New Rules for Medicare Advantage and Part D Plans

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On April 15, 2011, the Centers for Medicare & Medicaid Services (CMS) issued final regulations to provide policy and technical changes to the Medicare Parts C (Medicare Advantage) and D programs.[1]  The regulations address concerns raised by Medicare beneficiary advocates, and implement provisions of the Affordable Care Act.  They also codify into regulation some existing CMS guidance. The effective dates of the new regulations vary, depending on the section.  Many do not become effective until January 1, 2012, the start of the next Part C and Part D contract year.

This Alert identifies and summarizes many of the changes made by the final rules that directly affect Medicare beneficiaries.

Provisions to Implement the Affordable Care Act (ACA)

• Cost-sharing for Specified Services at Original Medicare Levels: Cost-sharing under Medicare Advantage (MA) plans cannot exceed the cost-sharing imposed under Traditional Medicare for three specific services – chemotherapy administration, renal dialysis services, and skilled nursing care.[2]   In the preamble to the final rules, CMS clarified that this limitation to MA cost-sharing applies only to in-network services.  Under Traditional Medicare, beneficiaries are not charged any cost-sharing for a covered skilled nursing facility (SNF) stay for the first 20 days.  Current CMS policy, however, allows MA plans to charge cost-sharing during this 20-day period.  Despite strong opposition from beneficiary advocates in comments to the proposed rules, CMS chose to continue this policy. Pursuant to authority granted to the Secretary of Health and Human Services (the Secretary) by the ACA to limit cost-sharing for other services, CMS proposed prohibiting MA plans from charging cost-sharing for in-network home health services – a proposal that was strongly endorsed by beneficiary advocacy groups.  In the final regulations, however, CMS chose not to include this prohibition.  Advocates had also recommended that durable medical equipment (DME) be added to this list. CMS did not adopt this suggestion.
• Change to Beneficiary Election Periods: Starting in fall of 2011, for the 2012 plan year, the annual coordinated election period (ACEP) has been changed from November 15^th through December 31^st every year to October 15^th to December 7^th.  Also starting this year, the former Medicare Advantage Open Enrollment Period (OEP) – now called the Medicare Advantage Disenrollment Period (MADP) – has been changed to a 45-day period at the beginning of the year (January 1 through February 14).  During the MADP, beneficiaries enrolled in an MA plan may disenroll and return to Traditional Medicare, with an option to enroll in a Medicare Part D plan.[3]  Beneficiary advocates had suggested that a special enrollment period (SEP) be granted for beneficiaries who missed the change in the ACEP, at least for the first year, but CMS has declined that recommendation at this time.
• Special Needs Plan (SNP) Provisions – The ACA authorizes CMS to apply a frailty payment adjustment under PACE payment rules for certain individuals enrolled in fully integrated Dual Eligible special needs plans (D-SNPs).  The final rule provides a definition of a fully integrated D-SNP, with further explanation to be provided in future guidance.  SNPs can continue to restrict enrollment to special needs individuals through the 2013 contract year, with the exception of dual eligible SNPs that do not have a contract with the State in which they operate. D-SNPs without contracts with their State Medicaid agencies may operate through 2012 but may not expand their service area.  The ACA requires all SNPs to be approved by the National Committee for Quality Assurance (NCQA) effective January 1, 2012 through a process based on standards established by the Secretary.  Under the final rule, all SNPs must submit their models of care (MOC) to CMS for NCQA evaluation and approval as per CMS guidance. CMS will retain responsibility for the overall SNP application review process, which SNPs and other MA plans go through annually. The application review process includes oversight of the NCQA approval process. CMS intends to expand to a multi-year approval process that would allow certain plans to be granted a longer approval period.[4]
• Authority to Deny Bids: The final rule stipulates that the Secretary may deny a bid submitted by Medicare Advantage and Part D plan sponsors if they propose significant increases in cost-sharing or decreases in benefits offered under the plan.[5] CMS declined to codify into regulation strict limitations on premium increases or benefit decreases.
• Determination of Part D Low-Income Benchmark Premium: CMS is required to calculate the low-income subsidy (LIS) benchmarks using basic Part D premiums before the application of Part C rebates each year.[6]  This provision will prevent the artificial lowering of the overall average (benchmark) amount of all Part D plans, which in turn should reduce the number of annual Part D plan reassignments of LIS enrollees. 
• Voluntary De Minimis Policy for Subsidy Eligible Individuals: The final rule allows the Secretary to permit plans whose premium exceeds the benchmark amount by a de mimimis amount to waive payment of that portion of the Part D premium that is above the benchmark for low-income subsidy eligible individuals.[7]  To the extent that plans choose to waive such increases, the individuals affected would not need to be reassigned to benchmark plans.  The rule also permits the Secretary to auto-enroll low-income individuals into such plans, to the extent that they waive the de minimis premium amount for the individual enrollee.  In the preamble, CMS clarified that Medicare Advantage Prescription Drug (MA-PD) plans will not be included in the pool of Part D plans qualified to receive auto-enrollees and reassignees.
• Increase in Part D Premiums Due to the Income Related Monthly Adjustment Amount (Part D-IRMAA): Since January 2011, beneficiaries with higher incomes who pay the Part B income-related premium have also been subject to a Part D income-related premium.[8] The increased premium amount is based on a percentage of the base beneficiary premium for that year as determined by the Secretary. The final rule clarifies that to the extent that an individual fails to pay only the Part D IRMAA (in other words, the additional premium amount based upon income), there will be an initial three-month grace period to pay this amount before the individual is disenrolled from the Part D plan (note that this is similar to the three-month grace period for individuals who fail to pay their Part B IRMAA).  If payment is not made during the grace period, an individual will have an additional three months to establish "good cause" for failure to pay the Part D IRMAA and make payment to be reinstated into the Part D plan.  However, CMS notes that individuals who fail to pay the regular Part D premium may be disenrolled by the plan after the expiration of the two-month grace period under current Part D rules[9], regardless of the payment status of their Part D IRMAA (but see note below re: extension of grace period and good cause for reinstatement under "Provisions to Strengthen Beneficiary Protections"). 
• Elimination of Medicare Part D Cost-Sharing for Individuals Receiving Home and Community-Based Services: The final rule eliminates Part D cost-sharing for full-benefit dual eligible individuals who are receiving home and community-based services (HCBS) under certain home and community-based waivers, a state plan amendment, or if enrolled in certain Medicaid managed care organizations.[10]   The existing Best Available Evidence (BAE) policy which requires plans to charge a lower copayment if certain evidence is provided will also apply to these individuals.  This rule takes effect January 1, 2012.
• Appropriate Dispensing of Prescription Drugs in Long-Term Care Facilities Under PDPs and MA-PD Plans: In an effort to reduce the amount of unused prescription drugs in long-term care (LTC) facilities, the rule finalizes a requirement that all Part D plan sponsors contract with network pharmacies servicing LTC facilities to dispense brand medications in 14-day-or-less increments, rather than in 30-day supplies.[11]   In response to comments from advocates and others, CMS clarified that regardless of the number of incremental dispensing events, the total cost-sharing for a Part D drug to which the 14-day-or-less dispensing requirements apply shall be no greater than the total cost-sharing that would be imposed for such Part D drug if the 14-day-or-less requirements did not apply.  The effective date of this rule has been delayed until January 1, 2013.
• Complaint System for Medicare Advantage Organizations and PDPs: The final rule requires MA and Part D plans to address complaints received by CMS against the plan by addressing and resolving complaints in the CMS complaint tracking system, and displaying a link to the electronic complaint form on the www.medicare.gov website on the plan's main web page.[12]  In response to findings that many plan sponsors fail to adequately summarize a complaint closure in the complaint tracking system, or inappropriately close a complaint (e.g., when a plan has been unable to reach a beneficiary by phone), CMS is adding requirements to the system in order for plans to close a complaint.                      
• Uniform Exceptions and Appeals Process for Prescription Drug Plans and MA-PD Plans: For exceptions and appeals filed on or after January 1, 2012, prescription drug plan sponsors must make available uniform model forms for requesting coverage determinations and redeterminations, establish a toll-free telephone number and website for accepting requests for coverage determinations and redeterminations, and arrange with their network providers to distribute written notices at the pharmacy instructing enrollees how to contact their plans to obtain a coverage determination or request an exception if they disagree with the information provided by the pharmacist.[13]   Although advocates praised CMS's original proposal to create a uniform, standard request form for coverage determinations and redeterminations in order to make the appeals process simpler and more accessible, in the final rule CMS noted its intention to develop separate model forms for coverage determinations and redeterminations, and will continue to allow plan sponsors to develop and make available drug-specific coverage determination request forms to supplement the model forms. In the preamble to the final rule, CMS also notes that it is "scaling back our expectations with respect to plan capabilities for having an interactive web-based application for coverage determinations and appeals."  Instead, CMS will simply require plan enrollees to have the ability to send a secure e-mail via the plan's website in order to initiate a request. 
• Including Costs Incurred by AIDS Drug Assistance Programs (ADAPs) and the Indian Health Service Toward the Annual Part D Out-of-Pocket Threshold: Pursuant to the ACA, the final rule dictates that supplemental drug coverage provided by the Indian Health Service (IHS) and AIDS Drug Assistance Programs (ADAPs) now count toward an individual's true out-of-pocket (TrOOP) expenses for the purpose of meeting the threshold at which catastrophic coverage begins under the Part D benefit.[14]
• Cost-Sharing for Medicare-Covered Preventive Services: MA and section 1876 Cost plans are required to provide in-network Medicare-covered preventive benefits at zero cost-sharing.[15]
• Improvements to Medication Therapy Management Programs: According to the preamble, Part D Medication Therapy Management Programs (MTMPs) are meant to ensure that targeted beneficiaries appropriately use covered Part D drugs to optimize therapeutic outcomes through improved medication use and to reduce the risk of adverse events.  Effective January 1, 2013, the final rule requires plan sponsors to perform a quarterly assessment of all "at risk" individuals who are not already enrolled in an MTMP, establish opt-out enrollment for MTMP, and offer medication therapy management services to targeted beneficiaries.[16]
• Changes to Close the Part D Coverage Gap: The final rule implements ACA provisions that close the Part D coverage gap between 2011 and 2019.[17]  As discussed in previous Alerts, starting in 2011, the coverage gap will decrease each year until 2020, when it will be eliminated and beneficiaries will pay 25% co-insurance for prescriptions. 

Provisions to Clarify Various Plan Sponsor Participation Requirements

• Changes to Ensure that Appropriate Licensed Professionals Make Medical Decisions that Affect Plan Enrollees:The final rules codify that a pharmacist must have a current, valid license to practice pharmacy, and require that medical necessity decisions must be reviewed by a currently-licensed physician or other health professional.[18] CMS states that, even when a PDP or Medicare Advantage Organization (MAO) uses a claims specialist who is not a physician to conduct the initial review of a Part C organization determination or a Part D coverage determination, a physician or other appropriate health care professional must be involved in the review if the plan intends to issue a partially or fully unfavorable decision. The final regulations also require that MAOs employ a medical director to ensure the clinical accuracy of all organization determinations and reconsiderations that involve medical necessity determinations. 

Provisions to Strengthen Beneficiary Protections

• Agent and Broker Training Requirements: To achieve greater standardization of training about Medicare Advantage and Part D plans, the new rules require agents and brokers to receive training and testing through a CMS-endorsed or approved training program.  The rules also extend the training requirement to all agents and brokers who sell or market MA plans or PDPs, regardless of whether they are employees of the plan sponsor or MAO or whether they are independent agents.[19]
• CallCenterand Web Site Requirements: Call center and internet web site requirements that existed for PDPs are extended to MA plans.  Additionally, the final regulations codify marketing guidance and require plans to provide interpreter services for non-English speaking and limited English proficient (LEP) individuals.  CMS changed the final regulations to eliminate a requirement that interpreter services be provided in "all" languages.  CMS says that it expects plans to provide interpretation services for "all languages that are served in common by the largest commercial interpretation services providers in the U.S…"[20]
• Contacting Beneficiaries to Explain Enrollment by an Unqualified Agent/Broker: MA plans and PDPs must terminate agents upon discovery that they were unqualified and must notify affected beneficiaries and inform them of their rights.[21]
• Customized Enrollee Data: CMS may require an MA plan to provide a plan enrollee, in a manner specified by CMS and in an easily understandable form, a written explanation of benefits furnished to the enrollee.  CMS' goal is to provide beneficiaries with enough information to evaluate their plan annually with regard to costs, benefits, and value.  CMS intends to develop a Part C explanation of benefits (EOB), similar to the Part D EOB, and to test the model through a pilot with volunteer MAOs.  A model EOB and full implementation will be delayed until after the pilot has been completed.[22]
• Mandatory Maximum Out-of-Pocket (MOOP): Starting with the January 2012 plan year, regional PPO plans will be subject to the mandatory MOOP and catastrophic limit requirements that apply to local MA plans.[23]
• Delivery of Adverse Part D Coverage Determination: A PDP may deliver an adverse coverage determination orally provided that it also sends the enrollee a written notice within 3 calendar days of the oral notice. CMS will provide guidance on the content of the oral notification.[24]
• Extension of Grace Period for Good Cause and Reinstatement: Beneficiaries who establish good cause for failure to pay a premium that leads to disenrollment from an MA plan or a PDP and who pay the arrearage in full within 3 months of the disenrollment may be reinstated into the plan. The failure to pay the premiums must have been due to circumstances beyond the beneficiary's control.  CMS will provide further guidance on what constitutes good cause.[25]
• Translated Marketing Materials: Plan sponsors must provide translated marketing materials in any language that is spoken by more than 5 percent of the general population in a plan benefit package service area.[26]  The final rules respond to comments by beneficiary advocacy groups and moved the population-based threshold from 10 percent as proposed to the 5 percent standard.  They also revise the method of calculating the threshold by focusing on individuals who primarily speak a non-English language, as opposed to including bilingual individuals.

Provisions to Assist CMS in Approving Stronger Part C and Part D Plan Applicants

• Expand Network Adequacy Requirements to Additional MA Plan Types: All MA plan types, including Medicare Medical Savings Account (MSA) plans that use a network of providers, will have to meet network adequacy requirements.[27]
• Release of Part C and Part D Payment Data: Part C and Part D plan contracts are to be amended to acknowledge that CMS publicly releases Part C and Part D summary payment data.  The data are to be released after CMS reconciles payments for the contract year. CMS says the purpose is to provide more information so that beneficiaries, researchers, and taxpayers can better understand Part C and Part D expenditures.[28]  Data will only be released to the extent that individually identifiable information is protected, consistent with CMS policy.  CMS will not release summary payment information or risk scores when the small number of enrollees in a plan or in an area might allow for the identification of individual information.
• Payment for Multi-Ingredient Drug Compounds: Only compounds that contain at least one ingredient that is a Part D-covered drug may be covered under Part D.  Sponsors may cover the Part D ingredients even if the compounded drug as a whole is not a Part D-covered drug.  If at least one component of the drug is covered under Part B, then the drug is a Part B drug.  For a Part D compound to be considered on formulary, all ingredients that separately meet the definition of a Part D drug must be on formulary.  In response to comments from beneficiaries, CMS did not adopt a proposed provision that would have allowed pharmacists to bill beneficiaries separately for non-Part D-covered components.  The final rule specifically states that the contract between the plan and the pharmacy must prohibit balance billing.  Also in response to beneficiary comments, the final rule states that, for low-income subsidy-eligible individuals, the co-payment amount is based on whether the most expensive Part D-covered component of the compound drug is a generic or brand name drug.[29]

Other Clarifications and Technical Changes

• Part D Transition Requirements:  The final rules modify the transition policy for enrollees residing in LTC facilities to be more consistent with rules that allow nursing homes to dispense some drugs in 7-day increments rather than in increments of 31 days. The temporary supply of non-formulary drugs, drugs subject to step therapy, and drugs subject to prior authorization must be for up to at least 91 days and up to 98 days consistent with the dispensing increment.  CMS explains in the preamble that the temporary supply should be evenly divisible by the quantities dispensed, ex., up to 93 days for a 31-day dispensing increment, up to 91 days for a 7-day dispensing increment, or up to 98 days for a 14-day dispensing increment. The beneficiary is to get one notice at the start of the transition fill period, to be sent within 3 business days of the first temporary fill.[30]
• Charges to Enrollees for Emergency Department Services:  Despite comments from beneficiary advocates, CMS modified the rule concerning charges for emergency department services.  The rule no longer caps the charge at $50, but states that CMS will determine the maximum charge annually.

Conclusion

The new Parts C and D rules make many changes to the workings of the Medicare Advantage and prescription drug programs.  Some of the changes address issues raised by beneficiary advocates for many years.  While the new rules are very detailed, the delay in their implementation will afford advocates the opportunity to familiarize themselves with the new requirements and protections. Advocates should be alert when reviewing Medicare Advantage and Part D plans during the annual coordinated enrollment period to ensure that plan offerings and plan materials to beneficiaries comply with the new requirements.

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[1] 76 Federal Register Parts 21432 (April 15 2011), amending 42 C.F.R. Parts 422 and 423.
[2] 42 C.F.R. §§417.454 and 422.100.
[3] 42 C.F.R. §§422.62, 422.68, 423.38, and 423.40.
[4] 42 C.F.R. §§422.2, 422.4, 422.101, 422.107 and 422.152.
[5] 42 C.F.R. §§422.254, 422.256, 423.265 and 423.272.
[6] 42 C.F.R. §423.780.
[7] 42 C.F.R. §§423.34 and 423.780.
[8] 42 C.F.R. §§423.44, 423.286, and 423.293.
[9] Medicare Prescription Drug Manual, Chapter 3, §50.3.1
[10] 42 C.F.R. §§423.772 and 423.782.
[11] 42 C.F.R. §423.154.
[12] 42 C.F.R. §§422.504 and 423.505.
[13] 42 C.F.R. §§423.128 and 423.562.
[14] 42 C.F.R. §§423.100 and 423.464.
[15] 42 C.F.R. §§417.454 and 422.100.
[16] 42 C.F.R. §423.153.
[17] 42 C.F.R. §423.104 and 423.884.
[18] 42 C.F.R. §§422.562, 422.566, 423.4, 423.562, and 423.566.
[19] 42 C.F.R. §§ 422.2274; 423.2274.
[20] 42 C.F.R. §§ 422.111; 423.128.
[21] 42 C.F.R. §§ 422.2272; 423.2272.
[22] 42 C.F.R. §422.111.
[23] 42 C.F.R. §§422.100, 422.101.
[24] 42 C.F.R. §§423.568.
[25] 42 C.F.R. §§ 422.72; 423.44.
[26] 42 C.F.R. §§4222.2264; 423.2264.
[27] 42 C.F.R. § 422.112.
[28] 42 C.F.R. §§422.504; 423.505; 423.884.
[29] 42 C.F.R. §423.120(d).
[30] 42 C.F.R. § 423.120.