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Vol. 76 Friday,No. 73 April 15, 2011

Part II

Department of Health and Human Services

Centers for Medicare & Medicaid Services

42 CFR Parts 417, 422 and 423Medicare Program; Changes to the Medicare Advantage and the MedicarePrescription Drug Benefit Programs for Contract Year 2012 and OtherChanges; Final Rule

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21432 Federal Register /Vol. 76, No. 73 / Friday, April 15, 2011 /Rules and Regulations

DEPARTMENT OF HEALTH ANDHUMAN SERVICES

Centers for Medicare & MedicaidServices

42 CFR Parts 417, 422, and 423

[CMS4144F]

RIN 0938AQ00

Medicare Program; Changes to theMedicare Advantage and the MedicarePrescription Drug Benefit Programs forContract Year 2012 and Other Changes

AGENCY: Centers for Medicare &Medicaid Services (CMS), HHS.

ACTION: Final rule.

SUMMARY: This final rule makesrevisions to the Medicare Advantage(MA) program (Part C) and PrescriptionDrug Benefit Program (Part D) toimplement provisions specifiedin thePatient Protection and Affordable CareAct and the Health Care and EducationReconciliation Act of 2010 (collectivelyreferredto as the Affordable Care Act)(ACA) and make other changes to theregulations basedon our experience inthe administration of the Part C and PartDprograms. These latter revisionsclarify various programparticipationrequirements; make changes tostrengthen beneficiary protections;strengthen our ability to identify strongapplicants for Part C and Part Dprogram

participation and remove consistentlypoorperformers; and make otherclarifications and technical changes.

DATES:EffectiveDates: Theseregulations are effective on June 6, 2011,unless otherwise specifiedin this finalrule. Amendments to 42 CFR422.564,422.624, and 422.626 published April 4,2003 at 68 FR 16652 are effective June6, 2011.

Applicability Date: In section II.A. ofthe preamble of this final rule, we

provide a table (Table 1) which lists keychanges in this final rule that have anapplicability date other than theeffective 60 days after the date ofdisplay of this final rule.

FOR FURTHER INFORMATION CONTACT:

Vanessa Duran, (410) 7868697,Christopher McClintick, (410) 7864682, and Sabrina Ahmed, (410) 7867499, General information.

HeatherRudo, (410) 7867627 andChristopher McClintick, (410) 7864682, Part C issues.

Deborah Larwood, (410) 7869500,Part D issues.

Kristy Nishimoto, (410) 7868517,Part C and Part D enrollment andappeals issues.

Deondra Moseley, (410) 7864577,Part Cpayment issues.

SUPPLEMENTARY INFORMATION:

Table ofContents

I. BackgroundII. Provisions of the Final Regulations and

Analysis of and Responses to PublicComments

A. Overview of the Final Changes andPublic Comments Received

1. Overview of the Final Changes

2. Public Comments Receivedon theProposed Rule

B. Changes to Implement the Provisions ofthe Affordable Care Act

1. Cost Sharing forSpecified Services atOriginal Medicare Levels ( 417.454 and 422.100)

2. Simplification ofBeneficiary ElectionPeriods ( 422.62, 422.68, 423.38, and 423.40)

3. Special Needs Plan (SNP) Provisions( 422.2, 422.4, 422.101, 422.107,and 422.152)

a. Adding a Definition ofFully IntegratedDual Eligible SNP ( 422.2)

b. Extending SNP Authorityc. Dual-Eligible SNP Contracts With State

Medicaid Agencies ( 422.107)d. Approval ofSpecial Needs Plansby the

National Committee forQualityAssurance ( 422.4, 422.101, and422.152)

4. Section 1876 Cost ContractorCompetition Requirements ( 417.402)

5. Making Senior Housing FacilityDemonstration Plans Permanent ( 422.2and 422.53)

6. Authority to Deny Bids ( 422.254, 422.256, 423.265, and 423.272)

7. Determination of Part D Low-IncomeBenchmark Premium ( 423.780)

8. Voluntary De Minimis Policy forSubsidy Eligible Individuals ( 423.34and 423.780)

a. Reassigning LIS Individuals ( 423.34)b. Enrollment ofLIS-Eligible Individuals

( 423.34)c. Premium Subsidy ( 423.780)9. Increase In Part D Premiums Due to the

Income Related Monthly AdjustmentAmount (DIRMAA) ( 423.44, 423.286, and 423.293)

a. Rules Regarding Premiums ( 423.286)b. Collection ofMonthly Beneficiary

Premium ( 423.293)c. Involuntary Disenrollmentby CMS

( 423.44)10. Elimination ofMedicare Part D Cost-

Sharing forIndividuals Receiving Homeand Community-Based Services( 423.772 and 423.782)

11. Appropriate Dispensing ofPrescriptionDrugs in Long-Term Care FacilitiesUnderPDPs and MAPD Plans( 423.154)

12. Complaint System forMedicareAdvantage Organizations and PDPs( 422.504 and 423.505)

13. Uniform Exceptions and AppealsProcess forPrescription Drug Plans andMAPD Plans ( 423.128 and 423.562)

14. Including Costs Incurredby AIDS DrugAssistance Programs and the IndianHealth Service Towardthe Annual PartD Out-of-Pocket Threshold ( 423.100and 423.464)

15. Cost Sharing forMedicare-CoveredPreventive Services ( 417.454 and 422.100)

16. Elimination of the Stabilization Fund( 422.458)

17. Improvements to Medication TherapyManagement Programs ( 423.153)

18. Changes to Close the Part D CoverageGap ( 423.104 and 423.884)

19. Payments to Medicare Advantage

Organizations ( 422.308)a. Authority to Apply Frailty AdjustmentUnderPACE Payment Rules for CertainSpecializedMA Plans forSpecial NeedsIndividuals ( 422.308)

b. Application ofCoding Adjustment( 422.308)

c. Improvements to Risk Adjustment forSpecial Needs Individuals With ChronicHealth Conditions ( 422.308)

20. Medicare Advantage Benchmark,Quality Bonus Payments, and Rebate( 422.252, 422.258, and 422.266)

a. Terminology ( 422.252)b. Calculation ofBenchmarks ( 422.258)c. Increases to the Applicable Percentage

forQuality ( 422.258(d)) d. Beneficiary Rebates ( 422.266)21. Quality Bonus Payment and Rebate

Retention Appeals ( 422.260)C. Clarify Various Program Participation

Requirements1. Clarify Payment Rules forNon-Contract

Providers ( 422.214)2. Pharmacist Definition ( 423.4)3. Prohibition on Part C and Part D Program

Participationby Organizations WhoseOwners, Directors, or ManagementEmployees Servedin a Similar CapacityWith AnotherOrganization ThatTerminated its Medicare Contract Withinthe Previous 2Years ( 422.506, 422.508, 422.512, 423.507, 423.508, and 423.510)

4. Timely Transferof Data and Files When

CMS Terminates a Contract With a PartD Sponsor( 423.509)

5. Review ofMedical Necessity Decisionsby a Physician orOther Health CareProfessional and the Employment ofaMedical Director( 422.562, 422.566, 423.562, and 423.566)

6. Compliance Officer Training ( 422.503and 423.504)

7. Removing Quality Improvement Projectsand Chronic Care Improvement Programsfrom CMS Deeming Process ( 422.156)

8. Definitions ofEmployment-BasedRetiree Health Coverage and GroupHealth Plan for MA Employer/Union-Only Group Waiver Plans ( 422.106)

D. Strengthening Beneficiary Protections

1. Agent and Broker Training Requirements( 422.2274 and 423.2274)

a. CMS-ApprovedorEndorsedAgent andBroker Training and Testing ( 422.2274and 423.2274)

b. Extending Annual TrainingRequirements to All Agents and Brokers( 422.2274 and 423.2274)

2. Call Centerand Internet Web siteRequirements ( 422.111 and 423.128)

a. Extension of CustomerCall CenterandInternet Web site Requirements to MAOrganizations ( 422.111)

b. Call Center Interpreter Requirements( 422.111 and 423.128)

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3. Require Plan Sponsors to ContactBeneficiaries to Explain Enrollment byan Unqualified Agent/Broker( 422.2272and 423.2272)

4. Customized Enrollee Data ( 422.111 and 423.128)

5. Extending the Mandatory MaximumOut-of-Pocket (MOOP) AmountRequirements to Regional PPOs( 422.100 and 422.101)

6. Prohibition on Use ofTiered CostSharingby MA Organizations ( 422.262)

7. Delivery ofAdverse CoverageDeterminations ( 423.568)

8. Extension of Grace PeriodforGoodCause and Reinstatement ( 422.74 and 423.44)

9. Translated Marketing Materials( 422.2264 and 423.2264)

E. Strengthening Our Ability to DistinguishforApproval Stronger Applicants forPart C and Part D Program Participationand to Remove Consistently PoorPerformers

1. Expand Network AdequacyRequirements to All MA Plan Types( 422.112)

2. Maintaining a Fiscally Sound Operation( 422.2, 422.504, 423.4, and 423.505)

3. Release of Part C and Part D PaymentData ( 422.504, 423.505, and 423.884)

4. RequiredUse ofElectronic TransactionStandards forMulti-Ingredient DrugCompounds; Payment forMulti-Ingredient Drug Compounds ( 423.120)

5. Denial ofApplications SubmittedbyPart C and Part D Sponsors With LessThan 14 Months Experience OperatingTheir Medicare Contracts ( 422.502 and 423.503)

F. Other Clarifications and TechnicalChanges

1. Clarification of the Expiration oftheAuthority To Waive the State LicensureRequirement forProvider-SponsoredOrganizations ( 422.4)

2. Cost Plan Enrollment Mechanisms( 417.430)

3. Fast-track Appeals ofServiceTerminations to Independent ReviewEntities (IREs) ( 422.626)

4. Part D Transition Requirements( 423.120)

5. Revision to Limitation on Charges toEnrollees for Emergency DepartmentServices ( 422.113)

6. Clarify Language Relatedto Submissionof a Valid Application ( 422.502 and 423.503)

7. Modifying the Definition ofDispensingFees ( 423.100)

III. Collection ofInformation RequirementsA. ICRs Regarding Cost Sharing for

Specified Services at Original MedicareLevels ( 417.454 and 422.100)

B. ICRs Regarding SNP Provisions( 422.101, 422.107, and 422.152)

1. Dual-Eligible SNP Contracts with StateMedicaid Agencies ( 422.107)

2. ICRs RegardingNCQA Approval ofSNPs( 422.101 and 422.152)

C. ICRs Regarding Voluntary De MinimisPolicy for Subsidy Eligible Individuals( 423.34 and 423.780)

D. ICRs Regarding Increase In Part DPremiums Due to the Income RelatedMonthly Adjustment Amount (DIRMAA) ( 423.44)

E. ICRs Regarding Elimination ofMedicarePart D Cost-Sharing forIndividualsReceiving Home and Community-BasedServices ( 423.772 and 423.782)

F. ICRs Regarding Appropriate DispensingofPrescription Drugs in Long-Term Care

Facilities UnderPDPs and MAPD plans( 423.154) and Dispensing Fees( 423.100)

G. ICRs Regarding Complaint System forMedicare Advantage Organizations andPDPs ( 422.504 and 423.505)

H. ICRs Regarding Uniform Exceptions andAppeals Process forPrescription DrugPlans and MAPD Plans ( 423.128 and 423.562)

I. ICRs Regarding Including Costs Incurredby AIDS Drug Assistance Programs andthe Indian Health Service TowardtheAnnual Part D Out-of-Pocket Threshold( 423.100 and 423.464)

J. ICRs Regarding Improvements toMedication Therapy Management

Programs ( 423.153)K. ICRs Regarding Changes to Close thePart D Coverage Gap ( 423.104 and 423.884)

L. ICRs Regarding Medicare AdvantageBenchmark, Quality Bonus Payments,and Rebate ( 422.252, 422.258 and 422.266)

M. ICRs Regarding Quality Bonus Appeals( 422.260)

N. ICRs Regarding Timely TransferofDataand Files When CMS Terminates aContract With a Part D Sponsor( 423.509)

O. ICRs Regarding Agent and BrokerTraining Requirements ( 422.2274 and 423.2274)

P. ICRs Regarding Call Centerand InternetWeb site Requirements ( 422.111 and 423.128)

Q. ICRs Regarding Requiring Plan Sponsorsto Contact Beneficiaries to ExplainEnrollmentby an Unqualified Agent/Broker ( 422.2272 and 423.2272)

R. ICRs Regarding Customized EnrolleeData ( 422.111 and 423.128)

S. ICRs Regarding Extending theMandatory Maximum Out-of-Pocket(MOOP) Amount Requirements toRegional PPOs ( 422.100(f) and 422.101(d))

T. ICRs Regarding Prohibition on Use ofTieredCost Sharingby MAOrganizations ( 422.100 and 422.262)

U. ICRs Regarding Translated MarketingMaterials ( 422.2264 and 423.2264)

V. ICRs Regarding Expanding NetworkAdequacy Requirements to AdditionalMA Plan Types ( 422.112)

W. ICRs Regarding Maintaining a FiscallySound Operation ( 422.2, 422.504, 423.4, and 423.505)

X. ICRs Regarding Release of Part C andPart D Payment Data (Parts 422 and 423,Subpart K)

Y. ICRs Regarding Revision to Limitationon Charges to Enrollees for EmergencyDepartment Services ( 422.113)

IV. Regulatory Impact Analysis

Regulations Text

Acronyms

ACA The Affordable Care Act of2010(which is the collective term for the PatientProtection and Affordable Care Act (Pub. L.111148) and the Health Care andEducation Reconciliation Act (Pub. L. 111152))

AO Accrediting Organization

ADS Automatic Dispensing SystemAEP Annual Enrollment PeriodAHFS American Hospital Formulary

ServiceAHFSDI American Hospital Formulary

Service-Drug InformationAHRQ Agency forHealth Care Research

and QualityALJ Administrative Law JudgeANOC Annual Notice ofChangeBBA Balanced Budget Act of 1997 (Pub. L.

10533)BBRA [Medicare, Medicaidand State Child

Health Insurance Program] BalancedBudget Refinement Act of 1999 (Pub. L.106113)

BIPA Medicare, Medicaid, and SCHIPBenefits Improvement Protection Act of2000 (Pub. L. 106554)

CAHPS Consumer Assessment HealthProviders Survey

CAP Corrective Action PlanCCIP Chronic Care Improvement ProgramCCS Certified Coding SpecialistCHIP Childrens Health Insurance ProgramsCMP Civil Money Penalties orCompetitive

Medical PlanCMR Comprehensive Medical ReviewCMS Centers forMedicare &Medicaid

Services CMSHCC CMS Hierarchal Condition

CategoryCTM Complaints Tracking Module

COB Coordination ofBenefitsCORF Comprehensive OutpatientRehabilitation Facility

CPC Certified Professional CoderCY Calendar yearDOL U.S. Department ofLaborDRA Deficit Reduction Act of 2005 (Pub. L.

109171)DUM Drug Utilization ManagementEGWP Employer Group/Union-Sponsored

Waiver PlanEOB Explanation ofBenefitsEOC Evidence ofCoverageESRD End-Stage Renal DiseaseFACA Federal Advisory Committee ActFDA Food and Drug Administration (HHS)FEHBP Federal Employees Health Benefits

PlanFFS Fee-For-Service FY Fiscal yearGAO Government Accountability OfficeHCPP Health Care Prepayment PlansHEDIS HealthCare Effectiveness Data and

Information SetHHS [U.S. Department of] Health and

Human ServicesHIPAA Health Insurance Portability and

Accountability Act of 1996 (Pub. L. 104191)

HMO Health Maintenance OrganizationHOS Health Outcome SurveyHPMS Health Plan Management System

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ICD9CM Internal Classification ofDisease, 9th, Clinical ModificationGuidelines

ICEP Initial Coverage Enrollment PeriodICL Initial Coverage LimitICR Information Collection RequirementIRMAA Income-Related Monthly

Adjustment AmountIVC Initial Validation ContractorLEP Late Enrollment Penalty

LIS Low Income SubsidyLTC Long Term CareMA Medicare AdvantageMAAA Memberof the American Academy

ofActuariesMAPD Medicare AdvantagePrescription

Drug PlansM+C Medicare +Choice programMOC Medicare Options CompareMPDPF Medicare Prescription Drug Plan

FinderMIPPA Medicare Improvements forPatients

and Providers Act of2008MMA Medicare Prescription Drug,

Improvement, and Modernization Act of2003 (Pub. L. 108173)

MSA Metropolitan Statistical Area

MSAs Medical Savings AccountsMSP Medicare Secondary PayerMTM Medication Therapy ManagementMTMP Medication Therapy Management

ProgramNAIC National Association Insurance

CommissionersNCPDP National Council forPrescription

Drug ProgramsNCQA National Committee forQuality

AssuranceNGC National Guideline ClearinghouseNIH National Institutes ofHealthNOMNC Notice ofMedicare Non-coverageOEP Open Enrollment PeriodOIG Office ofInspector GeneralOMB Office ofManagement and Budget

OPM Office ofPersonnel ManagementOTC Over the CounterPART C Medicare AdvantagePART D Medicare Prescription Drug Benefit

ProgramsPBM Pharmacy Benefit ManagerPDE Prescription Drug EventPDP Prescription Drug PlanPFFS Private Fee For Service PlanPOS Point ofservicePPO Preferred Provider OrganizationPPS Prospective Payment SystemP&T Pharmacy & TherapeuticsQIO Quality Improvement OrganizationQRS Quality Review StudyPACE Programs of All Inclusive Care for the

Elderly

RADV Risk Adjustment Data ValidationRAPS Risk Adjustment Payment SystemRHIA Registered Health Information

AdministratorRHIT Registered Health Information

TechnicianSEP Special Enrollment PeriodsSHIP State Health Insurance Assistance

ProgramsSNF Skilled Nursing FacilitySNP Special Needs PlanSPAP State Pharmaceutical Assistance

ProgramsSSA Social Security AdministrationSSI Supplemental Security Income

TMR Targeted Medication ReviewTrOOP True Out-Of-PocketU&C Usual and CustomaryUSP U.S. Pharmacopoeia

I. Background

The Balanced Budget Act of1997(BBA) (Pub. L. 10533) established anew Part C in the Medicare statute(sections 1851 through 1859 oftheSocial Security Act (the Act) whichestablishedthe current MA program(known as Medicare+Choice under theBBA). The Medicare Prescription Drug,Improvement, and Modernization Act of2003 (MMA) (Pub. L. 108173)establishedthe Part Dprogram andmade significant revisions to Part Cprovisions governing the MedicareAdvantage (MA) program. The MMAdirectedthat important aspects ofthePart Dprogrambe similarto, andcoordinated with, regulations for theMA program. Generally, the provisionsenactedin the MMA took effect January

1, 2006. The final rules implementingthe MMA for the MA and Part D

prescription drug programs appeared inthe Federal Register on January 28,2005 (70 FR 4588 through 4741 and 70FR 4194 through 4585, respectively).

As we have gained experience withthe MAprogram and the prescriptiondrug benefit program, we periodicallyhave revisedthe Part C and Part Dregulations to continue to improve orclarify existing policies and/or codifycurrent guidance for both programs. InDecember2007, we publisheda finalrule with comment on contract

determinations involving MedicareAdvantage (MA) organizations andMedicare Part Dprescription drug plansponsors (72 FR 68700). In April 2008,we publisheda final rule to address

policy and technical changes to the PartDprogram (73 FR 20486). In September2008 and January 2009, we finalizedrevisions to both the MedicareAdvantage and Medicareprescriptiondrug benefit programs (73 FR 54226 and74 FR 1494, respectively) to implementprovisions in the MedicareImprovement forPatients and ProvidersAct (MIPPA) (Pub. L. 110275), whichcontained provisions affectingboth theMedicare Part C and Part Dprograms,and to make other policy changes andclarifications basedon experience with

both programs (73 FR54208, 73 FR54226, and 74 FR 2881). We alsoclarifiedthe MIPPA marketing

provisions in aNovember2008 interimfinal rule (73 FR67407).

Proposedand final rules addressingadditional policy clarifications underthe Part C and Part Dprograms appearedin the October22, 2009 (74 FR54634)and April 15, 2010 Federal Register (75

FR 19678 through 19826), respectively.(These rules are hereinafter referred toas the October2009 proposedrule andthe April 2010 final rule, respectively.)As noted when issuing these rules, we

believedthat additional programmaticand operational changes were needed inorderto further improve our oversightand management of the Part C and Part

Dprograms, and to further improve abeneficiarys experience under MA orPart Dplans.

Indeed, one of the primary reasons setforth in support ofissuing our April2010 final rule was to addressbeneficiaryconcerns associatedwith theannual task ofselecting a Part C or PartDplan from so many options. We notedthat while it was clear that the MedicarePart C and Part Dprograms have beensuccessful in providing additionalhealth care options forbeneficiaries, asignificant numberofbeneficiaries have

been confusedby the array ofchoicesprovidedand have foundit difficult tomake enrollment decisions that are bestfor them. Moreover, experience hadshown that organizations submittingmultiplebids underPart C and Part Dhad not consistently submitted benefitdesigns significantly different from eachother, which we believed added to

beneficiary confusion. For this reason,the April 2010 rule required thatmultiple plan submissions in the samearea have significant differences fromeach other. Other changes set forth inthe April 2010 final rule were aimed atstrengthening existing beneficiary

protections, improvingpayment rules

andprocesses, enhancing our ability topursue data collection for oversight andquality assessment, strengtheningformulary policy, and finalizing anumberofclarifications and technicalcorrections to existing policy.

On November22, 2010, aproposedrule (hereinafter referredto as theNovember2010 proposed rule) appearedin the Federal Register (75 FR224), in which we proposedto continueourprocess ofimplementingimprovements in policy consistent withthose includedin the April 2010 finalrule, while also implementing changesto the Part C and Part Dprograms made

by recent legislative changes. ThePatientProtection and Affordable CareAct (Pub. L. 111148) was enacted onMarch 23, 2010, as passedby the Senateon December24, 2009, and the Houseon March 21, 2010. The Health Care andEducation Reconciliation Act (Pub. L.111152), which was enactedon March30, 2010, modifieda number ofMedicare provisions in Pub. L. 111148and added several new provisions. ThePatient Protection and Affordable CareAct (Pub. L. 111148) and the Health

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Care and Education Reconciliation Act(Pub. L. 111152) are collectivelyreferredto as the Affordable Care Act(ACA). The ACA includes significantreforms to both the private healthinsurance industry and the Medicareand Medicaid programs. Provisions inthe ACA concerning the Part C and PartDprograms largely focus on beneficiary

protections, MA payments, andsimplification of MA and Part D

program processes. These provisionsaffect the way we implement ourpolicies concerning beneficiary cost-sharing, assessingbids for meaningfuldifferences, and ensuring that cost-sharing structures in aplan aretransparent to beneficiaries and notexcessive. Some of the other provisionsfor which we proposed revisions to theMA and Part Dprograms, basedon theACA and our experiences inadministering the MA and Part D

programs, concern MA and Part D

marketing, including agent/brokertraining; payments to MA organizations

basedon quality ratings; standards fordetermining iforganizations are fiscallysound; low income subsidy policyunderthe Part Dprogram;paymentrules for non-contract health care

providers; extending current networkadequacy standards to Medicaremedicalsavings account (MSA) plansthat employ a networkofproviders;

establishing limits on out-of-pocketexpenses for MA enrollees; and severalrevisions to the special needs planrequirements, including changesconcerning SNP approvals and deeming.In general, the proposedrule wasintendedto strengthen the way weadministerthe Part C and Part Dprograms, and to aidbeneficiaries in

making the best plan choices for theirhealth care needs.

II. Provisions of the Final Regulationsand Analysis of and Responses toPublic Comments

A. Overview of the Final Changes andPublic Comments Received

1. Overview of the Final Changes

In the sections that follow, we discussthe changes made in the final rule toregulations in 42 CFRparts 417, 422,and423 governing the MA andprescription drug benefit programs. Tobetterframe the discussion ofthespecific regulatory provisions, we havestructuredthe preamble narrative bytopic area rather than in subpart order.Accordingly, we address the followingfive specific goals:

Implementing the provisions oftheACA.

Clarifying various programparticipation requirements.

Strengthening beneficiaryprotections.

Strengthening our ability todistinguish stronger applicants for PartC and Part Dprogramparticipation andto remove consistently poorperformers.

Implementing other clarificationsand technical changes.

A numberof the revisions andclarifications in this final rule affect

both the MA andprescription drug

programs, and some affect section 1876cost contracts. Within each section, wehave provideda chart listing all subjectareas containing provisions affecting thePart C, Part D, and section 1876 costcontract programs, and the associatedregulatory citations that are beingrevised.

We note that these regulations areeffective 60 days after the date ofdisplay of the final rule. Table 1 listskey changes that have an applicabilitydate other than 60 days after the date ofdisplay of this final rule. Theapplicability dates are discussedin the

preamble for each ofthese items.We are implementing several changes

to the regulations to reflect provisions inthe ACA which are already in effect.Table 2 lists the key changes. Whilethese ACA provisions became effectiveon the statutory effective date, theregulations implementing these

provisions will be effective 60 days afterthe date ofdisplay of the final rule.BILLING CODE 412001P

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Preamble Section Section Title Applicability Date

II.B.10

Elimination of Medicare Part D Cost-Sharing for Individuals Receiving Home and Community-BasedServices 01/01/2012

II.B.11

Appropriate Dispensing of Prescription Drugs in Long-term Care Facilities Under PDPs andMA-

PD Plans 01/01/2013II.B.12 Complaint System for Medicare Advantage Organizations andPOPs 01/01/2012

II.B.13 Uniform Exceptions and Appeals Process for Prescription Drug Plans and MA-PD Plans 01/01/2012

II.B.17 Improvements to Medication Therapy Management Programs 01/01/2013

II.B.20.a through d Medicare Advantage Benchmark, Quality Bonus Payments, andRebate 01/01/2012

II.E.4Required Use of Electronic Transaction Standards for Multi-Ingredient Drug Compounds; Paymentfor Multi-Ingredient Drug Compounds 01/01/2012

II.F.4 Part D Transition Requirements 01/01/2012

Table 1: ApplicabilityDate of Key Provisions Other than 60 Days after the Date of Display of the Final Rule

0.

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Preamble Section Section Title

Effective Date ofStatutory

Requirement As Specifiedin the ACA

II.B.2 Simplification of Beneficiary Election Periods 0110112011

II.B.3.b Extending SNP Authority

Upon enactment ofthe

ACA

II.B.3.c Dual Eligible SNP Contracts with State Medicaid Agencies

Upon enactment ofthe

ACA

II.B.4 Section 1876 Cost Contract Plan Competition Requirements Upon enactment ofthe

ACA

II.B.5 Making Senior Housing Facility Demonstration Plans Permanent 0110112010

II.B.6 Authority to Deny Bids 0110112011

II.B.7 Determination of Part D Low-Income Benchmark Premium 0110112011

II.B.8.a through c Voluntary De Minimis Policy for Subsidy Eligible Individuals Plan year2011

II.B.9.a through c

Increase In Part D Premiums Due to the Income Related Monthly Adjustment Amount

(D-IRMAA) 0110112011

II.B.14

Including Costs Incurred by AIDS Drug Assistance Programs and the Indian Health Service

Toward the Annual Part D Out-of-Pocket Threshold 0110112011II.B.18 Changes to Close the Part D Coverage Gap 0110112011

II.B.19.a

Authority to Apply Frailty Adjustment under PACE payment rules for Certain Specialized MA

Plans for Special Needs Individuals 0110112011

II.B.19.b Application of Coding Adjustment 0110112006

II.B.19.c Improvements to Risk Adjustment for Special Needs Individuals with Chronic Health Conditions 0110112011

Table 2: Key Statutory Provisions with Statutory Effective Dates Earlierthan 60 Days after the Date of Display of the Final

Rule

0.

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2. Public Comments Receivedon theProposed Rule

We received approximately 261 timelypublic comments on theNovember2010proposedrule. Thesepublic commentsaddressed issues on multiple topics.Commenters included health and drug

plan organizations, insurance industry

trade groups, pharmacy associations,pharmaceuticalbenefit manager(PBM)organizations, provider associations,representatives ofhospital and long termcare institutions, drug manufacturers,mental health anddisease specificadvocacy groups, beneficiary advocacygroups, researchers, and others.

In this final rule, we address allcomments and concerns on the policiesincludedin the proposedrule. We alsoreference comments that were outside

the scope of the proposals set forth inthe proposedrule, in the comment andresponse sections of this final rule.

Wepresent a summary of the publiccomments and our responses to them inthe applicable subject-matter sections ofthis final rule.

Comment: A commenter statedthatCMS revisedthe date for the closing of

the comment periodfrom January 21,2011 to January 11, 2011 and requestedthat CMS provide a rationale forshortening the comment periodfor the

proposed rule.Response: Ourproposedrule was

placedon display at the Office oftheFederal Register and made available onthe CMS Web site on November 10,2010. Section 1871(b)(1) of the Actrequires notice of the proposed rule, and aperiodof 60 days forpubliccomment thereon. Because notice ofthe

provisions of the proposedrule wasprovidedon November10, 2010 thecomment period closedon January 11,2011, which is 60 days after the date ofdisplay of the proposedrule at theOffice of the Federal Register and on theCMS Web site.

B. Changes To Implementthe Provisions

of the Affordable CareAct

The ACA includes significant reformsof both the private health insuranceindustry and the Medicare andMedicaid programs. Provisions in theACA that concern the Part C and Part Dprograms largely focus on beneficiaryprotections, MA payments, andsimplification of MA and Part Dprogram processes. The changes basedon provisions in the ACA are detailedin Table 3.

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TABLE 3-Changes to Implement the Provisions of the Affordable Care Act

Cost Sharing for Specified Subpart B 417.454 N/A N/A

Services at Original Medicare Subpart C 422.100

LevelsSimplification of Beneficiary Subpart B Subpart B 423.38

Election Periods .40

Special Needs Plan (SNP) Subpart A N/A N/A

Provisions Subpart C

Subpart D

Section 1876 Cost Contractor Subpart J N/A N/A'tion

Making Senior Housing Subpart A 422.2 N/A N/A

Facility Demonstration Plans Subpart B 422.53

PermanentAuthority to Deny Bids Subpart F 422.254,422.256 Subpart F 423.265

3.272

Determination of Part D Low- N/A N/A Subpart P 423.780

Income Benchmark Premium

Voluntary De Minimis Policy N/A N/A Subpart B 423.34

for Subsidy Eligible Subpart P 423.780

Individuals

Increase In Part D Premiums N/A N/A Subpart B 423.44

Due to the Income Related Subpart F 423.286

Monthly Adjustment Amount 423.293

Elimination of Medicare Part N/A N/A Subpart P 423.772

D Cost-Sharing for 423.782

Individuals Receiving Home

andCommunity-Based

Services

Appropriate Dispensing of N/A N/A Subpart D 423.154

Prescription Drugs in Long-

Term Care Facilities Under

PDPs and MA-PD Plans

Complaint System for SubpartK 422.504 Subpart K 423.505

Medicare AdvantageandPDPs

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BILLING CODE 412001C

1. Cost Sharing forSpecified Services atOriginal Medicare Levels ( 417.454 and 422.100)

Section 3202 of the ACA amendedsection 1852 of the Act to establish newstandards for MA plans cost sharing.Specifically, section 1852(a)(1)(B) oftheAct was amendedby the addition ofanew clause (iii) that limits cost sharingunderMAplans so that it cannot exceedthe cost sharing imposed under OriginalMedicare forspecific services identifiedin a new clause (iv). New section1852(a)(1)(B)(iv) of the Act lists thethree service categories forwhich costsharing in MAplans may not exceedthat requiredin Original Medicare(chemotherapy administration services,renal dialysis services, skilled nursingcare) and section 1852(a)(1)(B)(iv)(IV) ofthe Act specifies that this limit on costsharing also applies to such otherservices that the Secretary determinesappropriate, including services that the

Secretary determines require a highlevel ofpredictability and transparencyforbeneficiaries. The limits on costsharing in clause (iii) are subjecttoanexception in clause (v) which providesthat, [i]n the case ofservices describedin clause (iv) forwhich there is no costsharing required underParts A and B,cost sharing may be requiredfor thoseservicesunderthe clause (i) standardinplace priorto the amendments made

by section 3202 of the ACA. This

section requires that overall cost sharingfor Medicare Part A and B services beactuarially equivalent to that imposedunder Original Medicare. As noted inthe April 2010 final rule (75 FR19712)and clarifiedin our April 16, 2010

policy guidance, the provisions ofsection 3202 of the ACA apply to MA

plans offeredin CY 2011. To codifythese provisions, we proposedto amend 422.100by adding new paragraph (j).In addition, underour authority insection 1876(i)(3)(D) of the Act to

impose otherterms and conditionsdeemednecessary and appropriate,we

proposedto add new paragraph (e) in 417.101 to extendthe requirements insection 3202 of the ACA to section 1876cost contracts. In this rule we explainthat ourproposed addition to 417.101was technically incorrect and havecorrectedthe regulation citation so thatourproposed addition is new paragraph(e) to 417.454 to extend therequirements in section 3202 ofthe

ACA to section 1876 cost contracts. Webelieve that this extension is necessaryin orderto ensure that all Medicare

beneficiaries have the benefit of the costsharing protections enactedin the ACA,regardless ofwhetherthey receive theirPart A and Bbenefits through OriginalMedicare, an MAplan, or under asection 1876 cost contract.

In our April 16, 2010 guidance issuedvia the Health Plan Management System(HPMS) (BenefitsPolicy andOperations Guidance Regarding BidSubmissions; Duplicative and Low

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Enrollment Plans; Cost SharingStandards; General Benefits PolicyIssues; and Plan Benefits Package (PBP)Reminders forContract Year (CY)2011), we included clarifyinginformation relatedto implementationof the requiredcost sharing forchemotherapy administration services,renal dialysis services, and skilled

nursing care for CY 2011 and wedefined chemotherapy administrationservices to include chemotherapy drugs,radiation therapy services and otherrelated chemotherapeutic agents, as wellas administration, and skilled nursingcare to mean skilled nursing facilityservices. We also clarifiedthat, sincethere is no cost sharing under OriginalMedicare for the first 20 days ofskillednursing services, under section1852(a)(1)(B)(v) of the Act, the newrestrictions in section 3202 of the ACAdo not apply to such services duringthis period.

In ourproposed additions to 417.454 and 422.100, we proposed toincorporate these definitions for the twoservice categories. We welcomedcomments on these proposed costsharing standards.

We also proposedto limit cost sharingfor home health services under MA

plans to that charged under OriginalMedicare and notedthat, although wecan generally rely on our authority at1852(a)(1)(B)(iv)(IV) of the Act to applyOriginal Medicare cost sharing limits toother services that the Secretarydetermines appropriate, because there isno cost sharing under Original Medicare

for home health services, as in the caseofthe first 20 days ofskilled nursingfacility services, the exception in clause(v) ofsection 1852(a)(1)(B) of the Actwould apply, and the limit on costsharing under section 1852(a)(1)(B)(iii)of the Act wouldnot apply. Thus, in

proposing to apply Original Medicarecost sharing amounts to home healthservices or any other service with zerocost sharing, we instead indicated thatwe wouldrely on our authority insection 1856(b)(1) of the Act to establishMA standardsby regulation, and insection 1857(e)(1) of the Act to impose

additional

terms and conditions

foundnecessary and appropriate to requirethat cost sharing for these servicesunderMA plans conform to that underOriginal Medicare, meaning that no costsharing couldbe imposedfor theseservices.

We solicited public comment on ourproposal to limit cost sharing forhomehealth services to that chargedfor thoseservices under Original Medicare.

Comment: There were manycommenters who opposedourproposalto limit cost sharing forhome health

services underMA and cost plans atOriginal Medicare levels. Thecommenters expressed concern thatlimiting cost sharing forhome healthdecreases their flexibility in their plandesign and limits the plans tools toensure appropriate utilization ofhomehealth care.

MedPAC strongly opposed our

proposal to limit home health costsharing to $0 for several reasonsincluding: Home health is a less well-defined benefit in Medicare and itsappropriate use is more difficult tomonitorand the proposed prohibitionon cost sharing for home health isunduly restrictive. They also argued thatCMSproposal is basedon weakrationale. The comment included astatement ofMedPACsbelief that costsharing shouldbe one of the tools that

plans can use at their discretion as ameans ofensuring appropriateutilization. The comment informedusthat MedPAC was currently consideringthese kinds of issues as a part oftheirdeliberations on whetheror not torecommendthat traditional FFSMedicare shouldhave cost sharing forhome health services, along with thelevel ofsuch cost sharing and thecircumstances in which the cost sharingwould apply.

Response: We find MedPACsconcerns about ourproposal, in additionto those expressedby many othercommenters to be persuasive andbelieve we shouldnot finalize, at thistime, ourproposal to prohibit costsharing for in-network home health

services. MedPAC has recommended toCongress that it should direct theSecretary to establish a per episodecopayment for home health episodes ofcare that are not precededby ahospitalization orpost-acute care use.We believe it is reasonable for us to taketime to perform additional analyses ofhome health service utilization bybeneficiaries enrolledin MAplans.

Comment: We received severalcomments that supportedourproposalto limit cost sharing for home healthservices at Original Medicare levels.Those commenters believe that it will

provide beneficiaries with abenefitpackage that is transparent and easilypredictable for out-of-pocket expenses.

Response: We thankthe commentersfor their supportbut, as previouslydiscussedat length, we believe that itwouldbe more appropriate not tofinalize ourproposal. We will continueto evaluate the effectiveness ofourcurrent policies to protect beneficiariesfrom unfairor discriminatory costsharing, confusing plan choices, andunaffordable care before implementingany additional policy change.

Furthermore, under current policy onlyplans that provide extra beneficiaryprotection from high cost sharing byadopting a voluntary MOOP are

permittedto charge cost sharing forhome health services. We will continueto find the most appropriate balancebetween protecting beneficiaries fromexcessive out-of-pocket cost sharing and

ensuring the financial viability oftheMA program.

Comment: One commenter statedthatprohibiting cost sharing forhome healthcouldlead to further pricing challengesand another stated there are a numberofprovisions in the ACA that limit a

plans ability to charge cost sharing forspecified services and that these

provisions are being implementedat thesame time that CMS is implementing

payment cuts and medical costs arecontinuing to increase. The commenterstatedall plans wouldbe in jeopardy offinancial insolvency if they are

prohibitedfrom balancing costs,benefits, andpayment cuts.

Response: As statedin ourproposedrule, we estimatedthat the cost to theMedicare program of ourproposalwouldnot be significant. We also statedthat we did not expect a significantfinancial impact on the relatively few

plans that charge cost sharing for homehealth services. However, given ourdecision not to move forwardwith this

proposal forother reasons, this issue ismoot.

Comment: We receivedone commentthat expressed concern that our

proposed codification section 3202 of

the ACA couldbe interpreted andimplementedin a mannerso as tomandate the cost sharing obligation to

be charged, rather than permitting plansto set cost sharing levels at orbelow thatcost sharing limit amount.

Response: We thankthe commenterforsharing this concern. We thought wewere clear in ourproposal that planswouldbe able to set cost sharing levelsat orbelow those chargedunderOriginal Medicarebut will make everyeffort to be clear and consistent in ourguidance relatedto these limits.

Comment: We receivedtwo comments

that requestedthat we add DurableMedical Equipment (DME) to the list ofservice categories for which cost sharingmay not exceedthe levels requiredunder Original Medicare.

Response: We thankthe commentersfor their suggestion and we willconsider proposing that addition infuture rulemaking.

Comment: We received severalcomments that challenged CMSdecision to allow plans to charge costsharing during the first 20 days ofskilled nursing care. One commenter

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statedthat charging cost sharing in thefirst part of the SNF stay makes sensefor the plansbut does not make sensefor the beneficiaries. They stated thatthey understandCMS actuarialequivalency rationale and that the lawallows MA cost sharing for the services,

but believe CMSpolicy is contrary tothe intent ofhealth care reform. Another

commenter statedthat prohibiting costsharing for the first 20 days ofskillednursing care would increasetransparency forbeneficiaries and couldofferbetter opportunities for frail

beneficiaries.

Response: Prior to the ACA, weallowed plans to charge cost sharingduring the first 20 days ofskillednursing care so long as the plans SNF

benefit satisfiedthe actuarialequivalence test. In subregulatoryguidance subsequent to enactment ofthe ACA, we clarifiedthat because thereis not cost sharing under Original

Medicare for the first 20 days ofSNFcare, under section 1852(a)(1)(B)(v) ofthe Act, the new restrictions in section3202 of the ACA do not apply to suchservices during this periodand that wewould continue ourpolicy to allow costsharing during the first 20 days ofSNFcare. We do not believe that enrolled

beneficiaries are disadvantagedby thispolicy for at least two reasons. First,plans cost sharing for SNF care istransparent to beneficiaries as it isreflectedin the Summary ofBenefitsand the Medicare Plan Finder andsecond, because of the beneficiary

protections from unexpected,unmanageable out-of-pocket costs thatMedicare requires all MA plans to

provide.

CMS limits the cost sharing that maybe chargedfor SNF care so that it doesnot exceed what the beneficiary would

pay under Original Medicare, includingthe minimal cost sharing we allowduring the first 20 days in a coveredSNF stay. We believe that minimal costsharing is more than offset by othersavings andprotections offeredunderplans benefit packages. One veryimportant protection that all plans arerequiredto offer is the maximum out-of-

pocket (MOOP) limit on enrolledbeneficiaries out-of-pocket costs forcovered in-network services. Themaximum amount an enrolledbeneficiary can be requiredto pay forthose services is $6,700. In addition,most plans that charge cost sharing inthe first 20 days of SNF care, waive theOriginal Medicare requirement for a 3-day qualifying inpatient hospital staywhich saves beneficiaries enrolledinthose plans from having to pay the costsfor an inpatient stay.

Comment: One commenter requestedthat CMS establish an employer groupwaiver excepting MAplans offeredthrough employer/union group health

plans from the proposedcost sharingstandards.

Response: We thankthe commenterforthis suggestionbut we believe thatemployer group plans mustbe subject to

the same cost sharing as otherMAplansin orderto provide the beneficiariesenrolledin those plans the same

protect ions as beneficiaries enrolledinotherMA and cost plans.

Comment: Several commenterssupportedourproposed codification ofsection 3202 of the ACA to limit costsharing forchemotherapyadministration services, renal dialysisservices, skilled nursing care, and suchother services as the Secretarydetermines appropriate to levels not toexceedthat charged under OriginalMedicare and statedthat it was

welcome news forbeneficiaries. Onecommenter specifically expressedsupport for the extension of the costsharing limits to section 1876 costcontracts. Some of the commenters alsorequestedthat CMS provide greaterclarity that the limits on cost sharingapply only to in-network services.

Response: We thankthe commentersfor their support and in response to thethese comments we will revise our

proposed regulation text to clarify in 422.100 that the cost sharing chargedfor chemotherapy administrationservices, renal dialysis services and

skilled nursing care provided in-networkmay not exceedthe amount ofcost sharing requiredfor those servicesunder Original Medicare. Thus, in part,the final regulation text will be revisedto read: On an annualbasis, CMSwould evaluate whether there areservice categories forwhich MA plansin-networkcost sharing may not exceedthat required under Original Medicareand specify in regulation which servicesare subject to that cost sharing limit.

Comment: A few commentersobjectedto our codification in the

proposedrule of ourproposal to extendthe cost sharing limits ofsection 3202of the ACA to section 1876 cost plans

because we proposed to set forth thisrequirement in a new paragraph (g) to 417.101, which otherwise does notgovern cost plans. The commenterssuggestedthat we insteadadd a new

paragraph to 417.454, Charges toMedicare enrollees. One commenteralso recommendedthat we change ourreference to MAplans in the proposedregulation language to HMO or CMPto be consistent with the standardterminology usedin the regulations to

refer to the section 1876 contractingentity.

Response: We thankthe commentersfor their suggestions. Accordingly, inthis final rule, we will not include thecost-sharing requirements in 417.101,

but will insteadadd new paragraph (e)to 417.454 to require cost sharingchargedby section 1876 cost plans for

chemotherapy, renal dialysis and skillednursing care to be limitedto thatcharged under Original Medicare. Wealso will remove reference to MA

plans in the new regulatory textlanguage and replace it with HMOorCMP.

We have consideredall ofthecomments on this proposal and willfinalize, as revised, the addition ofanew paragraph and (j) to 422.100 toimplement section 3202 of the ACArequiring that MA plans in-networkcostsharing charges for chemotherapy,SNF care and dialysis will be no greater

than that charged under OriginalMedicare, and a new paragraph (e) to 417.454 to extend these protections tosection 1876 cost contracts. However,we will not finalize ourproposal to addnew paragraph (4) to 417.454(e) ornewparagraph (4) to 422.100(j) to

prohibit plans from charging costsharing for home health services.

2. Simplification ofBeneficiary ElectionPeriods ( 422.62, 422.68, 423.38,and 423.40)

Section 3204 of the ACA modifiedsection 1851(e)(3)(B) of the Act such

that, beginning with planyear 2012, the

annual coordinated election period(AEP) underParts C and D will be heldfrom October15 to December7. We

proposedto amend0 422.62(a)(2) and 423.38(b) to codify this change.

Section 3204 of the ACA also revisedsection 1851(e)(2)(C) of the Act toestablish, beginning in 2011, a 45-day

periodat the beginning of the year(January 1 through February 14) thatallows beneficiaries enrolled in MA

plans the opportunity to disenroll andjoin Original Medicare, with the optionto enroll in a Medicareprescriptiondrug plan. This 45-day period, also

referredto as the Medicare AdvantageDisenrollment Period(MADP), replacesthe open enrollment period(OEP) that

previously occurred annually fromJanuary 1st through March 31st. Tocodify this provision, we proposed thefollowing changes: 422.62(a) was amendedto provide

for this new disenrollment opportunityand clarify that the OEP ended after2010;

422.68(f) was amendedto specifythe effective date fordisenrollment

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requests submitted during the new 45-day disenrollment period; 423.38(d) was amendedto allow

individuals who disenrolledfrom anMAplan between January 1 throughFebruary 14th to enroll in a standalonePDP; and 423.40(d) was amendedto specify

the enrollment effective dates for

individuals who enroll in a standaloneMedicare prescription drug plan afterdisenrolling from MA during the 45-day

period.Comment: Commenters requestedthat

CMS conduct beneficiary education onthe new AEP timeframe.

Response: We are strongly committedto using all available means for ensuringthat beneficiaries are made aware ofthenew AEP timeframes. Thus, we expectto conduct specific outreach andeducation on this topic and highlightthe change in Medicare & You 2012which will be mailedto all

beneficiaries. Comment: Commenters recommended

that CMS adjust the timing ofplan bidsand make other important information,such as model notices, available earlierforplan preparation of the AEP. Inaddition, commenters requestedthat

plan marketingbe allowedto startearlier than October1 for the AEP.

Response: We are considering thetiming of ourprocesses and will bemaking appropriate adjustments as we

prepare for a successful implementationof the new AEP timeframe,but we donotplan to change the bid submission

orplan marketing dates. The plan bidsubmission date is set by statute andremains the first week in June, leavingonly a narrow timeframe for review andapproval of bids andbenefits and toensure that marketing materials alignwith approved benefits. Accuratemarketing materials are key to enabling

beneficiaries to make appropriatedeterminations regarding their healthcare andprescription drug coverage.Also, we do not believe it is appropriateor necessary to allow plans to marketearlier than October1 given that abeneficiary may not enroll in aplanuntil October 15th.

Comment: Commenters recommendedthat CMS create an open enrollment

periodthat would allow beneficiaries toenroll in Medigapproducts withoutregardto health status orpre-existingconditions. Another commenterrecommendedthat CMS clarify that

beneficiaries who disenroll from an MAplan using the 45-day disenrollmentperioddo not have guaranteed issuerights to prevent underwriting the plan

premium if they choose to purchase aMedigap policy.

Response: Section 1882 of the Actdoes not provide for a Federal annualopen enrollment periodfor Medigap.Furtherthe commenteris correct thatusing the MADP does not give the

beneficiary guaranteed issue rightsunder Federal law to prevent health-based underwriting of the Medigappolicy premium. In some cases, State

Medigap laws may offer additionalguaranteed issue rights to beneficiarieswho are affectedby the MADP.

Comment: Some commentersrecommendedthat CMS establish aspecial election period(SEP) for the firstyear of the new AEP timeframe to allowindividuals to make plan electionsthrough December31. Additionally, onecommenter suggesting allowingplansponsors to accept andprocessenrollment requests received fromDecember8 through December 31.

Response: Again, we will take anumberofsteps to ensure that

beneficiaries are made aware of the newAEP timeframes, and that they have thetools they needto make informeddecisions during the new AEPtimeframe. We believe that through

planned outreach and education effortsdirectly to beneficiaries and withstakeholders andplans, beneficiarieswill have sufficient notification to maketheir health plan electionsby December7. We believe that the establishment ofthe suggestedSEP would directlyconflict with the clear intent ofthestatute.

Comment: A commenter

recommendedthat individuals using theopportunity affordedby the MADP beallowedto enroll in an MAplan offered

by the same parent organization insteadofdefaulting to Original Medicare.Another commenter recommended CMSfind a less expensive alternative to theMADP such as reinstating the openenrollment periodor eliminating lock-in.

Response: Again, the new 45-daydisenrollment period, as establishedinthe ACA, is clearly designedto permitonly moves from MA to OriginalMedicare. Eliminating orbroadening thescope of this election period wouldcontradict the intent of the statute.Similarly, lock-in is mandatedby thestatute and cannotbe eliminated byCMS.

Comment: A commenter addressedCMSplans to establish an SEP to allow

beneficiaries in an MAplan with lessthan five stars to enroll in aplan withfive stars outside of the normalenrollment periods. The commenterrecommendedthat, in regions wherethere are no plans with five stars,individualsbe allowedto enroll in

plans with 4.5 stars outside ofthenormal enrollment periods.

Response: We appreciate thesuggestion; howeverthe SEP forindividuals to enroll in 5-starplans isoutside the scope of this regulation. Wewill considerthis suggestion as wefinalize guidance concerning the scopeof the SEP associated with Plan Ratings

later this year. We appreciate thecomments that were submittedand will

be finalizing these proposals withoutmodification.

3. Special Needs Plan (SNP) Provisions( 422.2, 422.4, 422.101, 422.107,and 422.152)

In ourproposedrule, we defined afully integrated dual eligible specialneeds plan (SNP) as specifiedby theACA, and set forth proposed regulationsimplementing changes madeby theACA.These changes would extend theauthority to offer SNPs, extendprovisions permitting existing DSNPsthat are not expanding their serviceareas to continue operating withoutcontracts with State Medicaid agenciesthrough 2012, and establish a required

NCQA quality approval process forSNPs.

a. Adding a Definition ofFullyIntegratedDual Eligible SNP ( 422.2)

Section 3205 of the ACA revisedsection 1853(a)(1)(B) of the Act to

provide authority to apply a frailtypayment underPACE payment rules forcertain individuals enrolledin fullyintegrated dual eligible special needs

plans describedin section 3205(b) oftheACA. In orderto implement this

provision, we proposeda definition offully integrated dual eligible specialneeds plan to 422.2 that will apply forthese purposes. Underourproposeddefinition, the DSNP must meet thefollowing criteria in orderto beconsidereda fully integrateddualeligible special needs plan:

Enroll special needs individualsentitledto medical assistance under aMedicaidState plan, as definedinsection 1859(b)(6)(B)(ii) of the Act and 422.2.

Provide dual eligible beneficiariesaccess to Medicare and Medicaidbenefits undera single managed careorganization (MCO). Have a capitated contract with a

State Medicaid agency that includescoverage ofspecified primary, acute andlong-term care benefits and services,consistent with State policy.

Coordinate the delivery ofcoveredMedicare and Medicaid health and long-term care services, using aligned caremanagement and specialty care networkmethods for high-risk beneficiaries.

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Employ policies andproceduresapprovedby CMS and the State tocoordinate or integrate membermaterials,including enrollment,communications, grievance and appeals,and quality assurance.

In this final rule, we adopt ourproposed definition of a fully integrateddual eligible special needs plan with

some modification. For reasonsdiscussed below, we have in this finalrule revisedthe definitionby removingthe wordincluding and have replacedthe wordassurancewithimprovement.

Comment: The majority ofcommenters supportedourproposeddefinition of a fully integrateddualeligible special needs plan. However,three commenters raised concerns abouttwo potential ambiguities in the part ofthe proposed definition which requiresthat a fully integrated dual eligiblespecial needs plan [e]mploypoliciesand procedures approvedby CMS andthe State to coordinate or integratemember materials, includingenrollment, communications, grievanceand appeals, and quality assurance.Specifically, these commentersrecommendedthat we eliminate thewordincluding after membermaterials, because the functions thatfollow the wordincluding in the

proposed definition are not all related tomember materials. Further, these samecommenters suggestedthat we use theterms performancemeasurementin

place of qualityassurance in theproposed definition, because, as

suggestedby the commenters, the termperformancemeasurement is moreconsistent with current regulatorylanguage.

Response: We appreciate thecommenters support for the definitionwe proposedfor a fully integrateddualeligible special needs plan. We agreewith the commenters that, as written,the final prong of the proposeddefinition is not sufficiently clear aboutwhat policies andprocedures must beapprovedby CMS and the State toensure integration and coordination.Accordingly, in response to thesecomments, we have revisedthis part ofthe proposed definition in 422.2 oftheMA program regulations by eliminatingthe wordincluding after membermaterials because, as the commenterssuggest, the functions that follow thewordincluding are not all related tomember materials. We believe this worddeletion makes this prong ofthedefinition more clear, and also moreaccurately reflects our intention that afully integrated dual eligible specialneeds plan coordinate or integrateMedicaidand Medicare member

materials, enrollment, communications,grievance and appeals, and qualityimprovement. In addition, we revisedthis part of the proposed definition bysubstituting the terms qualityimprovement for qualityassurance(or performancemeasurementassuggestedby three commenters).Qualityimprovement is most

consistent with existing MAterminology. We believe the termperformancemeasurement does notsufficiently specify our intention toensure that this portion of the definitionrequires coordinatedor integrated

policies regarding quality. Further, theuse of the term qualityimprovementintentionally demonstrates our intentionthat a fully integrated dual eligiblespecial needs plan integrate orcoordinate the full spectrum ofprograms and tools utilizedto ensurequality.

Comment: Several commenterssuggestedthat we broadly or flexiblyinterpret the definition of a fullyintegrated dual eligible special needsplan to allow for the broad variety ofdual eligible special needs plancontracting arrangements in place indifferent States. Additionally, onecommenterthat submitteda commentwith this suggestion also requested thatunderthe third prong of the definition,we allow for some combination ofspecified primary, acute and long-termcare benefits and services because Statesneed flexibility to design the details oftheir programs in response to theirstakeholders needs and concerns. In

contrast, another commenter urgedus touse caution when approving plans asfully integrated dual eligible specialneeds plans, and recommendedthat wespecify that any fully integrateddualeligible special needs plan purporting tooffer long-term supports and servicesmust offer the full range available in agiven State.

Response: We believe that there is agreat deal offlexibility in ourproposeddefinition of a fully integrateddualeligible special needs plan, as written inthe proposedrule and this final rule, toaccount for the variability in Stateintegration efforts. For example, theterms consistentwith State policy inthe definition recognizes the variabilityin the degree and extent to whichMedicaid services are coveredfrom oneState to the next. Additionally, ashighlightedby another commenter, useofthe wordspecified in the definition(coverage ofspecifiedprimary, acute,and long term care benefits and services,consistent with State policy) alsoacknowledges that States vary in thedegree to which Medicaid services arecoveredby the State by only requiring

the plan to cover those servicesspecifiedby the State Medicaid Agency.Moreover, fully integrated dual eligiblespecial needs plans and States have theflexibility to choose to contract to servecertain subsets of the sStates overalldual eligiblepopulation, provided thatthe MIPPA compliant State contract

between the State and the fully

integrated dual eligible special needsplan supports this arrangement.Therefore, in orderto meet thisdefinition aplan will be required to

provide all covered Medicaid primary,acute and long-term care services and

benefits to beneficiaries, and not somecombination thereof.

Comment: One commenterrecommendedthat we include in thedefinition of a fully integrateddualeligible special needs plan the referenceto PACE frailty levels from the statutorydefinition of a fully integrateddualeligible special needs plan foundinsection 3205 of the ACA. Thiscommenter suggestedthat this referenceto PACE frailty levels should beincludedin the definition of a fullyintegrated dual eligible special needs

plan, as well as where it now appearsin 422.308.

Response: While section 3205 oftheACA provides us with the authority toapply a frailty adjustment payment to afully integrated dual eligible specialneeds plan with a similar average leveloffrailty as the PACE program, thestatute does not limit our ability to usethe definition of a fully integrateddualeligible special needs plan for only this

purpose. Therefore, we will not includethis requested reference in the finaldefinition so we are able use thisdefinition for other purposes in thefuture.

Comment: One commenter askedusto clarify what is meantby alignedcaremanagement and specialty care networkmethods for high-riskbeneficiaries, andalso providedbrief recommendations onhow to implement this requirement.Further, the commenter recommendedthat any clarification on the alignedcare managementrequirement specifythat a fully integrated dual eligiblespecial needs plan is responsible formanaging care that is covered byMedicare or Medicaidin such a waythat the individual beneficiary gets fullaccess to all services coveredby bothprograms.

Response: Section 164(d) oftheMedicare Improvement forPatients andProviders Act of 2008 (MIPPA) requiresthat special needs plans have in placean evidenced-based model of care withappropriate networks ofproviders andspecialists * * * and use[s] aninterdisciplinary team in the

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management ofcare. The termsalignedcare management and specialtycare network methods for high-risk

beneficiaries derive from thisrequirement in MIPPA. In theSeptember18, 2008 Federal Register, weissuedan interim final rule withcomment on this MIPPA provision. Wehave received several comments on this

provision and will finalize the provisionlater this year. As such, the final rulewillprovide additional clarification onwhat is requiredto coordinatesthedelivery ofcovered Medicare andMedicaid health and long-term careservices, using alignedcare managementand specialty care network methods forhigh-riskbeneficiaries as requiredbythedefinition for a fully integrateddualeligible special needs plan.

Comment: One commenter askedusto clarify the requirement that aplandesignatedas a fully integrateddualeligible special needs plan must providenotices specific to the dual-eligible

population it is serving as opposed togeneric notices designedfornon-dual

beneficiaries that do not correctlyidentify their rights and obligations.

Response: We appreciate this concernand currently require certaincommunicationsbe developed specificto abeneficiarys eligibility. Forexample, we have createdan AnnualNotice ofChange/Evidence ofCoveragestandard template specifically for dualeligible special needs plans for usestarting with contract year 2012. Thetemplate was developed through severalrounds ofconsumer testing and

listening sessions with SNPrepresentatives and consumeradvocates.OtherCMS models may becustomizedto meet the needs ofdualeligible members. Furthermore, fullyintegratedand dual eligible specialneeds plans are requiredto coordinateand integrate member materials tocontain information specific to both theMedicare and Medicaid benefits. We arecommittedto ensuring beneficiariesreceive appropriate and helpfulmarketing materials and will continueto explore opportunities to improve

beneficiary experience in this regard.Comment: One commenter

recommends that we approve and allowboth fully integrated dual eligiblespecialneeds plans and non-fullyintegrated dual eligible special needs

plans to operate so that a largerpopulation ofduals may be served bythese plans.

Response: We agree with thiscommenters recommendation. We willcontinue to approve and allow bothfully integrated dual eligible specialneeds plans and non-fully integrateddual eligible special needs plan to

operate so a largerpopulation ofdualsmay be servedby these plans.

Comment: One commenter seeksclarification in the requirement that afully integrated dual eligible specialneeds plan have a capitatedcontractwith the State Medicaid agency.

Response: In response to thiscomment to clarify the meaning ofthe

term capitated in the third prong ofthe definition, a capitated contract is acontract that provides for a fixed

payment from the State MedicaidAgency to the fully integrateddualeligible special needs plan that does notvary basedon services providedinexchange for the plans provision ofthecovered Medicaid benefits to the

beneficiaries.

b. Extending SNP Authority

Based on section 3205(a) of the ACA,which revised section 1859(f)(1) oftheAct, we proposedin ourNovember 2010

proposedrule (75 FR 71198) to extendthe authority for SNPs to restrictenrollment to special needs individuals,thereby permitting SNPs to continue tolimit enrollment to special needsindividuals through the 2013 contractyear. This extension applies to all SNPcategories definedat 422.2, with theexception ofdual eligible SNPs (DSNPs) that do not have a contract withthe State in which they operate incontract year 2013, as describedinsection II.B.3.c of this final rule.

This provision was effective uponenactment of the ACA. However, we

proposedthat the regulationsimplementing this provision would beeffective 60 days after the publication ofthis final rule.

After considering comments, we arefinalizing this provision withoutmodification.

Comment: Several commentersbelievedthat delaying the proposedprovisions effective date until 60 daysafterpublication of the final rule wasunnecessary.

Response: We disagree with thecommenters claim that it isunnecessary to delay implementation ofthis provision until 60-days following

publication of this final rule. Whilesection 3205(a) of the ACA was effectiveupon enactment, the regulationscodifying this provision can be effectiveno earlier than 60 days following

publication of this final rule, asprovided underthe AdministrativeProcedure Act for economicallysignificant regulations.

Comment: One commenter suggestedthat extending the SNP program forlonger than 1 year would provide SNPswith more operational certainty.

Response: Ourproposed provisionextendedall SNPs, with the exceptionof DSNPs that do not have a Statecontract in the State in which theyoperate, until contract year 2013,consistent with the statutory language atsection 1859(f)(1) of the Act. We do nothave the statutory authority to extendthe SNP authority beyondthe length of

time Congress specified in the ACA.Therefore, we are finalizing this

provision without modification.

c. Dual-Eligible SNP Contracts WithState Medicaid Agencies ( 422.107)

Section 164(c)(2) of MIPPA requiredall new DSNPs and all existing DSNPs that are seeking to expand theirservice areas to have contracts with theState Medicaid agencies in the States inwhich they operate. The provisionallowed existing DSNPs that were notseeking to expand their service areas tocontinue to operate without a Statecontract through the 2010 contract yearas long as they met all other statutoryrequirements. Section 3205 of the ACA,which revised section 164(c)(2) ofMIPPA, extends the date that DSNPsnot seeking to expand their service areascan continue to operate without a Statecontract to December31, 2012. In orderto implement this provision, we

proposedto revise 422.107(d)(ii) tospecify the new deadline.

This provision was effective uponenactment of the ACA. However, we

proposedthat the regulationsimplementing this provision would beeffective 60 days after the publication of

the final rule.Comment: Many commenterssupportedthis proposed provision.However, the majority of the commentswe receivedon this provision centeredon the operational issues relatedto theState contracting requirement. Severalcommenters indicatedthat variation inState contracting andprocurement

processes has causedsome DSNPs toexperience delays in obtaining contractswith State Medicaid agencies and theyrequestedthat CMS give DSNPsadditional flexibility to meet thesecontracting deadlines. A fewcommenters suggestedthat CMSincentivize States to engage with DSNPs that are seeking to contract withthe State(s) in their service areas, whileanother commenter proposedthat CMShold plans harmless ifStates eitherrefuse to contract with them or requirethem to meet contract requirements thatare beyondthe minimum CMS-requiredcontract elements. Other commentersrecommendedthat CMS provide furtherregulatory and operational guidance onthe State contracting process. Severalcommenters expressed concern that

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States were receiving conflictinginformation from CMS central andregional offices (ROs), and askedCMS todevelop a model State contract fordissemination to DSNPs, States, andthe CMS ROs. Some commentersrecommendedthat CMS establish asystem ofreview and oversight ofDSNP State contracts through rulemaking.

Response: The proposedrule neithercodifiedthe DSNP State contractingrequirement nor specified specificcontract requirements; it only amended 422.107 to conform to the statutoryextension of the State contractingdeadline for existing, non-expanding DSNPs. Comments about operationalizingthe State contracting requirement werenot strictly within the scope of this rule.We note that, although we are notaddressing these specific operationalconcerns in this final rule, we intend to

provide additional operational guidanceon the DSNP State contractingrequirements in future operationalguidance well in advance of the Statecontracting deadline ofDecember 31,2012.

d. Approval ofSpecial Needs Plans bythe National Committee for QualityAssurance ( 422.4, 422.101, and 422.152)

The ACA amended section 1859(f) ofthe Act to require that all SNPs,existing, new, and those wishing toexpand their service areas, be approved

by the National Committee for QualityAssurance (NCQA) effective January 1,2012 and subsequent years. Section

1859(f) of the Act further specified thatthe NCQA approval process shall be

basedon the standards established bythe Secretary.

In ourNovember2010 proposed rule(75 FR 71199), we statedthat both thequality improvement (QI)programplandescription and the model ofcare(MOC) are critical clinical elements thatrepresent the potential for the SNP to

provide integratedcare for Medicareenrollees. We proposedthat NCQAreviewboth the QIprogramplandescription and the MOC submittedduring the application process forallSNPs using standards developed byCMS. Specifically, we proposedto adda new paragraph (iv) to 422.4(a) torequire MA plans wishing to offer aSNP, whethernew orcurrent, to beapprovedby NCQA, effective January 1,2012, by submitting their quality QI

program plan and MOC to CMS forNCQA evaluation and approval, perCMS guidance. We also proposed tocodify the new requirement at 422.101(f), which specifies MOCrequirements,by adding a new

paragraph (vi). Finally, we proposed to

codify the new requirementby revising 422.152(g), which specifies QI

program requirements.In the proposedrule, we also clarified

that CMS wouldnot participate in thescoring and review of the MOC and QI

program plans. We also statedin ourproposedrule that we would releasespecific instructions and guidance to

organizations, including the specificcriteria that NCQA woulduse toevaluate the QIprogramplandescription and MOC, informationabout technical assistance training thatwouldbe available to the SNPs as they

prepared theirQIprogramplan andMOC submissions, as well as details onthe frequency of the SNP approval

process. We also expressed concern thatan annual approval process could beburdensome forplans and solicitedcomments on how to determine theappropriate frequency for the SNPapproval process.

Based on the comments we receivedon the proposedrule, we are modifying 422.4(a)(iv), 422.101(f), and 422.152(g), as described below.

Comment: Several commentersexpressed concern with ourproposedSNP approval process and thecomponents that comprise that process.Specifically, these commenters notedthatboth the 2012 application cycle andthe 2011 SNP structure andprocessmeasure submissions were due inFebruary 2011. The commentersrequestedthat CMS clarify anyrelationship between the two processes.Other commenters requestedthat CMS

link the SNP approval process to thework NCQA currently performs aroundQI, MOC and HEDIS requirements.

Response: In ourproposedrule, weproposedthat NCQA would review theQIprogram plan and MOC submitted byall SNPs during the application cycleusing standards developedby CMS. Our

basis for this proposal was that thedescription of the plans QIprogram

plan and the MOC contained criticalelements representing the potential for aSNP to provide integratedcare forMedicare enrollees. Some commentersappearto have confusedourproposedrequirements for the SNP approval

process with other quality requirements,such as, the quality improvement

projects (QIPs), chronic careimprovement programs (CCIPs) and the

NCQA structure andprocess measures.As a result of this confusion, themajority ofthese comments did notsupport using evaluation ofeitherthe QI

program plan or MOC as part ofthisprocess. Other commentersrecommendedthat CMS ensure thatthere is consistency between therequirements for the SNP approval

process and those of the other, unrelatedNCQA quality assessment process.

Response: We agree with commentersthat the QIprogram plan may not be themost appropriatebasis forapproval ofSNPs. Therefore, we have modified ouroriginal proposalby removingevaluation of the QIprogram plan fromthe NCQA SNP approval process

describedin 422.4(a)(iv), 422.101(f),and 422.152(g). As a result, the SNPapproval process will be basedonly onevaluation of the MOC, which willallow the NCQA to focus purely on acomponent ofquality that is primarilyclinical in nature and is also unique toSNPs. Removing evaluation of the QI

program plan from the SNP approvalprocess may also help reduce theconfusion and concern plans expressedabout alignment of the SNP approval

process with otherQI assessmentmeasures and activities. All MAplanswill still be requiredto submit their QI

program plan; however, we will retainresponsibility for review and assessmentof this component as part of our largerQI efforts.

Comment: Several commenters urgedCMS to ensure that there is consistency

between the QIprogram and MOCdocuments submitted during theapplication process and NCQA structureandprocess measures submissions.

Response: The submission ofstructure andprocess measures is anongoing annual QI assessment activityfor all SNPs. The SNP approval processis a separate process for ensuring that

SNPs comprehendthe uniquerequirements of the SNP program andare capable ofimplementing theserequirements. We believe commentersmay be confusing submission ofstructure andprocess measures and theSNP approval process given NCQAsinvolvement in both processes, eventhough there is no relationship betweenthe two. Therefore, we clarify that thereis no relationship between thedocuments requiredto be submittedduring the application process and theinformation requiredfor the structureandprocess measures submissions.

Comment: Two commenters requestedthat CMS address the relationship

between the requirements for DSNPs tocontract with States, the SNPapplication, and the new SNP approval

process. They further requested thatCMS clarify that if a DSNP wereapprovedby NCQA for longer than oneyear but lost its State contract, CMSwouldnot approve the DSNP andwould terminate the plan.

Response: The DSNP Statecontracting requirement is separate fromthe SNP approval and SNP application

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processes and is described elsewhere inthis final rule.

Comment: Several commentersrecommendedthat CMS considerincorporating the SNP approval processinto the existingNCQA accreditation

process. One of the commentersrequestedthat CMS replace specificMedicare requirements, such as QI

program requirements that may be partof the NCQA accreditation process, inlieu of more appropriate and relevantMOC and SNP-specific measures.

Response: Section 1859(f) of the Actspecifies that the SNP approval processshall be basedon the standardsestablishedby the Secretary. WhileCMS has broad discretion regarding thedevelopment of the SNP approval

process, our goal is to develop aprocessthat is equitable for all SNPs. We do notbelieve that substituting NCQAaccreditation forexplicit SNP approvalis appropriate because accreditation isvoluntary, and not all plans areaccredited, nor is NCQA the onlyaccreditation organization recognized byCMS. CMS also has agreements withURAC (formerly the Utilization ReviewAccreditation Committee) and theAccreditation Association forAmbulatory Healthcare (AAAHC) to bedeeming accreditation organizations.Each accreditation organization definesits fully accredited status leveldifferently.

Comment: Several commenterssupportedourproposal to considerimplementing a multi-year approval

periodfor high scoring plans. These

commenters recommendeda 3-to-5-yearapproval cycle to limit theadministrative burden on plans thatdemonstrate their ability to meet theneeds ofspecial needs populations.These commenters statedthatimplementing an extended approvalcycle wouldalso allow CMS theopportunity to provide additionaloversight of low performing plans. Twocommenters recommendedthat CMSstructure the approval process in amanner similarto that of the NCQAstructure andprocess measures reviewcycle.

Response: We agree with thecommenters position that a multi-yearapproval period would limit MAorganizations administrative burden.To that end, we intendto implement amulti-year approval process that willallow plans that receive a higher scoreon NCQAs evaluation oftheirMOC to

be granteda longer approval period,meaning they wouldnot be required to

be reapprovedfor 1 or more years,unlike plans that score at the lower endof the scoring spectrum and which will

be granteda shorter approval period.

Specific guidance regarding thestandards formultiyear approvals will

be providedin separate guidance suchas HPMS memoranda and annual callletters.

Comment: One commentersupporteda multi-year approval cycle butrecommendedthat, rather than developnew measures, CMS shoulduse QI

measures that SNPs currently collect,such as annual QI audit results.

Response: We are conducting a reviewof the MOCs from a sample of the SNPs.While data are not yet available fromthese audits, we expect that the auditswill be completedby the end ofcalendaryear 2011. We will use thesedata to revise and improve the MOCrequirements in the future, as well as torefine the required evaluation criteriaforthe SNP approval process over time.We will also continue to researchadditional and appropriate QI measuresto use as part of this process.

Comment: To avoid introducingadditional complexity into the transitionto NCQA approval of SNPs, onecommenter recommendedthat CMSnot introduce new criteria forevaluationof SNPs at this time. This commenteralsorecommendedthat, once ourapproval standards are finalized, CMSleave them intact for several years inorderto give NCQA andplans time toassess operational impacts and to fine-tune their systems.

Response: We intendto continueusing criteria forevaluation of SNPs thatare familiarto plans. However, we willcontinue researching the feasibility of

revising the criteria for future approvalcycles. We will communicate changes tothese criteria andprovide opportunitiesforpublic review and comment.

Comment: Several commentersexpressed concern that CMS is

proposing to delegate full authority ofthe SNP approval process to NCQA.These commenters did not favor givingso much authority to aprivate entitywhose processes and activities are notsubject to public scrutiny. Thesecommenters recommendedthat CMS

periodically auditNCQAs work toensure that the work it is tasked with

performing is serving the best interestsof the beneficiaries. Response: Section 1859(f) of the Act

requires that NCQA approve SNPs basedon standards establishedby theSecretary. We will maintain oversight ofthis process via its contract with NCQA,as well as by establishing appropriatestandards for NCQA approval, asdescribed elsewhere in this preamble.

Comment: One commenter requestedthat CMS clarify that it will continue itsown review of SNP applications ratherthan allowNCQA approvals oftwo

documents to serve as deemedcompliance with all regulatoryrequirements.

Response: We confirm that we willretain responsibility of the MA and SNPapplication review process, and the SNPapproval process is one component ofthis process. We believe this commentermay have confusedthe NCQA approval

process with the annual applicationprocess, since both have the sametimeline.

Comment: Several commentersrecommendedthat CMS remove theSNP approval process from the annualSNP application timeframe.

Response: We disagree with thesecommenters recommendation. While we

proposedto link the SNP approvalprocess to the MA application process,the SNP approval process is only onecomponent of the overall process fordetermining whethera SNP may operatein contract year 2012. SNPs must stillcomplete other components of the SNP

proposal and otherCMS requirements tobe fully operational in contract year2012. We believe we are minimizingMA organizations administrative

burden by linking the SNP approvalprocess to the annual application cycle.Synchronizing the timelines for thesetwo processes will allow SNPs to followtimelines andprocedures with whichthey are familiarand allow forSNPapprovals to be completed priorto the

bid submission deadline.Comment: One commenter

recommendedthat CMS work withSNPs to identify a list ofSNP-specific

clinical and non-clinical QIP topics thatare relevant to target populations served

by SNPs, as well as a list oftopics fordual-eligible SNPs (DSNPs) that could

be coordinated with State Medicaidagencies so that they can meet bothFederal and State requirements.

Response: A major element in thedesign of the QIPs and CCIPs continuestobe that they must address a target

population that is appropriate for thatplan. We intendto review the non-clinical and clinical QIPs and CCIPs thatMA organizations have submitted toidentify gaps in topics that plans should

be addressing. We intendto issuefurther guidance on the submission ofQIPs and CCIPs, through HPMSmemoranda or the annual call letter

process.Comment: Several commenters

requestedthe opportunity to review andcomment on the new QIprogramplanand MOC instructional guidance.

Response: We are currently in theprocess ofconducting a review ofMOCsfrom a sample of SNPs. Informationreceivedfrom the review will be used toassist us in revising and improving the

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MOC. In addition, we intendto use theinformation to modify and refine therequired evaluation criteria over time toimprove the QIprogram and the MOC.Updates or changes to the QIprogram

plan and MOC instructional guidancewill be made available in advance for

public review and comment.Comment: One commenter

recommendedthat the CMS FederalCoordinated Health Care Office workwithNCQA and States to align MOCand QIprogram requirementsestablishedby CMS for the SNPapproval process forDSNPs.

Response: We appreciate therecommendation and note that we arealready working closely with theFederal Coordinated Health Care Officeon a myriadof SNP issues.

Comment: One commenter believeditwas not clear when plans that are notrequesting a service area expansion(SAE) wouldbe evaluated. Thiscommenteralso requestedthat CMSclarify whether the January 1, 2012effective date means that the approvalprocess begins in 2012 or that theapprovals mustbe completedfor allexisting SNPs priorto January 1, 2012(thus beginning in 2011).

Response: We approve potentialapplicants forcontract the yearprior tothe date the contract becomesoperational. Therefore, anyrequirements that mustbe in effect as ofJanuary 1, 2012 will be addressed as

part of the 2012 SNP application cyclefor contract year 2012. The deadline forsubmitting applications for

consideration during the 2012application cycle was February 24,2011.

4. Section 1876 Cost ContractorCompetition Requirements ( 417.402)

In accordance with section 3206 ofthe ACA, which revised section1876(h)(5)(C) of the Act, we proposedinourNovember2010 proposedrule (FR75 71199) to extend implementation ofthe section 1876 cost contractcompetition provisions until January 1,2013. Previously, MIPPA had specifiedthat section 1876 cost contractorsoperating in service areas orportions ofservice areas with two or more local ortwo or more regional Medicarecoordinatedcare plans meetingminimum enrollment requirements(5,000 enrollees for urban areas and1,500 enrollees for non urban areas)wouldbe non-renewed beginning in2010.

In implementing the new contractnon-renewal date, we specifiedin ourNovember2010 proposedrule that wewould evaluate enrollment ofcompetingMA coordinatedcare plans beginning in

2012, sendout non-renewal notices toaffected section 1876 cost contracts in2013, and that affected