Medicare Part C and D
Elizabeth B. Lippincott Emily A. Moseley Lippincott Law Firm PLLC
Contents
Introduction ... 3
Instructions on Using the Guide ... 3
Glossary and Definitions ... 4
Glossary of Acronyms ... 4
Definitions ... 6
Medicare Part C (Medicare Advantage) ... 11
Types of Medicare Advantage Plans ... 11
Regulations and Manual Chapter ... 11
Coordinated Care Plans ... 11
Private Fee‐for‐Service (PFFS) Plan ... 12
Overview of Benefits ... 12
Regulations and Manual Chapter ... 12
Basic, Required Benefits ... 12
Supplemental Benefits ... 13
Bidding ... 13
Regulations and Guidance ... 13
Bidding Process ... 13
Plan Reimbursement Methodology ... 13
Regulations ... 13
Capitated Payments ... 13
Regulation of Medicare Advantage Plan Operations ... 15
Eligibility and Enrollment ... 15
Organization Determinations... 18
Reconsiderations and Appeals ... 18
Grievances ... 19
Provider Network ... 20
Provider Reimbursement ... 20
Medicare Part D Prescription Drug Plans ... 20
Overview of Benefits ... 21
Bidding ... 22
Regulations and Guidance ... 22
Bidding Process ... 22
Plan Reimbursement Methodology ... 23
Regulation of Part D Plan Operations ... 23
Eligibility and Enrollment ... 23
Beneficiary Premium and Late Enrollment Penalty ... 25
Coverage Determinations ... 25
Transition Process ... 26
Redeterminations and Appeals ... 26
Grievances ... 26
Pharmacy Network ... 27
Marketing of Medicare Advantage and Part D Plans ... 27
Regulations and Manual Chapter ... 27
Development, Filing, and Distribution of Marketing Materials ... 27
Filing of Marketing Materials ... 28
Compliance Program Requirements for Medicare Advantage Plans ... 30
Monitoring and Oversight of Medicare Advantage and Part D Plans ... 31
Plan Reporting... 31
Ongoing Monitoring and Audits of Plan Performance ... 32
Conclusion ... 32
Introduction
This Introductory Guide to the Fundamentals of Medicare Parts C and D (this
"Guide") serves as a starting point for health lawyers researching questions about Medicare Part C ("Medicare Advantage" or "MA") and Part D Plans. The Guide begins with an overview of the acronyms and terminology of Medicare Parts C and D and then highlights key features of Part C and D Plan structure, bidding, payment methodology, and regulation of operational areas.
Instructions on Using the Guide
The high‐level discussion of topics included in this Guide represents the tip of the iceberg of the regulatory framework for Medicare Advantage and Part D. When using the Guide, health lawyers should recognize that more detailed requirements exist in regulations and guidance for every subject discussed and refer to primary sources for more information.
Throughout the Guide, there are hyperlinks to primary sources of regulation and sub‐regulatory guidance contained in CMS Manuals and other materials. CMS updates materials frequently, so health lawyers should verify that any linked materials have not been revised and reissued. Additionally, please note that other sources of sub‐ regulatory guidance exist, including memos sent directly to plan sponsors from CMS. Although a limited selection of these memos is posted on CMS' website for Medicare Advantage and Part D plans, at this time, there is not a comprehensive government repository of CMS guidance to plan sponsors.
Glossary and Definitions GLOSSARY OF ACRONYMS
The following are acronyms used in this Guide. Please see the definitions below for more detail.
Acronym Term
ACEP Annual Coordinated Election Period
ADP Annual Disenrollment Period
AEP Annual Enrollment Period
ALJ Administrative Law Judge
ANOC Annual Notice of Change
CAP Corrective Action Plan
CMS Center for Medicare & Medicaid Services
CTM Complaints Tracking Module
EGHP / EGWP Employer Group Health Plan, sometimes referred to as Employer Group Waiver Plan
EOC Evidence of Coverage
HCERA The Health Care and Education Reconciliation Act of 2010 HIPAA The Health Insurance Portability and Accountability Act
HPMS Health Plan Management System
ICL Initial Coverage Limit
IEP Initial Enrollment Period
IRE Independent Review Entity
LIS Low Income Subsidy
MA Medicare Advantage
MAC Medicare Appeals Council
MA‐PD Medicare Advantage Prescription Drug Plan
MIPPA The Medicare Improvements for Patients and Providers Act
MSA Medicare Savings Account
PDP Prescription Drug Plan
PFFS Private Fee For Service
PPACA The Patient Protection and Affordable Care Act
PPO Preferred Provider Organization
QIC Qualified Independent Contractors
RADV Risk Adjustment Data Validation
SEP Special Enrollment Period
SNP Special Needs Plan
TrOOP True Out‐of‐Pocket Costs
TRR Transaction Reply Report
DEFINITIONS
The following are defined terms used in this Guide: Term
Definition
Affordable Care Act Collective reference to PPACA, as amended by HCERA.
Annual Disenrollment Period MA and Part D enrollees have from January 1 to February 15 to disenroll from an MA plan and return to Original Medicare. Annual Coordinated Election
Period
Another term for the Annual Enrollment Period.
Annual Enrollment Period The period in which Medicare beneficiaries may enroll in a plan for the upcoming year. In 2011, the enrollment period changes from November 15 through December 31st to October 1 through December 7.
Annual Notice of Change The annual notice plans must send members in the fall stating any changes in health and drug coverage, costs, or services, that will become effective January 1.
Appeals The term used generally to describe all of the levels of recourse a member has to challenge a plan's decision, including reconsiderations (internal appeal to an MA plan) redeterminations (internal appeal to a Part D plan), and the additional levels of external appeal available (IRE, ALJ, MAC, judicial review).
Call Letter The annual instructions issued in the spring by CMS providing information and operational guidance for the upcoming benefit year for plans to use for bid preparation, implementation of CMS policies and procedures, and compliance with critical program requirements.
Capitated Payments Payments made by CMS to plans based on the number of enrollees covered by a plan in a given month.
Center for Medicare & Medicaid Services
The federal agency which administers Medicare, Medicaid, and the Children’s Health Insurance Program.
Complaints Tracking Module The system for tracking resolution of beneficiary complaints about MA or Part D plans that are reported directly to CMS. Corrective Action Plan The plan of action developed by a plan sponsor and, in some
cases, reviewed and approved by CMS, in response to compliance deficiencies identified by the plan or CMS. Coverage Determinations Decisions made by a Part D plan about the prescription drug
benefits an enrollee is entitled to and the level of cost sharing. Creditable Coverage Prescription drug coverage that is actuarially equivalent or
more generous than the standard Part D benefit. In other words, coverage that is expected to pay at least as much as the standard Part D coverage on average.
Evidence of Coverage The annual member booklet detailing, among other information, what benefits the plan will cover, how much members pay, and how to file an appeal.
Downstream Entity A contractor of a First Tier Entity and a subcontractor of a plan sponsor, including administrative services providers and healthcare providers, such as physicians and pharmacies. File and Use Process to file certain marketing materials which can then be
used beginning five days after filing with CMS.
First Tier Entity A contractor providing administrative or health care services for an MA or Part D plan, such as a pharmacy benefit manager. Grievances Complaints that do not qualify as organization determinations,
coverage determinations, or appeals of organization or coverage determinations.
Health Plan Management System
A CMS system used to transfer information to and from plans. For example, plan sponsors file marketing materials and receive approvals or rejections through HPMS, and CMS routinely sends guidance memos to plans through HPMS. Independent Review Entity The CMS‐contracted organization that reviews the
redeterminations and reconsiderations made by an MA or Part
D plan sponsor.
Initial Enrollment Period The seven month period beginning three months before an individual becomes eligible for Original Medicare and ending three months after the month of eligibility, when a beneficiary can first enroll in an MA, MA‐PD or Part D plan.
Low Income Subsidy A subsidy from Medicare, sometimes referred to as "extra help," that provides financial assistance for low‐income beneficiaries who meet income and resource requirements. Generally, recipients pay reduced or no Part D plan premiums, and reduced cost‐sharing.
MA Organizations An entity organized and licensed by a State as a risk‐bearing entity (with the exception of provider‐sponsored organizations receiving waivers) that is certified by CMS as meeting the MA contract requirements.
Marketing Guidelines CMS’s interpretation of the marketing requirements and related provisions of the MA and Part D regulations. The same Marketing Guidelines constitute Chapter 3 of the Medicare Managed Care Manual and the Prescription Drug Benefit Manual.
Marketing Materials Marketing Materials include any informational materials targeted to Medicare beneficiaries that promote a plan; inform beneficiaries that they may enroll, or remain enrolled in a plan; explain the rules and benefits of enrollment; or explain how services are covered. They may include advertising, presentation materials or promotional materials supplied to third parties. They may also include letters to plan members, membership communications, or membership activities.
Medicare Advantage Medicare Part C or “MA” Plans, offered by private companies approved by Medicare and which include both Part A (Hospital Insurance) and Part B (Medical Insurance) coverage.
Medicare Advantage Organization or MA Organization
An approved sponsor of Medicare Advantage plans
Medicare Advantage Prescription Drug Plan
A Medicare Advantage Plan that offers Medicare prescription drug coverage.
Medicare Part A Hospital insurance that pays for inpatient hospital stays, care in a skilled nursing facility and some home health agency services, and hospice care.
Medicare Part B Medical insurance that pays for physician services, outpatient hospital care, and some medical services not covered by Part A.
Medicare Part C Medicare Advantage or Part C plans are health plans offered by private companies, approved by Medicare, that provide both Part A (hospital insurance) and Part B (medical insurance) coverage.
Medicare Part D Medicare prescription drug coverage, either Medicare Prescription Drug Plans or Medicare Advantage Plans. Organization Determinations Decisions made by a Medicare Advantage Plan about the
benefits an enrollee is entitled to and the level of cost sharing. Original Medicare Coverage available under Part A and Part B through the
traditional fee‐for‐service payment system. Preferred Provider
Organization
A managed care plan in which benefits are available for care delivered by providers belonging to the plan's network or by out‐of‐network providers.
Prescription Drug Plan Term used to describe Medicare Part D Prescription Drug Plans (PDPs) .
Private Fee For Service A type of Medicare Advantage plan in which (before 2011) beneficiaries can go to any Medicare‐approved provider that accepts the plan’s payment terms, whether or not the provider has a contract with the plan, and the plan pays at least what the provider would receive under Original Medicare.
Reconsiderations The first level of appeal of a Medicare Advantage plan's organization determination, which is administered internally by the plan.
Redeterminations The first level of appeal of a Part D plan's coverage
determination, which is administered internally by the plan. Related Entity Any entity related to a plan sponsor by common ownership or
control that (1) performs management functions under contract or delegation; (2) furnishes services to enrollees; or (3) leases real property or sells materials to plan sponsor at a cost of more than $2,500 during a contract period.
Risk Adjustment Data Validation
Data validation audits performed by CMS to verify that
information submitted by MA organization is supported by the beneficiary‐patient’s medical records documentation. Plans routinely undergo small‐scale annual audits, but selected plans are subject to additional, very extensive and resource‐
intensive RADV audits, which are likely to result in requests for retroactive repayment of amounts paid to the plan by CMS. Special Enrollment Period A set time that a beneficiary can sign up for an MA or Part D
plan (e.g. moving to a different service area).
Transaction Reply Report CMS’s electronic response to a plan regarding enrollment transactions.
True Out of Pocket Cost TrOOP costs are prescription drug expenditures that count toward the annual out‐of‐pocket threshold that beneficiaries must reach before catastrophic drug coverage begins.
Medicare Part C (Medicare Advantage)
Under Medicare Part C,1 private companies contract with the federal government to offer Medicare medical benefits to beneficiaries. The plans, previously called Medicare+Choice, are now referred to as Medicare Advantage. CMS pays the plan sponsor on a capitated risk basis to manage each enrollee's Original Medicare benefits, which can be enhanced as described below, under the Medicare Advantage plan's approved benefit structure.
Types of Medicare Advantage Plans
Medicare Advantage includes several different types of plans.2 If licensed or otherwise approved under state law, a Medicare Advantage Organization may offer multiple plans and types of plans. Medicare Advantage Organizations must offer a plan option with Part D prescription drug benefits, though Medicare Advantage medical‐only plans may also be offered.
REGULATIONS AND MANUAL CHAPTER
The regulations describing the types of Medicare Advantage plans can be found at 42 C.F.R. Section 422.4, and Chapter 1 of the Medicare Managed Care Manual provides additional details on each type of Medicare Advantage Plan.
COORDINATED CARE PLANS
A coordinated care plan relies on a network of providers to deliver CMS‐ approved benefit packages. Coordinated care plans may include mechanisms to control utilization, such as referrals from a gatekeeper and financial arrangements that offer incentives to providers to furnish high quality and cost‐effective care. Coordinated care plans include:
Health Maintenance Organizations (HMO) Plan
A Medicare Advantage HMO Plan offers a network of contracted providers. Generally, out‐of‐network benefits are available only if services are required that cannot be provided in‐network.
Preferred Provider Organization (PPO) Plan
A PPO plan also relies on a network of providers who have agreed to a contractually specified reimbursement for covered benefits, but a PPO plan must reimburse all covered benefits regardless of whether the benefits are provided within the network of providers.
Special Needs Plan (SNP)
A SNP is a specialized, coordinated care, Medicare Advantage plan expressly for special needs individuals, such as individuals living in nursing homes or those with certain chronic or disabling conditions. There are also SNPs for beneficiaries eligible for both Medicare and Medicaid, known as "dual eligibles."
PRIVATE FEE‐FOR‐SERVICE (PFFS) PLAN
A PFFS Plan pays providers at a rate determined by the plan on a fee‐for‐service basis, either through deeming, as described below, or through negotiated contract rates. A PFFS Plan may not restrict an enrollee’s choice among providers that are lawfully authorized to provide services and agree to accept the plan's terms and conditions of payment. Before 2011, PFFS plans generally could operate without a network of contracted providers. Providers were "deemed" to have accepted the plan's fees and terms if they rendered services to PFFS enrollees, as long as the plan's reimbursement to providers was at least equal to what they would receive under Original Medicare.3
Effective in 2011, Section 162 of the Medicare Improvements for Patients and Providers Act of 2008 (“MIPPA”) (H.R. 6331), reflected in regulations at 42 C.F.R. Section 422.114(a)(3), required that individual PFFS plans operating in a service area with two or more network MA plans (coordinated care, network‐based MSA, or reasonable cost reimbursement plans) maintain a contracted network of providers that meets MA access to care requirements.4 Employer‐sponsored PFFS plans must maintain a contracted provider network that meets access requirements, regardless of whether multiple network‐based plans are available in the service area.5
Overview of Benefits
REGULATIONS AND MANUAL CHAPTER
The regulations governing the benefits available under Medicare Advantage plans can be found at 42 C.F.R. Part 422, Subpart C, and are further detailed in Chapter 4 of the Medicare Managed Care Manual.
BASIC, REQUIRED BENEFITS
Generally, Medicare Advantage plans must cover all services that are covered under Original Medicare, following national and local Medicare coverage determinations as well as Medicare coverage guidelines.6 Plans are subject to specific caps on out‐of‐pocket spending, set annually by CMS.7 Plan sponsors have some flexibility in structuring their benefits. In Medicare Advantage benefit packages, it is common to see outpatient services with fixed copayments, with inpatient benefits offered either with a percent coinsurance or fixed per‐day or per‐admission inpatient copayments, subject to an annual cap on out‐of‐pocket costs.
In addition, Medicare Advantage benefits are generally subject to utilization management programs similar to those administered for commercial managed care
plans. Medicare Advantage plan sponsors are required to administer quality improvement programs, including chronic care management. 8
SUPPLEMENTAL BENEFITS
MA Plans can add to these benefits by offering enrollees supplemental benefits and services.9 Examples of supplemental benefits include vision care, dental benefits, and gym memberships.
Bidding
REGULATIONS AND GUIDANCE
The regulations governing submission of bids can be found at 42 C.F.R. Part 422, Subpart F, and CMS distributes annual guidance to plans with benefit package and bid instructions, including the annual Advance Notice of Methodological Changes and Draft Call Letter and Announcement of Calendar Year Medicare Advantage Capitation Rates and Medicare Advantage and Part D Payment Policies and Final Call Letter (for 2013). BIDDING PROCESS
Approved MA Organizations submit bids to CMS no later than the first Monday in June for the following year, with an aggregate monthly bid amount for each MA plan the organization intends to offer.10 Bids for different plan benefit packages offered by the same MA Organization must reflect substantial differences relative to other options offered by that organization.11 CMS has the authority to negotiate with an MA Organization before approving or rejecting a bid.
Plan Reimbursement Methodology REGULATIONS
The regulations governing payments to MA Organizations can be found at 42 C.F.R. Part 422, Subpart G. These regulations were recently updated to incorporate extensive changes to payment methodology contained in the Affordable Care Act, which went into effect beginning in 2012. In its Final Rule dated April 15, 2011, CMS finalized regulations implementing these changes, and the Advance Notice of Methodological Changes and Draft Call Letter and Announcement of Calendar Year Medicare Advantage Capitation Rates and Medicare Advantage and Part D Payment Policies and Final Call Letter for 2012 outlined implementation instructions for the updated payment methodology.
CAPITATED PAYMENTS
There are two types of Medicare Advantage plans for purposes of payment, local plans, which serve one or more counties, and regional plans, which serve one or more of the regions created by CMS. For each county or region, there is a benchmark rate that has been adjusted for various factors including projected rates of per capita growth in medical expenditures.12
MA plan sponsors bid against a blended benchmark created by the Affordable Care Act.13 Benchmark rates for MA plan reimbursement are calculated taking into account each county’s per capita Original Medicare spending. Under the updated methodology, counties will be divided into quartiles based on their per capita Original Medicare spending, and benchmarks will be set using a percentage of Original Medicare spending, as shown in the following table:14
Quartile Benchmark Percentage
4 (highest) 95% of county’s Original Medicare spending
3 100% of county’s Original Medicare spending
2 107.5% of county’s Original Medicare spending
1 (lowest) 115% of county’s Original Medicare spending
These percentage adjustments will be phased in between 2012 and 2017 under a schedule that takes into account the extent of the reduction in the county benchmark.15 In addition, CMS will add quality bonuses to benchmarks for plans calculated based on the plan’s star rating. Medicare Advantage plans receive a quality rating using a five‐star scale that is posted on Medicare.gov and is based on performance measures in the following five categories:16
Staying Healthy: Screenings, Tests and Vaccines
Managing Chronic (Long Term) Conditions
Member Experience with Health Plan
Member Complaints, Problems Getting Services, and Improvement in the Health Plan’s Performance
Health Plan Customer Service
For 2012 through 2014, CMS will administer a Medicare Advantage Quality Bonus Payment Demonstration that increases the benchmark for Medicare Advantage plans achieving a rating of between three and five stars.17 The 2014 bonus percentages range from three percent for three‐star plans up to five percent for five‐star plans.18 For 2015, the Quality Bonus Payment Demonstration will have ended, and CMS will compensate MA plans under the ACA’s methodology. Under that structure, Medicare Advantage plans must obtain a star rating of at least four stars to qualify for a quality bonus payment.19
Plans receive reimbursement per member, per month, based on an aggregate bid amount for coverage of a beneficiary with an average risk profile, which is then adjusted for individual member demographic and health risk factors, referred to ask risk adjusters.20 Reimbursement and beneficiary premiums are determined based on
whether the plan's bid falls above or below the benchmark, as illustrated in the following graphic:21
If the bid falls below the benchmark, then the plan may use a percent of the difference, called a rebate, to fund supplemental benefits, offset the premium for Part D benefits in an MA‐PD plan, or as a credit to members' Part B premium.22 This is why some MA products are offered as "zero‐premium" plans. If the bid falls above the benchmark, then the beneficiaries must pay the difference as a premium for their Part C medical benefits.23
Through 2011, all plans were entitled to use 75 percent of the rebate to supplement benefits or offset Part D or B premiums. In accordance with the Affordable Care Act, beginning in 2012, CMS will adjust the rebate percentage a plan can use for the approved purposes based on the plans star‐rating level as follows:24
Star Rating 2012 2013 2014
4.5+ Stars 73.33% 71.67% 70%
3.5 to <4.5 Stars 71.67% 68.33% 65%
<3.5 stars 66.67% 58.33% 50%
This variation in plans’ ability to use the rebate to enhance member benefits and reduce premium reflects an effort to reward high quality MA plans by positioning them favorably in the marketplace.
Regulation of Medicare Advantage Plan Operations ELIGIBILITY AND ENROLLMENT
Regulations and Manual Chapter
The regulations governing eligibility and enrollment for Medicare Advantage plans can be found at 42 C.F.R. Part 422, Subpart B, and Chapter 2 of the Medicare Managed Care Manual expounds on these requirements. Additionally, there is a helpful summary calendar of the entire contract year, highlighting enrollment periods, at the end of the Announcement of Calendar Year Medicare Advantage Capitation Rates and Medicare Advantage and Part D Payment Policies and Final Call Letter.
Eligibility for Medicare Advantage
The following is an outline of eligibility requirements that must be met for enrollment in Medicare Advantage plans:25
Additional requirements apply for eligibility for SNPs and Employer Group Health Plans.
Election Periods
Eligible beneficiaries may enroll in Medicare Advantage, change plans, or disenroll only during specified time periods, as described below:26
Enrollment Process
In general, MA Plans must accept individuals who elect to enroll during an appropriate enrollment period. The election must meet CMS requirements regarding content and format and be approved by CMS, which can include paper enrollment forms, online enrollment applications, telephone enrollments, or enrollment through www.medicare.gov.27 Plan sponsors must comply with specified timeframes for enrollment processing and notices of enrollment receipt, acceptance, or denial. For example, the MA Organization has seven calendar days to submit to CMS an enrollment request received from an applicant.28 CMS will then send a Transaction Reply Report
("TRR") indicating whether the enrollment was accepted or rejected, and the MA organization must send written notice of the decision to the applicant within ten calendar days of receipt of the TRR.29
Disenrollment
Generally, an enrollee can disenroll only during an annual or special election period.30 There are circumstances in which an MA Organization is either required or permitted to involuntarily disenroll members, such as moving out of the service area (required) or non‐payment of premium (permitted), in which case the plan must follow beneficiary notice requirements.31
ORGANIZATION DETERMINATIONS
Organization determinations are decisions about the benefits an enrollee is entitled to receive and the level of cost‐sharing. The regulations governing standard and expedited organizational determinations for Medicare Advantage plans are found at 42 C.F.R. 422.566 through 422.576, and are expanded upon in Chapter 13 of the Medicare Managed Care Manual.
Organization determinations may be in response for requests for service or requests for payment, and requests for service can be made based on standard or expedited timeframes. The following is an overview of the timeframes for decisions on organization determinations.32
RECONSIDERATIONS AND APPEALS
Reconsiderations are first level appeals to the plan following an adverse organization determination, which are further appealable to decision makers outside of the plan. The regulations governing standard and expedited organizational determinations for Medicare Advantage plans are found at 42 C.F.R. 422.566 through
422.576, and are expanded upon in Chapter 13 of the Medicare Managed Care Manual. The timeframes for reconsideration decisions are as follows:33
If a plan's decision on reconsideration is adverse to the enrollee, then the plan must automatically forward the case to an Independent Review Entity (IRE) for further review.34 In the event that the IRE upholds the plan's decision, the external levels of appeal available to MA enrollees, some of which have minimum amounts in controversy, are as follows:35
GRIEVANCES
Generally, grievances are complaints about the plan that are not organization determinations or appeals of organization determinations.36 The regulations governing grievances can be found at 42 C.F.R. §§ 422.561 through 422.564, and more detailed discussion can be found in Chapter 13 of the Medicare Managed Care Manual. MA plans must provide a grievance process for enrollees that includes, among other things, notice to enrollees no later than 30 calendar days after receipt of a grievance.37
PROVIDER NETWORK
As described above under Types of Medicare Advantage Plans, plan sponsors generally must provide a contracted network of credentialed providers. Sponsors of coordinated care plans (and since 2011, many PFFS plans) must create and maintain contracted networks that meet care access requirements, which are described in 42 C.F.R. §§ 422.112 through 422.114 and Section 110 of Chapter 4 of the Medicare Managed Care Manual. MA plans must credential contracted providers initially upon contracting, and then providers must be re‐credentialed at least every three years.38 CMS regulations mandate that the written contracts between MA plan sponsors and health care providers, which CMS considers to be subcontractors or “first tier” and
“downstream” entities, contain certain provisions, such as audit and inspection rights and a 10‐year record retention requirement.39 The regulations governing relationships between providers and sponsors of Medicare Advantage plans can be found at 42 C.F.R Part 422, Subpart E, and Chapter 6 of the Medicare Managed Care Manual further explains these requirements.
PROVIDER REIMBURSEMENT
The reimbursement terms between MA plans and their contracted providers are the product of private contract negotiations, and contracted rates are typically set as a percent of Original Medicare. The Social Security Act provisions on MA plans include a
"non‐interference clause" that provides as follows: "(iii) Noninterference. In order to promote competition under this part and part D and in carrying out such parts, the Secretary may not require any MA organization to contract with a particular hospital, physician, or other entity or individual to furnish items and services under this title or require a particular price structure for payment under such a contract to the extent consistent with the Secretary's authority under this part."40 Generally, this means that CMS is not involved in pricing or contract discussions or disputes between MA plans and network or prospective network providers. Non‐contracted providers furnishing services to MA members must accept Original Medicare reimbursement rates as payment in full.41
Medicare Part D Prescription Drug Plans
Under Medicare Part D,42 private companies contract with the federal government to offer Medicare prescription drug benefits to beneficiaries. CMS makes capitated payments to the plan sponsor to administer enrollees' benefits under the Part D plan's approved benefit structure.
Overview of Benefits Regulations and Guidance
The regulations describing Medicare Part D benefits are in 42 C.F.R. Part 423, Subpart C, and additional information can be found in Chapter 5 of the Medicare Prescription Drug Benefit Manual in the annual Announcement of Calendar Year Medicare Advantage Capitation Rates and Medicare Advantage and Part D Payment Policies and Final Call Letter.
Description
Plan sponsors offering Medicare Part D benefits must offer a standard benefit or its actuarial equivalent and have the option of offering additional enhanced Part D benefit plans.43 Every Part D plan must have a CMS approved formulary of covered prescription drugs. Plans are subject to specific caps on out‐of‐pocket spending, set annually by CMS.44 Common benefit modifications and enhancements include plans without deductibles, with tiered copayments instead of coinsurance, or with generic drug benefits during the coverage gap. Beneficiaries who qualify for a Low Income Subsidy (LIS) pay lower cost sharing and lower or no premium for Part D coverage, as described in detail in Chapter 13 of the Medicare Prescription Drug Benefit Manual.45 The following is a description of the four phases of the standard Part D benefit for 2011: Standard Part D Benefit in 2013
Coverage Gap Discount Program
The Affordable Care Act created a program to close the coverage gap by requiring, among other things, that manufacturers of Part D drugs reimburse plans for fifty percent of member costs during the coverage gap.46 In 2011 and 2012, members of
standard Part D benefit plans were responsible for fifty percent coinsurance. The ACA provided for a phase‐in of additional costs in the coverage gap to be covered by the Part D plan, and by 2020, member coinsurance in this benefit phase will have been reduced to twenty‐five percent. With respect to brand drugs, for 2013 and 2014, the Part D plan will pay 2.5 percent, and the member will be responsible for the 47.5 percent that remains after the brand drug manufacturer contributes fifty percent through the discount program.47
For generic drugs, the Part D plan’s share of the cost in the coverage gap began at a rate of seven percent in 2011 and will increase by seven percent per year until it 2020, when it will be set at twenty‐five percent.48 In 2013, the Part D plan will cover twenty‐one percent of the cost of generics, and the member will be responsible for seventy‐nine percent.
Low Income Subsidy (LIS) and Low Income Cost Sharing (LICS)
Medicare beneficiaries meeting income and asset requirements may be eligible for two types of assistance with their Part D benefits, a premium subsidy referred to as LIS and a cost‐sharing subsidy referred to as LICS. Each subsidy is provided in multiple levels, depending on the individual’s financial status. Full Benefit Dual Eligible beneficiaries as well as those with income at or below 135 percent of the federal poverty level receive highest level of premium subsidy, which is one hundred percent of the national low‐income benchmark premium amount.49 There are three tiers of partial LIS that receive seventy‐five, fifty, and twenty‐five percent premium subsidy.50 LIS eligible individuals are not subject to the late enrollment penalty (LEP).51
There are three tiers of benefits for members eligible for LICS, Full‐Subsidy‐Full Benefit Dual Eligible (persons with Medicaid as well as Medicare), Full Subsidy, and Partial Subsidy.52 This means that for each Part D benefit plan, a plan sponsor will actually be administering four benefit packages, the standard benefit plus each of the three LICS levels.
Bidding
REGULATIONS AND GUIDANCE
The regulations governing submission of bids can be found at 42 C.F.R. Part 423, Subpart F, and CMS distributes annual guidance to plans with benefit and bid instructions, including the annual Advance Notice and the Announcement of Calendar Year Medicare Advantage Capitation Rates and Medicare Advantage and Part D Payment Policies and Final Call Letter.
BIDDING PROCESS
Plan sponsors and applicants submit bids to CMS no later than the first Monday in June for the following year.53 Bids for different plan benefit packages offered by the same sponsor must reflect substantial differences relative to other options offered by that organization.54
Plan Reimbursement Methodology
Part D plans receive reimbursement per member, per month based on the plan's approved standardized bid amount, adjusted for members' health status and risk and reduced by the amount of the member's premium for the plan.55 CMS calculates an annual benchmark amount, or national average monthly bid amount, which is an average of standardized bids, weighted by enrollment.56 In addition, CMS makes reinsurance payments to plans for eighty percent of drug costs for members in the catastrophic coverage phase of the Part D benefit. Finally, there may be retroactive adjustments to payments a plan received for a contract year based on a reconciliation process to evaluate prospective payments against experience as well as calculations under risk corridors.57
Regulation of Part D Plan Operations ELIGIBILITY AND ENROLLMENT
Regulations and Manual Chapter
The regulations governing eligibility and enrollment for Part D plans can be found at 42 C.F.R. Part 423, Subpart B, and Chapter 3 of the Part D Prescription Drug Benefit Manual further explains these requirements.
Eligibility for Part D
The following is an outline of eligibility requirements that must be met for enrollment in Part D plans:58
Election Periods
Eligible beneficiaries may enroll in Part D, change plans, or disenroll only during specified time periods, as described below:59
Enrollment Process
In general, Part D plans must accept individuals who elect the plan during an appropriate enrollment period. The enrollment form or other CMS‐approved mechanism, which can include online enrollment, telephone enrollment, or enrollment through www.medicare.gov, must comply with CMS instructions regarding content and format.60 Enrolling individuals must provide information regarding coverage under other insurance, group plans, or other third‐party arrangements. The plan sponsor must timely process the enrollment request and provide prompt notice of acceptance or denial. For example, the Part D plan sponsor has seven calendar days to submit to CMS an enrollment request received from an applicant.61 CMS will then send a Transaction Reply Report ("TRR") indicating whether the enrollment was accepted or rejected, and the plan sponsor must send written notice of the decision to the applicant within ten calendar days of receipt of the TRR. CMS may passively enroll individuals in limited circumstances, for example, in the case of an immediate termination of a plan.62
In addition, CMS enrolls low‐income subsidy ("LIS") eligible individuals, through what is referred to as "auto" or "facilitated" enrollment.63 Full‐benefit dual eligibles, beneficiaries who are eligible for comprehensive Medicaid benefits who have not opted out of Part D or enrolled in a Part D plan are generally "auto‐enrolled" into a plan.64 LIS eligible beneficiaries who do not receive full Medicaid benefits and have not opted out of Part D or enrolled in a plan will generally be "facilitated‐enrolled" into a qualifying Part D plan.65
Disenrollment
Generally, an enrollee can only voluntarily disenroll during an annual or special election period and will remain enrolled in a Part D plan until the individual enrolls in another Part D or MA plan or voluntarily disenrolled. There are circumstances in which an MA Organization is either required or permitted to involuntarily disenroll members,
such as moving out of the service area (required) or non‐payment of premium (permitted), in which case the plan must follow beneficiary notice requirements.66 BENEFICIARY PREMIUM AND LATE ENROLLMENT PENALTY
Part D enrollees pay a monthly beneficiary premium, which covers the beneficiary's share (roughly twenty‐five percent) of the cost of standard Part D coverage after that amount is (a) adjusted in the event that the Part D plan's bid exceeded or was lower than the premium benchmark and (b) increased to cover the cost of supplemental coverage included in the plan.67 LIS eligible beneficiaries pay a reduced premium if any.68
An enrollee must pay a late enrollment penalty, which is added to each month's Part D beneficiary premium, if there is a continuous period of at least 63 days in which the individual was eligible for Medicare Part D but not covered under a Part D plan or another source of creditable (actuarially equivalent to Part D) drug coverage.69 For details on creditable coverage and the late enrollment penalty, refer to Chapter 4 of the Medicare Prescription Drug Benefit Manual.
COVERAGE DETERMINATIONS
Coverage determinations are decisions about the prescription drug coverage a Part D enrollee is entitled to and the level of cost‐sharing and include, for example, requests for exceptions to a plan's formulary and requests for prior approval. The regulations governing standard and expedited coverage determinations for Part D Plans are found at 42 C.F.R. 423 Sections 566‐578 and are expanded upon in Chapter 18 of the Part D Prescription Drug Benefit Manual. Each Part D plan sponsor must have standard and expedited procedures for making coverage determinations. The following is an overview of the timeframes for decisions on coverage determinations.70
TRANSITION PROCESS
Part D plans must provide a transition supply of medications to new enrollees or enrollees affected by formulary changes if they have been prescribed drugs that are either not on the plan’s formulary or that are subject to prior authorization or step therapy.71 Members are entitled to a temporary supply of their medication during the first 90 days of their enrollment in the plan.72
REDETERMINATIONS AND APPEALS
Redeterminations are first level appeals to the plan following an adverse coverage determination, which are further appealable to decision makers outside of the plan. The regulations governing standard and expedited redeterminations and appeals for Part D plans are found at 42 C.F.R. Sections 423.580 through 423.638 (redeterminations) and 42 C.F.R. Part 423, Subpart U (external levels of appeal), and are expanded upon in Chapter 18 of the Part D Prescription Drug Benefit Manual. The timeframes for redetermination decisions are as follows:73
If a plan's decision on reconsideration is adverse to the enrollee, then the enrollee has the option of appealing to an Independent Review Entity (IRE) for further review.74 The external levels of appeal available to Part D enrollees, some of which have minimum amounts in controversy, are as follows:75
GRIEVANCES
Generally, grievances are complaints about the plan that are not coverage determinations or appeals of coverage determinations.76 The regulations governing grievances can be found at 42 C.F.R. §§ 423.560 through 423.546, and more detailed discussion is in Chapter 18 of the Part D Prescription Drug Benefit Manual. Part D plans
must provide a grievance process for enrollees that includes, among other mandates, notice to enrollees no later than 30 calendar days after receipt of a grievance.77
PHARMACY NETWORK
Part D plan sponsors must provide a contracted network of pharmacies that meets specific care access requirements, which are described in 42 C.F.R. Section 423.120 and Section 50 of Chapter 5 of the Prescription Drug Benefit Manual. In addition, under certain circumstances, out‐of‐network pharmacy access must be available.78
Marketing of Medicare Advantage and Part D Plans Regulations and Manual Chapter
Because of the risk of beneficiary confusion or manipulation, marketing is one of the most highly regulated and scrutinized functions of a MA or Part D plan sponsor. The regulations governing sales and marketing of MA and Part D plans can be found at 42 C.F.R. Part 422, Subpart V, 42 C.F.R. Part 423, Subpart V, and the Medicare Marketing Guidelines for 2012 ("Marketing Guidelines"), found in Chapter 3 of the Medicare Managed Care Manual, expound on these requirements. Because the requirements are, for the most part, the same for MA and Part D plans, this discussion will address marketing of both types of plans.
Development, Filing, and Distribution of Marketing Materials
The Marketing Guidelines govern virtually every detail of what marketing materials an MA or Part D plan sponsor must distribute, requirements for filing materials with CMS, how and when they are disseminated, and what content they must and must not include.
DEVELOPMENT OF MARKETING MATERIALS
The Marketing Guidelines contain detailed requirements on what must be included in various marketing materials, including specific disclaimers required in certain types of advertisements and other materials, as well as specifications such as font size and form numbers.79 The definition of marketing materials covers more than advertising and includes informational materials targeted to beneficiaries, including the following:80
General audience materials such as brochures, direct mail, newspapers, magazines, television, radio, billboards, yellow pages, or websites;
Marketing representative materials such as scripts or outlines;
Presentation slides;
Promotional materials such as brochures, including those circulated by physicians or other third parties;
Member communications and materials including membership rules, subscriber agreements, member booklets, and wallet card instructions;
Communications to members about contractual changes and changes in providers, premiums, benefits, or plan procedures;
Materials used by agents and brokers; and
Communications to members regarding plan policies, rules about non‐payment of premiums, enrollment confirmations, or other non‐claim specific notices.. CMS creates model materials and requires that plans use certain standardized model materials, without modification, when they are available.81
FILING OF MARKETING MATERIALS
Marketing materials must be filed with CMS through HPMS for approval before they are used by a plan sponsor, as described in Section 90 of the Marketing Guidelines. Plan sponsors are responsible for ensuring that materials comply with the Marketing Guidelines and other applicable requirements, even though they are filed with, and in some cases reviewed and approved, by CMS. It is standard for plan sponsors to use CMS' optional "File and Use" program. Materials qualified to be submitted under File and Use include general advertising that does not mention benefit and plan premium information; provider directories; standardized ANOC/EOC; formularies; certain model enrollment and member letters; and OMB‐approved forms. File and use materials may be used five calendar days after they are filed with CMS.82
The following is a summary of the timeframes for CMS review of filed marketing materials:83
Language Requirements
Marketing materials must be available in any language that is the primary language of more than five percent of a plan sponsor's plan benefit package service area.84 In addition, all plans, regardless of service area, must be able to serve non‐ English speaking callers through their call centers.85
Sales and Marketing Requirements and Prohibitions
The Marketing Guidelines contain numerous requirements and restrictions for sales and marketing of MA and Part D Products. The following table highlights a sampling of these specifications, with references to applicable sections of the Marketing Guidelines:
Plan Sponsors Must Plan Sponsors Must Not
Provide CMS with information about any studies cited in materials, § 40.4
Adhere to requirements for endorsements or testimonials (e.g.
"paid endorsement"), § 40.7
List customer service hours of operation and toll‐free number and TTY information whenever a customer service number is provided, § 40.8
Specify when a number given is for a licensed insurance agent/broker,
§40.8.1
Adhere to specific requirements for marketing multiple lines of business, § 40.11
Conduct outbound calls to new enrollees to confirm understanding of plan rules, § 70.8
Document "scope of appointment" agreed to with beneficiary before face‐ to‐face sales meeting, § 70.10.3
Maintain a website that meets all CMS requirements, § 100
Use hold time messages describing non‐health related services (e.g. life insurance), §30.10
Use of Medicare name, words or symbols in a manner suggesting government endorsement, § 40.4; Appendix 2
Use absolute superlatives (e.g.
"highest ranked") without supporting data, § 40.4
Conduct sales activities in healthcare settings except in common areas, § 70.12
Encourage or allow providers to promote particular plans, § 70.12
Market through unsolicited contacts, including door‐to‐door, telephone, or email solicitation, § 70.6
Restrictions on Gifts and Promotional Activities
Any promotional gifts, items, or activities offered to enrollees and potential enrollees by plan sponsors must be of nominal value, which is currently defined as worth $15 or less retail value, regardless of the actual cost to the plan sponsor.86 The annual aggregate retail value of all items offered to each person must be $50 or less.87 Gifts are subject to numerous additional restrictions, such as the requirement that they be offered to all eligible to enroll regardless of whether they enroll and that they cannot be offered in the form of cash, rebates, or gift cards that could be converted into cash.88
Agent and Broker Training
Plan sponsors must train brokers and agents annually on Medicare rules and regulations and details of the products they sell, and the broker or agent has to receive a score of at least eighty‐five percent on a test regarding the rules and regulations.89 Agent and Broker Compensation
Compensation of external agents and brokers selling Medicare Advantage and Part D products is tightly regulated, and CMS sets limits on rates of initial and renewal compensation.90 Initial compensation can be paid the first year of a beneficiary's enrollment in an MA plan, while renewal compensation (set at fifty percent of initial) is paid in the five years after that, even if the beneficiary enrolls in a different plan, either from the same or a different carrier, that is a like plan type.91 If the enrollee moves to a different plan type (as defined by CMS), the six‐year compensation cycle restarts, and the agent or broker may receive an initial compensation for the first year. Under specific circumstances, including rapid disenrollment, plan sponsors must recover payments made to agents.92
Marketing and Providers
The CMS Marketing Guidelines address marketing activities involving providers. These requirements apply to the MA and Part D plan sponsors, which CMS would hold accountable for non‐compliant activities of providers acting on the plan sponsor’s behalf.93 Generally, providers may not steer or attempt to steer enrollees toward particular MA plans.94 Additional restrictions on provider activities apply, such as a prohibition on providers distributing or accepting enrollment applications or acceptance of any direct or indirect compensation from a plan sponsor for enrollment activities. On the other hand, providers are permitted to provide certain information about MA plans to their patients, including the names of plans with which they contract, plan marketing materials (other than enrollment forms), and information from medicare.gov (including printed information and facilitated use of the plan comparison tool).95
Compliance Program Requirements for Medicare Advantage Plans MA plan sponsors must maintain effective compliance and fraud, waste, and abuse programs that meet recently updated regulatory requirements.96 In addition to the CMS regulatory requirements listed at 42 C.F.R. Sections 422.503(b)(4)(vi), Chapter 9 of the Prescription Drug Benefit Manual and Chapter 21 of the Medicare Managed Care Manual, Compliance Program Guidelines, outlines requirements and recommendations for compliance and fraud, waste, and abuse programs. A well‐designed and effectively implemented compliance plan must include the following seven elements:
(1) Written policies, procedures, and standard of conduct that, among other elements, articulate a commitment to comply with all applicable federal and state standards; implement compliance program operations; guide employees and others on how to deal with potential compliance issues;
