[Federal Register: June 26, 1998 (Volume 63, Number 123)]
[Rules and Regulations]
[Page 34967-35016]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr26jn98-27]
[[Page 34967]]
_______________________________________________________________________
Part II
Department of Health and Human Services
_______________________________________________________________________
Health Care Financing Administration
_______________________________________________________________________
42 CFR Part 400, et al.
Medicare Program; Establishment of the Medicare+Choice Program; Final
Rule
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Health Care Financing Administration
42 CFR Parts 400, 403, 410, 411, 417, and 422
[HCFA-1030-IFC]
RIN 0938-AI29
Medicare Program; Establishment of the Medicare+Choice Program
AGENCY: Health Care Financing Administration (HCFA), HHS.
ACTION: Interim final rule with comment period.
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SUMMARY: The Balanced Budget Act of 1997 (BBA) establishes a new
Medicare+Choice (M+C) program that significantly expands the health
care options available to Medicare beneficiaries. Under this program,
eligible individuals may elect to receive Medicare benefits through
enrollment in one of an array of private health plan choices beyond the
original Medicare program or the plans now available through managed
care organizations under section 1876 of the Social Security Act. Among
the alternatives that will be available to Medicare beneficiaries are
M+C coordinated care plans (including plans offered by health
maintenance organizations, preferred provider organizations, and
provider-sponsored organizations), M+C ``MSA'' plans, that is, a
combination of a high deductible M+C health insurance plan and a
contribution to an M+C medical savings account (MSA), and M+C private
fee-for-service plans.
The introduction of the M+C program will have a profound effect on
Medicare beneficiaries and on the health plans and providers that
furnish care. The new provisions of the Medicare statute, set forth as
Part C of title XVIII of the Social Security Act, address a wide range
of areas, including eligibility and enrollment, benefits and
beneficiary protections, quality assurance, participating providers,
payments to M+C organizations, premiums, appeals and grievances, and
contracting rules. This interim final rule explains and implements
these provisions.
In addition, we are soliciting letters of intent from organizations
that intend to offer M+C MSA plans to Medicare beneficiaries and/or to
serve as M+C MSA trustees.
DATES: Effective date: This interim final rule is effective July 27,
1998.
Comment period: Comments will be considered if received at the
appropriate address, as provided below, no later than September 24,
1998.
ADDRESSES: Mail written comments (1 original and 3 copies) to the
following address: Health Care Financing Administration, Department of
Health and Human Services, Attention: HCFA-1030-IFC, P.O. Box 26688,
Baltimore, MD 21207.
If you prefer, you may deliver your written comments (1 original
and 3 copies) to one of the following addresses:
Room 309-G, Hubert H. Humphrey Building, 200 Independence Avenue, SW.,
Washington, DC 20201, or
Room C5-09-26, 7500 Security Boulevard, Baltimore, MD 21244-1850.
Because of staffing and resource limitations, we cannot accept
comments by facsimile (FAX) transmission. In commenting, please refer
to file code HCFA-1027-IFC Comments received timely will be available
for public inspection as they are received, generally beginning
approximately 3 weeks after publication of a document, in Room 309-G of
the Department's offices at 200 Independence Avenue, SW., Washington,
DC, on Monday through Friday of each week from 8:30 a.m. to 5 p.m.
(phone: (202) 690-7890).
FOR FURTHER INFORMATION CONTACT:
Provider Sponsored Organizations, Aaron Brown, 410-786-1033.
M+C Private Fee-For Service Plans, Anita Heygster, 410-786-4486.
M+C MSA Plans, Cindy Mason, 410-786-6680.
Applications, Robert King, 410-786-7623.
Quality Assurance, Brian Agnew, 410-786-5964.
Payment/ACRs, Al D'Alberto, 410-786-1100.
Encounter Data, Cynthia Tudor, 410-786-6499.
Federal/State, Rebecca Cardozo, 410-786-0300.
Beneficiary Appeals, Valerie Hart, 410-786-6690.
Enrollment, Debe McKeldin, 410-786-9159.
Information Campaign, Jan Drass, 410-786-1354.
Contracts, Chris Eisenberg, 410-786-5509.
General Issues, Tony Hausner, 410-786-8290.
General Issues, Dorothea Musgrave, 410-786-8290.
SUPPLEMENTARY INFORMATION:
I. Background
A. Balanced Budget Act of 1997
Health care benefits covered under the Medicare program are divided
into two parts: hospital insurance, also known as ``Part A,'' and
supplementary medical insurance, also known as ``Part B.'' Health care
services covered under Part A include: inpatient hospital care, skilled
nursing facility care, home health agency care, and hospice care. Part
B coverage is optional and requires payment of a monthly premium. Part
B covers physician services (in both hospital and nonhospital settings)
and services furnished by certain nonphysician practitioners. It also
covers certain other services, including: clinical laboratory tests,
durable medical equipment, medical supplies, diagnostic tests,
ambulance services, prescription drugs that cannot be self-
administered, certain self-administered anti-cancer drugs, some other
therapy services, certain other health services, and blood not covered
under Part A.
Section 4001 of the Balanced Budget Act of 1997 (BBA) (Public Law
105-33), enacted August 5, 1997, added sections 1851 through 1859 to
the Social Security Act (the Act) to establish a new Part C of the
Medicare program, known as the ``Medicare+Choice Program.'' Note that
hereinafter, unless otherwise indicated references to the statute are
references to the Act. (The existing Part C of the statute, which
included provisions in section 1876 governing existing Medicare health
maintenance organization (HMO) contracts, has been redesignated as Part
D.) Under section 1851(a)(1), every individual entitled to Medicare
Part A and enrolled under Part B, except for individuals with end-stage
renal disease, may elect to receive benefits through either the
existing Medicare fee-for-service program or a Part C M+C plan.
The introduction of the M+C program represents what is arguably the
most significant change in the Medicare program since its inception in
1965. As its name implies, the primary goal of the M+C program is to
provide Medicare beneficiaries with a wider range of health plan
choices to complement the Original Medicare option. Alternatives
available to beneficiaries under the M+C program include both the
traditional managed care plans (such as HMOs) that have participated in
Medicare on a capitated payment basis under section 1876 , as well as a
broader range of plans comparable to those now available through
private insurance. Specifically, effective January 1, 1999, section
1851(a)(2) provides for three types of M+C plans:
<bullet> M+C coordinated care plans, including HMO plans (with or
without point of service options), provider-sponsored organization
(PSO) plans, and preferred provider organization (PPO) plans.
[[Page 34969]]
<bullet> M+C medical savings account (MSA) plans (that is,
combinations of a high deductible M+C health insurance plan and a
contribution to an M+C MSA).
<bullet> M+C private fee-for-service plans.
In addition to expanding the types of available health plans, the
M+C program introduces several other fundamental changes to the private
health plan sector of the Medicare program. These changes include:
<bullet> Establishment of an expanded array of quality assurance
standards and other consumer protection requirements.
<bullet> Introduction of an annual coordinated election period.
This election period, to be conducted in November for a January
effective date, will feature a phased in lock-in of enrollees to the
plan they have elected during this coordinated election period. In
addition, the annual coordinated election period will include the
distribution by HCFA of uniform, comprehensive information about
participating plans that is needed to promote informed choices by
beneficiaries.
<bullet> Revisions in the way we calculate payment rates to the
plans that will narrow the amount of payment variation across the
country and increase incentives for plans to operate in diverse
geographic areas.
<bullet> Establishment of requirements concerning participation
procedures for physicians and other health care professionals in M+C
plans, including prohibitions on interference with advice to enrollees.
These requirements will bring about changes for beneficiaries, for
physicians and other health care providers, for managed care
organizations that now contract with Medicare as well as those that
will be able to contract with Medicare for the first time, and for HCFA
and the States. The specific areas addressed by the different sections
of the statute are as follows:
<bullet> Section 1851--Eligibility, election and enrollment
<bullet> Section 1852--Benefits and beneficiary protections
<bullet> Section 1853--Payments to M+C organizations
<bullet> Section 1854--Premiums
<bullet> Section 1855--Organizational and financial requirements
for M+C organizations
<bullet> Section 1856--Establishment of standards
<bullet> Section 1857--Contracts with M+C organizations
<bullet> Section 1859--Definitions and miscellaneous provisions
As provided for in section 1856(b)(1), this interim final rule (1)
incorporates the new M+C provisions into the Medicare regulations, (2)
interprets the new statutory provisions in Part C, and (3) establishes
by regulation new standards under the M+C program. Other provisions of
the BBA addressed in this interim final rule include:
<bullet> Section 4002--Transitional rules for current HMO Medicare
program.
<bullet> Section 4003--Conforming changes in the Medigap program.
<bullet> Section 4006--M+C MSAs.
We note that in February, 1998, the President issued an Executive
Order directing the Secretary to comply to the extent possible through
administrative activities with the standards contained in the Consumer
Bill of Rights and Responsibilities. Therefore, as discussed in several
sections of this preamble, we have taken these standards into
consideration in developing the regulations contained in this interim
final rule. We have also incorporated conforming provisions consistent
with other parts of the Medicare statute, such as exempting services
under M+C coordinated care plans from the anti-referral provisions in
section 1877.
In several places in this preamble, we indicate that HCFA intends
to develop additional policy guidance or instructions. In doing so, we
will use a formal rulemaking process and allow for review by the Office
of Management and Budget pursuant to the requirements of the Paperwork
Reduction Act of 1995, wherever it is appropriate to do so.
B. Codification of Regulations
The regulations text set forth in this interim final rule is
codified in 42 CFR Part 422--Medicare+Choice Program. (Note that new
part 422 was established in our April 14, 1998 interim final rule on
PSOs (63 FR 18124).) The current Medicare regulations for managed care
organizations that contract with HCFA under section 1876, or for health
care prepayment plans (HCPPs) that are paid under section
1833(a)(1)(A), will continue to be located in 42 CFR part 417, Health
Maintenance Organizations, Competitive Medical Plans, and Health Care
Prepayment Plans. Although the part 422 provisions will eventually
supersede the regulations in part 417 for contracts with risk-bearing
HMOs and competitive medical plans (CMPs), there are some purposes for
which the part 417 provisions will continue in effect for a
transitional period. Also, various provisions of section 4002 of the
BBA provide for the continuation of cost-based contracts under section
1876 and of agreements with HCPPs under section 1833(a). Thus, the part
422 regulations cannot entirely replace the part 417 regulations at
this time. (Both transitional provisions and those relating to cost-
based contracts and HMOs are discussed in detail below in the
appropriate sections of this interim final rule.)
For the convenience of organizations that contract with HCFA only
under the M+C program, we are including in part 422 both new
requirements that implement newly enacted provisions in Part C and
existing requirements from part 417 that also will be imposed under
Part C. For transitional requirements, which could logically appear in
both parts, we are setting forth the full requirements in part 422 and
referencing them in part 417. Requirements that apply to organizations
that contract with HCFA, or are paid by HCFA, only under section 1876
or 1833(a) will remain in part 417. Regulations implementing the
provisions of section 1310 of the Public Health Service Act concerning
Federally-qualified HMOs also remain in part 417.
C. Organizational Overview of Part 422
The major subjects covered in each subpart of part 422 are as
follows:
<bullet> Subpart A--Definitions, including definition of types of
plans, application process, and user fees.
<bullet> Subpart B--Requirements concerning beneficiary
eligibility, election, enrollment and disenrollment procedures, and
plan information and marketing materials.
<bullet> Subpart C--Requirements concerning benefits, point of
service options, disclosure of information, access to services,
confidentiality of enrollee records, advance directives, and
beneficiary protection against liability.
<bullet> Subpart D--Quality assurance standards, external review,
and deeming of accredited organizations.
<bullet> Subpart E--Organizational relationships with participating
entities including the prohibition against interference with health
care professionals' advice to enrollees, physician incentive
requirements, and special rules for M+C private fee-for-service plans
and private contracts with health care professionals.
<bullet> Subpart F--Payment methodology for M+C organizations,
coverage that begins or ends during inpatient hospital stays, hospice
care, and encounter data requirements.
<bullet> Subpart G--Requirements concerning terms and conditions
for receiving capitated payments, limits on premiums and cost sharing,
determination of adjusted community rate, and prohibition of State-
imposed premium taxes.
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<bullet> Subpart H--Requirements concerning provider-sponsored
organizations (PSOs).
<bullet> Subpart I--Organization compliance with State law and
preemption by Federal law.
<bullet> Subpart K--General contract and enrollment requirements,
administration and management, and procedures for nonrenewal or
termination of contracts.
<bullet> Subpart L--Effect of change of ownership or leasing of
facilities during term of contract.
<bullet> Subpart M--Requirements concerning beneficiary grievances
and organization determinations and appeals.
<bullet> Subpart N--Requirements and procedures for contractor
appeals of nonrenewals or terminations of contracts.
<bullet> Subpart O--Procedures for imposing intermediate sanctions.
Each of these subparts is discussed below in section II of this
preamble. Sections III and IV consist of separate discussions of
provisions of the part 422 regulations that specifically concern M+C
MSA plans and M+C private fee-for-service plans, respectively.
II. Provisions of the Interim Final Rule
A. General Provisions--Subpart A
1. Overview
Subpart A begins with a brief section (Sec. 422.1) that specifies
the general statutory authority for the ensuing regulations and
indicates that the scope of part 422 is to establish standards
applicable to the M+C program. Under Sec. 422.2, we then set forth
definitions for terms used in part 422 that we believe need
clarification. These definitions provide the generally applied meaning
for terms that are used throughout part 422. Where necessary, we have
included in specific subparts of part 422 definitions for terms used
primarily in those subparts. In Sec. 422.4, we define the three
different types of M+C plans, consistent with section 1851(a)(2)--M+C
coordinated care plans, M+C MSA plans and M+C private fee-for-service
plans.
Sections 422.6 and 422.8 then detail the application process for an
entity seeking an M+C contract and HCFA's application evaluation
procedures.
Section 422.10 adopts, for purposes of the M+C program, the user
fee provisions now set forth at Sec. 417.472(h).
2. Definitions (Sec. 422.2)
For the most part, the definitions presented here are taken
directly from the statute or are essentially self-explanatory. Below,
we discuss some notable exceptions to this, including cases where we
have clarified the exact meaning and context of certain terms. Please
keep in mind that the definitions set forth in subpart A reflect
general meanings for the terms as they are used in part 422 unless
otherwise indicated; the definitions apply strictly for purposes of
part 422. For example, the term ``provider'' has a more inclusive
meaning under part 422 than it does for other Medicare purposes, as
discussed below. Similarly, when we define a term anywhere in part 422
other than in subpart A, it can be assumed that the definition of the
term is limited to a specified purpose in the relevant subpart or
section. Thus, as specified in the relevant sections of the
regulations, the term ``substantial financial risk'' has a different
meaning for purposes of the physician incentive provisions under
Sec. 422.208 than it does in the PSO provisions under Sec. 422.356.
Benefits and Benefit Categories
In Sec. 422.2, we have defined both the term ``benefits'' as well
the different categories under which benefits are provided: basic
benefits, additional benefits, mandatory supplemental benefits, and
optional supplemental benefits. ``Benefits'' consist of the health care
services delivered or covered by an M+C organization. (Note that
``services,'' under the long-standing Medicare definition at
Sec. 400.202, encompass medical care, services, and items.) The
definition of benefits is relevant both for purposes of the process of
determining adjusted community rates (ACRs) for M+C plans and for
purposes of a new provision in Part C that ``pre-empts'' State laws
relating to ``benefits.''
When we refer to one of the categories under which benefits are
provided, however, we generally are referring not only to the actual
health services that a beneficiary receives or is eligible to receive,
but also to the pricing structure applied to these benefits. For
example, the definition of ``additional benefits'' includes both the
health care services covered under a plan that are in addition to
regularly covered Medicare services, as well as any reductions in
premiums or cost-sharing for Medicare covered services. Thus, the
amount of deductibles or copayments that an M+C plan enrollee must
expend to receive services would fall within the scope of the term
``additional benefits.''
We wish to note that we have defined ``basic benefits'' in this
regulation to include both the Medicare-covered benefits required under
section 1852(a)(1)(A) and required ``additional benefits'' under
section 1852(a)(1)(B). Both Medicare benefits and required additional
benefits are: (1) Coupled together in section 1852(a)(1), in the first
paragraph under subsection (a), titled ``Basic Benefits''; (2) benefits
that an M+C has an obligation to provide (in contrast to supplemental
benefits, which may be provided totally at the M+C organization's
discretion); (3) benefits paid for with Medicare trust fund money; and
(4) benefits that are covered by the basic premium, if any, that counts
towards the limit based on the actuarial value of original Medicare
coinsurance and deductible amounts.
For all of these reasons, we have decided to divide benefits into
the two categories of the ``basic benefits'' including all required
benefits, and ``supplemental benefits,'' including both mandatory and
optional supplemental benefits provided at the discretion of the M+C
organization. We note that while Congress did not include a
``definition'' of ``basic benefits'' in Part C, it appears to use the
term ``basic'' to refer only to the Medicare-covered service package.
(See, for example, section 1851(b)(1)(B) or section 1854(e)(1).)
Although Congress did not actually include additional benefits in the
term ``basic benefits,'' in almost all cases, it coupled these benefits
together, and treated them the same. (See sections 1852(a)(1), and
1854(a)(2)(A), (3)(A), (4)(A), and (e)(1).) We accordingly believe that
it is appropriate in this regulation to include these two categories
together in the definition of ``basic benefits'' that applies for
purposes of part 422. We note, however, that where a statutory
provision refers only to the Medicare benefit component of our part 422
definition of ``basic benefits,'' we will similarly limit the
regulation implementing that provision.
M+C Organization and M+C Plan
The definitions of ``M+C organization'' and ``M+C plan'' set forth
in Sec. 422.2 are based on the BBA's use of these terms, which is not
always compatible with the way the terms ``organization'' and ``plan''
have been used in the past. In previous HCFA documents, the term
``managed care organization'' frequently has been used interchangeably
with the term ``managed care plan'' or ``health plan.'' Section 422.2
addresses this area of potential confusion by clarifying the
distinction between an M+C organization and an M+C plan. Succinctly
stated, an M+C ``organization'' is an entity that contracts with HCFA
to offer an M+C plan; the ``plan'' consists of the specific health
benefits, terms of coverage, and pricing structure.
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Section 1857(a) specifically states that HCFA contracts with an M+C
organization. Thus, for requirements that we would normally think of as
contractual requirements, we use the term ``M+C organization.'' In
Sec. 422.2 then, an M+C organization is defined as a public or private
entity organized and licensed under State law as a risk-bearing entity
(with the exceptions of PSOs receiving waivers) that is certified by
HCFA as meeting the M+C contract requirements. Under various BBA
provisions, the requirements M+C organizations are responsible for
meeting include: processing the enrollment and disenrollment of
beneficiaries within a plan; transmitting information such as
enrollment information and encounter data to HCFA; submitting marketing
materials; providing all Medicare-covered benefits and other benefits
covered under the contract in a manner consistent with specified access
standards; performing quality assurance; creating and carrying out all
plan procedures for grievances, organization determinations, and
appeals; maintaining necessary records; providing advance directives;
establishing procedures related to provider participation; setting
medical policies; notifying beneficiaries of any ``Conscience
Protection'' exceptions; disclosing physician incentive plans;
receiving payment; reporting financial information; paying user fees;
making prompt payments to providers; receiving any sanctions invoked by
HCFA on any of the organization's plans; and fulfilling other contract
requirements as specified in regulation.
Again, in contrast, an M+C plan is merely the health benefits
coverage and pricing structure that the organization offers to
beneficiaries. An M+C plan may include the basic benefits only (basic
benefits include Medicare-covered benefits and additional benefits) or
basic benefits combined with mandatory and/or optional supplemental
benefits.
An M+C organization may select which providers furnish services
under the plan, as long as the benefit package meets all the
requirements for access within the area, and outside of the area for
specific services. As discussed in detail below, service areas and
benefit packages generally are associated with individual plans;
uniform premium requirements and the need for an ACR proposal also
apply at the plan level.
Service Area
The service area designation of an M+C plan is an important element
of the structure and design of a particular plan. A plan's service
area--
<bullet> Determines the payment rate to the organization for
enrollees of the plan, based on the counties included in the service
area;
<bullet> Affects what benefits will be provided, since benefits and
premiums must be uniform under an M+C plan, throughout that plan's
defined service area;
<bullet> Determines which beneficiaries are able to elect the plan,
because organizations are obligated to enroll any eligible resident of
the service area who elects the plan; and
<bullet> For network plans, is the area in which the plan is
required to make covered services available and accessible; and
determines the boundaries beyond which the plan assumes liability for
urgently needed care and may offer enrollment continuation options.
As explained below, we will exercise discretion in reviewing and
approving service areas requested by M+C plans. For network plans, we
will use our knowledge of how service areas have been designated in the
past in the Medicare managed care program and in the Federally-
qualified HMO program, which we have administered since 1986, to ensure
availability and accessibility of services. We will attempt to ensure
that service areas of M+C network plans are consistent with community
patterns of care and/or rating practices--that is, service area
designations are not artificially delineated in such a way that usual
sources of care, in terms of geographic location, are not available to
beneficiaries; or in such a way that the service area designation
allows ``gaming'' of the community rate that forms the basis of M+C
premiums and benefits, to the disadvantage of Medicare beneficiaries. A
nondiscrimination standard will also apply to both network and non-
network plans. To the extent possible, we will attempt to ensure a
``level playing field'' among plans operating in the same geographic
area (for example, if one plan in an area is subject to the county
integrity rule discussed below, a new plan may also be subject to the
same standard in determining a new service area). These standards will
also be applied in evaluating requests for M+C service area expansions
and service area reductions. Consistent with the goals of the new M+C
program, we will attempt to maximize the number of choices available to
Medicare beneficiaries and maximize the availability of low-cost plans
offering additional benefits.
The regulations at Sec. 422.2 provide that an M+C organization may
propose a specified service area for each M+C plan, and HCFA will
determine whether the proposed area can be approved. The regulatory
definition of service area is slightly different from the current
service area definition at Sec. 417.401. The latter regulation defines
the term geographic area (which we used interchangeably with service
area with respect to section 1876 contracts) as ``the area found by the
Secretary to be the area in which an HMO is able to deliver the full
range of services,'' a definition that was essentially common to both
the Medicare program and the Federally qualified HMO program
(Sec. 417.1, ``service area''). The earlier definition emphasizes the
role of the Secretary (HCFA) in the designation of service areas, and
incorporates one of the standards applicable to network plans (which
continue to apply to such plans in these regulations). Statutory
references to a service area or geographic area under Medicare,
including references in the BBA, do not offer a definition of the term
or an indication of how the area is to be determined.
We have modified the wording of the earlier regulatory definition
of ``service area'' to recognize that organizations will propose
specific areas for M+C plans. Pursuant to section 1856(b)(1), which
provides for establishing M+C standards by regulation, and section
1856(b)(2), which provides for basing the standards on standards under
section 1876, we have retained our authority to approve or deny service
area configurations that organizations propose. This reflects what has
been the actual past practice of the agency in administering the
Medicare HMO/CMP program and the Federally-qualified HMO program. The
new definition also recognizes that service areas designated by
organizations for non-network plans are designated for the purpose of
determining who is eligible to enroll in the plan.
Consistent with current and past regulatory and statutory
standards, we will evaluate proposed service areas of network plans to
determine whether covered services are available and accessible, under
the standards of Sec. 422.112, to any resident of the area eligible to
elect enrollment in the plan. We will also examine the proposed service
area of any plan, including non-network plans, to ensure that the
delineation of the area does not result in discrimination against
beneficiaries through ``gerrymandering'' or ``red-lining'' to
deliberately avoid particular areas (e.g., to prevent the enrollment of
poorer Medicare beneficiaries, or those known to be in poorer health).
An example of such a practice would be an
[[Page 34972]]
urban area network plan's exclusion of poorer inner-city areas, leaving
obvious ``holes'' in the service area where residents would not have
any problem gaining access to care through the plan's providers had the
area been included in the proposed service area. Although we would not
ordinarily dictate the inclusion of particular areas in the service
area of a plan--for example, a multi-county commercial plan could
include only some of its counties in a Medicare contract--we would seek
to prevent clear cases of discrimination against, or disadvantaging of,
particular groups or populations.
Prior to the BBA, contracting HMOs and CMPs (virtually without
exception) all had existing, defined service areas prior to entering
into a Medicare contract. These were areas in which the entities
offered comprehensive health care services to non-Medicare enrollees of
the specified geographic area. As noted above, Medicare's statutory
language did not clearly define the terms service area or geographic
area, but it was assumed that each organization would have a specific
service area in which it operated and provided coverage to any enrollee
from the community (including any Medicare enrollee). The Medicare
premiums and benefits are a function of the community rate of the plan,
the rate applicable to any covered group within the community covered
by the plan. Hence, until the mid-1980s, we required that the service
area for Medicare be the same as the service area for the non-Medicare
population. Subsequently, we changed our policy to permit HMOs and CMPs
to limit the Medicare service area to a subset of the non-Medicare
(commercial) area, breaking the link between commercial service areas
and Medicare service areas (though the Medicare premiums and benefits
continue to be based on the community rate for the entire non-Medicare
community). We applied a ``county integrity'' standard in determining
how HMOs could reduce their service areas for Medicare; whole counties
could be excluded, but partial counties could only be excluded if the
organization operated (for commercial purposes) only in a portion of
the county.
Because the BBA provisions on waiver of minimum enrollment and
composition of enrollment requirements permit organizations to have M+C
plans with no prior enrollment, there will be plans that do not have
designated service areas and do not have a commercial service area that
can be used as a reference point for the designation of a Medicare
service area. In the case of network plans, we would work with such
organizations to determine an appropriate service area for the plan's
provider network, taking into consideration the patterns of medical
care in the community (e.g., where people obtain care, the types of
providers available in the community, reasonable travel times to obtain
care). We would also use our knowledge of how plan service areas
generally have been determined and approved in the past, as well as how
other organizations in the same area, or a similar area, have
established their service areas. There could be concerns both with a
proposed area that is too wide, offering limited availability of
services for outlying areas, and with a proposed area that is too
small, which would limit choices available to beneficiaries or might
raise the concerns discussed above regarding discrimination.
We believe that basing our decisions on community patterns of care
and the practices of other organizations in the same area, or in
similar areas, is consistent with our past approach to the issue of
service area designations, and consistent with the BBA. The BBA
requires a similar approach in developing elements of the adjusted
community rate for new plans (e.g., 1854(f)(4), referring to
``enrollment experience of other contracts entered into under this part
and * * * data in the general commercial marketplace'').
With respect to another issue related to service areas, our policy
that permitted HMOs and CMPs under 1876 to vary premium and benefit
offerings by county within a service area (the ``flexible benefits''
policy) will no longer apply under M+C. The flexible benefits policy
permitted organizations to use non-Medicare revenue to offer extra
benefits or reduced premiums (``free benefits'') to residents of a
particular county or counties rather than in the entire service area,
as long as all Medicare beneficiaries in the entire service received at
least the level of benefits required under the statute as determined
through the adjusted community rate process. With the requirement that
premiums and benefits be uniform throughout an M+C service area, it is
not possible to continue the flexible benefits policy. However, an
organization may be able to offer multiple plans and propose different
service areas for the plans in order to achieve a similar result as the
flexible benefits policy. This presents us with an issue of how to deal
with the proposals for service areas, or the carving up of existing
non-Medicare service areas, when it is done in order to have different
premiums and benefits in different counties. In the case of network
plans, a carving up of an existing service area, and the offering of
multiple plans across what may be a single service area for the non-
Medicare population, is only possible if each of the plans with
different service areas is able to ``stand alone'' in terms of meeting
all the requirements applicable to plans. The designation of multiple
service areas in such cases should also be consistent with community
practices in patterns of care, and/or consistent with rating practices,
and service are designations, for other purchasers.
Except in the case of non-network MSA plans, as discussed below,
the fact that Medicare pays different capitation rates by county is not
a sufficient reason to establish service areas consisting of individual
counties. For example, a staff-model HMO operating in a multi-county
area, that has a service delivery network consisting of only one
hospital and a group of physicians employed by the organization, cannot
designate each county as a separate service area. Although services are
accessible and available in each county, we do not believe there is a
valid reason to charge different premiums by county, for example, when
all Medicare beneficiaries enrolled in the organization will be using
the same providers.
On the other hand, some organizations that operate with very large
service areas may be justified in breaking up larger service areas for
Medicare contracting purposes. This would be similar to what Federally-
qualified HMOs do in designating distinct service areas as ``regional
components,'' which are sub-areas with an autonomous provider network
and with different community rating for the regional component. Some
HMOs, although they do not identify distinct service areas, require
enrollees to obtain services from a particular subset of providers
within the broader network (as Federally-qualified HMOs are permitted
to do (see 45 FR 28655 (April 29, 1980)). Some HMOs offer large
employers a statewide service area consisting of different provider
networks in geographically distinct areas in which there is no crossing
of boundaries, or very little crossing of boundaries, to receive
services. The large employer may be offered one rate for all areas, but
the same HMO may have smaller designated service areas for smaller
regional employers, in which different rates apply.
In evaluating proposals requesting approval of multiple service
areas in a contiguous geographic area, we would consider the patterns
of care in the community; and the rating and service
[[Page 34973]]
area practices of the individual organization, of other organizations
in the area, and of other organizations in similar areas. The
commercial service area will continue to be a reference point in that
we would be likely to approve a proposal if what is proposed for
Medicare contracting is similar to what is done in the commercial
marketplace. Similarly, we would take into consideration any
determination, or approval, of service areas by State regulatory
bodies.
At a minimum, each proposed M+C service area must be an area in
which the full range of covered services are available and accessible
to all Medicare enrollees primarily through providers located in the
service area. We would also evaluate proposals on the basis of the
criteria we discuss above relating to discrimination against, or
disadvantaging of, particular beneficiaries in the community. These
criteria would also be used in evaluating the proposed service areas of
non-network plans. Using the inner-city example, an entity could
request an area consisting only of the poorer inner-city area, where
residents would be required to pay a relatively high premium, while
other areas were charged a much lower premium. We would view this
practice as discouraging enrollment within a particular area. Although
the statute does not expressly provide for evaluation of service area
designations to determine whether they are discriminatory, we believe
that it is consistent with statutory requirements relating to
discrimination and discouraging enrollment (at 1852(a)(3), with respect
to the pricing of mandatory supplemental premiums, and 1852(b), with
respect to limiting enrollment based on a health status factor,
including claims experience or insurability). We have included the
above criteria for service area approval in the definition of ``service
area'' in Sec. 422.2.
As noted above, we are providing for a special exception for
service areas for non-network MSA plans. In the case of M+C MSA plans,
differences in payment rates for a given county affect not just the
amount the M+C organization offering the MSA plan is paid, but the
amount that is deposited in MSA accounts. (See section III of this
preamble.) We have decided that in the case of M+C non-network MSA
plans, under which enrollees are not limited to receiving services in a
defined area, we will permit M+C organizations to offer a different M+C
plan in each county in which they wish to enroll beneficiaries. This
would mean that a uniform amount would be deposited in the M+C MSA
account of every enrollee in the M+C MSA plan, and the M+C organization
could file a separate premium amount for each county to ensure that the
proper amount is deposited in accounts in that county.
Emergency and Urgently Needed Services
The definitions of emergency services and urgently needed services
in Sec. 422.2 are based on section 1852(d) and thus differ from those
in existing Sec. 417.401. In accordance with section 1852(d)(3) of the
statute, we are codifying the concept that an ``emergency medical
condition'' exists if a ``prudent layperson'' could reasonably expect
the absence of immediate medical attention to result in serious
jeopardy or harm to the individual. In addition, the new definition of
``emergency services'' includes emergency services provided both within
and outside of the plan, while the definition of ``urgently needed
services'' continues to encompass only services provided outside of the
plan's service area (or continuation area, if applicable), except in
extraordinary circumstances such as those discussed below.
Under section 1852(d)(1)(C)(i), M+C organizations are required to
pay for nonemergency services provided other than through the
organization where the services are immediately required because of
unforseen illness, injury or condition, and it is not reasonable given
the circumstances to obtain the services through the organization. We
believe that except in the rarest and most extraordinary of
circumstances, the only situation in which it would not be reasonable
to receive nonemergency services through the organization would be when
the enrollee is absent from the service area of the M+C plan in which
he or she is enrolled. It is possible, however, albeit extremely
unlikely, that there might be other situations in which this standard
would be met by an enrollee who is in the plan service area.
For example, there could be some temporary disruption of access to
the M+C plan's provider network, such as a strike, or possibly some
temporary physical impediment to traveling to M+C plan providers that
are otherwise readily accessible. Under such circumstances, an
individual might not need emergency services, but still may warrant
immediate attention. Because we do not believe that we can say that the
statutory standard could never be met by an individual who is in the
plan service area, we believe it is appropriate to provide for an
exception in the definition of urgently needed services to the rule
that the enrollee be out of area. We are thus providing for such an
exception in extraordinary cases in which the network is unavailable or
inaccessible due to an unusual event.
Other Definitions
In our April 14, 1998 interim final rule setting forth the
definition of a PSO and related requirements, we established under
Sec. 422.350(b) a definition for ``health care provider'' that is based
on the PSO requirements in section 1855(d)(5). In this interim final
rule, we are adopting the identical definition for general purposes of
the M+C program. Under this definition, as discussed in greater detail
in our April 14 interim final rule (63 FR 18126), the term ``provider''
applies both to individuals licensed or certified by a State to engage
in the delivery health care services (such as physicians, nurse
practitioners, clinical social workers), as well as to entities engaged
in the delivery of health care services (such as hospitals, nursing
homes, home health agencies).
Another clarification contained in this subpart involves the
definition of ``copayment.'' We have defined copayment as a fixed
amount that can be charged for a service. This is to distinguish
copayment from ``coinsurance,'' which is a fixed percentage of the
total cost of a service that can be charged. Copayments, coinsurance,
and deductibles represent the three forms of cost-sharing under a plan.
Finally, we have included a general definition of the term
``balance billing,'' indicating that balance billing refers to an
amount billed by a provider that represents the difference between the
amount the provider charges an individual for a service and the sum of
the amount the individual's health insurer (for example, the original
Medicare program) will pay for the service plus any cost sharing by the
individual. We note that there is significant variation within both
original Medicare and the M+C program regarding the extent to which
balance billing is permissible. For example, under original Medicare,
no balance billing is permitted for providers of services (such as
hospitals and home health agencies), while for nonparticipating
physicians, balance billing is permissible only up to the difference
between the Medicare allowed amount and the Medicare limiting charge.
Different rules apply under original Medicare for other
nonparticipating suppliers (such as ambulance or durable medical
equipment suppliers, for which there are currently no limits on balance
[[Page 34974]]
billing). Similarly, under the M+C program, different balance billing
restrictions apply depending on the type of M+C plan and the
contracting status of the provider. These restrictions are discussed in
detail in the appropriate sections of this preamble, particularly in
section IV regarding M+C private fee-for-service plans.
3. Types of M+C Plans (Sec. 422.4)
The creation of the M+C program allows beneficiaries access to a
much wider array of private health plan choices than the existing
alternatives to the original Medicare program. Moreover, this new
program will enable Medicare to use innovations from the commercial
sector that have helped the private market contain costs and expand
health care delivery options.
The BBA provides for several different types of M+C plans to be
available for beneficiaries. As noted above, these various M+C plans
can be classified into three general categories: M+C coordinated care
plans, M+C MSA plans (that is, a combination of a high deductible M+C
health insurance plan and a contribution to an M+C MSA), and M+C
private fee-for-service plans. Within each of these three categories,
M+C organizations may offer a variety of plans to Medicare
beneficiaries.
Since these are the only legally significant categories of plans
under the M+C program, we do not believe it is necessary to define all
of the different entities that accept prepaid, capitated payment for
delivering health services. Thus, examples of these entities, such as
PPOs, HMOs, or health insurance organizations, are not defined for
purposes of this regulation. Essentially, all entities that apply to
offer an M+C plan must conform to the requirements for either an M+C
coordinated care plan, an M+C MSA plan, or an M+C private fee-for-
service plan.
M+C Coordinated Care Plans (Sec. 422.4(a)(1))
Under the M+C program, beneficiaries may choose from among a
variety of coordinated care plans. Coordinated care plans include, but
are not limited to, HMO plans (with or without point of service
options) (HMOs), plans offered by PSOs (as defined in section 1855(d)
and in our April 14, 1998 interim final rule), and PPO plans. In
addition, certain beneficiaries may be able to choose another type of
coordinated care plan, the Religious Fraternal Benefit Society plan,
which is defined in section 1859(e).
Except in the case of a PSO granted a waiver under subpart H of
part 422, all organizations offering M+C coordinated care plans must
meet the State licensure requirements in section 1855 (and
Sec. 422.400). Thus, an M+C coordinated care plan must be offered by an
entity that is (1) appropriately licensed by the State to bear risk and
(2) eligible to offer health insurance or health benefits coverage in
each State in which it offers an M+C plan.
In addition, an M+C coordinated care plan must meet the definition
of a coordinated care plan set forth in Sec. 422.4. That is, an M+C
coordinated care plan is a type of plan offered by an M+C organization
that includes a network of providers that are under contract or
arrangement with the organization to deliver the benefit package
approved by HCFA. The network must be approved by HCFA to ensure that
all applicable requirements are met including access and availability
standards, service area requirements, and quality standards. A
coordinated care plan may include mechanisms to control utilization,
such as referrals from a gatekeeper to receive services within the
plan, and financial arrangements that offer incentives to providers to
furnish high quality and cost-effective care.
Except for PSOs that have obtained a waiver of the State licensure
requirement, and thus are subject to the additional requirements set
forth in subpart H of part 422, distinctions among HMOs, PSOs, PPOs,
and other coordinated care plans are not relevant for the purpose of
applying to offer an M+C plan. The distinctions among the various types
of coordinated care plans may be relevant for purposes of State
licensure. However, for the purpose of an M+C application, we are not
concerned with what type of coordinated care plan an applicant intends
to offer. In fact, an entity may offer an M+C coordinated care plan
even though it is not specifically licensed as an HMO, PSO, or PPO. As
long as the entity is licensed as a risk-bearing entity in accordance
with section 1855 of the statute and the plan being offered meets the
definition of a coordinated care plan under Sec. 422.4, the entity does
not need to be licensed specifically as an HMO, PSO, or PPO to offer an
M+C coordinated care plan.
For example, like an HMO or a PSO, a PPO may offer an M+C plan. Any
organization that is licensed as a risk-bearing entity in a State may
offer an M+C plan that is structured in the form of a PPO. We are not
requiring that an organization applying to offer an M+C PPO plan be
operating as a PPO in the non-Medicare marketplace. In that sense, the
BBA imposes a distinct change from prior law, because it does not
require that organizations with Medicare prepaid health plan contracts
meet certain conditions imposed on their structure and their commercial
business. Under section 1876, a PPO generally could not obtain a
Medicare risk contract because most PPOs have members that are
enrollees of an indemnity insurance product, and would not meet the
requirements under section 1876 to be an ``eligible organization''
entitled to contract under that section. The BBA only requires that an
organization be providing health benefits and insurance to enrollees
(regardless of whether on an indemnity or prepaid, capitated status)
and that it be licensed by the State as a risk-bearing entity.
The majority of the PPOs that are currently operating are plans
being offered by State-licensed indemnity carriers or State-licensed
HMOs. However, where the State does license the PPO as a risk-bearing
entity, the PPO may be eligible to become an M+C organization in and of
itself. Conversely, where the State does not allow the PPO to bear
risk, the PPOs in those States would not be eligible to become an M+C
organization on their own. These PPOs that are not allowed to bear risk
may partner with a licensed risk-bearing entity or contract with a
licensed risk-bearing entity to ``rent out'' their PPO network of
providers. Consistent with our policy of deferring to the State as to
which entities constitute licensed risk-bearing entities eligible for
the M+C program, HCFA will defer to the State in terms of whether the
PPOs can accept partial capitation from the licensed indemnity carrier
or licensed HMO.
An entity offering a PPO plan must still comply with the
requirements in 1854(e), which limit enrollee financial liability under
a PPO plan in the same manner that liability is limited under an HMO
plan or any other type of M+C coordinated care plan. That is, the sum
of the premium for basic benefits and the actuarial value of all out-
of-pocket expenses for such benefits (including the actuarial value of
all cost-sharing for non-participating providers in a PPO) cannot
exceed the actuarial value of the deductibles and coinsurance in
original fee-for-service Medicare. Therefore, if a PPO expects a high
level of utilization of non-participating providers, it must have a
very low premium or it must have a significantly reduced level of cost-
sharing for such services.
Religious Fraternal Benefit Society Plans
One specific type of coordinated care plan authorized by the BBA is
a religious fraternal benefit society plan
[[Page 34975]]
(RFB plan), which is defined in section 1859(e). An RFB plan is an
entirely new type of plan that may be offered under the M+C program.
As with the other types of coordinated care plans, an entity
offering an RFB plan must be organized and licensed under State law as
a risk-bearing entity eligible to offer health insurance or health
benefits coverage in each State in which it offers an M+C plan.
Essentially, an RFB society must meet the state licensing requirements
outlined in section 1855. As discussed above, the States define the
criteria for licensure, including any fiscal solvency standards that
apply.
Also, an organization offering an RFB plan under the M+C program
must do more than merely pay health care claims on behalf of their
beneficiaries. Rather, RFB plans that constitute M+C coordinated care
plans must meet the definition of a coordinated care plan included in
this regulation. That is, they must have a network of health
professionals and meet the applicable access, availability, service
area, and quality assurance requirements.
Section 1859(e) defines and describes the requirements for RFB
plans. Section 1859(e)(2) describes an M+C RFB plan as a coordinated
care plan that: (A) Is offered by a religious fraternal benefit society
only to members of the church, convention, or affiliated group; and (B)
permits all members to enroll without regard to health status-related
factors. Section 1859(e)(3) states that the RFB plan must be offered by
a religious fraternal benefit society that: (A) is described under
section 501(c)(8) of the Internal Revenue Code and is exempt from
taxation under section 501(a) of that Act; (B) is affiliated with,
carries out the tenets of, and shares a religious bond with, a church
or convention or association of churches or an affiliated group of
churches; (C) offers, in addition to an M+C religious fraternal benefit
society plan, at least the same level of health coverage to individuals
not entitled to Medicare benefits who are members of such church,
convention, or group; and (D) does not impose any limitation on
membership in the society based on any health status-related factor.
Section 501(c) of the Internal Revenue Code generally describes the
rules applicable to those organizations which are not subject to
Federal income tax under section 501(a) of the code. Section 501(c)(8)
describes one type-- fraternal beneficiary societies, orders or
associations that (a) operate under the lodge system for the exclusive
benefit of a Fraternity itself operating under the lodge system; (b)
provide for the payment of life, sick or accident or other benefits for
the members of such society or association or their dependents.
RFB Plans have two distinguishing factors from other types of M+C
coordinated care plans. The first is that RFB plans are allowed to
limit their enrollment to members of the church. Section 1859(e)(1)
indicates that a religious fraternal benefit society offering an M+C
plan may restrict the enrollment of individuals in the plan to
individuals who are members of the church, convention, or group with
which the society is affiliated.
In addition to this ability to limit enrollment strictly to members
of the church, RFB plans are distinct from other M+C coordinated care
plans in that RFB plans may be subject to possible payment adjustments
to ensure an ``appropriate payment level.'' Specifically, section
1859(e)(4) indicates that the Secretary shall provide for such
adjustment to the payment amounts otherwise established under section
1854 as may be appropriate to assure an appropriate payment level,
taking into account the actuarial characteristics and experience of
such individuals.
M+C MSA Plans (Sec. 422.4(a)(2))
The definition of an M+C MSA plan, as well as other requirements
that apply solely or in a different manner to M+C MSA plans, are
discussed in full in section III. of this preamble. Note that in
section III.K. of this preamble, we solicit letters of intent from
organizations that intend to offer M+C MSA plans to Medicare
beneficiaries and/or to serve as M+C MSA trustees.
M+C Private Fee-For-Service Plans (Sec. 422.4(a)(3))
The definition of an M+C private fee-for-service plan, as well as
other requirements that apply solely or in a different manner to M+C
private fee-for-service plans, are discussed in full in section IV of
this preamble.
Multiple Plans (Sec. 422.4(b))
Section 422.4(b) establishes that an M+C organization may offer
multiple plans, including plans of different types, under a single
contract with HCFA, provided that the organization is licensed or
approved under State law to offer the applicable types of plans. We
believe that this policy should prove to be less administratively
burdensome for both prospective M+C organizations and for HCFA than
other alternatives, such as requiring separate contracts between HCFA
and an M+C organization for each plan, or type of plan, being offered
by the organization. We also specify under this section that if an M+C
organization has received a waiver of the licensing requirement to
offer a PSO plan, the waiver does not apply to the licensing
requirement for other types of plans. Other issues associated with the
ability of an M+C organization to offer multiple plans under a single
contract with HCFA are discussed below, in the section of the preamble
that deals with the contract requirements contained in subpart K of
part 422.
4. Applications (Secs. 422.6 and 422.8)
Sections 422.6 and 422.8 set forth the application requirements for
entities seeking to contract with HCFA to offer M+C plans, as well as
HCFA's application evaluation procedures. For the most part we have
retained the contracting requirements from Secs. 417.143 and 417.144 as
authorized by section 1856(b)(2). This section of the law allows HCFA
to use past contracting standards applied to contracts under section
1876 or to create new standards as needed to implement the M+C program.
The application requirements and evaluation procedures are almost
identical to the current application procedures.
The primary change to our previous process is the additional
requirement that organizations wishing to contract with HCFA must
submit documentation of their appropriate State licensure, or submit
documentation of State certification that the entity is, in fact, able
to offer health insurance or health benefits coverage meeting State
fiscal solvency standards and authorized to accept prepaid capitation
for providing, arranging, or paying for comprehensive health care
services. (Entities meeting the definition of a PSO can be exempted
from this requirement if they meet conditions for a waiver, which can
be granted by HCFA--see subpart H of part 422.) This requirement is
necessitated by the fact that HCFA will no longer have primary
responsibility for determining the fiscal solvency of new contractors.
We intend to rely for the most part on State certification to insure
that the entities that we contract with are indeed fiscally solvent and
have the ability to handle and afford risk payments for health care
coverage, although we will if necessary ``look behind'' State
certifications for validation purposes.
In one addition to existing rules, Sec. 422.8(b) specifies that
HCFA may deny an entity's application to offer an M+C plan if the
entity has failed to complete a corrective action plan during the term
of its previous contract with HCFA, regardless of whether the contract
was under the section 1833, 1876, or the new Part C provisions of the
law. We
[[Page 34976]]
believe that this provision explicitly ensures that the proven
performance problems of entities that apply to contract with HCFA under
the M+C program are taken into consideration in the application
evaluation process.
5. User Fees (Sec. 422.10)
The last section of subpart A contains regulations implementing the
user fees provided for in section 1857(e)(2). Section 1857(e)(2)
directs the Secretary to collect user fees from M+C organizations, with
each paying its pro rata share, for the purpose of paying for costs
associated with enrollment and information activities under section
1851 and subpart B, and counseling and assistance programs under
section 4360 of the Omnibus Budget Reconciliation Act of 1990 (Public
Law 103-66).
Under section 1876(k)(4)(D), the user fees provided for in section
1857(e)(2) apply in 1998 to HMOs and CMPs with risk contracts under
section 1876. On December 2, 1997, we published regulations in
Sec. 417.472(h) implementing the user fee authority in section
1857(e)(2), and setting forth a methodology for determining an
organization's ``pro rata share'' of these fees. (62 FR 63669).
In this interim final rule, we are simply adopting at Sec. 422.10,
for purposes of the M+C program, the user fee provisions now set forth
at Sec. 417.472(h). Our reasons for adopting the methodology reflected
in these regulations are set forth in the preamble to the December 2,
1997 rule. We intend to respond to comments received on the December 2
interim final rule, as well as comments on this rule, in a future
rulemaking document.
B. Eligibility, Election, and Enrollment
1. Eligibility to Elect an M+C Plan (Sec. 422.50)
Section 1876 background: The provisions that have in the past
applied to managed care entities (and continue to apply until these
entities become M+C organizations) are in section 1876 and part 417 of
this chapter. Section 1876(d) provides that Medicare beneficiaries who
are entitled to benefits under Part A and enrolled in Part B, or
enrolled under Part B only, except those with ESRD, residing in the
service area of the plan are eligible to receive all their Medicare
benefits through an HMO or CMP that has a contract with HCFA.
Regulations at Sec. 417.423(b) excluded beneficiaries who elect hospice
care from enrolling in an HMOs or CMPs as long as the hospice election
remains in effect. Existing regulations at Sec. 417.460(f) require that
HMO or CMP disenroll individuals who move out of their geographic
areas, except that Sec. 417.460(f)(2) allows enrollees to remain
enrolled in an HMO or CMP under the following circumstances: (1) During
a temporary move from the service area for up to 90 days, or (2) during
a move to a new area for as long as 1 year if the HMO or CMP has
elected to offer this option under Sec. 417.460(f)(2).
a. Eligibility. The BBA established a new section 1851(a) that
includes the eligibility criteria an individual must meet in order to
enroll in an M+C plan, as defined in Sec. 422.4. Accordingly, except as
discussed below at section B.1.b. regarding the transition of Part B
only individuals, Sec. 422.50 states that individuals who are entitled
to Part A and enrolled in Part B are eligible to enroll in an M+C plan.
These individuals are referred to as ``M+C eligible individuals.''
Individuals with end stage renal disease (ESRD) are not permitted
to be new enrollees of an M+C organization offering an M+C plan.
Section 1851(a)(3)(B) excludes individuals with ESRD from enrolling in
an M+C plan generally, but provides that an individual who develops
ESRD while an enrollee in an M+C plan may ``continue to be enrolled''
in that plan. For purposes of this provision only we are considering
individuals who are enrolled in a private health plan offered by the
M+C organization to have been enrollees of the M+C plan when they
developed ESRD. In section 422.50(a)(2), therefore, we provide that an
individual who develops end-stage renal disease while enrolled in an
M+C plan, or in a private health plan offered by the M+C organization
offering an M+C plan, may continue to be enrolled in the M+C
organization as an M+C plan enrollee.
We take this position because we believe that Congress intended in
section 1851(a)(3)(B) to permit individuals with ESRD who are enrolled
with an M+C organization to remain enrolled with that organization. If
an individual develops ESRD as an enrollee of the organization after
becoming Medicare eligible, he or she clearly would be permitted under
section 1851(a)(3)(B) to remain enrolled with the organization. We do
not believe that enrollees of an M+C organization should be penalized
because they develop ESRD prior to becoming Medicare eligible rather
than after. This position is consistent with our existing policy
implementing a similar ESRD exclusion under section 1876, and therefore
is supported by section 1856(b)(2), which provides for the retention of
``standards established under section 1876 to carry out analogous
provisions of such section.''
We are not continuing the Sec. 417.423(b) exclusion policy on
hospice; individuals who elect hospice coverage may elect an M+C plan.
Unlike ESRD patients, individuals who elect hospice care are not
specifically excluded from participating in the M+C program. In fact,
section 1853(h) contains special rules for M+C organizations that
enroll hospice patients.
Section 1851(b) states that, except as the Secretary may otherwise
provide, individuals must live in the geographic area served by the M+C
plan in order to enroll in that plan. We have exercised the discretion
provided in this provision to provide that those individuals converting
from health plans in which they were enrolled prior to Medicare
entitlement who reside out of the plan's service area may also continue
enrollment in the M+C organization if they reside in the continuation
area of the plan.
An M+C organization must disenroll beneficiaries who permanently
move from the service area, unless the plan has chosen to provide a
continuation of enrollment option in the area to which the enrollee
moved, as allowed in section 1851(b)(1)(B) and the enrollee chooses to
remain with the plan. We discuss continuation of enrollment in detail
in section b.2., ``Continuation of Enrollment.'' Section 4002
enrollment transition for 1876 risk contracts.
Section 1876 risk contracts cannot be renewed for a contract year
beginning on or after January 1, 1999. Current risk contractors that
remain in compliance with current standards and that demonstrate
compliance with new requirements established by this regulation will be
able to transition into the M+C program by entering into an M+C
contract, as an M+C organization, with a contract effective date of
January 1, 1999.
Section 4002(c) of the BBA provided for a seamless transition of
enrolled membership. An individual who is enrolled on December 31, 1998
with an eligible organization under section 1876 shall be considered to
be enrolled with that organization on January 1, 1999 under the M+C
program if that organization has a contract under Part C of title XVIII
for providing services on January 1, 1999, unless the individual has
disenrolled effective on that date.
In addition, section 4002(b) provides that an individual who is
enrolled in Part B only and is enrolled in an eligible organization
with a risk-sharing contract under section 1876 on December 31, 1998,
may continue to be enrolled in the
[[Page 34977]]
organization in accordance with our regulations. This means that on
January 1 there will be a small population of ``grandfathered Part B
only'' enrollees retained in organizations formerly with risk contracts
that now hold contracts under the M+C program. However, this is a one
time opportunity, and an individual who is enrolled in Part B and not
entitled to Part A and who disenrolls from the M+C organization is not
eligible to elect a plan offered by another M+C organization.
In summary, we are interpreting the statute to allow an individual
to transition enrollment from the 1876 program without regard to
location of residence or whether the individual has end-stage renal
disease and to choose to enroll in any plan offered by the M+C
organization into which they are transitioning.
2. Continuation of Enrollment (Sec. 422.54)
As stated previously, section 1851(b)(1)(B) allows M+C
organizations to offer enrollees the option of continued enrollment in
the M+C plan when enrollees leave the plan's service area to reside
elsewhere, we have to interpieted this to mean on a permanent basis.
M+C organizations that choose the continuation of enrollment option
must explain it in marketing materials and make it available to all
enrollees in the service area. Enrollees may choose to exercise this
option when they move or they may choose to disenroll.
Before an M+C organization may offer a continuation of enrollment
option to Medicare beneficiaries, the organization must obtain HCFA
approval of the continuation area, its marketing materials, and the
organization's assurances that it will meet access requirements. Under
section 1851(b)(1)(B), the organization must provide enrollees with
reasonable access within the continuation area to the Medicare covered
benefits described in section 1852(a)(1)(A).
The payment rate at which the M+C organization will receive payment
from HCFA will be based on the rate and adjustment factors that
correspond to the beneficiary's permanent residence. The M+C
organization must, at a minimum, provide or arrange for the provision
of Medicare covered benefits in the continuation area as described in
the first sentence of Sec. 422.100(b)(1), and the plan must meet access
and cost-sharing requirements for all basic benefits.
Because the rate that we pay to M+C organizations includes amounts
that ordinarily must be used to provide additional benefits (see
preamble for subpart G), we believe that M+C organizations should be
required to provide additional benefits in the continuation area. As
noted above, however, section 1851(b)(1)(B) requires only that Medicare
benefits be provided to continuation enrollees. We accordingly are
considering a legislative proosial to require M+C organizations to
provide all services in section 1852(a)(1), including required
additional benefits under section 1852(a)(1)(B).
Section 1851(b)(1)(B) requires that ``reasonable access'' be
provided in the continuation area, and that enrollees be subject to
``reasonable cost-sharing.'' We are requiring that M+C organizations
satisfy the access requirements in Sec. 422.112, and provide services
either through written agreements with providers or by making payments
that satisfy the requirements in Sec. 422.100(b)(2).
We are defining ``reasonable cost-sharing'' in the continuation
area to be limited to (1) the cost-sharing amounts required in the M+C
plan's service area (in which the enrollee no longer resides) if
provided by contract providers; (2) the cost-sharing amounts required
by the continuation area plan if provided through agreements with
another M+C plan; or (3) the amount for which a beneficiary would be
liable under original Medicare if noncontracting providers furnish the
services.
We have included two items in these regulations that reflect our
prior experience with similar situations. They are: (1) that plans may
require prior notification from members of their intention to use the
continuation of enrollment option, but this requirement must be in
their marketing materials, and (2) appeals and grievances in the
continuation area must be handled in the same timely fashion as in the
service area, but the ultimate responsibility for the appropriate
handling of appeals and grievances is with the organization that is
receiving payment from HCFA.
3. Limitations on Enrollment in an M+C MSA Plan (Sec. 422.56)
While most M+C eligible individuals can choose to receive benefits
through one of the M+C plans defined in Sec. 422.4, the statute places
limitations on eligibility to enroll in M+C MSA plans.
Sections 1851(b)(2) and (b)(3) specifically exclude certain
individuals from enrolling in M+C MSA plans. We have specified at
Sec. 422.56(b) of this section, that individuals who are enrolled in a
Federal Employees Health Benefit program (FEHB) plan, or who are
eligible for health care benefits through the Veterans Administration
(VA) or the Department of Defense (DoD) may not enroll in an M+C MSA
plan. The statute provides that the restrictions on FEHB enrollment may
be eliminated if the Director of the Office of Management and Budget
certifies to the Secretary that the Office of Personnel Management has
adopted polices that will ensure that the enrollment of FEHB
participants in M+C MSA plans will not result in increased expenditures
for the Federal government. The Office of Personnel Management has
indicated to HCFA that they would not be able to certify that FEHB
costs would not increase at this time. Under our authority in section
1851(b)(2)(B), we intend to apply the same rules for enrollment
restriction to individuals who are eligible for health benefits through
the VA and DoD. Additionally, in Sec. 422.56(c) we have incorporated
the statutory requirement under section 1851(b)(3) that individuals who
are entitled to Medicare cost-sharing under a State plan under title
XIX are not eligible to enroll in M+C MSA plans. In addition, an
individual who receives health benefits that cover all or part of the
annual deductible under an M+C MSA plan may not enroll in an M+C MSA
plan.
Note that M+C MSA plans are described in detail in Section III of
this preamble.
4. Limited Enrollment Under M+C RFB Plans (Sec. 422.57)
Section 1859(e)(1) states that Religious Fraternal Benefit Society
(RFB) plans may limit the enrollment of individuals to those who are
members of the church, convention or group with which the society is
affiliated. We have included the restrictions on enrollment in RFB
plans at Sec. 422.57.
5. Election Process (Sec. 422.60)
Under section 1851(c)(1) the Secretary is required to establish a
process through which elections in M+C plans are made and changed,
including the form and manner in which they are done. In Sec. 422.60,
we describe the election process for enrollment with the M+C
organization. Where applicable we have included existing rules from 42
CFR Sec. 417.430 with conforming changes.
As stated at Sec. 422.66(a), M+C eligible individuals who wish to
elect an M+C plan may do so by filing the appropriate election form
with the M+C organization. At Sec. 422.60(a), we specify that M+C
organizations must accept without restriction, except as specified in
Sec. 422.57 for RFB plans, individuals who enroll in an M+C plan during
the
[[Page 34978]]
election periods described in section 1851(e)(6) and set forth at
Sec. 422.62 of the regulation.
As provided by section 1851(e)(6), and stated at Sec. 422.60(a),
and displayed in the following chart, M+C organizations are required to
accept enrollments during the initial coverage election period, the
annual election period, and special election periods, but M+C
organizations are not required to be open for enrollment during open
enrollment periods.
When Elections May Be Made or Changed*
----------------------------------------------------------------------------------------------------------------
M+C Plans Required to
Coverage Election Periods When: Sec. 422.62 Accept Enrollments: Effective Date of
Sec. 422.60 Coverage: Sec. 422.68
----------------------------------------------------------------------------------------------------------------
Initial Coverage Election Period..... 3 months before Yes.................... 1st day of month of
entitlement to Part A entitlement to Part A
and Part B. and Part B.
Annual Election Period............... Annually in November... Yes.................... January 1.
Special Election Period.............. Starting 2002, if Yes.................... To Be Determined--
beneficiary moves, depends on situation.
plan terminates, etc.
Special Election Period at Age 65.... Starting 2002, in first No--Election is 1st day of the month
12 months after original Medicare. after month of
initial election of election.
M+C plan.
Open Enrollment Periods.............. Anytime 1998-2001 Jan- No--Plans have option 1st day of the month
Jun 2002 Jan-Mar 2003+. of accepting after month of
enrollments. election.
----------------------------------------------------------------------------------------------------------------
*Refer to referenced regulation text for detail.
Note that different rules apply to M+C MSA plans.
As provided at Sec. 422.306(a)(2) to reflect the requirements in
section 1854(a)(1)(B), M+C organizations must submit by May 1 of each
year the enrollment capacity of each plan they offer. Section 422.60(b)
then provides that if HCFA determines that the M+C plan has a capacity
limit, the plan may limit the enrollment of M+C eligible individuals if
the plan accepts first those individuals who elected the plan prior to
the HCFA determination and then accepts others in a manner that does
not discriminate on the basis of health status.
We note that we have not included regulation text to address the
last sentence of section 1851(g)(2) regarding ``nonrepresentative''
enrollment. As written, the sentence disallows a capacity limit if
enrollment would become substantially nonrepresentative of the Medicare
population in the plan's service area, as determined in accordance with
regulations of the Secretary. We cannot envision circumstances under
which the imposition of a capacity limit on enrollment would by itself
lead to an enrollment ``substantially non-representative'' of the
Medicare population in an M+C plan's service area. We particularly
cannot envision circumstances under which the non-representativeness of
enrollment would be so ``substantial'' as to justify possible risks to
patient access and quality of services as the result of overloaded
capacity. We accordingly are not promulgating regulations at this time
implementing the authority in the last sentence in section 1851(g)(2).
We invite comments on this provision, and would consider including
guidance on this matter in a final regulation based upon comments
received.
At Sec. 422.60(c) we indicate requirements for the election form.
The form must comply with HCFA instructions regarding content and
format, must be completed and signed by the beneficiary (or the
individual who will soon be entitled to Medicare benefits), and must
include authorization for disclosure and exchange of necessary
information between HCFA and the M+C organization. Persons who assist
beneficiaries in completing forms must sign the form and indicate their
relationship to the beneficiary. The forms must also be filed and
retained by the M+C organization.
In general, and as indicated by our requirement that the
beneficiary complete and sign the form, we believe that an M+C eligible
individual should personally complete and sign any election form or
disenrollment request (referenced at Sec. 422.66(b)) whenever possible.
If for some reason a beneficiary is unable to sign for himself or
herself, we recognize and defer to state laws on who may sign for other
persons, which is also the policy in the Section 1876 program.
In Sec. 422.60(d), we specify that an election is considered to
have been made on the date it is received by the M+C organization. We
believe it is necessary that we define ``when an election is made''
because it is a determining factor in establishing the effective date
of M+C plan coverage. Note that HCFA's liability for payment is not as
of the election date, but rather, is as of the effective date of
coverage. Effective dates of coverage are specified at Sec. 422.68.
We have also set forth at Sec. 422.60(e) a process for handling of
forms, including for providing written notification of acceptance or
denial in the M+C plan.
6. Election of Coverage Under an M+C Plan (Sec. 422.62)
Section 1876 background: Section 1876(c)(3)(A)(i) requires that
HMOs and CMPs hold an open enrollment period for Medicare beneficiaries
of at least 30 consecutive days during each contract year to qualify
for a Medicare contract. For Medicare beneficiaries who enroll during
the open enrollment period, Sec. 417.450(a)(2) states that the
effective date of coverage cannot be earlier than the first month, nor
later than the third month, after the month in which HCFA received the
information necessary to include the beneficiary in its records. In
Sec. 417.450(b), HCFA reserves the option to approve a later month if
requested by the organization and the beneficiary. HMOs and CMPs can
also offer continuous open enrollment outside of the 30-day period.
In the M+C program under section 1851(a)(1), M+C eligible
individuals may elect to receive Medicare benefits under original
Medicare or through election of an M+C plan. Section 1851(e) describes
the various election periods available to M+C eligible individuals.
Many of these provisions allow the individual to ``change the election
under subsection (a)(1)'' during these periods. If section 1851(a)(1)
were read narrowly, it arguably would only allow an eligible individual
to change between original Medicare or the M+C program under Part C. We
have taken a broader approach in interpreting section (a)(1) to allow
eligible individuals to not only make a change between the original
Medicare program and an M+C plan, but also among M+C plans. Therefore,
an M+C eligible individual
[[Page 34979]]
who changes his or her election may change from an M+C plan to original
Medicare, from an M+C plan to another M+C plan or from original
Medicare to an M+C plan.
The BBA establishes specific parameters in which elections can be
made and/or changed. Individuals who wish to elect an M+C plan or
subsequently change their election, must do so during the periods
established under section 1851(e). That section requires that elections
or changes in election be made during the following periods: The
initial coverage election period, continuous open enrollment periods,
an annual coordinated election period or special election periods. Note
that the Medigap implications of a change of election to original
Medicare are discussed at section II.B.12 (Extended Period of
Guaranteed Access to Medigap Plans) of this preamble.
a. Initial Coverage Election Period. Section 1851(e)(1) requires
that the Secretary specify an initial coverage election period during
which an individual who is initially entitled to Part A and enrolled in
Part B may elect an M+C plan. The statute further stipulates that if an
individual elects an M+C plan during that period, coverage under the
plan will become effective as of the first day on which the individual
may receive that coverage. We believe that Congress intended that we
give a newly eligible individual the opportunity to be enrolled in an
M+C plan as soon as he or she would be entitled to actually receive
both Medicare Part A and Part B coverage.
In other contexts, we have interpreted the concept of ``entitled''
to mean that an individual has met all of the necessary requirements
for a benefit (that is, is eligible for the benefit), and has actually
applied for and been granted coverage. An individual is considered to
be ``enrolled'' under section 1837, on the other hand, when he or she
has applied for Part B coverage (or is deemed to have applied). Under
some situations, an individual may apply for or be deemed to have
applied for Part B before he or she is actually entitled to receive
coverage. For example, if an individual applies for Part B coverage and
becomes ``enrolled'' after he or she reaches age 65, the individual may
not actually be entitled to Part B coverage under section 1838 until
one or several months after the month of application and enrollment. If
we were to interpret section 1851(e)(1) to give effect to an M+C plan
election when an individual has only enrolled in Part B, he or she
could be entitled to the benefits of the M+C plan before actually being
entitled to Medicare Part B coverage. In order to avoid such a result,
we have interpreted ``enrolled'' in Part B as ``entitled'' to Part B.
We believe our interpretation is consistent with section
1851(e)(1), which requires the Secretary to specify an initial coverage
election period that would result in coverage under the plan becoming
effective as of the first day on which the individual may receive that
coverage.
In establishing the initial coverage election period we considered
the statutory process of entitlement to Part A and enrollment in Part
B. Section 226 of the Act provides that individuals who are age 65 and
entitled to retirement benefits under title II or the Railroad
Retirement Board Act and those who are under age 65 and have been
entitled (or deemed entitled) to disability benefits under title II or
the Railroad Retirement Board Act for 24 months shall be entitled to
Part A under the Medicare program and eligible to enroll in Part B.
Part A coverage is effective the month an individual attains age 65, or
the 25th month he or she is entitled to disability benefits. If an
individual is entitled to disability or retirement benefits at least 3
months before reaching age 65 or, in the case of a disabled individual,
three months before the 25th month in which he or she is entitled to
disability benefits, the individual is deemed enrolled in Part B at
that time. Under section 1838, Part B is effective with the month an
individual reaches age 65 or in the 25th month he or she is entitled to
disability benefits.
In order for an individual to have coverage under an M+C plan
effective as of the first day on which the individual may receive such
coverage, the individual must elect an M+C plan before he or she is
actually entitled to Part A and Part B coverage. We have therefore
defined the initial coverage election period as the 3-month period that
begins 3 months prior to the month the individual is first entitled to
both Part A and Part B and ends the last day of the month preceding the
month of entitlement.
This approach also permits individuals who do not enroll in Part B
at initial eligibility (i.e. at age 65 or in the 25th month of
disability entitlement) to elect an M+C plan at the time of subsequent
enrollment in Part B. Section 1837(i) provides for a special enrollment
period for individuals who defer enrollment in Part B because they are
covered under a group health plan based on their own employment or that
of a spouse (in the case of the disabled, the employment may be that of
any family member). Enrollment in Part B may occur during any month the
individual is covered under the group health plan based on current
employment or during the 8-month period that begins the first full
month the individual is no longer covered under the group health plan
based on current employment. Under section 1838(e), Part B coverage is
effective the first day of the month the application is filed or, at
the individual's option, the first day of any of the following three
months when enrollment occurs while the individual is covered under the
group health plan based on current employment or during the first full
month when not so covered. Therefore, an individual may file an
application for Part B up to three months in advance of entitlement.
Consequently, individuals who enroll in Part B during the special
enrollment period may elect an M+C plan during the 3-month period prior
to entitlement to Part B.
Additionally, section 1837(e) allows individuals who fail to enroll
for Part B during their initial enrollment period (3 months before they
are entitled to Part A or within 3 months after the month they are
entitled to Part A) to enroll for Part B during a general enrollment
period, which runs from January through March of every year, with
coverage effective July 1 of the year of enrollment. In this case, the
Part B application may be filed up to 6 months in advance of the month
of entitlement. (Individuals who enroll in a general enrollment period
are subject to an increased premium under section 1839(b), measured by
the length of the delay in enrollment.)
In order to be consistent with the 3 month periods that can occur
between timely enrollment for Part B and actual entitlement in existing
sections of the Medicare statute, we have limited the period during
which an individual may elect an M+C plan to the 3-month period prior
to actual entitlement to Part B. We believe that this correlation with
the 3-month period will be administratively more efficient than a
shorter or longer time period.
b. Annual Coordinated Election Period. Section 1851(e)(6)
establishes that organizations offering M+C plans in January, 1999 must
open enrollment to Medicare beneficiaries in November, 1998. In
addition, section 1851(e)(3) establishes the month of November of each
year beginning in 1999 as the annual coordinated election period.
During the month of November, an M+C eligible individual may elect
an M+C plan or change his or her election. Thus, the section 1876
requirement that plans be open any 30-day period is replaced by a
requirement that plans
[[Page 34980]]
have to be open for enrollment during the month of November.
c. Open Enrollment Periods. Section 1851(e)(2) establishes open
enrollment periods during which M+C eligible individuals may elect an
M+C plan, if it is open to new enrollees, or change their elections.
M+C individuals may not, however, as provided in section 1851(e)(5),
elect an M+C MSA plan during open enrollment periods.
Note that as provided by section 1851(e)(6) and stated at
Sec. 422.60(a)(2), M+C organizations may, but are not required, to
offer continuous open enrollment during open enrollment periods. This
is similar to the section 1876 policy which also allowed, but did not
require, continuous open enrollment outside of a 30-day period.
Section 1851(e)(2)(A) establishes that at any time during calendar
years 1998 through 2001, there will be no limit on the number of
elections or changes that an M+C eligible individual can make.
Section (e)(2)(B) establishes the first six months of 2002,
(January through June) as the open enrollment period for that year. An
M+C eligible individual may elect an M+C plan or change his or her
election, but only once during the first six months of the calendar
year.
Section (e)(2)(C) establishes the first three months of each year
(January through March) beginning 2003, as the open enrollment period.
An M+C eligible individual may elect an M+C plan or change his or her
election, but only once during the first three months of the calendar
year.
Section 1851(e)(2)(B)(i) allows that an individual who becomes an
M+C eligible individual in 2002 and elects an M+C plan or original
Medicare, to change that election once during the first 6 months of M+C
eligibility in 2002. Beginning in the year 2003 and thereafter, a newly
eligible individual who has made an election may change that election
once during the first 3 months of M+C eligibility in that year.
Consequently, those who become M+C eligible individuals late during the
year may not have a full 6-month or 3-month open enrollment period. For
example, an individual who becomes eligible in August 2002 has an open
enrollment period of 5 months, August through December. The sixth
month, January, does not occur during 2002 and cannot qualify as part
of the open enrollment period.
The limit to one change during the open enrollment periods in the
first six months of 2002 and the first three months of subsequent years
does not apply to changes in elections that an individual makes during
an annual coordinated election period or during a special election
period.
In Sec. 422.62, paragraphs (a)(4)(ii) and (5)(ii), we have
interpreted the 6 and 3 month periods ``in which the individual is an
M+C eligible individual'' in section 1851, paragraphs (e)(2)(B)(i) and
(e)(2)(C)(i), as the periods that begin with the month the individual
is first ``entitled to both Part A and Part B.'' The statute defines
``eligible for Medicare+Choice'' as eligible for Part A and enrolled in
Part B, a definition that we have reflected in Sec. 422.50(a)(1);
however, this definition could cause problems for newly eligible
individuals during the open enrollment period.
For example, individuals who are newly eligible for M+C in the year
2002 under section 1851(e)(2)(B) will have 6 months, beginning with
their eligibility for M+C, to change their election. If we start
counting this period from the time individuals enroll in Part B, some
will have little or no opportunity to change. Some of these individuals
may not actually be entitled to receive benefits for a delayed period,
which can be up to 6 months after they have enrolled if they have
enrolled during a general election period. Hence, the opportunity to
change could have no meaning, with the open enrollment period expiring
before the individuals have actually received any M+C coverage.
d. Special Election Periods. Section 1851(e)(4) establishes special
election periods beginning in 2002, during which M+C eligible
individuals may disenroll from an M+C plan or elect another M+C plan.
Special election periods are available if: (1) The service area or
continuation area is reduced or the plan terminates or is terminated in
the area in which the individual resides; (2) the individual moves out
of the plan's service area and the plan does not offer, or the
individual does not elect, the continuation of enrollment feature, or
there is some other change of circumstances specified by HCFA; (3) the
individual demonstrates to HCFA, in accordance with guidelines
established by HCFA, that the M+C organization offering the plan
substantially violated a material provision of its contract with regard
to the individual or the organization, its agent, representative, or
plan provider materially misrepresented the plan's provisions in
marketing the plan to the individual; or (4) the individual meets such
other exceptional conditions specified by HCFA.
The last paragraph in section 1851(e)(4) provides that, effective
January 1, 2002, an individual who, upon first becoming eligible for
benefits under Part A at age 65, enrolls in an M+C plan (other than an
M+C MSA plan), may discontinue the election and elect original Medicare
at any time during the 12 month period beginning on the effective date
of the M+C election. We have interpreted this provision to apply to
individuals who elect an M+C plan (other than an M+C MSA plan) during
the initial enrollment period, as defined under section 1837(d), that
surrounds their 65th birthday. This period begins 3 months before and
ends 3 months after the month of an individual's 65th birthday. We
believe that this interpretation fulfills the intention of the statute,
which is to provide this special election period to individuals who,
upon turning 65 and first becoming entitled to Medicare, elect an M+C
plan. Our interpretation takes into account the fact that many, if not
most, individuals will be making an election during an initial
enrollment period, rather than during the month that they turn 65.
e. Special Enrollment and Disenrollment Rules for M+C MSA Plans.
Section 1851(e)(5) establishes special rules for individuals enrolling
in M+C MSAs. M+C eligible individuals may elect the M+C MSA option only
during an initial coverage election period or during November of any
year, beginning in 1998. M+C MSA enrollees may discontinue their
election only during November of 1998, during annual coordinated
election periods in November of each subsequent year, and during
special election periods described in the first sentence of section
1851(e)(4). Individuals who elect an M+C MSA for the first time during
the annual coordinated election periods that begin in November of 1999
may revoke their election if they do so before December 15 of the year
in which they make the election, i.e., before the M+C MSA coverage
begins. M+C MSA plans are described in detail at the end of this
preamble.
7. Information about the M+C Program (Sec. 422.64)
Once these regulations are effective and M+C plans are approved by
HCFA, eligible Medicare beneficiaries will be able to choose to receive
their Medicare benefits from a new array of health care options. New
options will include coordinated care plans such as Health Maintenance
Organizations, Preferred Provider Organizations, Provider Sponsored
Organizations, as well as Private Fee for Service Plans and Medical
Savings Accounts. Medicare beneficiaries will still be able to choose
to remain in original Medicare. These choices are designed to offer
Medicare beneficiaries a marketplace of options
[[Page 34981]]
similar to those available to the non-Medicare population.
Under section 1851(d)(2), the Secretary is obligated to mail an
``open season notification'' at least 15 days before the beginning of
each annual coordinated election period to each M+C eligible individual
residing in an area and, to the extent practicable, to a newly eligible
individual not later than 30 days before the individual's initial
coverage election period. The notice must include certain general
information listed in section 1851(d)(3) and a list of plans and
certain plan comparisons as described in section 1851(d)(4). Section
1851(d)(1) requires that HCFA provide for activities to broadly
disseminate information to beneficiaries and prospective beneficiaries
on their coverage options under M+C, and section 1851(d)(5) requires
HCFA to maintain a toll-free line for M+C inquiries and an Internet
site through which individuals can obtain electronic information.
To promote informed choice, HCFA will provide access, via the
Internet and through distribution of print materials, to information
about original Medicare and M+C options. In accordance with section
1851(d)(3) and reflected in Sec. 422.64(c), HCFA will provide general
information to M+C eligible individuals with respect to benefits
available under Part A and Part B of original Medicare, including
covered services, beneficiary cost-sharing, such as deductibles,
coinsurance, and copayment amounts, including any beneficiary liability
for balanced billing. Such general information will also include
instructions on how to exercise election options under M+C; procedural
rights including the grievance and appeals procedures for original
Medicare and M+C and the individual's right to be protected against
discrimination based on health status related factors under section
1852(b), including the fact that an M+C organization may terminate its
contract, refuse to renew its contract, or reduce the service area
included in its contract and the effect this may have on the
individuals enrolled in the M+C plan. Finally, a general description of
the benefits, enrollment rights, and other requirements applicable to
Medicare supplemental policies under section 1882, including Medicare
Select, will be included.
Under section 1851(d)(4) and reflected in Sec. 422.64(c)(6), HCFA
will also provide information to M+C eligible individuals comparing M+C
plan options, including the benefits covered under the M+C plan;
covered services beyond those provided under original Medicare; and
beneficiary cost-sharing including maximum limitations on out-of-pocket
expenses and, in the case of an MSA plan or M+C private fee-for-service
plan, differences in cost-sharing, premiums, and balance billing as
compared to other M+C plans and whether the organization offering the
plan includes mandatory supplemental benefits in addition to its base
benefit package or offers optional supplemental benefits and the
premiums and other terms and conditions for such coverage. The M+C
monthly basic beneficiary premium and M+C monthly supplemental
beneficiary premium, if any for the plan or, in the case of an MSA
plan, the M+C monthly MSA premium, will also be included. M+C eligible
individuals will also be informed about the extent to which they may
obtain benefits through out-of-network health care providers; the
extent to which they may select among health care providers and the
types of providers participating in the plan's network. M+C eligible
individuals will be informed of the M+C organization's coverage of
emergency and urgently needed care, service area of the plan, and, to
the extent available, M+C plan quality and performance indicators.
The information comparing plan options is crucial to empowering
beneficiaries with the knowledge that will help them evaluate M+C
options and make informed decisions based on their individual needs. We
wish to make clear that our provision of comparative data is intended
neither to encourage or discourage beneficiaries from choosing one
health care plan over another nor to favor a choice of an M+C plan over
original Medicare.
We invite the public to comment or to provide specific guidance on
the types of information that should be made available to
beneficiaries. Once we have worked out what specific information we
will require within the above categories, we will post these at our
Internet site.
The Internet site, www.Medicare.gov, is a Medicare beneficiary-
centered consumer website designed to provide a broad array of
information on program benefits, health system performance, health care
choices, healthy behaviors and health promotion. This site will be
continuously improved to meet the mandate in section 1851(d)(2)(C) that
we provide information in a style and format that is easy to
understand. If necessary, we will publish regulations and allow for OMB
review, pursuant to the requirements of the Paperwork Reduction Act of
1995.
HCFA's ``Medicare Compare,'' the Managed Care Plans Comparison
Database, will be available on the Internet for public use. ``Medicare
Compare'' provides a wealth of information on health care plans,
allowing users to ``comparison shop'' for plans. Users can look up
information in different areas, by state, county or zip code. They can
also compare costs for premiums and types of services offered. The
information in the database will be updated quarterly. Plan specific
quality performance measures from the HEDIS information set and the
Consumer Assessment of Health Plans Survey (CAHPS) will be incorporated
into information provided to beneficiaries once the data and results
have been validated and determined to be accurate and reliable. HCFA is
committed to using a public process to determine information and data
specifications, including the details of what information will need to
be collected and the methods of collection to determine the remaining
unspecified data elements that organizations are required to submit.
HCFA will work collaboratively with organizations involved with quality
and performance standards and measurements, including performance
measurement experts, public and private purchasers, and beneficiary
representatives in this process. In addition, HCFA will hold public
meetings to invite interested parties to comment and provide input in
the process of determining the data specifications for additional
performance information, e.g., data about appeals or health outcome
measures. Finally, HCFA will publish a notice regarding plan data
elements to be collected and a summary of public processes used to
determine the data elements in question and this document would be
available at the discretion of the requestor. Educational information
will be made available on the Internet site to prepare consumers on how
to use this information when comparing plans and in making decisions
about their health care.
In support of efforts to promote informed choice, HCFA will also
maintain a toll-free line for M+C information.
Under section 1851(e)(3)(D), we are required to provide in the fall
of 1998 for a ``Special Information Campaign'' in the form of an
educational and publicity campaign that informs M+C eligible
individuals about the availability of M+C plans offered in different
areas, and about the election process. Section 1851(e)(3)(C) requires
that we provide for a nationally coordinated educational and publicity
campaign about M+C plans and the election process in November of each
year, beginning in 1999. We may conduct these campaigns
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using health fairs, as well as other methods for distributing
information.
8. Coordination of Enrollment and Disenrollment Through M+C
Organizations (Sec. 422.66)
a. Enrollment. Section 1851 (c)(1) and (c)(2) provide that
individuals who wish to elect an M+C plan may do so through filing an
appropriate election form with the organization during an election
period specified in section 1851(e), and reflected in Sec. 422.62.
Section 1851(c)(1) requires that the Secretary establish a process
through which elections in M+C plans are made. Therefore, we reserve
the right to develop and provide additional mechanisms for electing an
M+C plan. We have provided instructions on how M+C organizations must
process elections at Sec. 422.60(e). If necessary, we will publish
regulations and allow for OMB review, pursuant to the requirements of
the Paperwork Reduction Act of 1995.
b. Disenrollment. Section 1876 background: Under section
1876(c)(3)(B), which covers disenrollment from HMOs and CMPs, a
Medicare beneficiary can disenroll from an HMO or CMP at any time.
Under the HMO and CMP regulations in Sec. 417.461(a), an enrollee who
wishes to disenroll may, at any time, give the organization a signed,
dated request in the form and manner we specify. The beneficiary can
request a certain disenrollment date, but it can be no earlier than the
first day of the month following the month in which the organization
receives the disenrollment request. Under section 9312(h) of the
Omnibus Budget Reconciliation Act of 1986, Medicare beneficiaries are
also permitted to disenroll from an eligible organization under Section
1876 at a local Social Security office.
Section 417.461(b) describes the responsibility of the HMO or CMP
to promptly submit a disenrollment notice to HCFA and provide the
enrollee with a copy of the request for disenrollment and, in the case
of a risk HMO or CMP, an explanation of the date of disenrollment.
Section 417.461(c) provides that HMOs and CMPs must reimburse HCFA in
cases where a disenrollment notice is not submitted timely to HCFA.
Currently, when an individual enrolls in one HMO or CMP while still
enrolled in another, we regard this action as a disenrollment from the
first HMO or CMP, and automatically amend our enrollment records to
reflect the disenrollment. We do this so that the beneficiary does not
have to both submit a disenrollment request to the first HMO or CMP,
and an enrollment request to the new HMO or CMP.
To reflect these current policies, Sec. 422.66(b)(1) provides that
an individual who wishes to disenroll may change his or her election in
the following manner: (i) Elect a different M+C plan during an election
period specified in Sec. 422.62 or (ii) submit a signed and dated
request for disenrollment to the M+C organization during an election
period specified in Sec. 422.62. HCFA also reserves the right to
develop and provide additional mechanisms for disenrollments in
accordance with section 1851(c). Note that the Medigap implications of
a change of election to original Medicare are discussed at section
II.B.12 (Extended Period of Guaranteed Access to Medigap Plans) of this
preamble.
At Sec. 422.66(b)(2) we specify that a disenrollment request is
considered to have been made on the date it is received by the M+C
organization. Note that HCFA's liability for payment ends not on the
date the disenrollment request is received by the M+C organization, but
rather, as of the date of disenrollment. The date of disenrollment is
determined at Sec. 422.68 for changes made by enrollees during coverage
election periods and at Sec. 422.74 for disenrollments made by M+C
organizations.
At Sec. 422.66(b)(3) and (4) we are continuing the Sec. 417.461(b)
and (c) requirements for M+C organizations to provide timely notice of
disenrollment to HCFA and to provide the enrollee with a copy of the
disenrollment request with information on the date of disenrollment and
any lock-in requirements of the plan that apply until the effective
date of disenrollment. We also state that disenrollment requests must
be filed and retained as specified in HCFA instructions.
The regulation also provides that if the M+C organization fails to
submit a correct and complete disenrollment notice to us promptly, the
M+C organization must reimburse us for any capitation payments it has
received after the month in which we would have stopped payment, had
the M+C organization met the requirement.
c. Retroactive Disenrollment. Section 1876 background: In the case
of section 1876 contractors, HCFA has permitted beneficiaries to be
retroactively disenrolled from an HMO or CMP if it determines that
there never was a legally valid enrollment, or a valid request for
disenrollment was properly made but not processed or acted upon.
In the M+C program, HCFA will continue to consider retroactive
disenrollments in cases in which we determine that there never was a
legally valid enrollment, or a valid request for disenrollment was made
but not processed or acted upon. We have reflected this provision in
Sec. 422.66(b)(5).
d. Fee-for-Service Election by Default. Section 1851(c)(3)(A)(i)
establishes that newly eligible enrollees who do not choose an M+C plan
during the initial coverage election period are deemed to have chosen
original Medicare. We have reflected this provision in Sec. 422.66(c).
e. Seamless Continuation of Coverage (Conversions). Section 1876
background: In regulations at Sec. 417.432, an HMO/CMP is required to
accept any individual who was already enrolled in the HMO/CMP for the
month immediately prior to the month in which he or she was entitled to
both Part A and Part B, or entitled to Part B only. HCFA refers to such
enrollments as ``conversions'' or ``age-ins.'' The individual's
effective month of enrollment in the HMO or CMP as a Medicare enrollee
is effective the month in which he or she is entitled to both Medicare
Parts A and B, or Part B only.
With the enactment of BBA, a new section 1851(c)(3)(A)(ii) is added
to the statute that gives the Secretary discretion to establish
procedures under which individuals who are enrolled in a health plan
offered by an M+C organization at the time of their initial coverage
election periods will ``default'' to or be deemed to have elected an
M+C plan offered by the M+C organization, unless these individuals
elect a different option. We have chosen not to have individuals
default to the M+C plan offered by the organization. At this time we do
not have a mechanism in place to capture the information we would need
to implement such a process. A default process would require that M+C
eligible individuals as well as their relevant health plan information
be identified and captured prior to the individual's initial coverage
election period. At present, we do not have access to information on
which health plans individuals are enrolled in because such plans are
private health plans. In addition, we are not given any information if
individuals have not previously filed for title II (Social Security)
and/or title XVIII (Medicare) benefits.
One option that we may consider would be to specify that M+C
organizations which have individuals enrolled in private health plans
must notify such individuals 4 months preceding the month in which the
individual becomes an M+C eligible individual of their opportunity to
``age-in'' to the M+C plan or to select another option. This would give
the individual
[[Page 34983]]
the opportunity to select from a range of health care options in a
manner that would facilitate seamless continuation of coverage. M+C
organizations would be required to transmit to us the necessary plan
information for those individuals who are interested in exercising
their opportunity to ``age-in''. HCFA would then have the information
necessary to ``deem'' or ``default'' M+C eligible individuals into the
appropriate M+C plan. We request public comments on this issue and will
issue further clarification in the final rule. In the interim, we have
retained the conversion of enrollment process described in Sec. 417.432
with conforming changes.
In Sec. 422.66(d) we specify that M+C plans must accept any
individual who is enrolled in a health plan (other than an M+C plan)
offered by the same M+C organization, during the month immediately
preceding the month in which the individual is entitled to both Part A
and Part B. Conversion may occur if the individual resides in the
service area or continuation area of the plan and regardless of whether
an individual has ESRD. We limit conversions to individual in a service
area and continuation area in order to ensure that enrollees have
access to the full range of services offered by the plan. This policy
is also reflected in the section describing eligibility to elect a plan
(Sec. 422.50(a)(2) and (a)(3)). Therefore, an M+C organization's
obligation to accept current enrollees extends to enrollees in a
service area or a continuation area, or who developed ESRD while
enrolled with the organization under a private health plan. Converted
beneficiaries who reside out of the plan's service area or who have
ESRD cannot, however, later elect to enroll in a plan offered by
another M+C organization unless they meet the statutory requirements at
sections 1851(b)(1)(A) and 1851(a)(e)(B).
In addition, we allow M+C organizations to reserve vacancies for
their plans to accommodate conversions in recognition that M+C
organizations must accept conversions. We require the individual who is
converting to file an election form in accordance with
Sec. 422.60(c)(1). We also stipulate that the M+C organization may not
disenroll the individual except under the conditions described in
Sec. 422.74.
f. Maintenance of Enrollment. The statute provides at section
1851(c)(3)(B) that an individual who has made an election or is deemed
to have made an election is considered to have continued to make that
election until the individual changes it or the M+C plan is
discontinued or no longer serves the area in which the individual
resides. We have stated this rule at Sec. 422.66(e).
9. Effective Dates of Coverage and Change of Coverage (Sec. 422.68)
Section 1851(f) establishes the effective dates for elections and
changes to elections made during the various enrollment periods. Note
that the Medigap implications of a change of election to original
Medicare are discussed at section II.B.12 (Extended Period of
Guaranteed Access to Medigap Plans) of this preamble.
Section 1851(f)(1) states that an election made during the initial
coverage election period will take effect on the date the individual
becomes entitled to Part A and enrolled under Part B, but gives the
Secretary discretion to interpret this provision in a manner,
consistent with section 1838, that prevents retroactive coverage. We
are interpreting ``enrolled in Part B'' as ``entitled to Part B'' in
order to avoid retroactive coverage in an M+C plan that an individual
might receive after enrolling in Part B but prior to the time the
individual is actually entitled to Part B benefits. Therefore, we have
established that an election made during the initial coverage election
period is effective the first day of the month of entitlement to both
Part A and Part B.
Under section 1851(f)(3), an election or change of election made
during an annual coordinated election period is effective the first day
of the following calendar year. We have reflected this provision in
Sec. 422.68(b).
Under section 1851(f)(2), an election or change of election made
during an open enrollment period is effective the first day of the
first calendar month following the month in which the election is made.
We have reflected this provision in Sec. 422.68(c).
Under section 1851(f)(4), an election that occurs as the result of
a special election period is effective, to the extent practicable, in a
manner determined by HCFA to promote continuity of coverage. We have
reflected this provision in Sec. 422.68(d).
At Sec. 422.68(e) we are stating that an election of original
Medicare made during a special election period by an individual age 65
as provided at Sec. 422.62(c) is effective the first day of the first
calendar month following the month in which the election is made.
10. Disenrollment by the M+C Organization (Sec. 422.74)
Section 1851(g)(3) specifies that M+C organizations may only
disenroll individuals from an M+C plan for the following reasons: the
individual fails to pay any basic and supplemental premiums on a timely
basis; the individual engages in disruptive behavior; or the M+C
organization terminates its coverage of all M+C eligible individuals in
the area in which the individual resides.
In Sec. 422.74, we have set forth the conditions under which M+C
organizations can disenroll individuals. Section 1851(g)(3)(A) provides
that, except as provided in section 1851(g)(3)(B), ``a Medicare+Choice
organization may not for any reason terminate'' an individual's
enrollment in ``a Medicare+Choice plan it offers.'' [Emphasis added.]
We have included the three grounds for termination set forth in section
1851(g)(3)(B) in Sec. 422.74. With respect to the ground in section
1851(g)(3)(B)(ii), under which an enrollee can be disenrolled for
``disruptive behavior'' as specified in standards established in
regulations, we have implemented this ground for termination in two
separate provisions. First, under Sec. 422.74(b)(1)(ii), we refer to an
individual who meets general standards for disruptiveness set forth in
Sec. 422.74(d)(2). Section 422.74(d)(2) refers to behavior of an
individual that is ``disruptive, unruly, abusive, or uncooperative to
the extent that his or her continued enrollment * * * seriously impairs
the M+C organization's ability to furnish services. * * *'' We also
separately refer to a different kind of ``disruption'' or failure to
``cooperate''; namely, fraud or abuse of the enrollee's enrollment
card. This ground for termination is also based on section
1851(g)(3)(B)(ii), and standards for disenrollment on this basis are
also included in Sec. 422.74(d), in a separate paragraph (3).
In addition to implementing the grounds in section 1851(g)(3)(B),
we also provide in Sec. 422.74 for the termination of individuals who
are no longer eligible for enrollment in the M+C plan, because they
have left the area, lost entitlement to Medicare, or died. We believe
that the prohibition in section 1851(g)(3)(A) on terminating an
enrollee on grounds other than those set forth in paragraph (B) applies
only to individuals who are otherwise eligible for enrollment in the
plan. Clearly, if an individual does not meet the threshold
requirements for eligibility, disenrollment is not only permissible but
required.
We have established specific guidelines in Sec. 422.74(d)(1) that
the M+C organization must follow when disenrollment is based on failure
to pay basic and supplemental premiums, including the requirement to
send a notice of nonpayment within 20 days after the date that
delinquent charges
[[Page 34984]]
are due. The notice must alert the individual that he or she is
delinquent on a premium payment, provide the individual with an
explanation of the disenrollment procedures and any lock-in provisions
of the plan, and advise the individual that failure to pay the premiums
within the 90-day grace period will result in termination of M+C
coverage.
Note that in the section 1876 program, disenrollment for non-
payment of premiums is treated differently. At Sec. 417.460(c)(2), if a
beneficiary pays the basic premium and other charges, but fails to pay
the premium for optional supplemental benefits, the organization can
discontinue the optional benefits, but cannot disenroll the
beneficiary. However, under section 1851(g)(3)(B)(i), an M+C
organization may terminate an election of a plan if any M+C monthly
basic and supplemental beneficiary premiums are not paid on a timely
basis.
We have retained the current processes described in Sec. 417.460
for disenrollment for disruptive behavior and fraud and abuse. In the
case of disenrollment for disruptive behavior, the M+C organization
must ascertain that the individual's behavior is not related to the use
of medical services or to diminished mental capacity. If an individual
is disenrolled for disruptive behavior, HCFA will review the
documentation submitted by the M+C organization and the beneficiary to
determine whether the disenrollment requirements have been met.
We have included a qualifier for disenrollment when the individual
no longer resides in the M+C plan's service area to conform to section
1851(b)(1)(B), which permits plans to offer a continuation of
enrollment feature if the individual moves out of the service area. We
have modified the existing regulatory text at Sec. 417.460(h) which
requires disenrollment when the individual loses entitlement to Part B
benefits, to require disenrollment when an individual loses entitlement
to Part A or Part B benefits. We have also addressed the process for
disenrollment for plan termination or area reduction.
For all disenrollment situations, except those due to the death of
the individual or loss of Part A or Part B benefits, we require M+C
organizations to provide the individual with a written notice of the
disenrollment that includes an explanation of why the M+C organization
is planning to disenroll the individual and a description of the
individual's right to a hearing under the M+C organization's grievance
procedures.
The statute provides at section 1851(g)(3)(C) that individuals who
are disenrolled from an M+C plan due to disruptive behavior or failure
to pay basic or supplementary premiums will be deemed to have elected
original Medicare. We have treated fraud and abuse by the enrollee in
the same manner as other forms of disruptive behavior, with the
individual being disenrolled into the original Medicare program. We
believe that the result should be comparable because, in both cases,
the individual's disruptive behavior has given the organization cause
for the disenrollment. Individuals who lose entitlement to Part A or
Part B benefits default to original Medicare because they no longer
meet the requirements to receive Medicare benefits through an M+C plan,
which requires entitlement to Part A and enrollment in Part B.
As previously discussed, special election periods are available to
individuals who are disenrolled (or who disenroll) because of plan
termination or service area or continuation area reduction or because
they no longer reside in the M+C plan's service area or continuation
area. Section 1851(g)(3)(C)(ii), however, stipulates that individuals
who are disenrolled and who do not make an election during the special
election period are deemed to have elected original Medicare.
11. Approval of Marketing Materials and Application Forms (Sec. 422.80)
Section 1851(h) contains requirements related to marketing by M+C
organizations. These provisions are implemented in Sec. 422.80. Section
422.80(a) implements the requirement in section 1851(h)(1) that all
marketing material and application forms be submitted to HCFA for
approval 45 days before distribution, and that such materials may only
be used if HCFA does not disapprove such use by the end of this 45 day
period. In section 422.80(b), we define ``marketing materials'' which
must be submitted for approval under Sec. 422.80(a).
Section 1851(h)(2) requires that M+C standards under section 1856
include guidelines for review of marketing materials under section
1851(h)(1) and Sec. 422.80(a). Section 422.80(c) contains guidelines
for HCFA's review of marketing materials under Sec. 422.80(a). As
provided for in section 1852(b)(2), these guidelines include existing
marketing guidelines for HMOs and CMPs in Sec. 417.428, which have been
in effect since the inception of the existing Medicare risk contracting
program.