On January 10, 2014, CMS will publish the proposed rule titled Medicare Program: Contract Year 2015 and Technical Changes to the Medicare Advantage and the Medicare Prescription Drug Benefit Programs (the “Proposed Rule”).  The Proposed Rule propositions extensive reforms to the Medicare Advantage (“Part C”) and Medicare Prescription Drug Benefit Program (“Part D”), partly through regulations implementing provisions of the Affordable Care Act (“ACA”).  CMS states that the intent behind the Proposed Rule is to “(1) clarify program participation requirements; (2) make changes to strengthen beneficiary protections; (3) strengthen [its] ability to identify strong applicants for Part C and Part D program participation and remove consistently poor performers; and (4) make other clarifications and technical changes.”

The Proposed Rule

At a lengthy 678 pages, the Proposed Rule proffers several critical areas for comment and reform.  A summary of certain major provisions of the Proposed Rule is as follows:

  1. The Proposed Rule requires that payers offer no more than two Part D plans in the same service area, giving consumers “meaningful differences” in coverage options, thereby purporting to reduce consumer selection of plans based solely on premium costs, which reduces consumer selection of plans that do not cover their choice medications or pharmacy;
  2. The Proposed Rule excludes providers from Medicare if the government ascertains a pattern of abusive prescribing of Part D drugs, thereby purporting to reduce prescription drug abuse;
  3. The Proposed Rule seeks to exclude doctors who are not enrolled in Medicare from prescribing Part D-reimbursed drugs, with the responsibility of determining a prescriber’s Part D eligibility status falling on the payer;
  4. The Proposed Rule prohibits Part C plans from offering plan options that replace plans CMS previously required the carrier to consolidate or terminate due to low enrollment;
  5. The Proposed Rule would stop mail-order pharmacies from charging copayments at a lower rate than retail pharmacies by requiring one-month mail order-filled supplies to have cost-sharing lower than a comparable one-month supply filled at retail outlets;
  6. The Proposed Rule requires U.S. citizenship and lawful presence as an eligibility requirement for enrollment in Part C and Part D plans;
  7. The Proposed Rule modifies agent-broker requirements and compensations by eliminating the current and “complicated” 3-Tiered System by
    • revising the existing compensation structure to restrict Medicare Advantage Organizations (“MAO”) from paying more than fair market value (“FMV”) for initial payment to brokers for new enrollees, with the FMV amount being set annually by CMS;
    • allowing, for renewals in the second and subsequent  years, the MAO or sponsor to pay up to 35% of the FMV amount for that year;
    • modifying the training and testing requirements for agents and brokers; and
    • setting time limits on referral fees for agents and brokers;
  8. The Proposed Rule eliminates previously protected drug “categories of clinical concern,” while only including those categories for which access to all drugs in the category or class for a typical individual with a disease or condition treated by the drug in the class is required within 7 days in order to avoid likely hospitalization, incapacity, disability, or death as a result of the exacerbation of the disease or condition to be treated; otherwise, all medications in such previous categories of clinical concern no longer require formulary addition, thereby affording plan sponsors added negotiation leverage in determining their formularies;
  9. The Proposed Rule improves payment accuracy in accordance with the ACA requirement that MAOs and Part D Sponsors report and return identified Medicare overpayments;
  10. The Proposed Rule strengthens existing regulations at § 422.310 on Medicare Advantage plan sponsors’ accountability for valid risk adjustment data prior to submission;
  11. The Proposed Rule changes CMS audit authority and auditing procedure pursuant to § 6508 of the ACA by
    • now requiring that each Part C and Part D contract provide CMS the right to “timely” inspect or otherwise evaluate the quality, appropriateness, and timeliness of services performed under the contract; inspect or otherwise evaluate facilities of the organization when there is reasonable evidence of need; and audit and inspect any books, contracts, and records of the organization that pertain to the ability to bear the risk of potential financial losses;
    • allowing CMS to require MAO and Part D sponsors to hire an independent auditor to perform full or partial program audits; and
    • allowing CMS to require MAO or Part D sponsors to hire an independent auditor to verify that prior audit results indicating noncompliance have been corrected; and
  12. The Proposed Rule offers several other provisions affecting Part C and Part D plans.

The Proposed Rule is accessible online.

Be Heard and Provide Comment

As demonstrated above, the Proposed Rule is lengthy and should be read carefully as the implications of many of its provisions will likely have substantial impact on Part C and Part D sponsors and patients.  Comments are due by March 7, 2014.

In commenting, please refer to file code CMS-4159-P.  Among other ways, comments may be submitted electronically.  Follow the “Submit a comment” instructions for more information.

For further in-depth analysis on this or other matters, please contact the Squire Sanders Healthcare Practice Group.