United States: CMS Announces Final Regulatory Changes To Medicare Advantage And Part D

Jeffrey W. Mittleman and David M. Glynn are Partners and Melissa A. Wong is an Associate all in our Boston office.

HIGHLIGHTS:

  • CMS issues final Medicare Advantage and Part D regulatory changes after a controversial proposed rule was announced earlier this year.
  • New requirements for the reporting and return of Medicare Advantage and Part D overpayments have been implemented.
  • New safeguards against fraud, waste and abuse now require prescribers to be enrolled as Medicare providers. Enrollment will be subject to denial or revocation based on adverse actions by the DEA or state licensing boards, or by CMS' evaluation of "abusive" prescribing patterns or practices.

The Centers for Medicare and Medicaid Services (CMS) announced final regulatory changes affecting Medicare Advantage (MA) and Part D on May 19, 2014. This Final Rule is significant not only for the new regulations now implemented, but also for the proposed changes that CMS declined to adopt due to unprecedented controversy and backlash (see Holland & Knight alerts, " CMS Suggests Significant Changes to Medicare Part D and Medicare Advantage Prescription Drug Plans," Jan. 16, 2014, and " Medicare Advantage and Part D Final Call Letter for 2015," April 15, 2014). For example, CMS will not move forward with its proposal to establish new criteria for the six "protected" classes of drugs (immunosuppressants, anticonvulsants, antineoplastics, antidepressants, antipsychotics and antiretrovirals) due to "significant opposition" and concerns about patient health and welfare.

Reporting and Return of MA and Part D Overpayments

CMS has adopted almost in full its original proposed rule for the reporting and return of MA and Part D overpayments. CMS will require the reporting and return of identified overpayments no later than 60 days after the date on which the overpayment is identified. An overpayment exists when, after "applicable reconciliation," an MA organization or Part D sponsor is not entitled to the funds it has received and retained. The dates for "applicable reconciliation" are the following:

  • For MA organizations, the "applicable reconciliation" date will be the final risk adjustment data submission deadline, which effective July 22, 2014, will be set for January 31 of the year following the payment year.1
  • For Part D, the "applicable reconciliation" date will be the later of either the annual deadline for submitting prescription drug event (PDE) data, or the annual deadline for submitting direct and indirect remuneration (DIR) data. In practice, this represents about a six-month time lag after the end of the benefit year before a Part D overpayment retained in that year can even exist.

In addition, an MA organization or Part D sponsor will be deemed to have returned an overpayment when it takes action to submit corrected data that is the source of the overpayment. CMS will then recover the overpayment through established, routine CMS payment processes. CMS indicates that it will release further guidance as to how MA organizations and Part D sponsors will inform CMS of an identified overpayment, and how to correct the data associated with the overpayment. Additionally, the Final Rule sets forth a six-year look-back period for all overpayments.

Prescriber Fraud, Waste and Abuse

Effective June 1, 2015, all prescribers of Part D covered drugs must be enrolled as Medicare providers (or be granted a valid opt-out affidavit issued by a Part A or B MAC) in order for the claim to be paid under Part D. In addition, a Part D sponsor or its pharmacy benefits manager must deny a pharmacy claim for a Part D drug if the prescriber's National Provider Identifier (NPI) number is not included on the claim.

CMS will also begin to deny or revoke Medicare enrollment if a prescriber's DEA certificate is suspended or revoked, or if a state's licensing or administrative body has suspended or revoked the prescriber's ability to issue prescriptions. As part of perhaps the most controversial element of CMS' proposed fraud, waste and abuse countermeasures, CMS will have the right to revoke a prescriber's Medicare enrollment due to a prescribing pattern or practice that is "abusive and represents a threat to the health and safety of Medicare beneficiaries, or fails to meet Medicare requirements." In its evaluation of prescribing patterns or practices, CMS will use several factors, including:

  • whether there are diagnoses to support the indications for the drugs prescribed
  • whether controlled substances have been prescribed in excessive dosages that are linked to patient overdoses
  • the number and nature of disciplinary actions, malpractice suits, and final adverse actions against a prescriber

Network Pharmacy Contracting and Pricing

CMS declined to implement proposed requirements to offer preferred cost-sharing terms and conditions to any willing pharmacy, or to otherwise interfere with Part D sponsor and pharmacy network contracting. However, starting in 2016, CMS will begin to require that all price concessions from pharmacies be reflected in the "negotiated price," which is the payment that pharmacies receive from Part D plans for dispensed, covered Part D drugs as reported in PDE. If such price concessions are contingent or cannot be predicted at the point-of-sale, the concessions will not need to be factored into the negotiated price, and instead will continue to be reported as DIR.

Part D Bid Submission Requirements

CMS will limit parent organizations to offering only one Part D sponsor contract per service region, but will not implement its proposal to restrict sponsors to offering no more than two Part D plans (one basic plan and one enhanced plan) in one service region. CMS notes that it will not require current sponsors to consolidate contracts immediately, but will enforce this requirement only for new contracts at this time.

CMS has also announced that any entity seeking to contract as a Part D sponsor must have an arrangement so that either the applicant, or a contracted first-tier, downstream, or related entity (FDR) has one full benefit year serving as a Part D sponsor, or at least one full benefit year performing key functions for another Part D sponsor. In addition, any entity seeking to contract as a standalone Part D sponsor must have actively provided health insurance or health benefits coverage for two continuous years immediately prior to submitting an application. Alternatively, the applicant must have provided prescription drug benefit management services to a company providing health insurance or health benefits coverage for five continuous years prior to applying. An applicant can also be deemed as meeting these new requirements if it has a parent or subsidiary with the requisite Part D experience.

Additional Changes

The following are additional changes that CMS will implement as part of the final regulations:

  • Risk Adjustment Data Validation Audits. CMS will combine MA appeals based on error rate calculations and medical record review determinations into one process.
  • Agent-Broker Arrangements. CMS will impose new limits on agent and broker referral fees. In the preamble to the Final Rule, CMS has set this current limit at $100. CMS also will cap renewal payments to agents and brokers at 50 percent of current fair market value.
  • MA Rewards and Incentive Programs. CMS authorizes MA organizations to offer health-driven rewards and incentive programs to encourage current enrollees to participate in activities that will promote improved health and efficient use of health care resources, although rewards must be capped and cannot serve to decrease beneficiary cost-sharing or plan premiums.
  • FDR Requirements. Starting Jan. 1, 2016, CMS will require all FDRs to undergo CMS' standardized compliance and fraud, waste, and abuse training, rather than allow Part D sponsors to provide their own training. In addition, CMS can now request information directly from FDRs without going through Part D sponsors, though sponsors will be notified that a direct request for information has been made.

We will continue to monitor CMS guidance and rules as these final regulatory changes are implemented.

Footnotes

1 42 C.F.R. §422.310(g)(2)(ii).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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