHIP Reauthorization Act of 2015 (MACRA)

(i) Preclusion List

(b) Replacement of Enrollment Requirement With Preclusion List Requirement

(ii) Updates to Preclusion List

(3) Provisional Coverage

(4) Appeals

c. Specific Regulatory Changes

11. Part C/Medicare Advantage Cost Plan and PACE Preclusion List (§ 422.224)

12. Removal of Quality Improvement Project for Medicare Advantage Organizations (§ 422.152)Start Printed Page 56338

13. Reducing Provider Burden—Comment Solicitation

C. Implementing Other Changes

1. Reducing the Burden of the Medicare Part C and Part D Medical Loss Ratio Requirements (§§ 422.2420 and 423.2430)

a. Background

b. Proposed Regulatory Changes to the Calculation of the Medical Loss Ratio (§§ 422.2420, 422.2430, 423.2420, and 423.2430)

(1) Fraud Reduction Activities (§§ 422.2420, 422.2430, 423.2420, and 423.2430)

(2) Medication Therapy Management (MTM) (§§ 422.2430 and 423.2430)

(3) Additional Technical Changes to Calculation of the Medical Loss Ratio (§§ 422.2420 and 423.2420)

c. Proposed Regulatory Changes to Medicare MLR Reporting Requirements (§§ 422.2460 and 423.2460)

d. Proposed Technical Changes to Medicare MLR Review and Non-Compliance and the Release of MLR Data (§§ 422.2410, 422.2480, 422.2490, 423.2410, 423.2480, and 423.2490)

2. Medicare Advantage Contract Provisions (§ 422.504)

3. Late Contract Non-Renewal Notifications (§§ 422.506, 422.508, and 423.508)

4. Contract Request for a Hearing (§§ 422.664(b) and 423.652(b))

5. Physician Incentive Plans—Update Stop-Loss Protection Requirements (§ 422.208)

6. Changes to the Agent/Broker Compensation Requirements (§§ 422.2274 and 423.2274)

7. Changes to the Agent/Broker Requirements (§§ 422.2272(e) and 423.2272(e))

8. Codification of Certain Medicare Premium Adjustments as Initial Determinations (§ 405.924)

9. Eliminate Use of the Term “Non-Renewal” To Refer to a CMS-Initiated Termination (§§ 422.506, 422.510, 423.507, and 423.509)

III. Collection of Information Requirements

A. Wages

B. Proposed Information Collection Requirements (ICRs)

1. ICRs Regarding Passive Enrollment Flexibilities To Protect Continuity of Integrated Care for Dually Eligible Beneficiaries (§ 422.60(g))

2. ICRs Regarding Restoration of the Medicare Advantage Open Enrollment Period (§§ 422.60, 422.62, 422.68, 423.38, and 423.40)

3. ICRs Regarding Coordination of Enrollment and Disenrollment Through MA Organizations and Effective Dates of Coverage and Change of Coverage (§§ 422.66 and 422.68)

4. ICRs Regarding Revisions to Timing and Method of Disclosure Requirements (§§ 422.111 and 423.128)

5. ICRs Regarding the Removal of Quality Improvement Project for Medicare Advantage Organizations (§ 422.152)

6. ICRs Regarding Medicare Advantage Quality Rating System (§§ 422.162, 422.164, 422.166, 422.182, 422.184, and 422.186)

7. ICRs Regarding the Medicare Advantage Plan Minimum Enrollment Waiver (§ 422.514(b))

8. ICRs Regarding Revisions to Parts 422 and 423, Subpart V, Communication/Marketing Materials and Activities

9. ICRs Regarding Medical Loss Ratio Reporting Requirements (§§ 422.2460 and 423.2460)

10. ICRs Regarding Establishing Limitations for the Part D Special Enrollment Period for Dual Eligible Beneficiaries (§ 423.38(c)(4))

11. ICRs Regarding Expedited Substitutions of Certain Generics and Other Midyear Formulary Changes (§§ 423.100, 423.120, and 423.128)

12. ICRs Related to Preclusion List Requirements for Prescribers in Part D and Individuals and Entities in Medicare Advantage, Cost Plans and PACE

13. ICRs Regarding the Part D Tiering Exceptions (§§ 423.560, 423.578(a), and (c))

14. ICRs Regarding the Implementation of the Comprehensive Addiction and Recovery Act of 2016 (CARA) Provisions (§§ 423.38 and 423.153(f))

IV. Regulatory Impact Analysis

A. Statement of Need

B. Overall Impact

C. Anticipated Effects

1. CARA Provisions

2. Reducing the Burden of the Compliance Program Training Requirements (§§ 422.503 and 423.504)

3. Meaningful Differences in Medicare Advantage Bid Submissions and Bid Review (§§ 422.254 and 422.256)

4. Physician Incentive Plans—Update Stop-Loss Protection Requirements (§ 422.208)

5. Changes to the Agent/Broker Requirements (§§ 422.2272(e) and 423.2272(e))

6. Coordination of Enrollment and Disenrollment Through MA Organizations and Effective Dates of Coverage and Change of Coverage

7. Lengthening Adjudication Timeframes for Part D Payment Redeterminations and IRE Reconsiderations

8. Elimination of Medicare Advantage Plan Notice for Cases Sent to the IRE

9. Medicare Advantage and Prescription Drug Plan Quality Rating System

10. Changes to the Days' Supply Required by the Part D Transition Process

11. Treatment of Follow-On Biological Products as Generics for Non-LIS Catastrophic and LIS Catastrophic Cost Sharing

12. Eliminating the Requirement To Provide PDP Enhanced Alternative (EA) to EA Plan Offerings With Meaningful Differences (§ 423.265)

13. Removal of Quality Improvement Project for Medicare Advantage Organizations (§ 422.152)

14. Preclusion List Requirements for Prescribers in Part D and Providers and Suppliers in Medicare Advantage, Cost Plans and PACE

15. Any Willing Pharmacy Standard Terms and Conditions and Better Define Pharmacy Types

16. Expedited Substitutions of Certain Generics and Other Midyear Formulary Changes (§§ 423.100, 423.120, and 423.128)

D. Expected Benefits

E. Alternatives Considered

F. Accounting Statement and Table

G. Conclusion

Acronyms

ACA Affordable Care Act

ACS American Community Survey

AEP Annual Election Period

ANDA Abbreviated New Drug Application

ANOC Annual Notice of Change

AMA American Medical Association

AO Accrediting Organization

ASPE Office of the Assistant Secretary for Planning and Evaluation

AWP Any Willing Pharmacy

CAI Categorical Adjustment Index

CARA Comprehensive Addiction and Recovery Act

CCIP Chronic Care Improvement Program

CMS Centers for Medicare & Medicaid Services

CPT Current Procedural Terminology

DAB Departmental Appeals Board

DE Dual Eligible

DIR Direct or Indirect Remuneration

DME Durable Medical Equipment

DSMO Designated Standards Maintenance Organization

D-SNP Dual-Eligible Special Needs Plan

EDM Enhanced Disease Management

EHR Electronic Health Record

EOC Evidence of Coverage

EP Eligible Professionals

FFS Fee-for-Service

ePA Electronic Prior Authorization

eRx Electronic Prescription (e-prescribing)

FDA Food and Drug Administration

FIDE Fully Integrated Dual Eligible

FMV Fair Market Value

FPL Federal Poverty Level

HPMS Health Plan Management System

ICD-10 ICD-10-CM

IRE Independent Review Entity

LIS Low Income Subsidy

LPPO Local Preferred Provider Organization

LTC Long Term Care

MA Medicare Advantage

MADP Medicare Advantage Disenrollment Period

MA-PD Medicare Advantage Prescription Drug

MAO Medicare Advantage Organizations

MIPPA Medicare Improvements for Patients and Providers Act

MLR Medical Loss Ratio

MOOP Maximum Out-of-Pocket

NCPDP National Council of Prescription Drug Programs

NCQA National Committee for Quality Assurance

NDC National Drug Code

NSO National Standard Organization

OIG Office of Inspector General

OEP Open Enrollment Period

OMHA Office of Medicare Hearings and Appeals

OOPC Out-of-Pocket Cost

PA Prior Authorization

PBM Pharmacy Benefit Manager

PBP Plan Benefit Package

PDP Prescription Drug Plan

PHSA Public Health Service ActStart Printed Page 56339

PIP Physician Incentive Plan

PQA Pharmacy Quality Alliance

PSO Provider Sponsored Organization

PSP Provider Specific Plan

QBP Quality Bonus Payment

QI Quality Improvement

QIA Quality Improvement Activities

QIP Quality Improvement Project

REMS Risk Evaluation and Mitigation Strategies

RFI Request for Information

RHC Rural Health Center

RI Rewards and Incentives

RPPO Regional Preferred Provider Organization

RRB Railroad Retirement Board

SE Standard Error

SEP Special Enrollment/Election Period

SES Socio-Economic Status

SNP Special Needs Plan

SSA Social Security Administration

TMP Timeliness Monitoring Project

I. Executive Summary

A. Purpose

The primary purpose of this proposed rule is to make revisions to the Medicare Advantage (MA) program (Part C) and Prescription Drug Benefit Program (Part D) regulations based on our continued experience in the administration of the Part C and Part D programs and to implement certain provisions of the Comprehensive Addiction and Recovery Act and the 21st Century Cures Act. The proposed changes are necessary to—(1) Support Innovative Approaches to Improving Quality, Accessibility, and Affordability; (2) Improve the CMS Customer Experience; and (3) Implement Other Changes. In addition, this rule proposes technical changes related to treatment of Part A and Part B premium adjustments and updates the Script standard used for Part D electronic prescribing. While the Part D program has high satisfaction among users, we continually evaluate program policies and regulations to remain responsive to current trends and newer technologies. Specifically, this regulation meets the Administration's priorities to reduce burden and provide the regulatory framework to develop MA and Part D products that better meet the individual beneficiary's healthcare needs. Additionally, this regulation includes a number of provisions that will help address the opioid epidemic and mitigate the impact of increasing drug prices in the Part D program.

B. Summary of the Major Provisions

1. Implementation of the Comprehensive Addiction and Recovery Act of 2016 (CARA) Provisions

This proposed regulatory provision would implement statutory provisions of the Comprehensive Addiction and Recovery Act of 2016 (CARA), enacted into law on July 22, 2016, which amended the Social Security Act and includes new authority for Medicare Part D drug management programs, effective on or after January 1, 2019. Through this provision, CMS proposes a framework under which Part D plan sponsors may establish a drug management program for beneficiaries at risk for prescription drug abuse or misuse, or “at-risk beneficiaries.” CMS proposes that, under such programs, sponsors may limit at-risk beneficiaries' access to coverage of controlled substances that CMS determines are “frequently abused drugs” to a selected prescriber(s) and/or network pharmacy(ies). CMS also proposes to limit the use of the special enrollment period (SEP) for dually- or other low income subsidy (LIS)-eligible beneficiaries who are identified as at-risk or potentially at-risk for prescription drug abuse under such a drug management program. Finally, this provision proposes to codify the current Part D Opioid Drug Utilization Review (DUR) Policy and Overutilization Monitoring System (OMS) by integrating this current policy with our proposals for implementing the drug management program provisions. The current policy involves Part D prescription drug benefit plans engaging in case management with prescribers when an enrollee is found to be taking a very high dose of opioids and obtaining them from multiple prescribers and multiple pharmacies who may not know about each other. Through the adoption of this policy, from 2011 through 2016, there was a 61 percent decrease (over 17,800 beneficiaries) in the number of Part D beneficiaries identified as potential very high risk opioid overutilizers.[1] Thus, this proposal expands upon an existing, innovative, successful approach to reduce opioid overutilization in the Part D program by improving quality of care through coordination while maintaining access to necessary pain medications.

2. Updating the Part D E-Prescribing Standards (§ 423.160)

This provision proposes an update to the electronic standards to be used by Medicare Part D prescription drug plans. This includes the proposed adoption of the NDPDP SCRIPT Standard Version 2017071, and retirement of the current NCPDP SCRIPT Version 10.6, as the official electronic prescribing standard for transmitting prescriptions and prescription-related information using electronic media for covered Part D drugs for Part D eligible individuals. These changes would become effective January 1, 2019. The NCPDP SCRIPT standards are used to exchange information between prescribers, dispensers, intermediaries and Medicare prescription drug plans.

Although e-prescribing is optional for physicians and pharmacies, the Medicare Part D statute and regulations require drug plans participating in the prescription benefit to support electronic prescribing, and physicians and pharmacies who elect to transmit e-prescriptions and related communications electronically must utilize the adopted standards. The proposed updated NCPDP SCRIPT standards have been requested by the industry and could provide a number of efficiencies which the industry and CMS supports.

In order to facilitate this change, we propose to update § 423.160, and also make a number of conforming technical changes to other sections of part 423. In addition, we are proposing to correct a typographical error that occurred in the regulatory text listing the applicability dates of the standards by changing the reference in § 423.160(b)(1)(iv) to reference (b)(2)(iii) instead of (b)(2)(ii) to correctly cite to the present use of the currently adopted NCPDP SCRIPT Standard Version 10.

3. Revisions to Timing and Method of Disclosure Requirements

We are proposing to allow the electronic delivery of certain information normally provided in hard copy documents such as the Evidence of Coverage (EOC). Additionally, we are proposing to change the timeframe for delivery of the EOC in particular to the first day of the Annual Election Period (AEP) rather than fifteen days prior to that date. Allowing plans to provide the EOC electronically would alleviate plan burden related to printing and mailing, and simultaneously would reduce the number of paper documents that beneficiaries receive from plans. This would allow beneficiaries to focus on materials, like the Annual Notice of Change (ANOC), that drive decision making. Changing the date by which plans must provide the EOC to members would allow plans more time to finalize the formatting and ensure the accuracy of the information, as well as further distance it from the ANOC, which must still be delivered 15 days prior to the AEP. We see this proposed change as an overall reduction of impact that our regulations have on plans and beneficiaries. In aggregate, we estimate a savings (to plans for not producing Start Printed Page 56340and mailing hard-copy EOCs) of approximately $51 million.

4. Preclusion List

a. Part D

This proposed rule would rescind the current provisions in § 423.120(c)(6) that require physicians and eligible professionals (as defined in section 1848(k)(3)(B) of the Act) to enroll in or validly opt-out of Medicare in order for a Part D drug prescribed by the physician or eligible professional to be covered. As a replacement, we propose that a Part D plan sponsor must reject, or must require its pharmacy benefit manager to reject, a pharmacy claim for a Part D drug if the individual who prescribed the drug is included on the “preclusion list,” which would be defined in § 423.100 and would consist of certain prescribers who are currently revoked from the Medicare program under § 424.535 and are under an active reenrollment bar, or have engaged in behavior for which CMS could have revoked the prescriber to the extent applicable if he or she had been enrolled in Medicare, and CMS determines that the underlying conduct that led, or would have led, to the revocation is detrimental to the best interests of the Medicare program. We recognize, however, the need to minimize interruptions to Part D beneficiaries' access to needed medications. Therefore, we also propose to prohibit plan sponsors from rejecting claims or denying beneficiary requests for reimbursement for a drug on the basis of the prescriber's inclusion on the preclusion list, unless the sponsor has first covered a 90-day provisional supply of the drug and provide individualized written notice to the beneficiary that the drug is being covered on a provisional basis.

b. Part C

This proposed rule would rescind the current provisions in § 422.222 stating that providers or suppliers that are types of individuals or entities that can enroll in Medicare in accordance with section 1861 of the Act must be enrolled in Medicare in order to provide health care items or services to a Medicare enrollee who receives his or her Medicare benefit through an MA organization. As a replacement, we propose that an MA organization shall not make payment for an item or service furnished by an individual or entity that is on the “preclusion list.” The preclusion list, which would be defined in § 422.2, would consist of certain individuals and entities that are currently revoked from the Medicare program under § 424.535 and are under an active reenrollment bar, or have engaged in behavior for which CMS could have revoked the individual or entity to the extent applicable if he or she had been enrolled in Medicare, and CMS determines that the underlying conduct that led, or would have led, to the revocation is detrimental to the best interests of the Medicare program.

C. Summary of Costs and Benefits

ProvisionSavings
Implementation of the Comprehensive Addiction and Recovery Act of 2016Besides the benefits of preventing opioid dependency in beneficiaries we estimate a net savings in 2019 of $13 million to the Trust Fund because of reduced scripts, modestly increasing to a savings of $14 million in 2023. The cost to industry is estimated at about $2.8 million per year.
Revisions to Timing and Method of Disclosure RequirementsWe estimate 67% of the current 47.8 million beneficiaries will prefer use of the internet vs. hard copies. This will result in savings of $55 million in 2019 and growing due to inflation to $67 million in 2023.

II. Provisions of the Proposed Regulations

A. Supporting Innovative Approaches to Improving Quality, Accessibility, and Affordability

1. Implementation of the Comprehensive Addiction and Recovery Act of 2016 (CARA) Provisions

a. Medicare Part D Drug Management Programs

The Comprehensive Addiction and Recovery Act of 2016 (CARA), enacted into law on July 22, 2016, amended the Social Security Act and includes new authority for the establishment of drug management programs in Medicare Part D, effective on or after January 1, 2019. In accordance with section 704(g)(3) of CARA and revised section 1860D-4(c) of the Act, CMS must establish through notice and comment rulemaking a framework under which Part D plan sponsors may establish a drug management program for beneficiaries at-risk for prescription drug abuse, or “at-risk beneficiaries.” Under such a Part D drug management program, sponsors may limit at-risk beneficiaries' access to coverage of controlled substances that CMS determines are “frequently abused drugs” to a selected prescriber(s) and/or network pharmacy(ies). While such programs, commonly referred to as “lock-in programs,” have been a feature of many state Medicaid programs for some time, prior to the enactment of CARA, there was no statutory authority to allow Part D plan sponsors to require beneficiaries to obtain controlled substances from a certain pharmacy or prescriber in the Medicare Part D program.

In summary, this proposed rule would implement the CARA Part D drug management program provisions by integrating them with the current Part D Opioid Drug Utilization Review (DUR) Policy and Overutilization Monitoring System (OMS) (“current policy”). As explained in more detail later in this section, this integration would mean that Part D sponsors implementing a drug management program could limit an at-risk beneficiary's access to coverage of opioids beginning 2019 through a point-of-sale (POS) claim edit and/or by requiring the beneficiary to obtain opioids from a selected pharmacy(ies) and/or prescriber(s) after case management and notice to the beneficiary. To do so, the beneficiary would have to meet clinical guidelines that factor in that the beneficiary is taking a high-risk dose of opioids over a sustained time period and that the beneficiary is obtaining them from multiple prescribers and multiple pharmacies. This proposed rule would also implement a limitation on the use of the special enrollment period (SEP) for low income subsidy (LIS)-eligible beneficiaries who are identified as potential at-risk beneficiaries.

b. Stakeholder Input Informing This Notice of Proposed Rulemaking

Section 704(g)(2) of CARA required us to convene stakeholders to provide input on specific topics so that we could take such input into account in promulgating regulations governing Part D drug management programs. Stakeholders include Medicare beneficiaries with Part A or Part B, advocacy groups representing Medicare beneficiaries, physicians, pharmacists, and other clinicians (particularly other lawful prescribers of controlled Start Printed Page 56341substances), retail pharmacies, Part D plan sponsors and their delegated entities (such as pharmacy benefit managers), and biopharmaceutical manufacturers.

We hosted a Listening Session on the CARA drug management program provisions via a public conference call on November 14, 2016 that was announced in the October 26, 2016 Federal Register (81 FR 74388). We sought stakeholder input on specific topics enumerated in sections 704(a)(1) and 704(g)(2)(B) of the CARA and other related topics of concern to the stakeholders.

In developing this proposed rule, we considered the stakeholders' comments provided during the Listening Session, as well as written comments submitted afterward, including those submitted in response to the Request for Information associated with the publication of the Plan Year 2018 Medicare Parts C&D Final Call Letter. We refer to this input in this preamble using the terms “stakeholders,” “commenters” and “comments.”

c. Integration of CARA and the Current Part D Opioid DUR Policy and OMS

As noted in section II.A.1. of this proposed rule previously, we are proposing to implement the CARA Part D drug management program provisions by integrating them with our current policy that is not currently codified, but would be under this proposal. In using the term “current policy”, we refer to the aspect of our current Part D opioid overutilization policy that is based on retrospective DUR.[2] Specifically, we are proposing a regulatory framework for Part D plan sponsors to voluntarily adopt drug management programs through which they address potential overutilization of frequently abused drugs identified retrospectively through the application of clinical guidelines/criteria that identify potential at-risk beneficiaries and conduct case management which incorporates clinical contact and prescriber verification that a beneficiary is an at-risk beneficiary. If deemed necessary, a sponsor could limit at-risk beneficiaries' access to coverage for such drugs through pharmacy lock-in, prescriber lock-in, and/or a beneficiary-specific point-of-sale (POS) claim edit. Finally, sponsors would report to CMS the status and results of their case management to OMS and any beneficiary coverage limitations they have implemented to MARx, CMS' system for payment and enrollment transactions. While plan sponsors would have the option to implement a drug management program, our proposal codifies a framework that would place requirements upon such programs. We foresee that all plan sponsors will implement such drug management programs based on our experience that all plan sponsors' are complying with the current policy as laid out in guidance, the fact that our proposal largely incorporates the CARA drug management provisions into existing CMS and sponsor operations, and especially, in light of the national opioid epidemic and the declaration that the opioid crisis is a nationwide Public Health Emergency.

Because we propose to integrate the CARA Part D drug management program provisions with the current policy and codify them both, we describe the current policy in section II.A.1.c.(1) of this proposed rule, noting where our proposal incorporates changes to the current policy in order to comply with CARA and achieve operational consistency. Where we do not note a change, our intent is to codify the current policy, and we seek specific comment as to whether we have overlooked any feature of the current policy that should be codified. CMS communications regarding the current policy can be found at the CMS Web site, “Improving Drug Utilization Review Controls in Part D” at https://www.cms.gov/​Medicare/​Prescription-Drug-Coverage/​PrescriptionDrugCovContra/​RxUtilization.html.

Then we set forth our proposal for codification of the regulatory framework for drug management programs in section II.A.1.c.(2) of this proposed rule, which includes provisions specific to lock-in, which is not a feature of the current policy.

(1) Current Part D Opioid DUR Policy and OMS

CMS is actively engaged in addressing the opioid epidemic and committed to implementing effective tools in Medicare Part D. We will work across all stakeholder, beneficiary and advocacy groups, health plans, and other federal partners to help address this devastating epidemic. CMS has worked with plan sponsors and other stakeholders to implement Medicare Part D opioid overutilization policies with multiple initiatives to address opioid overutilization in Medicare Part D through a medication safety approach. These initiatives include better formulary and utilization management; real-time safety alerts at the pharmacy aimed at coordinated care; retrospective identification of high risk opioid overutilizers who may need case management; and regular actionable patient safety reports based on quality metrics to sponsors.

The goal of the current policy and OMS is to reduce opioid overutilization in Part D. In conjunction with related Part D opioid overutilization policies that address prospective opioid use, the current policy has played a key role in reducing high risk opioid overutilization in the Part D program by 61 percent (representing over 17,800 beneficiaries) from 2011 (pre-policy pilot) through 2016, even as the number of beneficiaries enrolled in Part D increased overall during this period from 31.5 million to 43.6 million enrollees, or a 38 percent increase.[3]

The purpose of the current policy is to provide Part D plan sponsors with specific guidance about compliance with § 423.153(b)(2) as to opioid overutilization, which requires a Part D plan sponsor to have a reasonable and appropriate drug utilization management program that maintains policies and systems to assist in preventing overutilization of prescribed medications. We adopted the current policy on January 1, 2013, and it has evolved over time in scope in several ways with stakeholder feedback and support, including through the addition of the OMS in July 2013, primarily via the annual Parts C&D Call Letter process.

The current policy has two aspects. First, in the CY 2013 final Call Letter and subsequent supplemental guidance, we provided guidance about our expectations for Part D plan sponsors to retrospectively identify beneficiaries who are at high risk for potential opioid overutilization and provide appropriate case management aimed at coordinated care.[4] More specifically, we currently expect Part D plan sponsors' Pharmacy and Therapeutics (P&T) committees to establish criteria consistent with CMS guidance to retrospectively identify potential opioid overutilizers at high risk for an adverse event enrolled in their plans who may warrant case management because they are receiving opioid prescriptions from multiple prescribers and pharmacies. Enrollees Start Printed Page 56342with cancer or in hospice are excluded from the current policy, because the benefit of their high opioid use may outweigh the risk associated with such use. This exclusion was supported by stakeholder feedback on the current policy.

Once such enrollees are identified through retrospective prescription drug claims review, we expect the Part D plan sponsors to diligently assess each case, and if warranted, have their clinical staff conduct case management with the beneficiary's opioid prescribers until the case is resolved. According to the supplemental guidance,[5] case management entails:

  • The personnel communicating with prescribers have appropriate credentials.
  • Written inquiries to the prescribers of the opioid medications about the appropriateness, medical necessity and safety of the apparent high dosage for their patient.
  • Attempts to schedule telephone conversations with the prescribers (separately or together) within a reasonable period from the issuance of the written inquiry notification, if necessary.
  • The clinician-to-clinician communication includes information about the existence of multiple prescribers and the beneficiary's total opioid utilization, and the plan's clinician elicits the information necessary to identify any complicating factors in the beneficiary's treatment that are relevant to the case management effort.
  • After discussion or communication about the appropriate level of opioid use, the consensus reached by the prescribers is implemented by the sponsor, with a beneficiary-specific opioid POS claim edit, as deemed appropriate by the prescribers, to prevent further Part D coverage of an unsafe level of drug.
  • In cases of non-responsive prescribers, the sponsor may also implement a beneficiary-specific opioid POS claim edit to prevent further coverage of an unsafe level of drug and to encourage the prescribers to participate in case management.

Thus, we expect case management to confirm that the beneficiary's opioid use is medically necessary or resolve an overutilization issue.

As part of the current policy, and because the Food and Drug Administration (FDA)-approved labeling for opioids generally does not include maximum daily doses, CMS developed specific criteria to identify beneficiaries at high risk through retrospective review of their opioid use in order to assist Part D sponsors in identifying such beneficiaries. These criteria incorporate a morphine milligram equivalent (MME) [6] approach, which is a method to uniformly calculate the total daily dosage of opioids across all of a patient's opioid prescription drug claims. Beginning with plan year 2018, we adjusted these criteria to align with the Centers for Disease Control (CDC) Guideline for Prescribing Opioids for Chronic Pain (CDC Guideline) [7] issued in March 2016 in terms of using 90 MME as a threshold to identify beneficiaries who appear to be at high risk due to their opioid use. In its guideline, after considering information from relevant studies and experts, the CDC identifies 50 MME daily dose as a threshold for increased risk of opioid overdose, and to generally avoid increasing the daily dosage to 90 MME. Our criteria, which we will discuss more fully later in the preamble, also incorporate a multiple prescriber and pharmacy count to focus on beneficiaries who appear to be not only overutilizing opioids but who also are at increased risk due to potential coordination of care issues, such that the providers who are prescribing or dispensing opioids to these beneficiaries may not know that other providers are also doing so.

The second aspect of the current policy came into place in July 2013, when CMS launched the OMS as a tool to monitor Part D plan sponsors' effectiveness in complying with § 423.153(b)(2) to address opioid overutilization. Through the OMS, CMS sends sponsors quarterly reports about their Part D enrollees who meet the criteria for being at high risk of opioid overutilization. Then, we expect sponsors to address each case through the case management process previously described and respond to CMS through the OMS using standardized responses. In addition, we expect sponsors to provide information to their regional CMS representatives and the MARx system about beneficiary-specific opioid POS claim edits that they intend to or have implemented.[8]

Because case management is very resource intensive for sponsors and PBMs, we have limited the scope of the current policy in terms of the number of beneficiaries identified by OMS, and when expanding that number, we have made changes incrementally through annual Parts C&D Call Letter process.

(2) Proposed Requirements for Part D Drug Management Programs (§§ 423.100 and 423.153)

We first propose several definitions for terms we propose to use in establishing requirements for Part D drug management programs.

(i) Definitions (§ 423.100)

(A) Definition of “Potential At-Risk Beneficiary” and “At-Risk Beneficiary” (§ 423.100)

Section 1860D-4(c)(5)(C) of the Act contains a definition for “at-risk beneficiary” that we propose to codify at § 423.100. In addition, although the section 1860D-4(c)(5) of the Act does not explicitly define a “potential at-risk beneficiary,” it contemplates a beneficiary who is potentially at-risk. Accordingly, we propose to define these two terms at § 423.100 as follows: Potential at-risk beneficiary means a Part D eligible individual—(1) Who is identified using clinical guidelines (as defined in § 423.100); or (2) With respect to whom a Part D plan sponsor receives a notice upon the beneficiary's enrollment in such sponsor's plan that the beneficiary was identified as a potential at-risk beneficiary (as defined in paragraph (1) of this definition) under the prescription drug plan in which the beneficiary was most recently enrolled, such identification had not been terminated upon disenrollment, and the new plan has adopted the identification. At-risk beneficiary means a Part D eligible individual—(1) who is—(i) Identified using clinical guidelines (as defined in § 423.100); (ii) Not an exempted beneficiary; and (iii) Determined to be at-risk for misuse or abuse of such frequently abused drugs under a Part D plan sponsor's drug management program in accordance with the requirements of § 423.153(f); or (2) With respect to whom a Part D plan sponsor receives a notice upon the beneficiary's enrollment in such sponsor's plan that the beneficiary was identified as an at-risk beneficiary (as defined in paragraph (1) of this definition) under the prescription drug plan in which the beneficiary was most Start Printed Page 56343recently enrolled, such identification had not been terminated upon disenrollment, and the new plan has adopted the identification. The distinction between a “potential at-risk beneficiary” and an “at-risk beneficiary” is important for a few reasons that we will explain later in this preamble. Also, we added the phrase, “and the new plan has adopted the identification” to both definitions for cases where a beneficiary has been identified as a potential at-risk or at-risk beneficiary by the immediately prior plan to indicate that the beneficiary's status in the subsequent plan is not automatic.

(B) Definition of “Frequently Abused Drug”, “Clinical Guidelines”, “Program Size”, and “Exempted Beneficiary” (§ 423.100)

Because we use these terms in the proposed definitions of “potential at-risk beneficiary” and “at-risk beneficiary,” we propose to define “frequently abused drug,” “clinical guidelines”, “program size”, and “exempted beneficiary” at § 423.100 as follows:

• Frequently Abused Drug

Section 1860D-4(c)(5)(G) of the Act defines “frequently abused drug” as a drug that is a controlled substance that the Secretary determines to be frequently abused or diverted. Consistent with the statutory definition, we propose to define “Frequently abused drug at § 423.100 to mean a controlled substance under the federal Controlled Substances Act that the Secretary determines is frequently abused or diverted, taking into account the following factors: (1) The drug's schedule designation by the Drug Enforcement Administration; (2) Government or professional guidelines that address that a drug is frequently abused or misused; and (3) An analysis of Medicare or other drug utilization or scientific data. This definition is intended to provide enough specificity for stakeholders to know how the Secretary will determine a frequently abused drug, while preserving flexibility to update which drugs CMS considers to be frequently abused drugs based on relevant factors, such as actions by the Drug Enforcement Administration and/or trends observed in Medicare or scientific data.

We plan to publish and update a list of frequently abused drugs for purposes of Part D drug management programs. We propose that future designations of frequently abused drugs by the Secretary primarily be included in the annual Parts C&D Call Letter or in similar guidance, which would be subject to public comment, if necessary to address midyear entries to the drug market or evolving government or professional guidelines. This approach would be consistent with our approach under the current policy and necessary for Part D drug management programs to be responsive to changing public health issues over time.

While this is the approach we propose for future designations of frequently abused drugs, we are including a discussion of the designation for plan year 2019 in this preamble. For plan year 2019, consistent with current policy, we propose that opioids are frequently abused drugs. Our proposal to designate opioids as frequently abused drugs illustrates how the proposed definition could work in practice:

First, the Secretary determines opioids are frequently abused or diverted, because they are controlled substances, and drugs and other substances that are considered controlled substances under the Controlled Substances Act (CSA) are so considered precisely because they have abuse potential. The Drug Enforcement Administration (DEA) divides controlled substances into five schedules based on whether they have a currently accepted medical use in treatment in the United States, their relative abuse potential, and their likelihood of causing dependence when abused. Most prescription opioids are Schedule II, where the DEA places substances with a high potential for abuse with use potentially leading to severe psychological or physical dependence.[9] A few opioids are Schedule III or IV, where the DEA places substances that have a potential for abuse.

Second, on October 26, 2017, the President directed that executive agencies use all appropriate emergency authorities and other relevant authorities to address drug addiction and opioid abuse, and the Acting Secretary of Health and Human Services declared a nationwide Public Health Emergency to address the opioid crisis.[10] In addition, the CDC has declared opioid overuse a national epidemic, both of which are relevant factors.[11] More than 33,000 people died from opioid overuse in 2015, which is the highest number per year on record. From 2000 to 2015, more than half a million people died from drug overdoses, and 91 Americans die every day from an opioid overdose. Nearly half of all opioid overdose deaths involve a prescription opioid. Given that opioids, including prescription opioids, are the main driver of drug overdose deaths in the U.S., it is reasonable for the Secretary to conclude that opioids are frequently abused and misused.

Third, government or professional guidelines support determining that opioids are frequently abused or misused. Consistent with current policy, we propose to designate all opioids as frequently abused drugs except buprenorphine for medication-assisted treatment (MAT) and injectables. The CDC MME Conversion Factor file [12] does not include all formulations of buprenorphine for MAT so that access is not limited, and injectables are not included due to low claim volume. Therefore, CMS cannot determine the MME. CMS will consider revisions to the CDC MME Conversion Factor file when updating the list of opioids designated as frequently abused drugs in future guidance.

Fourth, an analysis of Medicare data supports designating opioids as “frequently abused drugs,” at least initially. Over 727,000 Part D beneficiaries had an average MME of at least 90 mg during the 6-month period from July 1, 2015 to December 31, 2015 (“90 mg MME + users”), a number which excludes beneficiaries with cancer or in hospice, whom we propose to exempt from drug management programs, as we discuss later. As noted earlier, the CDC recommends prescribers generally avoid increasing the daily opioid dosage to 90 MME. Given that so many beneficiaries have an average MME above this threshold, it is reasonable that the Secretary consider this data to be a relevant factor in determining that opioids are frequently abused or diverted.

Most stakeholders recommended designating opioids as frequently abused drugs. In this regard, we note Start Printed Page 56344that our current policy applies only to opioids and that we are integrating the drug management provisions of CARA with our current policy. Therefore, designating opioids as frequently abused drugs, at least in the initial implementation of drug management programs, would have the added benefit of allowing CMS and stakeholders to gain experience with the use of lock-in in the Part D program, before potentially designating other controlled substances as frequently abused drugs.

Some commenters expressed support for including other or all controlled substances, such as benzodiazepines, sedatives, and certain muscle relaxants as frequently abused drugs; however, we are not persuaded. Opioids are unique in that there is generally no maximum dose for them in the FDA labeling. Also, in the proposed Contract Year 2016 Parts C&D Call Letter, we solicited feedback on expanding the current policy to other drugs, and the comments were mixed. A few commenters suggested that we expand the current policy to benzodiazepines and muscle relaxants when used with opioids. In respond to the feedback, we did not expand the current policy beyond the opioid class but indicated that we would investigate. Subsequently, the CDC Guideline was published and it specifically recommends that clinicians avoid prescribing opioid pain medication and benzodiazepines concurrently whenever possible due to increased risk for overdose. Therefore, we added a concurrent benzodiazepine-opioid flag to OMS in October 2016 to alert Part D sponsors that concurrent use may be an issue that should be addressed during case management, and we will continue to do so.[13]

Other than conveying the concurrent benzodiazepine use information to sponsors, we have not expanded the current policy to address non-opioid medications. However, we have stated that if a sponsor chooses to implement the current policy for non-opioid medications, we would expect the sponsor to employ the same level of diligence and documentation with respect to non-opioid medications that we expect for opioid medications.[14] We have taken this approach to the current policy so that we could focus on the opioid epidemic and also due to the difficulty in establishing overuse guidelines for non-opioid controlled substances. For this reason our proposal would not identify benzodiazepines as frequently abused drugs. However, we solicit additional comment on our proposed approach to frequently abused drugs. Also, we propose that, if finalized, this rule would supersede our current policy, and sponsors would no longer be allowed to implement the current policy for non-opioid medications. We seek feedback on allowing sponsors to continue to implement the current policy for non-opioid medications with respect to beneficiary-specific claim edits.

• Clinical Guidelines and Program Size

Section 1860D-4(c)(5)(C)(i)(I) of the Act requires at-risk beneficiaries to be identified using clinical guidelines that indicate misuse or abuse of frequently abused drugs and that are developed in consultation with stakeholders. We propose to include a definition of “clinical guidelines” that cross references standards that we are proposing at § 423.153(f) for how the guidelines would be established and updated. Specifically, we propose to define clinical guidelines for purposes of a Part D drug management program as criteria to identify potential at-risk beneficiaries who may be determined to be at-risk beneficiaries under such programs, and that are developed in accordance with the proposed standards in § 423.153(f)(16) and published in guidance annually.

We also propose to add § 423.153(f)(16) to state that potential at-risk beneficiaries and at-risk beneficiaries are identified by CMS or the Part D sponsor using clinical guidelines that: (1) Are developed with stakeholder consultation; (2) Are based on the acquisition of frequently abused drugs from multiple prescribers, multiple pharmacies, the level of frequently abused drugs, or any combination of these factors; (3) Are derived from expert opinion and an analysis of Medicare data; and (4) Include a program size estimate. This proposed approach to developing and updating the clinical guidelines is intended to provide enough specificity for stakeholders to know how CMS would determine the guidelines by identifying the standards we would apply in determining them.

This proposed approach indicates that the program size would be determined as part of the process to develop the clinical guidelines—a process into which stakeholders would provide input. Section 1860D-4(c)(5)(C)(iii) of the Act states that the Secretary shall establish policies, including the guidelines and exemptions, to ensure that the population of enrollees in drug management programs could be effectively managed by plans. We propose to define “program size” in § 423.100 to mean the estimated population of potential at-risk beneficiaries in drug management programs (described in § 423.153(f)) operated by Part D plan sponsors that the Secretary determines can be effectively managed by such sponsors as part of the process to develop clinical guidelines.

This proposed approach to developing and updating the clinical guidelines would also be flexible enough to allow for updates to the guidelines outside of the regulatory process to address trends in Medicare with respect to the misuse and/or diversion of frequently abused drugs. We have determined this approach is appropriate to enable CMS to assist Part D drug management programs in being responsive to public health issues over time. This approach would also be consistent with how the OMS criteria have been established over time through the annual Medicare Parts C&D Call Letter process, which we plan to continue except for 2019.

For plan year 2019, we propose the clinical guidelines in this preamble to be the OMS criteria established for plan year 2018, which meet the proposed standards for the clinical guidelines for the following reasons: First, as described earlier, the OMS criteria incorporate a 90 MME threshold cited in a CDC Guideline, which was developed by experts as the level that prescribers should avoid reaching with their patients. This threshold does not function as a prescribing limit for the Part D program; rather, it identifies potentially risky and dangerous levels of opioid prescribing in terms of misuse or abuse. Second, the OMS criteria also incorporate a multiple prescriber and pharmacy count. A high MED level combined with multiple prescribers and/or pharmacies may also indicate the abuse or misuse of opioids due to the possible lack of care coordination among the providers for the patient. Third, the OMS criteria have been revised over time based on analysis of Medicare data and with stakeholder input via the annual Parts C&D Call Letter process. Indeed, many stakeholders recommended the use of the CDC Guideline as part of the clinical guidelines the Secretary must develop, with some noting that they would need to be used in a way that accounts for use of multiple providers, which the OMS criteria do. Fourth, these criteria are familiar to Part D sponsors—they will already have experience with them by Start Printed Page 563452019, and they were established with an estimate of program size.

Several stakeholders in their comments referred to various criteria used in state Medicaid lock-in programs to identify beneficiaries appropriate for lock-in, without suggesting that any particular ones be adopted. Other commenters suggested CMS consider other guidelines, such as the American Society of Addiction Medicine (ASAM) National Practice Guideline for the Use of Medications in the Treatment of Addiction Involving Opioid Use and the Veterans Affairs/Department of Defense (VA/DoD) Clinical Practice Guideline on Opioid Therapy for Chronic Pain. However, these guidelines are similar to or moving toward an MME methodology which we currently use or address a more narrow population than persons who may be abusing or misusing frequently abused drugs, and they do not directly address situations involving multiple opioid providers. The VA/DoD Clinical Practice Guideline for Opioid Therapy for Chronic Pain is similar to the scope of the CDC Guideline. The ASAM Guideline for the Use of Medications in the Treatment of Addiction Involving Opioid Use was developed specifically for the evaluation and treatment of opioid use disorder and for the management of opioid overdose, which would not be applicable here because it serves a different purpose. Therefore, we do not see a reason to adopt these guidelines instead of the 2018 OMS criteria.

The clinical guidelines for use in drug management programs we are proposing for 2019 are: Use of opioids with an average daily MME greater than or equal to 90 mg for any duration during the most recent 6 months and either: 4 or more opioid prescribers and 4 or more opioid dispensing pharmacies OR 6 or more opioid prescribers, regardless of the number of opioid dispensing pharmacies. We note that we have described alternative clinical guidelines that we considered in the Regulatory Impact Analysis section of this rule. Stakeholders are invited to comment on those alternatives and any others which would involve identifying more or fewer potential at-risk beneficiaries.

We propose that under the proposed clinical guidelines, prescribers associated with the same single Tax Identification Number (TIN) be counted as a single prescriber. This is consistent with the current policy under which we have found that such prescribers are typically in the same group practice that is coordinating the care of the patients served by it. Thus, it is appropriate to count such prescribers as one, so as not to identify beneficiaries who are not at-risk.

In this regard, in applying the OMS criteria, CMS counts prescribers with the same TIN as one prescriber, unless any of the prescribers are associated with multiple TINs. For example, under the criteria we have proposed, a beneficiary who meets the 90 MME criterion and received opioid prescriptions from 4 prescribers in the same group practice and 3 independent opioid prescribers (1 group practice + 3 prescribers = 4 prescribers) and filled the prescriptions at 4 opioid dispensing pharmacies, would still meet the criteria, which is appropriate. However, a beneficiary who meets that 90 MME criterion and received opioid prescriptions from 4 prescribers in the same group practice and 1 independent opioid prescriber (1 group practice + 1 prescriber = 2 prescribers) and filled the prescriptions at 4 opioid dispensing pharmacies would not meet the criteria, which is also appropriate at this time given program size concerns.

Section 1860D-4(c)(5)(D) of the Act specifies that for purposes of limiting access to coverage of frequently abused drugs to those obtained from a selected pharmacy, if the pharmacy has multiple locations that share real-time electronic data, all such locations of the pharmacy collectively are treated as one pharmacy. Given this provision, as well as our proposal to treat multiple prescribers from the same group practice as one prescriber under the clinical guidelines, we propose that where a pharmacy has multiple locations that share real-time electronic data, all locations of the pharmacy collectively be treated as one pharmacy under the clinical guidelines.

Because not all Part D plans' data systems may be able to account for group practice prescribers as we described above, or chain pharmacies through data analysis alone, or may not be able to fully account for them, we request information on sponsors' systems capabilities in this regard. Also, if a plan sponsor does not have the systems capability to automatically determine when a prescriber is part of a group or a pharmacy is part of a chain, the plan sponsor would have to make these determinations during case management, as they do with respect to group practices under the current policy. If through such case management, the Part D plan finds that the multiple prescribers who prescribed frequently abused drugs for the beneficiary are members of the same group practice, the Part D plan would treat those prescribers as one prescriber for purposes of identification of the beneficiary as a potential at-risk beneficiary. Similarly, if through such case management, the Part D plan finds that multiple locations of a pharmacy used by the beneficiary share real-time electronic data, the Part D plan would treat those locations as one pharmacy for purposes of identification of the beneficiary as a potential at-risk beneficiary. Both of these scenarios may result in a Part D sponsor no longer conducting case management for a beneficiary because the beneficiary does not meet the clinical guidelines. We also note that group practices and chain pharmacies are important to consider for purposes of the selection of a prescriber(s) and pharmacy(ies) in cases when a Part D plan limits a beneficiary's access to coverage of frequently abused drugs to selected pharmacy(ies) and/or prescriber(s), which we discuss in more detail later in this preamble.

Under the current policy, sponsors must use 90 MME as a “floor” for their own criteria to identify beneficiaries who may be overutilizing opioids, but they may vary the prescriber and pharmacy count. This means sponsors may review beneficiaries who do not meet the OMS criteria but meet the sponsors' internal criteria for review, or they may not review beneficiaries who meet the OMS criteria but do not meet the sponsors' internal criteria for review. However, under our proposal to adopt the 2018 OMS criteria as the 2019 clinical guidelines for Part D drug management programs, we also propose to mostly eliminate this feature of the current policy. Under our proposal, Part D plan sponsors would not be able to vary the criteria of the guidelines to include more or fewer beneficiaries in their drug management programs, except that we propose to continue to permit plan sponsors to apply the criteria more frequently than CMS would apply them through OMS in 2018, which can result in sponsors identifying beneficiaries earlier. This is because CMS evaluates enrollees quarterly using a 6-month look back period, whereas sponsors may evaluate enrollees more frequently (for example, monthly).

While several commenters stated that Part D plan sponsors should have flexibility in developing their own criteria for identifying at-risk beneficiaries in their plans, a more conservative and uniform approach is warranted for the initial implementation of Part D drug management programs. While we already have experience with how frequently Part D plan sponsors use beneficiary-specific opioid POS claim edits to prevent opioid overutilization, we wish to learn how sponsors will use Start Printed Page 56346lock-in as a tool to address this issue before adopting clinical guidelines that might include parameters for permissible variations of the criteria. We plan to monitor compliance of drug management programs as we monitor compliance with the current policy through various CMS data sources, such as OMS, MARx, beneficiary complaints and appeals.

Also, we note that despite sponsors' additional identification of some beneficiaries currently, in practice, we have found that CMS identifies the vast majority of beneficiaries who are reviewed by Part D sponsors through OMS. CMS identifies over 80 percent of the cases reviewed through OMS, and about 20 percent are identified by sponsors based on their internal criteria. We understand that most of the beneficiaries representing the 20 percent were reported to OMS due to the sponsors averaging the MME calculations across all opioid prescriptions, which has subsequently been changed in the 2018 OMS criteria. The 2018 OMS criteria also have a lower MME threshold and account for additional beneficiaries who receive their opioids from many prescribers regardless of the number of pharmacies, which will result in the identification of more beneficiaries through OMS. Thus, our proposal would not substantially change the current practice. Furthermore, in approximately 39 percent of current OMS cases, sponsors respond that the case does not meet the sponsor's internal criteria for review.[15] We found that the original OMS criteria generated false positives that some sponsors' internal criteria did not because these sponsors used a shorter look back period or were able to group prescribers within the same practice or chain pharmacies. These best practices have also been incorporated into the revised 2018 OMS criteria, which are the basis of the proposed 2019 clinical guidelines. Thus, while our proposal will prevent sponsors from voluntarily reviewing more potential at-risk beneficiaries than CMS identifies through OMS, it will likely require sponsors to review more beneficiaries than they currently do.

Table 1 shows that in 2015 approximately 33,000 beneficiaries would have met the proposed 2019 clinical guidelines, which is approximately 0.08 percent of the 42 million beneficiaries enrolled in Part D in 2015. We think this population would constitute a manageable program size because this is the estimated OMS population we finalized during the Plan Year 2018 Parts C&D Call Letter process. Moreover, we have no evidence to suggest that this program size will be problematic for sponsors.

In addition, current Medicaid lock-in programs support the notion that this program size would be manageable by Part D plan sponsors. In 2015, an average 0.37 percent of Medicaid recipients were locked-in and the percentage of recipient's locked-in by state programs ranged from 0.01 percent to 1.8 percent.[16]

To derive this estimated population of potential at-risk beneficiaries, we analyzed prescription drug event data (PDE) from 2015,[17] using the CDC opioid drug list and MME conversion factors, and applying the criteria we proposed earlier as the clinical guidelines. This estimate is over-inclusive because we did not exclude beneficiaries in long-term care (LTC) facilities who would be exempted from drug management programs, as we discuss later in this section. However, based on similar analyses we have conducted, this exclusion would not result in a noteworthy reduction to our estimate. Also, we were unable to count all locations of a pharmacy that has multiple locations that share real-time electronic data as one, which is a topic we discussed earlier and will return to later. Thus, there likely are beneficiaries counted in our estimate who would not be identified as potential at-risk beneficiaries because they are in an LTC facility or only use multiple locations of a retail chain pharmacy that share real-time electronic data.

Table 1—Clinical Guidelines or Identifying Potential At-Risk Beneficiaries

Criteria appliedImpact to Part D program
≥90 mg MED and either:33,053 beneficiaries in 2015 (76.3% were LIS).
4+ opioid prescribers AND 4+ opioid dispensing pharmaciesRepresents 0.08% of 41,835,016 Part D beneficiaries in 2015.
ORLTC beneficiaries included in estimate but are exempt.
6+ opioid prescribers (regardless of the number of opioid dispensing pharmacies).Prescribers associated with the same single Tax Identification Numbers (TIN) are counted as a single prescriber.

We note that the alternatives for clinical guidelines that we considered, which are described in the Regulatory Impact Analysis (RIA) section of this rule, also include estimated population of potential at-risk beneficiaries for each alternative. Most of the options include a 90 MME threshold with varying prescriber and pharmacy counts and range from identifying 33,053 to 319,133 beneficiaries. Again, stakeholders are invited to comment on these alternatives. We are particularly interested in receiving comments on whether CMS should adjust the clinical guidelines so that more or fewer potential at-risk beneficiaries are identified, and if more are identified, whether the additional number would result in a manageable program size for plan sponsors (or too few beneficiaries to be meaningful).

• Exempted Beneficiary

Section 1860D-4(c)(5)(C)(ii) of the Act defines an exempted individual as one who receives hospice care, who is a resident of a long-term care facility for which frequently abused drugs are dispensed for residents through a contract with a single pharmacy, or who the Secretary elects to treat as an exempted individual. Consistent with this, we propose that an exempted beneficiary, with respect to a drug management program, would mean an enrollee who: (1) Has elected to receive hospice care; (2) Is a resident of a long-term care facility, of a facility described in section 1905(d) of the Act, or of another facility for which frequently abused drugs are dispensed for residents Start Printed Page 56347through a contract with a single pharmacy; or (3) Has a cancer diagnosis.

While the first two exceptions are required under CARA, we propose to exercise the authority in section 1860D-4(c)(5)(C)(ii)(III) of the Act to treat a beneficiary who has a cancer diagnosis as an exempted individual for two reasons. First, many commenters recommended that the Secretary exempt beneficiaries who have a cancer diagnosis, because a Part D drug management program should not be able to interfere administratively with their pain control regimen in the form of additional notices from their prescription drug benefit plans and limitations on their access to coverage for frequently abused drugs. We agree with these commenters. Second, exempting beneficiaries with a cancer diagnosis would be consistent with current policy. Under the current policy, which has been developed through stakeholder feedback, beneficiaries with cancer are excluded because the benefit of their opioid use may outweigh the risk associated with their opioid use. Also, as noted previously, some commenters requested that implementation of the drug management program provisions of CARA be as consistent as possible with the current policy for operational ease. We also agree with these commenters.

Some commenters recommended against exempting beneficiaries with cancer diagnoses, stating that there is no standard clinical reason why a beneficiary with cancer should be receiving opioids from multiple prescribers and/or multiple pharmacies, and that such situations warrant further review. While we understand the concern of these commenters, we maintain that beneficiaries who have a cancer diagnosis should be exempted for the reasons stated just above. Moreover, our experience with this exemption under the current policy suggests that the exemption is workable and appropriate. We understand beneficiaries with cancer diagnoses are identifiable by Part D plan sponsors either through recorded diagnoses, their drug regimens or case management, and no major concerns have been expressed about this exemption under our current policy, including from standalone Part D plan sponsors who may not have access to their enrollees' medical records.

A few commenters suggested exempting beneficiaries who are receiving palliative and end-of-life care, since not all patients receiving this type of care are necessarily enrolled in hospice or reside in an LTC facility. Two commenters suggested exempting beneficiaries in assisted living. Other commenters suggested exempting beneficiaries in various other health care facilities, such as group homes and adult day care centers, where medication is supervised. Other commenters suggested exempting beneficiaries with debilitating disorders or receiving medication-assisted treatment for substance abuse disorders.

We have not proposed to exempt these additional categories of beneficiaries but we seek specific comment on whether to do so and our rationale. First, we have not exempted these other beneficiaries under the current policy, and we thus do not think it is necessary to exempt them from drug management programs. Second, unlike with cancer diagnoses, we are not able to determine administratively through CMS data who these beneficiaries are to exempt them from OMS reporting. Consequently, it could be burdensome for Part D sponsors to attempt to exempt these beneficiaries, by definition, from their drug management programs. Third, it is important to remember that the proposed clinical guidelines would only identify potential at-risk beneficiaries in the Part D program who are receiving potentially unsafe doses of opioids from multiple prescribers and/or multiple pharmacies who typically do not know about each other in terms of providing services to the beneficiary. Thus, it is likely that a plan would discover during case management that a potential at-risk beneficiary is receiving palliative and end-of-life care during case management. Absent a compelling reason, we would expect the plan not to seek to implement a limit on such beneficiary's access to coverage of opioids under the current policy nor a drug management program, as it would seem to outweigh the medication risk in such circumstances. Moreover, in cases where a prescriber is cooperating with case management, we would not expect the prescriber to agree to such a limitation, again, absent a compelling reason. With respect to beneficiaries receiving medication-assisted treatment for substance abuse for opioid use disorder, we decline to propose to treat these individuals as exempted individuals. It is these beneficiaries who are among the most likely to benefit from a drug management program.

(ii) Requirements of Drug Management Programs (§§ 423.153, 423.153(f))

As noted previously, we are proposing to codify a regulatory framework under which Part D plan sponsors may adopt drug management programs to address overutilization of frequently abused drugs. Therefore, we propose to amend § 423.153(a) by adding this sentence at the end: “A Part D plan sponsor may establish a drug management program for at-risk beneficiaries enrolled in their prescription drug benefit plans to address overutilization of frequently abused drugs, as described in paragraph (f) of this section,” in accordance with our authority under revised section 1860D-4(c)(5)(A) of the Act.

We also propose to revise § 423.153 by adding a new paragraph (f) about drug management programs for which the introductory sentence would read: “(f) Drug Management Programs. A drug management program must meet all the following requirements.” Thus, the requirements that a Part D plan sponsor must meet to operate a drug management program would be codified in various provisions under subsection § 423.153(f).

(iii) Written Policies and Procedures (§ 423.153(f)(1))

We propose to require Part D sponsors document their programs in written policies and procedures that are approved by the applicable P&T committee and reviewed and updated as appropriate, which is consistent with the current policy. Also consistent with the current policy, we would require these policies and procedures to address the appropriate credentials of the personnel conducting case management and the necessary and appropriate contents of files for case management. We additionally propose to require sponsors to monitor information about incoming enrollees who would meet the definition of a potential at-risk and an at-risk beneficiary in proposed § 423.100 and respond to requests from other sponsors for information about potential at-risk and at-risk beneficiaries who recently disenrolled from the sponsor's prescription drug benefit plans. We discuss potential at-risk and at-risk beneficiaries who are identified as such in their most recent Part D plan later in this preamble.

To codify these requirements, we propose that section § 423.153(f)(1) read as follows: (1) Written policies and procedures. A sponsor must document its drug management program in written policies and procedures that are approved by the applicable P&T committee and reviewed and updated as appropriate. The policies and procedures must address all aspects of the sponsor's drug management program, including but not limited to the following: (i) The appropriate credentials of the personnel conducting case management required under Start Printed Page 56348paragraph (f)(2); (ii) The necessary and appropriate contents of files for case management required under paragraph (f)(2); and (iii) Monitoring reports and notifications about incoming enrollees who meet the definition of an at-risk beneficiary and a potential at-risk beneficiary in § 423.100 and responding to requests from other sponsors for information about at-risk beneficiaries and potential at-risk beneficiaries who recently disenrolled from the sponsor's prescription drug benefit plans. Thus, Part D sponsors would have flexibility—as they do today under the current policy—to adopt specific policies and procedures for their drug management programs, as long as they are consistent with the requirements of § 423.153, as finalized.

(iv) Case Management/Clinical Contact/Prescriber Verification (§ 423.153(f)(2))

As discussed earlier, case management is a key feature of the current policy, under which we currently expect Part D plan sponsors' clinical staff to diligently engage in case management with the relevant opioid prescribers to coordinate care with respect to each beneficiary reported by OMS until the case is resolved (unless the beneficiary does not meet the sponsor's internal criteria). We propose that the second requirement for drug management programs in a new § 423.153(f)(2) reflect the current policy with some adjustment to the current policy to require all beneficiaries reported by OMS to be reviewed by sponsors.

Our proposal for a new § 423.153(f)(2) also meets the requirements of section 1860D-4I(5)(C) of the Act. This section of the Act requires that, with respect to each at-risk beneficiary, the sponsor shall contact the beneficiary's providers who have prescribed frequently abused drugs regarding whether prescribed medications are appropriate for such beneficiary's medical conditions. Further, our proposal meets the requirements of Section 1860D-4(c)(5)(B)(i)(II) of the Act, which requires that a Part D sponsor first verify with the beneficiary's providers that the beneficiary is an at-risk beneficiary, if the sponsor intends to limit the beneficiary's access to coverage for frequently abused drugs.

Specifically, we propose that a new § 423.153(f)(2) read as follows: Case Management/Clinical Contact/Prescriber Verification. (i) General Rule. The sponsor's clinical staff must conduct case management for each potential at-risk beneficiary for the purpose of engaging in clinical contact with the prescribers of frequently abused drugs and verifying whether a potential at-risk beneficiary is an at-risk beneficiary. Proposed § 423.153(f)(2)(i) would further state that, except as provided in paragraph (f)(2)(ii) of this section, the sponsor must do all of the following: (A) Send written information to the beneficiary's prescribers that the beneficiary meets the clinical guidelines and is a potential at-risk beneficiary; (B) Elicit information from the prescribers about any factors in the beneficiary's treatment that are relevant to a determination that the beneficiary is an at-risk beneficiary, including whether prescribed medications are appropriate for the beneficiary's medical conditions or the beneficiary is an exempted beneficiary; and (C) In cases where the prescribers have not responded to the inquiry described in (i)(B), make reasonable attempts to communicate telephonically with the prescribers within a reasonable period after sending the written information.

Given the “Except as provided in paragraph (f)(2)(ii) of this section”, we propose to add paragraph (ii) to § 423.153(f)(2) that would read: (ii) Exception for identification by prior plan. If a beneficiary was identified as a potential at-risk or an at-risk beneficiary by his or her most recent prior plan, and such identification has not been terminated in accordance with paragraph (f)(14) of this section, the sponsor meets the requirements in paragraph (f)(2)(i) of this section, so long as the sponsor obtains case management information from the previous sponsor and such information is still clinically adequate and up to date. This proposal is to avoid unnecessary burden on health care providers when additional case management outreach is not necessary. This is consistent with the current policy under which sponsors are expected to enter information into MARx about pending, implemented and terminated beneficiary-specific POS claim edits, which is transferred to the next sponsor, if applicable. Pending and implemented POS claim edits are actions that sponsors enter into MARx after case management. We discuss potential at-risk and at-risk beneficiaries who change plans again later in this preamble.

The information that the plan sends to the prescribers and elicits from them is intended to assist a Part D sponsor to understand why the beneficiary meets the clinical guidelines and if a plan intervention is warranted for the safety of the beneficiary. Also, sponsors use this information to choose standardized responses in OMS and provide information to MARx about plan interventions that were referenced earlier. We will address required reporting to OMS and MARx by sponsors again later.

We note that, currently, OMS standardized responses generally fall into four categories: First, in approximately 18 percent of cases, the enrollee's opioid use is medically necessary. Second, approximately 38 percent of cases are resolved without a beneficiary-specific POS opioid claim edit, for example, when the sponsor takes a “wait and see” approach to observe if the prescribers adjust their management of, and the opioid prescriptions they are writing for, their patient due to the written information they received from the sponsor about their patient. Third, a small subset of cases—on average 1.3 percent—need a beneficiary-specific opioid POS claim edit to resolve the beneficiary's opioid overutilization issue. From 2013 through of July 4, 2017, CMS received 4,617 contract-beneficiary-level opioid POS claim edit notifications through MARx for 3,961 unique beneficiaries. Fourth, as previously mentioned, approximately 39 percent of cases do not meet the sponsor's internal criteria for review. We expect adjustment to these percentages under our proposal, particularly since we anticipate that plans will no longer be able to respond that a case does not meet its internal criteria for review. In addition, the revised 2018 OMS criteria which are the basis of the proposed 2019 clinical guidelines should reduce “false positives” which may have been reported through OMS but not identified through sponsors' internal criteria due to a shorter look back period and ability to group prescribers within the same practice.

We also note that under the current policy, sponsors are expected to make “at least three (3) attempts to schedule telephone conversations with the prescribers (separately or together) within a reasonable period (for example, a 10 business day period) from the issuance of the written inquiry notification.” If the prescribers are unresponsive to case management, under our current policy, a sponsor may also implement a beneficiary-specific POS claim edit for opioids as a last resort to encourage prescriber engagement with case management.

By contrast, our proposed § 423.153(f)(2) uses the terms “reasonable attempts” and “reasonable period” rather than a specific number of attempts or a specific timeframe for plan to call prescribers. The reason for this proposed adjustment to our policy is because our current policy also states that “[s]ponsors are not required to Start Printed Page 56349automatically contact prescribers telephonically,” but those that “employ a wait-and-see approach” should understand that “we expect sponsors to address the most egregious cases of opioid overutilization without unreasonable delay, and that we do not believe that all such cases can be addressed through a prescriber letter campaign.” Our guidance further states that, “to the extent that some cases can be addressed through written communication to prescribers only, we would acknowledge the benefit of not aggravating prescribers with unnecessary telephonic communications.” Finally, our guidance states that, “[s]ponsors must determine for themselves the usefulness of attempting to call or contact all opioid prescribers when there are many, particularly when they are emergency room physicians.” [18]

Given the competing priorities of sponsors' diligently addressing opioid overutilization in the Part D program through case management, which may necessitate telephone calls to the prescribers, while being cognizant of the need to be judicious in contacting prescribers telephonically in order to not unnecessarily disrupt their practices, we wish to leave flexibility in the regulation text for sponsors to balance these priorities on a case-by-case basis in their drug management programs, particularly since this flexibility exists under the current policy. We note however, that we propose a 3 attempts/10 business days requirement for sponsors to conclude that a prescriber is unresponsive to case management in § 423.153(f)(4) discussed later in this section.

(v) Limitations on Access to Coverage for Frequently Abused Drugs (§ 423.153(f)(3))

As described earlier, under the current policy, Part D sponsors may implement a beneficiary-specific opioid POS claim edit to prevent continued overutilization of opioids, with prescriber agreement or in the case of an unresponsive prescriber during case management. If a sponsor implements a POS claim edit, the sponsor thereafter does not cover opioids for the beneficiary in excess of the edit, absent a subsequent determination, including a successful appeal.

As noted earlier, revised section 1860D-4(c)(5)(A) of the Act provides additional tools commonly known as “lock-in”, for Part D plans to limit an at-risk beneficiary's access to coverage for frequently abused drugs. Prescriber lock-in would limit an at-risk beneficiary's access to coverage for frequently abused drugs to those that are prescribed for the beneficiary by one or more prescribers, and pharmacy lock-in would restrict an at-risk beneficiary's access to coverage for frequently abused drugs to those that are dispensed to the beneficiary by one or more network pharmacies.

If the sponsor uses a lock-in tool(s), the sponsor must generally cover frequently abused drugs for the beneficiary only when they are obtained from the selected pharmacy(ies) and/or prescriber(s), as applicable, absent a subsequent determination, including a successful appeal. Pursuant to section 1860D-4(c)(5)(D)(i)(II) of the Act, a sponsor would also have to cover frequently abused drugs from a non-selected pharmacy or prescriber, if such coverage were necessary in order to provide reasonable access. We discuss selection of pharmacies and prescribers and reasonable access later.

We propose to describe all the tools that would be available to sponsors to limit an at-risk beneficiary's access to coverage for frequently abused drugs through a drug management program in § 423.153(f)(3) as follows: Limitation on Access to Coverage for Frequently Abused Drugs. Subject to the requirements of paragraph (f)(4) of this section, a Part D plan sponsor may do all of the following: (i) Implement a point-of-sale claim edit for frequently abused drugs that is specific to an at-risk beneficiary; or (ii) In accordance with paragraphs (f)(10) and (f)(11) of this section, limit an at-risk beneficiary's access to coverage for frequently abused drugs to those that are (A) Prescribed for the beneficiary by one or more prescribers; (B) Dispensed to the beneficiary by one or more network pharmacies; or (C) Specified in both paragraphs (3)(ii)(B)(1) and (2) of this paragraph. Paragraph (iii)(A) would state that if the sponsor implements an edit as specified in paragraph (f)(3)(i) of this section, the sponsor must not cover frequently abused drugs for the beneficiary in excess of the edit, unless the edit is terminated or revised based on a subsequent determination, including a successful appeal. Paragraph (iii)(B) would state that if the sponsor limits the at-risk beneficiary's access to coverage as specified in paragraph (f)(3)(ii) of this section, the sponsor must cover frequently abused drugs for the beneficiary only when they are obtained from the selected pharmacy(ies) and/or prescriber(s), or both, as applicable, (1) in accordance with all other coverage requirements of the beneficiary's prescription drug benefit plan, unless the limit is terminated or revised based on a subsequent determination, including a successful appeal, and (2) except as necessary to provide reasonable access in accordance with paragraph (f)(12) of this section.

(vi) Requirements for Limiting Access to Coverage for Frequently Abused Drugs (§ 423.153(f)(4))

We propose that before a Part D plan sponsor could limit the access of at-risk beneficiary to coverage for frequently abused drugs, the sponsor must first take certain actions, consistent with current policy. We propose that a sponsor must first conduct the case management discussed earlier, which includes clinical contact to determine whether prescribed medications are appropriate for the potential at-risk beneficiary's medical conditions and prescriber verification that the beneficiary is an at-risk beneficiary. We also propose that the sponsor must first obtain the agreement of the prescribers of frequently abused drugs with the limitation, unless the prescribers were not responsive to the required case management, in light of the risk to the beneficiary's health. We further propose that the sponsor must first provide notice to the beneficiary in accordance with section 1860D-4(c)(5)(B)(i)(I) of the Act.

We propose to require the additional step of prescriber agreement, which is consistent with the current policy as discussed earlier, because a prescriber may verify that the beneficiary is an at-risk beneficiary but may not view a limitation on the beneficiary's access to coverage for frequently abused drugs as appropriate. Given the additional information the prescribers would have from the Part D sponsor through case management about the beneficiary's utilization of frequently abused drugs, the prescribers' professional opinion may be that an adjustment to their prescribing for, and care of, the beneficiary is all that is needed to safely manage the beneficiary's use of frequently abused drugs going forward. We invite stakeholders to comment on not requiring prescriber agreement to implement pharmacy lock-in. We could foresee a case in which the prescriber is responsive, but does not agree with pharmacy lock-in.

We also propose language that would provide an exception to the case management requirement in § 423.153(f)(2) when an at-risk Start Printed Page 56350beneficiary was identified as an at-risk beneficiary by the beneficiary's most recent prior prescription drug benefit plan. We discuss such cases more later in this section. Given the foregoing, we propose to add a paragraph (f)(4) to § 423.153 that reads: Requirements for Limiting Access to Coverage for Frequently Abused Drugs. (i) A sponsor may not limit the access of an at-risk beneficiary to coverage for frequently abused drugs under paragraph (f)(3) of this section, unless the sponsor has done all of the following: (A) Conducted the case management required by paragraph (f)(2) of this section and updated it, if necessary; (B) Obtained the agreement of the prescribers of frequently abused drugs for the beneficiary that the specific limitation is appropriate; and (C) Provided the notices to the beneficiary in compliance with paragraphs (f)(5) and (6) of this section. We would also state in subsection (ii) that if the sponsor complied with the requirement of paragraph (f)(2)(i)(C) of this section, and the prescribers were not responsive after 3 attempts by the sponsor to contact them by telephone within 10 business days, then the sponsor has met the requirement of paragraph (f)(4)(i)(B) of this section. Finally, we would state in a subsection (iii) that if the beneficiary meets paragraph (2) of the definition of a potential at-risk beneficiary or an at-risk beneficiary, and the sponsor has obtained the applicable case management information from the sponsor of the beneficiary's most recent plan and updated it as appropriate, the sponsor has met the case management requirement in paragraph (f)(2)(i).

(vii) Beneficiary Notices and Limitation of Special Enrollment Period (§§ 423.153(f)(5), 423.153(f)(6), 423.38)

(A) Initial Notice to Beneficiary and Sponsor Intent To Implement Limitation on Access to Coverage for Frequently Abused Drugs (§ 423.153(f)(5))

The notices referred to in proposed § 423.153(f)(4)(i)(C) are the initial and second notice that section 1860D-4(c)(5)(B)(i)(I) of the Act requires Part D sponsors to send to potential at-risk and at-risk beneficiaries regarding their drug management programs. We remind Part D sponsors that under Section 504 of the Rehabilitation Act of 1973, effective communications requirements would apply to both these notices. We first discuss the initial notice.

We propose in § 423.153(f)(5) that if a Part D plan sponsor intends to limit the access of a potential at-risk beneficiary to coverage for frequently abused drugs, the sponsor would be required to provide an initial written notice to the potential at-risk beneficiary. We also propose that the language be approved by the Secretary and be in a readable and understandable form that contains the language required by section 1860D-4(c)(5)(B)(ii) of the Act to which we propose to add detail in the regulation text. Finally, we propose that the sponsor be required to make reasonable efforts to provide the prescriber(s) of frequently abused drugs with a copy of the notice.

We propose that § 423.153(f)(5)(i) read as follows: Initial Notice to Beneficiary. A Part D sponsor that intends to limit the access of a potential at-risk beneficiary to coverage for frequently abused drugs under paragraph (f)(3) of this section must provide an initial written notice to the beneficiary. Paragraph (f)(5)(ii) would require that the notice use language approved by the Secretary and be in a readable and understandable form that provides the following information: (1) An explanation that the beneficiary's current or immediately prior Part D plan sponsor has identified the beneficiary as a potential at-risk beneficiary; (2) A description of all State and Federal public health resources that are designed to address prescription drug abuse to which the beneficiary has access, including mental health and other counseling services and information on how to access such services, including any such services covered by the plan under its Medicare benefits, supplemental benefits, or Medicaid benefits (if the plan integrates coverage of Medicare and Medicaid benefits); (3) An explanation of the beneficiary's right to a redetermination if the sponsor issues a determination that the beneficiary is an at-risk beneficiary and the standard and expedited redetermination processes described at § 423.580 et seq.; (4) A request that the beneficiary submit to the sponsor within 30 days of the date of this initial notice any information that the beneficiary believes is relevant to the sponsor's determination, including which prescribers and pharmacies the beneficiary would prefer the sponsor to select if the sponsor implements a limitation under § 423.153(f)(3)(ii); (5) An explanation of the meaning and consequences of being identified as an at-risk beneficiary, including an explanation of the sponsor's drug management program, the specific limitation the sponsor intends to place on the beneficiary's access to coverage for frequently abused drugs under the program, the timeframe for the sponsor's decision, and if applicable, any limitation on the availability of the special enrollment period described in § 423.38; (6) Clear instructions that explain how the beneficiary can contact the sponsor, including how the beneficiary may submit information to the sponsor in response to the request described in paragraph (f)(5)(ii)(C)(4); (7) Contact information for other organizations that can provide the beneficiary with assistance regarding the sponsor's drug management program; and (8) Other content that CMS determines is necessary for the beneficiary to understand the information required in this notice.

We propose to require at § 423.153(f)(5)(iii) that the Part D plan sponsor make reasonable efforts to provide the beneficiary's prescriber(s) of frequently abused drugs with a copy of the notice required under paragraph (f)(5)(i).

The content of the initial notice we propose in § 423.153(f)(5) closely follows the content required by section 1860D-4(c)(5)(B)(ii) of the Act, but as noted previously, we have proposed to add some detail to the regulation text. In proposed paragraph (f)(5)(ii)(C)(2)—which would require a description of public health resources that are designed to address prescription drug abuse—we propose to require that the notice contain information on how to access such services. We also included a reference in proposed paragraph (ii)(C)(4) to the fact that a beneficiary would have 30 days to provide information to the sponsor, which is a timeframe we discuss later in this preamble. We propose an additional requirement in paragraph (ii)(C)(5) that the sponsor include the limitation the sponsors intends to place on the beneficiary's access to coverage for frequently abused drugs, the timeframe for the sponsor's decision, and, if applicable, any limitation on the availability of the SEP. Finally, we proposed a requirement in paragraph (ii)(C)(8) that the notice contain other content that CMS determines is necessary for the beneficiary to understand the information required in the initial notice.

We note that our proposed implementation of the statutory requirements for the initial notice would permit the notice also to be used when the sponsor intends to implement a beneficiary-specific POS claim edit for frequently abused drugs. This is consistent with our current policy and would streamline beneficiary notices about opioids since we propose frequently abused drugs to consist of opioids for 2019.Start Printed Page 56351

Although section 1860D-4(c)(5) is silent as to the sequence of the steps of clinical contact, prescriber verification, and the initial notice, we propose to implement these requirements such that they would occur in the following order: First, the plan sponsor would conduct the case management which encompasses clinical contact and prescriber verification required by § 423.153(f)(2) and prescriber agreement required by § 423.153(f)(4), and second would, as applicable, indicate the sponsor's intent to limit the beneficiary's access to frequently abused drugs by providing the initial notice. In our view, a sponsor cannot reasonably intend to limit the beneficiary's access unless it has first undertaken case management to make clinical contact and obtain prescriber verification and agreement. Further, under our proposal, although the proposed regulatory text of (f)(4)(i) states that the sponsor must verify with the prescriber(s) that the beneficiary is an at-risk beneficiary in accordance with the applicable statutory language, the beneficiary would still be a potential at-risk beneficiary from the sponsor's perspective when the sponsor provides the beneficiary the initial notice. This is because the sponsor has yet to solicit information from the beneficiary about his or her use of frequently abused drugs, and such information may have a bearing on whether a sponsor identifies a potential at-risk beneficiary as an at-risk beneficiary.

Moreover, we believe that in general, a sponsor should not send a potential at-risk beneficiary an initial notice until after the sponsor has been in contact with the beneficiary's prescribers of frequently abused drugs, so as to avoid unnecessarily alarming the beneficiary, considering that a sponsor may learn from the prescribers that the beneficiary's use of the drugs is medically necessary, or that the beneficiary is an exempted beneficiary. This proposed approach is also consistent with our current policy and stakeholder comments. Therefore, under this approach, a sponsor would provide an initial notice to a potential at-risk beneficiary if the sponsor intends to limit the beneficiary's access to coverage for frequently abused drugs, and the sponsor would provide a second notice to an at-risk beneficiary when it actually limits the beneficiary's access to coverage for frequently abused drugs. Alternatively, the sponsor would provide an alternate second notice if it decides not to limit the beneficiary's access to coverage for frequently abused drugs. We discuss the second notice and alternate second notice later in this preamble.

We intend to develop language for the initial notice. Therefore, the proposed regulatory text states that the notice must use language approved by the Secretary.

(B) Limitation on the Special Enrollment Period for LIS Beneficiaries With an At-Risk Status (§ 423.38)

In addition to providing relevant information to a potential at-risk beneficiary, we propose that the initial notice will notify dually- and other low income subsidy (LIS)-eligible beneficiaries, that they will be unable to use the special enrollment period (SEP) for LIS beneficiaries due to their at-risk status. (Hereafter, this SEP is referred to as the “duals' SEP”). Section 1860D-1(b)(3)(D) of the Act requires the Secretary to establish a Part D SEP for full-benefit dually eligible (FBDE) beneficiaries. This SEP, codified at § 423.38(c)(4), was later extended to all other subsidy-eligible beneficiaries (75 FR 19720) so that all LIS-eligible beneficiaries were treated uniformly. The duals' SEP currently allows such individuals to make Part D enrollment changes (that is, enroll in, disenroll from, or change Part D plans) throughout the year, unlike other Part D enrollees who generally may make enrollment changes only during the annual election period (AEP). Individuals using this SEP can enroll in either a stand-alone Part D prescription drug plan (PDP) or a Medicare Advantage plan with prescription drug coverage.

Section 704(a)(3) of CARA gives the Secretary the discretion to limit the SEP for FBDE beneficiaries outlined in section 1860D-1(b)(3)(D) of the Act. This limitation is related to, but distinct from, other changes to the duals' SEP proposed in section III.A.11 of this proposed rule (as discussed later). A limitation under a sponsor's drug management program can only be effective as long as the individual is enrolled in that plan or another plan that also has a drug management program. Therefore, this proposed SEP limitation would be an important tool to reduce the opportunities for LIS-eligible beneficiaries designated as at-risk to switch plans. If an individual is determined to be an at-risk beneficiary, and is permitted to change plans using the duals' SEP, he or she could avoid the drug management program by leaving the plan before the program can be started or by enrolling in a PDP that does not have a drug management program. This would allow the beneficiary to circumvent the lock-in program and not receive the care coordination such a program provides. Even if an-risk beneficiary joined another plan that had a drug management program in place, there would be challenges in terms of preventing a gap managing their potential or actual overutilization of frequently abused drugs due to timing of information sharing between the plans and possible difference in provider networks.

Accordingly, we are proposing to revise § 423.38(c)(4), so that it is not available to potential at-risk beneficiaries or at-risk beneficiaries. Once an individual is identified as a potential at-risk beneficiary and the sponsor intends to limit the beneficiary's access to coverage for frequently abused drugs, the sponsor would provide an initial notice to the beneficiary and the duals' SEP would no longer be available to the otherwise eligible individual. This means that he or she would be unable to use the duals' SEP to enroll in a different plan or disenroll from the current Part D plan. The limitation would be effective as of the date the Part D plan sponsor identifies an individual to be potentially at-risk. Limiting the duals' SEP concurrent with the plan's identification of a potential at-risk beneficiary would reduce the opportunities for such beneficiaries to use the interval between receipt of the initial notice and application of the limitation (for example, pharmacy or prescriber lock-in, beneficiary-specific POS claim edit) as an opportunity to change plans before the restriction takes effect.

Based on the 2015 data in CMS' OMS, more than 76 percent of all beneficiaries estimated to be potential at-risk beneficiaries are LIS-eligible individuals. Based on this data, without an SEP limitation at the initial point of identification, the notification of a potential drug management program may prompt these individuals to switch plans immediately after receiving the initial notice. In effect, under the current regulations, if unchanged, the dually- or other LIS-eligible individual, could keep changing plans and avoid being subject to any drug management program.

We propose that, consistent with the timeframes discussed in proposed paragraph § 423.153(f)(7), if the Part D plan sponsor takes no additional action to identify the individual as an at-risk beneficiary within 90 days from the initial notice, the “potentially at-risk” designation and the duals' SEP limitation would expire. If the sponsor determines that the potential at-risk beneficiary is an at-risk beneficiary, the Start Printed Page 56352duals' SEP would not be available to that beneficiary until the date the beneficiary's at-risk status is terminated based on a subsequent determination, including a successful appeal, or at the end of a 12-month period calculated from the effective date the sponsor provided the beneficiary in the second notice as proposed at § 423.153(f)(6) whichever is sooner.

As discussed in section III.A.11 of this proposed rule, we are also proposing to revise § 423.38(c)(4) to make the SEP for FBDE or other subsidy-eligible individuals available only in certain circumstances. As further explained in section III.A.11, we also are proposing to establish a new SEP at § 423.38(c)(9) to permit any beneficiary to make an enrollment change when he or she has a gain, loss, or change in Medicaid or LIS eligibility.

We propose not to limit the availability of this new SEP to potential at-risk and at-risk beneficiaries. In situations where an individual is designated as a potential at-risk beneficiary or an at-risk beneficiary and later determined to be dually-eligible for Medicaid or otherwise eligible for LIS, that beneficiary should be afforded the ability to receive the subsidy benefit to the fullest extent for which he or she qualifies and therefore should be able to change to a plan that is more affordable, or that is within the premium benchmark amount if desired. Likewise, if an individual with an “at-risk” designation loses dual-eligibility or LIS status, or has a change in the level of extra help, he or she would be afforded an opportunity to elect a different Part D plan, as discussed in section III.A.11 of this proposed rule. This is also a life changing event that may have a financial impact on the individual, and could necessitate an individual making a plan change in order to continue coverage.

We note that auto- and facilitated enrollment of LIS eligible individuals and plan annual reassignment processes would still apply to dual- and other LIS-eligible individuals who were identified as an at-risk beneficiary in their previous plan. This is consistent with CMS's obligation and general approach to ensure Part D coverage for LIS-eligible beneficiaries and to protect the individual's access to prescription drugs. Furthermore, we note that the proposed enrollment limitations for Medicaid or other LIS-eligible individuals designated as at-risk beneficiaries would not apply to other Part D enrollment periods, including the AEP or other SEPs. As discussed previously, we propose that the ability to use the duals' SEP, as outlined in section III.A.11. of this proposed rule, would not be permissible once the individual is enrolled in a plan that has identified him or her as a potential at-risk beneficiary or at-risk beneficiary, for a dual or other LIS-eligible who meets the definition of at-risk beneficiary or potential at-risk beneficiary under proposed § 423.100.

(C) Second Notice to Beneficiary and Sponsor Implementation of Limitation on Access to Coverage for Frequently Abused Drugs by Sponsor (§ 423.153(f)(6))

As previously noted, section 1860D-4(c)(5)(B)(i)(I) of the Act requires Part D sponsors to provide a second written notice to at-risk beneficiaries when they limit their access to coverage for frequently abused drugs. Also, as with the initial notice, our proposed implementation of this statutory requirement for the second notice would permit the second notice to be used when the sponsor implements a beneficiary-specific POS claim edit for frequently abused drugs.

We propose to codify this requirement in § 423.153(f)(6)(i). Specifically, we propose to require the sponsor to provide the second notice when it determines that the beneficiary is an at-risk beneficiary and to limit the beneficiary's access to coverage for frequently abused drugs. We further propose to require the second notice to include the effective and end date of the limitation. Thus, this second notice would function as a written confirmation of the limitation the sponsor is implementing with respect to the beneficiary, and the timeframe of that limitation.

We also propose that the second notice, like the initial notice, contain language required by section 1860D-4(c)(5)(B)(iii) of the Act to which we propose to add detail in the regulation text. We also propose that the second notice, like the initial notice, be approved by the Secretary and be in a readable and understandable form, as well as contain other content that CMS determines is necessary for the beneficiary to understand the information required in this notice. Finally, in § 423.153(f)(6)(iii), we propose that the sponsor be required to make reasonable efforts to provide the beneficiary's prescriber(s) of frequently abused drugs with a copy of the notice, as we proposed with the initial notice.

Proposed § 423.153(f)(6)(i) would read as follows: Second notice. Upon making a determination that a beneficiary is an at-risk beneficiary and to limit the beneficiary's access to coverage for frequently abused drugs under paragraph (f)(3) of this section, a Part D sponsor must provide a second written notice to the beneficiary. Paragraph (f)(6)(ii) would require that the second notice use language approved by the Secretary and be in a readable and understandable form that contains the following information: (1) An explanation that the beneficiary's current or immediately prior Part D plan sponsor has identified the beneficiary as an at-risk beneficiary; (2) An explanation that the beneficiary is subject to the requirements of the sponsor's drug management program, including the limitation the sponsor is placing on the beneficiary's access to coverage for frequently abused drugs and the effective and end date of the limitation; and, if applicable, any limitation on the availability of the special enrollment period described in § 423.38 et seq.; (3) The prescriber(s) and/or pharmacy(ies) or both, if and as applicable, from which the beneficiary must obtain frequently abused drugs in order for them to be covered by the sponsor; (4) An explanation of the beneficiary's right to a redetermination under § 423.580 et seq., including a description of both the standard and expedited redetermination processes, with the beneficiary's right to, and conditions for, obtaining an expedited redetermination; (5) An explanation that the beneficiary may submit to the sponsor, if the beneficiary has not already done so, the prescriber(s) and pharmacy(ies), as applicable, from which the beneficiary would prefer to obtain frequently abused drugs; (6) Clear instructions that explain how the beneficiary may contact the sponsor, including how the beneficiary may submit information to the sponsor in response to the request described in paragraph (f)(6)(ii)(C)(5) of this section; and (7) Other content that CMS determines is necessary for the beneficiary to understand the information required in this notice.

The content of the second notice we propose in § 423.153(f)(6) closely follows the content required by section 1860D-4(c)(5)(B)(iii) of the Act, but as noted previously, we have proposed to add some detail to the regulation text. In proposed paragraph (2), we have proposed language that would require a sponsor to include the limitation the sponsors is placing on the beneficiary's access to coverage for frequently abused drugs, the effective and end date of the limitation, and if applicable, any limitation on the availability of the SEP. We propose an additional requirement in paragraph (6) that the sponsor include instructions how the beneficiary Start Printed Page 56353may submit information to the sponsor in response to the request described in paragraph (4). Finally, we proposed a requirement in paragraph (7) that the notice contain other content that CMS determines is necessary for the beneficiary to understand the information required in the initial notice.

We note that under our current policy, plan sponsors send only one notice to the beneficiary if they intend to implement a beneficiary-specific POS opioid claim edit, which generally provides the beneficiary with a 30-day advance written notice and opportunity to provide additional information, as well as to request a coverage determination if the beneficiary disagrees with the edit. If our proposal is finalized, the implementation of a beneficiary-specific POS claim edit or a limitation on the at-risk beneficiary's coverage for frequently abused drugs to a selected pharmacy(ies) or prescriber(s) would be an at-risk determination (a type of initial determination that would confer appeal rights). Also, the sponsor would generally be required to send two notices—the first signaling the sponsor's intent to implement a POS claim edit or limitation (both referred to generally as a “limitation”), and the second upon implementation of such limitation. Under our proposal, the requirement to send two notices would not apply in certain cases involving at-risk beneficiaries who are identified as such and provided a second notice by their immediately prior plan's drug management program.

(D) Alternate Second Notice When Limit on Access Coverage for Frequently Abused Drugs by Sponsor Will Not Occur (§ 423.153(f)(7))

We propose that if a sponsor does not implement the limitation on the potential at-risk beneficiary's access to coverage of frequently abused drugs it described in the initial notice, then the sponsor would be required to provide the beneficiary with an alternate second notice. Although not explicitly required by the statute, we believe this notice is consistent with the intent of the statute and is necessary to avoid beneficiary confusion and minimize unnecessary appeals. We propose generally that in such an alternate notice, the sponsor must notify the beneficiary that the sponsor no longer considers the beneficiary to be a potential at-risk beneficiary upon making such determination; will not place the beneficiary in its drug management program; will not limit the beneficiary's access to coverage for frequently abused drugs; and if applicable, that the SEP limitation no longer applies.

Specifically, we propose that § 423.153(f)(7)(i) would read: Alternate second notice. (i) If, after providing an initial notice to a potential at-risk beneficiary under paragraph (f)(4) of this section, a Part D sponsor determines that the potential at-risk beneficiary is not an at-risk beneficiary, the sponsor must provide an alternate second written notice to the beneficiary. Paragraph (f)(7)(ii) would require that the notice use language approved by the Secretary in a readable and understandable form containing the following information: (1) The sponsor has determined that the beneficiary is not an at-risk beneficiary; (2) The sponsor will not limit the beneficiary's access to coverage for frequently abused drugs; (3) If applicable, the SEP limitation no longer applies; (4) Clear instructions that explain how the beneficiary may contact the sponsor; and (5) Other content that CMS determines is necessary for the beneficiary to understand the information required in this notice.

Again, as with the initial and second notices, we propose in a paragraph (f)(7)(iii) that the Part D sponsor be required to make reasonable efforts to provide the beneficiary's prescriber(s) of frequently abused drugs with a copy of the notice required by paragraph (f)(7)(i). Also, as with the initial and second notices, we propose in paragraph (ii) that the notice use language approved by the Secretary and be in a readable and understandable form; in paragraph (ii)(C)(4) that the notice contain clear instructions that explain how the beneficiary may contact the sponsor; and in paragraph (ii)(C)(5), that the notice contain other content that CMS determines is necessary for the beneficiary to understand the information required in the notice.

(E) Timing of Notices (§ 423.153(f)(8))

Section 1860D-4(c)(5)(B)(iv) of the Act requires a Part D sponsor to provide the second notice to the beneficiary on a date that is not less than 30 days after the sponsor provided the initial notice to the beneficiary. We interpret the purpose of this requirement to be that the beneficiary should have ample time to provide information to the sponsor that may alter the sponsor's intended action that is contained in the initial notice to the beneficiary, or to provide the sponsor with the beneficiary's pharmacy and/or prescriber preferences, if the sponsor's intent is to limit the beneficiary's access to coverage for frequently abused drugs from selected a pharmacy(ies) and/or prescriber(s).

In addition, we propose to impose a deadline by when a sponsor must provide the second notice or alternate second notice to the beneficiary, although not specifically required by CARA. Such a requirement should provide the sponsor with sufficient time to complete the administrative steps necessary to execute the action the sponsor intends to take that was explained in the initial notice to the beneficiary, while acknowledging that the sponsor would have already met in the case management, clinical contact and prescriber verification requirement.

In the case of an alternate second notice, the timeframe should provide the beneficiary with definitive notice that the sponsor has not identified the beneficiary as an at-risk beneficiary and that there will be no limitation on his/her access to coverage for frequently abused drugs. Accordingly, we propose that the sponsor would be required to send either the second notice or the alternate second notice, as applicable, when it makes its determination or no later than 90 calendar days after the date on the initial notice, whichever comes sooner.

Specifically, we propose to include at § 423.153(f)(8) the following: Timing of Notices. (i) Subject to paragraph (ii) of this section, a Part D sponsor must provide the second notice described in paragraph (f)(6) of this section or the alternate second notice described in paragraph (f)(7) of this section, as applicable, on a date that is not less than 30 days and not more than the earlier of the date the sponsor makes the relevant determination or 90 days after the date of the initial notice described in paragraph (f)(5) of this section. We intend this proposed timeframe for the sponsor to provide either the second notice or the alternate second notice, as applicable, to be reasonable for both Part D sponsors and the relevant beneficiaries and important to ensuring clear, timely and reasonable communication between the parties.

Section 1860D-4(c)(5)(B)(iv)(II) of the Act explicitly provides for an exception to the required timeframe for issuing a second notice. Specifically, the statute permits the Secretary to identify through rulemaking concerns regarding the health or safety of a beneficiary or significant drug diversion activities that would necessitate that a Part D sponsor provide the second written notice to the beneficiary before the 30 day time period normally required has elapsed. For this reason, we included the language, “subject to paragraph (ii),” at the beginning of proposed § 423.153(f)(8)(i).Start Printed Page 56354

We note that the proposed definition of at-risk beneficiary would include beneficiaries for whom a gaining Part D plan sponsor received a notice upon the beneficiary's enrollment that the beneficiary was identified as an at-risk beneficiary under the prescription drug plan in which the beneficiary was most recently enrolled and such identification had not been terminated upon enrollment. This proposed definition is based on the language in section 1860-D-4(c)(5)(C)(i)(II) of the Act.

Given that this provision allows an at-risk identification to carry forward to the next plan, we believe it is appropriate to propose to permit a gaining plan to provide the second notice to an at-risk beneficiary so identified by the most recent prior plan sooner than would otherwise be required. For the same reasons, we believe that it would be appropriate to permit the gaining plan to even send the beneficiary a combined initial and second notice, under certain circumstances. However, because the content of the initial notice would not be appropriate for an at-risk beneficiary, and because such beneficiary would have already received an initial notice from his or her immediately prior plan sponsor, the content of this combined notice should only consist of the required content for the second notice so as not to confuse the beneficiary. Thus, our interpretation of section 1860D-4(c)(5)(B)(iv)(II) of the Act in conjunction with section 1860D-4(c)(5)(C)(i)(II) of the Act is that a gaining Part D sponsor may send the second notice immediately to a beneficiary for whom the sponsor received a notice upon the beneficiary's enrollment that the beneficiary was identified as an at-risk beneficiary under the prescription drug plan in which the beneficiary was most recently enrolled and such identification had not been terminated upon disenrollment. This is consistent with our current policy under which a gaining sponsor may immediately implement a beneficiary-specific opioid POS claim edit, if the gaining sponsor is notified that the beneficiary was subject to such an edit in the immediately prior plan and such edit had not been terminated.[19]

We propose that sending a second notice to an at-risk beneficiary so identified in the most recent plan would be permissible only if the new sponsor is implementing a beneficiary-specific POS claim edit for a frequently abused drug, or if the sponsor is implementing a limitation on access to coverage for frequently abused drugs to a selected pharmacy(ies) or prescriber(s) and has the same location of pharmacy(ies) and/or the same prescriber(s) in its provider network, as applicable, that the beneficiary used to obtain frequently abused drugs in the most recent plan. Otherwise, we propose that the new sponsor would be required to provide the initial notice to the at-risk beneficiary, even though the initial notice is generally intended for potential at-risk beneficiaries, and could not provide the second notice until at least 30 days had passed. This is because even though there would also be a concern for the at-risk beneficiary's health and safety in this latter case as well, this concern would be outweighed by the fact that the beneficiary had not been afforded a chance to submit his or her preference for a pharmacy(ies) and/or prescriber(s), as applicable, from which he or she would have to obtain frequently abused drugs to obtain coverage under the new plan's drug management program.

We propose to codify this policy by adding a paragraph (ii) to § 423.153(f)(8), as noted earlier, to read as follows: Immediately upon the beneficiary's enrollment in the gaining plan, the gaining plan sponsor may provide a second notice described in paragraph (f)(6) to a beneficiary for whom the gaining sponsor received notice that the beneficiary was identified as an at-risk beneficiary by his or her most recent prior plan and such identification had not been terminated in accordance with § 423.153(f)(14), if the sponsor is implementing either of the following: (A) A beneficiary-specific point-of-sale claim edit as described in paragraph (f)(3)(i); or (B) A limitation on access to coverage as described in paragraph(f)(3)(ii), if such limitation would require the beneficiary to obtain frequently abused drugs from the same location of pharmacy and/or the same prescriber, as applicable, that was selected under the immediately prior plan under (f)(9).

Some stakeholders commented that sponsors should be allowed to expedite the second notice in cases of egregious and potentially dangerous overutilization or in cases involving an active criminal investigation when allowed by a court. However, given the importance of a beneficiary having advance notice of a pending limit on his or her access to coverage for frequently abused drugs and sufficient time to respond and/or prepare, we believe exceptions to the timing of the notices should be very narrow. Therefore, we have only included a proposal for an exception to shorten the 30 day timeframe between the initial and second notice that is based on a beneficiary's status as an at-risk beneficiary in an immediately preceding plan. We note that is a status the drug management provisions of CARA explicitly requires to be shared with the next plan sponsor, if a beneficiary changes plans, which means there would be a concrete data point for this proposed exception to the timing of the notices. We discuss such sharing of information later in the preamble.

(viii) Provisions Specific to Limitations on Access to Coverage of Frequently Abused Drugs to Selected Pharmacies and Prescribers (§§ 423.153(f)(4), 423.153(f)(9), 423.153(f)(10), 423.153(f)(11), 423.153(f)(12), 423,153(f)(13))

Some of the drug management program provisions in CARA are only relevant to “lock-in”. We propose several regulatory provisions to implement these provisions, as follows:

(A) Special Requirement To Limit Access to Coverage of Frequently Abused Drugs to Selected Prescriber(s) (§ 423.153(f)(4))

We believe prescriber lock-in should be a tool of last resort to manage at-risk beneficiaries' use of frequently abused drugs, meaning when a different approach has not been successful, whether that was a “wait and see” approach or the implementation of a beneficiary specific POS claim edit or a pharmacy lock-in. Limiting an at-risk beneficiary's access to coverage for frequently abused drugs from only selected prescribers impacts the beneficiary's relationship with his or her health care providers and may impose burden upon prescribers in terms of prescribing frequently abused drugs.

As a result, we propose that a sponsor may not limit an at-risk beneficiary's access to coverage of frequently abused drugs to a selected prescriber(s) until at least 6 months has passed from the date the beneficiary is first identified as a potential at-risk beneficiary. We propose that this date be the date of the first OMS report that identified the beneficiary, so long as the beneficiary was also reported in the most recent OMS report that the sponsor received. This is because limiting the beneficiary's access to coverage of frequently abused drugs from a selected prescriber would only be necessary if the beneficiary continues to meet the clinical guidelines despite any existing Start Printed Page 56355intervention or limitation. We discuss OMS reports in more detail later.

We expect that the 6-month waiting period will provide the sponsor additional time to assess whether case management or another tool, such as a beneficiary-specific POS claim edit or pharmacy lock-in has failed to resolve the beneficiary's overutilization of frequently abused drugs. Sponsors have indicated in comments on the current policy that the case management process can take 3 to 6 months. Also, sponsors would need time to determine whether the beneficiary still meets the clinical guidelines and is thus continuing to be reported by OMS. Therefore, the time period we propose was chosen to account for time needed for the case management process and to align with the 6 month measurement period of the proposed clinical guidelines.

We seek comment on whether this 6-month waiting period would reduce provider burden sufficiently to outweigh the additional case management, clinical contact and prescriber verification that providers may experience if a sponsor believes a beneficiary's access to coverage of frequently abused drugs should be limited to a selected prescriber(s). Comments should include the additional operational considerations for sponsors to implement this proposal.

Given our proposal, we propose adding a paragraph (iv) to § 423.153(f)(4) that would state: (f)(4)(iv) A Part D sponsor must not limit an at-risk beneficiary's access to coverage for frequently abused drugs to those that are prescribed for the beneficiary by one or more prescribers under § 423.153(f)(3)(ii)(A) unless—(A) At least 6 months has passed from the date the beneficiary was first identified as a potential at-risk beneficiary from the date of the applicable CMS identification report; and (B) The beneficiary meets the clinical guidelines and was reported by the most recent CMS identification report.

We note that in conducting the case management required under § 423.153(f)(4)(i)(A) in anticipation of implementing a prescriber lock-in, the sponsor would be expected to update any case management it had already conducted. Also, even if a sponsor had already obtained the prescriber's agreement to implement a limitation on the beneficiary's coverage of frequently abused drugs to a selected pharmacy to comply with § 423.153(f)(4)(i)(B), for example, the sponsor would have to obtain the agreement of the prescriber who would be selected to implement a limitation on a beneficiary's coverage of frequently abused drugs to a selected prescriber. Finally, we note that even if a sponsor had already provided the beneficiary with the required notices to comply with § 423.153(f)(4)(i)(C), the sponsor would have to provide them again in order to remain compliant, because the beneficiary would not have been notified about the specific limitation on his or her access to coverage for frequently abused drugs to a selected prescriber(s) and has an opportunity to select the prescriber(s).

We foresee a scenario in which a sponsor may wish to implement a limitation on a beneficiary's access to coverage of frequently abused drugs to a selected prescriber(s) when the sponsor's first round of case management, clinical contact and prescriber verification resulted only in sending the prescribers of frequently abused drugs a written report about the beneficiary's utilization of frequently abused drugs and taking a “wait and see” approach, which did not result in the prescribers' adjusting their prescriptions for frequently abused drugs for their patient. In such a scenario, assuming the patient still meets the clinical guidelines and continues to be reported by OMS, the sponsor would need to try another intervention to address the opioid overuse. Another scenario could be that the sponsor implemented a pharmacy lock-in, but after 6-months, the beneficiary still meets the clinical guidelines due to receiving frequently abused drugs from additional prescribers.

(B) Selection of Pharmacies and Prescribers (§§ 423.153(f)(9), 423.153(f)(10), 423.153(f)(11), 423.153(f)(12), 423.153(f)(13))

(1) Beneficiary Preferences (§ 423.153(f)(9))

Section 1860D-4(c)(5)(D) of the Act provides that, if a sponsor intends to impose, or imposes, a limit on a beneficiary's access to coverage of frequently abused drugs to selected pharmacy(ies) or prescriber(s), and the potential at-risk beneficiary or at-risk beneficiary submits preferences for a pharmacy(ies) or prescriber(s), the sponsor must select the pharmacy(ies) and prescriber(s) for the beneficiary based on such preferences, unless an exception applies, which we will address later in the preamble. We further propose that such pharmacy(ies) or prescriber(s) must be in-network, except if the at-risk beneficiary's plan is a stand-alone prescription drug benefit plan and the beneficiary's preference involves a prescriber. Because stand-alone Part D plans (PDPs) do not have provider networks, and thus no prescriber would be in-network, the plan sponsor must generally select the prescriber that the beneficiary prefers, unless an exception applies. We discuss exceptions in the next section of this preamble. In our view, it is essential that an at-risk beneficiary must generally select in-network pharmacies and prescribers so that the plan is in the best possible position to coordinate the beneficiary's care going forward in light of the demonstrated concerns with the beneficiary's utilization of frequently abused drugs.

Accordingly, we propose § 423.153(f)(9) to read: Beneficiary preferences. Except as described in paragraph (f)(10) of this section, if a beneficiary submits preferences for prescribers or pharmacies or both from which the beneficiary prefers to obtain frequently abused drugs, the sponsor must do the following—(i) Review such preferences and (ii) If the beneficiary is—(A) Enrolled in a stand-alone prescription drug benefit plan and specifies a prescriber(s) or network pharmacy(ies) or both, select or change the selection of prescriber(s) or network pharmacy(ies) or both for the beneficiary based on beneficiary's preference(s) or (B) Enrolled in a Medicare Advantage prescription drug benefit plan and specifies a network prescriber(s) or network pharmacy(ies) or both, select or change the selection of prescriber(s) or pharmacy(ies) or both for the beneficiary based on the beneficiary's preference(s). If the beneficiary submits preferences for a non-network pharmacy(ies), or in the case of a Medicare Advantage prescription drug benefit plan a non-network prescriber(s), or both, the sponsor does not have to select or change the selection for the beneficiary to a non-network pharmacy or prescriber except if necessary to provide reasonable access.

In a paragraph (iii), we propose that the sponsor must inform the beneficiary of the selection in the second notice, or if not feasible due to the timing of the beneficiary's submission, in a subsequent written notice, issued no later than 14 days after receipt of the submission. Thus, this section would require a Part D plan sponsor to honor an at-risk beneficiary's preferences for in-network prescribers and pharmacies from which to obtain frequently abused drugs, unless the plan was a stand-alone PDP and the selection involves a prescriber. In other words, a stand-alone PDP or MA-PD does not have to honor a beneficiary's selection of a non-network pharmacy, except as necessary Start Printed Page 56356to provide reasonable access, which we discuss later in this section. Also, under our proposal, the beneficiary could submit preferences at any time. Finally, the sponsor would be required to confirm the selection in writing either in the second notice, if feasible, or within 14 days of receipt of the beneficiary's submission.

(2) Exception to Beneficiary Preferences (§ 423.153(f)(10))

Section 1860D-4(c)(5)(D)(iv) of the Act, provides for an exception to an at-risk beneficiary's preference of prescriber or pharmacy from which the beneficiary must obtain frequently abused drugs, if the beneficiary's allowable preference of prescriber or pharmacy would contribute to prescription drug abuse or drug diversion by the at-risk beneficiary. Section 1860-D-4(c)(5)(D)(iv) of the Act requires the sponsor to provide the at-risk beneficiary with at least 30 days written notice and a rationale for not honoring his or her allowable preference for pharmacy or prescriber from which the beneficiary must obtain frequently abused drugs under the plan.

A few commenters asserted there should be limits to how many times beneficiaries can submit their preferences. Other commenters stated there should be a strong evidence of inappropriate action before a sponsor can change a beneficiary's selection.

We are not proposing to place a limit on how many times beneficiaries can submit their preferences, but we are open to additional comments on this topic. We agree with commenters who stated that there should be a strong evidence of inappropriate action before a sponsor can change a beneficiary's selection, but we note that because such a situation would often involve a network pharmacy or prescriber, we would expect that the sponsor would also take appropriate action with respect to the pharmacy or prescriber, such as termination from the network.

Given the foregoing, we propose to add the following: § 423.153(f)(10) Exception to Beneficiary Preferences. (i) If the Part D sponsor determines that the selection or change of a prescriber or pharmacy under paragraph (f)(9) of this section would contribute to prescription drug abuse or drug diversion by the at-risk beneficiary, the sponsor may change the selection without regard to the beneficiary's preferences if there is strong evidence of inappropriate action by the prescriber, pharmacy or beneficiary. (ii) If the sponsor changes the selection, the sponsor must provide the beneficiary with (A) At least 30 days advance written notice of the change; and (B) A rationale for the change.

(3) Reasonable Access (§§ 423.100, 423.153(f)(11), 423.153(f)(12))

If a potential at-risk beneficiary or at-risk beneficiary does not submit pharmacy or prescriber preferences, section 1860-D-4(c)(5)(D)(i) of the Act provides that the Part D sponsor shall make the selection. Section 1860-D-4(c)(5)(D)(ii) of the Act further provides that, in making the selection, the sponsor shall ensure that the beneficiary continues to have reasonable access to frequently abused drugs, taking into account geographic location, beneficiary preference, impact on cost-sharing, and reasonable travel time.

We propose to add the following at § 423.153(f)(11): Reasonable access. In making the selections under paragraph (f)(12) of this section, a Part D plan sponsor must ensure both of the following: (i) That the beneficiary continues to have reasonable access to frequently abused drugs, taking into account geographic location, beneficiary preference, the beneficiary's predominant usage of a prescriber or pharmacy or both, impact on cost-sharing, and reasonable travel time; and (ii) reasonable access to frequently abused drugs in the case of individuals with multiple residences, in the case of natural disasters and similar situations, and in the case of the provision of emergency services.

Since the statute explicitly allows the beneficiary to submit preferences, we interpret the additional reference to beneficiary preference in the context of reasonable access to mean that a beneficiary allowable preference should prevail over a sponsor's evaluation of geographic location, the beneficiary's predominant usage of a prescriber and/or pharmacy impact on cost-sharing and reasonable travel time. In the absence of a beneficiary preference for pharmacy and/or prescriber, however, a Part D plan sponsor must take into account geographic location, the beneficiary's predominant usage of a prescriber and/or pharmacy, impact on cost-sharing and reasonable time travel in selecting a pharmacy and/or prescriber, as applicable, from which the at-risk beneficiary will have to obtain frequently abused drugs under the plan. Thus, absent a beneficiary's allowable preference, or the beneficiary's selection would contribute to prescription drug abuse or drug diversion, the sponsor must ensure reasonable access by choosing the network pharmacy or prescriber that the beneficiary uses most frequently to obtain frequently abused drugs, unless the plan is a stand-alone PDP and the selection involves a prescriber(s). In the latter case, the prescriber will not be a network provider, because such plans do not have provider networks. In urgent circumstances, we propose that reasonable access means the sponsor must have reasonable policies and procedures in place to ensure beneficiary access to coverage of frequently abused drugs without a delay that may seriously jeopardize the life or health of the beneficiary or the beneficiary's ability to regain maximum function.

Determining reasonable access may be complicated when an enrollee has multiple addresses or his or her health care necessitates obtaining frequently abused drugs from more than one prescriber and/or more than one pharmacy. Section 1860D-4(c)(5) addresses this issue by requiring the Part D plan sponsor to select more than one prescriber to prescribe frequently abused drugs and more than one pharmacy to dispense them, as applicable, when it reasonably determines it is necessary to do so to provide the at-risk beneficiary with reasonable access.

Given the foregoing, we propose the following at § 423.153(f)(12): Selection of Prescribers and Pharmacies. (i) A Part D plan sponsor must select, as applicable—(A) One, or, if the sponsor reasonably determines it necessary to provide the beneficiary with reasonable access, more than one, network prescriber who is authorized to prescribe frequently abused drugs for the beneficiary, unless the plan is a stand-alone PDP and the selection involves a prescriber(s), in which case, the prescriber need not be a network prescriber; and (B) One, or, if the sponsor reasonably determines it necessary to provide the beneficiary with reasonable access, more than one, network pharmacy that may dispense such drugs to such beneficiary.

We also propose to address chain pharmacies and group practices by adding a paragraph (ii) that states: (ii) (A) For purposes of this subsection (f)(12) of this section, in the case of a pharmacy that has multiple locations that share real-time electronic data, all such locations of the pharmacy shall collectively be treated as one pharmacy; and (B) For purposes of this subsection (f)(12), in the case of a group practice, all prescribers of the group practice shall be treated as one prescriber.

We would interpret these provisions to mean that a sponsor would be required to select more than one prescriber of frequently abused drugs, if more than one prescriber has asserted Start Printed Page 56357during case management that multiple prescribers of frequently abused drugs are medically necessary for the at-risk beneficiary. We further propose that if no prescribers of frequently abused drugs were responsive during case management, and the beneficiary does not submit preferences, the sponsor would be required to select the pharmacy or prescriber that the beneficiary predominantly uses to obtain frequently abused drugs.

(4) Confirmation of Pharmacy and Prescriber Selection (§ 423.153(f)(13))

Section 1860D-4(c)(5)(D)(v) of the Act requires that, before selecting a prescriber or pharmacy, a Part D plan sponsor must notify the prescriber and/or pharmacy that the at-risk beneficiary has been identified for inclusion in the drug management program which will limit the beneficiary's access to coverage of frequently abused drugs to selected pharmacy(ies) and/or prescriber(s) and that the prescriber and/or pharmacy has been selected as a designated prescriber and/or pharmacy for the at-risk beneficiary.

We propose that plan sponsors can obtain a network provider's confirmation in advance by including a provision in the network agreement specifying that the provider agrees to serve as at-risk beneficiaries' selected prescriber or pharmacy, as applicable. In these cases, the network provider would agree to forgo providing specific confirmation if selected under a drug management program to serve an at-risk beneficiary. However, the contract between the sponsor and the network provider would need to specify how the sponsor will notify the provider of its selection. Absent a provision in the network contract, however, the sponsor would be required to receive confirmation from the prescriber(s) and/or pharmacy(ies) that the selection is accepted before conveying this information to the at-risk beneficiary. Otherwise, the plan would need to make another selection and seek confirmation.

We propose § 423.153(f)(13) to read: Confirmation of Selections(s). (i) Before selecting a prescriber or pharmacy under this paragraph, a Part D plan sponsor must notify the prescriber or pharmacy, as applicable, that the beneficiary has been identified for inclusion in the drug management program for at-risk beneficiaries and that the prescriber or pharmacy or both is (are) being selected as the beneficiary's designated prescriber or pharmacy or both for frequently abused drugs. (ii) The sponsor must receive confirmation from the prescriber(s) or pharmacy(ies) or both that the selection is accepted before conveying this information to the at-risk beneficiary, unless the prescriber or pharmacy has agreed in advance in its network agreement with the sponsor to accept all such selections and the agreement specifies how the prescriber or pharmacy will be notified by the sponsor of its selection.

(ix) Drug Management Program Appeals (§§ 423.558, 423.560, 423.562, 423.564, 423.580, 423.582, 423.584, 423.590, 423.602, 423.636, 423.638, 423.1970, 423.2018, 423.2020, 423.2022, 423.2032, 423.2036, 423.2038, 423.2046, 423.2056, 423.2062, 423.2122, and 423.2126)

Section 1860D-4(c)(5)(E) of the Act specifies that the identification of an individual as an at-risk beneficiary for prescription drug abuse under a Part D drug management program, a coverage determination made under such a program, the selection of a prescriber or pharmacy, and information sharing for subsequent plan enrollments shall be subject to reconsideration and appeal under section 1860D-4(h) of the Act. This provision also permits the option of an automatic escalation to external review to the extent provided by the Secretary.

As discussed earlier in this preamble, we are proposing to integrate the lock-in provisions with existing Part D Opioid DUR Policy/OMS. Determinations made in accordance with any of those processes, proposed at § 423.153(f), and discussed previously, are interrelated issues that we collectively refer to as an “at-risk determination” made under a drug management program. The at-risk determination includes prescriber and/or pharmacy selection for lock-in, beneficiary-specific POS claim edits for frequently abused drugs, and information sharing for subsequent plan enrollments. Given the concomitant nature of the at-risk determination and associated aspects of the drug management program applicable to an at-risk beneficiary, we expect that any dispute under a plan's drug management program will be adjudicated as a single case involving a review of all aspects of the drug management program for the at-risk beneficiary. While a beneficiary who is subject to a Part D plan sponsor's drug management program always retains the right to request a coverage determination under existing § 423.566 for any Part D drug that the beneficiary believes may be covered by their plan, we believe that appeals of an at-risk determination made under proposed § 423.153(f) should involve consideration of all relevant elements of that at-risk determination. For example, if a Part D plan determines that a beneficiary is at-risk, implements a beneficiary-specific claim edit on 2 drugs that beneficiary is taking and locks that beneficiary into a specific pharmacy, the affected beneficiary should not be expected to raise a dispute about the pharmacy selection and about one of the claim edits in distinct appeals.

We note that, while section 1860D-4(c)(5)(B)(ii)(III) of the Act requires the initial written notice to the beneficiary, which identifies him or her as potentially being at-risk, to include “notice of, and information about, the right of the beneficiary to appeal such identification under subsection (h),” we interpret “such identification” to refer to any subsequent identification that the beneficiary is actually at-risk. Because CARA, at section 1860D-4(c)(5)(E) of the Act, specifically provides for appeal rights under subsection (h) but does not refer to identification as a potential at-risk beneficiary, we believe this interpretation is consistent with the statutory intent. Furthermore, when a beneficiary is identified as being potentially at-risk, but has not yet been identified as at-risk, the plan is not taking any action to limit such beneficiary's access to frequently abused drugs; therefore, the situation is not ripe for appeal. While an LIS SEP under § 423.38 would be restricted at the time the beneficiary is identified as potentially at-risk under proposed § 423.100, the loss of such SEP is not appealable under section 1860D-4(h) of the Act.

As noted previously, section 1860D-4(c)(5)(E) of the Act specifically refers to the Part D benefit appeals provisions in section 1860D-4(h) of the Act, which require Part D plan sponsors to meet the requirements of paragraphs (4) and (5) of section 1852(g) of the Act for benefits in a manner similar to the manner such requirements apply to MA organizations. Section 1852(g)(4) of the Act specifically provides for independent review of “reconsiderations that affirm denial of coverage, in whole or in part (emphasis added).” We believe section 1860D-4(c)(5)(E) of the Act broader reference to “reconsideration and appeal” should be interpreted to mean that individuals have a right to a plan level appeal, consistent with the reconsideration provisions under section 1860D-4(g) of the Act, followed by the right to independent review if the plan level affirms the initial adverse decision. In other words, we believe the reference to “reconsideration” means that a Part D plan sponsor should conduct the initial Start Printed Page 56358level of appeal following an at-risk determination under the plan sponsor's drug management program, consistent with the existing Part D drug benefit appeals process, despite the absence of a specific reference to section 1860D-4(g) of the Act.

Part D enrollees, plan sponsors, and other stakeholders are already familiar with the Part D benefit appeals process. Resolving disputes that arise under a plan sponsor's drug management program within the existing Part D benefit appeals process would allow at-risk beneficiaries to be more familiar with, and more easily access, the appeals process instead of creating a new process specific to appeals related to a drug management program. Also, allowing a plan sponsor the opportunity to review information it used to make an at-risk determination under the drug management program (and any additional relevant information submitted as part of the appeal) would be efficient for both the individual and the Medicare program because it would potentially resolve the issues at a lower level of administrative review. Conversely, permitting review by the independent review entity (IRE) before a plan sponsor has an opportunity to review and resolve any errors or omissions that may have been made during the initial at-risk determination would likely result in an unnecessary increase in costs for plan sponsors as well as CMS' Part D IRE contract costs.

As noted previously, the Secretary has the discretion under CARA to provide for automatic escalation of drug management program appeals to external review. Under existing Part D benefit appeals procedures, there is no automatic escalation to external review for adverse appeal decisions; instead, the enrollee (or prescriber, on behalf of the enrollee) must request review by the Part D IRE. Under the existing Part D benefit appeals process, cases are auto-forwarded to the IRE only when the plan fails to issue a coverage determination within the applicable timeframe. During the stakeholder call and in subsequent written comments, most commenters opposed automatic escalation to the IRE, citing support for using the existing appeals process for reasons of administrative efficiency and better outcomes for at-risk beneficiaries. The majority of stakeholders supported following the existing Part D appeals process, and some commenters specifically supported permitting the plan to review its lock-in decision prior to the case being subject to IRE review. Stakeholders cited a variety of reasons for their opposition, including increased costs to plans, the IRE, and the Part D program. Stakeholders cited administrative efficiency in using the existing appeal process that is familiar to enrollees, plans, and the IRE, while other commenters expressed support for automatic escalation to the IRE as a beneficiary protection.

We are proposing that at-risk determinations made under the processes at § 423.153(f) be adjudicated under the existing Part D benefit appeals process and timeframes set forth in Subpart M. However, we are not proposing to revise the existing definition of a coverage determination. The types of decisions made under a drug management program align more closely with the regulatory provisions in Subpart D than with the provisions in Subpart M related to coverage or payment for a drug based on whether the drug is medically necessary for an enrollee. Therefore, we believe it is clearer to set forth the rules for at-risk determinations as part of § 423.153 and cross reference § 423.153(f) in relevant provisions in Subpart M and Subpart U. While a coverage determination made under a drug management program would be subject to the existing rules related to coverage determinations, the other types of initial determinations made under a drug management program (for example, a restriction on the at-risk beneficiary's access to coverage of frequently abused drugs to those that are prescribed for the beneficiary by one or more prescribers) would be subject to the processes set forth at proposed § 423.153(f). Consistent with existing rules for redeterminations at § 423.582, an enrollee who wishes to dispute an at-risk determination would have 60 days from the date of the second written notice to make such request, unless the enrollee shows good cause for untimely filing under § 423.582(c). As previously discussed for proposed § 423.153(f)(6), the second written notice is sent to a beneficiary the plan has identified as an at-risk beneficiary and with respect to whom the sponsor limits his or her access to coverage of frequently abused drugs regarding the requirements of the sponsor's drug management programs.

Also consistent with the existing Part D benefit appeals process, we are proposing that at-risk beneficiaries (or an at-risk beneficiary's prescriber, on behalf of the at-risk beneficiary) must affirmatively request IRE review of adverse plan level appeal decisions made under a plan sponsor's drug management program. In other words, under this proposal, an adverse redetermination would not be automatically escalated to the Part D IRE, unless the plan sponsor fails to meet the redetermination adjudication timeframe. We are also proposing to amend the existing Subpart M rules at § 423.584 and § 423.600 related to obtaining an expedited redetermination and IRE reconsideration, respectively, to apply them to appeals of a determination made under a drug management program. The right to an expedited appeal of such a determination, which must be adjudicated as expeditiously as the at-risk beneficiary's health condition requires, would ensure that the rights of at-risk beneficiaries are protected with respect to access to medically necessary drugs. While we are not proposing to adopt auto-escalation, we believe our proposed approach ensures that an at-risk beneficiary has the right to obtain IRE review and higher levels of appeal (ALJ/attorney adjudicator, Council, and judicial review). Accordingly, we also are proposing to add the reference to an “at-risk determination” to the following regulatory provisions that govern ALJ and Council processes: §§ 423.2018, 423.2020, 423.2022, 423.2032, 423.2036, 423.2038, 423.2046, 423.2056, 423.2062, 423.2122, and 423.2126.

Finally, we are also proposing a change to § 423.1970(b) to address the calculation of the amount in controversy (AIC) for an ALJ hearing in cases involving at-risk determinations made under a drug management program in accordance with proposed § 423.153(f). Specifically, we propose that the projected value of the drugs subject to the drug management program be used to calculate the amount remaining in controversy. For example, if the beneficiary is disputing the lock-in to a specific pharmacy for frequently abused drugs and the beneficiary takes 3 medications that are subject to the plan's drug management program, the projected value of those 3 drugs would be used to calculate the AIC, including the value of any refills prescribed for the drug(s) in dispute during the plan year.

In addition to the proposed changes related to the implementation of drug management program appeals, we are also proposing to make technical changes to § 423.562(a)(1)(ii) to remove the comma after “includes” and replace the reference to “§§ 423.128(b)(7) and (d)(1)(iii)” with a reference to “§§ 423.128(b)(7) and (d)(1)(iv).”

(x) Termination of a Beneficiary's Potential At-Risk or At-Risk Status (§ 423.153(f)(14))

Section 1860-D-4(c)(5)(F) of the Act provides that the Secretary shall develop standards for the termination of the identification of an individual as an at-risk beneficiary, which shall be the Start Printed Page 56359earlier of the date the individual demonstrates that he or she is no longer likely to be an at-risk beneficiary in the absence of limitations, or the end of such maximum period as the Secretary may specify.

Most commenters recommended a maximum 12-month period for an at-risk beneficiary to be locked-in. We also note that a 12-month lock-in period is common in Medicaid lock-in programs.[20] A few commenters stated that a physician should be able to determine that a beneficiary is no longer an at-risk beneficiary. One commenter was opposed to an arbitrary termination based on a time period.

Given that most commenters recommended a 12-month period and such a period is common in Medicaid “lock-in” program, we propose a maximum 12-month period for both a lock-in period, and also for the duration of a beneficiary-specific POS claim edit for frequently abused drugs through the addition of the following language at § 423.153(f)(14): Termination of Identification as an At-Risk Beneficiary. The identification of an at-risk beneficiary as such shall terminate as of the earlier of the following—

(i) The date the beneficiary demonstrates through a subsequent determination, including but not limited to, a successful appeal, that the beneficiary is no longer likely, in the absence of the limitations under this paragraph, to be an at-risk beneficiary; or

(ii) The end of a 12 calendar month period calculated from the effective date of the limitation, as specified in the notice provided under paragraph (f)(6) of this section.

Thus, we note that if a beneficiary continues to meet the clinical guidelines and, if the sponsor implements an additional, overlapping limitation on the at-risk beneficiary's access to coverage for frequently abused drugs, the beneficiary may experience a coverage limitation beyond 12-months. The same is true for at-risk beneficiaries who were identified as such in the most recent prescription drug plan in which they were enrolled and the sponsor of his or her subsequent plan immediately implements a limitation on coverage of frequently abused drugs.

Section 1860-D-4(c)(5)(F)(ii) of the Act states that nothing in CARA shall be construed as preventing a plan from identifying an individual as an at-risk beneficiary after such termination on the basis of additional information on drug use occurring after the date of notice of such termination. Accordingly, we note that our proposed approach to termination of an at-risk determination would not prevent an at-risk beneficiary from being subsequently identified as a potential at-risk beneficiary or at-risk beneficiary on the basis of new information on drug use occurring after the date of such termination that causes the beneficiary to once again meet the clinical guidelines.

(xi) Data Disclosure and Sharing of Information for Subsequent Sponsor Enrollments (§ 423.153(f)(15))

In order for Part D sponsors to conduct the case management/clinical contact/prescriber verification required by proposed § 423.153(f)(2), CMS must identify potential at-risk beneficiaries to sponsors who are in the sponsors' Part D prescription drug benefit plans. In addition, new sponsors must have information about potential at-risk beneficiaries and at-risk beneficiaries who were so identified by their immediately prior plan and enroll in the new sponsor's plan and such identification had not terminated before the beneficiary disenrolled from the immediately prior plan. Finally, as discussed earlier, sponsors may identify potential at-risk beneficiaries by their own application of the clinical guidelines on a more frequent basis. It is important that CMS be aware of which Part D beneficiaries sponsors identify on their own, as well as which ones have been subjected to limitations on their access to coverage for frequently abused drugs under sponsors' drug management programs for Part D program administration and other purposes. This data disclosure process would be consistent with current policy, as described earlier in this preamble.

As we also discussed earlier, under the current policy, CMS provides quarterly reports to sponsors about beneficiaries enrolled in their plans who meet the OMS criteria. In turn, Part D sponsors are expected to provide responses to CMS through the OMS for each case identified within 30 days of receiving a report that reflects the status or outcome of their case management.[21] At the same time, also within 30 days, sponsors are expected to report additional beneficiaries to OMS that they identify using their own opioid overutilization identification criteria.[22]

Regarding data disclosures, section 1860D-4(c)(5)(H) of the Act provides that, in the case of potential at-risk beneficiaries and at-risk beneficiaries, the Secretary shall establish rules and procedures to require the Part D plan sponsor to disclose data, including any necessary individually identifiable health information, in a form and manner specified by the Secretary, about the decision to impose such limitations and the limitations imposed by the sponsor under this part.

Sponsors also report information to CMS' MARx system about pending, implemented and terminated beneficiary-specific POS claim edit for opioids within 7 business days of the date on the applicable beneficiary notice or of the termination.[23] The MARx system transfers information about pending and implemented claim edits to the gaining sponsor with the beneficiary's enrollment record if the beneficiary disenrolls and enrolls in the gaining sponsor's plan. If a gaining sponsor requests case management information from the losing sponsor about the beneficiary, we expect the losing sponsor to transfer the information to the gaining sponsor as soon as possible, but no later than 2 weeks from the date of the gaining sponsor's request.[24]

Section 1860-D-4(c)(5)(I) of the Act requires that the Secretary establish procedures under which Part D sponsors must share information when at-risk beneficiaries or potential at-risk beneficiaries enrolled in one prescription drug plan subsequently disenroll and enroll in another prescription drug plan offered by the next sponsor (gaining sponsor). We plan to expand the scope of the reporting to MARx under the current policy to include the ability for sponsors to report similar information to MARx about all pending, implemented and terminated limitations on access to coverage of frequently abused drugs associated with their plans' drug management programs.

We propose to codify the data disclosure and information sharing process under the current policy, with the expansion just described, by adding the following requirement to § 423.153: (f)(15) Data Disclosure. (i) CMS identifies each potential at-risk beneficiary to the sponsor of the prescription drug plan in which the beneficiary is enrolled. (ii) A Part D sponsor that operates a drug management program must disclose any Start Printed Page 56360data and information to CMS and other Part D sponsors that CMS deems necessary to oversee Part D drug management programs at a time, and in a form and manner, specified by CMS. The data and information disclosures must do all of the following: (A) Respond to CMS within 30 days of receiving a report about a potential at-risk beneficiary from CMS; (B) Provide information to CMS about any potential at-risk beneficiary that a sponsor identifies within 30 days from the date of the most recent CMS report identifying potential at-risk beneficiaries; (C) Provide information to CMS within 7 business days of the date of the initial notice or second notice that the sponsor provided to a beneficiary, or within 7 days of a termination date, as applicable, about a beneficiary-specific opioid claim edit or a limitation on access to coverage for frequently abused drugs; and (D) Transfer case management information upon request of a gaining sponsor as soon as possible but no later than 2 weeks from the gaining sponsor's request when: (1) An at-risk beneficiary or potential at-risk beneficiary disenrolls from the sponsor's plan and enrolls in another prescription drug plan offered by the gaining sponsor; and (2) The edit or limitation that the sponsor had implemented for the beneficiary had not terminated before disenrollment.

(xii) Summary

Our proposal is intended to be responsive to stakeholder input that CMS focus on opioids; allow for flexibility to adjust the clinical guidelines and frequently abused drugs in the future; is reflective of the importance of the provider-patient relationship; protects beneficiary's rights and access, and allows for operational manageability and consistency with the current policy to the extent possible. This proposal, if finalized, should result in effective Part D drug management programs within a regulatory framework provided by CMS, and further reduce opioid overutilization in the Part D program.

2. Flexibility in the Medicare Advantage Uniformity Requirements

We have determined that providing access to services (or specific cost sharing for services or items) that is tied to health status or disease state in a manner that ensures that similarly situated individuals are treated uniformly is consistent with the uniformity requirement in the Medicare Advantage (MA) regulations at § 422.100(d). This regulatory requirement is a means to implement both section 1852(d) of the Act, which requires that benefits under the MA plan be available and accessible to each enrollee in the plan, and section 1854(c) of the Act, which requires uniform premiums for each enrollee in the plan. Previously, we required MA plans to offer all enrollees access to the same benefits at the same level of cost sharing. We have determined that these statutory provisions and the regulation at § 422.100(d) mean that we have the authority to permit MA organizations the ability to reduce cost sharing for certain covered benefits, offer specific tailored supplemental benefits, and offer lower deductibles for enrollees that meet specific medical criteria, provided that similarly situated enrollees (that is, all enrollees who meet the identified criteria) are treated the same. For example, reduced cost sharing flexibility would allow an MA plan to offer diabetic enrollees zero cost sharing for endocrinologist visits. Similarly, with this flexibility, a MA plan may offer diabetic enrollees more frequent foot exams as a tailored, supplemental benefit. In addition, with this flexibility, a MA plan may offer diabetic enrollees a lower deductible. Under this example, non-diabetic enrollees would not have access to these diabetic-specific tailored cost-sharing or supplemental benefits; however, any enrollee that develops diabetes would then have access to these benefits.

Such flexibility under our new interpretation of the uniformity requirement is not without limits, however, as section 1852(b)(1)(A) of the Act prohibits an MA plan from denying, limiting, or conditioning the coverage or provision of a service or benefit based on health-status related factors. MA regulations (for example, §§ 422.100(f)(2) and 422.110(a)) reiterate and implement this non-discrimination requirement. In interpreting these obligations to protect against discrimination, we have historically indicated that the purpose of the requirements is to protect high-acuity enrollees from adverse treatment on the basis of their higher cost health conditions (79 FR 29843; 76 FR 21432; and 74 FR 54634). As MA plans consider this new flexibility in meeting the uniformity requirement, they must be mindful of ensuring compliance with non-discrimination responsibilities and obligations.[25] MA plans that exercise this flexibility must ensure that the cost sharing reductions and targeted supplemental benefits are for health care services that are medically related to each disease condition. CMS will be concerned about potential discrimination if an MA plan is targeting cost sharing reductions and additional supplemental benefits for a large number of disease conditions, while excluding other higher-cost conditions. We will review benefit designs to make sure that the overall impact is non-discriminatory and that higher acuity, higher cost enrollees are not being excluded in favor of healthier populations.

For example, an MA plan could identify enrollees diagnosed with specific diseases, such as diabetes, chronic heart failure, and COPD, as medically vulnerable and in need of certain services, which could be offered to these enrollees in the form of tailored supplemental benefits. In identifying eligible enrollees, the MA plan must use medical criteria that are objective and measurable, and the enrollee must be diagnosed by a plan provider or have their existing diagnosis certified or affirmed by a plan provider to assure equal application of the objective criteria necessary to provide equal treatment of similarly situated individuals.

For contract year 2019, we are considering issuing guidance clarifying the flexibility MA plans have to offer targeted supplemental benefits for their most medically vulnerable enrollees. A benefit package that offers differential access to enhanced services or benefits or reduced cost sharing or different deductibles based on objective criteria, and ensures equal treatment of similarly situated enrollees, for whom such services and benefits are useful, can be priced at a uniform premium consistent with the requirements for availability and accessibility throughout the service area for all enrollees in section 1852(d)(1)(A) of the Act and for uniform bids and premiums in section 1854(c) of the Act. We believe this flexibility will help MA plans better manage health care services for the most vulnerable enrollees. The benefit and cost sharing flexibility we have discussed here applies to Part C benefits but not Part D benefits. We are requesting comments and/or questions from stakeholders about the implementation of this flexibility. We note that CMS is currently testing value based insurance design (VBID) through the use of our demonstration authority under Section 1115A of the Act (42 U.S.C. 1315a, added by Section 3021 of the Affordable Care Act), which will include some of the elements we have discussed Start Printed Page 56361previously. However, there are also features of the VBID demonstration that are unique to the demonstration test. We expect the VBID demonstration to provide CMS with insights into future VBID innovations for the MA program.

3. Segment Benefits Flexibility

In reviewing section 1854(h) of the Social Security Act and Medicare Advantage (MA) regulations governing plan segments, we have determined that the statute and existing regulations may be interpreted to allow MA plans to vary supplemental benefits, in addition to premium and cost sharing, by segment, as long as the benefits, premium, and cost sharing are uniform within each segment of an MA plan's service area. Plans segments are county-level portions of a plan's overall service area which, under current CMS policy, are permitted to have different premiums and cost sharing amounts as long as these premiums and cost sharing amounts are uniform throughout the segment. We are proposing to revise our interpretation of the existing statute and regulations to allow MA plan segments to vary by benefits in addition to premium and cost sharing, consistent with the MA regulatory requirements defining segments at § 422.262(c)(2).

4. Maximum Out-of-Pocket Limit for Medicare Parts A and B Services (§§ 422.100 and 422.101)

As provided at § 422.100(f)(4) and (5) and § 422.101(d)(2) and (3), all Medicare Advantage (MA) plans (including employer group waiver plans (EGWPs) and special needs plans (SNPs)), must establish limits on enrollee out-of-pocket cost sharing for Parts A and B services that do not exceed the annual limits established by CMS. CMS added §§ 422.100(f)(4) and (f)(5), effective for coverage in 2011, under the authority of sections 1852(b)(1)(A), 1856(b)(1), and 1857(e)(1) of the Act in order not to discourage enrollment by individuals who utilize higher than average levels of health care services (that is, in order for a plan not to be discriminatory) (75 FR 19709-11). Section 1858(b)(2) of the Act requires a limit on in-network out-of-pocket expenses for enrollees in Regional MA Plans. In addition, Local Preferred Provider Organization (LPPO) plans, under § 422.100(f)(5), and Regional PPO (RPPO) plans, under section 1858(b)(2) of the Act and § 422.101(d)(3), are required to have a “catastrophic” limit inclusive of both in- and out-of-network cost sharing for all Parts A and B services, the annual limit which is also established by CMS. All cost sharing (that is, deductibles, coinsurance, and copayments) for Parts A and B services, excluding plan premium, must be included in each plan's Maximum Out-of-Pocket (MOOP) amount subject to these limits.

As discussed in the 2010 rulemaking (75 FR 19709), CMS affords greater flexibility in establishing Parts A and B cost sharing to MA plans that adopt a lower, voluntary MOOP limit than is available to plans that adopt the higher, mandatory MOOP limit. The percentage of eligible Medicare beneficiaries with access to an MA plan (excluding employer and dual eligible special needs plans) offering a voluntary MOOP limit has decreased from 97.7 percent in CY 2011 to 68.1 percent in CY 2017. This has resulted in the percentage of total enrollees in a voluntary MOOP plan decreasing from 51 percent in CY 2011 to 21 percent in CY 2017.

As stated in the CY 2018 final Call Letter [26] and in the 2010 final rule (75 FR 19710), CMS currently sets MOOP limits based on a beneficiary-level distribution of Parts A and B cost sharing for individuals enrolled in Medicare Fee-for-Service (FFS) for local and regional MA plans. The mandatory MOOP amount represents approximately the 95th percentile of projected beneficiary out-of-pocket spending. Stated differently, 5 percent of Medicare FFS beneficiaries are expected to incur approximately $6,700 or more in Parts A and B deductibles, copayments, and coinsurance. The voluntary MOOP amount of $3,400 represents approximately the 85th percentile of projected Medicare FFS out-of-pocket costs. The Office of the Actuary conducts an annual analysis to help CMS determine the MOOP limits. Since the MOOP requirements for local and regional MA plans were finalized in regulation, a strict application of the 95th and 85th percentile would have resulted in MOOP limits for local and regional MA plans fluctuating from year-to-year. Therefore, CMS has exercised discretion in order to maintain stable MOOP limits from year-to-year, when the beneficiary-level distribution of Parts A and B cost sharing for individuals enrolled in Medicare FFS is approximately equal to the appropriate percentile. This approach avoids enrollee confusion, allows plans to provide stable benefit packages year over year, and does not discourage the adoption of the lower voluntary MOOP amount because of fluctuations in the amount. CMS expects to change MOOP limits if a consistent pattern of increasing or decreasing costs emerges over time.

As part of the annual Call Letter process, stakeholders have suggested changes to how CMS establishes MOOP limits. Some of the comments suggested CMS use Medicare FFS and MA encounter data to inform its decision-making. Other suggestions received have included increasing the voluntary MOOP limit, increasing the number of service categories that have higher cost sharing in return for a plan offering a lower MOOP limit, and considering three levels of MOOP and service category cost sharing to encourage plan offerings with lower MOOP limits.

CMS's goal is to establish future MOOP limits based on the most relevant and available data, or combination of data, that reflects beneficiary health care costs in the MA program and maintains benefit stability over time. Medicare FFS data currently represents the most relevant and available data at this time. CMS may consider future rulemaking regarding the use of MA encounter cost data to understand program health care costs and compare to Medicare FFS data in establishing cost sharing limits. Under this current proposal to revise the regulations controlling MOOP limits, CMS might change its existing methodology of using the 85th and 95th percentiles of projected beneficiary out-of-pocket Medicare FFS spending in the future. CMS expects to establish future limits by striking the appropriate balance between limiting MOOP costs and potential changes in premium, benefits, and cost sharing with the goal of making sure beneficiaries can access affordable and sustainable benefit packages. While CMS intends to continue using the 85th and 95th percentiles of projected beneficiary out-of-pocket spending for the immediate future to set MA MOOP limits, CMS proposes to amend the regulation text in §§ 422.100(f)(4) and (5) and 422.101(d)(2) and (d)(3) to incorporate authority to balance factors discussed previously. The flexibility provided by these proposed changes will permit CMS to annually adjust mandatory and voluntary MOOP limits based on changes in market conditions and to ensure the sustainability of the MA program and benefit options.

The proposed new authority permitting changes in data and methodology related to establishing MOOP limits would be exercised by CMS in advance of each plan year; CMS would use the annual Call Letter and other guidance documents to explain its application of this proposed regulatory standard and the data used to identify MOOP limits in advance of bid Start Printed Page 56362deadlines. This will provide MA organizations adequate time to comment and prepare for changes. In addition, CMS plans to transition any significant changes under this proposal over time to avoid disruption to benefit designs and minimize potential beneficiary confusion.

CMS proposes to codify specific requirements because of the number of comments received in the past about MOOP changes. CMS proposes to amend §§ 422.100(f)(4) and (f)(5) and 422.101(d)(2) and (d)(3) to clarify that CMS may use Medicare FFS data to establish annual MOOP limits. In addition, CMS would have authority to increase the voluntary MOOP limit to another percentile level of Medicare FFS, increase the number of service categories that have higher cost sharing in return for offering a lower MOOP amount, and implement more than two levels of MOOP and cost sharing limits to encourage plan offerings with lower MOOP limits. This proposal includes authority to increase the number of service categories that have higher cost sharing in return for offering a lower (voluntary) MOOP amount and considering more than two levels of MOOP (with associated cost sharing limits) to encourage plan offerings with lower MOOP limits. Consistent with past practice, CMS will continue to publish annual limits and a description of how the regulation standard was applied (that is, the methodology used) in the annual Call Letter prior to bid submission so that MA plans can submit bids consistent with parameters that CMS has determined to meet the cost sharing limits requirements. CMS seeks comments and suggestions on the topics discussed in this section.

5. Cost Sharing Limits for Medicare Parts A and B Services (§§ 417.454 and 422.100)

As provided at §§ 417.454(e), 422.100(f)(6), and 422.100(j), MA plan cost sharing for Parts A and B services specified by CMS must not exceed certain levels. Section 422.100(f)(6) provides that cost sharing must not be discriminatory and CMS determines annually the level at which certain cost sharing becomes discriminatory. Sections 417.454(e) and 422.100(j), on the other hand, are based on how section 1852(a)(1)(B)(iii) and (iv) of the Act directs that cost sharing for certain services may not exceed cost sharing levels in Medicare Fee-for-Service (FFS); under the statute and the regulations, CMS may add to that list of services. CMS reviews cost sharing set by MA organizations using parameters based on Parts A and B services that are more likely to have a discriminatory impact on beneficiaries. The review parameters are currently based on Medicare FFS data and reflect a combination of patient utilization scenarios and length of stays or services used by average to sicker patients. CMS uses multiple utilization scenarios for some services (for example, inpatient care) to guard against MA organizations distributing benefit cost sharing amounts in a manner that is discriminatory. Review parameters are also established for frequently used professional services, such as primary and specialty care services.

CMS proposes here to amend § 422.100(f)(6) to clarify that it may use Medicare FFS data to establish appropriate cost sharing limits. In addition, CMS intends to use MA utilization encounter data to inform patient utilization scenarios used to help identify MA plan cost sharing standards and thresholds that are not discriminatory; we solicit comment on whether to codify that use of MA encounter data for this purpose in § 422.100(f)(6). This proposal is not related to a statutory change.

This proposal aims to allow CMS to use the most relevant and appropriate information in determining whether specific cost sharing is discriminatory and to set standards and thresholds above which CMS believes cost sharing is discriminatory. CMS intends to continue the practice of furnishing information to MA organizations about the methodology used to establish cost sharing limits and the thresholds CMS identifies as non-discriminatory through the annual Call Letter process or Health Plan Management System (HPMS) memoranda and solicit comments, as appropriate. This process allows MA organizations to prepare plan bids consistent with parameters that CMS have determined to be non-discriminatory.

As specified in section 1852(a)(1)(B)(iv) of the Act, the cost sharing charged by MA plans for chemotherapy administration services, renal dialysis services, and skilled nursing care may not exceed the cost sharing for those services under Parts A and B. Although CMS has not established a specific service category cost sharing limit for all possible services, CMS has issued guidance that MA plans must pay at least 50 percent of the contracted (or Medicare allowable) rate and that cost sharing for services cannot exceed 50 percent of the total MA plan financial liability for the benefit in order for the cost sharing for such services to be considered non-discriminatory; CMS believes that cost sharing (service category deductibles, copayments or co-insurance) that fails to cover at least half the cost of a particular service or item acts to discriminate against those for whom those services and items are medically necessary and discourages enrollment by beneficiaries who need those services and items. If a plan uses a copayment method of cost sharing, then the copayment for an in-network Medicare FFS service category cannot exceed 50 percent of the average contracted rate of that service under this guidance (Medicare Managed Care Manual, Chapter 4, Section 50.1). Some service categories may identify specific benefits for which a unique copayment would apply, while others include a variety of services with different levels of cost which may reasonably have a range of copayments based on groups of similar services, such as durable medical equipment or outpatient diagnostic and radiological services.

CMS affords MA plans that adopt a lower, voluntary MOOP limit greater flexibility in establishing Parts A and B cost sharing than is available to plans that adopt the higher, mandatory MOOP limit. As discussed in section III.A.5, CMS intends to continue to establish more than one set of Parts A and B service cost sharing thresholds for plans choosing to offer benefit designs with either a lower, voluntary MOOP limit or the higher, mandatory MOOP limit set under §§ 422.100(f)(4) and (5) and 422.101(d)(2) and (3). Medicare FFS data currently represents the most relevant and available data at this time and is used to evaluate cost sharing for specific services as well in applying the standard currently at § 422.100(f)(6) and in considering CMS's authority to add (by regulation) categories of services for which cost sharing may not exceed levels in Medicare FFS.

As noted with regard to setting MOOP limits under §§ 422.100 and 422.101, CMS expects that MA encounter data will be more accurate and complete in the future and may consider future rulemaking regarding the use of MA encounter to understand program health care costs and compare to Medicare FFS data in establishing cost sharing limits. For reasons discussed in section III.A.5, CMS proposes to amend § 422.100(f)(6) to permit use of Medicare FFS to evaluate whether cost sharing for Part A and B services is discriminatory to set the evaluation limits announced each year in the Call Letter: in addition, we propose to use MA utilization encounter data as part of that evaluation process. As with the proposal to authorize use of this data for setting MOOP limits, CMS intends to use the Advance Notice/Call Letter process to communicate its Start Printed Page 56363application of the regulation and to transition any significant changes over time to avoid disruption to benefit designs and minimize potential beneficiary confusion.

This proposal will allow CMS to use the most relevant and appropriate information in determining cost sharing standards and thresholds. For example, analyses of MA utilization encounter data can be used with Medicare FFS data to establish the appropriate utilization scenarios to determine MA plan cost sharing standards and thresholds. CMS seeks comments and suggestions on this proposal, particularly whether additional regulation text is needed to achieve CMS's goal of setting and announcing each year presumptively discriminatory levels of cost sharing.

6. Meaningful Differences in Medicare Advantage Bid Submissions and Bid Review (§§ 422.254 and 422.256)

As provided at §§ 422.254(a)(4) and 422.256(b)(4), CMS will only approve a bid submitted by a Medicare Advantage (MA) organization if its plan benefit package is substantially different from those of other plans offered by the organization in the area with respect to key plan characteristics such as premiums, cost sharing, or benefits offered. MA organizations may submit bids for multiple plans in the same area under the same contract only if those plans are substantially different from one another based on CMS's annual meaningful difference evaluation standards. CMS proposes to eliminate this meaningful difference requirement beginning with MA bid submissions for contract year (CY) 2019. Separate meaningful difference rules were concurrently adopted for MA and stand-alone prescription drug plans (PDPs), but this specific proposal is limited to the meaningful difference provision related to the MA program. This proposal is not related to a statutory change.

This proposal aims to improve competition, innovation, available benefit offerings, and provide beneficiaries with affordable plans that are tailored for their unique health care needs and financial situation. CMS will maintain requirements that prohibit plans from misleading beneficiaries in their communication materials, provide CMS the authority to disapprove a bid if a plan's proposed benefit design substantially discourages enrollment in that plan by certain Medicare-eligible individuals, and allow CMS to non-renew a plan that fails to attract a sufficient number of enrollees over a sustained period of time (§§ 422.100(f)(2), 422.510(a)(4)(xiv), 422.2264, and 422.2260(e)). CMS expects organizations to continue designing plan benefit packages that, within a service area, are different from one another with respect to key benefit design characteristics, so that any potential beneficiary confusion is minimized when comparing multiple plans offered by the organization. For example, beneficiaries may consider the following factors when they make their health care decisions: plan type, Part D coverage, differences in provider network, Part B and plan premiums, and unique populations served (for example, special needs plans, or SNPs). In addition, CMS intends to continue the practice of furnishing information to MA organizations about their bid evaluation methodology through the annual Call Letter process and/or Health Plan Management System (HPMS) memoranda and solicit comments, as appropriate. This process allows CMS to articulate bid requirements and MA organizations to prepare bids that satisfy CMS requirements and standards prior to bid submission in June each year.

Research studies indicate that consumers, especially elderly consumers, may be challenged by a large number of plan choices that may: (1) Result in not making a choice, (2) create a bias to not change plans, and (3) impact MA enrollment growth.[27] Beneficiaries indicate they want to make informed and effective decisions, but do not feel qualified. As a result, they seek help from Medicare Plan Finder (MPF), brokers or plan representatives, providers, and family members. Although challenged by choices, beneficiaries do not want their plan choices to be limited and understand key decision factors such as premiums, out-of-pocket cost sharing, Part D coverage, familiar providers, and company offering the plan.[28] CMS continues to explore enhancements to MPF that will improve the customer experience; some examples of recent updates are provided below.

As discussed later in this section, CMS believes that it is challenging to apply the current standardized meaningful difference evaluation (which is applied consistently to all plans) in a manner that accommodates and evaluates important considerations objectively. CMS is concerned that the current evaluation may create unintended consequences related to innovative benefit designs. In addition, CMS's efforts in implementing more sophisticated approaches to consumer engagement and decision-making should help beneficiaries, caregivers, and family members make informed plan choices. For example, in MPF, plan details have been expanded to include MA and Part D benefits and a new consumer friendly tool for the CY 2018 Medicare open enrollment period which will assist beneficiaries in choosing a plan that meets their unique and financial needs based on a set of 10 quick questions.

Prior to implementing the meaningful difference evaluation for CY 2011 bid submissions, the beneficiary weighted average number of plans per county was about 30 in 2010 compared to 18 in 2017 (these numbers do not include SNPs or employer group plans which have additional criteria for enrollment). Private-fee-for-service (PFFS) plans represented 13 of the 30 plans in 2010 and less than 1 of the 18 plans in 2017. The Medicare Improvements for Patients and Providers Act of 2008 required PFFS plans to establish contracted provider networks by 2011 and many PFFS plans non-renewed. The weighted average number of plans has remained relatively stable since the decline of PFFS options. MA enrollment continued to grow from more than 11 million in July 2010 to 18.7 million in July 2017, fueled by the continued overall acceptance of managed care, the baby boom generation aging into Medicare beginning in 2011, and decreases in average plan premium during the time period.

As stated in the October 22, 2009, proposed rule (74 FR 54670 through 73) and April 15, 2010, final rule (75 FR 19736 through 40), CMS's goal for the meaningful difference evaluation was to ensure a proper balance between affording beneficiaries a wide range of plan choices and avoiding undue beneficiary confusion in making coverage selections. The meaningful difference evaluation was initiated when cost sharing and benefits were relatively consistent within each plan and similar plans within the same contract could be readily compared by measuring estimated out-of-pocket costs and other factors currently integrated in the evaluation's methodology.

The current meaningful difference evaluation uses estimated enrollee out-of-pocket costs based on the CMS Out-of-Pocket Cost (OOPC) model. This model uses a nationally representative cohort of beneficiaries from the Medicare Beneficiary Surveys (MCBS) Start Printed Page 56364and is intended to be objective and applied in a standardized and consistent manner across plans. MCBS data collected by CMS from beneficiaries are used to create the cohort of beneficiaries whose medical and prescription data are used to estimate out-of-pocket costs. The OOPC model generates estimated out-of-pocket costs based on utilization from the cohort of beneficiaries and each plan's benefit design entered into the Plan Benefit Package submitted to CMS as part of the bidding process. Detailed information about the meaningful difference evaluation is available in the CY 2018 Final Call Letter issued April 3, 2017 (pages 115-118) and information about the CMS OOPC model is available at: https://www.cms.gov/​Medicare/​Prescription-Drug-Coverage/​PrescriptionDrugCovGenIn/​OOPCResources.html. Estimated enrollee cost sharing is determined by the cost sharing amounts for Part A, B, and D services and most mandatory supplemental benefits (for example, dental services). Benefit service categories within a plan may have a range of multiple and varying cost sharing amounts. For example, the outpatient procedures, tests, labs, and radiology services benefit category includes many services that may have a wide range of cost sharing amounts. The OOPC model uses the minimum or lowest cost sharing value placed in the Plan Benefit Package (PBP) for each service category to estimate out-of-pocket costs in these situations. As discussed in the CY 2018 Final Call Letter, the differences between similar plans must have at least a $20 per member per month estimated beneficiary out-of-pocket cost difference. Differences in plan type (for example, HMO, LPPO), SNP sub-type, and inclusion of Part D coverage are considered meaningful differences which aligns with beneficiary decision-making. Premiums, risk scores, actual plan utilization and enrollment are not included in the evaluation because these factors would introduce risk selection, costs, and margin into the evaluation, resulting in a negation of the evaluation's objectivity.

Based on CMS's efforts to revisit MA standards and the implementation of the governing law to find flexibility for MA beneficiaries and plans, MA organizations are able to: (1) Tier the cost sharing for contracted providers as an incentive to encourage enrollees to seek care from providers the plan identifies based on efficiency and quality data which was communicated in CY 2011 guidance; (2) establish Provider Specific Plans (PSPs) designed to offer enrollees benefits through a subset of the overall contracted network in a given service area, which are sometimes referred to as narrower networks, and which was collected in the PBP beginning in CY 2011; and (3) beginning in CY 2019, provide different cost sharing and/or additional supplemental benefits for enrollees based on defined health conditions within the same plan (Flexibility in the Medicare Advantage Uniformity Requirements). These flexibilities allow MA organizations to provide beneficiaries with access to health care benefits that are tailored to individual needs, but make it difficult for CMS to objectively measure meaningful differences between plans. Items 1 and 3 provide greater cost sharing flexibility to address individual beneficiary needs, but result in a much broader range of cost sharing values being entered into PBP. As discussed in the previous paragraph, the CMS OOPC model uses the lowest cost sharing value for each service category to estimate out-of-pocket costs which may or may not be a relevant comparison between different plans for purposes of evaluating meaningful difference when variable cost sharing of this type is involved.

CMS remains committed to ensuring transparency in plan offerings so that beneficiaries can make informed decisions about their health care plan choices. It is also important to encourage competition, innovation, and provide access to affordable health care approaches that address individual needs. The current meaningful difference methodology evaluates the entire plan and does not capture differences in benefits that are tied to specific health conditions. As a result, the meaningful difference evaluation would not fully represent benefit and cost sharing differences experienced by enrollees and could lead to MA organizations to focus on CMS standards, rather than beneficiary needs, when designing benefit packages.

In order to capture differences in provider network, more tailored benefit and cost sharing designs, or other innovations, the evaluation process would have to use more varied and complex assumptions to identify plans that are not meaningfully different from one another. CMS believes that such an evaluation could result in more complicated and potentially confusing benefit designs to achieve differences between plans. This process may require greater administrative resources for MA organizations and CMS, while not producing results that are useful to beneficiaries.

The current meaningful difference methodology may force MA organizations to design benefit packages to meet CMS standards rather than beneficiary needs. To satisfy current CMS meaningful difference standards, MA organizations may have to change benefit coverage or cost sharing in certain plans to establish the necessary benefit value difference, even if substantial difference exists based on factors CMS is currently unable to incorporate into the evaluation (such as tiered cost sharing, and unique benefit packages based on enrollee health conditions). Although these changes in benefits coverage may be positive or negative, CMS is concerned the meaningful difference requirement results in organizations potentially reducing the value of benefit offerings. On the basis of bid review activities performed over the past several years, CMS is concerned that benefits may be decreased or cost sharing increased to satisfy the meaningful difference evaluation. These are unintended consequences of the existing meaningful difference evaluation and may restrict innovative benefit designs that address individual beneficiary needs and affordability.

Beneficiaries may also consider plan and Part B premiums when choosing among health plan options. Making changes to the existing meaningful difference evaluation to consider premiums differences as sufficient to distinguish among otherwise similar plans may limit the value of CMS's evaluation by introducing factors that plans can easily leverage, such as risk selection, costs, and margin, to satisfy the evaluation test without resulting in additional benefit value or choice for enrollees.

Stakeholders have expressed concern that without the meaningful difference evaluation the number of bids and plan choices will likely increase and make beneficiary decisions more difficult. The number of plan bids may increase because of a variety of factors, such as payments, bidding and service area strategies, serving unique populations, and in response to other program constraints or flexibilities. CMS expects that eliminating the meaningful difference requirement will improve the plan options available for beneficiaries, but CMS does not believe the number of similar plan options offered by the same MA organization in each county will necessarily increase significantly or create confusion in beneficiary decision-making. New flexibilities in benefit design and more sophisticated approaches to consumer engagement and decision-making should help Start Printed Page 56365beneficiaries, caregivers, and family members make informed plan choices among more individualized plan offerings. Based on the previously stated information, CMS does not expect a significant increase in time spent in bid review as a direct result of eliminating meaningful difference nor increased health care provider burden.

In addition, new flexibilities in benefit design may allow MA organizations to address different beneficiary needs within existing plan options and reduce the need for new plan options to navigate existing CMS requirements. In addition, MA organizations may be able to offer a portfolio of plan options with clear differences between benefits, providers, and premiums which would allow beneficiaries to make more effective decisions if the MA organizations are not required to change benefit and cost sharing designs in order to satisfy §§ 422.254 and 422.256. Currently, MA organizations must satisfy CMS meaningful difference standards (and other requirements), rather than solely focusing on beneficiary purchasing needs when establishing a range of plan options.

CMS supports beneficiary decision-making by providing tools and materials that focus on key beneficiary purchasing criteria, such as eligibility to enroll in SNPs, need for Part D coverage, Part D formulary and benefit coverage, plan type preference (for example, HMO vs. PPO), network providers, medical benefit coverage, premiums, and the brand or organization offering the plan options. CMS is also taking steps to improve information available through MPF and 1-800-MEDICARE to help beneficiaries, caregivers, and family members make informed plan choices.

CMS continually evaluates consumer engagement tools and outreach materials (including marketing, educational, and member materials) to ensure information is formatted consistently so beneficiaries can easily compare multiple plans. CMS also provides annual guidance and model materials to MA organizations to assist them in providing resources, such as the plan's Annual Notice of Change and Evidence of Coverage, which contain valuable information for the enrollee to evaluate and select the best plan for their needs. To reinforce informed decision making, CMS invests substantial resources in engagement strategies such as 1-800-MEDICARE, MPF, standard and electronic mail, and social media to continuously communicate with beneficiaries, caregivers, family members, providers, community resources, and other stakeholders.

CMS will continue to furnish information to MA organizations and solicit comments on bid evaluation methodology through the annual Call Letter process or HPMS memoranda, as appropriate.

In addition, CMS is maintaining requirements around plans not misleading beneficiaries in communication materials, disapproving a bid if CMS finds that a plan's proposed benefit design substantially discourages enrollment in that plan by certain Medicare-eligible individuals, and non-renewing plans that fail to attract a sufficient number of enrollees over a sustained period of time (§§ 422.100(f)(2), 422.510(a)(4)(xiv), 422.2264, and 422.2260(e)). CMS expects these measures will continue to protect beneficiaries from discriminatory plan benefit packages and health plans that demonstrate a lack of beneficiary interest if the meaningful difference requirement is eliminated. For all these reasons, CMS proposes to remove §§ 422.254(a)(4) and 422.256(b)(4) to eliminate the meaningful difference requirement for MA bid submissions. CMS seeks comments and suggestions on the topics discussed in this section about making sure beneficiaries have access to innovative plans that meet their unique needs.

7. Coordination of Enrollment and Disenrollment Through MA Organizations and Effective Dates of Coverage and Change of Coverage (§§ 422.66 and 422.68)

Section 1851(c)(3)(A)(ii) of the Act provides the Secretary with the authority to implement default enrollment rules for the Medicare Advantage (MA) program in addition to the statutory direction that beneficiaries who do not elect an MA plan are defaulted to original (fee-for-service) Medicare. This provision states that the Secretary may establish procedures whereby an individual currently enrolled in a non-MA health plan offered by an MA organization at the time of his or her Initial Coverage Election Period is deemed to have elected an MA plan offered by the organization if he or she does not elect to receive Medicare coverage in another way.

We initially addressed default enrollment upon conversion to Medicare in rulemaking (70 FR 4606 through 4607) in 2005, indicating that we would retain the flexibility to implement this provision through future instructions and guidance to MA organizations. Such subregulatory guidance was established later that same year and was applicable to the 2006 contract year. As outlined in Chapter 2 of the Medicare Managed Care Manual, we established an optional enrollment mechanism, whereby MA organizations may develop processes and, with CMS approval, provide seamless continuation of coverage by way of enrollment in an MA plan for newly MA eligible individuals who are currently enrolled in other health plans offered by the MA organization (such as commercial or Medicaid plans) at the time of the individuals' initial eligibility for Medicare. The guidance emphasized that MA organizations not limit seamless continuation of coverage to situations in which an enrollee becomes eligible for Medicare by virtue of age, but includes all newly eligible Medicare beneficiaries, including those whose Medicare eligibility is based on disability. We did not mandate that organizations implement a process for seamless continuation of coverage but, instead, gave organizations the option of implementing such a process for its enrollees who are approaching Medicare eligibility. From its inception, the guidance has required that individuals receive advance notice of the proposed MA enrollment and have the ability to “opt out” of such an enrollment prior to the effective date of coverage. This guidance has been in practice for the past decade for MA organizations that requested to use this voluntary enrollment mechanism, but we have encountered complaints and heard concerns about the practice. We are proposing new regulation text to establish limits and requirements for these types of default enrollments to address these concerns and our administrative experience with seamless continuation of coverage, commonly referred to as seamless conversion.

Based on our experience with the seamless conversion process thus far, we are proposing, to be codified at § 422.66(c)(2), requirements for seamless default enrollments upon conversion to Medicare. As proposed in more detail later in this section, such default enrollments would be into dual eligible special needs plans (D-SNPs) and be subject to five substantive conditions: (1) The individual is enrolled in an affiliated Medicaid managed care plan and is dually eligible for Medicare and Medicaid; (2) the state has approved use of this default enrollment process and provided Medicare eligibility information to the MA organization; (3) the individual does not opt out of the default enrollment; (4) the MA Start Printed Page 56366organization provides a notice that meets CMS requirements to the individual; and (5) CMS has approved the MA organization to use the default enrollment process before any enrollments are processed. We are also proposing that coverage under these types of default enrollments begin on the first of the month that the individual's Part A and Part B eligibility is effective. We are also proposing changes to §§ 422.66(d)(1) and (d)(5) and 422.68 that coordinate with the proposal for § 422.66.

In the Advance Notice of Methodological Changes for Calendar Year (CY) 2016 for Medicare Advantage (MA) Capitation Rates, Part C and Part D Payment Policies and 2016 Call Letter, we explained how entities that sponsor Medicaid managed care organizations (MCOs) and affiliated D-SNPs can promote coverage of an integrated Medicare and Medicaid benefit through existing authority for seamless continuation of coverage of Medicaid MCO members as they become eligible for Medicare. We received positive comments from state Medicaid agencies that supported this enrollment mechanism and requested that we clarify the process for approval of seamless continuation of coverage as a mechanism to promote enrollment in integrated D-SNPs that deliver both Medicare and Medicaid benefits. We also received comments from beneficiary advocates asking that additional consumer protections, including requiring written beneficiary confirmation and a special enrollment period for those individuals who transition from non-Medicare products to Medicare Advantage. We believe that our proposal, described later in this section, adequately addresses the concerns on which these requests are based, given that the default enrollment process would be permissible only for individuals enrolled in a Medicaid managed care plan in states that support this process. This means that the Medicare plan into which individuals would be defaulted would be one that is offered by the same parent organization as their existing Medicaid plan, such that much of the information needed by the MA plan would already be in the possession of the MA organization to facilitate the default enrollment process. Also, default enrollment would not be permitted if the state does not actively support this process, ensuring an accurate source of data for use by MA organizations to appropriately identify and notify individuals eligible for default enrollment.

On October 21, 2016,[29] in response to inquiries regarding this enrollment mechanism, its use by MA organizations, and the beneficiary protections currently in place, we announced a temporary suspension of acceptance of new proposals for seamless continuation of coverage. Based on our subsequent discussions with beneficiary advocates and MA organizations approved for this enrollment mechanism, it is clear that organizations attempting to conduct seamless continuation of coverage from commercial coverage (that is, private coverage and Marketplace coverage) find it difficult to comply with our current guidance and approval parameters. This is especially true of the requirement to identify commercial members who are approaching Medicare eligibility based on disability. Also challenging for these organizations is the requirement that they have the means to obtain the individual's Medicare number and are able to confirm the individual's entitlement to Part A and enrollment in Part B no fewer than 60 days before the MA plan enrollment effective date.

In addition, the ability for organizations to conduct seamless enrollment of individuals converting to Medicare will be further limited due to the statutory requirement that CMS remove Social Security Numbers (SSNs) from all Medicare cards by April 2019. A new Medicare number will replace the SSN-based Health Insurance Claim Number (HICN) on the new Medicare cards for Medicare transactions. Beginning in April 2018, we'll start mailing the new Medicare cards with the new number to all people with Medicare. Given the random and unique nature of the new Medicare number, we believe MA organizations will be limited in their ability to automatically enroll newly eligible Medicare beneficiaries without having to contact them to obtain their Medicare numbers, as CMS does not share Medicare numbers with organizations for their commercial members who are approaching Medicare eligibility. We note that contacting the individual in order to obtain the information necessary to process the enrollment does not align with the intent of default enrollment, which is designed to process enrollments and have coverage automatically shift into the MA plan without an enrollment action required by the beneficiary.

Organizations operating Medicaid managed care plans are better able to meet these requirements when states provide data, including the individual's Medicare number, on those about to become Medicare eligible. As part of coordination between the Medicare and Medicaid programs, CMS shares with states, via the State MMA file, data of individuals with Medicaid who are newly becoming entitled to Medicare; such data includes the Medicare number of newly eligible Medicare beneficiaries. MA organizations with state contracts to offer D-SNPs would be able to obtain (under their agreements with state Medicare agencies) the data necessary to process the MA enrollment submission to CMS. Therefore, we are proposing to revise § 422.66 to permit default enrollment only for Medicaid managed care enrollees who are newly eligible for Medicare and who are enrolled into a D-SNP administered by an MA organization under the same parent organization as the organization that operates the Medicaid managed care plan in which the individual remains enrolled. These requirements would be codified at § 422.66(c)(2)(i) (as a limit on the type of plan into which enrollment is defaulted) and (c)(2)(i)(A) (requiring existing enrollment in the affiliated Medicaid managed care plan as a condition of default MA enrollment). At paragraph (c)(2)(i)(B), we are also proposing to limit these default enrollments to situations where the state has actively facilitated and approved the MA organization's use of this enrollment process and articulates this in the agreement with the MA organization offering the D-SNP, as well as providing necessary identifying information to the MA organization.

The option of default enrollment can be particularly beneficial for Medicaid managed care enrollees who are newly eligible for Medicare, because in the case that the parent organization of the Medicaid managed care plan also offers a D-SNP, default enrollment promotes enrollment in a plan that offers some level of integration of acute care, behavioral health and, for eligible beneficiaries, long-term care services and supports, including institutional care, and home and community-based services (HCBS). This is in line with CMS' support of state efforts to increase enrollment of dually eligible individuals in fully integrated systems of care and the evidence [30] that such systems Start Printed Page 56367improve health outcomes. Further this proposal will provide states with additional flexibility and control. States can decide if they wish to allow their contracted Medicaid managed care plans to use default enrollment of Medicaid enrollees into D-SNPs and can control which D-SNPs receive default enrollments through two means: The contracts that states maintain with D-SNPs (§ 422.107(b)) and by providing the data necessary for MA organizations to successfully implement the process. Under our proposal, MA organizations can process default enrollments only for dual-eligible individuals in states where the contract with the state under § 422.107 approves it and the state identifies eligibility and shares necessary data with the organization.

To ensure that Medicaid beneficiaries considered for default enrollment upon their conversion to Medicare are aware of the default MA enrollment and of the changes to their Medicare and Medicaid coverage, we also propose, at § 422.66(c)(2)(i)(C) and (c)(2)(iv), that the MA organization must issue a notice no fewer than 60 days before the default enrollment effective date to the enrollee. The proposed revised notice [31] must include clear information on the D-SNP, as well as instructions to the individual on how to opt out (or decline) the default enrollment and how to enroll in Original Medicare or a different MA plan. This notice requirement aims to help ensure a smooth transition of eligible individuals into the D-SNP for those who choose not to opt out. All MA organizations currently approved to conduct seamless conversion enrollment issue at least one notice 60 days prior to the MA enrollment effective date, so our proposal would not result in any additional burden to these MA organizations using this process. Recent discussions with MA organizations currently conducting seamless conversion enrollment have revealed that several of them already include in their process additional outreach, including reminder notices and outbound telephone calls to aid in the transition. We believe that these additional outreach efforts are helpful and we would encourage their use under our proposal.

We also propose, in paragraph (c)(2)(i)(E) and (2)(ii), that MA organizations must obtain approval from CMS before implementing default enrollment. Under our proposal in paragraph (c)(2)(i)(B), CMS approval would be granted only if the applicable state approves the default enrollment through its agreement with the MA organization. MA organizations would be required to implement default enrollment in a non-discriminatory manner, consistent with their obligations under § 422.110; that is, MA organizations could not select for default enrollment only certain of the members of the affiliated Medicaid plan who were identified as eligible for default enrollment. Lastly, we propose that CMS may suspend or rescind approval at any time if it is determined that the MA organization is not in compliance with the requirements. We request comment whether this authority to rescind approval should be broader; we have considered whether a time limit on the approval (such as 2 to 5 years) would be appropriate so that CMS would have to revisit the processes and procedures used by an MA organization under this proposed regulation in order to assure that the regulation requirements are still being followed. We are particularly interested in comment on this point in conjunction with our alternative (discussed later in this section) proposal to codify the existing parameters for this type of seamless conversion default enrollment such that all MA organizations would be able to use this default enrollment process for newly eligible and newly enrolled Medicare beneficiaries in the MA organization's non-Medicare coverage.

Under our proposal, default enrollment of individuals at the time of their conversion to Medicare would be more limited than the default enrollments Congress authorized the Secretary to permit in section 1851(c)(3)(A)(ii) of the Act. However, we are also proposing some flexibility for MA organizations that wish to offer seamless continuation of coverage to their non-Medicare members, commercial, Medicaid or otherwise, who are gaining Medicare eligibility. As discussed in more detail below, affirmative elections would be necessary for individuals not enrolled in a Medicaid managed care plan, consistent with § 422.50. However, because individuals enrolled in an organization's commercial plan, for example would already be known to the parent organization offering both the non-Medicare plan and the MA plan and the statute acknowledges that this existing relationship is somewhat relevant to Part C coverage, we propose to amend § 422.66(d)(5) and to establish, through subregulatory guidance, a new and simplified positive (that is, “opt in”) election process that would be available to all MA organizations for the MA enrollments of their commercial, Medicaid or other non-Medicare plan members. To reflect our change in policy with regard to a default enrollment process and this proposal to permit a simplified election process for individuals who are electing coverage in an MA plan offered by the same entity as the individual's non-Medicare coverage, we are also proposing to add text in § 422.66(d)(5) authorizing a simplified election for purposes of converting existing non-Medicare coverage, commercial, Medicaid or otherwise, to MA coverage offered by the same organization. This new mechanism would allow for a less burdensome process for MA organizations to offer enrollment in their MA plans to their non-Medicare health plan members who are newly eligible for Medicare. As the MA organization has a significant amount of the information from the member's non-Medicare enrollment, this new simplified election process aims to make enrollment easier for the newly-eligible beneficiary to complete and for the MA organization to process. It would align with the individual's Part A and Part B initial enrollment period (and initial coordinated election period for MA coverage), provided he or she enrolled in both Medicare Parts A and B when first eligible for Medicare. This new election process would provide a longer period of time for MA organizations to accept enrollment requests than the time period in which MA organizations would be required to effectuate default enrollments, as organizations would be able to accept enrollments throughout the individual's Initial Coverage Election Period (ICEP), which for an aged beneficiary is the 7-month period that begins 3 months before the month in which the individual turns 65 and ends 3 months after the month in which the individual turns 65. We would use existing authority to create this new enrollment Start Printed Page 56368mechanism which, if implemented, would be available to MA organizations in the 2019 contract year. We solicit comments on the proposed changes to the regulation text as well as the form and manner in which such enrollments may occur.

This optional simplified election process for the enrollment of non-Medicare plan members into MA upon their initial eligibility (or initial entitlement) for Medicare would provide individuals the option to remain with the organization that offers their non-Medicare coverage. A positive election in this circumstance provides an additional beneficiary protection for non-dually eligible individuals, so that they may actively choose a Medicare plan structure similar to that of their commercial, Medicaid or other non-Medicare health plans, as there may be significant differences between an organization's commercial plans, for example, and its MA plans in terms of provider networks, drug formularies, costs and benefit structures. While these differences may result in a more restrictive network, a mandated change in a primary care physician and increased out-of-pocket costs for converting enrollees, default enrollment of a dually eligible individual enrolled in a Medicaid plan into a D-SNP, triggers no premium liability or cost sharing for medical care or prescription drugs above levels that apply under Original Medicare. Further, the individual remains in the Medicaid managed care plan and is gaining additional Medicare coverage, which is not always the case in other contexts. We solicit comment on these coordinated proposals to implement section 1851(c)(3)(A)(ii) in general as discussed below and in two particular ways: (1) To permit default MA enrollments for dually-eligible beneficiaries who are newly eligible for Medicare under certain conditions and (2) to permit simplified elections for seamless continuations of coverage for other newly-eligible beneficiaries who are in non-Medicare health coverage offered by the same parent organization that offers the MA plan. We further invite comments regarding whether the CMS approval of an organization's request to conduct default enrollment should be limited to a specific time frame. In addition, we are proposing amendments to §§ 422.66(d)(1) and 422.68 that are also related to MA enrollment. Currently, as described in the 2005 final rule (70 FR 4606 through 4607), § 422.66(d)(1) requires MA organizations to accept, during the month immediately preceding the month in which he or she is entitled to both Part A and Part B, enrollment requests from an individual who is enrolled in a non-Medicare health plan offered by the MA organization and who meets MA eligibility requirements. To better reflect section 1851(c)(3)(A)(ii), we are proposing to amend § 422.66(d)(1) to add text clarifying that seamless continuations of coverage are available to an individual who requests enrollment during his or her Initial Coverage Election Period. In light of our proposal to permit a simplified election process for individuals who are electing coverage in an MA plan offered by the same parent organization as the individual's non-Medicare coverage, we are also proposing a revision to § 422.68(a) to ensure that ICEP elections made during or after the month of entitlement to both Part A and Part B are effective the first day of the calendar month following the month in which the election is made. This proposed revision would codify the subregulatory guidance that MA organizations have been following since 2006. This proposal is also consistent with the proposal at § 422.66(c)(2)(iii) regarding the effective date of coverage for default enrollments into D-SNPs. We also solicit comment on these related proposals.

In conclusion, we are proposing to add regulation text at § 422.66(c)(2)(i) through (iv) to set limits and requirements for a default enrollment of the type authorized under section 1851(c)(3)(A)(ii). We are proposing a clarifying amendment to § 422.66(d)(1) regarding when seamless continuation coverage can be elected and revisions to § 422.66(d)(5) to reflect our proposal for a new and simplified positive election process that would be available to all MA organizations. Lastly, we are proposing revisions to § 422.68(a) to ensure that ICEP elections made during or after the month of entitlement to both Part A and Part B are effective the first day of the calendar month following the month in which the election is made.

We invite comments in general on our proposal, as well as on the alternatives presented. We recognize that our proposal narrows the scope of default enrollments compared to what CMS approved under section 1851(c)(3)(A) of the Act in the past. As we contemplated the future of the seamless conversion mechanism, we considered retaining processes similar to how the seamless conversion mechanism is outlined currently in section 40.1.4 of Chapter 2 of the Medicare Managed Care Manual and had been in practice through October 2016. We considered proposing regulations to codify that guidance as follows—

  • Articulating the requirements for an MA organization's proposal to use the seamless conversion mechanism, including identifying eligible individuals in advance of Medicare eligibility;
  • Establishing timeframes for processing and the effective date of the enrollment; and
  • Requiring notification to individuals at least 60 days prior to the conversion of their right to opt-out or decline the enrollment.

In considering this alternative, we contemplated adding additional beneficiary protections, including the issuance of an additional notice to ensure that individuals understood the implication of taking no action. While this alternative would have led to increased use of the seamless conversion enrollment mechanism than what had been used in the past, the operational challenges, particularly in relation to the new Medicare Beneficiary Identification number may be significant for MA organizations to overcome at this time.

We also considered proposing regulations to limit the use of default enrollment to only the aged population. While this alternative would simplify a MA organization's ability to identify eligible individuals, we have concerns about disparate treatment among newly eligible individuals based on their reason for obtaining Medicare entitlement.

We invite comments on our proposal and the alternate approaches, including the following:

  • Codify the existing parameters for this type of seamless conversion default enrollment such that all MA organizations would be able to use this default enrollment process for newly eligible and newly enrolled Medicare beneficiaries in the MA organization's non-Medicare coverage.
  • Codify the existing parameters for this type of seamless conversion default enrollment, as described previously, but allow that use of default enrollment be limited to only the aged population.

If commenters recommend one or more alternate approaches, we ask for suggested solutions that address the concerns noted in this discussion, particularly related to the requirement that plans identify commercial members who are approaching Medicare eligibility based on disability, as well as how plans could confirm MA eligibility and process enrollments without access to the individual's Medicare number.Start Printed Page 56369

8. Passive Enrollment Flexibilities To Protect Continuity of Integrated Care for Dually Eligible Beneficiaries (§ 422.60(g))

Beneficiaries who are dually eligible for both Medicare and Medicaid typically face significant challenges in navigating the two programs, which include separate or overlapping benefits and administrative processes. Fragmentation between the two programs can result in a lack of coordination for care delivery, potentially resulting in unnecessary, duplicative, or missed services. One method for overcoming this challenge is through integrated care, which provides dually eligible beneficiaries with the full array of Medicaid and Medicare benefits for which they are eligible through a single delivery system, thereby improving quality of care, beneficiary satisfaction, care coordination, and reducing administrative burden.

Integrated care options are increasingly available for dually eligible beneficiaries, which include a variety of integrated D-SNPs. D-SNPs can provide greater integrated care than enrollees would otherwise receive in other MA plans or Medicare Fee-For-Service (FFS), particularly when an individual is enrolled in both a D-SNP and Medicaid managed care organization offered by the same organization. D-SNPs that meet higher standards of integration, quality, and performance benchmarks—known as highly integrated D-SNPs—are able to offer additional supplemental benefits to support integrated care pursuant to § 422.102(e). D-SNPs that are fully integrated—known as Fully Integrated Dual-Eligible (FIDE) SNPs, as defined at § 422.2 provide for a much greater level of integration and coordination than non-integrated D-SNPs, providing all primary, acute, and long-term care services and supports under a single entity.

While enrollment in integrated care options continues to grow, there are instances in which beneficiaries may face disruptions in coverage in integrated care plans. These disruptions can result from numerous factors, including market forces that impact the availability of integrated D-SNPs and state re-procurements of Medicaid managed care organizations. Such disruptions can result in beneficiaries being enrolled in two separate organizations for their Medicaid and Medicare benefits, thereby losing the benefits of integration achieved when the same entity offers both benefit packages. In an effort to protect the continuity of integrated care for dually eligible beneficiaries, we are proposing a limited expansion of our regulatory authority to initiate passive enrollment for certain dually eligible beneficiaries in instances where integrated care coverage would otherwise be disrupted.

Section 1851(c)(1) of the Act authorizes us to develop mechanisms for beneficiaries to elect MA enrollment, and we have used this authority to create passive enrollment. The current regulation at § 422.60(g) limits the use of passive enrollment to two scenarios: (1) In instances where there is an immediate termination of an MA contract; or (2) in situations in which we determine that remaining enrolled in a plan poses potential harm to beneficiaries. The passive enrollment defined in § 422.60(g) requires beneficiaries to be provided prior notification and a period of time prior to the effective date to opt out of enrollment from a plan. Current § 422.60(g)(3) provides every passively enrolled beneficiary with a special election period to allow for election of different Medicare coverage: Selecting a different managed care plan or opting out of MA completely and, instead, receiving services through Original Medicare (a FFS delivery system). A beneficiary who is offered a passive enrollment is deemed to have elected enrollment in the designated plan if he or she does not elect to receive Medicare coverage in another way.

Our proposal is a limited expansion of this regulatory authority to promote continued enrollment of dually eligible beneficiaries in integrated care plans to preserve and promote care integration under certain circumstances. The proposal includes use of these existing opt-out procedures and special election period. Therefore, we are proposing to redesignate these requirements from (g)(1) through (3) to (g)(3) through (g)(5) respectively, with minor revisions in proposed paragraph (g)(5) to describe the application of special election period and in proposed paragraph (g)(4) to make minor grammatical changes to the text to improve its readability and clarity.

Our proposal is to add authority to passively enroll full-benefit dually eligible beneficiaries who are currently enrolled in an integrated D-SNP into another integrated D-SNP under certain circumstances. We anticipate that these proposed regulations would permit passive enrollments only when all the following conditions are met:

  • When necessary to promote integrated care and continuity of care;
  • Where such action is taken in consultation with the state Medicaid agency;
  • Where the D-SNP receiving passive enrollment contracts with the state Medicaid agency to provide Medicaid services; and
  • Where certain other conditions are met to promote continuity and quality of care.

We expect that these factors would all occur in situations when affected beneficiaries would otherwise be experiencing an involuntary disruption in either their Medicare or Medicaid coverage. We anticipate using this new proposed authority exclusively in such situations.

All individuals would be provided with a special election period (which, as established in subregulatory guidance, lasts for 2 months), as described in § 422.62(b)(4), provided they are not otherwise eligible for another SEP (for example, under proposed § 423.38(c)(4)(ii)).

For illustrative purposes we have outlined two scenarios in which this proposed regulatory authority could be used to promote continued access to integrated care and maintain continuity of care for dually eligible individuals:

  • State Re-Procurement of Medicaid Managed Care Contracts: In several states, dually eligible beneficiaries receive Medicaid services through managed care plans that the state selects through a competitive procurement process. Some states also require that the sponsors of Medicaid health plans also offer a D-SNP in the same service area to promote opportunities for integrated care. Dually eligible beneficiaries can face disruptions in coverage due to routine state re-procurements of Medicaid managed care contracts. Individuals enrolled in Medicaid managed care plans that are not renewed are typically transitioned to a separate Medicaid managed care plan. In such a scenario, dually eligible beneficiaries enrolled in the non-renewing Medicaid managed care plan's corresponding D-SNP product would now be enrolled in two separate organizations for their Medicaid and Medicare services, resulting in non-integrated coverage. Under this proposed regulation, CMS would have the ability, in consultation with the state Medicaid agency that contracts with integrated D-SNPs, to passively enroll dually eligible beneficiaries facing such a disruption into an integrated D-SNP that corresponds with their new Medicaid managed care plan, thereby promoting continuous enrollment in integrated care.Start Printed Page 56370
  • Non-Renewal of D-SNP Contracts: Beneficiaries enrolled in an integrated D-SNP that non-renews its MA contract at the end of the contract year can face disruptions in integrated care coverage, requiring them to actively select a new MA plan or default into Original Medicare and a standalone prescription drug plan. While states are permitted to passively enroll beneficiaries for Medicaid coverage as defined in § 438.54(c), CMS is not permitted to do so for Medicare coverage when an MA plan non-renews at the end of the contract year, as current authority for passive enrollment is limited to midyear terminations. Rather, beneficiaries in the D-SNP that is non-renewing its contract would need to actively select and enroll in an MA plan that integrates their Medicare and Medicaid coverage in order to continue the same level of integrated care. Permitting CMS the ability to passively enroll D-SNP enrollees into other integrated D-SNP plans in consultation with the state Medicaid agency would support beneficiaries remaining in integrated care.

With a limited expansion of our passive enrollment regulatory authority, we can better promote integrated care and continuity of care for dually eligible beneficiaries. Therefore, we are proposing to redesignate the introductory text in § 422.60(g) as paragraph (g)(1), with a new heading, technical revisions to the existing text that specifies when passive enrollments may be implemented by CMS designated as (g)(1)(i) and (ii), and a new paragraph (iii). This new (g)(1)(iii) would authorize CMS to passively enroll certain dually eligible individuals currently enrolled in an integrated D-SNP into another integrated D-SNP, after consulting with the state Medicaid agency that contracts with the D-SNP or other integrated managed care plan, to promote continuity of care and integrated care.

We also propose to add a new paragraph (g)(2) to include a number of requirements that an MA plan would have to meet in order to qualify to receive passive enrollments under paragraph (g)(1)(iii). We also propose to include in paragraph (g)(1)(iii) a reference to new paragraph (g)(2) to make it clear that a contract with the state is also necessary for a D-SNP to be eligible to receive these passive enrollments. Specifically, we propose that in order to receive passive enrollments under the new authority, MA plans must be highly integrated, thereby restricting passive enrollment to those MA plans that operate as a FIDE SNP or meet the integration standard for a highly-integrated D-SNP, as defined in § 422.2 and described in § 422.102(e) respectively. In an effort to ensure continuity of care, acquiring MA plans would also be required to have substantially similar provider and facility networks and Medicare- and Medicaid-covered benefits as the integrated MA plan (or plans) from which beneficiaries are passively enrolled. MA plans receiving passive enrollment would also be required to not have any prohibition on new enrollment imposed by CMS and have appropriate limits on premium and cost-sharing for beneficiaries. If our proposed paragraphs (g)(1) and (g)(2) are finalized, we would describe in subregulatory guidance the procedure through which CMS would determine qualification for passive enrollment. We also propose that to receive these passive enrollments, that D-SNP must meet minimum quality standards based on MA Star Ratings; we direct the reader to the proposal at section III.A.12. of this rule regarding the MA Star Rating System. Our proposed regulation text refers to a requirement to have a minimum overall MA Star Rating of at least 3 stars, which represents average or above-average performance. The rating for the year prior to receipt of passive enrollment would be used in order to provide sufficient time for CMS, states, and MAOs to prepare for the passive enrollment process. Low-enrollment contracts or new plans without MA Star Ratings as defined in § 422.252 would also be eligible for passive enrollment under our proposal, as long as the plan meets all other proposed requirements.

Our goal with this proposed requirement is to ensure that the D-SNP plans receiving these passive enrollments provide high-quality care, coverage and administration of benefits. As passive enrollments, in some sense, are a benefit to a plan, by providing an enrollee and associated payments without the plan having successfully marketed to the enrollee, we believe that it is important that these enrollments are limited to plans that have demonstrated commitment to quality. Further, it is important to ensure that when we are making an enrollment decision for a beneficiary who does not make an alternative coverage choice that we are guided by the beneficiary's best interests, which are likely served by a plan that is rated as having average or above-average performance on the MA Stars Rating System. However, we recognize that MA Star Ratings do not capture performance for those services that would be covered under Medicaid, including community behavioral health treatment and long-term services and supports. We welcome comments on the process for determining qualification for passive enrollment under this proposal and particularly on the minimum quality standards. We request that commenters identify specific measures and minimum ratings that would best serve our goals in this proposal and are specific or especially relevant to coverage for dually eligible beneficiaries.

In addition to the proposed minimum quality standards and other requirements for a D-SNP to receive passive enrollments, we are considering limiting our exercise of this proposed new passive enrollment authority to those circumstances in which such exercise would not raise total cost to the Medicare and Medicaid programs. We seek comment on this potential further limitation on exercise of the proposed passive enrollment regulatory authority to better promote integrated care and continuity of care. In particular, we seek stakeholder feedback how to calculate the projected impact on Medicare and Medicaid costs from exercise of this authority.

The intent of the proposed passive enrollment regulatory authority is to better promote integrated care and continuity of care—including with respect to Medicaid coverage—for dually eligible beneficiaries. As such, we would implement this authority in consultation with the state Medicaid agencies that are contracting with these plan sponsors for provision of Medicaid benefits.

We considered proposing new beneficiary notification requirements for passive enrollments that occur under proposed paragraph (g)(1)(iii). We considered requiring MA organizations receiving the passive enrollment to provide two notifications to all potential enrollees prior to their enrollment effective date. We acknowledge that under the Financial Alignment Initiative demonstrations, states are required to provide two passive enrollment notices. Under the passive enrollment authority proposed here, we would continue to encourage, but not require, a second notice or additional outreach to impacted individuals. Given the existing beneficiary notifications that are currently required under Medicare regulations and concerns regarding the quantity of notifications sent to beneficiaries, we are not proposing to modify the existing notification requirements, so these existing standards would apply for existing passive enrollments and for the newly proposed passive enrollment authority. Start Printed Page 56371However, we solicit comment on alternatives regarding beneficiary notices, including comments about the content and timing of such notices. Our proposal redesignates the notice requirements to paragraph (g)(4) with minor grammatical revisions.

Finally, we propose a technical correction to a citation in § 422.60(g), which discusses situations involving an immediate termination of an MA plan as provided in § 422.510(a)(5). This citation is outdated, as the regulatory language at § 422.510(a)(5) has been moved to § 422.510(b)(2)(i)(B). We propose to replace the current citation with a reference to § 422.510(b)(2)(i)(B).

9. Part D Tiering Exceptions (§§ 423.560, 423.578(a) and (c))

a. Background

Section 1860D-4(g)(2) of the Act specifies that a beneficiary enrolled in a Part D plan offering prescription drug benefits for Part D drugs through the use of a tiered formulary may request an exception to the plan sponsor's tiered cost-sharing structure. The statute requires such plan sponsors to have a process in place for making determinations on such requests, consistent with guidelines established by the Secretary. At the start of the Part D program, we finalized regulations at § 423.578(a) that require plan sponsors to establish and maintain reasonable and complete exceptions procedures. These procedures permit enrollees, under certain circumstances, to obtain a drug in a higher cost-sharing tier at the more favorable cost-sharing applicable to alternative drugs on a lower cost-sharing tier of the plan sponsor's formulary. Such an exception is granted when the plan sponsor determines that the non-preferred drug is medically necessary based on the prescriber's supporting statement. The tiering exceptions regulations establish the general scope of issues that must be addressed under the plan sponsor's tiering exceptions process. Our goal with the exceptions rules codified in the Part D final rule (70 FR 4352) was to allow plan sponsors sufficient flexibility in benefit design to obtain pricing discounts necessary to offer optimal value to beneficiaries, while ensuring that beneficiaries with a medical need for a non-preferred drug are afforded the type of drug access and favorable cost-sharing called for under the law.

At the start of the program, most Part D formularies included no more than four cost-sharing tiers, generally with only one generic tier. For the 2006 and 2007 plan years respectively, about 83 percent and 89 percent of plan benefit packages (PBPs) that offered drug benefits through use of a tiered formulary had 4 or fewer tiers. Since that time, there have been substantial changes in the prescription drug landscape, including increasing costs of some generic drugs, as well as the considerable impact of high-cost drugs on the Part D program. Plan sponsors have responded by modifying their formularies and PBPs, resulting in the increased use of two generic-labeled drug tiers and mixed drug tiers that include brand and generic products on the same tiers. The flexibilities CMS permits in benefit design enable plan sponsors to continue to offer comprehensive prescription drug coverage with reasonable controls on out of pocket costs for enrollees, but increasingly complex PBPs with more variation in type and level of cost-sharing. For the 2017 plan year, about 91 percent of all Part D PBPs offer drug benefits through use of a tiered formulary. Over 98 percent of those tiered PBPs use a formulary containing 5 or 6 tiers; of those, about 98 percent contain two generic-labeled tiers.

These changes and increased complexities, and more than a decade of program experience, lead us to believe that our current regulations are no longer sufficient to ensure that tiering exceptions are understood by beneficiaries and adjudicated by plan sponsors in the manner the statute contemplates. For this reason, we propose to amend §§ 423.560, 423.578(a) and 423.578(c) to revise and clarify requirements for how tiering exceptions are to be adjudicated and effectuated.

While section 1860D-4(g)(2) of the Act uses the terms “preferred” and “non-preferred” drug, rather than “brand” and “generic”, it also gives the Secretary authority to establish guidelines for making a determination with respect to a tiering exception request. The statute further specifies that “a non-preferred drug could be covered under the terms applicable for preferred drugs” (emphasis added) if the prescribing physician determines that the preferred drug would not be as effective or would have adverse effects for the individual. The statute therefore contemplates that tiering exceptions must allow for an enrollee with a medical need to obtain favorable cost-sharing for a non-preferred product, but that such access be subject to reasonable limitations. Establishing regulations that allow plans to impose certain limitations on tiering exceptions helps ensure that all enrollees have access to needed drugs at the most favorable cost-sharing terms possible.

b. General Rules

We are proposing to revise § 423.578(a)(2) to read as follows: “Part D plan sponsors must establish criteria that provide for a tiering exception consistent with paragraphs § 423.578(a)(3) through (a)(6) of this section.” We believe that inserting a cross-reference to paragraph (a)(6), which establishes allowable limitations on tiering exceptions, and which we are also proposing to revise, would streamline and clarify the requirements for such exceptions. The proposed revisions would establish rules that more definitively base eligibility for tiering exceptions on the lowest applicable cost sharing for the tier containing the preferred alternative drug(s) for treatment of the enrollee's health condition in relation to the cost sharing of the requested, higher-cost drug, and not based on tier labels.

c. Limitations on Tiering Exceptions

We are also proposing to revise the regulations at § 423.578(a)(6) to specify when a Part D plan sponsor may limit tiering exceptions. We believe the current text, which permits a plan sponsor to exempt any dedicated generic tier from its tiering exceptions procedures, is being applied in a manner that restricts tiering exceptions more stringently than is appropriate. Specifically, Part D sponsors have been considering any tier that is labeled “generic” to be exempt from tiering exceptions even if the tier also contains brand name drugs. This has become even more problematic with the increase in the number of PBPs with more than one tier labeled “generic”. Based on an analysis of 2017 plan data entered into the Health Plan Management System (HPMS), for all Part D plans using a tiered formulary, 62 percent have indicated at least two tiers that contain only generic drugs, and 7 percent have three such tiers. Combined with the allowable exemption of a specialty tier (used by 99.8 percent of tiered Part D plans in 2017), almost two-thirds of all tiered PBPs could exempt 3 of their 5 or 6 tiers from tiering exceptions without any consideration of medical need or placement of preferred alternative drugs. To ensure appropriate enrollee access to tiering exceptions, we are proposing to revise § 423.578(a)(6) to specify that a Part D plan sponsor would not be required to offer a tiering exception for a brand name drug to a preferred cost-sharing level that applies only to generic alternatives. Under this proposal, however, plans would be required to approve tiering exceptions for non-preferred generic drugs when Start Printed Page 56372the plan determines that the enrollee cannot take the preferred generic alternative(s), including when the preferred generic alternative(s) are on tier(s) that include only generic drugs or when the lower tier(s) contain a mix of brand and generic alternatives. In other words, plans would not be permitted to exclude a tier containing alternative drug(s) with more favorable cost-sharing from their tiering exceptions procedures altogether just because that lower-cost tier is dedicated to generic drugs. As described in the following paragraph, we are also proposing at § 423.578(a)(6) to establish specific tiering exceptions policy for biological products.

Proposed § 423.578(a)(6)(iii) would specify that, “If a Part D plan sponsor maintains a specialty tier, as defined in § 423.560, the sponsor may design its exception process so that Part D drugs and biological products on the specialty tier are not eligible for a tiering exception.” We also propose to add the following definition to Subpart M at § 423.560:

Specialty tier means a formulary cost-sharing tier dedicated to very high cost Part D drugs and biological products that exceed a cost threshold established by the Secretary. We note that, while the proposed definition of specialty tier does not refer to “unique” drugs as existing § 423.578(a)(7) does, we do not intend to change the criteria for the specialty tier, which has always been based on the drug cost. This proposal would retain the current regulatory provision that permits Part D plan sponsors to disallow tiering exceptions for any drug that is on the plan's specialty tier. This policy is currently codified at § 423.578(a)(7), which would be revised and redesignated as § 423.578(a)(6)(iii). We believe that retaining the existing policy limiting the availability of tiering exceptions for drugs on the specialty tier is important because of the beneficiary protection that limits cost-sharing for the specialty tier to 25 percent coinsurance (up to 33 percent for plans that have a reduced or $0 Part D deductible), ensuring that these very high cost drugs remain accessible to enrollees at cost sharing equivalent to the defined standard benefit.

We also clarify that, if the specialty tier has cost sharing more preferable than another tier, then a drug placed on such other non-preferred tier is eligible for a tiering exception down to the cost sharing applicable to the specialty tier if an applicable alternative drug is on the specialty tier and the other requirements of § 423.578(a) are met. In other words, while plans are not required to allow tiering exceptions for drugs on the specialty tier to a more preferable cost-sharing tier, the specialty tier is not exempt from being considered a preferred tier for purposes of tiering exceptions.

We believe a shift in regulatory policy that establishes a distinction between non-preferred branded drugs, biological products, and non-preferred generic and authorized generic drugs, achieves needed balance between limitations in plans' exceptions criteria and beneficiary access, and aligns with how many plan sponsors already design their tiering exceptions criteria. Accordingly, we are proposing to revise § 423.578(a)(6) to clarify and establish additional limitations plans would be permitted to place on tiering exception requests. First, we are proposing new paragraphs (i) and (ii), which would permit plans to limit the availability of tiering exceptions for the following drug types to a preferred tier that contains the same type of alternative drug(s) for treating the enrollee's condition:

  • Brand name drugs for which an application is approved under section 505(c) of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 355(c)), including an application referred to in section 505(b)(2) of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 355(b)(2)); and
  • Biological products, including follow-on biologics, licensed under section 351 the Public Health Service Act.

With the proposed revisions, that approved tiering exceptions for brand name drugs would generally be assigned to the lowest applicable cost-sharing associated with brand name alternatives, and approved tiering exceptions for biological products would generally be assigned to the lowest applicable cost-sharing associated with biological alternatives. Similarly, tiering exceptions for non-preferred generic drugs would be assigned to the lowest applicable cost-sharing associated with alternatives that are either brand or generic drugs (see further discussion later in this section related to assignment of cost-sharing for approved tiering exceptions to the lowest applicable tier). Given the widespread use of multiple generic tiers on Part D formularies, and the inclusion of generic drugs on mixed, higher-cost tiers, we believe these changes are needed to ensure that tiering exceptions for non-preferred generic drugs are available to enrollees with a demonstrated medical need. Procedures that allow for tiering exceptions for higher-cost generics when medically necessary promote the use of generic drugs among Part D enrollees and assist them in managing out of pocket costs.

We are also proposing at § 423.578(a)(6)(i) to codify that plans are not required to offer tiering exceptions for brand name drugs or biological products at the cost-sharing level of alternative drug(s) for treating the enrollee's condition, where the alternatives include only the following drug types:

  • Generic drugs for which an application is approved under section 505(j) of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 355(j)), or
  • Authorized generic drugs as defined in section 505(t)(3) of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 355(t)(3)).

As discussed in the Call Letter, CMS collects Part D plan formulary data based on the National Library of Medicare RxNorm concept unique identifier (RxCUI), and not at the manufacturer-specific National Drug Code (NDC) level. This process does not allow us to clearly identify whether a plan sponsor includes coverage of authorized generic NDCs or not. We believe this position is consistent with how plans currently administer their formularies. Under this regulatory proposal, a plan sponsor could not completely exclude a lower tier containing only generic and authorized generic drugs from its tiering exception procedures, but would be permitted to limit the cost sharing for a particular brand drug or biological product to the lowest tier containing the same drug type. Plans would be required to grant a tiering exception for a higher cost generic or authorized generic drug to the cost sharing associated with the lowest tier containing generic and/or authorized generic alternatives when the medical necessity criteria is met.

d. Alternative Drugs for Treatment of the Enrollee's Condition

In response to the 2018 Call Letter and RFI, we received comments from plan sponsors and PBMs requesting that CMS provide additional guidance on how to determine what constitutes an alternative drug for purposes of tiering exceptions, including establishment of additional limitations on when such exceptions are approvable. The statutory language for tiering and formulary exceptions at sections 1860D-4(g)(2) and 1860D-4(h)(2) of the Act, respectively, specifically refers to a preferred or formulary drug “for treatment of the same condition.” We interpret this language to be referring to the condition as it affects the enrollee—that is, taking into consideration the individual's overall clinical condition, Start Printed Page 56373including the presence of comorbidities and known relevant characteristics of the enrollee and/or the drug regimen, which can factor into which drugs are appropriate alternative therapies for that enrollee. The Part D statute at § 1860D-4(g)(2) requires that coverage decisions subject to the exceptions process be based on the medical necessity of the requested drug for the individual for whom the exception is sought. We believe that requirement reasonably includes consideration of alternative therapies for treatment of the enrollee's condition, based on the facts and circumstances of the case.

e. Approval of Tiering Exception Requests

We are proposing to revise § 423.578(c)(3) by renumbering the provision and adding a new paragraph (ii) to codify our current policy that cost sharing for an approved tiering exception request is assigned at the lowest applicable tier when preferred alternatives sit on multiple lower tiers. Under this proposal, assignment of cost sharing for an approved tiering exception must be at the most favorable cost-sharing tier containing alternative drugs, unless such alternative drugs are not applicable pursuant to limitations set forth under proposed § 423.578(a)(6). We are also proposing to delete similar language from existing (c)(3) that proposed new paragraph (c)(3)(ii) would replace.

f. Additional Technical Changes and Corrections

Finally, we are proposing various technical changes and corrections to improve the clarity of the tiering exceptions regulations and consistency with the regulations for formulary exceptions. Specifically, we are proposing the following:

  • Revise the introductory text of § 423.578(a) to clarify that a “requested” non-preferred drug for treatment of an enrollee's health condition may be eligible for an exception.
  • Revise § 423.578(a)(1) to include “tiering” when referring to the exceptions procedures described in this subparagraph.
  • Revise § 423.578(a)(4) by making “conditions” singular and by adding “(s)” to “drug” to account for situations when there are multiple alternative drugs.
  • Revise § 423.578(a)(5) by removing the text specifying that the prescriber's supporting statement “demonstrate the medical necessity of the drug” to align with the existing language for formulary exceptions at § 423.578(b)(6). The requirement that the supporting statement address the enrollee's medical need for the requested drug is already explained in the introductory text of § 423.578(a).
  • Redesignate paragraphs § 423.578(c)(3)(i) through (iii) as paragraphs § 423.578(c)(3)(i)(A) through (C), respectively. This proposed change would improve consistency between the regulation text for tiering and formulary exceptions.

We anticipate that the proposed changes to the tiering exceptions regulations will make this process more accessible and transparent for enrollees and less cumbersome for plan sponsors to administer. We also believe that, by helping plan sponsors ensure their tiering exceptions processes comply with CMS requirements, IRE overturn rates for tiering exception requests will remain low.

10. Establishing Limitations for the Part D Special Election Period (SEP) for Dually Eligible Beneficiaries (§ 423.38)

As discussed in section III.A.2 of this proposed rule, the MMA added section 1860D-1(b)(3)(D) to the Act to establish a special election period (SEP) for full-benefit dual eligible (FBDE) beneficiaries under Part D. This SEP, codified at § 423.38(c)(4), was later extended to all other subsidy-eligible beneficiaries by regulation (75 FR 19720). The SEP allows eligible beneficiaries to make Part D enrollment changes (that is, enroll in, disenroll from, or change Part D plans, including Medicare Advantage Prescription Drug (MA-PD) plans) throughout the year, unlike other Part D enrollees who generally may switch plans only during the annual enrollment period (AEP) each fall.

The MMA sought to strike a balance of promoting beneficiary plan choice, but also ensuring that FBDE beneficiaries who did not make an active election would still have Part D coverage. The statute directed the Secretary to enroll FBDE beneficiaries into a PDP if they did not enroll in a Part D plan on their own. (As noted previously, CMS extended the SEP through rulemaking to make it available to all other subsidy-eligible beneficiaries.) When the automatic enrollment of subsidy-eligible beneficiaries was originally proposed in rulemaking, we noted that beneficiaries would have the option to use the SEP if they determined there was a better plan option for them, and codified a continuous SEP (that is, that was available monthly).

At the time, we did not know on what factors FBDE beneficiaries would rely to make their plan choice. Now, with over 10 years of programmatic experience, we have observed certain enrollment trends in terms of FBDE and other LIS beneficiaries:

  • Most LIS beneficiaries do not make an active choice to join a PDP. For plan year 2015, over 71 percent of LIS individuals in PDPs were placed into that plan by CMS.
  • Once in a plan, whether it was a CMS-initiated enrollment or a choice they made on their own, most LIS beneficiaries do not make changes during the year. Of all LIS beneficiaries who were eligible for the SEP in 2016, less than 10 percent utilized it. Overall, we have seen slight growth of SEP usage over the past 5 years (for example, less than 8 percent in 2012, approximately 9 percent in 2014).
  • A small subset (0.8 percent) of LIS beneficiaries use the SEP to actively enroll in a plan of their choice and then disenroll within 2 months.

While we know that the majority of LIS-eligible beneficiaries do not take advantage of the SEP, we have seen the Medicare and Medicaid environment evolve in such a way that it may be disadvantageous to beneficiaries if they changed plans during the year, let alone if they made multiple changes. States and plans have noted that they are best able to provide or coordinate care if there is continuity of enrollment, particularly if the beneficiary is enrolled in an integrated product (as discussed later in this section). We now know that in addition to choice, there are other critical issues that must be considered in determining when and how often beneficiaries should be able to change their Medicare coverage during the year, such as coordination of Medicare-Medicaid benefits, beneficiary care management, and public health concerns such as the national opioid epidemic (and the drug management programs discussed in section II.A.1). In addition, there are different care models available now such as dual eligible special needs plans (D-SNPs), Fully Integrated Dual Eligible (FIDE) SNPs, and Medicare-Medicaid Plans (MMPs) that are discussed later in this section and specifically designed to meet the needs of high risk, high needs beneficiaries.

Current enrollment trends demonstrate that while a majority of subsidy-eligible beneficiaries still receive their Part D coverage through standalone PDPs, an increasing percentage of beneficiaries are enrolled in MA-PDs and other capitated managed care products, including over one in three dually eligible beneficiaries. A smaller but rapidly growing subset are enrolled in capitated Start Printed Page 56374Medicare managed care products that also integrate Medicaid services. For example:

  • The MMA established D-SNPs to provide coordinated care to dually eligible beneficiaries. Between 2007 and 2016, growth in D-SNPs has increased by almost 150 percent.
  • FIDE SNPs are a type of SNP created by the Affordable Care Act (ACA) in 2010 designed to promote full integration and coordination of Medicare and Medicare benefits for dually eligible beneficiaries by a single managed care organization. In 2017, there are 39 FIDE SNPs providing coverage to approximately 155,000 beneficiaries.
  • MMPs, which operate as part of a model test under Section 1115(A) of the Act, are fully-capitated health plans that serve dually eligible beneficiaries though demonstrations under the Financial Alignment Initiative. The demonstrations are designed to promote full access to seamless, high quality integrated health care across both Medicare and Medicaid. In 2017, there are 58 MMPs providing coverage to nearly 400,000 beneficiaries.

The current SEP, especially in the context of these products that integrate Medicare and Medicaid, highlights differences in Medicare and Medicaid managed care enrollment policies. Bringing Medicare and Medicaid enrollment policies into greater alignment, even partially, is a mechanism to reduce complexity in the health care system and better partner with states. Both are important priorities for CMS.

In addition, the application of the continuous SEP carries different service delivery implications for enrollees of MA-PD plans and related products than for standalone enrollees of PDPs. At the outset of the Part D program, when drug coverage for dually eligible beneficiaries was transitioned from Medicaid to Medicare, there were concerns about how CMS would effectively identify, educate, and enroll dually eligible beneficiaries. While processes (for example, auto-enrollment, reassignment) were established to facilitate coverage, the continuous SEP served as a fail-safe to ensure that the beneficiary was always in a position to make a choice that best served their healthcare needs. Unintended consequences have resulted from this flexibility, including, as noted by the Medicare Payment Advisory Commission (MedPAC [32] ), opportunities for marketing abuses.

Among the key obstacles the SEP (and resulting plan movement) can present are—

  • Interfering with the coordination of care among the providers, health plans, and states;
  • Hindering the ability for beneficiaries to benefit from case management and disease management;
  • Wasting the effort and resources needed to conduct enrollee needs assessments and developing plans of care for services covered by Medicare and Medicaid;
  • Limiting a plan's opportunity for continuous treatment of chronic conditions; and
  • Diminishing incentives for plans to innovate and invest in serving potentially high-cost members.

While we still support in the underlying principle that LIS beneficiaries should have the ability to make an active choice, we find that plan sponsors are better able to administer benefits to beneficiaries, including coordination of Medicare and Medicaid benefits, and maximize care management and positive health outcomes, if dual and other LIS-eligible beneficiaries are held to the similar election period requirements as all other Part D-eligible beneficiaries. Therefore, we are proposing to amend § 423.38(c)(4) to make the SEP for FBDE and other subsidy-eligible individuals available only in certain circumstances. These circumstances would be considered separate and unique from one another, so there could be situations where a beneficiary could still use the SEP multiple times if he or she meets more than one of the conditions proposed as follows. Specifically, we are proposing to revise to § 423.38(c) to specify that the SEP is available only as follows:

  • In new paragraph (c)(4)(i), eligible beneficiaries (that is, those who are dual or other LIS-eligible and meet the definition of at-risk beneficiary or potential at-risk beneficiary under proposed § 423.100) would be able to use the SEP once per calendar year.
  • In new paragraph (c)(4)(iii), eligible beneficiaries who have been assigned to a plan by CMS or a State would be able to use the SEP before that election becomes effective (that is, opt out and enroll in a different plan) or within 2 months of their enrollment in that plan.
  • In new paragraph (c)(9), dual and other LIS-eligible beneficiaries who have a change in their Medicaid or LIS-eligible status would have an SEP to make an election within 2 months of the change, or of being notified of such change, whichever is later. This SEP would be available to beneficiaries who experience a change in Medicaid or LIS status regardless of whether they have been identified as potential at-risk beneficiaries or at-risk beneficiaries under proposed § 423.100. In addition, we are also proposing to remove the phrase “at any time” in the introductory language of § 423.38(c) for the sake of clarity.

The onetime annual SEP opportunity would be able to be used at any time of the year to enroll in a new plan or disenroll from the current plan, provided that their eligibility for the SEP has not been limited consistent with section 1860D-1(b)(3)(D) of the Act, as amended by CARA (as discussed in section III.A.2. of this proposed rule). We believe that the onetime annual SEP would still provide dually eligible beneficiaries adequate opportunity to change their coverage during the year if desired, but is also responsive to consistent feedback we have received from States and plans that have noted that the current SEP, which allows month-to-month movement, can disrupt continuity of care, especially in integrated care plans. They specifically noted that effective care management can best be achieved through continuous enrollment.

Beneficiaries who have been enrolled in a plan by CMS or a state (that is, through processes such as auto enrollment, facilitated enrollment, passive enrollment, default enrollment (seamless conversion), or reassignment), would be allowed a separate, additional use of the SEP, provided that their eligibility for the SEP has not been limited consistent with section 1860D-1(b)(3)(D) of the Act, as amended by CARA. These beneficiaries would still have a period of time before the election takes effect to opt out and choose their own plan or they would be able to use the SEP to make an election within 2 months of the assignment effective date. Once a beneficiary has made an election (either prior to or after the effective date) it would be considered “used” and no longer would be available. If a beneficiary wants to change plans after 2 months, he or she would have to use the onetime annual election opportunity discussed previously, provided that it has not been used yet. If that election has been used, the beneficiary would have to wait until they are eligible for another election period to make a change.Start Printed Page 56375

Under a new proposed SEP, individuals who have a change in their Medicaid or LIS-eligible status would have an election opportunity that is separate from, and in addition to, the two scenarios discussed previously. (As discussed in section III.A.2. of this rule, and unlike the other two conditions discussed previously, individuals identified as “at risk” would be able to use this SEP.) This would apply to individuals who gain, lose, or change Medicaid or LIS eligibility. We believe that in these instances, it would be appropriate to give these beneficiaries an opportunity to re-evaluate their Part D coverage in light of their changing circumstances. Beneficiaries eligible for this SEP would need to use it within 2 months of the change or of being notified of the change, whichever is later.

We considered multiple alternatives related to the SEP proposal. We describe two such alternatives in the following discussion:

Limit of two or three uses of the SEP per year. In 2016, 1.2 million beneficiaries used the SEP for FBDE or other subsidy-eligible individuals, including over 27,000 who used the SEP three or more times, and over 1,700 who used the SEP five or more times during the year. These SEP changes are in addition to changes made during the AEP and any other election periods for which a beneficiary may qualify. We believe that any overuse of the SEP creates significant inefficiencies and impedes meaningful continuity of care and care coordination. As such, we considered applying a simple numerical limit to the number of times the LIS SEP could be used by any beneficiary within each calendar year. We specifically considered limits of either two or three uses of the SEP per year.

Compared to our proposal to limit the use of the SEP to one time per calendar year, this alternative would permit more opportunities for midyear changes. However, it could still allow for a high level of membership churning. Relative to our proposal, it would also be less effective in limiting the opportunities for aggressive marketing to LIS beneficiaries outside of the AEP. We welcome comments on this alternative.

Limits on midyear MA-PD plan switching. We also considered a more complex option, drawing heavily on earlier MedPAC recommendations.[33] Under this alternative we would:

  • Modify the SEP to prohibit its use to elect a non-integrated MA-PD plan. As such, the SEP would not be used for switching between MA-PD plans, movement from integrated products to a non-integrated MA-PD plan, or movement from Medicare FFS to an MA-PD plan. Beneficiaries would still be able to select non-integrated MA-PD plans during other enrollment periods, such as the AEP, the open enrollment period (OEP) outlined in section III.C.2. of this proposed rule, and any other SEP for which they may be eligible; and
  • Allow continuous use of the dual SEP to allow eligible beneficiaries to enroll into FIDE SNPs or comparably integrated products for dually eligible beneficiaries through model tests under section 1115(A) of the Act.

This alternative would still permit continuous election of Medicare FFS with a standalone PDP throughout the year and a continuous option to change between standalone PDPs.

We believe this alternative would create greater stability among plans and limit the opportunities for misleading and aggressive marketing to dually-eligible individuals. It would also maintain the opportunity for continuous enrollment into integrated products to reflect our ongoing partnership with states to promote integrated care. However, this alternative would be more complex to administer and explain to beneficiaries, and it encourages enrollment into a limited set of MA plans compared to all the plans available to the beneficiary under the MA program. We welcome comments on this alternative.

We believe that our proposed approach to narrowing of the scope of the SEP preserves a dual or other LIS-eligible beneficiary's ability to make an active choice. As noted previously, less than 10 percent of the LIS population used the dual SEP in 2016. We acknowledge that even though this is a small percentage of the population, given the number of beneficiaries who receive Extra Help, this equates to over a million elections. We note, though, that of this group, the majority (74.5 percent) used the SEP one time. Under our proposal, this population would still be able to make an election, thus, we believe that the majority of beneficiaries would not be negatively impacted by these changes. We opted for our proposed approach, as opposed to the alternatives, because we believe it encourages continuity of enrollment and care, without overcomplicating both beneficiary understanding of how the SEP is available to them, as well as plan sponsor operational responsibilities.

If the proposal is finalized, we would revise our messaging and beneficiary education materials as necessary to ensure that dual and other LIS-eligible beneficiaries understand that the SEP is no longer an unlimited opportunity. We would also need to ensure that beneficiaries who are assigned to a plan by CMS or the State understand that they must use the SEP within 2 months after the new coverage begins if they wish to change from the plan to which they were assigned.

We note that other election periods, including the AEP, the new OEP, or other SEPs (for example, when moving to a new service area), would still be available to individuals. In addition, the proposed limitations would also apply to the Part C SEP established in sub-regulatory guidance for dual-eligible individuals or individuals who lose their dual-eligibility.

We welcome public comment on this proposal and the considered alternatives. Specifically, we seek input on the following areas:

  • Are there other limited circumstances where the dual SEP should be available?
  • Are there special considerations CMS should keep in mind if we finalize this policy?
  • Are there other alternative approaches we should consider in lieu of narrowing the scope of the SEP?
  • In addition to CMS outreach materials, what are the best ways to educate the affected population and other stakeholders of the new proposed SEP parameters?

11. Medicare Advantage and Part D Prescription Drug Program Quality Rating System

a. Introduction

We are committed to transforming the health care delivery system—and the Medicare program—by putting a strong focus on person-centered care, in accordance with the CMS Quality Strategy, so each provider can direct their time and resources to each beneficiary and improve their outcomes. As part of this commitment, one of our most important strategic goals is to improve the quality of care for Medicare beneficiaries. The Part C and D Star Ratings support the efforts of CMS to improve the level of accountability for the care provided by health and drug plans, physicians, hospitals, and other Medicare providers. We currently publicly report the quality and performance of health and drug plans on the Medicare Plan Finder tool on www.medicare.gov in the form of summary and overall ratings for the contracts under which each MA plan (including MA-PD plans) and Part D plan is offered, with drill downs to Start Printed Page 56376ratings for domains, ratings for individual measures, and underlying performance data. We also post additional measures on the display page [34] at www.cms.gov for informational purposes. The goals of the Star Ratings are to display quality information on Medicare Plan Finder for public accountability and to help beneficiaries, families, and caregivers make informed choices by being able to consider a plan's quality, cost, and coverage; to incentivize quality improvement; to provide information to oversee and monitor quality; and to accurately measure and calculate scores and stars to reflect true performance. In addition, CMS has started to incorporate efforts to recognize the challenges of serving high risk, high needs populations while continuing the focus on improving health care for these important groups.

In this rule as part of the Administration's efforts to improve transparency, we propose to codify the existing Star Ratings System for the MA and Part D programs with some changes. As noted later in this section in more detail, the proposed changes include more clearly delineating the rules for adding, updating, and removing measures and modifying how we calculate Star Ratings for contracts that consolidate. Although the rulemaking process will create a longer lead time for changes, codifying the Star Ratings methodology will provide plans with more stability to plan multi-year initiatives, because they will know the measures several years in advance. We have received comments for the past several years from MA organizations and other stakeholders asking that CMS use Federal Register rulemaking for the Star Ratings System; we discuss in section III.12.c. (regarding plans for the transition period before the codified rules are used) how section 1832(b) authorizes CMS to establish and annually modify the Star Ratings System using the Advance Notice and Rate Announcement process because the system is an integral part of the policies governing Part C payment. We think this is an appropriate time to codify the methodology, because the rating system has been used for several years now and is relatively mature so there is less need for extensive changes every year; the smaller degree of flexibility in having codified regulations rather than using the process for adopting payment methodology changes may be appropriate. Further, by adopting and codifying the rules that govern the Star Ratings System, we are demonstrating a commitment to transparency and predictability for the rules in the system so as to foster investment.

b. Background

We originally acted upon our authority to disseminate information to beneficiaries as the basis for developing and publicly posting the 5-star ratings system (sections 1851(d) and 1852(e) of the Act). The MA statute explicitly requires that information about plan quality and performance indicators be provided to beneficiaries in an easy to understand language to help them make informed plan choices. These data are to include disenrollment rates, enrollee satisfaction, health outcomes, and plan compliance with requirements.

The Part D statute (at section 1860D-1(c)) imposes a parallel information dissemination requirement with respect to Part D plans, and refers specifically to comparative information on consumer satisfaction survey results as well as quality and plan performance indicators. Part D plans are also required by regulation (§ 423.156) to make Consumer Assessment of Healthcare Providers and Systems (CAHPS) survey data available to CMS and are required to submit pricing and prescription drug event data under statutes and regulations specific to those data. Regulations require plans to report on quality improvement and quality assurance and to provide data which CMS can use to help beneficiaries compare plans (§§ 422.152 and 423.153). In addition we may require plans to report statistics and other information in specific categories (§§ 422.516 and 423.514).

Currently, for similar reasons of providing information to beneficiaries to assist them in plan enrollment decisions, we also review and rate section 1876 cost plans on many of the same measures and publish the results. We also propose to continue to include 1876 cost contracts in the MA and Part D Star Rating system to provide comparative information to Medicare beneficiaries making plan choices. We propose specific text, to be codified at § 417.472(k), noting that 1876 cost contracts must agree to be rated under the quality rating system specified at subpart D of part 422. Cost contracts are also required by regulation (§ 17.472(j)) to make CAHPS survey data available to CMS. As is the case today, no quality bonus payments (QBP) would be associated with the ratings for 1876 cost contracts.

In line with §§ 422.152 and 423.153, CMS uses the Healthcare Effectiveness Data and Information Set (HEDIS), Health Outcomes Survey (HOS), CAHPS data, Part C and D Reporting requirements and administrative data, and data from CMS contractors and oversight activities to measure quality and performance of contracts. We have been displaying plan quality information based on that and other data since 1998.

Since 2007, we have published annual performance ratings for stand-alone Medicare PDPs. In 2008, we introduced and displayed the Star Ratings for Medicare Advantage Organizations (MAOs) for both Part C only contracts (MA-only contracts) and Part C and D contracts (MA-PDs). Each year since 2008, we have released the MA Star Ratings. An overall rating combining health and drug plan measures was added in 2011, and differential weighting of measures (for example, outcomes being weighted 3 times the value of process measures) began in 2012. The measurement of year to year improvement began in 2013, and an adjustment (Categorical Adjustment Index) was introduced in 2017 to address the within-contract disparity in performance revealed in our research among beneficiaries that are dual eligible, receive a low income subsidy, and/or are disabled.

The MA and Part D Star Ratings measure the quality of care and experiences of beneficiaries enrolled in MA and Part D contracts, with 5 stars as the highest rating and 1 star as the lowest rating. The Star Ratings provide ratings at various levels of a hierarchical structure based on contract type, and all ratings are determined using the measure-level Star Ratings. Contingent on the contract type, ratings may be provided and include overall, summary (Part C and D), and domain Star Ratings. Information about the measures, the hierarchical structure of the ratings, and the methodology to generate the Star Ratings is detailed in the annually updated Medicare Part C and D Star Ratings Technical Notes, referred to as Technical Notes, available at http://go.cms.gov/​partcanddstarratings.

The MA and Part D Star Ratings System is designed to provide information to the beneficiary that is a true reflection of the plan's quality and encompasses multiple dimensions of high quality care. The information included in the ratings is selected based on its relevance and importance such that it can meet the data needs of beneficiaries using it to inform plan choice. While encouraging improved health outcomes of beneficiaries in an efficient, person centered, equitable, and high quality manner is one of the Start Printed Page 56377primary goals of the ratings, they also provide feedback on specific aspects of care that directly impact outcomes, such as process measures and the beneficiary's perspective. The ratings focus on aspects of care that are within the control of the health plan and can spur quality improvement. The data used in the ratings must be complete, accurate, reliable, and valid. A delicate balance exists between measuring numerous aspects of quality and the need for a small data set that minimizes reporting burden for the industry. Also, the beneficiary or his or her representative must have enough information to make an informed decision without feeling overwhelmed by the volume of data.

The Patient Protection and Affordable Care Act (Pub. L. 111-148), as amended by the Healthcare and Education Reconciliation Act (Pub. L. 111-152), provides for quality ratings, based on a 5-star rating system and the information collected under section 1852(e) of the Act, to be used in calculating payment to MA organizations beginning in 2012. Specifically, sections 1853(o) and 1854(b)(1)(C) of the Act provide, respectively, for an increase in the benchmark against which MA organizations bid and in the portion of the savings between the bid and benchmark available to the MA organization to use as a rebate. Under the Act, Part D plan sponsors are not eligible for quality based payments or rebates. We finalized a rule on April 15, 2011 to implement these provisions and to use the existing Star Ratings System that had been in place since 2007 and 2008. (76 FR 21485-21490).[35] In addition, the Star Ratings measures are tied in many ways to responsibilities and obligations of MA organizations and Part D sponsors under their contracts with CMS. We believe that continued poor performance on the measures and overall and summary ratings indicates systemic and wide-spread problems in an MA plan or Part D plan. In April 2012, we finalized a regulation to use consistently low summary Star Ratings—meaning 3 years of summary Star Ratings below 3 stars—as the basis for a contract termination for Part C and Part D plans. (§§ 422.510(a)(14) and 423.509(a)(13)). Those regulations further reflect the role the Star Ratings have had in CMS' oversight, evaluation, and monitoring of MA and Part D plans to ensure compliance with the respective program requirements and the provision of quality care and health coverage to Medicare beneficiaries.

The true potential of the use of the MA and Part D Star Ratings System to reach our goals and to serve as a catalyst for change can only be realized by working in tandem with our many stakeholders including beneficiaries, industry, and advocates. The following guiding principles have been used historically in making enhancements to the MA and Part D Star Ratings:

  • Ratings align with the current CMS Quality Strategy.
  • Measures developed by consensus-based organizations are used as much as possible.
  • Ratings are a true reflection of plan quality and enrollee experience; the methodology minimizes risk of misclassification.
  • Ratings are stable over time.
  • Ratings treat contracts fairly and equally.
  • Measures are selected to reflect the prevalence of conditions and the importance of health outcomes in the Medicare population.
  • Data are complete, accurate, and reliable.
  • Improvement on measures is under the control of the health or drug plan.
  • Utility of ratings is considered for a wide range of purposes and goals.

++ Accountability to the public.

++ Enrollment choice for beneficiaries.

++ Driving quality improvement for plans and providers.

  • Ratings minimize unintended consequences.
  • Process of developing methodology is transparent and allows for multi-stakeholder input.

We are using these goals to guide our proposal and how we interpret and apply the proposed regulations once finalized. For each provision we are proposing, we solicit comment on whether our specific proposed regulation text best serves these guiding principles. We also solicit comment on whether additional or other principles are better suited for these roles in measuring and communicating quality in the MA and Part D programs in a comparative manner.

As we continue to consider making changes to the MA and Part D programs in order to increase plan participation and improve benefit offerings to enrollees, we would also like to solicit feedback from stakeholders on how well the existing stars measures create meaningful quality improvement incentives and differentiate plans based on quality. We welcome all comments on those topics, and will consider them for changes through this or future rulemaking or in connection with interpreting our regulations (once finalized) on the Star Rating system measures. However, we are particularly interested in receiving stakeholder feedback on the following topics:

  • Additional opportunities to improve measures so that they further reflect the quality of health outcomes under the rated plans.
  • Whether CMS' current process for establishing the cut points for Star Rating can be simplified, and if the relative performance as reflected by the existing cut points accurately reflects plan quality.
  • How CMS should measure overall improvement across the Star Ratings measures. We are requesting input on additional improvement adjustments that could be implemented, and the effect that these adjustments could have on new entrants (that is, new MA organizations and/or new plans offered by existing MA organizations).
  • Additional adjustments to the Star Ratings measures or methodology that could further account for unique geographic and provider market characteristics that affect performance (for example, rural geographies or monopolistic provider geographies), and the operational difficulties that plans could experience if such adjustments were adopted.
  • In order to further encourage plan participation and new market entrants, whether CMS should consider implementing a demonstration to test alternative approaches for putting new entrants (that is, new MA organizations) on a level playing field with renewing plans from a Star Ratings perspective for a pre-determined period of time.
  • Adding measures that evaluate quality from the perspective of adopting new technology (for example, the percent of beneficiaries enrolled through online brokers or the use of telemedicine) or improving the ease, simplicity, and satisfaction of the beneficiary experience in a plan.
  • Including survey measures of physicians' experiences. (Currently, we measure beneficiaries' experiences with their health and drug plans through the CAHPS survey.) Physicians also interact with health and drug plans on a daily basis on behalf of their patients. We are considering developing a survey tool for collecting standardized information on physicians' experiences with health and drug plans and their services, and we would welcome comments.Start Printed Page 56378

c. Basis, Purpose and Applicability of the Quality Star Ratings System

We propose to codify regulation text, at §§ 422.160 and 423.180, that identifies the statutory authority, purpose, and applicability of the Star Ratings System regulations we are proposing to add to part 422 subpart D and part 423 subpart D. Under our proposal, the existing purposes of the quality rating system—to provide comparative information to Medicare beneficiaries pursuant to sections 1851(d) and 1860D-1(c) of the Act, to identify and apply the payment consequences for MA plans under sections 1853(o) and 1854(b)(1)(C) of the Act, and to evaluate and oversee overall and specific performance by plans—would continue. To reflect how the Part D ratings are used for MA-PD plan QBP status and rebate retention allowances, we also propose specific text, to be codified at § 423.180(b)(2), noting that the Part D Star Rating will be used for those purposes.

We are proposing here, broadly stated, to codify the current quality Star Ratings System uses, methodology, measures, and data collection beginning with the measurement periods in calendar year 2019. We are proposing some changes, such as how we handle consolidations from the current Star Ratings program, but overall the proposal is to continue the Star Ratings System as it has been developed and has stabilized. Data will be collected and performance will be measured using these proposed rules and regulations for the 2019 measurement period; the associated quality Star Ratings will be used to assign QBP ratings for the 2022 payment year and released prior to the annual coordinated election period held in late 2020 for the 2021 contract year. Application of the final regulations resulting from this proposal will determine whether the measures proposed in section III.A.12.i. of the proposed rule (Table 2) are updated, transitioned to or from the display page, and otherwise used in conjunction with the 2019 performance period.

Under our proposal, the current quality Star Ratings System and the procedures for revising it will remain in place for the 2019 and 2020 quality Star Ratings. Section 1853(b) of the Act authorizes an advance notice and rate announcement to announce and seek comment for proposed changes to the MA payment methodology, which includes the Part C and D Star Ratings program. The statute identifies specific notice and comment timeframes, but that process does not require publication in the Federal Register. We have used the draft and final Call Letter, which are attachments to the Advance Notice and final Rate Announcement respectively,[36] to propose for comment and finalize changes to the quality Star Ratings System since the ratings became a component of the payment methodology for MA and MA-PD plans. (76 FR 214878 through 89). Because the Star Ratings System has been integrated into the payment methodology since the 2012 contract year (as a mechanism used to determine how much a plan is paid, and not the mechanism by which (or a rule about when) a plan is paid), the Star Ratings are part of the process for setting benchmarks and capitation rates under section 1853, and the process for announcing changes to the Star Ratings System falls within the scope of section 1853(b). Although not expressly required by section 1853(b), CMS has historically solicited comment on significant changes to the ratings system using a Request for Comment process before the Advance Notice and draft Call Letter are released; this Request for Comment [37] provides MAOs, Part D sponsors, and other stakeholders an opportunity to request changes to and raise concerns about the Star Ratings methodology and measures before CMS finalizes its proposal for the Advance Notice. We intend to continue the current process at least until the 2019 measurement period that we are proposing as the first measurement period under these new regulations, but we may discontinue that process at a later date as the rulemaking process may provide sufficient opportunity for public input. In addition, CMS issues annually the Technical Notes [38] that describe in detail how the methodology is applied from the changes in policy adopted through the Advance Notice and Rate Announcement process. We intend to continue the practice of publishing the Technical Notes during the preview periods. Under our proposal, we would also continue to use the draft and final Call Letters as a means to provide subregulatory application), interpretation, and guidance of the final version of these proposed regulations where necessary. Our proposed regulation text does not detail these plans for continued use of the current process and future for subregulatory guidance because we believe such regulation text would be unnecessary. We propose to codify the first performance period (2019) and first payment year (2022) to which our proposed regulations would apply at § 422.160(c) and § 423.180(c).

d. Definitions

There are a number of technical and other terms relevant to our proposed regulations. Therefore, we propose the following definitions for the respective subparts in part 422 and part 423 in paragraph (a) of §§ 422.162 and 423.182 respectively. Some proposed definitions are discussed in more detail later in this preamble in connection with other proposed regulation text related to the definition.

  • CAHPS refers to a comprehensive and evolving family of surveys that ask consumers and patients to evaluate the interpersonal aspects of health care. CAHPS surveys probe those aspects of care for which consumers and patients are the best or only source of information, as well as those that consumers and patients have identified as being important. CAHPS initially stood for the Consumer Assessment of Health Plans Study, but as the products have evolved beyond health plans the acronym now stands for Consumer Assessment of Healthcare Providers and Systems.
  • Case-mix adjustment means an adjustment to the measure score made prior to the score being converted into a Star Rating to take into account certain enrollee characteristics that are not under the control of the plan. For example age, education, chronic medical conditions, and functional health status that may be related to the enrollee's survey responses.
  • Categorical Adjustment Index (CAI) means the factor that is added to or subtracted from an overall or summary Star Rating (or both) to adjust for the average within-contract (or within-plan as applicable) disparity in performance associated with the percentages of beneficiaries who are dually eligible for Medicare and enrolled in Medicaid, beneficiaries who receive a Low Income Subsidy or have disability status in that contract (or plan as applicable).
  • Clustering refers to a variety of techniques used to partition data into distinct groups such that the observations within a group are as similar as possible to each other, and as dissimilar as possible to observations in any other group. Clustering of the measure-specific scores means that gaps that exist within the distribution of the scores are identified to create groups (clusters) that are then used to identify Start Printed Page 56379the four cut points resulting in the creation of five levels (one for each Star Rating), such that the scores in the same Star Rating level are as similar as possible and the scores in different Star Rating levels are as different as possible. Technically, the variance in measure scores is separated into within-cluster and between-cluster sum of squares components. The clusters reflect the groupings of numeric value scores that minimize the variance of scores within the clusters. The Star Ratings levels are assigned to the clusters that minimize the within-cluster sum of squares. The cut points for star assignments are derived from the range of measure scores per cluster, and the star levels associated with each cluster are determined by ordering the means of the clusters.
  • Consolidation means when an MA organization/Part D sponsor that has at least two contracts for health and/or drug services of the same plan type under the same parent organization in a year combines multiple contracts into a single contract for the start of the subsequent contract year.
  • Consumed contract means a contract that will no longer exist after a contract year's end as a result of a consolidation.
  • Display page means the CMS Web site on which certain measures and scores are publicly available for informational purposes; the measures that are presented on the display page are not used in assigning Part C and D Star Ratings.
  • Domain rating means the rating that groups measures together by dimensions of care.
  • Dual Eligible (DE) means a beneficiary who is enrolled in both Medicare and Medicaid.
  • HEDIS is the Healthcare Effectiveness Data and Information Set which is a widely used set of performance measures in the managed care industry, developed and maintained by the National Committee for Quality Assurance (NCQA). HEDIS data include clinical measures assessing the effectiveness of care, access/availability measures, and service use measures.
  • Highest rating means the overall rating for MA-PDs, the Part C summary rating for MA-only contracts, and the Part D summary rating for PDPs.
  • Highly-rated contract means a contract that has 4 or more stars for their highest rating when calculated without the improvement measures and with all applicable adjustments (CAI and the reward factor).
  • HOS means the Medicare Health Outcomes Survey which is the first patient reported outcomes measure that was used in Medicare managed care. The goal of the Medicare HOS program is to gather valid, reliable, and clinically meaningful health status data in the Medicare Advantage (MA) program for use in quality improvement activities, pay for performance, program oversight, public reporting, and improving health. All managed care organizations with MA contracts must participate.
  • Low Income Subsidy (LIS) means the subsidy that a beneficiary receives to help pay for prescription drug coverage (see § 423.34 for definition of a low-income subsidy eligible individual).
  • Measurement period means the period for which data are collected for a measure or the performance period that a measures covers.
  • Measure score means the numeric value of the measure or an assigned `missing data' message.
  • Measure star means the measure's numeric value is converted to a Star Rating. It is displayed to the nearest whole star, using a 1-5 star scale.
  • Overall Rating means a global rating that summarizes the quality and performance for the types of services offered across all unique Part C and Part D measures.
  • Part C Summary Rating means a global rating that summarizes the health plan quality and performance on Part C measures.
  • Part D Summary Rating means a global rating of the prescription drug plan quality and performance on Part D measures.
  • Plan Benefit Package (PBP) means a set of benefits for a defined MA or PDP service area. The PBP is submitted by PDP sponsors and MA organizations to CMS for benefit analysis, bidding, marketing, and beneficiary communication purposes.
  • Reliability means a measure of the fraction of the variation among the observed measure values that is due to real differences in quality (“signal”) rather than random variation (“noise”); it is reflected on a scale from 0 (all differences in plan performance measure scores are due to measurement error) to 1 (the difference in plan performance scores is attributable to real differences in performance).
  • Reward factor means a rating-specific factor added to the contract's summary or overall (or both) rating if a contract has both high and stable relative performance.
  • Statistical significance assesses how likely differences observed in performance are due to random chance alone under the assumption that plans are actually performing the same. Although not part of the proposed regulatory definition, we clarify that CMS uses statistical tests (for example, t-test) to determine if a contract's measure value is statistically different (greater than or less than depending on the test) from the national mean for that measure, or whether conversely, the observed differences from the national mean could have arisen by chance.
  • Surviving contract means the contact that will still exist under a consolidation, and all of the beneficiaries enrolled in the consumed contract(s) are moved to the surviving contracts.
  • Traditional rounding rules mean that the last digit in a value will be rounded. If rounding to a whole number, look at the digit in the first decimal place. If the digit in the first decimal place is 0, 1, 2, 3 or 4, then the value should be rounded down by deleting the digit in the first decimal place. If the digit in the first decimal place is 5 or greater, then the value should be rounded up by 1 and the digit in the first decimal place deleted.

e. Contract Ratings

Star Ratings and data reporting are at the contract level for most measures. Currently, data for measures are collected at the contract level including data from all PBPs under the contract, except for the following Special Needs Plan (SNP)-specific measures which are collected at the PBP level: Care for Older Adults—Medication Review, Care for Older Adults—Functional Status Assessment, and Care for Older Adults—Pain Assessment. The SNP-specific measures are rolled up to the contract level by using an enrollment-weighted mean of the SNP PBP scores. Subject to the discussion later in this section about the feasibility and burden of collecting data at the PBP (plan) level and the reliability of ratings at the plan level, we propose to continue the practice of calculating the Star Ratings at the contract level and all PBPs under the contract would have the same overall and/or summary ratings.

However, beneficiaries select a plan, rather than a contract, so we have considered whether data should be collected and measures scored at the plan level. We have explored the feasibility of separately reporting quality data for individual D-SNP PBPs, instead of the current reporting level. For example, in order for CAHPS measures to be reliably scored, the number of respondents must be at least 11 people and reliability must be at least 0.60. Our current analyses show that, at the PBP level, CAHPS measures could be reliably reported for only about one-third of D-SNP PBPs due to sample size Start Printed Page 56380issues, and HEDIS measures could be reliably reported for only about one-quarter of D-SNP PBPs. If reporting were done at the plan level, a significant number of D-SNP plans would not be rated and in lieu of a Star Rating, Medicare Plan Finder would display that the plan is “too small to be rated.” However, when enough data are available, plan level quality reporting would better reflect the quality of care provided to enrollees in that plan. Plan-level quality reporting would also give states that contract with D-SNPs plan-specific information on their performance and provide the public with data specific to the quality of care for dual eligible (DE) beneficiaries enrolled in these plans. For all plans as well as D-SNPs, reporting at the plan level would significantly increase plan burden for data reporting and would have to be balanced against the availability of additional clinical information available at the plan level. Plan-level ratings would also potentially increase the ratings of higher-performing plans when they are in contracts that have a mix of high and low performing plans. Similarly, plan-level ratings would also potentially decrease the ratings of lower-performing plans that are currently in contracts with a mix of high and low performing plans. Measurement reliability issues due to small sample sizes would also decrease our ability to measure true performance at the plan level and add complexities to the rating system. We are soliciting comments on balancing the improved precision associated with plan level reporting (relative to contract level reporting) with the negative consequences associated with an increase in the number of plans without adequate sample sizes for at least some measures; we ask for comments about this for D-SNPs and for all plans as we continue to consider whether rating at the plan level is feasible or appropriate. In particular, we are interested in feedback on the best balance and whether changing the level at which ratings are calculated and reported better serves beneficiaries and our goals for the Star Ratings System.

We are also exploring whether some measure data could be reported at a higher level (parent organization versus contract) to ease and simplify reporting and still remain useful (for example, call center measures as we anticipate that parent organizations use a consolidated call center to serve all contracts and plans) to incorporate into the Star Ratings. Further, we are exploring if contract market area reporting is feasible when a contract covers a large geographic area. For example, when HEDIS reporting began in 1997, there were contract-specific market areas that evolved into reporting by market area for five states with large Medicare populations.[39] We are planning to continue work in this area to determine the best reporting level for each measure that most accurately reflects performance and minimizes to the extent possible plan reporting burden. As we consider alternative reporting units, we welcome comments and suggestions about requiring reporting at different levels (for example, parent organization, contract, plan, or geographic area) by measure.

We propose to continue at this time calculating the same overall and/or summary Star Ratings for all PBPs offered under an MA-only, MA-PD, or PDP contract. We propose to codify this policy in regulation text at §§ 422.162(b) and 423.182(b). We also propose a cost plan regulation at § 417.472(k) to require cost contracts to be subject to the part 422 and part 423 Medicare Advantage and Part D Prescription Drug Program Quality Rating System as they are measured and rated like an MA plan. Specifically, we propose, at paragraph (b)(1) that CMS will calculate overall and summary ratings at the contract level and propose regulation text that cross-references other proposed regulations regarding the calculation of measure scoring and rating, and domain, summary and overall ratings. Further, we propose to codify, at (b)(2) of each section, that data from all PBPs offered under a contract will continue to be used to calculate the ratings for the contract. For SNP specific measures collected at the PBP level, we propose that the contract level score would be an enrollment-weighted mean of the PBP scores using enrollment in each PBP as reported as part of the measure specification, which is consistent with current practice. The proposed text is explicit that domain and measure ratings, other than the SNP-specific measures, are based on data from all PBPs under the contract.

f. Contract Consolidations

We are proposing a change in how contract-level Star Ratings are assigned in the case of contract consolidations. We have historically permitted MAOs and Part D sponsors to consolidate contracts when a contract novation occurs or to better align business practices. As noted in MedPAC's March 2016 Report to Congress (https://aspe.hhs.gov/​pdf-report/​report-congress-social-risk-factors-and-performance-under-medicares-value-based-purchasing-programs), there has been a continued increase in the number of enrollees being moved from lower Star Rating contracts that do not receive a QBP to higher Star Rating contracts that do receive a QBP as part of contract consolidations, which increases the size of the QBPs that are made to MAOs due to the large enrollment increase in the higher rated, surviving contract. We are worried that this practice results in masking low quality plans under higher rated surviving contracts. This does not provide beneficiaries with accurate and reliable information for enrollment decisions, and it does not truly reward higher quality contracts. We propose here to modify from the current policy the calculation of Star Ratings for surviving contracts that have consolidated. Instead of assigning the surviving contract the Star Rating that the contract would have earned without regard to whether a consolidation took place, we propose to assign and display on Medicare Plan Finder Star Ratings based on the enrollment-weighted mean of the measure scores of the surviving and consumed contract(s) so that the ratings reflect the performance of all contracts (surviving and consumed) involved in the consolidation. Under this proposal, the calculation of the measure, domain, summary, and overall ratings would be based on these enrollment-weighted mean scores. The number of contracts this would impact is small relative to all contracts that qualify for QBPs. During the period from 1/1/2015 through 1/1/2017 annual consolidations for MA contracts ranged from a low of 7 in 2015 to a high of 19 in 2016 out of approximately 500 MA contracts. As proposed in §§ 422.162(b)(3)(i)-(iii) and 423.182(b)(3)(i)-(iii), CMS will use enrollment-weighted means of the measure scores of the consumed and surviving contracts to calculate ratings for the first and second plan years following the contract consolidations. We believe that use of enrollment-weighted means will provide a more accurate snapshot of the performance of the underlying plans in the new consolidated contract, such that both information to beneficiaries and QBPs are not somehow inaccurate or misleading. We also propose, however, that the process of weighting the enrollment of each contract and applying this general rule would vary depending on the specific types of measures involved in order to take into account the measurement period and Start Printed Page 56381data collection processes of certain measures. Our proposal would also treat ratings for determining quality bonus payment (QBP) status for MA contracts differently than displayed Star Ratings for the first year following the consolidation for consolidations that involve the same parent organization and plans of the same plan type.

We propose to codify our new policy at §§ 422.162(b)(3) and 423.182(b)(3). First, we propose generally, at paragraph (b)(3)(i) of each regulation, that CMS will assign Star Ratings for consolidated contracts using the provisions of paragraph (b)(3). We are proposing in § 422.162(b)(3) both a specific rule to address the QBP rating following the first year after the consolidation and a rule for subsequent years. As Part D plan sponsors are not eligible for QBPs, the Part D regulation text is proposed without the QBP aspect. We propose in § 422.162(b)(3)(iv) and § 423.182(b)(3)(ii) the process for assigning Star Ratings for posting on the Medicare Plan Finder for the first 2 years following the consolidation.

For the first contract year following a consolidation, as proposed at paragraphs § 422.162(b)(3)(iv) and § 423.182(b)(3)(ii), we propose to use the enrollment-weighted means as calculated below to set Star Ratings for publication (and, in § 422.162(b)(3)(iii), use of certain enrollment-weighted means for establishing QBP status:

  • The Star Ratings measure scores for the consolidated entity's first plan year would be based on enrollment-weighted measure scores using the July enrollment of the measurement period of the consumed and surviving contracts for all measures, except the survey-based and call center measures.
  • The survey-based measures (that is, CAHPS, HOS, and HEDIS measures collected through CAHPS or HOS) would use enrollment of the surviving and consumed contracts at the time the sample is pulled for the rating year. For example, for a contract consolidation that is effective January 1, 2021 the CAHPS sample for the 2021 Star Ratings would be pulled in January 2020 so enrollment in January 2020 would be used. The call center measures would use mean enrollment during the study period. We believe that these proposals for survey-based measures are more nuanced and account for how the data underlying those measures are gathered. By using the enrollment-weighted means we are reflecting the true underlying performance of both the surviving and consumed contracts.

For the second year following the consolidation, for all MA and Part D Sponsors, the Star Ratings would be calculated as follows:

  • The enrollment-weighted measure scores using the July enrollment of the measurement period of the consumed and surviving contracts would be used for all measures except HEDIS, CAHPS, and HOS.
  • The current reporting requirements for HEDIS and HOS already combine data from the surviving and consumed contract(s) following the consolidation, so we are not proposing any modification or averaging of these measure scores. For example, for HEDIS if an organization consolidates one or more contracts during the change over from measurement to reporting year, then only the surviving contract is required to report audited summary contract-level data but it must include data on all members from all contracts involved. For this reason, we are proposing regulation text that HEDIS and HOS measure data will be used as reported in the second year after consolidation.
  • The CAHPS survey sample that would be selected following the consolidation would be modified to include enrollees in the sample universe from which the sample is drawn from both the surviving and consumed contracts. If there are two contracts (that is, Contract A is the surviving contract and Contract B is the consumed contract) that consolidate, and Contract A has 5,000 enrollees eligible for the survey and Contract B has 1,000 eligible for the survey, the universe from which the sample would be selected would be 6,000.

After applying these rules for calculating the measure scores in the first and second year after consolidation, CMS would use the other rules proposed in §§ 422.166 and 423.186 to calculate the measure, domain, summary, and overall Star Ratings for the consolidated contract. In the third year after consolidation and subsequent years, the performance period for all the measures would be after the consolidation, so our proposal is limited to the Star Ratings issued the first 2 years after consolidation.

When consolidations involve two or more contracts for health and/or drug services of the same plan type under the same parent organization combining into a single contract at the start of a contract year, we propose to calculate the QBP rating for that first year following the consolidation using the enrollment-weighted mean, using traditional rounding rules, of what would have been the QBP ratings of the surviving and consumed contracts using the contract enrollment in November of the year the Star Ratings were released. In November of each year following the release of the ratings on Medicare Plan Finder, the preliminary QBP ratings are displayed in the Health Plan Management System (HPMS) for the year following the Star Ratings year. For example, the first year the consolidated entity is in operation is plan year 2020; the 2020 QBP rating displayed in HPMS in November 2018 would be based on the 2019 Star Ratings (which are released in October 2018) and calculated using the weighted mean of the November 2018 enrollment of the surviving and consumed contracts. Because the same parent organization is involved in these situations, we believe that many administrative processes and procedures are identical in the Medicare health plans offered by the sponsoring organization, and using a weighted mean of what would have been their QBP ratings accurately reflects their performance for payment purposes. In subsequent years after the first year following the consolidation, QBPs status would be determined based on the consolidated entity's Star Rating posted on Medicare Plan Finder. Under our proposal, the measure, domain, summary, and in the case of MA-PD plans the overall Star Ratings posted on Medicare Plan Finder for the second year following consolidation would be based on the enrollment-weighted measure scores so would include data from all contracts involved. Consequently, the ratings used for QBP status determinations would reflect the care provided by both the surviving and consumed contracts.

In conclusion, we are proposing a new set of rules regarding the calculation of Star Ratings for consolidated contracts to be codified at paragraphs (b)(3)(i) through (iv) of §§ 422.162 and 423.182. In most cases, we propose that the Star Ratings for the first and second year following the consolidation to be an enrollment-weighted mean of the scores at the measure level for the consumed and surviving contracts. For the QBP rating for the first year following the consolidation, we propose to use the enrollment-weighted mean of the QBP rating of the surviving and consumed contracts (which would be the overall or summary rating depending on the plan type) rather than averaging measure scores. We solicit comment on this proposal and whether our separate treatment of different measure types during the first and second year adequately addresses the differences in how data are collected (and submitted) for those measures during the different Start Printed Page 56382periods. We would also like to know whether sponsoring organizations believe that the special rule for consolidations involving the same parent organization and same plan types adequately addresses how those situations are different from cases where an MA organization buys or sells a plan or contract from or to a different entity and whether these rules should be extended to situations where there are different parent organizations involved. For commenters that support the latter, we also request comment on how CMS should determine that the same administrative processes are used and whether attestations from sponsoring organizations or evidence from prior audits should be required to support such determinations.

g. Data Sources

Under 1852(e) of the Act, MA organizations are required to collect, analyze, and report data that permit measurement of health outcomes and other indices of quality. The Star Ratings System is based on information collected consistent with section 1852(e) of the Act. Section 1852(e)(3)(B) of the Act prohibits the collection of data on quality, outcomes, and beneficiary satisfaction other than the types of data that were collected by the Secretary as of November 1, 2003; there is a limited exception for SNPs to collect, analyze, and report data that permit the measurement of health outcomes and other indicia of quality. The statute does not require that only the same data be collected, but that we do not change or expand the type of data collected until after submission of a Report to Congress (prepared in consultation with MA organizations and accrediting bodies) that explains the reason for the change(s). We clarify here that the types of data included under the Star Ratings System are consistent with the types of data collected as of November 1, 2003. Since 1997, Medicare managed care organizations have been required to annually report quality of care performance measures through HEDIS. We have also been conducting the CAHPS survey since 1997 to measure beneficiaries' experiences with their health plans, and since 2007 we have been measuring experiences with drug plans with CAHPS. HOS began in 1998 to capture changes in the physical and mental health of MA enrollees. To some extent, these surveys have been revised and updated over time, but the same types of data—clinical measures, beneficiary experiences, and changes in physical and mental health, respectively—have remained the focus of these surveys. In addition, there are several measures in the Stars Ratings System that are based on performance that address telephone customer service, members' complaints, disenrollment rates, and appeals; however these additional measures are not collected directly from the sponsoring organizations for the primary purpose of quality measurement. These additional measures are calculated from information that CMS has gathered as part of the administration of the Medicare program, such as information on appeals forwarded to the Independent Review Entity under subparts M, enrollment, and compliance and enforcement actions.

The Part D program was implemented in 2006, and while there is no parallel provision regarding applicable Part D sources of data, we have used similar datasets, for example CAHPS survey data, for beneficiaries' experiences with prescription drug plans. Section 1860D-4(d) of the Act specifically directs the administration and collection of data from consumer surveys in a manner similar to those conducted in the MA program. All of these measures reflect structure, process, and outcome indices of quality that form the measurement set under Star Ratings. Since 2007, we have publicly reported a number of measures related to the drug benefit as part of the Star Ratings. For MA organizations that offer prescription drug coverage, we have developed a series of measures focusing on administration of the drug benefit. Similar to MA measures of quality relative to health services, the Part D measures focus on customer service and beneficiary experiences, effectiveness, and access to care relative to the drug benefit. We believe that the Part D Star Ratings are consistent with the limitation expressed in section 1852(e) of the Act even though the limitation does not apply to our collection of Part D quality data from Part D sponsors.

We intend to continue to base the types of information collected in the Part C Star Ratings on section 1852(e) of the Act, and we propose at § 422.162(c)(1) that the type of data used for Star Ratings will be data consistent with the section 1852(e) limits and data gathered from CMS administration of the MA program. In addition, we propose in § 422.162(c)(1) and in § 423.182(c)(1) to include measures that reflect structure, process, and outcome indices of quality, including Part C measures that reflect the clinical care provided, beneficiary experience, changes in physical and mental health, and benefit administration, and Part D measures that reflect beneficiary experiences and benefit administration. The measures encompass data submitted directly by MA organizations (MAOs) and Part D sponsors to CMS, surveys of MA and Part D enrollees, data collected by CMS contractors, and CMS administrative data. We also propose, primarily so that the regulation text is complete on this point, a regulatory provision at §§ 422.162(c)(2) and 423.182(c)(2) that requires MA organizations and Part D plan sponsors to submit unbiased, accurate, and complete quality data as described in paragraph(c)(1) of each section. Our authority to collect quality data is clear under the statute and existing regulations, such as section 1852(e)(3)(A) and 1860D-4(d) and §§ 422.12(b)(2) and 423.156. We propose the paragraph (c)(2) regulation text to ensure that the quality ratings system regulations include a regulation on this point for readers and to avoid confusion in the future about the authority to collect this data. In addition, it is important that the data underlying the ratings are unbiased, accurate, and complete so that the ratings themselves are reliable. This proposed regulation text would clearly establish the sponsoring organization's responsibility to submit data that can be reliably used to calculate ratings and measure plan performance.

h. Adding, Updating, and Removing Measures

We are committed to continuing to improve the Part C and D Star Ratings System by focusing on improving clinical and other outcomes. We anticipate that new measures will be developed and that existing measures will be updated over time. NCQA and the Pharmacy Quality Alliance (PQA) continually work to update measures as clinical guidelines change and develop new measures focused on health and drug plans. To address these anticipated changes, we propose in §§ 422.164 and 423.184 specific rules to govern the addition, update, and removal of measures. We also propose to apply these rules to the measure set proposed in this rulemaking, to the extent that there are changes between the final rule and the Star Ratings based on the performance periods beginning on or after January 2019.

As discussed in more detail in the following paragraphs, we propose the following general rules to govern adding, updating, and removing measures:

  • For data quality issues identified during the calculation of the Star Ratings for a given year, we propose to continue our current practice of Start Printed Page 56383removing the measure from the Star Ratings.
  • That new measures and substantive updates to existing measures would be added to the Star Ratings System based on future rulemaking but that prior to such a rulemaking, CMS would announce new measures and substantive updates to existing measures and solicit feedback using the process described for changes in and adoption of payment and risk adjustment policies in section 1853(b) of the Act (that is the Call Letter attachment to the Advance Notice and Rate Announcement).
  • That existing measures (currently existing or existing after a future rulemaking) used for Star Ratings would be updated with regular updates from the measure stewards through the process described for changes in and adoption of payment and risk adjustment policies in section 1853(b) of the Act when the changes are not substantive.
  • That existing measures (currently existing or existing after a future rulemaking) used for Star Ratings would be removed from use in the Star Ratings when there has been a change in clinical guidelines associated with the measure or reliability issues identified in advance of the measurement period; CMS would announce the removal using the process described for changes in and adoption of payment and risk adjustment policies in section 1853(b) of the Act. Removal might be permanent or temporary, depending on the basis for the removal.

We are proposing specific rules for updating and removal that would be implemented through subregulatory action, so that rulemaking will not be necessary for certain updates or removals. Under this proposal, CMS would announce application of the regulation standards in the Call Letter attachment to the Advance Notice and Rate Announcement process under section 1853(b) of the Act.

First, we propose to codify, at §§ 422.164(a) and 423.184(a), regulation text stating the general rule that CMS would add, update, and remove measures used to calculate Star Ratings as provided in §§ 422.164 and 423.184. In each paragraph regarding addition, updating, and removal of measures and the use of improvement measures, we also propose rules to identify when these types of changes would not involve rulemaking based on application of the standards and authority in the regulation text. Under our proposal, CMS would solicit feedback of its application of the rules using the draft and final Call Letter each year.

Second, we propose, in paragraph (b) of these sections, that CMS would review the quality of the data on which performance, scoring, and rating of measures is done each year. We propose to continue our current practice of reviewing data quality across all measures, variation among organizations and sponsors, and measures' accuracy, reliability, and validity before making a final determination about inclusion of measures in the Star Ratings. The intent is to ensure that Star Ratings measures accurately measure true plan performance. If a systemic data quality issue is identified during the calculation of the Star Ratings, we would remove the measure from that year's rating under proposed paragraph (b).

Third, we propose to address the addition of new measures in paragraph (c).

In identifying whether to add a measure, we will be guided by the principles we listed in section III.A.12.b. of the proposed rule. Measures should be aligned with best practices among payers and the needs of the end users, including beneficiaries. Our strategy is to continue to adopt measures when they are available, nationally endorsed, and in alignment with the private sector, as we do today through the use of measures developed by NCQA and the PQA, and the use of measures that are endorsed by the National Quality Forum (NQF). We propose to codify this standard for adopting new measures at §§ 422.164(c)(1) and 423.184(c)(1). We do not intend this standard to require that a measure be adopted by an independent measure steward or endorsed by NQF in order for us to propose its use for the Star Ratings, but that these are considerations that will guide us as we develop such proposals. We also propose that CMS may develop its own measures as well when appropriate to measure and reflect performance in the Medicare program.

For the 2021 Star Ratings, we propose (at section III.A.12.) of the proposed rule to have measures that encompass outcome, intermediate outcome, patient/consumer experience, access, process, and improvement measures. It is important to have a mix of different types of measures in the Star Ratings program to understand how all of the different facets of the provision of health and drug services interact. For example, process measures are evidence-based best practices that lead to clinical outcomes of interest. Process measures are generally easier to collect, while outcome measures are sometimes more challenging requiring in some cases medical record review and more sophisticated risk-adjustment methodologies.

Over time new measures will be added and measures will be removed from the Star Ratings program to meet our policy goals. As new measures are added, our general guidelines for deciding whether to propose new measures through future rulemaking will use the following criteria:

  • Importance: The extent to which the measure is important to making significant gains in health care processes and experiences, access to services and prescription medications, and improving health outcomes for MA and Part D enrollees.
  • Performance Gap: The extent to which the measure demonstrates opportunities for performance improvement based on variation in current health and drug plan performance.
  • Reliability and Validity: The extent to which the measure produces consistent (reliable) and credible (valid) results.
  • Feasibility: The extent to which the data related to the measure are readily available or could be captured without undue burden and could be implemented by the majority of MA and Part D contracts.
  • Alignment: The extent to which the measure or measure concept is included in one or more existing federal, State, and/or private sector quality reporting programs.

We would balance these criteria as part of our decision making process so that each new measure proposed for addition to the Star Ratings meets each criteria in some fashion or to some extent. We intend to apply these criteria to identify and adopt new measures for the Star Ratings, which will be done through future rulemaking that includes explanations for how and why we propose to add new measures. When we identify a measure that meets these criteria, we propose to follow the process in our proposed paragraphs (c)(2) through (4) of §§ 422.164 and 423.184. We would initially solicit feedback on any potential new measures through the Call Letter.

As new performance measures are developed and adopted, we propose, at §§ 422.164(c)(3) and (4) and 423.184(c)(3) and (4), that they would initially be incorporated into the display page for at least 2 years but that we would keep a new measure on the display page for a longer period if CMS finds there are reliability or validity issues with the measure. As noted in the Start Printed Page 56384Introduction, the rulemaking process will create a longer lead time for changes, in particular to add a new measure to the Star Ratings or to make substantive changes to measures as discussed later in this section. Here is an example timeline for adding a new measure to the Star Ratings. In this scenario, the new measure has already been developed by the NCQA and the PQA, and endorsed by the NQF. Otherwise, that process may add an extra 3 to 5 years to the timeline.

  • January 2019: Solicit feedback on whether to add the new measure in the draft 2020 Call Letter.
  • April 2019: Summarize feedback on adding the new measure in the 2020 Call Letter.
  • 2020/2021: Propose adding the new measure to the 2024 Star Ratings (2022 measurement period) in a proposed rule; finalize through rulemaking (for 1/1/2022 effective date).
  • 2020: Performance period and collection of data for the new measure and collection of data for posting on the 2022 display page.
  • 2021: Performance period and collection of data for the new measure and collection of data for posting on the 2023 display page.
  • Fall 2021: Publish new measure on the 2022 display page (2020 measurement period).
  • January 1, 2022: Applicability date of new measure for Star Ratings.
  • 2022: Performance period and collection of data for the new measure and collection of data for inclusion in the 2024 Star Ratings.
  • Fall 2022: Publish new measure on the 2023 display page (2021 measurement period).
  • Fall 2023: Publish new measure in the 2024 Star Ratings (2022 measurement period).
  • 2025: QBP status and rebate retention allowances are determined for the 2025 payment year.

Fourth, at §§ 422.164(d) and 423.184(d) we propose to address updates to measures based on whether an update is substantive or non-substantive. Since quality measures are routinely updated (for example, when clinical codes are updated), we propose to adopt rules for the incorporation of non-substantive updates to measures that are part of the Star Ratings System without going through new rulemaking. As proposed in paragraphs (d)(1) of §§ 422.164 and 423.184, we would only incorporate updates without rulemaking for measure specification changes that do not substantively change the nature of the measure.

Substantive changes (for example, major changes to methodology) to existing measures would be proposed and finalized through rulemaking. In paragraphs (d)(2) of §§ 422.164 and 423.184, we propose to initially solicit feedback on whether to make the substantive measure update through the Call Letter prior to the measurement period for which the update would be initially applicable. For example, if the change announced significantly expands the denominator or population covered by the measure (for example, the age group included in the measures is expanded), the measure would be moved to the display page for at least 2 years and proposed through rulemaking for inclusion in Star Ratings. We intend this process for substantive updates to be similar to the process we would use for adopting new measures under proposed paragraph (c). As appropriate, the legacy measure may remain in the Star Ratings while the updated measure is on the display page if, for example, the updated measure expands the population covered in the measure and the legacy measure would still be relevant and measuring a critical topic to continue including in the Star Ratings while the updated measure is on display. Adding the updated measure to the Star Ratings would be proposed through rulemaking.

We propose to adopt rules to incorporate specification updates that are non-substantive in paragraph (d)(1). Non-substantive updates that occur (or are announced by the measure steward) during or in advance of the measurement period will be incorporated into the measure and announced using the Call Letter. We propose to use such updated measures to calculate and assign Star Ratings without the updated measure being placed on the display page. This is consistent with current practice.

In paragraph (d)(1)(i-v) of §§ 422.164 and paragraph (d)(1)(i-v) of 423.184, we propose to codify a non-exhaustive list for identifying non-substantive updates announced during or prior to the measurement period and how we would treat them under our proposal. The list includes updates in the following circumstances:

  • If the change narrows the denominator or population covered by the measure with no other changes, the updated measure would be used in the Star Ratings program without interruption. For example, if an additional exclusion—such as excluding nursing home residents from the denominator—is added, the change would be considered non-substantive and would be incorporated automatically. In our view, changes to narrow the denominator generally benefit Star Ratings of sponsoring organizations and should be treated as non-substantive for that reason.
  • If the change does not meaningfully impact the numerator or denominator of the measure, the measure would continue to be included in the Star Ratings. For example, if additional codes are added that increase the number of numerator hits for a measure during or before the measurement period, such a change would not be considered substantive because the sponsoring organization would generally benefit from that change. This type of administrative (billing) change has no impact on the current clinical practices of the plan or its providers, and thus would not necessitate exclusion from the Star Ratings System of any measures updated in this way.
  • The clinical codes for quality measures (such as HEDIS measures) are routinely revised as the code sets are updated. For updates to address revisions to the clinical codes without change in the intent of the measure and the target population, the measure would remain in the Star Ratings program and would not move to the display page. Examples of clinical codes that might be updated or revised without substantively changing the measure include:

++ ICD-10-CM (“ICD-10”) code sets. Annually, there are new ICD 10 coding updates, which are effective from October 1 through September 30th of any given year.

++ Current Procedural Terminology (CPT) codes. These codes are published and maintained by the American Medical Association (AMA) to describe tests, surgeries, evaluations, and any other medical procedure performed by a healthcare provider on a patient.

++ Healthcare Common Procedure Coding System (HCPCS) codes. These codes cover items, supplies, and non-physician services not covered by CPT codes.

++ National Drug Code (NDC). The PQA updates NDC lists biannually, usually in January and July.

  • If the measure specification change is providing additional clarifications such as the following, the measure would also not move to the display page since this does not change the intent of the measure but provides more information about how to meet the measure specifications:

++ Adding additional tests that would meet the numerator requirements.

++ Clarifying documentation requirements (for example, medical record documentation).Start Printed Page 56385

++ Adding additional instructions to identify services or procedures that meet (or do not meet) the specifications of the measure.

  • If the measure specification change is adding additional data sources, the measure would also not move to the display page because we believe such changes are merely to add alternative ways to collect the data to meet the measure specifications without changing the intent of the measure.

We solicit comment on our proposal to add non-substantive updates to measures and using the updated measure (replacing the legacy measure) to calculate Star Ratings. In particular, we are interested in stakeholders' views whether only non-substantive updates that have been adopted by a measure steward after a consensus-based or notice and comment process should be added to the Star Ratings under this proposed authority. Further, we solicit comment on whether there are other examples or situations involving non-substantive updates that should be explicitly addressed in the regulation text or if our proposal is sufficiently extensive.

In addition to updates and additions of measures, we are proposing rules to address the removal of measures from the Star Ratings to be codified in §§ 422.164(e) and 423.184(e). In paragraph (e)(1) of each section, we propose the two circumstances under which a measure would be removed entirely from the calculation of the Star Ratings. The first circumstance would be changes in clinical guidelines that mean that the measure specifications are no longer believed to align with or promote positive health outcomes. As clinical guidelines change, we would need the flexibility to remove measures from the Star Ratings that are not consistent with current guidelines. We are proposing to announce such subregulatory removals through the Call Letter so that removals for this reason are accomplished quickly and as soon as the disconnect with positive clinical outcomes is definitively identified. We note that this proposal is consistent with our current practice. For example, previously we retired the Glaucoma Screening measure for HEDIS 2015 after the U.S. Preventive Services Task Force concluded that the clinical evidence is insufficient to assess the balance of benefits and harms of screening for glaucoma in adults.

In addition to removal of measures because of changes in clinical guidelines, we currently review measures continually to ensure that the measure remains sufficiently reliable such that it is appropriate to continue use of the measure in the Star Ratings. We propose, at paragraph (e)(1)(ii), that we would also have authority to subregulatorily remove measures that show low statistical reliability so as to move swiftly to ensure the validity and reliability of the Star Ratings, even at the measure level. We will continue to analyze measures to determine if measure scores are “topped out” (that is, showing high performance across all contracts decreasing the variability across contracts and making the measure unreliable) so as to inform our approach to the measure, or if measures have low reliability. Although some measures may show uniform high performance across contracts and little variation between them, we seek evidence of the stability of such high performance, and we want to balance how critical the measures are to improving care, the importance of not creating incentives for a decline in performance after the measures transition out of the Star Ratings, and the availability of alternative related measures. If, for example, performance in a given measure has just improved across all contracts, or if no other measures capture a key focus in Star Ratings, a “topped out” measure which would have lower reliability may be retained in Star Ratings. Under our proposal to be codified at paragraph (e)(2), we would announce application of this rule through the Call Letter in advance of the measurement period.

We request comment on these proposals regarding the processes to add, update, and remove Star Ratings measures.

i. Measure Set for Performance Periods Beginning on or After January 1, 2019

We are proposing the measures included in Table 2 to be collected for performance periods beginning on or after January 1, 2019 for the 2021 Part C and D Star Ratings. The CAHPS measure specification, including case-mix adjustment, is described in the Technical Notes and at ma-pdpcahps.org. The HOS measure specification, including case-mix adjustment, is described at (http://hosonline.org/​globalassets/​hos-online/​survey-results/​hos_​casemix_​coefficient_​tables_​c17.pdf). These specifications are part of our proposal.

We are not proposing to codify this list of measures and specifications in regulation text in light of the regular updates and revisions contemplated by our proposals at §§ 422.164 and 423.184. We intend, as proposed in paragraph (a) of these sections, that the Technical Notes for each year's Star Ratings would include the applicable full list of measures.

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j. Improvement Measures

In the 2013 Part C and D Star Ratings, we implemented the Part C and D improvement measures (CY2013 Rate Announcement, https://www.cms.gov/​Medicare/​Health-Plans/​MedicareAdvtgSpecRateStats/​Downloads/​Announcement2013.pdf). The improvement measures address the overall improvement or decline in individual measure scores from the prior to the current year. We propose to continue the current methodology detailed in the Technical Notes for calculating the improvement measures and to codify it at §§ 422.164(f) and 423.184(f). For a measure to be included in the improvement calculation, the measure must have numeric value scores in both the current and prior year and not have had a substantive specification change during those years. In addition, the improvement measure will not include any data on measures that are already focused on improvement (for example, HOS measures focused on improving or maintaining physical or mental health). The Part C improvement measure includes only Part C measure scores, and the Part D improvement measure includes only Part D measure scores. All measures meeting these criteria would be included in the improvement measures under our proposal at paragraph (f)(1)(i) through (iv) of §§ 422.164 and 423.184.

Annually, the subset of measures to be included in the improvement measures following these criteria would be announced through the Call Letter, similar to our proposal for regular updates and removal of measures. Under our proposal, once the measures to be used for the improvement measures are identified, CMS would determine which contracts have sufficient data for purposes of applying and scoring the improvement measure(s). Following current practices, the improvement measure score would be calculated only for contracts that have numeric measure scores for both years for at least half of the measures identified for use in the improvement measure. We propose this standard for determining contracts eligible for an improvement measure at paragraph (f)(2).

We propose at part §§ 422.164(f)(3) and (4) and 423.184(f)(3) and (4) the process for calculating the improvement measure score(s) and a special rule for any identified improvement measure for a contract that received a measure-level Star Rating of 5 in each of the 2 years examined, but whose associated measure score indicates a statistically significant decline in the time period. The improvement measure would be calculated in a series of distinct steps:

  • The improvement change score (the difference in the measure scores in the 2-year period) would be determined for each measure that has been identified as part of an improvement measure and for which a contract has a numeric score for each of the 2 years examined.
  • Each contract's improvement change score would be categorized as a significant change or not by employing a two tailed t-test with a level of significance of 0.05.
  • The net improvement per measure category (outcome, access, patient experience, process) would be calculated by finding the difference between the weighted number of significantly improved measures and significantly declined measures, using the measure weights associated with each measure category.
  • The improvement measure score would then be determined by calculating the weighted sum of the net improvement per measure category divided by the weighted sum of the number of eligible measures.
  • The improvement measure score would be converted to a measure-level Star Rating using the hierarchical clustering algorithm.

The improvement measure score cut points would be determined using two separate clustering algorithms. Improvement measure scores of zero and above would use the clustering algorithm to determine the cut points for the Star Rating levels of 3 and above. Improvement measure scores below zero would be clustered to determine the cut points for 1 and 2 stars. The Part D improvement measure thresholds for MA-PDs and PDPs would be reported separately.

We propose a special rule in paragraph (f)(3) to hold harmless sponsoring organizations that have 5-star ratings for both years on a measure used for the improvement measure calculation. This hold harmless provision was added in 2014 to avoid the unintended consequence for contracts that score 5 stars on a subset of measures in each of the 2 years. For any identified improvement measure for which a contract received a rating of 5 stars in each of the years examined, but for which the measure score demonstrates a statistically significant decline based on the results of the significance testing (at a level of significance of 0.05) on the change score, the measure will be categorized as having no significant change. The measure will be included in the count of measures used to determine eligibility for the improvement measure and in the denominator of the improvement measure score. The intent of the hold harmless provision for a contract that receives a measure rating of 5 stars for each year is to prevent the measure from lowering a contract's improvement measure when the contract still demonstrates high performance. We propose in section III.A.12. of this proposed rule another hold harmless provision to be codified at §§ 422.166(g)(1) and 423.186(g)(1).

We request comment on the methodology for the improvement measures, including rules for determining which measures are included, the conversion to a Star Rating, and the hold harmless provision for individual measures that are used for the determination of the improvement measure score.

k. Data Integrity

The data underlying a measure score and rating must be complete, accurate, and unbiased for it to be useful for the purposes we have proposed at §§ 422.160(b) and 423.180(b). As part of the current Star Ratings methodology, all measures and the associated data have multiple levels of quality assurance checks. Our longstanding policy has been to reduce a contract's measure rating if we determine that a contract's measure data are incomplete, inaccurate, or biased. Data validation is a shared responsibility among CMS, CMS data providers, contractors, and Part C and D sponsors. When applicable (for example, data from the IRE, PDE, call center), CMS expects sponsoring organizations to routinely monitor their data and immediately alert CMS if errors or anomalies are identified so CMS can address these errors.

We propose to codify at §§ 422.164(g) and 423.184(g) specific rules for the reduction of measure ratings when CMS identifies incomplete, inaccurate, or biased data that have an impact on the accuracy, impartiality, or completeness of data used for the impacted measures. Data may be determined to be incomplete, inaccurate, or biased based on a number of reasons, including mishandling of data, inappropriate processing, or implementation of incorrect practices that impacted specific measure(s). One example of such situations that give rise to such determinations includes a contract's failure to adhere to HEDIS, HOS, or CAHPS reporting requirements. Our modifications to measure-specific ratings due to data integrity issues are separate from any CMS compliance or enforcement actions related to a sponsor's deficiencies. This policy and Start Printed Page 56395these rating reductions are necessary to avoid falsely assigning a high star to a contract, especially when deficiencies have been identified that show we cannot objectively evaluate a sponsor's performance in an area.

As a standard practice, we check for flags that indicate bias or non-reporting, check for completeness, check for outliers, and compare measures to the previous year to identify significant changes which could be indicative of data issues. CMS has developed and implemented Part C and Part D Reporting Requirements Data Validation standards to assure that data reported by sponsoring organizations pursuant to §§ 422.516 and 423.514 satisfy the regulatory obligation. Sponsor organizations should refer to specific guidance and technical instructions related to requirements in each of these areas. For example, information about HEDIS measures and technical specifications is posted on: http://www.ncqa.org/​HEDISQualityMeasurement/​HEDISMeasures.aspx. Information about Data Validation of Reporting Requirements data is posted on: https://www.cms.gov/​Medicare/​Prescription-Drug-Coverage/​PrescriptionDrugCovContra/​PartCDDataValidation.html and https://www.cms.gov/​Medicare/​Prescription-Drug-Coverage/​PrescriptionDrugCovContra/​RxContracting_​ReportingOversight.html.

We propose, in paragraphs (g)(1)(i) through (iii), rules for specific circumstances where we believe a specific response is appropriate. First, we propose a continuation of a current policy: To reduce HEDIS measures to 1 star when audited data are submitted to NCQA with an audit designation of “biased rate” or BR based on an auditor's review of the data if a plan chooses to report; this proposal would also apply when a plan chooses not to submit and has an audit designation of “non-report” or NR. Second, we propose to continue to reduce Part C and D Reporting Requirements data, that is, data required pursuant to §§ 422.514 and 423.516, to 1 star when a contract did not score at least 95 percent on data validation for the applicable reporting section or was not compliant with data validation standards/sub-standards for data directly used to calculate the associated measure. In our view, data that do not reach at least 95 percent on the data validation standards are not sufficiently accurate, impartial, and complete for use in the Star Ratings. As the sponsoring organization is responsible for these data and submits them to CMS, we believe that a negative inference is appropriate to conclude that performance is likely poor. Third, we propose a new specific rule to authorize scaled reductions in Star Ratings for appeal measures in both Part C and Part D.

The data downgrade policy was adopted to address instances when the data that would be used for specific measures are not reliable for measuring performance due to their incompleteness or biased/erroneous nature. For instances where the integrity of the data is compromised because of the action or inaction of the sponsoring organization (or its subcontractors or agents), this policy reflects the underlying fault of the sponsoring organization for the lack of data for the applicable measure. Without some policy for reduction in the rating for these measures, sponsoring organizations could “game” the Star Ratings and merely fail to submit data that illustrate poor performance. We believe that removal of the measure from the ratings calculation would unintentionally reward poor data compilation and submission activities such that our only recourse is to reduce the rating to 1 star for affected measures.

For verification and validation of the Part C and D appeals measures, we propose to use statistical criteria to determine if a contract's appeals measure-level Star Ratings would be reduced for missing IRE data. The criteria would allow us to use scaled reductions for the appeals measures to account for the degree to which the data are missing. The completeness of the IRE data is critical to allow fair and accurate measurement of the appeals measures. All plans are responsible and held accountable for ensuring high quality and complete data to maintain the validity and reliability of the appeals measures.

In response to stakeholder concerns about CMS' prior practice of reducing measure ratings to one star based on any finding of data inaccuracy, incompleteness, or bias, CMS initiated the Timeliness Monitoring Project (TMP) in CY 2017.[40] The first submission for the TMP was for the measurement year 2016 related to Part C organization determinations and reconsiderations and Part D coverage determinations and redeterminations. The timeframe for the submitted data was dependent on the enrollment of the contract with smaller contracts submitting data from a three-month period, medium-sized contracts submitting data from a two-month period, and larger contracts submitting data from a one-month period.[41]

We propose to use multiple data sources whenever possible, such as the TMP data or information from audits to determine whether the data at the Independent Review Entity (IRE) are complete. Given the financial and marketing incentives associated with higher performance in Star Ratings, safeguards are needed to protect the Star Ratings from actions that inflate performance or mask deficiencies.

CMS is proposing to reduce a contract's Part C or Part D appeal measures Star Ratings for IRE data that are not complete or otherwise lack integrity based on the TMP or audit information. The reduction would be applied to the measure-level Star Ratings for the applicable appeals measures. There are varying degrees of data issues and as such, we are proposing a methodology for reductions that reflects the degree of the data accuracy issue for a contract instead of a one-size fits all approach. The methodology would employ scaled reductions, ranging from a 1-star reduction to a 4-star reduction; the most severe reduction for the degree of missing IRE data would be a 4-star reduction which would result in a measure-level Star Rating of 1 star for the associated appeals measures (Part C or Part D). The data source for the scaled reduction is the TMP or audit data, however the specific data used for the determination of a Part C IRE data completeness reduction are independent of the data used for the Part D IRE data completeness reduction. If a contract receives a reduction due to missing Part C IRE data, the reduction would be applied to both of the contract's Part C appeals measures. Likewise, if a contract receives a reduction due to missing Part D IRE data, the reduction would be applied to both of the contract's Part D appeals measures. We solicit comment on this proposal and its scope; we are looking in particular for comments related to how to use the process we are proposing Start Printed Page 56396in this proposal to account for data integrity issues discovered through means other than the TMP and audits of sponsoring organizations.

CMS' proposed scaled reduction methodology is a three-stage process using the TMP or audit information to determine: First, whether a contract may be subject to a potential reduction for the Part C or Part D appeals measures; second, the basis for the estimate of the error rate; and finally, whether the estimated error rate is significantly greater than the cut points for the scaled reductions of 1, 2, 3, or 4 stars.

Once the scaled reduction for a contract is determined using this methodology, the reduction would be applied to the contract's associated appeals measure-level Star Ratings. The minimum measure-level Star Rating is 1 star. If the difference between the associated appeals measure-level Star Rating (before the application of the reduction) and the identified scaled reduction is less than one, the contract would receive a measure-level Star Rating of 1 star for the appeals measure.

The error rate for the Part C and Part D appeals measures using the TMP or audit data and the projected number of cases not forwarded to the IRE for a 3-month period would be used to identify contracts that may be subject to an appeals-related IRE data completeness reduction. A minimum error rate is proposed to establish a threshold for the identification of contracts that may be subject to a reduction. The establishment of the threshold allows the focus of the possible reductions on contracts with error rates that have the greatest potential to distort the signal of the appeals measures. Since the timeframe for the TMP data is dependent on the enrollment of the contract, with smaller contracts submitting data from a three-month period, medium-sized contracts submitting data from a 2-month period, and larger contracts submitting data from a one-month period, the use of a projected number of cases allows a consistent time period for the application of the criteria proposed.

The calculated error rate formula (Equation 1) for the Part C measures is proposed to be determined by the quotient of the number of cases not forwarded to the IRE and the total number of cases that should have been forwarded to the IRE. The number of cases that should have been forwarded to the IRE is the sum of the number of cases in the IRE during TMP or audit data collection period and the number of cases not forwarded to the IRE during the same period.

The calculated error rate formula (Equation 2) for the Part D measures is proposed to be determined by the quotient of the number of untimely cases not auto-forwarded to the IRE and the total number of untimely cases.

The projected number of cases not forwarded to the IRE in a 3-month period would be calculated by multiplying the number of cases found not to be forwarded to the IRE based on the TMP or audit data by a constant determined by the TMP time period. Contracts with mean annual enrollments greater than 250,000 that submitted data from 1-month period would have their number of cases found not to be forwarded to the IRE based on the TMP data multiplied by the constant 3.0. Contracts with mean enrollments of 50,000 but at most 250,000 that submitted data from a 2-month period would have their number of cases found not to be forwarded to the IRE based on the TMP data multiplied by the constant 1.5. Small contracts with mean enrollments less than 50,000 that submitted data for a 3-month period would have their number of cases found not to be forwarded to the IRE based on the TMP data multiplied by the constant 1.0.

Under this proposal, contract ratings would be subject to a possible reduction due to lack of IRE data completeness if both following conditions are met• The calculated error rate is 20 percent or more.

  • The projected number of cases not forwarded to the IRE is at least 10 in a 3-month period.

The requirement for a minimum number of cases is needed to address statistical concerns with precision and small numbers. If a contract meets only one of the conditions, the contract would not be subject to reductions for IRE data completeness issues.

If a contract is subject to a possible reduction based on the aforementioned conditions, a confidence interval estimate for the true error rate for the contract would be calculated using a Score Interval (Wilson Score Interval) at a confidence level of 95 percent.

The midpoint of the score interval would be determined using Equation 3.

The z score that corresponds to a level of statistical significance of 0.05, commonly denoted as zα/2 but for ease of presentation represented here as z. (The z value that will be used for the purpose of the calculation of the interval is 1.959964.).

For the Part C appeals measures, the midpoint of the confidence interval would be calculated using Equation 3 along with the calculated error rate from the TMP, which is determined by Equation 1. The total number of cases in Equation 3 is the number of cases that should have been in the IRE for the Part C TMP data.

For the Part D appeals measures, the midpoint of the confidence interval would be calculated using Equation 3 along with the calculated error rate from the TMP, which is determined by Equation 2. The total number of cases in Start Printed Page 56397Equation 3 is the total number of untimely cases for the Part D appeals measures.

Letting the calculated error rate be represented by and the total number of cases represented as n, Equation 3 can be streamlined as Equation 4:

The lower bound of the confidence interval estimate for the error rate is calculated using Equation 5 below:

For each contract subject to a possible reduction, the lower bound of the interval estimate of the error rate would be compared to each of the thresholds in Table 3. If the contract's calculated lower bound is higher than the threshold, the contract would receive the reduction that corresponds to the highest threshold that is less than the lower bound. In other words, the contract's lower bound is being employed to determine whether the contract's error rate is significantly greater than the thresholds of 20 percent, 40 percent, 60 percent, and 80 percent. The proposed scaled reductions are in Table 3, and would be codified in narrative form at paragraph (g)(1)(iii)(D) of both regulations.

The reductions due to IRE data completeness issues would be applied after the calculation of the measure-level Star Rating for the appeals measures. The reduction would be applied to the Part C appeals measures and/or the Part D appeals measures.

It is important to note that a contract's lower bound could be statistically significantly greater than more than one threshold. The reduction would be determined by the highest threshold that the contract's lower bound exceeds. For example, if the lower bound for a contract is 64.560000 percent, the contract's estimated value is significantly greater than the thresholds of 20 percent, 40 percent, and 60 percent because the lower bound value 64.560000 percent is greater than each of these thresholds. The lower bound for the contract's confidence interval is not greater than 80 percent. The contract would be subject to the reduction that corresponds to the 60 percent threshold, which is three stars.

Table 3—Appeals Measure Star Ratings Reductions by the Incomplete Data Error Rate

Proposed thresholds using the lower bound of confidence interval estimate of the error rate (%)Reduction for incomplete IRE data (stars)
201
402
603
804

We propose regulation text at § 422.164(g)(1)(iii)(A) through (N) and § 423.184(g)(1)(iii)(A) through (K) to codify these parameters and formulas for the scaled reductions. We note that the proposed text for the Part C regulation includes specific paragraphs related to MA and MA-PD plans that are not included in the proposed text for the Part D regulation but that the two are otherwise identical.

In addition, we propose in §§ 422.164(g)(2) and 423.184(g)(2) to authorize reductions in a Star Rating for a measure when there are other data accuracy concerns (that is, those not specified in paragraph (g)(1)). We propose an example in paragraph (g)(2) of another circumstance where CMS would be authorized to reduce ratings based on a determination that performance data are incomplete, inaccurate, or biased. We also propose this other situation would result in a reduction of the measure rating to 1 star.

We have taken several steps in past years to protect the integrity of the data we use to calculate Star Ratings. However, we welcome comments about alternative methods for identifying inaccurate or biased data and comments on the proposed policies for reducing stars for data accuracy and completeness issues. Further, we welcome comments on the proposed methodology for scaled reductions for the Part C and Part D appeals measures to address the degree of missing IRE data.

l. Measure-Level Star Ratings

We propose in §§ 422.166(a) and 423.186(a) the methods for calculating Star Ratings at the measure level. As part of the Part C and D Star Ratings System, Star Ratings are currently calculated at the measure level. To separate a distribution of scores into distinct groups or star categories, a set of values must be identified to separate one group from another group. The set of values that break the distribution of the scores into non-overlapping groups is a set of cut points. We propose to continue to determine cut points by applying either clustering or a relative distribution and significance testing methodology; we propose to codify this policy in paragraphs (a)(1) of each section. We propose in paragraphs (a)(2) and (a)(3) of each section that for non-CAHPS measures, we would use a clustering methodology and that for CAHPS measures, we would use relative distribution and significance testing. Measure scores would be converted to a 5-star scale ranging from 1 to 5, with whole star increments for the cut points. A rating of 5 stars would indicate the highest Star Rating possible, while a rating of 1 star would be the lowest rating on the scale. Consistent with current policy, we propose to use the two methodologies described as follows to convert measure scores to measure-level Star Ratings.

The clustering method would be applied to all Star Ratings measures, except for the CAHPS measures. For each individual measure, we would determine the measure cut points using all measure scores for all contracts required to report that do not have missing, flagged as biased, or erroneous data. For the Part D measures, we propose to determine MA-PD and PDP cut points separately. The scores would Start Printed Page 56398be grouped such that scores within the same rating (that is 1 star, 2 stars, etc.) are as similar as possible, and scores in different ratings are as different as possible. The hierarchical clustering algorithm and the associated tree and cluster assignments using SAS (a statistical software package) are currently used to determine the cut points for the assignment of the measure-level Star Ratings. We intend to continue use of this software under this proposal, but improvements in statistical analysis will not result in rulemaking or changes in these proposed rules. Rather, we believe that the software used to apply the clustering methodology is generally irrelevant.

Conceptually, the clustering algorithm identifies natural gaps within the distribution of the scores and creates groups (clusters) that are then used to identify the cut points that result in the creation of a pre-specified number of categories. The Euclidean distance between each pair of contracts' measure scores serves as the input for the clustering algorithm. The hierarchical clustering algorithm begins with each contract's measure score being assigned to its own cluster. Ward's minimum variance method is used to separate the variance of the measure scores into within-cluster and between-cluster sum of squares components in order to determine which pairs of clusters to merge. For the majority of measures, the final step in the algorithm is done a single time with five categories specified for the assignment of individual scores to cluster labels. The cluster labels are then ordered to create the 1 to 5-star scale. The range of the values for each cluster (identified by cluster labels) is examined and would be used to determine the set of cut points for the Star Ratings. The measure score that corresponds to the lower bound for the measure-level ratings of 2 through 5 would be included in the star-specific rating category for a measure for which a higher score corresponds to better performance. For a measure for which a lower score is better, the process would be the same except that the upper bound within each cluster label would determine the set of cut points. The measure score that corresponds to the cut point for the ratings of 2 through 5 would be included in the star-specific rating category. In cases where multiple clusters have the same measure score value range, those clusters would be combined, leading to fewer than 5 clusters. Under our proposal to use clustering to set cut points, we would not require the same number of observations (contracts) within each rating and instead would use a data-driven approach.

As proposed in paragraphs (a)(2)(ii) of each section the improvement measures for Part C and Part D would require the clustering algorithm to be done twice for the identification of the cut points that would allow the conversion of the improvement measure scores to the star scale. The Part D improvement measure score clustering for MA-PDs and PDPs would be reported separately. Improvement scores of zero or greater would be assigned at least 3 stars for the improvement Star Rating, while improvement scores less than zero would be assigned either 1 or 2 stars. The clustering would be conducted separately for improvement measure scores greater than or equal to zero and those with improvement measure scores less than zero. For contracts with improvement scores greater than or equal to zero, the clustering process would result in three clusters with measure-level Star Ratings of 3, 4, or 5 with the lower bound of each cluster serving as the cut point for the associated Star Rating. For those contracts with improvement scores less than zero, the clustering algorithm would result in two clusters with measure-level Star Ratings of 1 or 2.

We propose in paragraphs (a)(3) of each section to use percentile standing relative to the distribution of scores for other contracts, measurement reliability standards, and statistical significance testing to determine star assignments for the CAHPS measures. This method would combine evaluating the relative percentile distribution of scores with significance testing and measurement reliability standards in order to maximize the accuracy of star assignments based on scores produced from the CAHPS survey. For CAHPS measures, contracts are first classified into base groups by comparisons to percentile cut points defined by the current-year distribution of case-mix adjusted contract means. Percentile cut points would then be rounded to the nearest integer on the 0-100 reporting scale, and each base group would include those contracts whose rounded mean score is at or above the lower limit and below the upper limit. Then, the number of stars assigned would be determined by the base group assignment, the statistical significance and direction of the difference of the contract mean from the national mean, an indicator of the statistical reliability of the contract score on a given measure (based on the ratio of sampling variation for each contract mean to between-contract variation), and the standard error of the mean score. Table 4, which we propose to codify at §§ 422.166(a)(3) and 423.186(a)(3), details the CAHPS star assignment rules for each rating. All statistical tests, including comparisons involving standard error, would be computed using unrounded scores.

We propose that if the reliability of a CAHPS measure score is very low for a given contract, less than 0.60, the contract would not receive a Star Rating for that measure. For purposes of applying the criterion for 1 star on Table 3, at item (c), low reliability scores would be defined as those with at least 11 respondents and reliability greater than or equal to 0.60 but less than 0.75 and also in the lowest 12 percent of contracts ordered by reliability. The standard error would be considered when the measure score is below the 15th percentile (in base group 1), significantly below average, and has low reliability: In this case, 1 star would be assigned if and only if the measure score is at least 1 standard error below the unrounded cut point between base groups 1 and 2. Similarly, when the measure score is at or above the 80th percentile (in base group 5), significantly above average, and has low reliability, 5 stars would be assigned if and only if the measure score is at least 1 standard error above the unrounded cut point between base groups 4 and 5.

Table 4—CAHPS Star Assignment Rules

StarCriteria for assigning star ratings
1A contract is assigned one star if both criteria (a) and (b) are met plus at least one of criteria (c) and (d): (a) Its average CAHPS measure score is lower than the 15th percentile; AND (b) its average CAHPS measure score is statistically significantly lower than the national average CAHPS measure score; (c) the reliability is not low; OR (d) its average CAHPS measure score is more than one standard error (SE) below the 15th percentile.
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2A contract is assigned two stars if it does not meet the one-star criteria and meets at least one of these three criteria: (a) Its average CAHPS measure score is lower than the 30th percentile and the measure does not have low reliability; OR (b) its average CAHPS measure score is lower than the 15th percentile and the measure has low reliability; OR (c) its average CAHPS measure score is statistically significantly lower than the national average CAHPS measure score and below the 60th percentile.
3A contract is assigned three stars if it meets at least one of these three criteria: (a) Its average CAHPS measure score is at or above the 30th percentile and lower than the 60th percentile, AND it is not statistically significantly different from the national average CAHPS measure score; OR (b) its average CAHPS measure score is at or above the 15th percentile and lower than the 30th percentile, AND the reliability is low, AND the score is not statistically significantly lower than the national average CAHPS measure score; OR (c) its average CAHPS measure score is at or above the 60th percentile and lower than the 80th percentile, AND the reliability is low, AND the score is not statistically significantly higher than the national average CAHPS measure score.
4A contract is assigned four stars if it does not meet the 5-star criteria and meets at least one of these three criteria: (a) Its average CAHPS measure score is at or above the 60th percentile and the measure does not have low reliability; OR (b) its average CAHPS measure score is at or above the 80th percentile and the measure has low reliability; OR (c) its average CAHPS measure score is statistically significantly higher than the national average CAHPS measure score and above the 30th percentile.
5A contract is assigned five stars if both criteria (a) and (b) are met plus at least one of criteria (c) and (d): (a) Its average CAHPS measure score is at or above the 80th percentile; AND (b) its average CAHPS measure score is statistically significantly higher than the national average CAHPS measure score; (c) the reliability is not low; OR (d) its average CAHPS measure score is more than one SE above the 80th percentile.

We request comments on our proposed methods to determine cut points. For certain measures, we previously published pre-determined 4-star thresholds. If commenters recommend pre-determined 4-star thresholds, we request suggestions on how to minimize generating Star Ratings that do not reflect a contract's “true” performance, otherwise referred to as the risk of “misclassifying” a contract's performance (for example, scoring a “true” 4-star contract as a 3-star contract, or vice versa, or creating “cliffs” in Star Ratings and therefore, potential benefits between plans with nearly identical Star Ratings on different sides of a fixed threshold), and how to continue to create incentives for quality improvement. We also welcome comments on alternative recommendations for revising the cut point methodology. For example, we are considering methodologies that would minimize year-to-year changes in the cut points by setting the cut points so they are a moving average of the cut points from the two or three most recent years or setting caps on the degree to which a measure cut point could change from one year to the next. We welcome comments on these particular methodologies and recommendations for other ways to provide stability for cut points from year to year.

m. Hierarchical Structure of the Ratings

We propose to continue our existing policy to use a hierarchical structure for the Star Ratings. The basic building block of the MA Star Ratings System is, and under our proposal would continue to be, the measure. Because the MA Star Ratings System consists of a large collection of measures across numerous quality dimensions, the measures would be organized in a hierarchical structure that provides ratings at the measure, domain, Part C summary, Part D summary, and overall levels. The regulation text at §§ 422.166 and 423.186 is built on this structure and provides for calculating ratings at each “level” of the system. The organization of the measures into larger groups increases both the utility and efficiency of the rating system. At each aggregated level, ratings are based on the measure-level stars. Ratings at the higher level are based on the measure-level Star Ratings, with whole star increments for domains and half-star increments for summary and overall ratings; a rating of 5 stars would indicate the highest Star Rating possible, while a rating of 1 star would be the lowest rating on the scale. Half-star increments are used in the summary and overall ratings to allow for more variation at the higher hierarchical levels of the ratings system. We believe this greater variation and the broader range of ratings provide more useful information to beneficiaries in making enrollment decisions while remaining consistent with the statutory direction in sections 1853(o) and 1854(b) of the Act to use a 5-star system. These policies for the assignment of stars would be codified with other rules for the ratings at the domain, summary, and overall level. Domain ratings employ an unweighted mean of the measure-level stars, while the Part C and D summary and overall ratings employ a weighted mean of the measure-level stars and up to two adjustments. We propose to codify these policies at paragraphs (b)(2), (c)(1) and (d)(1) of §§ 422.166 and 423.186.

n. Domain Star Ratings

Groups of measures that together represent a unique and important aspect of quality and performance are organized to form a domain. Domain ratings summarize a plan's performance on a specific dimension of care. Currently the domains are used purely for purposes of displaying data on Medicare Plan Finder to organize the measures and help consumers interpret the data. We propose to continue this policy at §§ 422.166(b)(1)(i) and 423.186(b)(1)(i).

At present, there are nine domains—five for Part C measures for MA-only and MA-PDs plans and four for Part D measures for MA-PDs. We propose to continue to group measures for purposes of display on Medicare Plan Finder and to continue use of the same domains as in current practice in §§ 422.166(b)(1)(i) and 423.196(b)(1)(i). The current domains are listed in Tables 5 and 6.

Table 5—Part C Domains

Domain
Staying Healthy: Screenings, Tests and Vaccines.
Managing Chronic (Long Term) Conditions.
Member Experience with Health Plan.
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Member Complaints and Changes in the Health Plan's Performance.
Health Plan Customer Service.

Table 6—Part D Domains

Domain
Drug Plan Customer Service.
Member Complaints and Changes in the Drug Plan's Performance.
Member Experience with the Drug Plan.
Drug Safety and Accuracy of Drug Pricing.

Currently, Star Ratings for domains are calculated using the unweighted mean of the Star Ratings of the included measures. They are displayed to the nearest whole star, using a 1-5 star scale. We propose to continue this policy at paragraph (b)(2)(ii). We also propose that a contract must have stars for at least 50 percent of the measures required to be reported for that domain for that contract type to have that domain rating calculated in order to have enough data to reflect the contract's performance on the specific dimension. For example, if a contract is rated only on one measure in Staying Healthy: Screenings, Tests and Vaccines, that one measure would not necessarily be representative of how the contract performs across the whole domain so we do not believe it is appropriate to calculate and display a domain rating. We propose to continue this policy by providing, at paragraph (b)(2)(i), that a minimum number of measures must be reported for a domain rating to be calculated.

o. Part C and D Summary Ratings

In the current rating system the Part C summary rating provides a rating of the health plan quality and the Part D summary rating provides a rating of the prescription drug plan quality. We are proposing, at §§ 422.166(c) and 423.186(c), to codify regulation text governing the adoption of Part C summary ratings and Part D summary ratings. An MA-only plan and a Part D standalone plan would receive a summary rating only for, respectively, Part C measures and Part D measures.

First, in paragraphs (c)(1) of each section, we propose the overall formula for calculating the summary ratings for Part C and Part D. Under current policy, the summary rating for an MA-only contract is calculated using a weighted mean of the Part C measure-level Star Ratings with up to two adjustments: The reward factor (if applicable) and the categorical adjustment index (CAI); similarly, the current summary rating for a PDP contract is calculated using a weighted mean of the Part D measure-level Star Ratings with up to two adjustments: The reward factor (if applicable) and the CAI. We propose in §§ 422.166(c)(1) and 423.186(c)(1) that the Part C and Part D summary ratings would be calculated as the weighted mean of the measure-level Star Ratings with an adjustment to reward consistently high performance (reward factor) and the application of the CAI, pursuant to paragraph (f) (where we propose the specifics for these adjustments) for Parts C and D, respectively.

Second, and also consistent with current policy, we propose an MA-only contract and PDP would have a summary rating calculated only if the contract meets the minimum number of rated measures required for its respective summary rating: A contract must have scores for at least 50 percent of the measures required to be reported for the contract type to have the summary rating calculated. The proposed regulation text would be codified as paragraph (c)(2)(i) of §§ 422.166 and 423.186. The same rules would be applied to both the Part C and Part D summary ratings for the minimum number of rated measures and flags for display. We would apply this regulation to require a MA-PD to have a Part C and a Part D summary rating if the minimum requirement of rated measures for each summary rating type is met. The improvement measures are based on identified measures that are each counted towards meeting the proposed requirement for the calculation of a summary rating. We propose (at paragraph (c)(2)(ii)) that the improvement measures themselves are not included in the count of minimum number of measures for the Part C or Part D summary ratings.

Third, we propose a paragraph (c)(3) in both §§ 422.166 and 423.186 to provide that the summary ratings are on a 1 to 5 star scale in half-star increments. Traditional rounding rules would be employed to round the summary rating to the nearest half-star. The summary rating would be displayed in HPMS and Medicare Plan Finder to the nearest half-star. As proposed in §§ 422.166(h) and 423.186(h), if a contract has not met the measure requirement for calculating a summary rating, the display in HPMS (and on Medicare Plan Finder) for the applicable summary rating would be the flag “Not enough data available” or if the measurement period is less than 1 year past the contract's effective date the flag would be “Plan too new to be measured”.

We welcome comments on the calculations for the Part C and D summary ratings.

p. Overall Rating

The overall Star Rating is a global rating that summarizes the plan's quality and performance for the types of services offered by the plans under the rated contract. We propose at §§ 422.166(d) and 423.186(d) to codify the standards for calculating and assigning overall Star Ratings for MA-PD contracts. The overall rating for an MA-PD contract is proposed to be calculated using a weighted mean of the Part C and Part D measure level Star Ratings, respectively, with an adjustment to reward consistently high performance described in paragraph (f)(1) and the application of the CAI, pursuant to described in paragraph (f)(2).

Consistent with current policy, we propose at paragraph (d)(2) that an MA-PD would have an overall rating calculated only if the contract receives both a Part C and Part D summary rating, and scores for at least 50% of the measures are required to be reported for the contract type to have the overall rating calculated. As with the Part C and D summary ratings, the Part C and D improvement measures would not be included in the count for the minimum number of measures for the overall rating. Any measure that shares the same data and is included in both the Part C and Part D summary ratings would be included only once in the calculation for the overall rating; for example, Members Choosing to Leave the Plan and Complaints about the Plan. As with summary ratings, we propose that overall MA-PD ratings would use a 1 to 5 star scale in half-star increments; traditional rounding rules would be employed to round the overall rating to the nearest half-star. These policies are proposed as paragraphs (d)(2)(i) through (iv).

In accordance with our general proposed policy at §§ 422.166(h) and 423.186(h), the overall rating would be posted on HPMS and Medicare Plan Finder, with specific messages for lack of ratings for certain reasons. Applying that rule, if an MA-PD contract has only one of the two required summary ratings, the overall rating would not be calculated and the display in HPMS would be the flag “Not enough data available.”

For QBP purposes, low enrollment contracts and new MA plans are defined in § 422.252. Low enrollment contract Start Printed Page 56401means a contract that could not undertake Healthcare Effectiveness Data and Information Set (HEDIS) and Health Outcomes Survey (HOS) data collections because of a lack of a sufficient number of enrollees to reliably measure the performance of the health plan; new MA plan means a MA contract offered by a parent organization that has not had another MA contract in the previous 3 years. Low enrollment contracts and new plans do not receive an overall or summary rating because of the lack of necessary data. However, they are treated as qualifying plans for the purposes of QBPs. Section 1853(o)(3)(A)(ii)(II) of the Act, as implemented at § 422.258(d)(7), provides that for 2013 and subsequent years, CMS shall develop a method for determining whether an MA plan with low enrollment is a qualifying plan for purposes of receiving an increase in payment under section 1853(o). This determination is applied at the contract level and thus determines whether a contract (meaning all plans under that contract) is a qualifying contract. The statute, at section 1853(o)(3)(A)(iii) of the Act, provides for treatment of new MA plans as qualifying plans eligible for a specific QBP. We therefore propose, at §§ 422.166(d)(3) and 423.186(d)(3), that low enrollment contracts (as defined in § 422.252 of this chapter) and new MA plans (as defined in § 422.252 of this chapter) do not receive an overall and/or summary rating; they would be treated as qualifying plans for the purposes of QBPs as described in § 422.258(d)(7) of this chapter and announced through the process described for changes in and adoption of payment and risk adjustment policies in section 1853(b) of the Act. This proposal would merely codify existing policy and practice.

q. Measure Weights

Prior to the 2012 Part C and D Plan Ratings (now known as Star Ratings), all individual measures included in the program were weighted equally, suggesting equal importance. Based on feedback from stakeholders, including health and drug plans and beneficiary advocacy groups, we moved to provide greater weight to clinical outcomes and lesser weight to process measures. Patient experience and access measures were also given greater weight than process measures, but not as high as outcome measures. The differential weighting was implemented to help create further incentives to drive improvement in clinical outcomes, patient experience, and access. These differential weights for measures were implemented for the 2012 Ratings following a May 2011 Request for Comments and adopted in the CY2013 Rate Announcement and Final Call Letter.

In the Contract Year 2012 Final Rule for Changes to the Medicare Advantage and the Medicare Prescription Drug Benefit Programs rule (79 FR 21486), we stated that scoring methodologies should also consider improvement as an independent goal. To this end, we implemented in the CY 2013 Rate Announcement the Part C and D improvement measures that measure the overall improvement or decline in individual measure scores from the prior to the current year. Given the importance of recognizing quality improvement as an independent goal, for the 2015 Star Ratings, we proposed and subsequently finalized through the 2015 Rate Announcement and final Call Letter an increase in the weight of the improvement measure from 3 times to 5 times that of a process measure. This weight aligns the Part C and D Star Ratings program with value-based purchasing programs in Medicare fee-for-service which heavily weight improvement.

We are proposing in §§ 422.166(e) and 423.186(e) to continue the current weighting of measures in the Part C and D Star Ratings program by assigning the highest weight (5) to improvement measures, followed by outcome and intermediate outcome measures (weight of 3), then by patient experience/complaints and access measures (weight of 1.5), and finally process measures (weight of 1). We are considering increasing the weight of the patient experience/complaints and access measures and are interested in stakeholder feedback on this potential change in order to reflect better the importance of these issues in plan performance. If we were to increase the weight, we are considering increasing it from a weight of 1.0 to between 1.5 and 3 similar to outcome measures. This increased weight would reflect CMS' commitment to serve Medicare beneficiaries by putting the patients first, including their assessments of the care received by plans. We solicit comment on this point, particularly the potential change in the weight of the patient experience/complaints and access measures.

Table 7 includes the proposed measure categories, the definitions of the measure categories, and the weights. In calculating the summary and overall ratings, a measure given a weight of 3 counts three times as much as a measure given a weight of 1. In section III.A.12. of this proposed rule, we propose (as Table 2) the measure set and include the category and weight for each measure; those weight assignments are consistent with this proposal. We propose that as new measures are added to the Part C and D Star Ratings, we would assign the measure category based on these categories and the regulation text proposed at §§ 422.166(e) and 423.186(e), subject to two exceptions. We propose in paragraphs (e)(2) of each section as the first exception, to assign new measures to the Star Ratings program a weight of 1 for their first year in the Star Ratings. In subsequent years the weight associated with the measure weighting category would be used. This is consistent with current policy.

Table 7—Measure Categories, Definitions and Weights

Measure categoryDefinitionWeight
ImprovementPart C and Part D improvement measures are derived through comparisons of a contract's current and prior year measure scores5
Outcome and Intermediate OutcomeOutcome measures reflect improvements in a beneficiary's health and are central to assessing quality of care. Intermediate outcome measures reflect actions taken which can assist in improving a beneficiary's health status. Controlling Blood Pressure is an example of an intermediate outcome measure where the related outcome of interest would be better health status for beneficiaries with hypertension3
Patient Experience/ComplaintsPatient experience measures reflect beneficiaries' perspectives of the care and services they received1.5
AccessAccess measures reflect processes and issues that could create barriers to receiving needed care. Plan Makes Timely Decisions about Appeals is an example of an access measure1.5
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ProcessProcess measures capture the health care services provided to beneficiaries which can assist in maintaining, monitoring, or improving their health status1

In addition, we propose (at §§ 422.166(e)(3) and 423.186(e)(3)) a second exception to the general weighting rule for MA and Part D contracts that have service areas that are wholly located in Puerto Rico. We recognize the additional challenge unique to Puerto Rico related to the medication adherence measures used in the Star Ratings Program due to the lack of Low Income Subsidy (LIS). For the 2017 Star Ratings, we implemented a different weighting scheme for the Part D medication adherence measures in the calculation of the overall and summary Star Ratings for contracts that solely serve the population of beneficiaries in Puerto Rico. We propose, at §§ 422.166(e)(3) and 423.186(e)(3), to continue to reduce the weights for the adherence measures to 0 for the summary and overall rating calculations and maintain the weight of 3 for the adherence measures for the improvement measure calculations for contracts that solely serve the population of beneficiaries in Puerto Rico. We request comment on our proposed weighting strategy for Measure Weights generally and for Puerto Rico, including the weighting values themselves.

r. Application of the Improvement Measure Scores

Consistent with current policy, we propose at §§ 422.166(g) and 423.186(g) a hold harmless provision for the inclusion or exclusion of the improvement measure(s) for highly-rated contracts' highest ratings. We are proposing, in paragraphs (g)(1)(i) through (iii), a series of rules that specify when the improvement measure is included in calculating overall and summary ratings.

MA-PDs would have the hold harmless provisions for highly-rated contracts applied for the overall rating. For an MA-PD that receives an overall rating of 4 stars or more without the use of the improvement measures and with all applicable adjustments (CAI and the reward factor), a comparison of the rounded overall rating with and without the improvement measures is done. The overall rating with the improvement measures used in the comparison would include up to two adjustments, the reward factor (if applicable) and the CAI. The overall rating without the improvement measures used in the comparison would include up to two adjustments, the reward factor (if applicable) and the CAI. The higher overall rating would be used for the overall rating. For an MA-PD that has an overall rating of 2 stars or less without the use of the improvement measure and with all applicable adjustments (CAI and the reward factor), the overall rating would exclude the improvement measure. For all others, the overall rating would include the improvement measure.

MA-only and PDPs would have the hold harmless provisions for highly-rated contracts applied for the Part C and D summary ratings, respectively. For an MA-only or PDP that receives a summary rating of 4 stars or more without the use of the improvement measure and with all applicable adjustments (CAI and the reward factor), a comparison of the rounded summary rating with and without the improvement measure and up to two adjustments, the reward factor (if applicable) and CAI, is done. The higher summary rating would be used for the summary rating for the contract's highest rating. For MA-only and PDPs with a summary rating of 2 stars or less without the use of the improvement measure and with all applicable adjustments (CAI and the reward factor), the summary rating would exclude the improvement measure. For all others, the summary rating would include the improvement measure. MA-PDs would have their summary ratings calculated with the use of the improvement measure regardless of the value of the summary rating.

In addition, at paragraph (g)(2), we also propose text to clarify that summary ratings use only the improvement measure associated with the applicable Part C or D performance.

We welcome comments on the hold harmless improvement provision we propose to continue to use, particularly any clarifications in how and when it should be applied.

s. Reward Factor (Formerly Referred to as Integration Factor)

In 2011, the integration factor was added to the Star Ratings methodology to reward contracts that have consistently high performance. The integration factor was later renamed the reward factor. (The reference to either reward or integration factor refers to the same aspect of the Star Ratings.) This factor is calculated separately for the Part C summary rating, Part D summary rating for MA-PDs, Part D summary rating for PDPs, and the overall rating for MA-PDs. It is currently added to the summary (Part C or D) and overall rating of contracts that have both high and stable relative performance for the associated summary or overall rating. The contract's performance will be assessed using its weighted mean relative to all rated contracts without adjustments.

The contract's stability of performance will be assessed using its weighted variance relative to all rated contracts at the same rating level (overall, summary Part C, and summary Part D). The Part D summary thresholds for MA-PDs are determined independently of the thresholds for PDPs. We propose to codify the calculation and use of the reward factor in §§ 422.166(f)(1) and 423.186(f)(1).

Annually, we propose to update the performance and variance thresholds for the reward factor based upon the data for the Star Ratings year, consistent with current policy. A multistep process would be used to determine the values that correspond to the thresholds for the reward factors for the summary and/or overall Star Ratings for a contract. The determination of the reward factors would rely on the contract's ranking of its weighted variance and weighted mean of the measure-level stars to the summary or overall rating relative to the distribution of all contracts' weighted variance and weighted mean to the summary and/or overall rating. A contract's weighted variance would be calculated using the quotient of the following two values: (1) The product of the number of applicable measures based on rating-type and the sum of the products of the weight of each applicable measure and its squared deviation [42] and (2) the product of one less than the number of applicable measures and the sum of the weights of the applicable measures. A contract's weighted mean performance would be Start Printed Page 56403found by calculating the quotient of the following two values: (1) The sum of the products of the weight of a measure and its associated measure-level Star Ratings of the applicable measures for the rating-type and (2) the sum of the weights of the applicable measures for the rating type. The thresholds for the categorization of the weighted variance and weighted mean for contracts would be based upon the distribution of the calculated values of all rated contracts of the same type. Because highly-rated contracts may have the improvement measure(s) excluded in the determination of their final highest rating, each contract's weighted variance and weighted mean is calculated both with and without the improvement measures.

A contract's weighted variance is categorized into one of three mutually exclusive categories, identified in Table 8A, based upon the weighted variance of its measure-level Star Ratings and its ranking relative to all other contracts' weighted variance for the rating type (Part C summary for MA-PDs and MA-only, overall for MA-PDs, Part D summary for MA-PDs, and Part D summary for PDPs), and the manner in which the highest rating for the contract was determined—with or without the improvement measure(s). For an MA-PD's Part C and D summary ratings, its ranking is relative to all other contracts' weighted variance for the rating type (Part C summary, Part D summary) with the improvement measure. Similarly, a contract's weighted mean is categorized into one of three mutually exclusive categories, identified in Table 8B, based on its weighted mean of all measure-level Star Ratings and its ranking relative to all other contracts' weighted means for the rating type (Part C summary for MA-PDs and MA-only, overall, Part D summary for MA-PDs, and Part D summary for PDPs) and the manner in which the highest rating for the contract was determined—with or without the improvement measure(s). For an MA-PD's Part C and D summary ratings, its ranking is relative to all other contracts' weighted means for the rating type (Part C summary, Part D summary) with the improvement measure. Further, the same threshold criterion is employed per category regardless of whether the improvement measure was included or excluded in the calculation of the rating. The values that correspond to the thresholds are based on the distribution of all rated contracts and are determined with and without the improvement measure(s) and exclusive of any adjustments. Table 8A details the criteria for the categorization of a contract's weighted variance for the summary and overall ratings. Table 8B details the criteria for the categorization of a contract's weighted mean (performance) for the overall and summary ratings. The values that correspond to the cutoffs are provided each year during the plan preview and are published in the Technical Notes.

Table 8A—Categorization of a Contract Based on Its Weighted Variance Ranking

Variance categoryRanking
LowBelow the 30th percentile.
MediumAt or above the 30th percentile to less than the 70th percentile.
HighAt or above the 70th percentile.

Table 8B—Categorization of a Contract Based on Weighted Mean (Performance) Ranking

Weighted mean (performance) categoryRanking
HighAt or above the 85th percentile.
Relatively HighAt or above the 65th percentile to less than the 85th percentile.
OtherBelow the 65th percentile.

These definitions of high, medium, and low weighted variance ranking and high, relatively high, and other weighted mean ranking would be codified in narrative form in paragraph (f)(1)(ii).

A contract's categorization for both weighted mean and weighted variance determines the value of the reward factor. Table 9 shows the values of the reward factor based on the weighted variance and weighted mean categorization; these values would be codified, as a chart, in paragraph (f)(i)(iii). The weighted variance and weighted mean thresholds for the reward factor are available in the Technical Notes and updated annually.

Table 9—Categorization of a Contract for the Reward Factor

Weighted varianceWeighted mean (performance)Reward factor
LowHigh0.4
MediumHigh0.3
LowRelatively High0.2
MediumRelatively high0.1
HighOther0.0

We propose to continue the use of a reward factor to reward contracts with consistently high and stable performance over time. Further, we propose to continue to employ the methodology described in this subsection to categorize and determine the reward factor for contracts. As proposed in paragraphs (c)(1) and (d)(1), these reward factor adjustments would be applied at the summary and overall rating level.Start Printed Page 56404

t. Categorical Adjustment Index

A growing body of evidence links the prevalence of beneficiary-level social risk factors with performance on measures included in Medicare value-based purchasing programs, including MA and Part D Star Ratings. With support from our contractors, we undertook research to provide scientific evidence as to whether MA organizations or Part D sponsors that enroll a disproportionate number of vulnerable beneficiaries are systematically disadvantaged by the current Star Ratings. In 2014, we issued a Request for Information to gather information directly from organizations to supplement the data that CMS collects, as we believe that plans and sponsors are uniquely positioned to provide both qualitative and quantitative information that is not available from other sources. In February and September 2015, we released details on the findings of our research.[43] We have also reviewed reports about the impact of socio-economic status (SES) on quality ratings, such as the report published by the NQF posted at www.qualityforum.org/​risk_​adjustment_​ses.aspx and the Medicare Payment Advisory Commission's (MedPAC) Report to the Congress: Medicare Payment Policy posted at http://www.medpac.gov/​docs/​default-source/​reports/​march-2016-report-to-the-congress-medicare-payment-policy.pdf?​sfvrsn=​0. We have more recently been reviewing reports prepared by the Office of the Assistant Secretary for Planning and Evaluation (ASPE [44] ) and the National Academies of Sciences, Engineering, and Medicine on the issue of measuring and accounting for social risk factors in CMS' value-based purchasing and quality reporting programs, and we have been considering options on how to address the issue in these programs. On December 21, 2016, ASPE submitted a Report to Congress on a study it was required to conduct under section 2(d) of the Improving Medicare Post-Acute Care Transformation (IMPACT) Act of 2014. The study analyzed the effects of certain social risk factors of Medicare beneficiaries on quality measures and measures of resource use in nine Medicare value-based purchasing programs. The report also included considerations for strategies to account for social risk factors in these programs. A January 10, 2017 report released by the National Academies of Sciences, Engineering, and Medicine provided various potential methods for measuring and accounting for social risk factors, including stratified public reporting.[45]

We have also engaged NCQA and the PQA to examine their measure specifications used in the Star Ratings program to determine if re-specification is warranted. The majority of measures used for the Star Ratings program are consensus-based. Measure specifications can be changed only by the measure steward (the owner and developer of the measure). Thus, measure scores cannot be adjusted for differences in enrollee case mix unless required by the measure steward. Measure re-specification is a multiyear process. For example, NCQA has a standard process for reviewing any measure and determining whether a measure requires re-specification. NCQA's re-evaluation process is designed to ensure any resulting measure updates have desirable attributes of relevance, scientific soundness, and feasibility:

  • Relevance describes the extent to which the measure captures information important to different groups, for example, consumers, purchasers, policymakers. To determine relevance, NCQA assesses issues such as health importance, financial importance, and potential for improvement among entities being measured.
  • Scientific soundness captures the extent to which the measure adheres to clinical evidence and whether the measure is valid, reliable, and precise.
  • Feasibility captures the extent to which a measure can be collected at reasonable cost and without undue burden. To determine feasibility, NCQA also assesses whether a measure is precisely specified and can be audited. The overall process for assessing the value of re-specification emphasizes multi-stakeholder input, use of evidence-based guidelines and data, and wide public input.

Beginning with 2017 Star Ratings, we implemented the CAI that adjusts for the average within-contract disparity in performance associated with the percentages of beneficiaries who receive a low income subsidy and/or are dual eligible (LIS/DE) and/or have disability status. We developed the CAI as an interim analytical adjustment while we developed a long-term solution. The adjustment factor varies by a contract's categorization into a final adjustment category that is determined by a contract's proportion of LIS/DE and beneficiaries with disabilities. By design, the CAI values are monotonic in at least one dimension (LIS/DE or disability status) and thus, contracts with larger LIS/DE and/or disability percentages realize larger positive adjustments. MA-PD contracts can have up to three rating-specific CAI adjustments—one for the overall Star Rating and one for each of the summary ratings (Part C and Part D). MA-only contracts can have one adjustment for the Part C summary rating. PDPs can have one adjustment for the Part D summary rating. We propose to codify the calculation and use of the reward factor and the CAI in §§ 422.166(f)(2) and 423.186(f)(2), while we consider other alternatives for the future.

As is currently done today, the adjusted measure scores of a subset of the Star Ratings measures would serve as the foundation for the determination of the index values. Measures would be excluded as candidates for adjustment if the measures are already case-mix adjusted for SES (for example, CAHPS and HOS outcome measures), if the focus of the measurement is not a beneficiary-level issue but rather a plan or provider-level issue (for example, appeals, call center, Part D price accuracy measures), if the measure is scheduled to be retired or revised during the Star Rating year in which the CAI is being applied, or if the measure is applicable to only Special Needs Plans (SNPs) (for example, SNP Care Management, Care for Older Adults measures). We propose to codify these paragraphs for determining the measures for CAI values at paragraph (f)(2)(ii).The categorization of a beneficiary as LIS/DE for the CAI would rely on the monthly indicators in the enrollment file. For the determination of the CAI values, the measurement period would correspond to the previous Star Ratings year's measurement period. For the identification of a contract's final adjustment category for its application of the CAI in the current year's Star Ratings Program, the measurement period would align with the Star Ratings year. If a beneficiary was designated as full or partially dually eligible or receiving a LIS at any time during the applicable measurement period, the Start Printed Page 56405beneficiary would be categorized as LIS/DE. For the categorization of a beneficiary as disabled, we would employ the information from the Social Security Administration (SSA) and Railroad Retirement Board (RRB) record systems. Disability status would be determined using the variable original reason for entitlement (OREC) for Medicare. The percentages of LIS/DE and disability per contract would rely on the Medicare enrollment data from the applicable measurement year. The counts of beneficiaries for enrollment and categorization of LIS/DE and disability would be restricted to beneficiaries that are alive for part or all of the month of December of the applicable measurement year. Further, a beneficiary would be assigned to the contract based on the December file of the applicable measurement period. We propose to codify these paragraphs for determining the enrollment counts at paragraph (f)(2)(i)(B).

Using the subset of the measures that meet the basic inclusion requirements, we propose to select the measure set for adjustment based on the analysis of the dispersion of the LIS/DE within-contract differences using all reportable numeric scores for contracts receiving a rating in the previous rating year. For the selection of the Part D measures, MA-PDs and PDPs would be independently analyzed. For each contract, the proportion of beneficiaries receiving the measured clinical process or outcome for LIS/DE and non-LIS/DE beneficiaries would be estimated separately, and the difference between the LIS/DE and non-LIS/DE performance rates per contract would be calculated. CMS would use a logistic mixed effects model for estimation purposes that includes LIS/DE as a predictor, random effects for contract and an interaction term of contract and LIS/DE.

Using the analysis of the dispersion of the within-contract disparity of all contracts included in the modelling, the measures for adjustment would be identified employing the following decision criteria: (1) A median absolute difference between LIS/DE and non-LIS/DE beneficiaries for all contracts analyzed is 5 percentage points or more or [46] (2) the LIS/DE subgroup performed better or worse than the non-LIS/DE subgroup in all contracts. We propose to codify these paragraphs for the selection criteria for the adjusted measures for the CAI at paragraph (f)(2)(iii).

The Part D measures for PDPs would be analyzed separately. In order to apply consistent adjustments across MA-PDs and PDPs, the Part D measures would be selected by applying the selection criteria to MA-PDs and PDPs independently and, then, selecting measures that met the criteria for either delivery system. The measure set for adjustment of Part D measures for MA-PDs and PDPs would be the same after applying the selection criteria and pooling the Part D measures for MA-PDs and PDPs. We propose to codify these paragraphs for the selection of the adjusted measure set for the CAI for MA-PDs and PDPs at (f)(2)(iii)(C). We also seek comment on the proposed methodology and criteria for the selection of the measures for adjustment. Further, we seek comment on alternative methods or rules to select the measures for adjustment for future rulemaking.

Annually, while the CAI is being developed using the rules we are proposing here, we would release on CMS.gov an updated analysis of the subset of the Star Ratings measures identified for adjustment using this rule as ultimately finalized. Basic descriptive statistics would include the minimum, median, and maximum values for the within-contract variation for the LIS/DE differences. The set of measures for adjustment for the determination of the CAI would be announced in the draft Call Letter.

We propose, at paragraph (f)(2)(iv) of each regulation, to determine the adjusted measure scores for LIS/DE and disability status from regression models of beneficiary-level measure scores that adjust for the average within-contract difference in measure scores for MA or PDP contracts. The approach employed to determine the adjusted measure scores approximates case-mix adjustment using a beneficiary-level, logistic regression model with contract fixed effects and beneficiary-level indicators of LIS/DE and disability status, similar to the approach currently used to adjust CAHPS patient experience measures. However, unlike CAHPS case-mix adjustment, the only adjusters would be LIS/DE and disability status.

The sole purpose of the adjusted measure scores is for the determination of the CAI values. The adjusted measure scores would be converted to a measure-level Star Rating using the measure thresholds for the Star Ratings year that corresponds to the measurement period of the data employed for the CAI determination.

All contracts would have their adjusted summary rating(s) and for MA-PDs, an adjusted overall rating, calculated employing the standard methodology proposed at §§ 422.166 and 423.186 (which would also be outlined in the Technical Notes each year), using the subset of adjusted measure-level Star Ratings and all other unadjusted measure-level Star Ratings. In addition, all contracts would have their summary rating(s) and for MA-PDs, an overall rating, calculated using the traditional methodology and all unadjusted measure-level Star Ratings.

For the annual development of the CAI, the distribution of the percentages for LIS/DE and disabled using the enrollment data that parallels the previous Star Ratings year's data would be examined to determine the number of equal-sized initial groups for each attribute (LIS/DE and disabled). The initial categories would be created using all groups formed by the initial LIS/DE and disabled groups. The total number of initial categories would be the product of the number of initial groups for LIS/DE and the number of initial groups for the disabled dimension.

The mean difference between the adjusted and unadjusted summary or overall ratings per initial category would be calculated and examined. The initial categories would then be collapsed to form the final adjustment categories. The collapsing of the initial categories to form the final adjustment categories would be done to enforce monotonicity in at least one dimension (LIS/DE or disabled). The mean difference within each final adjustment category by rating-type (Part C, Part D for MA-PD, Part D for PDPs, or overall) would be the CAI values for the next Star Ratings year.

The percentage of LIS/DE is a critical element in the categorization of contracts into the final adjustment category to identify a contract's CAI. Starting with the 2017 Star Ratings, we applied an additional adjustment for contracts that solely serve the population of beneficiaries in Puerto Rico to address the lack of LIS in Puerto Rico. The adjustment results in a modified percentage of LIS/DE beneficiaries that is subsequently used to categorize contracts into the final adjustment category for the CAI.

We propose to continue this adjustment and to calculate the contract-level modified LIS/DE percentage for Puerto Rico using the following sources of information: The most recent data available at the time of the development of the model of both the 1-year American Community Survey (ACS) estimates for the percentage of people living below the Federal Poverty Level (FPL) and the ACS 5-year estimates for the percentage of people living below 150 percent of the FPL, and Start Printed Page 56406the Medicare enrollment data from the same measurement period used for the Star Ratings year.

The data to develop the model would be limited to the 10 states, drawn from the 50 states plus the District of Columbia, with the highest proportion of people living below the FPL as identified by the 1-year ACS estimates. Further, the Medicare enrollment data would be aggregated from MA contracts that had at least 90 percent of their enrolled beneficiaries with mailing addresses in the 10 highest poverty states. A linear regression model would be developed using the known LIS/DE percentage and the corresponding DE percentage from the subset of MA contracts.

The estimated slope from the linear regression approximates the expected relationship between LIS/DE for each contract in Puerto Rico and its DE percentage. The intercept term is adjusted for use with Puerto Rico contracts by assuming that the Puerto Rico model will pass through the point (x, y) where x is the observed average DE percentage in the Puerto Rico contracts based on the enrollment data, and y is the expected average percentage of LIS/DE in Puerto Rico. The expected average percentage of LIS/DE in Puerto Rico (the y value) is not observable, but is estimated by multiplying the observed average percentage of LIS/DE in the 10 highest poverty states by the ratio based on the most recent 5-year ACS estimates of the percentage living below 150 percent of the FPL in Puerto Rico compared to the corresponding percentage in the set of 10 states with the highest poverty level. (Further details of the methodology can be found in the CAI Methodology Supplement available at http://go.cms.gov/​partcanddstarratings.)

Using the model developed from this process, the estimated modified LIS/DE percentage for contracts operating solely in Puerto Rico would be calculated. The maximum value for the modified LIS/DE indicator value per contract would be capped at 100 percent. All estimated modified LIS/DE values for Puerto Rico would be rounded to 6 decimal places when expressed as a percentage.

We propose to continue to employ the LIS/DE indicator for contracts operating solely in Puerto Rico while the CAI is being used as an interim analytical adjustment. Further, we propose that the modeling results would continue to be detailed in the appendix of the Technical Notes and the modified LIS/DE percentages would be available for contracts to review during the plan previews.

We propose to continue the use of the CAI while the measure stewards continue their examination of the measure specifications and ASPE completes their studies mandated by the IMPACT Act and formalizes final recommendations. Contracts would be categorized based on their percentages of LIS/DE and disability using the data as outlined previously. The CAI value would be the same for all contracts within each final adjustment category. The CAI values would be determined using data from all contracts that meet reporting requirements from the prior year's Star Rating data. The CAI calculation for the PDPs would be performed separately and use the PDP specific cut points. Under our proposal, CMS would include the CAI values in the draft and final Call Letter attachment of the Advance Notice and Rate Announcement each year while the interim solution is applied. The values for the CAI value would be displayed to 6 decimal places. Rounding would take place after the application of the CAI value and if applicable, the reward factor; standard rounding rules would be employed. (All summary and overall Star Ratings are displayed to the nearest half-star.)

While we consider the recommendations from the ASPE report, findings from measure developers, and work by NQF on risk adjustment for quality measures, we are continuing to collaborate with stakeholders. We are seeking to balance accurate measurement of genuine plan performance, effective identification of disparities, and maintenance of incentives to improve the outcomes for disadvantaged populations. Keeping this in mind, we continue to seek public comment on whether and how we should account for low SES and other social risk factors in the Part C and D Star Ratings.

We look forward to continuing to work with stakeholders as we consider the issue of accounting for LIS/DE, disability and other social risk factors and reducing health disparities in CMS programs. As we have stated previously, we are continuing to consider options to how to measure and account for social risk factors in our Star Ratings program. What we discovered though our research to date is, although a sponsoring organization's administrative costs may increase as a result of enrolling significant numbers of beneficiaries with LIS/DE status or disabilities, the impacts of SES on the quality ratings are quite modest, affect only a small subset of measures, and do not always negatively impact the measures. However, CMS would like to better understand whether, how, and to what extent a sponsoring organization's administrative costs differ for caring for low-income beneficiaries and we welcome comment on that topic. Administrative costs may include non-medical costs such as transportation costs, coordination costs, marketing, customer service, quality assurance and costs associated with administering the benefit. We continue our commitment toward ensuring that all beneficiaries have access to and receive excellent care, and that the quality of care furnished by plans is assessed fairly in CMS programs.

u. High and Low Performing Icons

Consistent with our current practice, we are proposing regulation text to govern assignment of high and low performing icons at §§ 422.166(i) and 423.186(i). We propose to continue current policy that a contract would receive a high performing icon as a result of its performance on the Part C and D measures. The high performing icon would be assigned to an MA-only contract for achieving a 5-star Part C summary rating, a PDP contract for a 5-star Part D summary rating, and an MA-PD contract for a 5-star overall rating.

We propose that a contract would receive a low performing icon as a result of its performance on the Part C or Part D summary ratings. The low performing icon would be calculated by evaluating the Part C and Part D summary ratings for the current year and the past 2 years (for example, the 2016, 2017, and 2018 Star Ratings). If the contract had any combination of Part C and Part D summary ratings of 2.5 or lower in all 3 years of data, it would be marked with a low performing icon. A contract must have a summary rating in either Part C or Part D for all 3 years to be considered for this icon. These rules would be codified at §§ 422.166(i)(2)(i) and 423.186(i)(2)(i).

We also propose, at paragraph (i)(2)(ii), to continue our policy of disabling the Medicare Plan Finder online enrollment function for Medicare health and prescription drug plans with the low-performing icon to ensure that beneficiaries are fully aware that they are enrolling in a plan with low quality and performance ratings; we believe this is an important beneficiary protection to ensure that the decision to enroll in a low rated and low performing plan has been thoughtfully considered. Beneficiaries who still want to enroll in a low-performing plan or who may need to in order to get the benefits and services they require (for example, in geographical areas with limited plans) will be warned, via explanatory Start Printed Page 56407messaging of the plan's poorly rated performance and directed to contact the plan directly to enroll.

v. Plan Preview of Star Ratings

We propose in §§ 422.166(i)(3) and 423.186(i)(3) that CMS have plan preview periods before each Star Ratings release, consistent with current practice. Part C and D sponsors can preview their Star Ratings data in HPMS prior to display on the Medicare Plan Finder. During the first plan preview, we expect Part C and D sponsors to closely review the methodology and their posted numeric data for each measure. The second plan preview would include any revisions made as a result of the first plan preview. In addition, our preliminary Star Ratings for each measure, domain, summary score, and overall score would be displayed. During the second plan preview, we expect Part C and D sponsors to again closely review the methodology and their posted data for each measure, as well as their preliminary Star Rating assignments. As part of this regulation, we are proposing that CMS continue to offer plan preview periods, but are not codifying the details of each period because over time the process has evolved to provide more data to sponsors to help validate their data. We envision it to continue to evolve in the future and do not believe that codifying specific display content is necessary.

It is important that Part C and D sponsors regularly review their underlying measure data that are the basis for the Part C and D Star Ratings. For measures that are based on data reported directly from sponsors, any issues or problems should be raised well in advance of CMS' plan preview periods. A draft version of the Technical Notes would be available during the first plan preview. The draft is then updated for the second plan preview and finalized when the ratings data have been posted to Medicare Plan Finder.

We welcome comments on the proposed plan preview process.

w. Technical Changes

We also propose a number of technical changes to other existing regulations that refer to the quality ratings of MA and Part D plans; we propose to make technical changes to refer to the proposed new regulation text that provides for the calculation and assignment of Star Ratings. Specifically, we propose:

  • In § 422.258(d)(7), to revise paragraph (d)(7) to read: Increases to the applicable percentage for quality. Beginning with 2012, the blended benchmark under paragraphs (a) and (b) of this section will reflect the level of quality rating at the plan or contract level, as determined by the Secretary. The quality rating for a plan is determined by the Secretary according to the 5-star rating system (based on the data collected under section 1852(e) of the Act) specified in subpart D of this part 422. Specifically, the applicable percentage under paragraph (d)(5) of this section must be increased according to criteria in paragraphs (d)(7)(i) through (v) of this section if the plan or contract is determined to be a qualifying plan or a qualifying plan in a qualifying county for the year.
  • In § 422.260(a), to revise the paragraph to read: Scope. The provisions of this section pertain to the administrative review process to appeal quality bonus payment status determinations based on section 1853(o) of the Act. Such determinations are made based on the overall rating for MA-PDs and Part C summary rating for MA-only contracts for the contract assigned pursuant to subpart 166 of this part 422.
  • In § 422.260(b), to revise the definition of “quality bonus payment (QBP) determination methodology” to read: Quality bonus payment (QBP) determination methodology means the quality ratings system specified in subpart 166 of this part 422 for assigning quality ratings to provide comparative information about MA plans and evaluating whether MA organizations qualify for a QBP.
  • In § 422.504(a)(18), to revise paragraph (a)(18) to read: To maintain a Part C summary plan rating score of at least 3 stars pursuant to the 5-star rating system specified in subpart 166 of this part 422. A Part C summary plan rating is calculated as provided in § 422.166.
  • In § 423.505(b)(26), to revise paragraph (b)(26) to read: Maintain a Part D summary plan rating score of at least 3 stars pursuant to the 5-star rating system specified in subpart 186 of this part 423. A Part D summary plan rating is calculated as provided in § 423.186.

We welcome comment on these technical changes and whether there are additional changes that should be made to account for our proposal to codify the Star Ratings methodology and measures in regulation text.

12. Any Willing Pharmacy Standards Terms and Conditions and Better Define Pharmacy Types (§§ 423.100, 423.505)

Section 1860D-4(b)(1)(A) of the Act and § 423.120(a)(8)(i) require a Part D plan sponsor to contract with any pharmacy that meets the Part D plan sponsor's standard terms and conditions for network participation. Section 423.505(b)(18) requires Part D plan sponsors to have a standard contract with reasonable and relevant terms and conditions of participation whereby any willing pharmacy may access the standard contract and participate as a network pharmacy.

In the preamble to final rule published on January 28, 2005 (January 2005 final rule) (70 FR 4194) which implemented § 423.120(a)(8)(i) and § 423.505(b)(18), we indicated that standard terms and conditions, particularly for payment terms, could vary to accommodate geographic areas or types of pharmacies, so long as all similarly situated pharmacies were offered the same terms and conditions. We also stated that we viewed these standard terms and conditions as a “floor” of minimum requirements that all similarly situated pharmacies must abide by, but that Part D plans could modify some standard terms and conditions to encourage participation by particular pharmacies. We believe this approach strikes an appropriate balance between the any willing pharmacy requirement at section 1860D-4(b)(1)(A) of the Act and the provisions of section 1860D-4(b)(1)(B) of the Act, which permits Part D plan sponsors to offer reduced cost sharing at preferred pharmacies.

The balancing of these goals has led to the development of preferred pharmacy networks in which certain pharmacies agree to additional or different terms from the standard terms and conditions. This has resulted in the development of “standard” terms and conditions that in some cases has had the effect, in our view, of circumventing the any willing pharmacy requirements and inappropriately excluding pharmacies from network participation. This section is intended to clarify or modify our interpretation of the existing regulations to ensure that plan sponsors can continue to develop and maintain preferred networks while fully complying with the any willing pharmacy requirement.

First, we intend to clarify that the any willing pharmacy requirement applies to all pharmacies, regardless of how they have organized one or more lines of pharmacy business. Second, we propose to revise the definition of retail pharmacy and define mail-order pharmacy. Third, we propose to clarify our regulatory requirements for what constitutes “reasonable and relevant” standard contract terms and conditions. Finally, we propose to codify our existing guidance with respect to when a pharmacy must be provided with a Start Printed Page 56408Part D plan sponsor's standard terms and conditions.

a. Any Willing Pharmacy Required for All Pharmacy Business Models

With the pharmaceutical distribution and pharmacy practice landscape evolving rapidly, and because pharmacies now frequently have multiple lines of business, many pharmacies no longer fit squarely into traditional pharmacy type classifications. For example, compounding pharmacies and specialty pharmacies, including but not limited to manufacturer-limited-access pharmacies, and those that may specialize in certain drugs, disease states, or both, are increasingly common, and Part D enrollees increasingly need access to their services. As noted previously, in implementing the any willing pharmacy provision, we indicated that standard terms and conditions could vary to accommodate different types of pharmacies so long as all similarly situated pharmacies were offered the same terms and conditions. In the original rule to implement Part D (70 FR 4194, January 28, 2005), we defined certain types of pharmacies (that is, retail, mail order, Long Term Care (LTC)/institutional, and I/T/U [Indian Health Service, Indian tribe or tribal organization, or urban Indian organization]) at § 423.100 to operationalize various statutory provisions that specifically mention these types of pharmacies (for example, section 1860D-4(b)(1)(C)(iv) of the Act). However, these definitions were never intended to limit the scope of the any willing pharmacy requirement. Nevertheless, we have anecdotal evidence that some Part D plan sponsors have declined to permit willing pharmacies to participate in their networks on the grounds that they do not meet the Part D plan sponsor's definition of a pharmacy type for which it has developed standard terms and conditions.

Section 1860D-4(b)(1)(A) of the Act requires Part D plan sponsors to permit the participation of “any pharmacy” that meets the standard terms and conditions. Accordingly, it is not appropriate for Part D plan sponsors to offer standard terms and conditions for network participation that are specific to only one particular type of pharmacy, and then decline to permit a willing pharmacy to participate on the grounds that it does not squarely fit into that pharmacy type. Therefore, we are clarifying in this preamble that although Part D sponsors may continue to tailor their standard terms and conditions to various types of pharmacies, Part D plan sponsors may not exclude pharmacies with unique or innovative business or care delivery models from participating in their contracted pharmacy network on the basis of not fitting in the correct pharmacy type classification. In particular, we consider “similarly situated” pharmacies to include any pharmacy that has the capability of complying with standard terms and conditions for a pharmacy type, even if the pharmacy does not operate exclusively as that type of pharmacy.

Thus, Part D plan sponsors must not exclude pharmacies from their retail pharmacy networks solely on the basis that they, for example, maintain a traditional retail business while also specializing in certain drugs or diseases or providing home delivery service by mail to surrounding areas. Or as another example, a Part D plan sponsor must not preclude a pharmacy from network participation as a retail pharmacy because that pharmacy also operates a home infusion book of business, or vice versa. Later in this section we are proposing to codify our requirements for when a Part D sponsor must provide a pharmacy with a copy of its standard terms and conditions. These requirements, if finalized, would apply to all pharmacies, regardless of whether they fit into traditional pharmacy classifications or have unique or innovative business or care delivery models.

b. Revise the Definition of Retail Pharmacy and Add a Definition of Mail-Order Pharmacy

Since the inception of the Part D program, Part D statute, regulations, and sub-regulatory guidance have referred to “mail-order” pharmacy and services without defining the term “mail order”. Unclear references to the term “mail order” have generated confusion in the marketplace over what constitutes “mail-order” pharmacy or services. This confusion has contributed to complaints from pharmacies and beneficiaries regarding how Part D plan sponsors classify pharmacies for network participation, the Plan Finder, and Part D enrollee cost-sharing expectations. Additionally, pharmacies that are not mail-order pharmacies, but that may offer home delivery services by mail (relative to that pharmacy's overall operation), have complained because Part D plan sponsors classified them as mail-order pharmacies for network participation and required them to be licensed in all United States, territories, and the District of Columbia, as would be required for traditional mail-order pharmacies providing a mail-order benefit.

In creating the Part D program, the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) (Pub. L. 108-173) added the convenient access provision of section 1860D-4(b)(1)(C) of the Act and the level playing field provision of section 1860D-4(b)(1)(D) of the Act. The convenient access provisions, as codified at § 423.120(a)(1)-(7), require Part D plan sponsors to secure the participation in their networks a sufficient number of pharmacies that dispense (other than by mail order) drugs directly to patients to ensure convenient access (consistent with rules established by the Secretary) and includes special provisions for standards with respect to Long Term Care (LTC) and I/T/U pharmacies (as defined at § 423.100). The level playing field provision, as codified at § 423.120(a)(10), requires Part D plan sponsors to permit enrollees to receive the same benefits, including extended days' supplies, through a pharmacy (other than a mail-order pharmacy) (that is, a retail pharmacy), although the Part D plan sponsor may require the enrollee to pay a higher level of cost-sharing to do so.

We currently define “retail pharmacy” at § 423.100 to mean “any licensed pharmacy that is not a mail-order pharmacy from which Part D enrollees could purchase a covered Part D drug without being required to receive medical services from a provider or institution affiliated with that pharmacy.” Although we did not define “non-retail pharmacy,” § 423.120(a)(3) provides that “a Part D plan's contracted pharmacy network may be supplemented by non-retail pharmacies, “including pharmacies offering home delivery via mail-order and institutional pharmacies,” provided the convenient access requirements are met (emphasis added). In the preamble to our January 2005 final rule, we also stated, “examples of non-retail pharmacies include I/T/U, FQHC, Rural Health Center (RHC) and hospital and other provider-based pharmacies, as well as Part D [plan]-owned and operated pharmacies that serve only plan members” (see 70 FR 4249). We also stated “home infusion pharmacies will not count toward Part D plans' pharmacy access requirements (at § 423.120(a)(1)) because they are not retail pharmacies” (see 70 FR 4250).

Since 2005, our regulation at § 423.120(a) has included access requirements for retail, home infusion, LTC, and I/T/U pharmacies. While mail-order pharmacies could be considered Start Printed Page 56409one of several subsets of non-retail pharmacies, we never defined the term mail-order pharmacy in regulation, nor have we specified access or service-level requirements at § 423.120(a) for mail-order pharmacies.

As discussed previously, our classifications of certain types of pharmacies were never intended to limit or exclude participation of pharmacies, such as pharmacies with multiple lines of business, that do not fit into one of these classifications. Additionally, we have recognized since our January 2005 final rule that pharmacies may have multiple lines of business, including retail pharmacies that may offer home delivery services (see 70 FR 4235 and 4255).

Nonetheless, despite this guidance and specific access requirements for LTC and HI pharmacies at § 423.120(a), some Part D plan sponsors interpreted “including pharmacies offering home delivery via mail-order and institutional pharmacies” at § 423.120(a)(3) to mean that any pharmacies, even retail pharmacies, that may offer home delivery services by mail are mail-order pharmacies. Although § 423.120(a)(3) specifically allows for access to non-retail pharmacies, and we intended “including pharmacies offering home delivery via mail-order and institutional pharmacies” to mean home infusion pharmacies, mail-order pharmacies, long-term care pharmacies, or other non-retail pharmacies that offer home delivery services by mail, some Part D plan sponsors began to require any interested pharmacies, even retail pharmacies, that may offer home delivery services by mail to contract as mail-order pharmacies in order to participate in the plan's contracted pharmacy network. Because Part D plan sponsors frequently require contracted mail-order pharmacies to be licensed in all United States, territories, and the District of Columbia, the classification of any pharmacies that may offer home delivery services by mail as mail-order pharmacies for purposes of contracting with Part D plan sponsors as a network pharmacy, including licensure requirements, led to complaints from beneficiaries and pharmacies, including retail, specialty, and other pharmacies.

Although the language at § 423.120(a)(3) is specific to non-retail pharmacies, there is a great deal of confusion regarding mail-order pharmacy in the Part D marketplace. We believe it is inappropriate to classify pharmacies as “mail-order pharmacies” solely on the basis that they offer home delivery by mail. Because the statute at section 1860D-4(b)(1)(D) of the Act discusses cost sharing in terms of mail order versus other non-retail pharmacies, mail-order cost sharing is unique to mail-order pharmacies, as we have proposed to define the term. For example, while a non-retail home infusion pharmacy may provide services by mail, cost-sharing is commensurate with retail cost-sharing. Therefore, to clarify what a mail-order pharmacy is, we propose to define mail-order pharmacy at § 423.100 as a licensed pharmacy that dispenses and delivers extended days' supplies of covered Part D drugs via common carrier at mail-order cost sharing.

Although we propose to add the definition of mail-order pharmacy, we also believe that our existing definition of retail pharmacy has contributed, in part, to the confusion in the Part D marketplace. As discussed previously, the existing definition of “retail pharmacy” at § 423.100 means “any licensed pharmacy that is not a mail-order pharmacy from which Part D enrollees could purchase a covered Part D drug without being required to receive medical services from a provider or institution affiliated with that pharmacy.” This definition, given the rapidly evolving pharmacy practice landscape, may be a source of some confusion given that it expressly excludes mail-order pharmacies, but not other non-retail pharmacies such as home infusion or specialty pharmacies.

We note that Medicaid recently adopted a definition of “retail community pharmacy.” Pursuant to section 1927(k)(10) of the Act, as amended by section 2503 of the Affordable Care Act (ACA), for purposes of Medicaid prescription drug coverage, CMS defines “retail community pharmacy” at § 447.504(a) as “an independent pharmacy, a chain pharmacy, a supermarket pharmacy, or a mass merchandiser pharmacy that is licensed as a pharmacy by the state and that dispenses medications to the walk-in general public at retail prices. Such term does not include a pharmacy that dispenses prescription medications to patients primarily through the mail, nursing home pharmacies, long-term care facility pharmacies, hospital pharmacies, clinics, charitable or not-for-profit pharmacies, government pharmacies, or pharmacy benefit managers.” Although this definition adds greater clarity about the locations or practice settings where retail pharmacies may be found, we were concerned that, for the purposes of the Part D program, the mention of additional types of pharmacies in our regulation could contribute to more confusion instead of less.

However, two aspects of this definition are similar to Part D statutory language in section 1860D-4(b)(1)(C) and (D) of the Act. The first is the concept that a retail pharmacy is open to dispense prescription medications to the walk-in general public, which echoes the requirement at section 1860D-4(b)(1)(C) of the Act that Part D plan sponsors secure the participation in their networks a sufficient number of pharmacies that dispense (other than mail order) drugs directly to patients. The second is the concept that prescriptions are dispensed at retail prices, or for the Part D program, retail cost-sharing, which echoes the requirement at section 1860D-4(b)(1)(D) of the Act that Part D plan sponsors permit enrollees to receive benefits (which may include a 90-day supply of drugs or biologicals) through a pharmacy (other than a mail-order pharmacy), with any differential in charge paid by such enrollees. Because these concepts are consistent with the Part D statute, we believe their inclusion in our definition of retail pharmacy at § 423.100 would be appropriate.

Therefore, to clarify what a retail pharmacy is, we propose to revise the definition of retail pharmacy at § 423.100. First, we note that the existing definition of “retail pharmacy” is not in alphabetical order, and we propose a technical change to move it such that it would appear in alphabetical order. Second, we propose to incorporate the concepts of being open to the walk-in general public and retail cost-sharing such that the definition of retail pharmacy would mean “any licensed pharmacy that is open to dispense prescription drugs to the walk-in general public from which Part D enrollees could purchase a covered Part D drug at retail cost sharing without being required to receive medical services from a provider or institution affiliated with that pharmacy.”

Although we were originally unsure whether Part D enrollees would need routine access to specialty drugs and specialty pharmacies beyond our out-of-network requirements (see 70 FR 4250), as the Part D program has evolved, the use of specialty drugs in the Part D program has grown exponentially and will likely continue to do so. The June 2016 MedPAC report (available at http://www.medpac.gov/​docs/​default-source/​reports/​chapter-6-improving-medicare-part-d-june-2016-report-.pdf) notes growth in the use of specialty drugs in the Part D program is currently outpacing other drugs and health spending, generally. Such drugs are often high-cost and complex, for Start Printed Page 56410diseases including, but not limited to, cancer, Hepatitis C, HIV/AIDS, multiple sclerosis, and rheumatoid arthritis. The report also highlights that each year since 2009, more than half of the United States Food and Drug Administration (FDA) approvals have been for specialty drugs. Because many specialty drugs can be self-administered on an outpatient basis, even in the patient's home, and for chronic or long-term use, increasing numbers of Part D enrollees need routine access to specialty drugs and specialty pharmacies. Nonetheless, because the pharmacy landscape is changing so rapidly, we believe any attempt by us to define specialty pharmacy could prematurely and inappropriately interfere with the marketplace, and we decline to propose a definition of specialty pharmacy at this time.

Similar to specialty pharmacy, we also decline to further define non-retail pharmacy. The pharmacy types that we define and propose to modify and define in regulation describe functional lines of business that an individual pharmacy may have, solely, or in combination. However, unlike mail order, home infusion, I/T/U, FQHC, LTC, hospital, other institutional, other provider-based, and “members-only” Part D plan-owned and operated pharmacy types or lines of business that comprise “non-retail”, the term “non-retail” does not, itself, define a unique pharmacy functional line of business, and does not lend itself to a clear definition. Consistent with statutory any willing pharmacy and preferred pharmacy provisions, mail-order pharmacies may be preferred or non-preferred. Part D plan sponsors may establish unique non-preferred mail-order cost-sharing, or may establish such non-preferred mail-order cost sharing commensurate with those for retail pharmacies.

We solicit comment on our proposed definition of mail-order pharmacy and our proposed modification to the definition of retail pharmacy. Specifically, we solicit comment regarding whether stakeholders believe these definitions strike the right balance to resolve confusion in the marketplace, afford Part D plan sponsor flexibility, and incorporate recent innovations in pharmacy business and care delivery models.

c. Treatment of Accreditation and Other Similar Any Willing Pharmacy Requirements in Standard Terms and Conditions

As noted previously, since the beginning of the Part D program, we have considered standard terms and conditions for network participation to set a “floor” of minimum requirements by which all similarly situated pharmacies must abide. We further believe it is reasonable for a Part D plan sponsor to require additional terms and conditions beyond those required in the standard contract for network participation for pharmacies to have preferred status. Therefore, we implemented the requirements of section 1860D-4(b)(1)(A) of the Act by requiring that standard terms and conditions be “reasonable and relevant,” but declined to further define “reasonable and relevant” in order to provide Part D plans with maximum flexibility to structure their standard terms and conditions.

We note that a pharmacy's ability to participate in a preferred or specially labeled subset of the Part D plan sponsor's larger contracted pharmacy network or to offer preferred cost sharing assumes that, at a minimum, the pharmacy is able to participate in the network. Where there are barriers to a pharmacy's ability to participate in the network at all, it raises the question of whether the standard (that is, entry-level) terms and conditions are reasonable and relevant.

It has been our longstanding policy that Part D plans cannot restrict access to certain Part D drugs to specialty pharmacies within their Part D network in such a manner that contravenes the convenient access protections of section 1860D-4(b)(1)(C) of the Act and § 423.120(a) of our regulations. (See Q&A at https://www.cms.gov/​Medicare/​Prescription-Drug-Coverage/​PrescriptionDrugCovContra/​Downloads/​QASpecialtyAccess_​051706.pdf). In 2006, we informed sponsors they cannot restrict access to drugs on the “specialty/high cost” tier to a subset of network pharmacies, except when necessary to meet FDA-mandated limited dispensing requirements (for example, Risk Evaluation and Mitigation Strategies (REMS) processes) or to ensure the appropriate dispensing of Part D drugs that require extraordinary special handling, provider coordination, or patient education when such extraordinary requirements cannot be met by a network pharmacy (that is, a contracted network pharmacy that does not belong to the restricted subset). Since 2006, it has been our general policy that these types of special requirements for Part D plan sponsors to limit dispensing of specialty drugs be directly linked to patient safety or regulatory reasons.

As the specialty drug distribution market has grown, so has the number of organizations competing to distribute or dispense specialty drugs, such as pharmacy benefit managers (PBMs), health plans, wholesalers, health systems, physician practices, retail pharmacy chains, and small, independent pharmacies (see the URAC White Paper, “Competing in the Specialty Pharmacy Market: Achieving Success in Value-Based Healthcare,” available at http://info.urac.org/​specialtypharmacyreport). CMS is concerned that Part D plan sponsors might use their standard pharmacy network contracts in a way that inappropriately limits dispensing of specialty drugs to certain pharmacies. In fact, we have received complaints from pharmacies that Part D plan sponsors have begun to require accreditation of pharmacies, including accreditation by multiple accrediting organizations, or additional Part D plan-/PBM-specific credentialing criteria, for network participation. We agree that there is a role in the Part D program for pharmacy accreditation, to the extent pharmacy accreditation requirements in network agreements promote quality assurance. In particular, we support Part D plan sponsors that want to negotiate an accreditation requirement in exchange for, for example, designating a pharmacy as a specialty or preferred pharmacy in the Part D plan sponsor's contracted pharmacy network. However, we do not support the use of Part D plan sponsor- or PBM-specific credentialing criteria, in lieu of, or in addition to, accreditation by recognized accrediting organizations, apart from drug-specific limited dispensing criteria such as FDA-mandated REMS or to ensure the appropriate dispensing of Part D drugs that require extraordinary special handling, provider coordination, or patient education when such extraordinary requirements cannot be met by a network pharmacy (as discussed previously). Moreover, we are especially concerned about anecdotal reports that allege such standard terms and conditions for network participation are waived, for example, when a Part D plan sponsor needs a particular pharmacy in its network in order to meet convenient access requirements, or even for certain pharmacies that received preferred pharmacy status.

If the premise of accreditation or Part D plan sponsor- or PBM-specific credentialing requirements is to ensure more stringent quality standards, then there is no reasonable explanation for why a quality-related standard term or condition could be waived for situations when the Part D plan sponsor needs a particular pharmacy in its contracted Start Printed Page 56411pharmacy network in order to meet the convenient access standards or to designate a particular pharmacy with preferred pharmacy status. A term or condition which can be dropped in such situations is by definition not “standard” according to the plain meaning of the word. Waivers or inconsistent application of such standard terms and conditions is an explicit acknowledgement that such terms and conditions are not necessary for the ability of a pharmacy to perform its core functions, and are thus neither reasonable nor relevant for any willing pharmacy standard terms and conditions.

It has been our longstanding policy to leave the establishment of pharmacy practice standards to the states, and we do not intend to change that now. We continue to believe pharmacy practice standards established by the states provide applicable minimum standards for all pharmacy practice standards, and § 423.153(c)(1) requires representation that network providers are required to comply with minimum standards for pharmacy practice as established by the states.

Additionally, because a pharmacy's ability to dispense certain medications is not dependent on it having the ability to dispense other medications, it is not relevant for sponsors to require pharmacies to dispense a particular roster of certain drugs or drugs for certain disease states in order to receive standard terms and conditions for network participation as a contracted network pharmacy for that Part D plan sponsor. Consequently, consistent with our longstanding policy, discussed previously, we would not expect Part D plan sponsors to limit dispensing of certain drugs or drugs for certain disease states to a subset of network pharmacies, except when necessary to meet FDA-mandated limited dispensing requirements (for example, Risk Evaluation and Mitigation Strategies (REMS) processes) or except as required by applicable state law(s) if the contracted network pharmacy is capable of and appropriately licensed under applicable state law(s) for doing so. We solicit comment on this topic.

d. Timing of Contracting Requirements

CMS has received complaints over the years from pharmacies that have sought to participate in a Part D plan sponsor's contracted network but have been told by the Part D plan sponsor that its standard terms are not available until the sponsor has completed all other network contracting. In other instances, pharmacies have told us that Part D plan sponsors delay sending them the requested terms and conditions for weeks or months or require pharmacies to complete extensive paperwork demonstrating their eligibility to participate in the sponsor's network before the sponsor will provide a document containing the standard terms and conditions. CMS believes such actions have the effect of frustrating the intent of the any willing pharmacy requirement, and as a result, we believe it is necessary to codify specific procedural requirements for the delivery of pharmacy network standard terms and conditions.

To this end, we propose to establish deadlines by which Part D plan sponsors must furnish their standard terms and conditions to requesting pharmacies. The first deadline we propose to establish is the date by which Part D plan sponsors must have standard terms and conditions available for pharmacies that request them. By mid-September of each year, Part D plan sponsors have signed a contract with CMS committing them to delivering the Part D benefit through an accessible pharmacy network during the upcoming year and have provided information about that network to CMS for posting on the Medicare Plan Finder Web site. At that point, Part D plan sponsors should have had ample opportunity to develop standard contract terms and conditions for the upcoming plan year. Therefore, we propose to require at § 423.505(b)(18)(i) that Part D plan sponsors have standard terms and conditions readily available for requesting pharmacies no later than September 15 of each year for the succeeding benefit year.

The second deadline we propose concerns the promptness of Part D plan sponsors' responses to pharmacy requests for standard terms and conditions. As discussed previously, we propose to require all Part D plan sponsors to have standard terms and conditions developed and ready for distribution by September 15. Therefore, we propose to require at § 423.505(b)(18)(ii) that, after that date and throughout the following plan year, Part D plan sponsors must provide the applicable standard terms and conditions document to a requesting pharmacy within two business days of receipt of the request. Part D plan sponsors would be required to clearly identify for interested pharmacies the avenue (for example, phone number, email address, Web site) through which they can make this request. In instances where the Part D plan sponsor requires a pharmacy to execute a confidentiality agreement with respect to the terms and conditions, the Part D plan sponsor would be required to provide the confidentiality agreement within two business days after receipt of the pharmacy's request and then provide the standard terms and conditions within 2 business days after receipt of the signed confidentiality agreement. While Part D plan sponsors may ask pharmacies to demonstrate that they are qualified to meet the Part D plan sponsors' standard terms and conditions before executing the contract, Part D plan sponsors would be required to provide the pharmacy with a copy of the contract terms for its review within the two-day timeframe. If finalized, this proposed requirement would permit pharmacies to do their due diligence with respect to whether a Part D plan sponsor's standard terms and conditions are acceptable at the same time Part D plan sponsors are conducting their own review of the qualifications of the requesting pharmacy. We specifically seek comment on whether these timeframes are the right length to address our goal but are operationally realistic. We also request examples of situations where a longer timeframe might be needed.

13. Changes to the Days' Supply Required by the Part D Transition Process

We promulgated regulations under the authority of section 1860D-11(d)(2)(B) of the Act to require Part D sponsors to provide for an appropriate transition process for enrollees prescribed Part D drugs that are not on the prescription drug plan's formulary (including Part D drugs that are on a sponsor's formulary but require prior authorization or step therapy under a plan's utilization management rules). These regulations are codified at § 423.120(b)(3). Specifically, these regulations require that a Part D sponsor ensure certain enrollees access to a temporary supply of drugs within the first 90 days under a new plan (including drugs that are on a plan's formulary but require prior authorization or step therapy under a plan's utilization management rules) by ensuring a temporary fill when an enrollee requests a fill of a non-formulary drug during this time period. In the outpatient setting, the supply must be for at least 30 days of medication, unless the prescription is written for less. In the LTC setting, this supply must be for up to at least 91 days and may be up to 98 days, consistent with the dispensing increment, unless a less amount is prescribed.

We propose to make two changes to these regulations. First, we propose to shorten the required transition days' Start Printed Page 56412supply in the long-term care (LTC) setting to the same supply currently required in the outpatient setting. Second, we propose a technical change to the current required days' transition supply in the outpatient setting to be a month's supply.

We provided our rationale for the transition fill days' supply requirement in the LTC setting in CMS final rule CMS-4085-F published on April 15, 2010 (75 FR 19678). In that final rule, we stated that for a new enrollee in a LTC facility, the temporary supply may be for up to 31 days (unless the prescription is written for less than 31 days), consistent with the dispensing practices in the LTC industry. We further stated that, due to the often complex needs of LTC residents that often involve multiple drugs and necessitate longer periods in order to successfully transition to new drug regimens, we will require sponsors to honor multiple fills of non-formulary Part D drugs, as necessary during the entire length of the 90-day transition period. Thus, we required a Part D sponsor to provide a LTC resident enrolled in its Part D plan with at least a 31 day supply of a prescription with refills provided, if needed, up to a 93 days' supply (unless the prescription is written for less) (75 FR 19721). In a subsequent final rule published on April 15, 2011, we changed the 93 days' supply to 91 to 98 days' supply, as noted previously, to acknowledge variations in days' supplies that could result from the short-cycle dispensing of brand drugs in the LTC setting (76 FR 21460 and 21526).

We received and responded to a comment in the April 2010 final rule about transition and a longer timeframe in the LTC setting. We stated that a number of commenters supported our proposal of requiring an extended transition supply for enrollees residing in LTC facilities but that commenters requested that we provide the same protections to individuals requiring LTC in community-based settings. In our response to the comment, we indicated that residents of LTC institutions were more limited in access to prescribing physicians hired by LTC facilities due to a limited visitation schedule and more likely to require extended transition timeframes in order for the physician to work with the facility and LTC pharmacies on transitioning residents to formulary drugs. We further stated that we believed that community-based enrollees, in contrast, were less limited in their access to prescribing physicians and did not require an extended transition period to work with their physicians to successfully transition to a formulary drug. (75 FR 19721). Thus, the requirement to provide longer transition fill days' supply in the LTC setting was a result of our concerns that a longer timeframe would be needed in the LTC setting.

After more than 10 years of experience with Part D in LTC facilities, we have not seen the concerns that we expressed in the 2010 final rule materialize. We are not aware of any evidence that transition for a Part D beneficiary in the LTC setting necessarily takes any longer than it does for a beneficiary in the outpatient setting. We understand that it is common for Part D beneficiaries in the LTC setting to be cared for by on-staff or consultant physicians and other health professionals with prescriptive authority who are under contract with the LTC facility. Additionally, we also understand that Part D beneficiaries in the LTC setting are typically served by an on-site pharmacy or one under contract to service the LTC facility. Given this structure of the LTC setting, we understand that the LTC prescribers and pharmacies are readily available to address transition for Part D beneficiaries in the LTC setting. In addition, LTC facilities now have many years' experience with the Medicare Part D program generally and transition specifically.

While our concerns about the needed timeframe for transition in the LTC setting do not seem to have materialized, we have continuing concerns about drug waste and the costs associated with such waste in the LTC setting. Some of these concerns have been addressed by our rule requiring the short-cycle dispensing of brand drugs to Part D beneficiaries in LTC facilities in the April 2011 final rule. That rule, codified at 42 CFR 423.154, requires that all Part D sponsors require all network pharmacies servicing LTC facilities to dispense certain solid oral doses of covered Part D brand-name drugs to enrollees in such facilities in no greater than 14-day increments at a time to reduce drug waste. However, we now believe that CMS could eliminate additional drug waste and cost by no longer requiring a longer transition days' supply in the LTC setting. Therefore, we are proposing that the transition days' supply in the LTC setting be the same as it is in the outpatient setting.

Our second proposed change involves the current required 30 days' transition supply in the outpatient setting, which is codified at § 423.120(b)(3)(iii)(A). We have received a number of inquiries from Part D sponsors regarding scenarios involving medications that do not easily add up to a 30 days' supply when dispensed (for example, drugs that typically are dispensed in 28-day packages). Historically, our response to those inquiries has been that the regulation requires plans to provide at least 30 days of medication, which requires plans to dispense more than one package to comply with the text of the regulation. However, the intent of the regulation was for the transition fill in the outpatient setting to be for at least a month's supply. For this reason, we are proposing a change to the regulation from “30 days” to “a month's supply.” If finalized, this change would mean that the regulation would require that a transition fill in the outpatient setting be for a supply of at least a month of medication, unless the prescription is written by the prescriber for less. Therefore, the supply would have to be for at least the days' supply that the applicable Part D prescription drug plans has approved as its retail month's supply in its Plan Benefit Package submitted to CMS for the relevant plan year, again, unless the prescription is written by the prescriber for less.

Together, our two proposals—if finalized—would mean that § 423.120 (b)(3)(iii)(A) would be consolidated into § 423.120 (b)(3)(iii) to read that the transition process must “[e]nsure the provision of a temporary fill when an enrollee requests a fill of a non-formulary drug during the time period specified in paragraph (b)(3)(ii) of this section (including Part D drugs that are on a plan's formulary but require prior authorization or step therapy under a plan's utilization management rules) by providing a one-time, temporary supply of at least a month's supply of medication, unless the prescription is written by a prescriber for less than a month's supply and requires the Part D sponsor to allow multiple fills to provide up to a total of a month's supply of medication.” Section 423.120(b)(3)(iii)(B) would be eliminated.

Please note that we also are proposing in II.A.15. Expedited Substitutions of Certain Generics and Other Midyear Formulary Changes to revise § 423.120(b)(3)(i)(B) to state that the transition process is not applicable in cases in which a Part D sponsor substitutes a generic drug for a brand name drug as specified under paragraph § 423.120(b)(3)(iv) or § 423.120(b)(6) of this section.Start Printed Page 56413

14. Expedited Substitutions of Certain Generics and Other Midyear Formulary Changes (§§ 423.100, 423.120, and 423.128)

Section 1860D-4(b)(3)(E) of the Act requires Part D sponsors to provide “appropriate notice” to the Secretary, affected enrollees, authorized prescribers, pharmacists, and pharmacies regarding any decision to either: (1) Remove a drug from its formulary, or (2) make any change in the preferred or tiered cost-sharing status of a drug. Section 423.120(b)(5) implements that requirement by defining appropriate notice as that given at least 60 days prior to such change taking effect during a given contract year. We have recognized that both current and prospective enrollees of a prescription drug plan need to have the most current formulary information by the time of the annual election period described in § 423.38(b) in order to enroll in the Part D plan that best suits their particular needs. To this end, § 423.120(b)(6) prohibits Part D sponsors and MA organizations from removing a covered Part D drug from a formulary or changing the preferred or tiered cost-sharing status of a covered Part D drug between the beginning of the annual election period described in § 423.38(b)(2) and 60 days subsequent to the beginning of the contract year associated with that annual election period. Our concern has been to prevent situations in which Part D sponsors change their formularies early in the contract year without providing appropriate notice as described in § 423.120(b)(5) to new enrollees. Thus, § 423.120(b)(6) has required that all materials distributed during the annual election period reflect the formulary the Part D sponsor will offer at the beginning of the contract year for which it is enrolling Part D eligible individuals. Lastly, under § 423.128(d)(2)(iii), Part D sponsors must also provide current and prospective Part D enrollees with at least 60 days' notice regarding the removal or change in the preferred or tiered cost-sharing status of a Part D drug on its Part D plan's formulary. The general notice requirements and burden are currently approved by OMB under control number 0938-0964 (CMS-10141).

MedPAC observed that the continuity of a plan's formulary is very important to all beneficiaries in order to maintain access to the medications that were offered by the plan at the time the beneficiaries enrolled. While we agree with MedPAC's assertion, we acknowledge the need to balance formulary continuity with requests from Part D sponsors to provide greater flexibility to make midyear changes to formularies. Indeed, MedPAC made its observation in a report that suggested that CMS's rules regarding formulary changes warranted examination. There MedPAC pointed out, among other things, that CMS could provide Part D sponsors with greater flexibility to make changes such as adding a generic drug and removing its brand name version without first receiving agency approval. (MedPAC, Report to the Congress: Medicare and the Health Care Delivery System, June 2016, page 192.)

This proposed rule would implement MedPAC's recommendation by permitting generic substitutions without advance approval as specified later in this section. We have also taken this opportunity to examine our regulations to determine how to otherwise facilitate the use of certain generics. Currently, Part D sponsors can add drugs to their formularies at any time; however, there is no guarantee that enrollees will switch from their brand name drugs to newly added generics. Therefore, Part D sponsors seeking to better manage the Part D benefit may choose to remove a brand name drug, or change its preferred or tiered cost-sharing, and substitute or add its therapeutic equivalent. But even this takes some time: Under current regulations, Part D sponsors must submit formulary change requests to CMS and provide specified notice before removing drugs or changing their cost-sharing (except for unsafe drugs or those withdrawn from the market). As noted earlier, the general notice requirements and burden are currently approved by OMB under control number 0938-0964 (CMS-10141). Also, as detailed previously, § 423.120(b)(5)(i) requires 60 days' notice to specified entities prior to the effective date of changes and 60 days' direct notice to affected enrollees or a 60 day refill. The ability of Part D sponsors to make generic substitutions as approved by CMS is further limited by the fact that as detailed previously, under § 423.120(b)(6), Part D sponsors generally cannot remove drugs or make cost-sharing changes from the start of the annual election period (AEP) until 2 months after the plan year begins.

We propose to provide Part D sponsors with more flexibility to implement generic substitutions as follows: The proposed provisions would permit Part D sponsors meeting all requirements to immediately remove brand name drugs (or to make changes in their preferred or tiered cost-sharing status), when those Part D sponsors replace the brand name drugs with (or add to their formularies) therapeutically equivalent newly approved generics—rather than having to wait until the direct notice and formulary change request requirements have been met. The proposed provisions would also allow sponsors to make those specified generic substitutions at any time of the year rather than waiting for them to take effect 2 months after the start of the plan year. Related proposals would require advance general and retrospective direct notice to enrollees and notice to entities; clarify online notice requirements; except specified generic substitutions from our transition policy; and conform our definition of “affected enrollees.” Lastly, to address stakeholder requests for greater flexibility to make midyear formulary changes in general, we are also proposing to decrease the days of enrollee notice and refill required when (aside from generic substitution and drugs deemed unsafe or withdrawn from the market) drug removal or changes in cost-sharing will affect enrollees.

Specifically, we propose to add a new paragraph (b)(5)(iv) to § 423.120 to permit Part D sponsors to immediately remove, or change the preferred or tiered cost-sharing of, brand name drugs and substitute or add therapeutically equivalent generic drugs provided specified requirements are met. The generic drug would need to be offered at the same or a lower cost-sharing and with the same or less restrictive utilization management criteria originally applied to the brand name drug. The Part D sponsor could not have as a matter of timing been able to previously request CMS approval of the change because the generic drug had not yet been released to the market. Also, the Part D sponsor must have previously provided prospective and current enrollees general notice that certain generic substitutions could occur without additional advance notice. As proposed, we would permit Part D sponsors to substitute a generic drug for a brand name drug immediately rather than make that change effective, for instance, at the start of the next month. However, we solicit comment as to whether there would be a reason to require such a delay, especially given the fact that we are proposing not to require advance direct notice (rather, only advance general notice) or CMS approval. The proposed regulation would also require that, when generic drug substitutions occur, Part D sponsors must provide direct notice to affected enrollees and other specified notice to CMS and other entities. We also propose to specify in a revision to Start Printed Page 56414§ 423.120(b)(3)(i)(B) that the transition process is not applicable in cases in which a Part D sponsor substitutes a generic drug for a brand name drug under paragraph (b)(6) of this section.

A proposed exception to § 423.120(b)(6) would permit Part D sponsors to make the above specified changes (removing covered Part D drugs from their formularies, or changing their cost-sharing, when substituting or adding their generic equivalents) during any time of the year. That section generally provides—with a current exception only for unsafe drugs and drugs removed from the market—that Part D sponsors generally cannot remove drugs or make cost-sharing changes between the beginning of the AEP and 60 days after the plan year begins. We believe that revising this provision would assist Part D sponsors by permitting substitutions to take place effect during a longer time period than is currently permitted. Given that the previous exception would permit generic substitutions prior to the start of the calendar year, we also propose to conform the definition of “affected enrollees” to clarify that applicable changes must affect their access to drugs during the current plan year.

We are aware that some may be concerned about not requiring advance CMS approval or advance direct notice to enrollees prior to making the permitted generic substitutions, or requiring a transition fill. But we would only permit immediate substitution when the generics are deemed therapeutically equivalent to the brand name drug being removed by the Federal Drug and Food Administration (FDA) and meet other requirements specified later in this section. This would not apply to follow-on biological products under current FDA guidance. The FDA has, in fact noted that, “A generic drug is a medication created to be the same as an existing approved brand-name drug in dosage form, safety, strength, route of administration, quality, and performance characteristics.” (“Generic Drug Facts,” see FDA Web site, https://www.fda.gov/​Drugs/​ResourcesForYou/​Consumers/​BuyingUsingMedicineSafely/​UnderstandingGenericDrugs/​ucm167991.htm, accessed September 19, 2017, hereafter FDA, “Abbreviated New Drug Application (ANDA): Generics”.) Additionally, immediate generic substitution has long been an established bedrock of commercial insurance, and we are not aware of any harm to the insured resulting from such policies.

Also, we do not believe a transition policy would be appropriate for these situations: The purpose of the transition process is to make sure that the medical needs of enrollees are safely accommodated in that they do not go without their medications or face an abrupt change in treatment. If the proposal to permit Part D sponsors to immediately substitute generics for brand name drugs upon market release were finalized, most enrollees in this situation would not have had an opportunity to try the drug prior to the drug substitution to see how it worked for them. In other words, an enrollee could not be certain that a generic substitution would not work, would constitute an abrupt change in treatment, or that the enrollee would be better served by taking no medication rather than the generic unless he or she had previously tried the generic drug.

Moreover, we have built beneficiary protections into the proposed provisions. First, proposed § 423.120(b)(5)(iv)(A) addresses safety concerns by permitting Part D sponsors to add only therapeutically equivalent generic drugs. This means the FDA must have approved the generic drug in an abbreviated new drug application pursuant to section 505(j) of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 355(j)), and it must be listed with the innovator drug in the publication “Approved Drug Products with Therapeutic Equivalence Evaluations” (commonly known as the Orange Book) in which the FDA identifies drug products approved on the basis of safety and effectiveness by the FDA, and be considered by the FDA to be therapeutically equivalent to the brand name drug.

Second, we share the concern that prospective enrollees could be misled by Part D sponsors that deliberately offer brand name drugs during open enrollment periods only to remove them or change their cost-sharing as quickly as possible during the plan year. We believe that our proposed provision would address such problems: Under proposed § 423.120(b)(5)(iv)(B), a Part D sponsor cannot substitute a generic for a brand name drug unless it could not have previously requested formulary approval for use of that drug. As a matter of operations, CMS permits Part D sponsors to submit formularies, and their respective change requests, only during certain windows. Under proposed § 423.120(b)(5)(iv)(B), a Part D sponsor could not remove a brand name drug or change its preferred or tiered cost-sharing if that Part D sponsor could have included its generic equivalent with its initial formulary submission or during a later update window.

However, to be certain, that we have not missed practical or other complications that would hinder the ability of Part D sponsors to timely seek approval within the CMS timeframes, we solicit comment as to whether we should consider immediate substitution, potentially in limited circumstances, of specified generics for which Part D sponsors could have previously requested formulary approval. At the same time, we remain mindful of beneficiary protections and are hesitant to simply permit substitution of any generics regardless of how long they have been on the market. Accordingly, we welcome suggestions of any other practical cut-offs, as well as information on possible effects on beneficiaries that could result if we were to permit Part D sponsors to substitute specified generics that have been on the market for longer time periods.

Third, we believe the two-pronged approach of the proposed provision would provide appropriate notice for this type of formulary change. The general notice requirement of proposed § 423.120(b)(iv)(C) would require that, before making any generic substitutions, a Part D sponsor provide all prospective and current enrollees with notice in the formulary and other applicable beneficiary communication materials stating that the Part D sponsor can remove, or change the preferred or tiered cost-sharing of, any brand name drug immediately without additional advance notice (beyond the general advance notice) when a new equivalent generic is added. This would, for instance, include the Evidence of Coverage (EOC). Proposed § 423.120(b)(iv)(C) would also require that this general notice advise prospective and current enrollees that they will get direct notice about any specific drug substitutions made that would affect them and that the direct notice would advise them of the steps they could take to request coverage determinations and exceptions. Therefore, the general notice would advise enrollees about what might take place before any changes occur.

When the Part D sponsor substitutes a generic for a brand name drug, the proposed direct notice provision, § 423.120(b)(5)(iv)(E), would require the Part D sponsor to provide affected enrollees with direct notice consistent with § 423.120(b)(5)(ii). We currently require Part D sponsors to provide this information 60 days before such changes are made. Under the proposed changes, enrollees would receive the same information they receive under the current regulation—the only difference being that the notice could be provided Start Printed Page 56415after the effective date of the generic substitution. As discussed earlier, under the proposed provision Part D sponsors seeking to make immediate substitutions would be newly required to have previously provided general notice in beneficiary communication materials such as formularies and EOCs that certain generic substitutions could take place without additional advance notice.

We understand there may be concerns that the direct notice identifying the specific drug substitution would arrive after the formulary change has already taken place. As explained previously, we believe generic substitutions pose no threat to enrollee safety. Also, as noted earlier, we are proposing to revise § 423.120(b)(6) to permit generic substitutions to take place throughout the entire year. This means that, under the proposed provision, a Part D sponsor meeting all the requirements would be able to substitute a generic drug for a brand name drug well before the actual start of the plan year (for instance, if a generic drug became available on the market days after the summer update). There is nothing in our regulation that would prohibit advance notice and, in fact, we would encourage Part D sponsors to provide direct notice as early as possible to any beneficiaries who have reenrolled in the same plan and are currently taking a brand name drug that will be replaced with a generic drug with the start of the next plan year. We would also anticipate that Part D sponsors will be promptly updating the formularies posted online and provided to potential beneficiaries to reflect any permitted generic substitutions—and at a minimum meeting any current timing requirements provided in applicable guidance. At this time we are not proposing to set a regulatory deadline by which Part D sponsors must update their formularies before the start of the new plan year. However, if we were to finalize this provision and thereafter find that Part D sponsors were not timely updating their formularies, we would reexamine this policy. And we would note, as regards timing, that § 423.128(d)(2)(iii) requires that the current formulary posted online be updated at least monthly.

In cases in which the Part D sponsor would necessarily have to send notice after the fact, for example instances in which a drug is not released to the market until after the beginning of the plan year and the Part D sponsor then immediately makes a generic substitution, the proposed general notice would have already advised enrollees that they would receive information about any specific drug generic substitutions that affected them and that they would still be able to request coverage determinations and exceptions. While the timing would most likely mean most enrollees would only be able to make such requests after receiving a generic drug fill, in the vast majority of cases, an enrollee could not be certain that a generic substitution would not work unless he or she actually tried the generic drug. Additionally, we are strongly encouraging Part D sponsors to provide the retrospective direct notices of these generic substitutions (including direct notice to affected enrollees and notice to entities including CMS) no later than by the end of the month after which the change becomes effective. While sponsors are required to report this information to both enrollees and entities including CMS, we currently are not proposing to codify the end of month timing requirement; however, if we were to finalize this provision and thereafter find that Part D sponsors were not timely providing retrospective notice, we would reexamine this policy.

Fourth, enrollees would be protected from higher cost-sharing under proposed paragraph (b)(5)(iv)(A), which would require Part D sponsors to offer the generic with the same or lower cost-sharing and the same or less restrictive utilization management criteria as the brand name drug.

We also believe requirements and guidance regarding beneficiary communications will continue to provide beneficiary protections. Section 423.128(e)(5) currently requires Part D sponsors to furnish directly to enrollees an explanation of benefits (EOB) that includes any applicable formulary changes for which Part D plans are required to provide notice as described in § 423.120(b)(5). As noted previously, § 423.128(d)(2)(iii) currently requires Part D sponsors to post at least 60 days' notice of removals and cost-sharing changes online for current and prospective Part D enrollees. In light of our proposal for generic substitutions described previously, we propose to modify § 423.128(d)(2)(iii) to require Part D sponsors to provide “timely” notice under 423.120(b)(5). This would mean that, under the proposed provision, a Part D sponsor would need to provide at least 30 days' online notice to affected enrollees before removing drugs or making cost-sharing changes except when adding a therapeutically equivalent generic as specified, and as has currently been the requirement, removing unsafe or withdrawn drugs. Part D sponsors could provide online notice after the effective date of changes only in those limited instances.

As regards content, § 423.128(d)(2)(iii) requires—and would continue to do so under the proposed revisions—that Part D sponsors post online notice regarding any removal or change in the preferred or tiered cost-sharing status of a Part D drug on its Part D plan's formulary. Posting information online related to removing a specific drug or changing its cost-sharing solely to meet the content requirements of § 423.128(d)(2)(iii) cannot replace general notice under proposed § 423.120(b)(5)(iv)(C); direct notice to affected enrollees under § 423.120(b)(5)(ii); or notice to CMS when required under § 423.120(b)(5). For instance, as noted in the January, 28, 2005 final rule (70 FR 4265), we view online notification under § 423.128(d)(2)(iii) on its own as an inadequate means of providing specific information to the enrollees who most need it, and we consider it an additional way that Part D sponsors provide notice of formulary changes to affected enrollees.

However, we do not mean to restrict or otherwise affect other rules governing the provisions of materials online. For instance, if Part D sponsors were able to fulfill CMS marketing and beneficiary communications requirements by posting a specific document online rather than providing it in paper, the fact the document was posted online would not preclude it from providing general notice required under our proposed provisions. In other words, if otherwise valid, provision of general notice in a document posted online could suffice as notice as regards that specified document under proposed § 423.120(b)(5)(iv)(C). In contrast, we do not wish to suggest that posting one type of notice online would necessarily suffice to meet distinct notice requirements. For instance, providing the general advance notice that would be required under § 423.120(b)(5)(iv)(C) in a document posted online could not meet the online content requirements of § 423.128(d)(2)(iii) related to providing information about removing drugs or changing their cost-sharing. Nor, as noted previously, could the opposite apply: Posting the content required under § 423.128(d)(2)(iii) online could not fulfill the advance general notice requirements that would be required under proposed § 423.120(b)(5)(iv)(C) (or suffice to provide direct notice to affected enrollees under § 423.120(b)(5)(ii) or notice to CMS under § 423.120(b)(5)).

In addition to requiring the direct notice to affected enrollees discussed previously, proposed § 423.120(b)(iv)(D) would also require Part D sponsors to provide the following entities with Start Printed Page 56416notice of the generic substitutions consistent with § 423.120(b)(5)(ii): CMS, State Pharmaceutical Assistance Programs (as defined in § 423.454), entities providing other prescription drug coverage (as described in § 423.464(f)(1)), authorized prescribers, network pharmacies, and pharmacists. (To avoid repetition, we propose to revise the provision to refer to all of these entities as “CMS and other specified entities” for the purposes of § 423.120(b).) Even though, as proposed, a Part D sponsor that met all of the requirements would be able to make the generic substitution immediately without submitting any formulary change requests to CMS, the Part D sponsor must include the generic substitution in the next available formulary submission to CMS. We note that Part D plans can determine the most effective means to communicate formulary change information to State Pharmaceutical Assistance Programs, entities providing other prescription drug coverage, authorized prescribers, network pharmacies, and pharmacists and that, under our proposed provision, we would consider online posting sufficient for those purposes.

Lastly as part of our reexamination of the need to generally provide Part D sponsors greater flexibility in formulary changes, we plan to decrease the amount of direct notice required in cases where the removal of a drug or change in cost-sharing status will affect enrollees currently taking the drug. (This would contrast proposed notice requirements that would apply to immediate substitution of specified generics. There we would also require advance general notice that such changes can occur, and direct notice of the specific changes could be provided after their effective date.) Section 423.120(b)(5)(i) currently requires at least 60 days' notice to all entities prior to the effective date of changes and at least 60 days' direct notice to affected enrollees or a 60 day refill upon the request of an affected enrollee. We propose to reduce the notice requirement in both instances to at least 30 days and the refill requirement to a month. Beneficiaries would be affected, and therefore receive the 30 days' notice or a month refill, in cases in which, for instance, Part D sponsors planned to add prior authorization requirements as a result of new safety-related information or clinical guidelines. This proposal would permit Part D sponsors to institute formulary changes in half the time.

We are, again, aware that some may be concerned that we are reducing the number of days advance notice afforded to enrollees in these instances. But again, we believe current CMS requirements provide the necessary beneficiary protections, and that 30 (rather than 60) days' notice still will afford enrollees sufficient time to either change to a covered alternative drug or to obtain needed prior authorization or an exception for the drug affected by the formulary change. Existing CMS regulations establish robust beneficiary protections in the coverage and appeals process, including expedited adjudication timeframes for exigent circumstances (maximum timeframe of 24 hours for coverage determinations and 72 hours for level 1 and 2 appeals), and a requirement that Part D plan sponsors automatically forward all untimely coverage determinations and redeterminations to the IRE for independent review. Further, while 60 days' notice is currently required, we have no evidence to suggest that beneficiaries are currently utilizing the full 60 days. The reduction to 30 days would align these requirements with the timeframes for transition fills. And, with over 11 years of program experience, we have no evidence to suggest that 30 days has been an insufficient temporary days supply for transition fills.

(Note we are also proposing to amend the refill amount to months (namely a month) rather than days (it was 60 days previously) to conform to a proposed revision to the transition policy regulations at § 423.120(b)(3).) For further discussion, see section III.A.15 of this proposed rule, Changes to the Transition.)

Summary: The following provides a high level summary of notice changes proposed in § 423.120(b). Details on these requirements appear in the preamble and proposed provisions. This summary does not address other proposed changes (for instance, changes to transition requirements); notice provisions we do not propose to change (for instance, notice for safety edits); or other rules that may also apply (for instance, marketing and beneficiary communications rules regarding formulary updates).

  • Notice required for expedited substitutions of certain generics: Part D sponsors that would otherwise be permitted to make certain generic substitutions as specified under proposed § 423.120(b)(5)(iv) would be required to provide the following types of notice:

++ Advance general notice in the formulary and EOC and other applicable beneficiary communications stating that such changes may occur without notice.

++ Notice that identifies the specific drug substitution made—which may be provided after the effective date of the change—as follows:

—Direct notice to affected enrollees.

—Notice posted online for current and prospective enrollees.

—Notice to CMS.

—Notice to other entities.

  • Notice and refill required for certain other midyear formulary changes: Part D sponsors that would be otherwise permitted to remove or change the preferred or tiered cost-sharing status of drugs would be required to provide the below types of notice and refills under proposed § 423.120(b)(5)(i) and (ii). However, these notice requirements do not apply when removing drugs deemed unsafe by the FDA or removed from the market by manufacturers (for applicable requirements see § 423.120(b)(5)(iii).)
  • For affected enrollees—

++ Advance direct written notice at least 30 days prior to the effective date; or

++ Written notice of the change and a month supply of the brand name drug under the same terms as provided before the change; and

  • For entities and other enrollees:

++ Advance notice identifying the specific drug changes to be made at least 30 days prior to the effective date of the change as follows:

—Notice posted online for current and prospective enrollees;

—Notice to CMS; and

—Notice to other entities.

15. Treatment of Follow-On Biological Products as Generics for Non-LIS Catastrophic and LIS Cost Sharing

Similar to the introduction of an abbreviated approval pathway for generic drugs provided by the Hatch-Waxman Act in 1984 to spur more competition through quicker approvals and introduction of lower cost therapeutic alternatives in the marketplace, Congress enacted the “Biologics Price Competition and Innovation Act of 2009” to balance innovation and consumer interests. Specifically, section 7002 of the ACA amended section 351 of the Public Health Service Act (PHS Act) (42 U.S.C. 262), adding a subsection (k) to create an abbreviated licensure pathway for follow-on biological products that are demonstrated to be either “biosimilar” to or “interchangeable” with a United States Food and Drug Administration (FDA) licensed reference biological product. According to the FDA, “a biosimilar product is a biological product that is approved based on a showing that it is highly similar to an FDA-approved biological product, known as a reference product, and has Start Printed Page 56417no clinically meaningful differences in terms of safety and effectiveness from the reference product. Only minor differences in clinically inactive components are allowable in biosimilar products.” However, “an interchangeable biological product is biosimilar to an FDA-approved reference product and meets additional standards for interchangeability. An interchangeable biological product may be substituted for the reference product by a pharmacist without the intervention of the health care provider who prescribed the reference product.” (See http://www.fda.gov/​Drugs/​DevelopmentApprovalProcess/​HowDrugsareDevelopedandApproved/​ApprovalApplications/​TherapeuticBiologicApplications/​Biosimilars/​ ) Biosimilar biological products are, by definition, not interchangeable, and are not substitutable without a new prescription. Follow-on biological products are listed in the FDA's Purple Book: Lists of Licensed Biological Products with Reference Product Exclusivity and Biosimilarity or Interchangeability Evaluations, available at http://www.fda.gov/​Drugs/​DevelopmentApprovalProcess/​HowDrugsareDevelopedandApproved/​ApprovalApplications/​TherapeuticBiologicApplications/​Biosimilars/​ucm411418.htm. Part D plan sponsors are also encouraged to monitor the FDA's Web site for new biologic (BLA) approvals at http://www.accessdata.fda.gov/​scripts/​cder/​drugsatfda/​index.cfm?​fuseaction=​Reports.ReportsMenu.

Sections 1860D-2(b)(4) and 1860D-14(a)(1)(D)(ii-iii) of the Act specify lower Part D maximum copayments for low-income subsidy (LIS) eligible individuals for generic drugs and preferred drugs that are multiple source drugs (as defined in section 1927(k)(7)(A)(i) of the Act) than are available for all other Part D drugs. Currently the statutory cost sharing levels are set at the maximums. CMS does not interpret the statutory language to mean that each plan can establish lower LIS cost sharing on drugs, but rather, that CMS, through rulemaking, could establish lower cost sharing than the maximum amount, and it would therefore be the same for all Part D plans.

For the Part D program, CMS defines a “generic drug” at § 423.4 as a drug for which an application under section 505(j) of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 355(j)) is approved. Biosimilar and interchangeable biological products do not meet the section 1927(k)(7) definition of a multiple source drug or the CMS definition of a generic drug at § 423.4. Consequently, follow-on biological products are subject to the higher Part D maximum copayments for LIS eligible individuals and non-LIS Part D enrollees in the catastrophic portion of the benefit applicable to all other Part D drugs. While the statutory maximum LIS copayment amounts apply to all phases of the Part D benefit, the statute only specifies non-LIS maximum copayments for the catastrophic phase. CMS clarified the applicable LIS and non-LIS catastrophic cost sharing in a March 30, 2015 Health Plan Management System (HPMS) memorandum. We advised that additional guidance may be issued for interchangeable biological products at a later date.

Nonetheless, treatment of follow-on biological products, which are generally high-cost, specialty drugs, as brands for the purposes of non-LIS catastrophic and LIS cost sharing generated a great deal confusion and concern for plans and advocates alike, and CMS received numerous requests to redefine generic drug at § 423.4. Advocates expressed concerns that LIS enrollees were required to pay the higher brand copayment for biosimilar biological products. Stakeholders who contacted us asserted treatment of biosimilar biological products as brands for purposes of LIS cost-sharing creates a disincentive for LIS enrollees to choose lower cost alternatives. Some of these stakeholders also expressed similar concerns for non-LIS enrollees in the catastrophic portion of the benefit.

We agree and propose to revise the definition of generic drug at § 423.4 to include follow-on biological products approved under section 351(k) of the PHS Act (42 U.S.C. 262(k)) solely for purposes of cost-sharing under sections 1860D-2(b)(4) and 1860D-14(a)(1)(D)(ii-iii) of the Act. Lower cost sharing for lower cost alternatives will improve enrollee incentives to choose follow-on biological products over more expensive reference biological products, and will reduce costs to both Part D enrollees and the Part D program.

While CMS generally seeks to encourage the utilization of lower cost follow-on biological products, we propose to limit inclusion of follow-on biological products in the definition of generic drug to purposes of non-LIS catastrophic cost sharing and LIS cost sharing only because we want to avoid causing any confusion or misunderstanding that CMS treats follow-on biological products as generic drugs in all situations. We do not believe that would be appropriate because the same FDA requirements for generic drug approval (for example, therapeutic equivalence) do not apply to biosimilar biological products, currently the only available follow-on biological products. Accordingly, CMS currently considers biosimilar biological products more like brand name drugs for purposes of transition or midyear formulary changes because they are not interchangeable. In these contexts, treating biosimilar biological products the same as generic drugs would incorrectly signal that CMS has deemed biosimilar biological products (as differentiated from interchangeable biological products) to be therapeutically equivalent. This could jeopardize Part D enrollee safety and may generate confusion in the marketplace through conflation with other provisions due to the many places in the Part D statute and regulation where generic drugs are mentioned. Therefore, we believe the proposed change to treat follow-on biological products as generics should be limited to purposes of non-LIS catastrophic and LIS cost sharing only.

We propose to modify the definition of generic drug at § 423.4 as follows:

  • We propose to redesignate the existing definition as paragraph (i).
  • We propose to add a new paragraph (ii) to state “for purposes of cost sharing under sections 1860D-2(b)(4) and 1860D-14(a)(1)(D) of the Act only, a biological product for which an application under section 351(k) of the Public Health Service Act (42 U.S.C. 262(k)) is approved.”

We solicit comment on this proposed change to the definition of generic drug at § 423.4.

16. Eliminating the Requirement To Provide PDP Enhanced Alternative (EA) to EA Plan Offerings With Meaningful Differences (§ 423.265)

CMS has the authority under section 1857(e)(1) of the Act, incorporated for Part D by section 1860D-12(b)(3)(D) of the Act, to establish additional contract terms that CMS finds “necessary and appropriate,” as well as authority under section 1860D-11(d)(2)(B) of the Act to propose regulations imposing “reasonable minimum standards” for Part D sponsors. Using this authority we previously issued regulations to ensure that multiple plan offerings by Part D sponsors represent meaningful differences to beneficiaries with respect to benefit packages and plan cost structures. At that time, separate meaningful difference rules were concurrently adopted for MA and stand-alone PDPs. This section addresses proposed changes to our regulations pertaining strictly to meaningful Start Printed Page 56418differences in PDP plan offerings. One of the underlying principles in the establishment of the Medicare Part D prescription drug benefit is that both market competition and the flexibility provided to Part D sponsors in the statute would result in the offering of a broad array of cost effective prescription drug coverage options for Medicare beneficiaries. We continue to support the concept of offering a variety of prescription drug coverage choices for Medicare beneficiaries consistent with our commitment to afford beneficiaries access to the prescription drugs they need.

PDP sponsors must offer throughout a PDP region a basic plan that consists of: Standard deductible and cost sharing amounts (or actuarial equivalents); an initial coverage limit based on a set dollar amount of claims paid on the beneficiary's behalf during the plan year; a coverage gap phase; and finally, catastrophic coverage that applies once a beneficiary's out-of-pocket expenditures for the year have reached a certain threshold. Prior to our adopting regulations requiring meaningful differences between each PDP sponsor's plan offerings in a PDP Region, our guidance allowed sponsors that offered a basic plan to offer additional basic plans in the same region, as long as they were actuarially equivalent to the basic plan structure described in the statute. These sponsors could also offer enhanced alternative plans that provide additional value to beneficiaries in the form of reduced deductibles, reduced copays, coverage of some or all drugs while the beneficiary is in the gap portion of the benefit, coverage of drugs that are specifically excluded as Part D drugs under paragraph (2)(ii) of the definition of Part D drug under § 423.100, or some combination of those features. As we have gained experience with the Part D program, we have made consistent efforts to ensure that the number and type of plan benefit packages PDP sponsors may market to beneficiaries are no more numerous than necessary to afford beneficiaries choices from among meaningfully different plan options. To that end, CMS sets differential out-of-pocket cost (OOPC) targets each year, using an analysis performed on the previous year's bid submissions, to ensure contracting organizations submit bids that clearly offer differences in value to beneficiaries. Published annually in the Call Letter, the threshold differentials are defined for a basic and enhanced plan, as well as for two enhanced plans, when offered by a parent organization in the same region. For example, in CY 2018, a basic and enhanced plan are required at minimum to provide for a $20 out-of-pocket difference, while two enhanced plans are required to have at least a $30 differential. Over the years, the thresholds have ranged from $18 to $23 between basic and enhanced plans, and from $12 to $34 between two enhanced plans. We issued regulations in 2010, at § 423.265(b)(2), that established our authority to deny bids that are not meaningfully different from other bids submitted by the same organization in the same service area. Our application of this authority has eliminated PDP sponsors' ability to offer more than one basic plan in a PDP region since all basic plan benefit packages must be actuarially equivalent to the standard benefit structure discussed in the statute, and in guidance we have also limited to two the number of enhanced alternative plans that we approve for a single PDP sponsor in a PDP region. As part of the same 2010 rulemaking, we also established at § 423.507(b)(1)(iii) our authority to terminate existing plan benefit packages that do not attract a number of enrollees sufficient to demonstrate their value in the Medicare marketplace. Both of these authorities have been effective tools in encouraging the development of a variety of plan offerings that provide meaningful choices to beneficiaries.

We continue to be committed to maintaining benefit flexibility and efficiency throughout both the MA and Part D programs. We wish to continue the trend of using transparency, flexibility, program simplification, and innovation to transform the MA and Part D programs for Medicare enrollees to have options that fit their individual health needs. In our April 2017 Request for Information (RFI), we offered stakeholders the opportunity to submit their ideas on how to better accomplish these goals. In response to the RFI, we received two comments specific to the meaningful difference requirement for PDPs. One commenter urged us to eliminate meaningful difference requirements to allow market competition to determine the appropriate number and type of plan offerings. Alternatively, it was suggested that if the meaningful difference standard is retained, we should revise it to allow plans to be treated as meaningfully different based on differences in plan characteristics not previously considered by CMS. The commenter contends that the meaningful difference requirement, as currently applied, unfairly limits the number of plan offerings and beneficiary choices. Specifically, it was argued that the meaningful difference test does not recognize premiums as elements constituting meaningful differences, despite this being an extremely important factor for beneficiaries in making enrollment decisions. Another commenter recommended that we lower the OOPC differentials between basic and enhanced PDP offerings but at a minimum, we should lower the OOPC differential between enhanced PDP offerings.

While we received relatively few comments related to meaningful difference in response to the RFI, we did receive a number of comments both in support of and opposing the proposed increase in the meaningful difference threshold between enhanced PDP offerings we announced in the Draft CY 2018 Call Letter. Those in favor of our proposal believe that the increase would help to ensure that sponsors are offering meaningfully different plans and would minimize beneficiary confusion. Commenters opposed to the proposal argued that the increase would lead to more expensive plans and would effectively limit plan choice. They argued that expanding OOPC differentials would ultimately create more beneficiary disruption as sponsors would have to consolidate plans that do not meet the new threshold. This result would directly contradict our request that plan sponsors consider options to minimize beneficiary disruption. Commenters suggested that we should utilize OOPC estimates as they were originally intended, to ensure that beneficiaries receive a minimum additional value from enhanced plans. They added that steady and reasonable OOPC thresholds will give beneficiaries more consistent benefits and lower premiums.

We appreciate the importance of ensuring adequate plan choice for beneficiaries and the value of multiple plan offerings with a diversity of benefits, now and in the future. We agree with the argument that two enhanced plans offered by a plan sponsor could vary with respect to their plan characteristics and benefit design, such that they might appeal to different subsets of Medicare enrollees, but in the end have similar out-of-pocket beneficiary costs. We continue to believe however that a meaningful difference, that takes into account out-of-pocket costs, be maintained between basic and enhanced plans to ensure that there is a meaningful value for beneficiaries given the supplemental Part D premium associated with the enhanced plans. Therefore, effective for Start Printed Page 56419Contract Year (CY) 2019, we propose to revise the Part D regulations at § 423.265 (b)(2) to eliminate the PDP EA to EA meaningful difference requirement, while maintaining the requirement that enhanced plans be meaningfully different from the basic plan offered by a plan sponsor in a service area. We believe these proposed revisions will help us accomplish the balance we wish to strike with respect to encouraging competition and plan flexibilities while still providing PDP choices to beneficiaries that represent meaningful choices in benefit packages. Anticipated impacts to this change include: (1) A modest increase in the number of plans that would be offered by PDP sponsors (if the EA to EA meaningful difference requirement was the sole barrier to a PDP sponsors offering a second EA plan in a region) and (2) a potential decrease in the average supplemental Part D premium.

We also announce our future intent to reexamine, with the benefit of additional information, how we define the meaningful difference requirement between basic and enhanced plans offered by a PDP sponsor within a service area. We recognize that the current OOPC methodology is only one method for evaluating whether the differences between plan offerings are meaningful, and will investigate whether the current OOPC model or an alternative methodology should be used to evaluate meaningful differences between PDP offerings. While we intend to conduct our own analyses, we also seek stakeholder input on how to define meaningful difference as it applies to basic and enhanced Part D plans. CMS will continue to provide guidance for basic and enhanced plan offering requirements in the annual Call Letter.

Beneficiaries can continue to rely on the many resources CMS makes available, such as the Medicare Plan Finder (MPF), 1-800-MEDICARE and the Medicare and You Handbook, to assist them and their caregivers in making the best plan choices that meet their individual health needs. To the extent that CMS finds its elimination results in potential beneficiary confusion or harm, CMS will consider reinstating the meaningful difference requirement through future rule making or consider taking other action.

17. Request for Information Regarding the Application of Manufacturer Rebates and Pharmacy Price Concessions to Drug Prices at the Point of Sale

a. Introduction

Part D sponsors and their contracted PBMs have been increasingly successful in recent years at negotiating price concessions from pharmaceutical manufacturers, network pharmacies, and other such entities. Between 2010 and 2015, the amount of all forms of price concessions received by Part D sponsors and their PBMs increased nearly 24 percent per year, about twice as fast as total Part D gross drug costs, according to the cost and price concession data Part D sponsors submitted to CMS for payment purposes.

The data Part D sponsors submit to CMS as part of the annual required reporting of direct or indirect remuneration (DIR) show that manufacturer rebates, which comprise the largest share of all price concessions received, have accounted for much of this growth.[47] The data also show that manufacturer rebates have grown dramatically relative to total Part D gross drug costs each year since 2010. Rebate amounts are negotiated between manufacturers and sponsors or their PBMs, independent of CMS, and are often tied to the sponsor driving utilization toward a manufacturer's product through, for instance, favorable formulary tier placement and cost-sharing requirements.

The DIR data show similar trends for pharmacy price concessions. Pharmacy price concessions, net of all pharmacy incentive payments, have grown faster than any other category of DIR received by sponsors and PBMs and now buy down a larger share of total Part D gross drug costs than ever before. Such price concessions are negotiated between pharmacies and sponsors or their PBMs, again independent of CMS, and are often tied to the pharmacy's performance on various measures defined by the sponsor or its PBM.

When manufacturer rebates and pharmacy price concessions are not reflected in the price of a drug at the point of sale, beneficiaries might see lower premiums, but they do not benefit through a reduction in the amount they must pay in cost-sharing, and thus, end up paying a larger share of the actual cost of a drug. Moreover, given the increase in manufacturer rebates and pharmacy price concessions in recent years, the point-of-sale price of a drug that a Part D sponsor reports on a PDE record as the negotiated price is rendered less transparent at the individual prescription level and less representative of the actual cost of the drug for the sponsor when it does not include such discounts. Finally, variation in the treatment of rebates and price concessions by Part D sponsors may have a negative effect on the competitive balance under the Medicare Part D program, as explained later in this section.

At the time the Part D program was established, we believed, as discussed in the Part D final rule that appeared in the January 28, 2005 Federal Register (70 FR 4244), that market competition would encourage Part D sponsors to pass through to beneficiaries at the point of sale a high percentage of the manufacturer rebates and other price concessions they received, and that establishing a minimum threshold for the rebates to be applied at the point of sale would only serve to undercut these market forces. However, actual Part D program experience has not matched expectations in this regard. In recent years, only a handful of plans have passed through a small share of price concessions to beneficiaries at the point of sale. Instead, because of the advantages that accrue to sponsors in terms of premiums (also an advantage for beneficiaries), the shifting of costs, and plan revenues, from the way rebates and other price concessions applied as DIR at the end of the coverage year are treated under the Part D payment methodology, sponsors may have distorted incentives as compared to what we intended in 2005.

Therefore, in this request for information we discuss considerations related to and solicit comment on requiring sponsors to include at least a minimum percentage of manufacturer rebates and all pharmacy price concessions received for a covered Part D drug in the drug's negotiated price at the point of sale. Feedback received will be used for consideration in future rulemaking on this topic.

b. Background

Section 1860D-2(d)(1) of the Act requires that a Part D sponsor provide beneficiaries with access to negotiated prices for covered Part D drugs. Under our current regulations at § 423.100, the negotiated price is the price paid to the network pharmacy or other network dispensing provider for a covered Part D drug dispensed to a plan enrollee that is reported to CMS at the point of sale by the Part D sponsor. This point of sale price is used to calculate beneficiary cost-sharing. More broadly, the negotiated price is the primary basis by which the Part D benefit is adjudicated, and is used to determine plan, beneficiary, manufacturer (in the Start Printed Page 56420coverage gap), and government liability during the course of the payment year, subject to final reconciliation following the end of the coverage year.

Under current law, when not explicitly required to do so for certain types of pharmacy price concessions, Part D sponsors can choose whether to reflect various price concessions, including manufacturer rebates, they or their intermediaries receive in the negotiated price. Specifically, section 1860D-2(d)(1)(B) of the Act merely requires that negotiated prices “shall take into account negotiated price concessions, such as discounts, direct or indirect subsidies, rebates, and direct or indirect remunerations, for covered part D drugs . . . .” In other words, Part D sponsors are allowed, but generally not currently required, to apply rebates and other price concessions at the point of sale to lower the price upon which beneficiary cost-sharing is calculated. To date, sponsors have elected to include rebates and other price concessions in the negotiated price at the point-of-sale only very rarely. All rebates and other price concessions that are not included in the negotiated price must be reported to CMS as DIR at the end of the coverage year and are used in our calculation of final plan payments, which, under the statute, are required to be based on costs actually incurred by Part D sponsors, net of all applicable DIR.

(1) Premiums and Plan Revenues

The main benefit to a Part D beneficiary of price concessions applied as DIR at the end of the coverage year (and not to the negotiated price at the point of sale) comes in the form of a lower plan premium. A sponsor must factor into its plan bid an estimate of the DIR expected to be generated—that is, it must lower its estimate of plan liability by a share of the projected DIR—which has the effect of reducing the price of coverage under the plan. Under the current Part D benefit design, price concessions that are applied post-point-of-sale, as DIR, reduce plan liability, and thus premiums, more than price concessions applied at the point of sale. When price concessions are applied to reduce the negotiated price at the point of sale, some of the concession amount is apportioned to reduce beneficiary cost-sharing, as explained in this section, instead of plan and government liability; this is not the case when price concessions are applied post-point-of-sale, where the majority of the concession amount accrues to the plan, and the remainder accrues to the government. Therefore, to the extent that plan bids reflect accurate DIR estimates, the rebates and other price concessions that Part D sponsors and their PBMs negotiate, but do not include in the negotiated price at the point of sale, put downward pressure on plan premiums, as well as the government's subsidies of those premiums. The average Part D basic beneficiary premium has grown at an average rate of only about 1 percent per year between 2010 and 2015, and is projected to decline in 2018, due in part to sponsors' projecting DIR growth to outpace the growth in projected gross drug costs each year. The average Medicare direct subsidy paid by the government to cover a share of the cost of coverage under a Part D plan has also declined, by an average of 8.1 percent per year between 2010 and 2015, partly for the same reason.

However, any DIR received that is above the projected amount factored into a plan's bid contributes primarily to plan profits, not lower premiums. The risk-sharing construct established under Part D by statute allows sponsors to retain as plan profit the majority of all DIR that is above the bid-projected amount.[48] Our analysis of Part D plan payment and cost data indicates that in recent years, DIR amounts Part D sponsors and their PBMs actually received have consistently exceeded bid-projected amounts.

To capture the relative premium and other advantages that price concessions applied as DIR offer sponsors over lower point-of-sale prices, sponsors sometimes opt for higher negotiated prices in exchange for higher DIR and, in some cases, even prefer a higher net cost drug over a cheaper alternative. This may put upward pressure on Part D program costs and, as explained below, shift costs from the Part D sponsor to beneficiaries who utilize drugs in the form of higher cost-sharing and to the government through higher reinsurance and low-income cost-sharing subsidies.

(2) Cost-Shifting

When manufacturer rebates and other price concessions are not reflected in the negotiated price at the point of sale (that is, applied instead as DIR at the end of the coverage year), beneficiary cost-sharing, which is generally calculated as a percentage of the negotiated price, becomes larger, covering a larger share of the actual cost of a drug. Although this is especially true when a Part D drug is subject to coinsurance, it is also true when a drug is subject to a copay because Part D rules require that the copay amount be at least actuarially equivalent to the coinsurance required under the defined standard benefit design. For many Part D beneficiaries who utilize drugs and thus incur cost-sharing expenses, this means, on average, higher overall out-of-pocket costs, even after accounting for the premium savings tied to higher DIR. For the millions of low-income beneficiaries whose out-of-pocket costs are subsidized by Medicare through the low income cost-sharing subsidy, those higher costs are borne by the government. This potential for cost-shifting grows increasingly pronounced as manufacturer rebates and pharmacy price concessions increase as a percentage of gross drug costs and continue to be applied outside of the negotiated price. Numerous research studies further suggest that the higher cost-sharing that results can impede beneficiary access to necessary medications, which leads to poorer health outcomes and higher medical care costs for beneficiaries and Medicare.[49 50 51] These effects of higher beneficiary cost-sharing under the current policies regarding the determination of negotiated prices must be weighed against the impact on beneficiary access to affordable drugs of the lower premiums that are currently charged for Part D coverage.

Moreover, beneficiaries progress through the four phases of the Part D benefit as their total gross drug costs and cost-sharing obligations increase. Because both of these values are calculated based on the negotiated prices reported at the point of sale, when manufacturer rebates and pharmacy price concessions are not applied at the point of sale, the higher negotiated prices that result move Part D beneficiaries more quickly through the Part D benefit. This, in turn, shifts more of the total drug spend into the catastrophic phase, where Medicare liability is highest (80 percent, paid as reinsurance) and plan liability, after the closing of the coverage gap, is lowest (15 percent). Part D program experience further suggests that sponsors are able to offset their already limited liability in the catastrophic phase by capturing additional rebates from manufacturers, Start Printed Page 56421the largest share of which, under current Part D rules, as explained previously, are allocated to reduce plan liability. Consistent with this benefit, we note that sponsors have negotiated more high price-high rebate arrangements, especially in recent years, which has caused the proportion of costs for which the plan sponsor is at risk to shrink when those higher rebates are not passed on at the point of sale. Under current rules, therefore, Part D sponsors may have weak incentives, and, in some cases even, no incentive, to lower prices at the point of sale or to choose lower net cost alternatives to high cost-highly rebated drugs when available.

(3) Transparency and Differential Treatment

Given the significant growth in manufacturer rebates and pharmacy price concessions in recent years, when such amounts are not reflected in the negotiated price, at least to some degree, the true price of a drug to the plan is not available to consumers at the point of sale, nor is it reflected on the Medicare Prescription Drug Plan Finder (Plan Finder) tool. Consequently, consumers cannot efficiently minimize both their costs and costs to the taxpayers by seeking and finding the lowest-cost drug or the lowest-cost drug and pharmacy combination.

The quality of information available to consumers is even less conducive to producing efficient choices when rebates and other price concessions are treated differently by different Part D sponsors; that is, when they are applied to the point-of-sale price to differing degrees and/or estimated and factored into plan bids with varying degrees of accuracy. First, when some sponsors include price concessions in negotiated prices while others treat them as DIR, negotiated prices no longer have a consistent meaning across the Part D program, undermining meaningful price comparisons and efficient choices by consumers. Second, if a sponsor's bid is based on an estimate of net plan liability that is understated because the sponsor has been applying price concessions as DIR at the end of the coverage year rather than using them to reduce the negotiated price at the point of sale, it follows that the sponsor may be able to submit a lower bid than a competitor that applies price concessions at the point of sale or opts for lower net cost alternatives to high cost-highly rebated drugs when available. This lower bid results in a lower plan premium that must be paid by enrollees in the plan, which could allow the sponsor to capture additional market share. The resulting competitive advantage accruing to one sponsor over another in this scenario stems only from a technical difference in how plan costs are reported to CMS. Therefore, the opportunity for differential treatment of rebates and price concessions could result in bids that are not comparable and in premiums that are not valid indicators of relative plan efficiency.

c. Manufacturer Rebates to the Point of Sale

We are soliciting comment from stakeholders on how we might most effectively design a policy requiring Part D sponsors to pass through at the point of sale a share of the manufacturer rebates they receive, in order to mitigate the effects of the DIR construct [52] on costs to both beneficiaries and Medicare, competition, and efficiency under Part D. In this section, we put forth for consideration potential parameters for such a policy and seek detailed comments on their merits, as well as the merits of any alternatives that might better serve our goals of reducing beneficiary costs and better aligning incentives for Part D sponsors with the interests of beneficiaries and taxpayers. We specifically seek comment on how this issue could be addressed without increasing government costs and without reducing manufacturer payments under the coverage gap discount program. We encourage all commenters to provide quantitative analytical support for their ideas wherever possible.

Specifically, we are considering requiring, through future rulemaking, Part D sponsors to include in the negotiated price reported to CMS for a covered Part D drug a specified minimum percentage of the cost-weighted average of rebates provided by drug manufacturers for covered Part D drugs in the same therapeutic category or class. We will refer to the rebate amount that we would require be included in the negotiated price for a covered Part D drug as the “point-of-sale rebate.” Under such a policy, sponsors could apply as DIR at the end of the coverage year only those manufacturer rebates received in excess of the total point-of-sale rebates. In the unlikely event that total manufacturer rebate dollars received for a drug are less than the total point-of-sale rebates, the difference would be reported at the end of the coverage year as negative DIR.

(1) Specified Minimum Percentage

We are considering setting the minimum percentage of manufacturer rebates that must be passed through at the point of sale at a point less than 100 percent of the applicable average rebate amount for drugs in the same drug category or class. For operational ease, we are considering setting the same minimum percentage, which we would specify in regulation, for all rebated drugs in all years—that is, the minimum percentage would not change by drug category or class or by year.

It is important to note that we are not considering requiring that 100 percent of rebates be applied at the point of sale. As explained earlier, the statutory definition of negotiated price in section 1860D-2(d)(1)(B) of the Act requires that “negotiated prices shall take into account negotiated price concessions, such as discounts, direct or indirect subsidies, rebates, and direct or indirect remunerations, for covered part D drugs . . .” (emphasis added). We believe this language, particularly when read in the context of the requirement in section 1860D-2(d)(2) of the Act that Part D sponsors report the aggregate price concessions made available “by a manufacturer which are passed through in the form of lower subsidies, lower monthly beneficiary prescription drug premiums, and lower prices through pharmacies and other dispensers,” contemplates that Part D sponsors have some flexibility in determining how to apply manufacturer rebates in order to reduce costs under the plan.

Furthermore, we are cognizant of the fact that while requiring that a higher share of rebates be included in the negotiated price would more meaningfully address the concerns highlighted earlier and lead to larger cost-sharing savings for many beneficiaries, doing so would also result in larger premium increases for all beneficiaries, as discussed in greater detail later in this section, and lower flexibility for Part D sponsors in regards to the treatment of manufacturer rebates, and thus, for some sponsors, weaker incentives to participate in the Part D program. We aim to set the minimum percentage of rebates that must be applied at the point of sale at a point that allows an appropriate balance between these outcomes and thus achieves the greatest possible increase in beneficiary access to affordable drugs.

We are soliciting comment on the minimum percentage of manufacturer rebates that should be reflected in the negotiated price in order to achieve this balance. We are also seeking comment on how and how often, if at all, that Start Printed Page 56422minimum percentage should be updated by CMS, and what factors should be considered in making any such change. We request that commenters provide analytical justification for their ideas wherever possible. We also are seeking comment on the effect that specifying a minimum percentage of rebates that must be reflected in the negotiated price would have on the competition for rebates under Part D and the total rebate dollars received by Part D sponsors and PBMs.

(2) Applicable Average Rebate Amount

We are also particularly interested in stakeholder feedback regarding the following methodology to calculate the applicable average rebate amount, a specified minimum percentage of which would be required to be applied at the point of sale:

Rebate Year: We are considering requiring that point-of-sale rebate amounts be based on average manufacturer rebates expected to be received for each drug category or class under the manufacturer rebate agreements for the current payment year, not historical rebate experience. To the extent that rebate agreements are structured with contingencies that would be unclear at the point of sale, sponsors would be required to base the point-of-sale rebate amount on a good faith estimate of the rebates expected to be received. We solicit comments on whether this approach would ensure that the price available to beneficiaries at the point of sale reflects the actual price of a drug at that time, or if an alternative approach would do so more effectively.

Rebated Drugs: We are considering requiring that the average rebate amount be calculated using only drugs for which manufacturers provide rebates. We believe including non-rebated drugs in this calculation would serve only to drive down the average manufacturer rebates, which would dampen the intended effects of any change.

Additionally, we would likely consider each drug product with a unique 11-digit national drug code (NDC) separately for purposes of calculating the average rebate amount. PDE and rebate data submitted to CMS show that gross drug costs and rebate rates under a plan can vary even for the same drugs produced by the same manufacturer that are packaged differently and thus have different NDC-11 identifiers. Therefore, we believe that the average rebate amounts are more likely to be accurate when calculated based on the gross drug cost and rebate data at the 11-digit NDC level. We solicit comment on whether specifying such a requirement would also serve to ensure consistency in how average rebates are calculated across sponsors, which would make prices more comparable across Part D plans and enforcement easier.

Plan-Level Average: We are considering requiring that average rebate amounts be calculated separately for each plan (that is, calculated at the plan-benefit-package level). In other words, the same average rebate amount would not apply to the point-of-sale price for a covered drug across all plans under one contract, nor across all contracts under one sponsor. We believe this approach would result in the calculation of more accurate average rebates because the PDE and rebate data that are submitted by sponsors demonstrate that gross drug costs and rebate levels are not the same across all plans under one contract, nor across all contracts under one sponsor. This approach would also largely be consistent with how sponsors develop cost estimates for their Part D bids because benefit designs, including formulary structure, and assumptions about enrollee characteristics and utilization vary by plan, even for multiple plans under one contract. Similarly, final payments are calculated by CMS at the plan level, based on the data submitted by the sponsor. We solicit comment on whether the most appropriate approach for calculating the average rebate amount for point-of-sale application would be to do so at the plan level, using plan-specific information, given that moving a portion of manufacturer rebates to the point of sale would impact plan liability and payments, or if another approach would be more appropriate.

Drug Category or Class: We are considering requiring that the manufacturer rebate amount applied to the point-of-sale price for a covered drug be based on the plan's average rebate amount calculated for the rebated drugs in the same category or class. We are considering requiring sponsors to determine the average rebate amount at the therapeutic category or class level, rather than a drug-specific rebate amount, in order to maintain the confidentiality of any manufacturer-sponsor/PBM pricing relationship with respect to an individual drug. Given that rebate rates are typically negotiated at the individual drug level, we believe that the drug category/class-average approach we are considering would help maintain fair competition among drug manufacturers, as well as Part D sponsors, by preventing competitors from reverse engineering the particulars of any proprietary pricing arrangement. This approach would also increase price transparency over the status quo, especially at the drug category or class level, and improve market competition and efficiency under Part D as a result. In addition to feedback on this general approach and our rationale for it, we are seeking comment, in particular, on the drug classification system that Part D sponsors should be required to use to calculate their drug category/class-level average rebate amounts and why that system would be most appropriate for use in such a point-of-sale rebate policy. We also are seeking comment on the effect of calculating average rebates at the drug category/class level on competition and, in turn, on the total rebate dollars received.

We are also particularly interested in comments on how an average rebate amount should be calculated for a drug that is the only rebated drug in its drug category or class. An alternative approach would be necessary in this case because the average rebate amount calculated under the general approach we have described above would equal the drug-specific rebate amount, which, if included in the negotiated price, could result in the release of proprietary pricing information. We ask that commenters explain how any alternative they suggest for the only rebated drug scenario would address this concern and comment on the level of price transparency that would be achieved under the suggested alternative.

Weighting: We are considering requiring that when calculating the applicable average rebate amount for a particular drug category, the manufacturer rebate amount for each individual drug in that category be weighted by the total gross drug costs incurred for that drug, under the plan, over the most recent month, quarter, year, or another time period to be specified in future rulemaking for which cost data is available. We believe a weighted average is more accurate than a simple average because sponsors do not receive the same level of rebates for all drugs in a particular drug category or class, and thus, contrary to the assumption underlying a simple average, not all drugs contribute equally to the final average rebate percentage for a drug category or class received by the sponsor under a plan at the end of a payment year. A gross drug cost-weighted average ensures that drugs with higher utilization, higher costs, or both will be more important to the final average rebate rate realized for the drug category or class than lower utilization, lower cost, or lower cost-lower utilization drugs in the category or class.Start Printed Page 56423

In the case of a drug with less time on the market than the time period for which cost data would be required under this weighting approach or of a plan that has not been active in the Part D program for the time period required under the weighting approach, we are considering requiring that the drug's rebate amount be weighted by a sponsor's projection of total gross drug costs for the plan that takes into account any plan-specific cost experience already available. If no plan-specific cost experience is available when calculating average rebate amounts, such as at the beginning of a payment year for a new plan, are considering requiring sponsors to use the same drug cost projections on which they base their Part D bids. Further, for operational ease, it appears the manufacturer rebates used in the calculation of the average rebate amount would need to include all manufacturer rebates received for the drug, including all point-of-sale rebates. Then, in order not to double count the point-of-sale rebates, the total gross drug costs used to weight the average under this methodology would have to be based on the drug's price at the point of sale before it is lowered by any manufacturer rebates or other price concessions applied at the point of sale. We are interested in stakeholder feedback on these considerations.

For an illustration of how the weighted-average rebate amount for a particular drug category or class would be calculated, see the point-of-sale rebate example later in this section.

Timing: We are considering requiring Part D sponsors to recalculate the applicable average rebate amount every month, quarter, year, or another time period to be specified in future rulemaking, in order to ensure that the average reflects current cost experience and manufacturer rebate information. We believe that a requirement to recalculate the average rebate amount should balance the need to sustain a level of price transparency throughout the entire year with the additional burden on sponsors associated with more frequent updates. We are seeking comment on how often the applicable cost-weighted drug category/class-average rebate amount, and thus the point-of-sale rebate for any drug, should be recalculated.

(3) Point-of-Sale Rebate Drugs

We are considering limiting the application of any point-of-sale rebate requirement to only rebated drugs. Under this approach, the calculated average rebate amount would only be required to be applied to the point-of-sale prices for drugs that are rebated, with each drug identified by its unique NDC-11 identifier. The alternative would result in a manufacturer that provides no rebates for a particular drug benefiting from a direct competitor's rebate, as the competitor's rebate would be used to lower the negotiated price and thereby potentially increasing sales of the non-rebated drug. However, to be clear, under this potential approach, sponsors would maintain their flexibility to include in the negotiated price for any drug, including a non-rebated drug, manufacturer rebates and other price concessions above those required to be included in the negotiated price for rebated drugs under a point-of-sale rebate policy such as the one we describe here.

Moreover, in order to limit the impact on premiums for all beneficiaries of adopting a requirement that sponsors include a portion of manufacturer rebates in the negotiated price at the point of sale, we are also seeking comment on the merits or limitations of, a more targeted version of the policy approach that would require sponsors to pass through a minimum percentage of rebates at the point of sale only for specific drugs or drug categories or classes. Under this alternative approach, the point-of-sale rebate policy would apply only for drugs or drug categories or classes that most directly contribute to increasing Part D drug costs in the catastrophic phase of coverage or drugs with high price-high rebate arrangements; such drugs or drug categories or classes are likely to have the most significant impact on beneficiary costs and serve to increase program costs overall, as discussed previously. We are interested in stakeholder feedback on whether targeting the rebate requirement in such a way would effectively address the misaligned sponsor incentives and market inefficiencies that exist under Part D today as a result of the DIR construct. In addition to general comments on the alternative, more targeted policy approach, we are particularly interested in recommendations for the criteria that we might use to determine which drugs or drug categories or classes to target under such an alternative approach.

(4) Point-of-Sale Rebate Example

To illustrate how the weighted-average rebate amount for a particular drug class would be calculated under a point-of-sale rebate requirement that includes the features described earlier, we provide the following example: suppose drugs A, B, and C are the only three rebated drugs on the plan's formulary in a particular drug class. The negotiated prices, before application of the point-of-sale rebates, for the three drugs in the current time period are $200, $100, and $75, respectively. The manufacturer rebates expected by the plan in this payment year, given the information available in the current period, for drugs A, B, and C equal 20, 10, and 5 percent, respectively, of the drugs' pre-rebate negotiated prices. Over the previous time period, total gross drug costs incurred under the plan for drug A equaled $2 million, for drug B equaled $750,000, and for drug C equaled $150,000. Therefore, the gross drug cost-weighted average rebate rate for this drug class in the current time period is calculated as the following: [($2 million × 20 percent) + ($750,000 × 10 percent) + ($150,000 × 5 percent)]/($2 million + $750,000 + $150,000), or 16.64 percent. If we were to require that a minimum 50 percent of the average rebate be applied at the point of sale for all rebated drugs in this drug class (and the plan only applies the minimum required percentage), the final negotiated prices for drugs A, B, and C, now equal to $183.36, $91.68, and $68.76, respectively, would be 8.32 percent (50 percent of 16.64 percent) lower than the pre-rebated prices.

For each of the three drugs in this example, beneficiary out-of-pocket costs would be lower under the approach we are considering than under the status quo. Assuming, for instance, these drugs are subject to a 25 percent coinsurance, the enrollee's costs for the three drugs under this approach would be $45.84 (25 percent of $183.36) for drug A, $22.92 (25 percent of $91.68) for drug B, and $17.19 (25 percent of $68.76) for drug C. Under the status quo, the enrollee's costs would be $50 for drug A ($4.16 higher), $25 for drug B ($2.08 higher), and $18.75 for drug C ($1.56 higher).

Any difference between the rebates applied at the point of sale and those actually received would be captured as DIR through reporting at the end of the coverage year. Assume, for instance, that total gross drug costs for drugs A, B, and C equal $1.5 million, $1 million, and $200,000, respectively, in this period. The actual manufacturer rebates received, therefore, will equal $300,000, $100,000, and $10,000, respectively, for drugs A, B, and C in this period, based on the plan's expected rebate rates of 20, 10, and 5 percent, respectively, for the three drugs in this payment year. Based on the point-of-sale rebate rate calculated above for the applicable drug class and the total gross drug cost assumptions provided for the three drugs, we calculate the total point-of-Start Printed Page 56424sale rebates in this period to be $124,786.48 (8.32 percent of $1.5 million) for drug A, $83,189.66 (8.32 percent of $1 million) for drug B, and $16,637.93 (8.32 percent of $200,000) for drug C. Therefore, the manufacturer rebates applied by the plan as DIR at the end of the coverage year for the three drugs, respectively, would be $175,215.52, $16,810.34, and -$6,637.93 and total $185,387.93 across the drug class.

(5) Additional Considerations

Under the policy approach that we are considering here for moving manufacturer rebates to the point of sale, the responsibility for calculating the appropriate point-of-sale rebate amount over the course of the year would fall on Part D sponsors given their role in administering the Medicare drug benefit. We would leverage existing reporting mechanisms to review the sponsors' calculations, as we do with other cost data required to be reported. Specifically, we would likely use the estimated rebates at point-of-sale field on the PDE record to collect point-of-sale rebate information, and the manufacturer rebates fields on the Summary and Detailed DIR Reports to collect final manufacturer rebate information at the plan and NDC levels. Differences between the manufacturer rebate amounts applied at the point of sale and rebates actually received would become apparent when comparing the data collected through those means at the end of the coverage year.

Additionally, we note that in accordance with § 423.505(k) of the Part D regulations, a Part D sponsor is required to certify the accuracy, completeness, and truthfulness of all data related to payment, including the PDE data and information on allowable costs that it submits for purposes of risk corridor and reinsurance payment. A Part D sponsor certifies its Part D cost data by signing and submitting attestations to CMS. By signing the attestations, the Part D sponsor certifies (based on best knowledge, information, and belief) that the PDE data, DIR data, and any other information provided for the purposes of determining payment to the plan for the applicable contract year are accurate, complete, and truthful. If we were to move forward with a point-of-sale rebate policy, we would also consider amending § 423.505(k) to add a new requirement that the CEO, CFO, or COO attest (based on best knowledge, information, and belief) to the accuracy, completeness, and truthfulness of the average rebate amount included in the negotiated price and reported on the PDE. The submission of accurate, complete, and truthful data regarding the average rebate amount included in the negotiated price would be necessary to ensure accurate reinsurance and risk corridor payments.

Under the approach we are considering, if a Part D sponsor discovers errors after the certification has been made (that is, after the attestation has been signed), the Part D sponsor would submit corrected PDE data, and, under most circumstances, CMS would reconcile the error through the reopening process described at § 423.346. All reopenings are at the discretion of CMS. CMS performs a global reopening approximately 4 years after the initial reconciliation for that contract year. A Part D sponsor's reopening request resulting from errors in PDE data discovered after the global reopening for the contract year in which the error occurred would be evaluated by CMS on a case by case basis. Any errors in the calculation of the average rebate amount that result in overpayments would be required to be reported and returned consistent with § 423.360 and the applicable subregulatory guidance on overpayments.

We note that prior to the submission of the attestation, and more specifically, prior to the PDE submission deadline for the initial reconciliation for a contract year, if a Part D sponsor discovers an issue with the average rebate amount included in the negotiated price and reported on the PDE, all affected PDEs would need to be adjusted or deleted in accordance with applicable CMS guidance. As of the publication of this request for information, the applicable guidance is October 6, 2011 CMS memorandum, Revision to Previous Guidance Titled “Timely Submission of Prescription Drug Event (PDE) Records and Resolution of Rejected PDEs.”

We encourage stakeholders to comment on what other enforcement and oversight mechanisms should be instituted to ensure compliance with any potential point-of-sale rebate requirement. We are particularly interested in stakeholder feedback on how we might ensure accurate rebate amounts are applied at the point of sale when rebate agreements are structured with contingencies that would be unclear at the point of sale.

We also seek stakeholder comment on what, if any, special considerations should be taken into account in the design of a point-of-sale rebate policy, for Part D employer group waiver plans (EGWPs). We are also interested in feedback on what particular effects requiring Part D sponsors to apply some manufacturer rebates at the point of sale would have on the EGWP market, as well as on how such a requirement might impact the retiree drug subsidy program.

Finally, we note that the negotiated price is also the basis by which manufacturer liability for discounts in the coverage gap is determined. Under section 1860D-14A(g)(6) of the Act, the negotiated price used for coverage gap discounts is based on the definition of negotiated price in the version of § 423.100 that was in effect as of the passage of the Patient Protection and Affordable Care Act (PPACA). Under this definition, the negotiated price is “reduced by those discounts, direct or indirect subsidies, rebates, other price concessions, and direct or indirect remuneration that the Part D sponsor has elected to pass through to Part D enrollees at the point of sale” (emphasis added). Because this definition of negotiated price only references the price concessions that the Part D sponsor has elected to pass through at the point of sale, we are uncertain as to whether we would have the authority to require sponsors include in the negotiated price the weighted-average rebate amounts that would be required to be passed through under any potential point-of-sale rebate policy, for purposes of determining manufacturer coverage gap discounts. We intend to consider this issue further and will address it in any future rulemaking regarding the requirements for determining the negotiated price that is available at the point of sale.

(6) Impacts of Applying Manufacturer Rebates at the Point of Sale

Under a point-of-sale rebate policy designed as we have described in this comment solicitation, beneficiaries would see lower prices at the pharmacy point-of-sale, and on Plan Finder, beginning immediately in the year the policy takes effect. Lower point-of-sale prices would result directly in lower cost-sharing costs for non-low income beneficiaries, especially for those who use drugs in highly competitive, highly-rebated categories or classes. For low income beneficiaries whose out-of-pocket costs are subsidized through Medicare's low-income cost-sharing subsidy, cost-sharing savings resulting from lower point-of-sale prices would accrue to the government. Plan premiums would likely increase as a result of such a point-of-sale rebate policy—if some rebates are required to be passed through to beneficiaries at the point of sale, fewer such concessions could be apportioned to reduce plan liability, which would have the effect of Start Printed Page 56425increasing the cost of coverage under the plan. At the same time, the reduction in cost-sharing obligations for the average beneficiary would likely be large enough to lower their overall out-of-pocket costs. The increasing cost of coverage under Part D plans as a result of rebates being applied at the point of sale likely would have a more significant impact on government costs, which would increase overall due to the significant growth in Medicare's direct subsidies of plan premiums and low income premium subsidies.

Partially offsetting the increase in direct subsidy and low income premium subsidy costs for the government would be decreases in Medicare's reinsurance and low income cost-sharing subsidies. Decreases in Medicare's reinsurance subsidy result when lower negotiated prices slow down the progression of beneficiaries through the Part D benefit and into the catastrophic phase, and when the government's 80 percent reinsurance payments for allowable drug costs incurred in the catastrophic phase are based on lower negotiated prices. Similarly, low income cost-sharing subsidies would decrease if beneficiary cost-sharing obligations decline due to the reduction in prices at the point of sale. Finally, the slower progression of beneficiaries through the Part D benefit would also have the effect of reducing manufacturer gap discount payments as fewer beneficiaries would enter the coverage gap phase or progress entirely through it.

The following tables summarize the 10-year impacts we have modeled for when 33, 66, 90, and 100 percent of all manufacturer rebates are applied at the point of sale: [53]

Table 10A—Total Impacts for 2019 Through 2028

[In $billions]

33%66%90%100%
Beneficiary Costs−$19.6−$39.1−$53.2−$56.9
Cost-Sharing−28.8−57.8−78.9−85.2
Premium9.218.725.728.3
Government Costs27.355.175.582.1
Direct Subsidy62.8128.1177.4200.0
Reinsurance−21.7−44.7−62.2−73.1
LI Cost-Sharing Subsidy−16.6−34.2−47.7−53.7
LI Premium Subsidy2.95.98.18.9
Manufacturer Gap Discount−9.7−19.4−26.4−29.4

Table 10B—2019-2028 Per Member-Per Month Impacts

33%66%90%100%
Beneficiary Costs−$30.33−$60.58−$82.42−$88.13
Cost-Sharing−44.61−89.50−122.26−131.97
Premium14.2928.9239.8343.84
Government Costs42.3885.40117.01127.22
Direct Subsidy97.45198.93275.43310.58
Reinsurance−33.76−69.57−96.84−113.75
LI Cost-Sharing Subsidy−25.80−53.06−74.11−83.42
LI Premium Subsidy4.499.1012.5313.81
Manufacturer Gap Discount−15.01−30.02−40.93−45.48

Table 10C—2019-2028 Impacts—Percent Change

33%66%90%100%
Beneficiary Costs−3−5−7−8
Cost-Sharing−6−12−16−17
Premium471011
Government Costs2456
Direct Subsidy24496776
Reinsurance−3−7−9−11
LI Cost-Sharing Subsidy−4−9−12−14
LI Premium Subsidy481112
Manufacturer Gap Discount−7−13−18−20

While we did not account for behavioral changes when modeling these impacts, requiring rebates to be applied at the point of sale might induce changes in sponsor behavior related to drug pricing that would further reduce the cost of the Part D program for beneficiaries and taxpayers. Specifically, requiring that at least a minimum percentage of manufacturer rebates be used to lower the price at the point of sale could limit the potential for sponsors to leverage the benefits that accrue to them when price concessions are applied as DIR at the end of the Start Printed Page 56426coverage year rather than as discounts at the point of sale, and thus potentially better align sponsors' incentives with those of beneficiaries and taxpayers. For example, we believe such an approach could reduce the incentive for sponsors to favor high cost-highly rebated drugs to lower net cost alternatives, when such alternatives are available, and also potentially increase the incentive for sponsors and PBMs to negotiate lower prices at the point of sale instead of higher DIR. We seek comment on the extent to which a point-of-sale rebate policy might be expected to further align the incentives for beneficiaries, sponsors, and taxpayers.

Finally, we believe requiring that some manufacturer rebates be applied at the point of sale as we are considering doing would improve price transparency and limit the opportunity for differential reporting of costs and price concessions, which may have a positive effect on market competition and efficiency. We solicit comment on whether basing the rebate applied at the point of sale on average rebates at the drug category/class level, as described previously, would meaningfully increase price transparency over the status quo by ensuring a consistent percentage of the rebates received are reflected in the price at the point of sale, while also protecting the details of any manufacturer-sponsor pricing relationship.

d. Pharmacy Price Concessions to Point of Sale

In recent years, a growing proportion of Part D sponsors and their contracted PBMs have entered into payment arrangements with Part D network pharmacies in which a pharmacy's reimbursement for a covered Part D drug is adjusted after the point of sale based on the pharmacy's performance on various measures defined by the sponsor or its PBM. Furthermore, we understand that the share of pharmacies' reimbursements that is contingent upon their performance under such arrangements has also grown steadily each year. As a result, sponsors and PBMs have been recouping increasing sums from network pharmacies after the point of sale (pharmacy price concessions) for “poor performance” relative to standards defined by the sponsor or PBM. These sums are far greater than those paid to network pharmacies after the point of sale (pharmacy incentive payments) for “high performance.” We refer to pharmacy price concessions and incentive payments collectively as pharmacy payment adjustments. These findings are largely based on the aggregate pharmacy payment adjustment data submitted to CMS by Part D sponsors as part of the annual required reporting of DIR, which show that performance-based pharmacy price concessions, net of all pharmacy incentive payments, increased most dramatically after 2012.

In order to address the effects of the DIR construct, as it relates to pharmacy payment adjustments, on cost, competition, and efficiency under Part D, in the Part C and Part D final rule that appeared in the May 23, 2014 Federal Register (79 FR 29844), we amended the definition of “negotiated prices” at § 423.100 to require Part D sponsors to include in the negotiated price at the point of sale all pharmacy price concessions and incentive payments to pharmacies, with an exception, which was intended to be narrow, allowed for contingent pharmacy payment adjustments that cannot reasonably be determined at the point of sale (the reasonably determined exception). However, when we formulated these requirements in 2014, the most recent year for which DIR data was available was 2012 and we did not anticipate the growth of performance-based pharmacy payment arrangements that we have observed in subsequent years. We now understand that the reasonably determined exception we currently allow applies more broadly than we had initially envisioned because of the shift by Part D sponsors and their PBMs towards these types of contingent pharmacy payment arrangements, and, as a result, this exception prevents the current policy from having the intended effect on price transparency, consistency, and beneficiary costs.

Specifically, we have heard from several stakeholders that have suggested that the reasonably determined exception applies to all performance-based pharmacy payment adjustments. The amount of these adjustments, by definition, is contingent upon performance measured over a period that extends beyond the point of sale and, thus, cannot be known in full at the point of sale. Therefore, performance-based pharmacy payment adjustments cannot “reasonably be determined” at the point of sale as they cannot be known in full at the point of sale. We initially proposed, in a September 29, 2014 memorandum entitled Direct and Indirect Remuneration (DIR) and Pharmacy Price Concessions, that if the amount of the post-point of sale pharmacy payment adjustment could be reasonably approximated at the point of sale, the adjustment should be reflected in the negotiated price, even if the actual amount of the payment adjustment was subject to later reconciliation and thus not known in full at the point of sale. However, we did not finalize that interpretation because we determined that it was inconsistent with the existing regulation given that it would have effectively eliminated the reasonably determined exception from inclusion in the negotiated price for all pharmacy price concessions, as we stated in our follow-up memorandum of the same name released on November 5, 2014.

Given the predominance of performance-contingent pharmacy payment arrangements, we do not believe that the existing requirement that pharmacy price concessions be included in the negotiated price can be implemented in a manner that achieves meaningful price transparency, ensures that all pharmacy payment adjustments are taken into account consistently by all Part D sponsors, and prevents the shifting of costs onto beneficiaries and taxpayers. Therefore, we are soliciting comment from stakeholders on how we might update the requirements governing the determination of negotiated prices, to better reflect current pharmacy payment arrangements, so as to ensure that the reported price at the point of sale includes all pharmacy price concessions. In this section, we put forth for consideration one potential approach for doing so and seek comments on its merits, as well as the merits of any alternatives that might better serve our goals of reducing beneficiary costs and better aligning incentives for Part D sponsors with the interests of beneficiaries and taxpayers. We encourage all commenters to provide quantitative analytical support for their ideas wherever possible.

(1) All Pharmacy Price Concessions

We are considering revising the definition of negotiated price at § 423.100 to remove the reasonably determined exception and to require that all price concessions from pharmacies be reflected in the negotiated price that is made available at the point of sale and reported to CMS on a PDE record, even when such concessions are contingent upon performance by the pharmacy. We believe we have the discretion to require that all pharmacy price concessions be applied at the point of sale, and not just a share of the amounts as we discussed earlier for manufacturer rebates. Such a requirement would preserve the flexibilities provided under section 1860D-2(d)(1)(B) of the Act with respect to the treatment of manufacturer rebates, while also allowing for greater Start Printed Page 56427transparency and consistency in the reporting of pharmacy price concessions. First, section 1860D-2(d)(2) of the Act, which provides the context critical to our interpretation that sponsors are granted flexibility in how to apply manufacturer rebates, does not contemplate price concessions from sources other than manufacturers, such as pharmacies, being passed through in various ways. Second, even when all price concessions from pharmacies are required to be applied at the point of sale, sponsors would retain the flexibility to determine how to apply manufacturer rebates and other price concessions received from sources other than pharmacies in order to reduce costs under the plan. Finally, we believe that requiring that all pharmacy price concessions be applied at the point of sale would ensure that negotiated prices “take into account” at least some price concessions and, therefore, would be consistent with the plain language of section 1860D-2(d)(1)(B) of the Act. We are considering requiring all, and not only a share of, pharmacy price concessions be included in the negotiated price in order to maximize the level of price transparency and consistency in the determination of negotiated prices and bids and meaningfully reduce the shifting of costs from sponsors to beneficiaries and taxpayers.

(2) Lowest Possible Reimbursement

In order to effectively capture all pharmacy price concessions at the point of sale consistently across sponsors, we are considering requiring the negotiated price to reflect the lowest possible reimbursement that a network pharmacy could receive from a particular Part D sponsor for a covered Part D drug. Under this approach, the price reported at the point of sale would need to include all price concessions that could potentially flow from network pharmacies, as well as any dispensing fees, but exclude any additional contingent amounts that could flow to network pharmacies and increase prices over the lowest reimbursement level, such as incentive fees. That is, if a performance-based payment arrangement exists between a sponsor and a network pharmacy, the point-of-sale price of a drug reported to CMS would need to equal the final reimbursement that the network pharmacy would receive for that prescription under the arrangement if the pharmacy's performance score were the lowest possible. If a pharmacy is ultimately paid an amount above the lowest possible contingent incentive reimbursement (such as in situations where a pharmacy's performance under a performance-based arrangement triggers a bonus payment or a smaller penalty than that assessed for the lowest level of performance), the difference between the negotiated price reported to CMS on the PDE record and the final payment to the pharmacy would need to be reported as negative DIR. For an illustration of how negotiated prices would be reported under such an approach, see the example provided later in this section.

We are interested in public comment on whether requiring the negotiated price at the point of sale to reflect the lowest possible pharmacy reimbursement would effectively address recent developments in industry practices, that is, the growing prevalence of performance-based pharmacy payment arrangements, and ensure that all pharmacy price concessions are included in the negotiated price, and thus shared with beneficiaries, in a consistent manner by all Part D sponsors. By requiring that sponsors assume the lowest possible pharmacy performance when reporting the negotiated price, we would be prescribing a standardized way for Part D sponsors to treat the unknown (final pharmacy performance) at the point of sale under a performance-based payment arrangement, which many Part D sponsors and PBMs have identified as the most substantial operational barrier to including such concessions at the point of sale. We are also interested in public comment on whether requiring the negotiated price to be the lowest possible pharmacy reimbursement would serve to maximize the cost-sharing savings accruing to beneficiaries by passing through all potential pharmacy price concessions at the point of sale.

Further, we are interested in public comment on whether this approach would be clearer for Part D sponsors to follow than the requirements in place today, which require Part D sponsors to assess which types of pharmacy payment adjustments fall under the reasonably determined exception. We are interested in public comment on whether providing such additional clarity and thus limiting the need for interpretation of the requirements by Part D sponsors would improve consistency in the application of the requirements regarding pharmacy price concessions across sponsors, as well as reducing sponsor burden in terms of the resources necessary to ensure compliance in the absence of clear guidance. In addition, we welcome feedback on whether the change we describe here would improve the quality of pricing information available across Part D plans and thus improve market competition and cost-efficiency under Part D.

Requiring the negotiated price to reflect the lowest possible pharmacy reimbursement, would move the negotiated price closer to the final reimbursement for most network pharmacies under current pharmacy payment arrangements and thus closer to the actual cost of the drug for the Part D sponsor. We are interested in public comment on whether such an outcome would help us to achieve meaningful price transparency. We have learned from the DIR data reported to CMS and feedback from numerous stakeholders that pharmacies rarely receive an incentive payment above the original reimbursement rate for a covered claim. We gather that performance under most arrangements dictates only the magnitude of the amount by which the original reimbursement is reduced, and most pharmacies do not achieve performance scores high enough to qualify for a substantial, if any, reduction in penalties. Therefore, we seek comment on whether a requirement that the negotiated price reflect the lowest possible reimbursement to a network pharmacy, including all potential pharmacy price concessions, is likely to capture the actual price of the drug at a network pharmacy, or at least move closer to it.

Finally, we are considering requiring that all contingent incentive payments be excluded from the negotiated price because including the actual amount of any contingent incentive payments to pharmacies in the negotiated price would make drug prices appear higher at a “high performing” pharmacy, which receives an incentive payment, than at a “poor performing” pharmacy, which is assessed a penalty. This pricing differential could potentially create a perverse incentive for beneficiaries to choose a lower performing pharmacy for the advantage of a lower price. We seek comment on whether such an approach would prevent this unintended consequence and thus avoid reducing the competitiveness of high performing pharmacies by increasing the negotiated price charged to the beneficiary at those pharmacies.

(3) Lowest Possible Reimbursement Example

To illustrate how Part D sponsors and their intermediaries would report costs under the approach we are considering, we provide the following example: Suppose that under a performance-based payment arrangement between a Start Printed Page 56428Part D sponsor and its network pharmacy, the sponsor will: (1) Recoup 5 percent of its total Part D-related payments to the pharmacy at the end of the contract year for the pharmacy's failure to meet performance standards; (2) recoup no payments for average performance; or (3) provide a bonus equal to 1 percent of total payments to the pharmacy for high performance. For a drug that the sponsor has agreed to pay the pharmacy $100 at the point of sale, the pharmacy's final reimbursement under this arrangement would be: (1) $95 for poor performance; (2) $100 for average performance; or (3) $101 for high performance. However, under all performance scenarios, the negotiated price reported to CMS on the PDE at the point of sale for this drug would be $95, or the lowest reimbursement possible under the arrangement. Thus, if a plan enrollee were required to pay 25 percent coinsurance for this drug, then the enrollee's costs under all scenarios would be 25 percent of $95, or $23.75, which is less than the $25 the enrollee would pay today (when the negotiated price is likely to be reported as $100). Any difference between the reported negotiated price and the pharmacy's final reimbursement for this drug would be reported as DIR at the end of the coverage year. The sponsor would report $0 as DIR under the poor performance scenario ($95 minus $95), − $5 as DIR under the average performance scenario ($95 minus $100), and − $6 as DIR under the high performance scenario ($95 minus $101), for every covered claim for this drug purchased at this pharmacy.

(4) Additional Considerations

As with the policy approach that we described previously for moving manufacturer rebates to the point of sale, we would leverage existing reporting mechanisms to confirm that sponsors are appropriately applying pharmacy price concessions at the point of sale, as we do with other cost data required to be reported. Specifically, we would likely use the estimated rebates at point-of-sale field on the PDE record to also collect point-of-sale pharmacy price concessions information, and fields on the Summary and Detailed DIR Reports to collect final pharmacy price concession information at the plan and NDC levels. Differences between the amounts applied at the point of sale and amounts actually received, therefore, would become apparent when comparing the data collected through those means at the end of the coverage year.

Finally, as noted previously, the negotiated price is also the basis by which manufacturer liability for discounts in the coverage gap determined. Under section 1860D-14A(g)(6) of the Act, the definition of negotiated price used for coverage gap discounts is based on the regulatory definition of the negotiated price in the version of § 423.100 that was in effect as of the passage of the PPACA. As discussed previously, this definition of negotiated price only references the price concessions that the Part D sponsor has elected to pass through at the point of sale. As such, we are uncertain as to whether we would have the authority to require sponsors include pharmacy price concessions in the negotiated price for purposes of determining manufacturer coverage gap discounts. We intend to consider this issue further and will address it in any future rulemaking regarding the requirements for determining the negotiated price that is available at the point of sale.

(5) Impacts for Applying Pharmacy Price Concessions at the Point of Sale

Requiring that all pharmacy price concessions that sponsors and PBMs receive be used to lower the price at the point of sale, as we described earlier, would affect beneficiary, government, and manufacturer costs largely in the same manner as discussed previously in regards to moving manufacturer rebates to the point of sale. The difference is in the magnitude of the impacts given that sponsors and PBMs receive significantly higher sums of manufacturer rebates than of pharmacy price concessions. The following table summarizes the 10-year impacts we have modeled for moving all pharmacy price concessions to the point of sale: [54]

Table 11—2019-2028 Point-of-Sale Pharmacy Price Concessions Impacts

Total (billions)Per member-per monthPercent change
Beneficiary Costs−$10.4−$16.09−1
Cost-Sharing−16.1−24.89−3
Premium5.78.792
Government Costs16.625.651
Direct Subsidy33.551.8913
Reinsurance−8.8−13.74−1
LI Cost-Sharing Subsidy−9.9−15.23−3
LI Premium Subsidy1.82.732
Manufacturer Gap Discount−5.0−7.69−3

Moreover, while not accounted for when modeling these impacts, we seek comment on whether requiring that all pharmacy price concessions be included in the negotiated price, as we have described, would also lead to prices and Part D bids and premiums being more accurately comparable and reflective of relative plan efficiencies, with no unfair competitive advantage accruing to one sponsor over another based on a technical difference in how costs are reported. We are further interested in comments on whether this outcome could make the Part D market more competitive and efficient.

B. Improving the CMS Customer Experience

1. Restoration of the Medicare Advantage Open Enrollment Period (§§ 422.60, 422.62, 422.68, 423.38 and 423.40)

Section 4001 of the Balanced Budget Act of 1997 (BBA), added section Start Printed Page 564291851(e) of the Act establishing specific parameters in which elections can be made and/or changed during open enrollment and disenrollment periods under the Medicare Advantage (MA) program. In addition, section 1851(e)(6) of the Act permits MA organizations, at their discretion, to choose not to accept enrollment requests during the open enrollment period (that is, choose to be closed to accept enrollments for all or a portion of the enrollment period). The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) amended section 1851(e)(2) of the Act to further establish open enrollment periods during which MA-eligible individuals were limited to a single election to (that is, enroll, disenroll, or change MA plans) during such period.

From 2007 to 2010, the Act outlined an Open Enrollment Period (OEP)—referred to hereafter as the “old OEP”—which provided MA-eligible individuals one opportunity to make an enrollment change between January 1 and March 31. It permitted new enrollment into an MA plan from Original Medicare, switches between MA plans, and disenrollment from a MA plan to Original Medicare. During this old OEP, individuals were not allowed to make changes to their Part D coverage. Hence, an individual who had Part D coverage through a Medicare Advantage Prescription Drug plan (MA-PD plan) could only use the old OEP to switch to (1) another MA-PD plan; or (2) Original Medicare with a Prescription Drug Plan (PDP). This old OEP did not permit someone enrolled in either an MA-only plan or Original Medicare without a PDP to enroll in Part D coverage through this enrollment opportunity. The old OEP was codified at § 422.62(a)(5) in 2005 (see 70 FR 4587).

In 2010, section 3204 of the Patient Protection and Affordable Care Act modified section 1851(e)(2)(C) of the Act to no longer offer the old OEP and instead provide a different enrollment period for MA enrollees to leave the MA program and return to Original Medicare in the first 45 days of the calendar year. The statute further permitted individuals who utilized this disenrollment opportunity to enroll in a Part D plan upon their return to Original Medicare. On April 15, 2011, we amended § 422.62(a)(5) and codified §§ 422.62(a)(7) and 423.38(d) to conform with this statutory change and to establish the current Medicare Advantage Disenrollment Period (MADP) with its coordinating Part D enrollment period. These changes were effective for the 2011 plan year (76 FR 21442 and43).

Section 17005 of the 21st Century Cures Act (the Cures Act) modified section 1851(e)(2) of the Act to eliminate the MADP and to establish, beginning in 2019, a new OEP—hereafter referred to as the “new OEP”—to be held from January 1 to March 31 each year. Subject to the MA plan being open to enrollees as provided under § 422.60(a)(2), this new OEP allows individuals enrolled in an MA plan to make a one-time election during the first 3 months of the calendar year to switch MA plans or to disenroll from an MA plan and obtain coverage through Original Medicare. In addition, this provision affords newly MA-eligible individuals (those with Part A and Part B) who enroll in a MA plan, the opportunity to also make a one-time election to change MA plans or drop MA coverage and obtain Original Medicare. Newly eligible MA individuals can only use this new OEP during the first 3 months in which they have both Part A and Part B. Similar to the old OEP, enrollments made using the new OEP are effective the first of the month following the month in which the enrollment is made, as outlined in § 422.68(c). In addition, an MA organization has the option under section 1851(e)(6) of the Act to voluntarily close one or more of its MA plans to OEP enrollment requests. If an MA plan is closed for OEP enrollments, then it is closed to all individuals in the entire plan service area who are making OEP enrollment requests. All MA plans must accept OEP disenrollment requests, regardless of whether or not it is open for enrollment.

There are a few key differences between the old OEP and the new OEP as authorized by the Cures Act. Unlike the old OEP, this new OEP permits changes to Part D coverage for individuals who, prior to the change in election during the new OEP, were enrolled in an MA plan. As eligibility to use the new OEP is available only for MA enrollees, the ability to make changes to Part D coverage is limited to any individual who uses the OEP; however, the new OEP does not provide enrollment rights to any individual who is not enrolled in an MA plan during the applicable 3-month period. Individuals who use the new OEP to make changes to their MA coverage may also enroll in or disenroll from Part D coverage. For example, an individual enrolled in an MA-PD plan may use the new OEP to switch to: (1) Another MA-PD plan; (2) an MA-only plan; or (3) Original Medicare with or without a PDP. The new OEP would also allow an individual enrolled in an MA-only plan to switch to—(1) another MA-only plan; (2) an MA-PD plan; or (3) Original Medicare with or without a PDP. However, this enrollment period does not allow for Part D changes for individuals enrolled in Original Medicare, including those with enrollment in stand-alone PDPs.

In addition, individuals with enrollment in Original Medicare or other Medicare health plan types, such as cost plans, are not able use the new OEP to enroll in an MA plan, regardless of whether or not they have Part D. We note that the inability for an individual enrolled in Original Medicare to use the new OEP is a significant difference from the old OEP. Furthermore, and significantly different from the old OEP, unsolicited marketing is prohibited by statute during this period.

To implement the changes required by the Cures Act, we propose the following revisions:

  • Amend current § 422.62(a)(5) and add §§ 423.38(e) and 423.40(e) to establish the new OEP starting 2019 and the corresponding limited Part D enrollment period.
  • Amend §§ 422.62(a)(7), 422.68(f), 423.38(d) and 423.40(d) to end the MADP at the end of 2018.
  • Remove current regulations in § 422.62(a)(3) and (a)(4) that outline historical OEPs which have not been in existence for more than a decade. As these past enrollment periods are no longer relevant to the current enrollment periods available to MA-eligible individuals, we are proposing to delete these paragraphs and renumber the enrollment periods which follow them. As such, we propose that § 422.62 (a)(5) become § 422.62 (a)(3), and both §§ 422.62 (a)(6) and (a)(7) be renumbered as §§ 422.62(a)(4) and (a)(5), respectively.
  • Amend new redesignated paragraph (a)(4) (proposed to be redesignated from (a)(6)) to make two technical changes to replace the phrase “as defined by CMS” with “as defined in § 422.2” and to capitalize “original Medicare.”
  • As noted previously, and discussed in section III.C.7, §§ 422.2268 and 423.2268 would be revised to prohibit marketing to MA enrollees during the OEP.
  • Conforming technical edits to update cross references in §§ 422.60(a)(2), 422.62(a)(5)(iii), and 422.68(c).

2. Reducing the Burden of the Compliance Program Training Requirements (§§ 422.503 and 423.504)

Sections 1857(e) and 1860D-12(b)(3)(D) of the Act specify that contracts with MA organizations and Start Printed Page 56430Part D sponsors shall contain other terms and conditions that the Secretary may find necessary and appropriate. We have previously established that all Part C and Part D contracting organizations must have the necessary administrative and management arrangements to have an effective compliance program, as reflected in § 422.503(b)(4)(vi) and § 423.504(b)(4)(vi). Effective compliance programs are those designed and implemented to prevent, detect and correct Medicare non-compliance, fraud waste and abuse and address improper conduct in a timely and well-documented manner. Medicare non-compliance may include inaccurate and untimely payment or delivery of items or medical services, complaints from providers and enrollees, illegal activities and unethical behavior. While there is no “one-size fits all” program for every contracting organization, there are seven core elements that must exist to have an effective compliance program that is tailored to the organization's unique operations, compliance risks, resources and circumstances. These 7 core elements are codified in current regulations at §§ 422.503(b)(4)(vi)(A) through (G) and 423.504(b)(4)(vi)(A) through (G). One of the 7 core elements is training and education. Compliance programs for Part C and Part D organizations must include training and education between the compliance officer and the sponsoring organization's employees, senior administrators, governing body members as well as their first-tier, downstream and related entities (FDRs).

FDRs have long complained of the burden of having to complete multiple sponsoring organizations' compliance trainings and the amount of time it can take away from providing care to beneficiaries. We attempted to resolve this burden by developing our own web-based standardized compliance program training modules and establishing, in a May 23, 2014 final rule (79 FR 29853 and 29855), which was effective January 1, 2016, that FDRs were required to complete the CMS training to satisfy the compliance training requirement. The mandatory use of the CMS training by FDRs was a means to ensure that FDRs would only have to complete the compliance training once on an annual basis. The FDRs could then provide the certificate of completion to all Part C and Part D contracting organizations they served, hence, eliminating the prior duplication of effort that so many FDRs stated was creating a huge burden on their operation.

However, CMS continues to receive hundreds of inquiries and concerns from sponsors and FDRs regarding their difficulties with adopting CMS' compliance training to satisfy the compliance program training requirement. While CMS' previous market research indicated that this provision would mitigate the problems raised by FDRs who held contracts with multiple sponsors and who completed repetitive trainings for each sponsor with which they contract, in practice, we learned that the problems persisted. Many sponsors are unwilling to accept completion of the CMS training as fulfillment of the training requirement and identify which critical positions within the FDR are subject to the training requirement. As a result, FDRs are still being subjected to multiple sponsors' specific training programs. FDRs have the additional burden of taking CMS training and reporting completion back to the sponsor or sponsors with which they contract. Furthermore, the industry has indicated that the requirement has increased the burden for various Part C and Part D program stakeholders, including hospitals, suppliers, health care providers, pharmacists and physicians, all of which may be considered FDRs. Since the implementation of the mandatory CMS-developed training has not achieved the intended efficiencies in the administration of the Part C and Part D programs, we propose to delete the provisions from the Part C and Part D regulations that require use of the CMS-developed training. Additionally we propose to restructure § 422.503(b)(4)(vi)(C)(1) (with the proposed revisions) into two paragraphs (that is, paragraph (C)(1) and (C)(2)) to separate the scope of the compliance training from the frequency with which the training must occur, as these are two distinct requirements. With this proposed revision, the organization of § 422.503(b)(4)(vi)(C) will mirror that of § 423.504(b)(4)(vi)(C). Further, we propose to revise the text in § 423.504(b)(4)(vi)(C)(2) to track the phrasing in § 422.503(b)(4)(vi)(C)(2), as reorganized. The technical changes in the text eliminate any potential ambiguity created by different phrasing in what we intend to be identical requirements as to the timing requirements for the training. We believe these technical changes make the requirements easier to understand.

Furthermore, we believe that the broader requirement that plan sponsors provide compliance training to their FDRs no longer promotes the effective and efficient administration of the Medicare Advantage and Prescription Drug programs. Part C and Part D sponsoring organizations have evolved greatly and their compliance program operations and systems are well established. Many of these organizations have developed effective training and learning models to communicate compliance expectations and ensure that employees and FDRs are aware of the Medicare program requirements. Also, the attention focused on compliance program effectiveness by CMS' Part C and Part D program audits has further encouraged sponsors to continually improve their compliance operations.

CMS does not generally interfere in private contractual matters between sponsoring organizations and their FDRs. Our contract is with the sponsoring organization, and sponsoring organizations are ultimately responsible for compliance with all applicable statutes, regulations and sub-regulatory guidance, regardless who is performing the work. Additionally, delegated entities range in size, structure, risks, staffing, functions, and contractual arrangements which necessitates the sponsoring organization have discretion in its method of oversight to ensure compliance with program requirements. This may be accomplished through routine monitoring and implementing corrective action, which may include training or retraining as appropriate, when non-compliance or misconduct is identified.

We will continue to hold MA organizations and Part D sponsors accountable for the failures of their FDRs to comply with Medicare program requirements, even with these proposed changes. Existing regulations at § 422.503(b)(4)(vi) and § 423.504(b)(4)(vi) require that every sponsor's contract must specify that FDRs must comply with all applicable federal laws, regulations and CMS instructions. Additionally, we audit sponsors' compliance programs when we conduct routine program audits, and our audit process includes evaluations of sponsoring organizations' monitoring and auditing of their FDRs as well as FDR oversight. Our audits also evaluate formulary administration and processing of coverage and appeal requests in the Part C and Part D programs. FDRs often perform some or all of these functions for sponsors, so if they are non-compliant, it will come to light during the program audit and the sponsoring organization is ultimately held responsible for the FDRs' failure to comply with program requirements.

Given that compliance programs are very well established and have grown more sophisticated since their inception, coupled with the industry's desire to perform well on audit, the Start Printed Page 56431CMS training requirement is not the driver of performance improvement or FDR compliance with key CMS requirements. Given this accumulated program experience and the growing sophistication of the industry's compliance operations, as well as our continuing requirements on sponsors for oversight and monitoring of FDRs, we are proposing to delete not just the regulatory provision requiring acceptance of CMS' training as meeting the compliance training requirements, but also the reference to FDRs in the compliance training requirements codified at §§ 422.503(b)(4)(vi)(C) and 423.504(b)(4)(vi)(C). Specifically, we propose to remove the phrases in paragraphs (C)(1) and (C)(2) that refer to first tier, downstream and related entities and remove the paragraphs specific to FDR training at §§ 422.503(b)(4)(vi)(C)(2) and (3) and 423.504(b)(4)(vi)(C)(3) and (4); we are also proposing technical revisions to restructure § 422.503(b)(4)(vi)(C)(1) into two paragraphs and ensure that the remaining text is grammatically correct and consistent with Office of the Federal Register style. Compliance training would still be required of MA and Part D sponsors, their employees, chief executives or senior administrators, managers, and governing body members. This change will allow sponsoring organizations, and the FDRs with which they contract, the maximum flexibility in developing and meeting training requirements associated with effective compliance programs. We invite comments concerning this proposal and suggestions on other options we can implement to accomplish the desired outcome.

3. Medicare Advantage Plan Minimum Enrollment Waiver (§ 422.514(b))

Under section 1857(b) of the Act, CMS may not enter into a contract with a MA organization unless the organization complies with the minimum enrollment requirement. Under the basic rule at § 422.514(a), to provide health care benefits under the MA program, MA organizations must demonstrate that they have the capability to enroll at least 5,000 individuals, and provider sponsored organizations (PSOs) must demonstrate that they have the capability to enroll at least 1,500 individuals. If an MA organization intends to offer health care benefits outside urbanized areas as defined in § 422.62(f), then the minimum enrollment level is reduced to 1,500 for MA organizations and to 500 for PSOs. The statute permits CMS to waive this requirement in the first 3 years of the contract for an MA contract applicant. We have codified this authority at § 422.514(b) and limited it to circumstances where the MA contract applicant is capable of administering and managing an MA contract and is able to manage the level of risk required under the contract. We are proposing to revise § 422.514 regarding the minimum enrollment requirements to improve program efficiencies.

Currently, MA organizations, including PSOs, with an approved minimum enrollment waiver for their first contract year have the option to resubmit the waiver request for CMS in the second and third year of the contract. In conjunction with the waiver request, the MA organization must continue to demonstrate the organization's ability to operate and demonstrate that it has and uses an effective marketing and enrollment system, despite continued failure to meet the minimum enrollment requirement. In addition, the current regulation limits our authority to grant the waiver in the third year to situations where the MA organization has at least attained a projected number of enrollees in the second year. Since 2012, we have not received any waiver to the minimum enrollment requirement during the second and third year of the contract. Rather, we only received minimum enrollment waiver requests through the initial application process.

We believe the current requirement to resubmit the waiver in the second and third year of the contract is unnecessary. The statute does not require a reevaluation of the minimum enrollment standard each year and plainly authorizes a waiver “during the first 3 contract years with respect to an organization.” The current minimum enrollment waiver review in the initial MA contract application provides CMS the confidence to determine whether an MA organization may operate for the first 3 years of the contract without meeting the minimum enrollment requirement. CMS currently monitors low enrollment at the plan benefit package (PBP) level. We note that a similar provision in current § 422.506(b)(1)(iv) permits CMS to terminate an MA contract (or terminate a specific plan benefit package) if the MA plan fails to maintain a sufficient number of enrollees to establish that it is a viable independent plan option for existing or new enrollees. In addition, compliance with § 422.514 is required under § 422.503(a)(13). If an organization's PBP does not achieve and maintain enrollment levels in accordance with the applicable low and minimum enrollment policies in existing regulations, CMS may move to terminate the PBP absent an approved waiver from CMS during the first 3 years of the contract pursuant to § 422.510(a).

Under our proposal, we would only review and approve waivers through the MA application process as opposed to the current practice of reviewing annual requests and, potentially, requests from existing MA organizations that fail to maintain enrollment in the second or third year of operation.

We are proposing to revise the text in § 422.514(b) to provide that the waiver of the minimum enrollment requirement may be in effect for the first 3 years of the contract. Further, we are proposing to delete all references to “MA organizations” in paragraph (b) to reflect our proposal that we would only review and approve waiver requests during the contract application process. We also propose to delete current paragraphs (b)(2) and (b)(3) in their entirety to remove the requirement for MA organizations to submit an additional minimum enrollment waiver annually for the second and third years of the contract. Finally, the proposed text also includes technical changes to redesignate paragraphs (b)(1)(i) through (iii) as (b)(1) through (3), consistent with regulation style requirements of the Office of the Federal Register.

4. Revisions to Timing and Method of Disclosure Requirements (§§ 422.111 and 423.128)

As provided in sections 1852(c)(1) and 1860D-4(a)(1)(A) of the Act, Medicare Advantage (MA) organizations and Part D sponsors must disclose detailed information about the plans they offer to their enrollees “at the time of enrollment and at least annually thereafter.” This detailed information is specified in section 1852(c)(1) of the Act, with additional information specific to the Part D benefit also required under section 1860D-4(a)(1)(B) of the Act. Under § 422.111(a)(3), CMS requires MA plans to disclose this information to each enrollee “at the time of enrollment and at least annually thereafter, 15 days before the annual coordinated election period.” A similar rule for Part D sponsors is found at § 423.128(a)(3). Additionally, § 417.427 directs 1876 cost plans to follow the disclosure requirements in § 422.111 and § 423.128. In making the changes proposed here, we will also affect 1876 cost plans, though it is not necessary to change the regulatory text at § 417.427.

Sections 422.111(b) and 423.128(b) of the Part C and Part D program regulations, respectively, describe the information plans must disclose. The content listed in § 422.111(b) is found in Start Printed Page 56432an MA plan's Evidence of Coverage (EOC) and provider directory. The content listed in § 423.128(b) is found in a Part D Sponsor's EOC, formulary, and pharmacy directory. Section 422.111(h)(2)(i) requires that plans must maintain an internet Web site that contains the information listed in § 422.111(b) and also states that posting the EOC, Summary of Benefits, and provider network information on the plan's Web site “does not relieve the MA organization of its responsibility under § 422.111(a) to provide hard copies to enrollees.”

We propose two changes to the disclosure requirements. First, we propose to revise §§ 422.111(a)(3) and 423.128(a)(3) to require MA plans and Part D Sponsors to provide the information in paragraph (b) of the respective regulations by the first day of the annual enrollment period, rather than 15 days before. In addition, we propose to modify the sentence in § 422.111(h)(2)(ii) which states that posting the EOC, Summary of Benefits, and provider network information on the plan's Web site does not relieve the plan of responsibility to provide hard copies to enrollees. We propose to revise the sentence slightly and add “upon request” to the existing regulatory language to make it clear when any document that is required to be delivered under paragraph (a) in a manner that includes provision of a hard copy upon request, posting the document on the Web site (whether that document is the EOC, SB, directory information or other materials) does not relieve the MA organizations of a responsibility to deliver hard copies upon request. We intend these proposals to provide CMS with the flexibility to permit delivery other than through mailing hard copies (which is the requirement today for all materials and information covered by § 422.111(a)), including through electronic delivery or posting on the Web site in conjunction with delivery of a hard copy notice describing how the information and materials are available. We believe this proposal will ultimately provide additional flexibility to plans to take advantage of technological developments and reduce the amount of mail enrollees receive from plans.

Prior to the 2009 contract year, §§ 422.111(a) and 423.128(a) required the provision of the materials in their respective paragraphs (b) at the time of enrollment and at least annually thereafter, but did not specify a deadline. In the September 18, 2008, final rule, CMS required MA organizations to send this material to current enrollees 15 days before the annual coordinated election period (AEP) (73 FR 54216). The rationale for this requirement was to provide beneficiaries with comprehensive information prior to the AEP so that they could make informed enrollment decisions.

However, we have found through consumer testing that the large size of these mailings overwhelmed enrollees. In particular, the EOC is a long document that enrollees found difficult to navigate. Enrollees were more likely to review the Annual Notice of Change (ANOC), a shorter document summarizing any changes to plan benefits beginning on January 1 of the upcoming year, if it was separate from the EOC. Sections 422.111(d) and 423.128(g)(2) require MA organizations and Part D sponsors to provide the ANOC to all enrollees at least 15 days before the AEP.

The ANOC is intended to convey all of the information essential to an enrollee's decision to remain enrolled in the same plan for the following year or choose another plan during the AEP. CMS's research and experience have indicated that the ANOC is particularly useful to and used by enrollees. Therefore, we are not proposing to change the §§ 422.111(d) and 423.128(g) requirements that the ANOC be received 15 days prior to AEP.

Unlike the ANOC, the EOC is a document akin to a contract that provides enrollees with exhaustive information about their medical coverage and rights and responsibilities as members of a plan. The provider directory, pharmacy directory, and formulary also contain information necessary to access care and benefits. As such, CMS requires MA organizations and Part D sponsors to make these documents available at the start of the AEP, so CMS proposes to amend §§ 422.111(a)(3) and 423.128(a)(3) to remove the current deadline and insert “by the first day of the annual coordinated election period.” To the extent that enrollees find the EOC, provider directory, pharmacy directory, and formulary useful in making informed enrollment decisions, CMS believes that receipt of these documents by the first day of the AEP is sufficient. Any changes in the plan rules reflected in these documents for the next year should be adequately described in the ANOC, which will be provided earlier.

This change would also provide an additional 2 weeks for MA organizations and Part D plan sponsors to prepare, review, and ensure the accuracy of the EOC, provider directory, pharmacy directory, and formulary documents. CMS considers the additional time for the EOC important due to the high number errors plans self-identify in the document through errata sheets they submit to CMS and mail to beneficiaries. In 2017, plans submitted 166 ANOC/EOC errata, which identified 221 ANOC errors and 553 EOC errors. Additional time to produce the EOC will give plans more time to conduct quality assurance and improve accuracy and result in fewer errata sheets in the future.

In addition to the proposed changes in §§ 422.111(a)(3) and 423.128(a)(3), we also propose to give plans more flexibility to provide the materials specified in § 422.111(b) electronically. The language in § 422.111(h)(2)(ii) requiring hard copies of the specified documents first appeared in the January 28, 2005, final rule (70 FR 4587) in § 422.111(f)(12). At that time, MA plans were not required to maintain a Web site, but if they chose to they were required to include the EOC, Summary of Benefits, and provider network information on the Web site. However, plans were prohibited from posting these documents online as a substitute for providing hard copies to enrollees. A subsequent final rule, published April 15, 2011, established that MA plans are required to maintain an internet Web site at § 422.111(h)(2) and moved the requirement that posting documents on the plan Web site did not substitute for hard copies from § 422.111(f)(12) to § 422.111(h)(2)(ii) (76 FR 21502).

There is no parallel to § 422.111(h)(2)(ii) in § 423.128. Instead, § 423.128(a) states that Part D sponsors must disclose the information in paragraph (b) in the manner specified by CMS. Section 423.128(d)(2)(i) requires Part D sponsors to maintain an internet Web site that includes information listed in § 423.128(b). CMS sub-regulatory guidance has instructed plans to provide the EOC in hard copy, but we believe that the regulatory text would permit delivery by notifying enrollees of the internet posting of the documents, subject to the right to request hard copies.[55] As explained previously regarding the changes to § 422.111, we intend for plans to have the flexibility to provide documents such as the Summary of Benefits, the EOC, and the provider network information in electronic format. We intend to change the relevant sub-regulatory guidance to coincide with this as well.

In the preamble to the 2005 final rule, we noted that the prohibition on Start Printed Page 56433substituting electronic posting on the MA plan's internet site for delivery of hardcopy documents was in response to comments recommending this change (70 FR 4623). At the time, we did not think enough Medicare beneficiaries used the internet to permit posting the documents online in place of mailing them.

In the 12 years since the rule was finalized, research indicates that internet use has increased significantly among Medicare beneficiaries. Drawing on nationally representative surveys, the Pew Research Center found that 67 percent of American adults age 65 and older use the internet. Half of seniors have broadband available at home. Internet use increases even more among seniors age 65-69, of which 82 percent use the internet and 66 percent have broadband at home.[56] Electronic documents include advantages such as word search tools, the ability to magnify text, screen reader capabilities, and bookmarks or embedded links, all of which make documents easier to navigate. Given that the younger range of Medicare beneficiaries have a higher rate of internet access, we believe the number of beneficiaries who “use the internet” will only continue to grow with time. Posted electronic documents can also be accessed from anywhere the internet is available.

As mentioned previously, the EOC sometimes contains errors. To correct these, MA and Part D plans currently have to mail errata sheets and post an updated version online. The hardcopy version of the EOC is then out-of-date. Beneficiaries either have to refer to errata sheets in addition to the hardcopy EOC or go online to access a corrected EOC. Increasing beneficiary use of the electronic EOC ensures that beneficiaries are using the most accurate information. Under this proposal to permit flexibility for us to approve non-hard-copy delivery in some cases, we intend to continue requiring hardcopy mailings of any ANOC or EOC errata.

Plans have also continued to request CMS give plans the flexibility to provide the EOC electronically. They have frequently cited the expense of printing and mailing large documents. Medicaid managed care plans already have the flexibility to provide directories, formularies, and member handbooks (similar to the EOC) electronically, per §§ 438.10(h)(1), 438.10(h)4)(i), and 438.10(g)(3) respectively.

To begin addressing this, in the Medicare Marketing Guidelines released July 2, 2015, CMS notified plans that they could mail either a hardcopy provider and/or pharmacy directory or a hardcopy notice to enrollees instructing them where to find the directories online and how to request a hard copy. That guidance has been moved to Chapter 4, section 110.2.3, of the Medicare Managed Care Manual. If plans choose to mail a notice with the location of the online directory rather than a hard copy, the notice must include: A direct link to the online directory, the customer service number to call and request a hard copy, and if available the email address to request a hard copy. The notice must be distinct, separate, and mailed with the ANOC/EOC.[57] Section 60.4 of the Medicare Marketing Guidelines released July 20, 2017, extends the same flexibility to formularies, with the same required content in the notice identifying the location of the online formulary. As CMS has received few complaints from any source about this new process, allowing plans the option to use a similar strategy for additional materials is appropriate.

Upon finalizing this rule, we would issue sub-regulatory guidance to identify permissible manners of disclosure; we expect that guidance would be similar to the current guidance for the provider directory, pharmacy directory, and formulary regarding dissemination of the EOC. Importantly, this provision does not eliminate the requirement for plans to provide accessible formats of required documents. As recipients of federal funding, plans are obligated to provide materials in accessible formats upon request, at no cost to the individual, to individuals with disabilities, under Section 504 of the Rehabilitation Act of 1973 and to take reasonable steps to provide meaningful access, including translation services, to individuals who have limited English proficiency under Title VI of the Civil Rights Act of 1964.

To create this flexibility, CMS proposes modifying the sentence, “Such posting does not relieve the MA organization of its responsibility under § 422.111(a) to provide hard copies to enrollees,” to include “upon request” in § 422.111(h)(2)(ii) and to revise § 422.111(a) by inserting “in the manner specified by CMS.” These changes will align §§ 422.111(a) and 423.128(a) to authorize CMS to provide flexibility to MA plans and Part D sponsors to use technology to provide beneficiaries with information. CMS intends to use this flexibility to provide sponsoring organizations with the ability to electronically deliver plan documents (for example, the Summary of Benefits) to enrollees while maintaining the protection of a hard copy for any enrollee who requests such hard copy. As the current version of § 422.111(a) and (h)(2) require hard copies, we believe this proposal will ultimately result in reducing burden and providing more flexibility for sponsoring organizations.

5. Revisions to §§ 422 and 423 Subpart V, Communication/Marketing Materials and Activities

Section 1851(h) of the Act prohibits Medicare Advantage (MA) organizations from distributing marketing materials and application forms to (or for the use of) MA eligible individuals unless the document has been submitted to the Secretary at least 45 days (10 days for certain materials) prior to use and the document has not been disapproved. Further, in section 1851(j), the Secretary is authorized to adopt standards regarding marketing activities, and the statute identifies certain prohibited activities. While the Act requires the submission and review of the marketing materials and applications, it does not provide a definition of what materials fall under the umbrella term “marketing.” Sections 1806D-1(d)(3)(B)(iv) and 1860D-4(l) of the Act provide similar restrictions on use of marketing and enrollment materials and activities to promote enrollment in Part D plans.

Section 1876(c)(3)(C) of the Act states that no brochures, application forms, or other promotional or informational material may be distributed by cost plan to (or for the use of individuals eligible to enroll with the organization under this section unless (i) at least 45 days before its distribution, the organization has submitted the material to the Secretary for review, and (ii) the Secretary has not disapproved the distribution of the material. As delegated this authority by the Secretary, CMS reviews all such material submitted and disapproves such material upon determination that the material is materially inaccurate or misleading or otherwise makes a material misrepresentation. Similar to 1851(h) of the Act, section 1876(c)(3)(C) of the Act focuses more on the review and approval of materials as opposed to providing an exhaustive list of materials that would qualify as marketing or promotional information and materials. Start Printed Page 56434As part of the implementation of section 1876(c)(3)(C) of the Act, the regulation governing cost plans at § 417.428(a) refers to Subpart V of part 422 for marketing guidance. Throughout this proposal, the changes discussed for MA organizations/MA plans and prescription drug plan (PDP) sponsors/Part D plans applies as well to cost plans subject to the same requirements as a result of this cross-reference.

Section 422.2260(1)-(4) of the Part C program regulations currently identifies marketing materials as any materials that: (1) Promote the MA organization, or any MA plan offered by the MA organization; (2) inform Medicare beneficiaries that they may enroll, or remain enrolled in, an MA plan offered by the MA organization; (3) explain the benefits of enrollment in an MA plan, or rules that apply to enrollees; and (4) explain how Medicare services are covered under an MA plan, including conditions that apply to such coverage. Section 423.2260(1)-(4) applies identical regulatory provisions to the Part D program.

Sections 422.2260(5) and 423.2260(5) provide specific examples of materials under the “marketing materials” definition, which include: General audience materials such as general circulation brochures, newspapers, magazines, television, radio, billboards, yellow pages, or the internet; marketing representative materials such as scripts or outlines for telemarketing or other presentations; presentation materials such as slides and charts; promotional materials such as brochures or leaflets, including materials for circulation by third parties (for example, physicians or other providers); membership communication materials such as membership rules, subscriber agreements, member handbooks and wallet card instructions to enrollees; letters to members about contractual changes; changes in providers, premiums, benefits, plan procedures etc.; and membership activities (for example, materials on rules involving non-payment of premiums, confirmation of enrollment or disenrollment, or no claim specific notification information). Finally, §§ 422.2260(6) and 423.2260(6) provide a list of materials that are not considered marketing materials, including materials that are targeted to current enrollees; are customized or limited to a subset of enrollees or apply to a specific situation; do not include information about the plan's benefit structure; and apply to a specific situation or cover claims processing or other operational issues.

We are proposing several changes to Subpart V of the part 422 and 423 regulations. To better outline these proposed changes, they are addressed in four areas of focus: (1) Including “communication requirements” in the scope of Subpart V or parts 422 and 423, which will include new definitions for “communications” and “communication materials;” (2) amending §§ 422.2260 and 423.2260 to add (at a new paragraph (b)) a definition of “marketing” in place of the current definition of “marketing materials” and to provide lists identifying marketing materials and non-marketing materials; (3) adding new regulation text to prohibit marketing during the Open Enrollment Period proposed in section III.B.1 of this proposed rule; (4) technical changes to other regulatory provisions as a result of the changes to Subpart V. To the extent necessary, CMS relies on its authority to add regulatory and contract requirements to the cost plan, MA, and Part D programs to propose and (ultimately) adopt these changes. We note as well that sections 1851(h) and (j) of the Act (cross-referenced in sections 1860D-1 and 1860D-4(l)) of the Act address activities and direct that the Secretary adopt standards limiting marketing activities, which CMS interprets as permitting regulation of communications about the plan that do not rise to the level of activities and materials that specifically promote enrollment.

a. Revising the Scope of Subpart V To Include Communications and Communications Materials

The current version of Subpart V of parts 422 and 423 regulation focuses on marketing materials, as opposed to other materials currently referred to as “non-marketing” in the sub-regulatory Medicare Marketing Guidelines. This leaves a regulatory void for the requirements that pertain to those materials that are not considered marketing. Historically, the impact of not having regulatory guidance for materials other than marketing has been muted because the current regulatory definition of marketing is so broad, resulting in most materials falling under the definition. The overall effect of this combination—no definition of materials other than marketing and a broad marketing definition—is that marketing and communications with enrollees became synonymous.

With this CMS proposal to narrow the marketing definition, we believe there is a need to continue to apply the current standards to and develop guidance for those materials that fall outside of the proposed definition. We propose changing the title of each Subpart V by replacing the term “Marketing” with “Communication.” We propose to define in §§ 422.2260(a) and 423.2260(a) definitions of “communications” (activities and use of materials to provide information to current and prospective enrollees) and “communications materials” (materials that include all information provided to current members and prospective beneficiaries). We propose that marketing materials (discussed later in this section) would be a subset of communications materials. In many ways, the proposed definition of communications materials is similar to the current definition of marketing materials; the proposed definition has a broad scope and would include both mandatory disclosures that are primarily informative and materials that are primarily geared to encourage enrollment.

CMS also proposes, through revisions to §§ 422.2268 and 423.2268, to apply some of the current standards and prohibitions related to marketing to all communications and to apply others only to marketing. Marketing and marketing materials would be subject to the more stringent requirements, including the need for submission to and review by CMS. Under this proposal, those materials that are not considered marketing, per the proposed definition of marketing, would fall under the less stringent communication requirements.

In addition to these proposals related to defined terms and revising the scope of Subparts V in parts 422 and 423, we are proposing changes to the current regulations at §§ 422.2264 and 423.2264 and §§ 422.2268 and 423.2268 that are related to our proposal to distinguish between marketing and communications.

With regard to §§ 422.2264 and 423.2264, we are proposing the following changes:

  • Deletion of paragraph (a)(3), which currently provides for an adequate written explanation of the grievance and appeals process to be provided as part of marketing materials. In our view grievance and appeals communications would not be within the scope of marketing as proposed in this rule.
  • Deletion of paragraph (a)(4), which provides for CMS to determine that marketing materials include any other information necessary to enable beneficiaries to make an informed decision about enrollment. The intent of this section was to ensure that materials which include measuring or ranking mechanisms such as Star Ratings were a part of CMS's marketing review. We Start Printed Page 56435propose deleting this section as the exclusion list to be codified at § 422.2260(c)(2)(ii) ensures materials that include measuring or ranking standards will be considered marketing, thus making §§ 422.2264(a)(4) and § 423.2264(a)(4) duplicative.
  • Deletion of paragraph (e), which requires sponsoring organizations to provide translated materials in certain areas where there is a significant non-English speaking population. We propose to recodify these requirement as a general communication standard in §§ 422.2268 and 423.2268, at new paragraph (a)(7). As part of the redesignation of this requirement as a standard applicable to all communications and communication materials, we are also proposing revisions. First, we are proposing to revise the text so that it is stated as a prohibition on sponsoring organizations: For markets with a significant non-English speaking population, provide materials, as defined by CMS, unless in the language of these individuals. We propose adding the statement of “as defined by CMS” to the first sentence to allow the agency the ability to define the significant materials that would require translation. We propose deleting the word “marketing” so the second sentence now reads as “materials”, to make it clear that the updated section applies to the broader term of communications rather than the more narrow term of marketing.

In addition, we are proposing to revise §§ 422.2262(d) and 423.2262(d) to delete the term “ad hoc” from the heading and regulation text in favor of referring to “communication materials” to conform to the addition of communication materials under Subpart V.

Current regulations at §§ 422.2268 and 423.2268 list prohibited marketing activities. These activities include items such as providing meals to potential enrollees, soliciting door to door, and marketing in provider settings. With the proposal to distinguish between overall communications and marketing activities, we are proposing to break out the prohibitions into categories: those applicable to all communications (activities and materials) and those that are specific to marketing and marketing materials. In reviewing the various standards under the current regulations to determine if they would apply to communications or marketing, we looked at the each standard as it applied to the new definitions under Subpart V. Prohibitions that offer broader beneficiary protections and are currently applicable to a wide variety of materials are proposed here to apply to communications activities and communication materials; this list of prohibitions is proposed as paragraph (a) Conversely, prohibitions that are currently targeted to activities and materials that are within the narrower scope of marketing and marketing materials are proposed at paragraph (b) as prohibitions on marketing. We are not proposing to expand the list of prohibitions but are proposing to notate which prohibitions are applicable to which category. The only substantive change is in connection with paragraph (a)(7), which we discuss earlier in this section. We welcome comment on our proposed distinctions between these types of prohibitions and whether certain standards or prohibitions from current §§ 422.2268 and 423.2268 should apply more narrowly or broadly than we have proposed.

b. Amending the Regulatory Definition of Marketing and Marketing Materials

In conjunction with adding new proposed communication requirements, we also propose a definition of “marketing” be codified in §§ 422.2260(b) and 423.2260(b). Under this proposal, we would delete the current text in that section defining only “marketing materials” to add a new definition of “marketing” and lists of materials that are “marketing materials” and that are not. Specifically, the term “marketing” would be defined as the use of materials or activities by the sponsoring organization (that is, the MA organization, Part D Sponsor, or cost plan, depending on the specific part) or downstream entities that are intended to draw a beneficiary's attention to the plan or plans and influence a beneficiary's decision making process when making a plan selection; this last criterion would also be met when the intent is to influence an enrollee's decision to remain in a plan (that is, retention-based marketing).

The current regulations address both prohibited marketing activities and marketing materials. The prohibited activities are directly related to marketing activities, but the current definition of “marketing materials” is overly broad and has resulted in a significant number of documents being classified as marketing materials, such as materials promoting the sponsoring organization as a whole (that is, brand awareness) rather than materials that promote enrollment in a specific Medicare plan. We believe that Congress' intent was to target those materials that could mislead or confuse beneficiaries into making an adverse enrollment decision. Since the original adoption of §§ 422.2260 and 423.2260, CMS has reviewed thousands of marketing materials, tracked and resolved thousands of beneficiary complaints through the complaints tracking module (CTM), conducted secret shopping programs of MA plan sales events, and investigated numerous marketing complaints. These efforts have provided CMS insight into the types of plan materials that present the greatest risk of misleading or confusing beneficiaries. Based on this experience, we believe that the current regulatory definition of marketing materials is overly broad. As a result, materials that pose little to no threat of a detrimental enrollment decision fall under the current broad marketing definition. As such, the materials are also required to follow the associated marketing requirements, including submission to CMS for potential review under limited statutory timeframes. CMS believes that the level of scrutiny required on numerous documents that are not intended to influence an enrollment decision, combined with associated burden to sponsoring organizations and CMS, is not justified. By narrowing the materials that fall under the scope of marketing, this proposal will allow us to better focus its review on those materials that present the greatest likelihood for a negative beneficiary experience.

We propose to more appropriately implement the statute by narrowing the definition of marketing to focus on materials and activities that aim to influence enrollment decisions. We believe this is consistent with Congress's intent. Moreover, the new definition differentiates between factually providing information about the plan or benefits (that is, the Evidence of Coverage (EOC)) versus persuasively conveying information in a manner designed to prompt the beneficiary to make a new plan decision or to stay with their current plan (for example, a flyer that touts a low monthly premium). As discussed later, the majority of member materials would no longer fall within the definition of marketing under this proposal. The EOC, subscriber agreements, and wallet card instructions are not developed nor intended to influence enrollment decisions. Rather, they are utilized for current enrollees to understand the full scope of and the rules associated with their plan. We believe the proposed new marketing definition appropriately safeguards potential and current enrollees while not placing an undue burden on sponsoring organizations. Moreover, those materials that would be Start Printed Page 56436excluded from the marketing definition would fall under the proposed definition of communication materials, with what we believe are more appropriate requirements. CMS notes that enrollment and mandatory disclosure materials continue to be subject to requirements in §§ 422.60(c), 422.111, 423.32(b), and 423.128.

Second, we propose to revise the list of marketing materials, currently codified at §§ 422.2260(5) and 423.2260(5), and to include it in the proposed new §§ 422.2260(c)(1) and 423.2260(c)(1). The current list of examples includes: brochures; advertisements in newspapers and magazines, and on television, billboards, radio, or the internet, and billboards; social media content; marketing representative materials, such as scripts or outlines for telemarketing or other presentations; and presentation materials such as slides and charts. In conjunction with the proposed new definition of marketing, we are proposing to remove from the list of examples items such as membership communication materials, subscriber agreements, member handbooks, and wallet card instructions to enrollees, as they would no longer fall under the proposed regulatory definition of marketing. The proposed text complements the new definition by providing a concise non-exhaustive list of example material types that would be considered marketing.

Third, we propose to revise the list of exclusions from marketing materials, currently codified at §§ 422.2260(6) and 423.2260(6), and to include it in the proposed new §§ 422.2260(c)(2) and 423.2260(c)(2) to identify the types of materials that would not be considered marketing. Materials that do not include information about the plan's benefit structure or cost sharing or do not include information about measuring or ranking standards (for example, star ratings) will be excluded from marketing. In addition, materials that do mention benefits or cost sharing, but do not meet the definition of marketing as proposed here, would also be excluded from marketing. We also propose that required materials in § 422.111 and § 423.128 not be considered marketing, unless otherwise specified. Lastly, we are proposing to exclude materials specifically designated by us as not meeting the definition of the proposed marketing definition based on their use or purpose. The purpose of this proposed revision of the list of exclusions from marketing materials, as with the proposed marketing definition and proposed non-exhaustive list of marketing materials, is to maintain the current beneficiary protections that apply to marketing materials but to narrow the scope to exclude materials that are unlikely to lead to or influence an enrollment decision.

In the proposed changes to the exclusions from marketing materials, we intend to exclude materials that do not include information about the plan's benefit structure or cost-sharing. We believe that materials that do not mention benefit structure or cost sharing would not be used to make an enrollment decision in a specific Medicare plan, rather they would be used to drive beneficiaries to request additional information that would fall under the new definition of marketing. Similarly, we want to be sure it is clear that the use of measuring or ranking standards, such as the CMS Star Ratings, even when not accompanied by other plan benefit structure or cost sharing information, could lead a beneficiary to make an enrollment decision. It should be noted that our authority for similar requirements can be found under the current §§ 422.2264(a)(4) and 423.2264(a)(4). We believe this is clearer and more appropriately housed under the regulatory definition of marketing. As such, together with the proposed update to excluded materials, we will make the technical change to remove (a)(4) from §§ 422.2264 and 423.2264. In addition, we propose to exclude materials that mention benefits or cost sharing but do not meet the proposed definition of marketing. The goal of this proposal is to exclude member communications that convey important factual information that is not intended to influence the enrollee's decision to make a plan selection or to stay enrolled in their current plan. An example is a monthly newsletter to current enrollees reminding them of preventive services at $0 cost sharing.

In addition, we note the proposal excludes those materials required under § 422.111 (for MA plans) and § 423.128 (for Part D sponsors), unless otherwise specified by CMS because of their use or purpose. This proposal is intended to exclude post-enrollment materials that we require be disclosed and distributed to enrollees, such as the EOC. Such materials convey important plan information in a factual manner rather than to entice a prospective enrollee to choose a specific plan or an existing enrollee to stay in a specific plan. In addition, either these materials use model formats and text developed by us or are developed by plans based on detailed instructions on the required content from us; this high level of standardization by us on the front-end provides the necessary beneficiary protections and negates the need for our review of these materials before distribution to enrollees.

The proposed changes do not release cost plans, MA organizations, or Part D sponsors from the requirements in sections 1876(c)(3)(C), 1851(h), and 1860D-1(b)(1)(B)(vi) of the Act to have application forms reviewed by CMS as well. To clarify this requirement, we are proposing to revise § 417.430(a)(1) and § 423.32(b), which pertain to application and enrollment processes, to add a cross reference to §§ 422.2262 and 423.2262, respectively. The cross references directly link enrollment applications back to requirements related to review and distribution of marketing materials. These proposed changes update an old cross-reference, codify existing practices, and are consistent with language already in § 422.60(c).

c. Prohibition of Marketing During the Open Enrollment Period

The 21st Century Cures Act (the Cures Act) amended section 1851(e)(2) of the Act by adding a new continuous open enrollment and disenrollment period (OEP) for MA and certain PDP members. See section III.A.X for CMS's other proposal related to that provision. As part of establishing this OEP, the Cures Act prohibits unsolicited marketing and mailing marketing materials to individuals who are eligible for the new OEP. We are proposing to add a new paragraph (b)(9) to both proposed §§ 422.2268 and 423.2268 to apply this prohibition on marketing. However, we request comment on how the agency could implement this statutory requirement. The new OEP is not available for enrollees in Medicare cost plans; therefore, these limitations would apply to MA enrollees and to any PDP enrollee who was enrolled in an MA plan the prior year. CMS is concerned that it may be difficult for a sponsoring organization to limit marketing to only those individuals who have not yet enrolled in a plan during the OEP. One mechanism could be to limit marketing entirely during that period, but we are concerned that such a prohibition would be too broad We believe that using a “knowing” standard will both effectuate the statutory provision and avoid against overly broad implementation. We welcome comment on how a sponsoring organization could appropriately control who would or should be marketed to during the new OEP, such as through as mailing campaigns aimed at a more general audience.Start Printed Page 56437

d. Technical Changes to Other Regulatory Provisions as a Result of the Changes to Subpart V

As previously stated, because of the broad regulatory definition of marketing, the term marketing and communication became synonymous. With the proposed updates to Subpart V in both part 422 and part 423, a definition of the broader term communication would be added and the definition of marketing, as well as the materials that fall within the scope of that definition, would be narrowed. As a result, a number of technical changes will be needed to update certain sections of the regulation that use the term marketing. Accordingly, we propose the following technical changes in Part C:

  • In § 422.54, we propose to update paragraphs (c)(1)(i) and (d)(4)(ii) to replace “marketing materials” with “communication materials.”
  • In § 422.62, we propose to update paragraph (b)(3)(B)(ii) by replacing “in marketing the plans to the individual” with “in communication materials.”
  • In § 422.102(d), we propose to use “supplemental benefits packaging” instead of “marketing of supplemental benefits.”
  • In § 422.206(b)(2)(i), we propose to replace “§ 422.80 (concerning approval of marketing materials and election forms)” with “all applicable requirements under subpart V”.
  • In § 422.503(b)(4)(ii), we propose to replace the term “marketing” with the term “communication.”
  • In § 422.510(a)(4)(iii), we propose to remove the word “marketing” so that the reference is to the broader Subpart V.

CMS has had longstanding authority to initiate “marketing sanctions” in conjunction with enrollment sanctions as a means of protecting beneficiaries from the confusion that stems from receiving information provided by a plan that is—as a result of enrollment sanctions—unable to accept enrollments. In this rulemaking, CMS is proposing to replace the term “marketing” with “communications” in § 422.750 and 422.752 to reflect its proposal for Subpart V. The intent of this proposal to change the terminology is not to expand the scope of CMS's authority with respect to sanction regulations. Rather, CMS intends to preserve the existing reach of its sanction authority it currently has—to prohibit any communications under the current broad definition of “marketing materials” from being issued by a sponsoring organization while that entity is under sanction. For this reason, CMS is proposing the following changes to §§ 422.750 and 422.752:

  • In § 422.750, we propose to revise paragraph (a)(3) to refer to suspension of “communication activities.”
  • In § 422.752, we propose to replace the term “marketing” in paragraph (a)(11) and the heading for paragraph (b) with the term “communications.”

We are not proposing any changes to the use of the term “marketing” in §§ 422.384, 422.504(a)(17), 422.504(d)(2)(vi), or 422.514, as those regulations use the term in a way that is consistent with the proposed definition of the term “marketing,” and the underlying requirements and standards do not need to be extended to all communications from an MA organization.

We also propose the following technical changes in Part D:

  • In § 423.38(c)(8)(i)(C), we propose to revise the paragraph to read: “The organization (or its agent, representative, or plan provider) materially misrepresented the plan's provisions in communication materials.”
  • In § 423.504(b)(4)(ii), we propose to replace “marketing” with “communications” to reflect the change to Subpart V.

For the reasons explained in connection with our proposal to revise the Part C sanction regulations, we also propose the following changes:

  • In § 423.505(b)(25), we propose to replace “marketing” with “communications” to reflect the change to Subpart V.
  • In § 423.509(a)(4)(V)(A), we propose to delete the word “marketing” and instead simply refer to Subpart V.

We are not proposing any changes to the use of the term “marketing” in §§ 423.505(d)(2)(vi), 423.871(c), or 423.756(c)(3)(ii), as those regulations use the term in a way that is consistent with the proposed definition of the term “marketing,” and the underlying requirements and standards do not need to be extended to all communications from a PDP sponsor.

We solicit comment on the proposed technical changes, particularly whether a proposed revision here would be more expansive than anticipated or have unintended consequences for sponsoring organizations or for CMS's oversight and monitoring of the MA and Part D programs.

In conclusion, we believe that our proposal here—the proposed definitions of “communications,” “communications materials,” “marketing,” and “marketing materials;” and the various proposed changes to Subpart V; to distinguish between prohibitions applicable to communications and those applicable to marketing; and to conform § 417.430(a)(1) and § 423.32(b) to § 422.60(c) and reflect the statutory direction regarding enrollment materials; all maintain the appropriate level of beneficiary protection. These proposals will facilitate and focus our oversight of marketing materials, while appropriately narrowing the scope of what is considered marketing. We believe beneficiary protections are further enhanced by adding communication materials and associated standards under Subpart V. These changes allow us to focus its oversight efforts on plan marketing materials that have the highest potential for influencing a beneficiary to make an enrollment decision that is not in the beneficiary's best interest. We solicit comment on these proposals and whether the appropriate balance is achieved with the proposed regulation text.

6. Lengthening Adjudication Timeframes for Part D Payment Redeterminations and IRE Reconsiderations (§§ 423.590 and 423.636)

Sections 1860D-4(g) and (h) of the Act require the Secretary to establish processes for initial coverage determinations and appeals similar to those used in the Medicare Advantage program. In accordance with section 1860D-4(g) of the Act, § 423.590 establishes Part D plan sponsors' responsibilities for processing redeterminations, including adjudication timeframes. Pursuant to section 1860D-4(h) of the Act, § 423.600 sets forth the requirements for an independent review entity (IRE) for processing reconsiderations.

We are proposing changes to the adjudication timeframe for Part D standard redetermination requests for payment at § 423.590(b) and the related effectuation provision § 423.636(a)(2). Specifically, we are proposing to change the timeframe for issuing decisions on payment redeterminations from 7 calendar days from the date the plan sponsor receives the request to 14 calendar days from the date the plan sponsor receives the request. This proposed 14-day timeframe for issuing a decision related to a payment request would also apply to the IRE reconsideration pursuant to § 423.600(d). We are not proposing to make changes to the existing requirements for making payment. When applicable, the Part D plan sponsor must make payment no later than 30 days from receipt of the request Start Printed Page 56438for redetermination, or the IRE reconsideration notice, respectively.

Some of the feedback received from the RFI published in the 2018 Call Letter related to simplifying and establishing greater consistency in Part D coverage and appeals processes. The proposed change to a 14 calendar day adjudication timeframe for payment redeterminations, which would also apply to payment requests at the IRE reconsideration level of appeal, will establish consistency in the adjudication timeframes for payment requests throughout the plan level and IRE processes, as § 423.568(c) requires a plan sponsor to notify the enrollee of its determination no later than 14 calendar days after receipt of the request for payment. We believe affording more time to adjudicate payment redetermination requests (including obtaining necessary documentation to support the request) will ease burden on plan sponsors because it could reduce the need to deny payment redeterminations due to missing information. We also expect the proposed change to the payment redetermination timeframe would reduce the volume of untimely payment redeterminations that must be auto-forwarded to the IRE.

In addition, having more time to gather information and process these requests could be beneficial to enrollees because decisions will be more fully informed, potentially resulting in fewer decisions having to undergo further appeal. While we acknowledge that some enrollees would have to wait longer for a decision, we note that the proposed changes are limited to payment requests where the enrollee has already received the drug, ensuring any delay would not adversely affect the enrollee's health. As noted previously, when coverage is approved, the plan would remain obligated to remit payment to affected enrollees within 30 days. Allowing plan sponsors and the IRE additional time to process payment appeal requests may assist these adjudicators in allocating resources in a manner that is most efficient and enrollee friendly, for example, ensuring adequate resources are directed to processing more time-sensitive pre-service requests where the enrollee has not yet obtained the drug, particularly during periods of increased case volume.

7. Elimination of Medicare Advantage Plan Notice for Cases Sent to the IRE (§ 422.590)

Section 1852(g) of Act requires MA organizations to have a procedure for making timely determinations regarding whether an enrollee is entitled to receive a health service and any amount the enrollee is required to pay for such service. Under this statutory provision, the MA plan also is required to provide for reconsideration of that determination upon enrollee request.

In accordance with section 1852(g) of the Act, our current regulations at §§ 422.578, 422.582, and 422.584 provide MA enrollees with the right to request reconsideration of a health plan's initial decision to deny Medicare coverage. Pursuant to § 422.590, when the MA plan upholds initial payment or service denials, in whole or in part, it must forward member case files to an independent review entity (IRE) that contracts with CMS to review plan-level appeals decisions; that is, plans are required to automatically forward to the IRE any reconsidered decisions that are adverse or partially adverse for an enrollee without the enrollee taking any action.

Currently, MA plans are required to notify enrollees upon forwarding cases to the IRE, as set forth at § 422.590(f). CMS sub-regulatory guidance, set forth in Chapter 13 of the Medicare Managed Care Manual, specifically directs plans to mail a notice to the enrollee informing the individual that the plan has upheld its decision to deny coverage, in whole or in part, and thus is forwarding the enrollee's case file to the IRE for review. We have made a model notice available for plans to use for this purpose. (See Medicare Managed Care Manual, Chapter 13, § 10.3.3, 80.3, and Appendix 10.) In addition, the Part C IRE is required, under its contract with CMS, to notify the enrollee when the IRE receives the reconsidered decision for review. We are proposing to revise § 422.590 to remove paragraph (f) and redesignate the existing paragraphs (g) and (h) as (f) and (g), respectively. The Part C IRE is contractually responsible for notifying an enrollee that the IRE has received and will be reviewing the enrollee's case; thus, we believe the plan notice is duplicative and nonessential. Under this proposal, the IRE would be responsible for notifying enrollees upon forwarding all cases—including both standard and expedited cases. We will continue to closely monitor the performance of the IRE and beneficiary complaints related to timely and appropriate notification that the IRE has received and will be reviewing the enrollee's case.

We received feedback in response to the Request for Information included in the 2018 Call Letter related to simplifying and streamlining appeals processes. To that end, we believe this proposed change will help further these goals by easing burden on MA plans without compromising informing the beneficiary of the progress of his or her appeal. If this proposal is finalized, and plans are no longer required to notify an enrollee that his or her case has been sent to the IRE, we would expect plans to redirect resources previously allocated to issuing this notice to more time-sensitive activities such as review of pre-service and post-service coverage requests, improved efficiency in appeals processing, and provision of health benefits in an optimal, effective, and efficient manner.

8. E-Prescribing and the Part D Prescription Drug Program; Updating Part D E-Prescribing Standards

a. Legislative Background

Section 101 of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) (Pub. L. 108-173) amended title XVIII of the Act to establish a voluntary prescription drug benefit program at section 1860D-4(e) of the Act. Among other things, these provisions required the adoption of Part D e-prescribing standards. Prescription Drug Plan (PDP) sponsors and Medicare Advantage (MA) organizations offering Medicare Advantage-Prescription Drug Plans (MA-PD) are required to establish electronic prescription drug programs that comply with the e-prescribing standards that are adopted under this authority. There is no requirement that prescribers or dispensers implement e-prescribing. However, prescribers and dispensers who electronically transmit prescription and certain other information for covered drugs prescribed for Medicare Part D eligible beneficiaries, directly or through an intermediary, are required to comply with any applicable standards that are in effect.

For a further discussion of the statutory basis for this proposed rule and the statutory requirements at section 1860D-4(e) of the Act, please refer to section I. (Background) of the E-Prescribing and the Prescription Drug Program proposed rule, published February 4, 2005 (70 FR 6256).

b. Regulatory History

Transaction standards are periodically updated to take new knowledge, technology and other considerations into account. As CMS adopted specific versions of the standards when it adopted the foundation and final e-prescribing standards, there was a need to establish a process by which the standards could be updated or replaced Start Printed Page 56439over time to ensure that the standards did not hold back progress in the industry. We discussed these processes in the November 7, 2005 final rule (70 FR 67579).

The discussion noted that the rulemaking process will generally be used to retire, replace or adopt a new e-prescribing standard, but it also provided for a simplified “updating process” when a non-HIPAA standard could be updated with a newer “backward-compatible” version of the adopted standard. In instances in which the user of the later version can accommodate users of the earlier version of the adopted non-HIPAA standard without modification, however, it noted that notice and comment rulemaking could be waived, in which case the use of either the new or old version of the adopted standard would be considered compliant upon the effective date of the newer version's incorporation by reference in the Federal Register. We utilized this streamlined process when we published an interim final rule with comment on June 23, 2006 (71 FR 36020). That rule recognized NCPDP SCRIPT 8.1 as a backward compatible update to the NCPDP SCRIPT 5.0 for the specified transactions, thereby allowing for use of either of the two versions in the Part D program. Then, on April 7, 2008, we used notice and comment rulemaking (73 FR 18918) to finalize the identification of the NCPDP SCRIPT 8.1 as a backward compatible update of the NCPDP SCRIPT 5.0, and, effective April 1, 2009, retire NCPDP SCRIPT 5.0 and adopt NCPDP SCRIPT 8.1 as the official Part D e-prescribing standard for the specified transactions. On July 1, 2010, CMS utilized the streamlined process to recognize NCPDP SCRIPT 10.6 as a backward compatible update of NCPDP SCRIPT 8.1 in an interim final rule (75 FR 38026).

We finalized the NCPDP SCRIPT 10.6 as a Backward Compatible Version of NCPDP SCRIPT 8.1, and retired NCPDP SCRIPT 8.1 and adopted the NCPDP SCRIPT 10.6 as the official Part D e-Prescribing Standard for the specified transactions in the CY 2013 Physician Fee Schedule, effective November 1, 2013. For a more detailed discussion, see the CY 2013 PFS final rule (77 FR 69329 through 69333).

c. Proposed adoption of NCPDP SCRIPT version 2017071 as the official Part D E-Prescribing Standard for certain specified transactions, retirement of NCPDP SCRIPT 10.6, proposed conforming changes elsewhere in 423.160, and correction of a historic typographical error in the regulatory text which occurred when NCPDP SCRIPT 10.6 was initially adopted.

The National Council for Prescription Drug Programs (NCPDP) is a not-for-profit ANSI-Accredited Standards Development Organization (SDO) consisting of more than 1,600 members who are interested in electronic standardization within the pharmacy services sector of the healthcare industry. NCPDP provides a forum wherein our diverse membership can develop solutions, including ANSI-accredited standards, and guidance for promoting information exchanges related to medications, supplies, and services within the healthcare system.

NCPDP has developed the NCPDP SCRIPT standard for use by prescribers, dispensers, pharmacy benefit managers (PBMs), payers and other entities who wish to electronically transmit information about prescriptions and prescription-related information. NCPDP has periodically updated its SCRIPT standard over time, and three separate versions of the NCPDP SCRIPT standard, versions 5.0, 8.1 and most recently 10.6 have been adopted by CMS for the part D e-prescribing program through the notice and comment rulemaking process. We believe that our current proposal to adopt the NCPDP SCRIPT 2017071 as the official part D e-prescribing standard for certain specified transactions, and to retire the current standard for those transactions would, among other things, improve communications between the prescriber and dispensers, and we welcome public comment on these proposals.

Our actions were, in part, precipitated by a May 24, 2017, letter from the NCPDP that requested our adoption of NCPDP SCRIPT Standard Version 2017071. This version was balloted and approved July 28, 2017. The letter noted the considerable amount of time that had passed since the last update to the current adopted standard (NCPDP SCRIPT 10.6), and that there were many changes to the NCPDP SCRIPT Standard version 2017071 that would benefit its users.

CMS reviewed the specifications for NCPDP SCRIPT Standard Version 2017071 and found that this version would allow users substantial improvements in efficiency. Version 2017071 supports communications regarding multi-ingredient compounds, thereby allowing compounded medication to be prescribed electronically. Previously prescriptions for compounds were handwritten and sent via fax to the dispenser, which often required follow up communications between the prescriber and pharmacy. The ability to process prescriptions for compounds electronically in lieu of relying on more time intensive interpersonal interactions would be expected to improve efficiency.

While we do not propose mandating its use at this time, one transaction supported by the proposed version of NCPDP SCRIPT would also provide interested users with a Census transaction functionality which is designed to service beneficiaries residing in long term care. The Census feature would trigger timely notification of a beneficiary's absence from a long term care facility, which would enable discontinuation of daily medication dispensing when a leave of absence occurs, thereby preventing the dispensing of unneeded medications. Version 2017071 also contains an enhanced Prescription Fill Status Notification that allows the prescriber to specify if/when they want to receive the notifications from the dispenser. It now supports data elements for diabetic supply prescriptions and includes elements which could be required for the pharmacy during the dispensing process which may be of value to prescribers who need to closely monitor medication adherence.

We therefore believe that the functionalities offered by NCPDP SCRPT 2017071 could offer efficiencies to the industry, and believe that it would be an appropriate e-prescribing standard for the transactions currently covered by the Medicare Part D program. Furthermore, NCPDP SCRIPT 2017071 supports transactions new to the part D e-prescribing program that we believe would prove beneficial to the industry. Therefore, in addition to the transactions for which prior versions of NCPDP SCRIPT were adopted (as reflected in the current regulations at 423.160(b)), we propose to require use of NCPDP SCRPT 2017071 for the following transactions:

  • Prescription drug administration message,
  • New prescription requests,
  • New prescription response denials,
  • Prescription transfer message,
  • Prescription fill indicator change,
  • Prescription recertification,
  • Risk Evaluation and Mitigation Strategy (REMS) initiation request,
  • REMS initiation response, REMS request, and
  • REMS response.

We believe that transitioning to the new 2017071 versions of the transactions already covered by the current part D e-prescribing standard (version 10.6 of the NCPDP SCRIPT) will impose deminimus cost on the Start Printed Page 56440industry as the burden in using the updated standards is anticipated to be the same as using the old standards for the transactions currently covered by the program. We are also proposing adoption of version 2017071 of the NCPDP SCRIPT standards for the nine new transactions to replace manual processes that currently occur. Reducing the manual processes currently used to support these transactions will improve efficiency, accuracy, and user satisfaction with the system. While system implementation may result in minimal expenses, we believe that these minimal expenses will be more than offset by rendering these manual transactions obsolete. That is, we believe that prescribers and dispensers that are now e-prescribing largely invested in the hardware, software, and connectivity necessary to e-prescribe. We do not anticipate that the retirement of NCPDP SCRIPT 10.6 in favor of NCPDP SCRIPT 2017071 will result in significant costs.

As such, we are proposing to revise § 423.160(b)(1)(iv) so as to limit its application to transactions before January 1, 2019 and add a new § 423.160(b)(1)(v). The requirement at § 423.160(b)(1)(v) would identify the standards that will be in effect on or after January 1, 2019, for those that conduct e-prescribing for part D covered drugs for part D eligible beneficiaries. If finalized, those individuals and entities would be required to use NCPDP SCRIPT 2017071 to convey prescriptions and prescription-related information for the following transactions:

  • Get message transaction.
  • Status response transaction.
  • Error response transaction.
  • New prescription request transaction.
  • Prescription change request transaction.
  • Prescription change response transaction.
  • Refill/Resupply prescription request transaction.
  • Refill/Resupply prescription response transaction.
  • Verification transaction.
  • Password change transaction.
  • Cancel prescription request transaction.
  • Cancel prescription response transaction.
  • Fill status notification.
  • Prescription drug administration message.
  • New prescription requests.
  • New prescription response denials.
  • Prescription transfer message.
  • Prescription fill indicator change.
  • Prescription recertification.
  • Risk Evaluation and Mitigation Strategy (REMS) initiation request.
  • REMS initiation response, REMS request
  • REMS initiation response.
  • REMS request.
  • REMS response.

We are also proposing to adopt NCPDP SCRIPT 2017071 as the official part D e-prescribing standard for the medication history transaction at § 423.160(b)(4). As a result, we are also proposing to retire NCPDP SCRIPT versions 8.1 and 10.6 for medication history transactions transmitted on or after January 1, 2019.

Furthermore, we propose to amend § 423.160(b)(1) by modifying § 423.160(b)(1)(iv) to limit usage of NCPDP SCRIPT