On February 12, 2015, the Centers for Medicare and Medicaid Services (CMS) published final rules entitled “Medicare Program; Contract Year 2016 Policy and Technical Changes to the Medicare Advantage and the Medicare Prescription Drug Benefit Programs” [CMS-4159-F2], otherwise known as the final 2016 rules for Medicare Parts C and D.
Applicable to the 2016 plan year for Medicare Advantage (Part C) and prescription drug plans (Part D), most of the provisions are effective March 16, 2015, in advance of plans submitting their bids for next year. Below, we describe some of the provisions that directly impact Medicare Advantage and Part D plan enrollees.
In January 2014, CMS released a set of wide-ranging proposed rules for Parts C and D plans in 2015. These proposed rules generated considerable push-back from lawmakers, industry, and many advocacy organizations. One proposal in particular drew almost universal opposition: changing how “protected classes” of drugs in Part D are defined. The proposal was to lift the designation on three of the six classes of drugs that currently receive protected status. CMS subsequently withdrew the proposal concerning the protected classes. There were a number of other proposed changes that the Center for Medicare Advocacy, along with other advocacy organizations, supported, including provisions that reflected CMS’ apparent belief that enhanced oversight of Part C and D plans is needed to improve the delivery of Medicare benefits.
In May 2014, CMS finalized some of the provisions from the 2015 proposed rule. The February 2015 final rule finalizes additional proposals from January 2014, but several proposals remain unimplemented. While we support some of the provisions in the recently issued final rule, we are disappointed that other provisions that would have further strengthened CMS’ oversight capacity and strengthened beneficiary protections are not being implemented at this time.
Selected Provisions of Final Rule
Note that this is not an exhaustive list of all of the provisions of the final rule. There are a number of provisions that relate solely to plan oversight, operations and payment, most of which are not addressed here. The provisions are organized by section as they appear in the final rule.
Clarifying Various Program Participation Requirements
- Changes to Audit and Inspection Authority – CMS is requiring that a Part C or D sponsoring organization hire an independent auditor to validate if the deficiencies that were found during a CMS full or partial program audit have been corrected. Note that despite CMS’ acknowledgement in the January 2014 proposed rule that limited resources allow the agency to perform annual audits on only 10% of plan sponsors, CMS backed off of a proposal to require MA and Part D plans to hire an independent auditor to conduct full or partial audits no less than every three years “based on strong opposition and valid concerns raised by contracting organizations.”
- Enrollment Eligibility for Individuals Not Lawfully Present in the U.S. – CMS clarifies that any individual “not lawfully present” in the United States is no longer eligible to remain enrolled in an MA, Part D or cost plan. Such individuals will be involuntarily disenrolled from their plan and the effective date of disenrollment will be the first of the month following notice by CMS to a plan sponsor of an individual’s ineligibility. Because of notice provided to individuals as part of “existing processes” at the Social Security Administration (SSA) regarding potential changes to lawful presence status, CMS will not require any additional notice from the plans at the time of disenrollment. In order to accommodate individuals who regain lawful presence status, and therefore eligibility for Parts C and/or D, CMS notes that it will establish a special enrollment period (SEP) to be outlined in sub-regulatory guidance. (Note that the rule discusses how an individual can be enrolled in Medicare even if he is not “lawfully present” but Medicare benefits are not payable for such an individual.)
- Part D Notice of Changes – CMS codifies existing guidance that requires Part D plan sponsors make an Annual Notice of Change (ANOC) available to beneficiaries 15 days prior to the Medicare Annual Coordinated Election Period (ACEP, from October 15 through December 7 each year), thus aligning Part D requirements with MA rules.
- Business Continuity for MA and Part D Plans – in order to ensure that Part C and D plan sponsors maintain plans to rapidly restore operations after disasters, CMS is requiring sponsors to develop business continuity plans, including a “plan to” restore essential functions within 72 hours following a systems failure.
- Efficient Dispensing in Long-Term Care Facilities – CMS is implementing policy pursuant to the Affordable Care Act that “provides that the Secretary [of Health and Human Services] shall require Medicare Part D sponsors of prescription drug plans to utilize specific, uniform dispensing techniques, such as weekly, daily or automated dose dispensing, when dispensing covered Part D drugs to enrollees who reside in [a long term care, or LTC] facility in order to reduce waste associated with 30-day fills.” According to CMS, it has finalized a prohibition on payment arrangements that penalize the offering and adoption of more efficient LTC dispensing techniques by prorating dispensing fees based on days’ supply or quantity dispensed. This provision does not appear to affect cost-sharing that beneficiaries pay (but see “Implementing Other Technical Changes” below).
- Transfer of TrOOP Between PDP Sponsors Due to Enrollment Changes – CMS codifies existing guidance concerning correctly transferring Part D true-out-of-pocket costs (TrOOP) for purposes of calculating benefit limits when an individual changes Part D plans during the year. These requirements include plans’ reporting and accepting of data in real-time and applying the costs promptly.
Strengthening Beneficiary Protections
- MA-PD Coordination Requirements for Drugs Covered Under Parts A, B, and D – CMS acknowledges that beneficiary access to needed drugs is impeded when a Medicare Advantage Prescription Drug plan (MA-PD) does not properly adjudicate claims for drugs that may be covered under Part A or B, rather than Part D, at the point of sale (POS). Thus, CMS is requiring MA-PDs to establish and maintain a process to ensure that appropriate payment is assigned at the POS. If a denial under Part D is based on the existence of coverage under Parts A or B, the MA-PD plan should authorize or provide the drug under that other benefit without requiring the enrollee to make a subsequent request for coverage under that other benefit. According to the preamble of the final rule, CMS is amending 42 CFR §422.112(b)(7) to “require MA-PDs to coordinate with their network pharmacies and prescribers to improve existing processes and develop new ones in order to ensure that enrollees receive their Medicare-covered prescription medications, without delay, when they present at the network pharmacy.” While CMS did not include beneficiary advocates’ request to require plans to treat a POS claim transaction as a request for a coverage determination under Part D, this new rule should nonetheless improve coordination of and access to drug coverage for MA-PD enrollees.
- Good Cause Processes – Part C and D plans may involuntarily disenroll individuals who fail to pay basic and supplemental premiums after following certain requirements, including offering a grace period. Until now, the process of accepting, reviewing, and processing beneficiary requests for reinstatement for good cause has been carried out exclusively by CMS. Despite concerns about impartiality and the “quality of work currently performed by plans and CMS contractors” raised by beneficiary advocates, CMS will assign the responsibility to effectuate reinstatements when good cause criteria are met to a third party, which can include an MA or Part D plan sponsor.
- MA Organizations’ Extension of Adjudication Timeframes for Organization Determinations and Reconsiderations – Current regulations dictate the procedures MA organizations must follow in issuing standard and expedited organization determinations which trigger a beneficiary’s right to appeal a plan decision, including timeframes and circumstances in which plans are permitted to extend those timeframes. In the preamble to the final rule, CMS explains that some MA plans are inappropriately extending their own deadlines:
“… we believe the current language that permits extension of the adjudication timeframes set forth in § 422.568(b), § 422.572(b), § 422.590(a)(1), and § 422.590(d)(2) is being interpreted more broadly than we intended and that MA organizations are regularly invoking extensions of the adjudication timeframes for organization determinations and reconsiderations. Based on information ascertained during recent MA program audits, we have seen circumstances in which MA organizations are routinely and inappropriately invoking the 14-day extension in cases where the plan: (1) Lacks adequate internal controls to ensure coverage requests are reviewed and adjudicated within the required regulatory timeframe; and (2) is awaiting receipt of supporting clinical documentation from one of its contract providers.” CMS goes on to state: “Routinely invoking an extension of the applicable adjudication timeframe is counter to the intent of the statutory and regulatory requirements for timely determinations that emphasize the health needs of the beneficiary in determining the appropriate adjudication timeframe. Extensions that are not affirmatively requested by the enrollee should be permitted only in limited circumstances, and only if the extension is in the enrollee’s interest.”
Accordingly, CMS has revised the applicable regulations to clarify that extensions should be permitted in only limited circumstances. As noted in the preamble, CMS revisions include:
“At § 422.568(b)(1)(ii), § 422.572(b)(1)(ii), and § 422.590(e)(1)(ii), to clarify that an extension may be justified and in the enrollee’s interest due to the need to obtain additional medical information, which may result in changing the MA organization’s denial of coverage of an item or service only from a non-contract provider.
• At new § 422.568(b)(1)(iii), § 422.572(b)(1)(iii), and § 422.590(e)(1)(iii), to clarify that an extension of the adjudication timeframe may be permitted when the extension is justified due to extraordinary, exigent or other non-routine circumstances, and it is in the enrollee’s interest.”
Implementing Other Technical Changes
- Requirements for Urgently Needed Services – CMS finalized a proposal to improve MA enrollees’ access to out-of-network facilities in non-extraordinary circumstances. 42 CFR §422.113, which defines MA coverage of “urgently needed services”, has been revised to remove the phrase “under extraordinary and unusual circumstances.” As noted in the preamble, this revision is meant to encourage plans to cover care provided in clinics that operate on weekends and outside of normal business hours when the plan network is not available.
- Application and Calculation of Daily Cost-Sharing Rates – As noted in the preamble, CMS offers technical clarifications to regulatory language that “should assist sponsors in correctly setting, calculating, and applying daily cost-sharing rates [for prescription drugs] in the retail and [long-term care] settings whenever a prescription is dispensed by a network pharmacy for less than a 30-days’ supply, unless the drug is excepted in the regulation.”
- Technical Change to Align Regulatory Requirements for Delivery of the Standardized Pharmacy Notice – As explained by CMS, “current regulations … require Part D plan sponsors to make arrangements with their network pharmacies to distribute notices instructing enrollees how to contact their plans to obtain a coverage determination or request an exception [which is] accomplished through delivery of a standardized notice …” Because distribution of the pharmacy notice is based “on whether the drug in question can be provided under Part D and whether the enrollee is able to obtain coverage for the drug at the pharmacy counter” rather than whether or not the enrollee disagrees with information provided by the pharmacist, CMS is revising 42 CFR §423.562(a)(3) to remove reference of an enrollee’s “disagreement with information provided by the pharmacist” as a condition requiring delivery of the pharmacy notice.
- MA Organization Responsibilities in Disasters and Emergencies — CMS revises 42 CFR §422.100 to codify and further clarify an MA plan’s obligations when plan services are affected by public health emergencies or disasters. The clarification includes a requirement that MA plans “ensure access, at in-network cost sharing, to covered services even when furnished by noncontracted providers when disruption in the service area impedes enrollees’ ability to access contracted providers and/or contracted providers’ ability to provide needed services.”
While many of these provisions expand existing consumer protections, we urge CMS to further enhance plan oversight and ensure Medicare Advantage and Part D enrollees are able to access the care to which they are entitled.
February 2015 – D. Lipschutz
 80 Federal Register 7912 (February 12, 2015), available at http://www.gpo.gov/fdsys/pkg/FR-2015-02-12/pdf/2015-02671.pdf.
 79 Fed Reg 1918 (January 10, 2014).
 See, e.g., comments to the proposed rule the Center for Medicare Advocacy drafted in coordination with several other advocacy organizations, including the Medicare Rights Center and the National Senior Citizens Law Center: https://www.medicareadvocacy.org/center-comments-on-proposed-medicare-part-c-part-d-rules/
 79 Fed Reg 29844 (May 23, 2014).
 For a discussion of these proposed and final rules, including provisions that were not implemented, see, e.g., Yochelson, Mindy, “CMS Revisits Provisions From 2014 Proposal in Final Rule for 2016 MA, Part D Contracts” (February 6, 2015), Bloomberg BNA.
 See, e.g., Table 2 – Provisions Not Being Finalized, 80 Fed Reg 7916. Also see the Center for Medicare Advocacy’s comments, infra, linked at endnote 3.
 80 Fed Reg 7919.
 See discussion at 80 Fed Reg 7919-7923.
 80 Fed Reg 7930.
 80 Fed Reg 7941.
 See discussion at 80 Fed Reg 7942-7943.
 80 Fed Reg 7943.
 80 Fed Reg 7943; for regulatory language see 7961-7962.
 80 Fed Reg 7949.
 80 Fed Reg 7952.
 80 Fed Reg 7952.
 80 Fed Reg 7952-7953.
 80 Fed Reg 7953.