Proposed Medicare Part C and D Rules Address Prescriptions, Agents, Aliens

CMS has proposed changes to the Medicare Advantage (MA) (Part C) and the Prescription Drug Benefit Program (Part D) regulations for calendar year 2015. If finalized, the changes would: (1) clarify program eligibility requirements to exclude illegal aliens; (2) provide new tools to combat fraud and abuse; (3) adjust agent/broker compensation and limit their referral fees; (4) upgrade agent/broker testing and training requirements; (5) require MA organization and Part D sponsors to report and return Medicare overpayments; (6) strengthen MA plan accountability for valid risk adjustment data; and (7) help CMS identify strong applicants for program participation and remove consistently poor performers. The proposed rule will be published in the Federal Register on January 10, 2014.CMS will accept comments on the proposed rule until March 7, 2014.

Illegal aliens formally excluded. The proposed rule would formally establish U.S. citizenship and lawful presence in the United States as an eligibility requirement for enrollment in MA and Part D plans. The Personal Responsibility and Work Opportunity Reconciliation Act of 1996 makes individuals not lawfully present in the United States ineligible to receive Medicare benefits. This change is necessary because MA and Part D enrollment rules currently do not prevent the payment of capitation rates for these individuals.

Fraudulent Prescribing

The proposal would also use new tools when problematic prescribers and pharmacies are identified in the Part D program. The tools would include: (1) requiring prescribers of Part D drugs to enroll in Medicare and revoking such enrollment in cases of abusive prescribing practices and patterns; (2) allowing CMS to request and collect information directly from pharmacy benefit managers, pharmacies and other entities that contract with Part D sponsors to better detect fraud; and (3) requiring MA organizations and Part D sponsors to report and return identified Medicare overpayments. In doing so, CMS would adopt the statutory definition of overpayment for both Part C and Part D.

Agent/Broker Compensation

The current compensation structure consisted of a 6-year cycle that ended on December 31, 2013. Under that structure, MA organizations and Part D sponsors provided an initial compensation payment to independent agents for new enrollees and paid a renewal rate (equal to 50 percent of the initial year compensation) for years two through six. According to CMS, this structure was too complicated to monitor and created an incentive for agents to move beneficiaries from plan to plan without regard to beneficiary health care needs, as long as the fair market value (FMV) continued to increase each year.

Under the proposed rule, MA organizations and PDP sponsors would continue to have the discretion to decide annually whether to pay initial and/or renewal compensation payments to their independent agents. Also, for new enrollments, MA organizations and sponsors could make an initial payment that is no greater than the FMV amount, which CMS would set annually in its guidance that interprets these regulations. For renewals in year two and subsequent years, the MA organization or sponsor could pay up to 35 percent of the FMV amount for that year. In addition, CMS would amend the training and testing requirements as well as setting limits on referral fees for agents and brokers.

CMS believes that these changes are needed because a 2-tiered payment system (initial and renewal) is significantly less complicated than a 3-tiered system (initial, 50 percent renewal for years three through six , and 25 percent residual for years seven and subsequent years), and would reduce administrative burden and confusion for plan sponsors. Secondly, CMS has determined that 35 percent is the renewal compensation level at which the present value of overall payments under a 2-tiered system would be relatively equal to the present value of overall payments under a 3-tiered system.

Drug Categories and Classes of Clinical Concern

CMS believes that rather than mandating coverage of all drug products in a particular class on all Part D formularies, it can reduce costs in most cases by identifying more efficient formulary requirements or other beneficiary protections. Therefore, under the proposal, CMS would interpret its authority to limit protected classes to those for which access to all drugs in a category or class for a typical individual with a disease or condition treated by the drugs in the class is required within seven days and where more specific formulary requirements would not suffice to meet multitude of specific applications of the drugs within the category or class.

MA Risk Adjustment Data

The proposed rule would also strengthen existing regulations at 42 CFR sec. 422.310 on MA plan sponsors’ accountability for valid risk adjustment data prior to submission.