April 1, 2013

NOTE TO: All Medicare Advantage Organizations, Prescription Drug Plan Sponsors, and
Other Interested Parties
SUBJECT: Announcement of Calendar Year (CY) 2014 Medicare Advantage Capitation
Rates and Medicare Advantage and Part D Payment Policies and Final Call Letter
In accordance with section 1853(b)(1) of the Social Security Act (the Act), we are notifying you
of the annual Medicare Advantage (MA) capitation rate for each MA payment area for CY 2014
and the risk and other factors to be used in adjusting such rates. The capitation rate tables for
2014 are posted on the Centers for Medicare & Medicaid Services (CMS) web site at
http://www.cms.gov/Medicare/Health-Plans/MedicareAdvtgSpecRateStats/index.html under
Ratebooks and Supporting Data. The statutory component of the regional benchmarks,
transitional phase-in periods for the Affordable Care Act rates, qualifying counties, and each
countys applicable percentage are also posted at this website.
Attachment I shows the final estimates of the increases in the National Per Capita MA Growth
Percentage for 2014 and the National Medicare Fee-for-Service (FFS) Growth Percentage for
2014. These growth rates will be used to calculate the 2014 capitation rates. As discussed in
Attachment I, the final estimate of the increase in the National Per Capita MA Growth
Percentage for combined aged and disabled beneficiaries is 2.96 percent, and the final estimate
of the increase in the FFS Growth Percentage is 3.53 percent. Attachment II provides a set of
tables that summarizes many of the key Medicare assumptions used in the calculation of the
National Per Capita MA Growth Percentage.
The basis for the Growth Percentage for 2014 has been changed to incorporate an assumption
that Congress will act to prevent the scheduled 25-percent reduction in Medicare physician
payment rates from occurring. The Office of the Actuary has been directed by the Secretary to
use this assumption, on the grounds that it is a more reasonable expectation than the reduction
required under the statutory sustainable growth rate (SGR) formula. Although the Office of
the Actuary agrees that Congress is very likely to override the physician fee reduction, the
assumption conflicts with the Offices professional judgment that, as in all past years, the
determination should be based on current law, not an assumed alternative.
Section 1853(b)(4) of the Act requires CMS to release county-specific per capita FFS
expenditure information on an annual basis, beginning with March 1, 2001. In accordance with
this requirement, FFS data for CY 2011 are being posted on the above website.
Attachment III presents responses to comments on the Advance Notice of Methodological
Changes for CY 2014 MA Capitation Rates and Part C and Part D Payment Policies (Advance
Notice). Attachment IV contains the changes in the payment methodology for Medicare Part D
for CY 2014. Attachment V contains tables with the Part D benefit parameters; Attachment VI
1

contains details regarding the Part D benefit parameters; Attachment VII contains tables with the
2014 CMS-HCC and RxHCC risk adjustment models.
Attachment VIII presents the final Call Letter. We received many submissions in response to
CMS request for comments on the Advance Notice/Call Letter, published on February 15, 2013.
Comments were received from professional organizations, MA and Part D sponsors, advocacy
groups, the pharmaceutical industry, pharmacy benefit managers, pharmacies, and concerned
citizens.
Key Changes from the Advance Notice:
Growth Percentages: Attachment I provides the final estimates of the National MA Growth
Percentage and the FFS Growth Percentage and information on deductibles for MSAs.
Calculation of FFS Rates: In 2014, we will begin transitioning to a methodology in which the
historical claims data are adjusted to reflect the most current hospital wage index and physician
geographic practice cost index. More information on this methodology change is provided in
Attachment III, Section C. For CY 2014, the blend between the repriced and non-repriced AGAs
will be done based on a 50-50 split.
CMS-HCC Risk Adjustment Model: We will implement the updated, clinically revised CMS-HCC
risk adjustment model proposed in the Advance Notice with the following differences: (1) we will
not adjust the denominator and (2) we will blend the risk scores calculated using this model with the
risk scores calculated using the 2013 CMS-HCC model, weighting the risk scores from the 2013
CMS-HCC model by 25 percent and the risk scores from the 2014 CMS-HCC model by 75 percent.
We include in this Announcement the final version of the updated, clinically revised model,
including community, institutional, new enrollee, and C-SNP new enrollee segments. The
relative factors for 2013 CMS-HCC model can be found in the 2013 Announcement.

PACE Model: We will continue to use the same risk adjustment model for PACE payments that
we have used in 2012 and 2013.
Normalization Factor for the CMS-HCC Model: Because the normalized risk scores from the
2014 and 2013 CMS-HCC models will be blended, there are two normalization factors for 2014.
They are:

2013 CMS-HCC model: 1.041.

2014 CMS-HCC model: 1.026.

Normalization Factor for the PACE Model: The final normalization factor for the PACE
model is 1.085.
Normalization Factor for the RxHCC Model: The final normalization factor for the RxHCC
model is 1.030.
2

Frailty Adjustment: The 2014 frailty factors for PACE organizations are the same frailty factors
posted in the 2013 Advance Notice. There are two sets of FIDE SNP frailty factors for 2014; we
will calculate frailty scores using the frailty factors associated with the 2014 CMS-HCC model
and using the frailty factors associated with the 2013 CMS-HCC model. The FIDE SNP frailty
factors associated with the 2014 CMS-HCC model are finalized in this Announcement. The
FIDE SNP frailty factors associated with the 2013 CMS-HCC model are posted in the 2013
Advance Notice. CMS will separately calculate frailty scores for FIDE SNPs using each set of
factors and blend the two frailty scores in the same manner as the 2014 risk scores. These
blended frailty scores will be used both to determine a FIDE SNPs eligibility for frailty
payments and, if eligibility is met, for payment.

MA Enrollee Risk Assessments: In response to comments received on the proposed policy for
MA Enrollee Risk Assessments, CMS is delaying the collection of flags for these assessments
until 2014 dates of service. We will propose and finalize a policy on the extent to which
diagnoses from 2014 Enrollee Risk Assessments will be used to calculate risk scores for payment
year 2015 in the 2015 Advance Notice and Rate Announcement.
Proposals Adopted as Issued in the Advance Notice:
As in past years, policies proposed in the Advance Notice that are not modified or retracted in
the Rate Announcement become effective in the upcoming payment year. Clarifications in the
Rate Announcement supersede materials in the Advance Notice.
Rebasing County Rates: We will rebase the FFS capitation rates for 2014, using historical claims
data for 2007 through 2011.
MA Benchmark, Quality Bonus Payments and Rebate: The Affordable Care Act (ACA)
established a new blended benchmark as the county MA rate effective in 2012. In the Advance
Notice we announced the continued implementation of the methodology used to derive the new
ACA blended benchmark county rates, how the qualifying bonus counties will be identified, and
how transitional phase in periods are determined. The continued applicability of the star system
is also announced, along with the QBP demonstration. This Announcement finalizes these
proposals.
IME Phase Out: For 2014, CMS will continue phasing out indirect medical education amounts
from MA capitation rates.
Clinical Trials: We are continuing the policy of paying on a FFS basis for qualified clinical trial
items and services provided to MA plan members that are covered under the National Coverage
Determinations on clinical trials.

Location of Network Areas for PFFS Plans in Plan Year 2015: The list of network areas for plan
year 2015 is available on the CMS website at http://www.cms.gov/PrivateFeeforServicePlans/,
under PFFS Plan Network Requirements.
Adjustment for MA Coding Pattern Differences: We will implement an MA coding pattern
difference adjustment of 4.91 percent for payment year 2014.
Normalization Factors for ESRD models: The normalization factors for the ESRD models for
2014 are:

CMS-HCC ESRD Functioning graft status: 1.085

CMS-HCC ESRD dialysis model: 1.039

Update of the RxHCC Model: We will update the Part D model to reflect more recent data and
changes in plan liability in the coverage gap.
Payment Reconciliation: The 2014 risk percentages and payment adjustments for Part D risk
sharing are unchanged from contract year 2013.
Part D Benefit Parameters: Attachment V provides the updated 2014 Part D benefit parameters
for the defined standard benefit, low-income subsidy, and retiree drug subsidy.

/s/
Jonathan D. Blum
Deputy Administrator and Director
Center for Medicare
/s/
Paul Spitalnic, ASA, MAAA
Director
Parts C & D Actuarial Group
Office of the Actuary
Attachments

2014 ANNOUNCEMENT
Announcement .................................................................................................................................1
Key Changes from the Advance Notice: ...................................................................................2
Proposals Adopted as Issued in the Advance Notice: ................................................................3
Attachment I. Final Estimate of the Increase in the National Per Capita MA Growth
Percentage and the National Medicare Fee-for-Service Growth Percentage for
2014....................................................................................................................................10
Attachment II. Key Assumptions and Financial Information .......................................................12
Attachment III. Responses to Public Comments ..........................................................................21
Section A. Final Estimate of the National Per Capita Growth Percentage and the Fee-forService (FFS) Growth Percentage for Calendar Year 2014 ...........................................21
Section B. MA Benchmark, Quality Bonus Payments and Rebate .........................................25
Section C. Calculation of Fee for Service Rates ......................................................................27
Section D. Recalibration and Clinical Update of the CMS-HCC Risk Adjustment Model ....29
Section E. MA Enrollee Risk Assessments .............................................................................35
Section F. Adjustment for MA Coding Pattern Differences ....................................................36
Section G.

Normalization Factors ........................................................................................37

G1.

Normalization for the CMS-HCC Model (aged/disabled beneficiaries

enrolled in MA plans) ............................................................................................37

G2.

Normalization Factor for the Rx Hierarchical Condition Category (RxHCC)

Model .....................................................................................................................38

Section G. Frailty Adjustment .................................................................................................39

Section H. Medical Loss Ratio (MLR) Requirements for the MA and the Medicare
Prescription Drug Benefit Programs ..............................................................................40
Section I. Part D Benefit Administration and Prescription Drug Event (PDE) Reporting ......41
Section J. Update of the RxHCC Model ..................................................................................43
Section K. Medicare Part D Benefit Parameters: Annual Adjustments for Defined
Standard Benefit in 2014 ................................................................................................44
Attachment IV. Changes in the Payment Methodology for Medicare Part D for CY 2014 .........46
Section A. Part D Benefit Administration and Prescription Drug Event (PDE) Reporting ....46

A1.

Applicable Beneficiary and Plan Dispensing/Vaccine Administration Fee

Liability on: a) Applicable Drug Claims that Straddle the Coverage Gap and
b) Applicable Drug Coverage Gap Claims under EA Plans offering Part D
Supplemental Coverage in the Gap........................................................................46

A2.

Beneficiary and Plan Negotiated Price Cost Component Liability .......................52

A3.

Other Health Insurance (OHI) including Employer Group Waiver Plans

(EGWPs) ................................................................................................................55

A4.

Enhanced Alternative Plan Mapping Rule 4 ..........................................................57

Attachment V. Final Updated Part D Benefit Parameters for Defined Standard Benefit,
Low-Income Subsidy, and Retiree Drug Subsidy..............................................................58
Attachment VI. Medicare Part D Benefit Parameters for the Defined Standard Benefit:
Annual Adjustments for 2014 ............................................................................................60
Section A. Annual Percentage Increase in Average Expenditures for Part D Drugs per
Eligible Beneficiary........................................................................................................60
Section B. Annual Percentage Increase in Consumer Price Index, All Urban Consumers
(all items, U.S. city average) ..........................................................................................61
Section C. Calculation Methodology .......................................................................................61
Section D. Estimated Total Covered Part D Spending at Out-of-Pocket Threshold for
Applicable Beneficiaries ................................................................................................63
Section E. Retiree Drug Subsidy Amounts ..............................................................................65
Attachment VII. CMS-HCC and RxHCC Risk Adjustment Factors .............................................66
Table 1. 2014 CMS-HCC Model Relative Factors for Community and Institutional
Beneficiaries ...................................................................................................................67
Table 2. 2014 CMS-HCC Model Relative Factors for Aged and Disabled New Enrollees ....71
Table 3. 2014 CMS-HCC Model Relative Factors for New Enrollees in Chronic
Condition Special Needs Plans (C-SNPs) ......................................................................72
Table 4. Disease Hierarchies for the 2014 CMS-HCC Model.................................................73
Table 5. Comparison of 2013 and 2014 CMS-HCC Risk Adjustment Model HCCs .............74
Table 6. RxHCC Model Relative Factors for Continuing Enrollees .......................................79
Table 7. RxHCC Model Relative Factors for New Enrollees, Non-Low Income ...................83
Table 8. RxHCC Model Relative Factors for New Enrollees, Low Income ...........................84
Table 9. RxHCC Model Relative Factors for New Enrollees, Institutional ............................85
Table 10. List of Disease Hierarchies for the Revised RxHCC Model ..................................86
Attachment VIII. 2014 Call Letter .................................................................................................87
6

How to Use This Call Letter ....................................................................................................90

Section I Parts C and D .........................................................................................................91
Annual Calendar ................................................................................................................91
Plan Corrections .................................................................................................................97
Incomplete Bid Submissions..............................................................................................98
Formulary Submission Deadline........................................................................................99
Star Ratings Changes .......................................................................................................100
Plan/Sponsor Continuity of Operations (COOP) .............................................................114
Revisions to Good Cause Processes ................................................................................114
Year 7 Agent/Broker Compensation Guidance ...............................................................115
Capitated Financial Alignment Demonstrations ..............................................................115
Section II Part C ..................................................................................................................117
Benefit Flexibility for Certain Special Needs Plans ........................................................117
SNP Annual Notice of Change (ANOC) and Evidence of Coverage (EOC)
Requirements .......................................................................................................119
Updates to the Qualification Process for Fully Integrated Dual Eligible (FIDE)
Special Needs Plans .............................................................................................119
Supplemental Benefits Guidance .....................................................................................119
Rewards and Incentives Programs for Medicare Advantage Organizations ...................120
Provider / Beneficiary Shared Decision Making ..........................................................120
Inappropriate shifting of drug coverage from Medicare Part B to Part D .......................121
Plans with Low Enrollment .............................................................................................122
Overview of CY 2014 Benefits Bid Review....................................................................122
Meaningful Difference (Duplicative Plan Offerings) ......................................................123
Total Beneficiary Cost (TBC) ..........................................................................................125
Maximum Out of Pocket (MOOP) Limits .......................................................................126
Transferability of an MA enrollees annual contribution toward their maximum outof-pocket cost sharing limit (MOOP) ..................................................................128
Service Category Cost Sharing Requirements .................................................................128
Part C Optional Supplemental Benefits ...........................................................................130
Part C Crosswalks: Segmentation ....................................................................................130
7

Exceptions to Policies Permitting Plans to Limit Durable Medical Equipment to

Certain Brands and Manufacturers ......................................................................131
Cost Plan Competition Requirements ..............................................................................132
Expanding use of the Blue Button Initiative ..................................................................132
Medicare Advantage Part C EOB ....................................................................................133
Summary of Benefits (SB) Update ..................................................................................133
PBP Notes Update for CY 2014 ......................................................................................134
Section 6055 of the Internal Revenue Code ....................................................................134
Section III Part D ................................................................................................................134
Payment for Hospice and ESRD Beneficiaries under Part D ..........................................134
Daily Cost Sharing Requirements ....................................................................................139
Hospital Outpatient Drug Supplies During Observation Services ...................................141
Withdrawal of Part D Bids after CMS Approval .............................................................142
Inappropriate Use of Prior Authorization (PA) Forms ....................................................143
Auto-Ship Refill Programs in Part D ...............................................................................144
Incremental Fills of Schedule II Controlled Substances Prescriptions ............................146
Real-time, Direct Access to Systems that Adjudicate Claims and Process Appeals
and Grievances .....................................................................................................147
Applicability of Rewards and Incentives in Part D .........................................................148
Payment of Extemporaneous Compounds from Compounding Pharmacies ...................148
Million HeartsTM Initiatives .............................................................................................149
Expansion of Part D Policy on Improving Utilization Review Controls .........................151
Drug Class Quantity Limits .............................................................................................151
Change in Part D Barbiturate Coverage...........................................................................152
Part D Benefit Parameters for Non-Defined Standard Plans ...........................................153
Employer Group Waiver Plan (EGWP) Supplemental Prescription Drug Benefits ........156
PDE Guidance on Post-Point-Of-Sale Claim Adjustments .............................................157
Post Point-of-Sale Per Claim Administrative Fees ..........................................................164
Medication Therapy Management ...................................................................................165
Antipsychotic Data...........................................................................................................172
Improvements to the Prescription Drug Plan Information Files ......................................173
8

Coordination of Benefits (COB) User Fee.......................................................................174

Part D Low Enrollment ....................................................................................................174
Preferred / Non-Preferred Pharmacy Networks ...............................................................175
Appendix 1 Additional Gap Coverage ................................................................................177
Appendix 2 Contract Year 2014 Guidance for Prescription Drug Plan (PBP) Renewals
and Non-Renewals .......................................................................................................180
Appendix 3 Contract Year 2014 Guidance for Prescription Drug Plan (PBP) Renewals
and Non-Renewals - Table ...........................................................................................185
Appendix 4 Contract Year 2014 Guidance for PDP PBP Renewal Option 6 Special
Disenrollment Model Notice ........................................................................................189
Appendix 5 - Summary of Comments on the Draft Call Letter .............................................191

Attachment I. Final Estimate of the Increase in the National Per Capita MA Growth
Percentage and the National Medicare Fee-for-Service Growth Percentage for 2014
The Table I-1 below shows the National Per Capita MA Growth Percentages (NPCMAGP) for
2014. An adjustment of 0.77 percent for the combined aged and disabled is included in the
NPCMAGP to account for corrections to prior years estimates as required by section
1853(c)(6)(C). The combined aged and disabled increase is used in the development of the
ratebook.
Table I-1 - Increase in the National Per Capita MA Growth Percentages for 2014
Prior Increases

Aged+Disabled
1

Current Increases

2003 to 2013

2003 to 2013

2013 to 2014

2003 to 2014

44.78%

45.90%

2.17%

49.06%

NPCMAGP for 2014

With 1853(c)(6)(C)
1
adjustment
2.96%

Current increases for 2003-2014 divided by the prior increases for 2003 to 2014.

The Affordable Care Act of 2010 requires the Medicare Advantage benchmark amounts be tied
to a percentage of the county FFS amounts. There will be a transition to the percentage of FFS
over a number of years. Table I-2 below provides the increase in the FFS USPCC which will be
used for the county FFS portion of the benchmark. The percentage increase in the FFS USPCC
is shown as the current projected FFS USPCC for 2014 divided by projected FFS USPCC for
2013 as estimated in the 2013 Rate Announcement released on April 2, 2012.
Table I-2 Increase in the FFS USPCC Growth Percentage for CY 2014
Aged + Disabled

Dialysis only ESRD

Current projected 2014 FFS USPCC

$795.11

$7,063.55

Prior projected 2013 FFS USPCC

$767.99

$7,218.90

Percent increase

3.53%

2.15%

Table I-3 below shows the monthly actuarial value of the Medicare deductible and coinsurance
for 2013 and 2014. In addition, for 2014, the actuarial value of deductibles and coinsurance is
being shown for non-ESRD only, since the plan bids will not include ESRD benefits in 2014.
These data were furnished by the Office of the Actuary.

10

Table I-3 - Monthly Actuarial Value of Medicare Deductible and Coinsurance for 2013 and 2014

Part A Benefits
1

Part B Benefits

Total Medicare
1

2013

2014

Change

2014 non-ESRD

$40.99

$39.13

4.5%

$37.23

$103.95

$114.99

10.6%

$107.05

$144.94

$154.12

6.3%

$144.28

Includes the amounts for outpatient psychiatric charges.

Medical Savings Account (MSA) Plans. The maximum deductible for current law MSA plans
for 2014 is $11,200.

11

Attachment II. Key Assumptions and Financial Information

The USPCCs are the basis for the National Per Capita MA Growth Percentages. Attached is a
table that compares last years estimate of United States Per Capita Costs (USPCC) with current
estimates for 2003 to 2015. In addition, this table shows the current projections of the USPCCs
through 2016. We are also providing an attached set of tables that summarize many of the key
Medicare assumptions used in the calculation of the USPCCs. Most of the tables include
information for the years 2003 through 2016.
Most of the tables in this attachment present combined aged and disabled non-ESRD data. The
ESRD information presented is for the combined aged-ESRD, disabled-ESRD and ESRD only.
All of the information provided in this enclosure applies to the Medicare Part A and Part B
programs. Caution should be employed in the use of this information. It is based upon
nationwide averages, and local conditions can differ substantially from conditions nationwide.
None of the data presented here pertain to the Medicare prescription drug benefit.

12

Comparison of Current & Previous Estimates of the Total USPCC non-ESRD

Calendar
Year
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016

Part A
Current Last Years
Estimate
Estimate

Part B
Current Last Years
Estimate
Estimate

Current
Estimate

$295.77
$313.80
$334.52
$344.97
$355.59
$373.36
$385.74
$385.58
$390.04
$382.67
$386.10
$382.36
$383.54
$396.10

$249.37
$273.97
$293.53
$314.44
$332.26
$352.68
$369.93
$378.57
$388.44
$398.54
$409.27
$430.24
$442.62
$457.28

$545.14
$587.77
$628.05
$659.41
$687.85
$726.04
$755.67
$764.15
$778.48
$781.21
$795.37
$812.60
$826.16
$853.38

$295.77
$313.80
$334.52
$344.97
$357.00
$373.70
$386.59
$388.01
$397.24
$396.48
$403.13
$409.12
$408.05

$249.37
$273.97
$293.53
$314.44
$332.28
$352.89
$369.97
$378.78
$396.54
$411.14
$386.13
$402.22
$417.23

Part A & Part B

Last Years
Estimate

Ratio

$545.14
$587.77
$628.05
$659.41
$689.28
$726.59
$756.56
$766.79
$793.78
$807.62
$789.26
$811.34
$825.28

1.000
1.000
1.000
1.000
0.998
0.999
0.999
0.997
0.981
0.967
1.008
1.002
1.001

Comparison of Current & Previous Estimates of the FFS USPCC non-ESRD

Calendar
Year
2010
2011
2012
2013
2014
2015
2016

Part A
Current Last Years
Estimate
Estimate

Part B
Current Last Years
Estimate
Estimate

Part A & Part B

Current Last Years
Estimate
Estimate

$373.21
$373.94
$363.60
$371.79
$375.59
$380.58
$393.40

$377.18
$387.71
$398.83
$409.18
$419.52
$436.60
$451.66

$750.39
$761.65
$762.43
$780.97
$795.11
$817.18
$845.06

$376.48
$387.64
$381.50
$393.22
$401.47
$404.14

$377.51
$400.83
$416.29
$374.77
$393.00
$411.93

$753.99
$788.47
$797.79
$767.99
$794.47
$816.07

Ratio
0.995
0.966
0.956
1.017
1.001
1.001

Comparison of Current & Previous Estimates of the ESRD Dialysis-only FFS USPCC
Calendar
Year

Current
Estimate

2010
2011
2012
2013
2014
2015
2016

$6,834.14
$6,770.39
$6,834.71
$7,039.85
$7.063.55
$7,324.21
$7,945.05

13

Part A+B
Last Years
Estimate

Ratio

$6,834.14
$7,031.65
$7,229.84
$7,218.90
$7,676.79
$7,925.55

1.000
0.963
0.945
0.975
0.920
0.924

Basis for ESRD Dialysis-only FFS USPCC Trend

Calendar
Year

Part A+B
Adjustment
Adjusted
All ESRD
Factor for Dialysis-only
Cumulative DialysisCumulative
FFS Trend
only
Trend

2012
2013
2014
2015
2016

1.0032
1.0268
1.0240
1.0546
1.1353

1.0063
1.0126
1.0188
1.0258
1.0336

1.0095
1.0398
1.0433
1.0818
1.1735

Note: 2011 All ESRD FFS USPCC is $4,721.87

Summary of Key Projections

Part A1
Year

Calendar Year
CPI Percent Increase

Fiscal Year
PPS Update Factor

2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016

2.2%
2.6%
3.5%
3.2%
2.9%
4.1%
-0.7%
2.1%
3.6%
2.1%
1.8%
2.2%
2.4%
2.5%

3.0%
3.4%
3.3%
3.7%
3.4%
2.7%
2.7%
1.9%
-0.6%
-0.1%
2.8%
0.5%
3.3%
3.5%

FY Part A Total Reimbursement

(Incurred)
3.5%
8.4%
8.8%
5.9%
5.8%
8.0%
6.8%
3.1%
4.0%
1.7%
4.4%
2.9%
3.0%
6.3%

Part B2
Calendar Year
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016

Physician Fee Schedule

Fees
Residual3
1.4%
3.8%
2.1%
0.2%
-1.4%
0.4%
1.6%
2.5%
0.9%
-1.0%
-0.1%
-0.5%
0.0%
0.0%

4.5%
5.9%
3.2%
4.6%
3.5%
3.3%
1.4%
1.4%
2.4%
1.1%
0.4%
2.4%
1.9%
1.7%

Part B Hospital
4.4%
11.1%
10.8%
5.1%
8.3%
6.3%
8.7%
5.0%
8.1%
8.0%
6.2%
7.1%
7.7%
7.9%

Total
6.8%
9.8%
7.0%
6.1%
4.3%
4.8%
3.8%
2.2%
2.6%
2.1%
1.9%
3.9%
3.2%
4.1%

Percent change over prior year.

Percent change in charges per Aged Part B enrollee.
3
Residual factors are factors other than price, including volume of services, intensity of services, and age/sex changes.
2

14

Medicare Enrollment Projections (In Millions)

Non-ESRD Total
Part A
Calendar Year
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016

Aged
34.426
34.837
35.243
35.779
36.429
37.358
38.235
39.068
39.912
41.511
42.887
44.333
45.799
47.308

Part B
Disabled
5.928
6.247
6.573
6.851
7.128
7.320
7.531
7.788
8.091
8.245
8.489
8.694
8.880
9.017

Aged
33.027
33.282
33.608
33.960
34.448
35.121
35.811
36.494
37.202
38.499
39.874
41.151
42.437
43.764

Disabled
5.595
5.895
6.141
6.108
6.186
6.199
6.245
6.411
6.578
6.526
6.575
6.687
6.887
7.081

Aged
28.086
28.288
28.274
27.447
26.765
26.282
26.050
26.238
26.395
26.698
27.024
27.672
29.067
30.763

Disabled
5.187
5.458
5.746
5.985
6.212
6.404
6.628
6.900
7.201
7.386
7.567
7.750
7.912
8.036

Non-ESRD Fee For Service

Part A
Calendar Year
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016

Aged
29.582
29.934
30.001
29.350
28.820
28.593
28.542
28.880
29.172
29.785
30.112
30.934
32.507
34.387

Part B
Disabled
4.847
5.100
5.309
5.236
5.264
5.277
5.337
5.518
5.684
5.663
5.648
5.738
5.915
6.096

ESRD
Calendar Year
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016

ESRD-Total
Total Part A
Total Part B
0.382
0.370
0.399
0.382
0.416
0.398
0.435
0.416
0.453
0.433
0.471
0.450
0.491
0.469
0.510
0.488
0.526
0.503
0.543
0.521
0.563
0.540
0.581
0.558
0.597
0.575
0.613
0.590

15

ESRD-Fee For Service

Total Part A
Total Part B
0.361
0.348
0.377
0.360
0.394
0.375
0.406
0.386
0.417
0.397
0.428
0.406
0.439
0.417
0.456
0.433
0.468
0.445
0.481
0.458
0.495
0.472
0.510
0.487
0.527
0.504
0.544
0.521

Part A Projections for non-ESRD (Aged+Disabled)

Calendar
Year
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016

Inpatient Hospital
Aged + Disabled
2,588.58
2,709.46
2,812.46
2,758.66
2,707.07
2,709.78
2,668.41
2,644.78
2,609.93
2,520.54
2,515.37
2,506.32
2,559.11
2,695.91

SNF
Aged + Disabled
371.32
414.47
451.65
476.27
504.64
537.92
553.23
569.94
616.09
556.19
566.40
587.40
623.57
670.07

Home Health
Aged + Disabled
124.42
134.05
141.04
141.48
143.91
151.56
154.33
155.77
143.85
137.25
136.97
137.57
141.18
145.22

Average reimbursement per enrollee on an incurred basis, except where noted.

16

Managed Care
Aged + Disabled
458.37
501.31
603.02
758.13
907.34
1,076.78
1,248.97
1,252.94
1,304.69
1,372.72
1,409.18
1,351.82
1,273.94
1,238.50

Hospice: Total
Reimbursement
(in Millions)
Aged + Disabled
5,733
6,832
8,016
9,368
10,518
11,413
12,290
13,088
13,983
14,980
15,922
17,066
18,396
19,878

Part B Projections for non-ESRD (Aged+Disabled)

Calendar Year

Physician Fee Schedule

Aged + Disabled

Part B Hospital
Aged + Disabled

Durable Medical Equipment

Aged + Disabled

2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016

1,240.44
1,367.32
1,404.39
1,403.33
1,381.42
1,381.06
1,390.63
1,433.17
1,461.81
1,427.55
1,407.02
1,417.28
1,474.17
1,534.03

365.14
419.28
478.18
498.05
527.57
555.82
600.72
627.58
675.97
719.81
752.00
805.28
887.80
983.60

197.17
196.45
195.32
196.84
194.70
199.92
183.34
184.44
176.27
178.48
164.73
157.18
165.33
160.20

Calendar Year

Carrier Lab
Aged + Disabled

Other Carrier
Aged + Disabled

Intermediary Lab
Aged + Disabled

2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016

74.78
80.61
82.56
85.44
91.42
95.27
102.89
102.23
102.44
109.47
109.01
113.01
120.12
130.68

333.74
361.00
363.88
362.11
367.23
370.48
389.40
400.25
412.51
412.53
416.91
431.70
450.71
473.55

Calendar Year
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016

Other Intermediary
Aged + Disabled
114.10
119.70
139.93
142.25
151.35
158.34
167.68
170.06
169.59
176.50
186.86
166.32
179.49
195.02

Home Health
Aged + Disabled
136.89
156.61
179.63
203.12
232.61
252.75
283.19
286.46
269.65
257.98
257.14
258.66
265.75
273.53

Average reimbursement per enrollee on an incurred basis.

17

75.25
80.56
84.26
84.60
84.48
85.89
90.70
91.44
95.43
97.50
95.81
99.08
105.16
114.33
Managed Care
Aged + Disabled
421.83
471.86
560.92
770.83
932.32
1,105.68
1,206.55
1,224.39
1,277.21
1,381.70
1,500.29
1,691.78
1,639.62
1,598.44

2014 Projections by Service Category for non-ESRD (Aged+Disabled)*

Service Type
Part A
Inpatient Hospital
SNF
Home Health
Managed Care
Part B
Physician Fee Schedule
Part B Hospital
Durable Medical Equipment
Carrier Lab
Other Carrier
Intermediary Lab
Other Intermediary
Home Health
Managed Care

Current
Estimate

Last Years
Estimate

Ratio

2,506.32
587.40
137.57
1,351.82

2,794.65
735.79
160.56
1,212.44

0.897
0.798
0.857
1.115

1,417.28
805.28
157.18
113.01
431.70
99.08
166.32
258.66
1,691.78

1,206.75
867.35
195.64
118.66
495.99
108.40
196.37
288.94
1,326.81

1.174
0.928
0.803
0.952
0.870
0.914
0.847
0.895
1.275

* Average reimbursement per enrollee on an incurred basis

Claims Processing Costs as a Fraction of Benefits

Calendar
Year
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016

Part A
0.001849
0.001676
0.001515
0.001245
0.000968
0.000944
0.000844
0.000773
0.000749
0.000749
0.000749
0.000749
0.000749
0.000749

18

Part B
0.011194
0.010542
0.009540
0.007126
0.006067
0.006414
0.005455
0.005055
0.004396
0.004396
0.004396
0.004396
0.004396
0.004396

Approximate Calculation of the USPCC, the National MA Growth Percentage for

Combined (Aged+Disabled) Beneficiaries, and the FFS USPCC (Aged+Disabled)
The following procedure will approximate the actual calculation of the USPCCs from the
underlying assumptions for the contract year for both Part A and Part B.
Part A:
The Part A USPCC can be approximated by using the assumptions in the tables titled Part A
Projections Under Present Law for non-ESRD (Aged+Disabled) and Claims Processing Costs
as a Fraction of Benefits. Information in the Part A Projections table is presented on a
calendar year per capita basis. First, add the per capita amounts over all types of providers
(excluding hospice). Next, multiply this amount by 1 plus the loading factor for administrative
expenses from the Claims Processing Costs table. Then, divide by 12 to put this amount on a
monthly basis.
Part B:
The Part B USPCC can be approximated by using the assumptions in the tables titled Part B
Projections under Present Law for non-ESRD (Aged+Disabled) and Claims Processing Costs
as a Fraction of Benefits. Information in the Part B Projections table is presented on a
calendar year per capita basis. First, add the per capita amounts over all types of providers.
Next, multiply by 1 plus the loading factor for administrative expenses and divide by 12 to put
this amount on a monthly basis.
The National Per Capita MA Growth Percentage:
The National Per Capita MA Growth Percentage for 2014 (before adjustment for prior years
over/under estimates) is calculated by adding the USPCCs for Part A and Part B for 2014 and
then dividing by the sum of the current estimates of the USPCCs for Part A and Part B for 2013.

19

The FFS USPCC:

The tables used to calculate the total USPCC can also be used to approximate the calculations of
the FFS USPCC. The per capita data presented by type of provider in the projections tables for
both Part A and B are based on total enrollment. To approximate the FFS USPCCs, first add the
corresponding provider types under Part A and Part B separately. For the FFS calculations, do
not include the managed care provider type. Next, rebase the sum of the per capita amounts for
FFS enrollees, i.e., multiply the sum by total enrollees and divide by FFS enrollees. (The
enrollment tables in this attachment now also include FFS enrollment). Then, multiply by 1 plus
the loading factor for administrative expenses and divide by 12. The result will only be
approximate because there is an additional adjustment to the FFS data which accounts for cost
plan data which comes through the FFS data system. This cost plan data is in the total per capita
amounts by type of provider, but is removed for the FFS calculations.

20

Attachment III. Responses to Public Comments

Section A. Final Estimate of the National Per Capita Growth Percentage and the Fee-forService (FFS) Growth Percentage for Calendar Year 2014
Comment: As has been the case with respect to comments on the Advance Notice for a number
of years, numerous commenters requested that, when calculating the growth percentage
estimates, CMS should assume that there will be a fix to the physician payment rates produced
by the Sustainable Growth Rate (SGR) formula in 2014 as there has been for the last eleven
years. Specifically, commenters requested that CMS assume a zero percent update to avoid
subjecting MA plans to a reduction in rates based on an estimate of Medicare spending growth
that is lower than it would turn out to be if a fix is enacted. Commenters argued that Sections
1853(c)(6) and 1876(a)(4) require CMS to develop estimates of the projected growth rate in
Medicare expenditures and applicable county-specific FFS costs that serve as the basis for MA
rates and that the statute permits the agency to rely on the best available information on what is
actually expected to happen in making such estimates. Commenters contended that these
statutory provisions grant CMS a significant degree of flexibility in determining how to calculate
estimated rates for MA payments and, therefore, would permit CMS to assume that an SGR fix
will be enacted. Many commenters argued that if CMS projects county rates reflecting an SGR
impact that is not likely to occur, CMS would be setting MA rates at a level lower than the
Congress intended.
Response: The Social Security Act requires that the national MA growth percentage reflect the
Secretarys estimate of the projected per capita rate of growth in expenditures under this title
(title XVIII). CMS historically has responded to comments urging CMS to assume an SGR fix
by indicating that we interpreted the use of the phrase under this title to mean that the estimate
was to be based on the provisions of title XVIII as in effect on the date that the rates are
announced. Given the increasing number of years in a row for which Congress has enacted an
SGR fix after the MA rates for the upcoming year have been released in April, CMS now agrees
with the commenters that it would be more reasonable to instead interpret the phrase under this
title as a general reference to the nature of the expenditures, namely expenditures from the Part
A and Part B trust funds, rather than necessarily interpreting the phrase to incorporate current
provisions of law into CMSs best estimate of the extent to which Medicare expenditures are
actually expected to change.
Accordingly, we are accepting the commenters recommendation that we change our
interpretation of how we calculate the estimate of projected per capita rate of growth under this
title under 1853(c)(6)(A) from an estimate of what would occur to the physician fee schedule for
the following year under current law to a best estimate of what CMS believes actually will occur
to the physician fee schedule for the following year based on recent history, and we are revising
the growth rate to assume a zero percent change for the physician fee schedule for 2014. We
made this change to reflect the fact that Congress has annually changed the law every year since
21

2003 such that the projected SGR cut does not occur. We believe it is more reasonable to base
the estimate of projected growth in Medicare expenditures on the assumption that a fix will occur
than it would be to base the estimate on current law. Therefore, we have calculated the final MA
Growth Percentage and the FFS Growth Percentage based on the assumption of a zero percent
change for the physician fee schedule for 2014. Details on the growth percentages are contained
in Attachment I.
Comment: Many commenters requested that CMS release underlying data and assumptions used
by CMS in the development of the preliminary estimates of the MA growth percentage and FFS
Growth Percentage. One commenter requested that CMS provide as much data as possible by
March 8 and additional data as quickly as possible thereafter. This commenter argued that the
data are critical to MA organizations planning and bid development activities.
Response: We have added additional detail on our methodology in Attachment II of the Rate
Announcement. We will consider providing more detailed information in the Advance Notices
for future years to assist the publics understanding of the preliminary estimates of the growth
percentages. In addition, we will consider adding a discussion of our recent trend work to
actuarial user group calls.
Comment: We also received a comment that OACT should not wait until the final Rate
Announcement to release details on the costs of health care services by line item and wanted
CMS to distribute data on how the different components of Medicare spending are changing in
the latest forecast of the 2004 to 2014 USPCCs. This commenter recommended that OACT
provide similar detail on the USPCCs that it provides in the Rate Announcement for the
historical years and the upcoming contract year.
Response: In response to requests for further detail, we have provided in Attachment II, tables
that can be used to crosswalk information from the Advance Notice. In particular, we are
providing a table that compares the previous and current estimate of the USPCC, and shows the
percent changes between these estimates. We have also provided an additional table that
compares, for 2014, the previous and current estimates of the USPCC by Medicare type of
service. These tables supplement the tables routinely published in the Rate Announcement. We
are evaluating the tables used in the Advance Notice and will consider changes in these tables for
2015 to better complement the final rate notice tables. Details of the final growth percentage are
included in Attachments I and II of the Rate Announcement. Shortly after release of this Rate
Announcement, CMS will provide additional detailed data to the public on the CMS web site at
(http://www.cms.gov/Medicare/Health-Plans/MedicareAdvtgSpecRateStats/). We will announce
this release during our actuarial user group calls.
Comment: One commenter noted that CMS assumes that recent low Medicare medical cost
trends will continue through 2014. This commenter asked CMS to consider a more moderate
forecast of Medicare medical costs, including an element of reversion to long-term mean on
22

2013 and 2014 trends. A few commenters noted that the trend factors reflected in CMS
estimates are not consistent with plans experiences or market conditions. Other commenters
stated that there is no evidence that stronger economic growth will not lead to a rebound in
health care spending, and they did not believe that OACT should assume that the low USPCC
trends for 2010-2012 will continue beyond these three years when historically there has never
been such an extended period for low growth rates in the USPCCs.
Response: CMS believes that, based on the evidence from Medicare data, spending has slowed in
the Medicare program compared to historical levels. Our forecast is based on historical trend,
anticipated economic factors, and changes in Medicare laws and regulations. It is expected that
some of the factors contributing to plan cost and utilization changes will be different than FFS
Medicare.
Comment: Commenters stated that CMS estimated growth rate for CY14 of -2.3 percent is far
lower than actual medical cost trends and over five percentage points lower than the growth rate
for CY2013 (+2.8%). A few plan commenters stated that their data suggested that medical costs
for their Medicare members grew by about 5 percent in 2012.
Response: The preliminary estimate of the MA Growth Percentage for CY14 of -2.3 percent is
comprised of a prior period adjustment of -3.9 percent and 2013-2014 projected growth of 1.6
percent. Most of the prior period adjustment was attributable to the lower actual Medicare trends
for 2011 and 2012. Specifically, in the 2013 rate announcement, the total USPCC trend from
2010 through 2012 was estimated to be 5.3 percent. This two-year trend has been revised down
to 2.3 percent in calculating the preliminary growth percentage. We note that MA plan bids
increased by 1.8 percent during this two-year period, which suggests that the average cost trends
that MA plans experienced from 2010 to 2012 are in line with the revised 2.3 percent trend in
FFS Medicare. It is also worth noting that changes mandated by the American Taxpayer Relief
Act of 2012 (ATRA) reduced the preliminary 2013-2014 growth percentage by 1.1 percent.
Comment: One commenter recommended that CMS recalculate the growth percentages so that
the geographic areas of the country that have done a poor job of controlling costs are not
rewarded for unsustainable behavior, while areas that have done a good job controlling costs are
required to make even more cuts to benefits.
Response: The growth percentages treat all areas equally in an effort to pay, as the statute
requires, based on the expected costs to Medicare.
Comment: Some commenters stated that the estimated reduction in the MA growth percentage is
derived as the result of the application of a statutorily-required formula, not due to a change in
policy. These commenters noted that the reduction is unsurprising because Medicare costs
overall have grown more slowly than expected in recent years.

23

Response: We appreciate the comment and concur that the growth of Medicare spending has
slowed.
Comment: Several commenters had concerns about the magnitude of changes proposed in the
Advance Notice and the impact to Medicare beneficiaries and plans. Commenters contended
that the payment reductions described in the Notice were unanticipated and will lead to
significantly higher MA premiums or significantly reduced benefits or both. Some commenters
argued that these cuts would lead to MA plans exiting the market. One commenter argued that
chronically ill patients would experience higher cost increases than the average beneficiary.
Some commenters felt that cutting funding to MA plans would not be in line with the nations
move away from a FFS model toward a more coordinated and integrated system. Some
providers noted that the reductions to MA contained in the Advance Notice would seriously
threaten their ability to provide innovative, high quality care to beneficiaries. We also received
comments that the cuts would lead to market contraction, less competition, and ultimately less
access for beneficiaries.
Response: As we stated in the Advance Notice, we recognize that plans face several payment
changes that present challenges for plans. We also share the commenters concern on reducing
plan choices and increasing costs for beneficiaries. At the same time, we have seen increased
enrollment and stable benefits within the MA program, and note that this strong enrollment
growth has happened during a time when payment rates are transitioning to be more aligned with
FFS Medicare rates. We have not always seen a reduction in benefits in areas that have had
declines in payment rates.
However, to address concerns with the variety of payment changes for MA, we have modified
some of our proposed payment policies for 2014. As discussed above, we have updated the MA
capitation rates with growth percentages that assume an SGR fix, which we believe will result in
a more accurate estimate of what FFS expenditures will be in 2014. In addition, we are phasing
in changes to the risk adjustment model (shown in Section D) by blending risk scores under the
2013 and 2014 CMS-HCC models, as well as changes to the AGA methodology (shown in
Section C).
Comment: One commenter urged that CMS stop MA cuts from happening. This commenter
suggested that if CMS plans to proceed with the MA cuts, they recommend that CMS establish
annual maximum allowed benchmark payment reduction thresholds at a county level in order to
minimize member disruption and program volatility. The commenter encouraged CMS to
consider all possible bases for such an approach, including the potential use of demonstration
authority under sections 402 or 1115A of the Social Security Act.
Response: We do not agree that a demonstration would be appropriate as suggested by the
commenter, as it is not clear what would be tested under such a demonstration.

24

Section B. MA Benchmark, Quality Bonus Payments and Rebate

Comment: A number of commenters asked that CMS not rebase the rates for 2014. These
commenters noted that CMS has rebased in each of the last two years and the statute does not
require CMS to rebase in 2014. Furthermore, these commenters noted that rebasing creates
additional uncertainty for plans, and some asked that CMS not rebase the rates until 2016. One
commenter noted that rebasing each year is too frequent.
Response: Section 1853(c)(1)(D)(ii) requires CMS to rebase the county FFS rates, which form
the basis of the ACA specified amount, periodically, but not less than once every three years.
The new ACA rate set under section 1853(n)(2) of the Act (specified amount) is based on FFS
costs. In some counties, MA rates are based entirely on FFS rates as of 2013.
Rebasing means that CMS is basing the FFS-based components of MA rates on the most recent
historical claims costs from the FFS program. Frequent rebasing also helps provide a smooth
transition toward the ACA requirement that100 percent of MA rates will be based on FFS costs,
in that it limits the more significant changes that may occur with less frequent updates.
Comment: Some commenters suggested that if a county qualifies for double bonus status in 2013
that CMS should allow for a two year policy transition if a county loses its double bonus status in
2014.
Response: We do not believe this transition policy would be consistent with the description of
double bonus counties in the statute, in which the determination is made on an annual basis
based on the countys relationship to the FFS USPCC. The other two criteria that determine a
double bonus county status the MA penetration rate as of December 2009 and the countys
status as previously being an urban floor county do not change.
Comment: One commenter asked CMS to confirm that the 2014 FFS spending used in the
qualifying county determination will be consistent with implementation of the proposed new
AGA methodology.
Response: Yes, the 2014 FFS spending is used to determine the qualifying county determination.
Section 1853(o)(3)(B) of the Social Security Act defines a qualifying county as a county that
meets the following three criteria: 1) has an MA capitation rate that, in 2004, was based on the
amount specified in subsection (c)(1)(B) for a Metropolitan Statistical Area with a population of
more than 250,000; 2) as of December 2009, had at least 25 percent of beneficiaries residing in
the county enrolled in an MA plan; and 3) has an average FFS county spending for 2014 that is
less than the national average FFS spending for 2014.
Comment: One commenter asked us to clarify the star rating that will be assigned for new
contracts in new parent organizations for QBP purposes, and wanted to confirm if the 2014
bonus for new organizations would be 3.5 percent.
25

Response: We define a new MA plan as an MA contract offered by a parent organization that has
not had another MA contract in the previous three years. A new contract under a new parent
organization will be assigned a star rating of 3.5 stars. Thus, the appropriate quality bonus
payment (QBP) for new plans in contract year 2014 is 3.5 percent. For a parent organization that
has had MA contract(s) with CMS in the previous three years, any new MA contract under that
parent organization will receive a weighted average of the star ratings earned by the parent
organizations existing MA contracts or MA contracts in the previous three years if there are no
existing contracts in the current year.
Comment: One commenter asked that CMS continue to publish a preliminary list of the county
quartiles with the Advance Notice each time the prior years FFS rates are rebased, as it is
helpful for the plan to understand its potential benchmark levels for the coming year.
Response: CMS will consider making this file available next year. However, we would note that
the county level FFS data needed to rank the counties into quartiles for 2015 will be included in
the 2014 ratebook calculation file.
Comment: We received a number of comments expressing concern about the MA payment rates
in Puerto Rico. Some of these commenters expressed concerns that Puerto Rico rates are
artificially low because of special Medicare FFS payment provisions for Puerto Rico. These
commenters also urged that refinements CMS has made to the AGA calculation for Puerto Rico,
which began to be phased-in starting in 2012, be fully implemented in 2014.
Response: CMS began a detailed analysis of FFS spending in Puerto Rico in the fall of 2010.
The results of that analysis confirm that Medicare enrollment, cost, and use patterns in Puerto
Rico are different than on the mainland. A far greater proportion of beneficiaries in Puerto Rico
enroll in MA plans and those who remain in FFS are much less likely to enroll in Part B. While
most mainland beneficiaries are automatically enrolled in Part B and must opt out to decline it,
beneficiaries in Puerto Rico must take affirmative action to opt-in to Part B coverage. In
addition, Medicare FFS payment rates in Puerto Rico tend to be lower than on the mainland.
Given that beneficiaries who enroll in MA are all by law enrolled in both Part A and Part B, we
concluded that, beginning with payment year 2012, the FFS rate calculation in Puerto Rico used
to determine MA rates should be based exclusively on beneficiaries who are enrolled in both Part
A and Part B. We have applied this refinement to historical FFS data for 2009 and 2010 for
payment years 2012 and 2013. Due to the unique circumstances of Puerto Rico, we will fully
implement this change for payment year 2014. As a result of this change, rates in Puerto Rico
counties are higher relative to what they would have been under the methodology proposed in
the Advance Notice. Due to the technical challenges of making this correction, the rates
published with this Rate Notice will not include this change. We will publish revised rates for
Puerto Rico to reflect this change before the end of April.

26

Clinical Trials
Comment: We received one comment from a commenter that erroneously believed that MA
enrollees were not eligible to participate in cancer clinical trials. Specifically, this commenter
believes that as the clinical trial policy currently stands, individuals in MA plans would be
required to relinquish their MA coverage and revert to standard FFS Medicare if they wish to
participate in a clinical trial.
Response: MA plan members are free to participate in any certified clinical trial that any other
(FFS) Medicare beneficiary can participate in. MA beneficiaries are not required to relinquish
their MA coverage if they wish to participate in a clinical trial. If an MAO conducts its own
clinical trial, the MA can explain the benefits of participating in the MAO sponsored clinical
trial. But, an MAO may not require pre-authorization for a non-plan-sponsored clinical trial, nor
may it create impediments to a plan members use of a non-plan clinical trial, even if the MAO
believes it is sponsoring a clinical trial of similar nature. MA plans must cover all Medicare
services including qualified clinical trials. Finally, effective for CY 2011 and subsequent years,
as finalized in the 2011 Rate Announcement, our policy is that MA plans are required to
reimburse beneficiaries for cost sharing incurred for clinical trial services that exceeds the MA
plans in-network cost sharing for the same category of service, and members clinical trial cost
sharing must count towards their in-network out-of-pocket maximum.
Section C. Calculation of Fee for Service Rates
Comment: We received a number of comments asking for more detailed, county level
information on the repricing of claims data proposed in the Advance Notice. These commenters
expressed concern that they could not adequately comment on the proposed changes without
these impacts. In addition, these commenters suggested that CMS delay implementation of the
repricing of claims until more information is made available on the potential impacts of the
repricing.
Response: We are publishing with the final Rate Announcement files that contain the wage
indices in each claim year (i.e., 2007-2011), and the wage indices for 2013, by county. We will
consider publishing additional data with the Advance Notice in future years that can help
stakeholders understand the potential impacts of proposed changes in the Advance Notice.
Comment: One commenter asked whether OACT is proposing to use an SGR update of over -30
percent to price the historical 2007 to 2011 physician claims, or will they use the 2013 SGR
update of 0 percent. This commenter stated that there will be a major difference depending on
which assumption OACT uses. Using current laws 2014 SGR update would truly distort
historical physician claims, and would significantly distort the Part B costs of counties,
particularly counties with a higher proportion of Part B costs.

27

Response: The repricing of claims adjusts the historical physician claims for the ratio of the 2013
geographic practice cost index to the geographic practice cost index in effect at the time. The
historical claims already include the effect of physician fee fixes enacted for each year; there is
no SGR adjustment to the AGAs.
Comment: One commenter noted that hospice claims should be carved out of the Puerto Rico
rates by using national hospice FFS rates. This commenter noted that hospice costs are higher in
Puerto Rico than in the mainland due to inappropriate use or billing of hospice care in Puerto
Rico.
Response: The MA program does not pay for hospice claims, and for this reason, hospice claims
are excluded from FFS data used to determine annual MA capitation rates. We believe that the
current methodology accurately removes these claims from the FFS rates. Please see the
Advance Notice and final Rate Announcement for 2012 for more detail on this methodology.
Comment: We received several comments in support of repricing the historical FFS claims.
Response: We appreciate the support for this approach.
Comment: One commenter asked that CMS limit the effect of repricing to no more than plus or
minus 2 percent.
Response: We believe that this approach would result in FFS rates that would not accurately
represent the expected FFS costs for a plan; furthermore this approach would potentially
underpay in some counties and overpay in others. Finally, we do not believe this approach
would be consistent with the statute.
Comment: Several commenters asked that CMS not adopt the proposal to re-price historical FFS
claims data used to determine MA rates, in light of the uncertainty about the impacts and the
potential for market disruption. One commenter suggested that CMS use an average of the
previous two to three years of wage indices instead of only the previous years wage index.
Others asked that CMS consider phasing in the changes over time in order to mitigate the
impacts.
Response: We recognize that the potential exists for disparate geographic impacts, and we also
appreciate the concern that plans be given more time to adjust to potential changes in county
rates. At the same time, we believe that repricing the claims provides for more accurate county
level FFS rates. As such, we will be phasing in the changes over a two year period. For 2014,
the repriced AGAs will be blended with non-repriced AGAs on a 50/50 basis (e.g., 50 percent
repriced AGA and 50 percent non-repriced AGAs). Both sets of AGAs are included with the
ratebook files posted on the CMS website. For 2015, we anticipate that the AGAs will be
repriced and that no blending will occur.

28

However, we are not finalizing our proposal to recalculate home health claims to account for the
outlier payment policy that went into effect in 2010. While the impact of the outlier payment
policy will be reflected in home health claims in two of the five years in the AGA (2010 and
2011), we will not adjust claims in 2007 through 2009 to reflect the outlier policy.
Section D. Recalibration and Clinical Update of the CMS-HCC Risk Adjustment Model
Comment: Many commenters prefer delaying implementation of the CMS-HCC risk adjustment
model, phasing in implementation of an updated model over time, and/or seeking additional
industry input before implementing an updated model. Several commenters noted that CMS has
the discretion to update risk adjustment models and that we should not update a model in a year
when MA organizations are facing other negative adjustments. Commenters cited concerns in a
number of areas, including: decrease in risk scores and payments, insufficient time to determine
impacts, negative impacts on MA organizations, particularly those with high numbers of
beneficiaries with chronic health conditions, and operational and administrative burdens. Some
commenters requested more information and clarification of the transition plan to an updated
model. Some commenters support improvements to the model that provide for more accurately
capturing the risk of MA beneficiaries.
Response: We are finalizing the proposed model generally, but to mitigate the changes in risk
scores faced by individual MA organizations, for 2014 we will blend the risk scores calculated
using the 2014 CMS-HCC model with risk scores calculated using the 2013 CMS-HCC model,
each appropriately normalized, weighting the normalized risk scores from the 2013 model by 25
percent and the normalized risk scores from the clinically revised model by 75 percent. These
risk scores from the 2013 and 2014 CMS-HCC models will include the risk scores calculated
from the community, institutional, new enrollee, and C-SNP new enrollee segments of the model
and will be used in Part C payment for aged/disabled beneficiaries enrolled in MA plans. Given
that we will blend risk scores under the 2013 and 2014 CMS-HCC models, no reduction to the
model denominator will be made instead, we will use the unadjusted model denominator of
$9,276.26. For PACE organizations, we will continue using the PACE model we have used in
2012 and 2013.
Comment: A number of commenters believe that the proposed changes in the risk adjustment
model were intended for the sole purpose of addressing the difference in health care condition
coding between MA and original FFS.
Response: CMS balanced several goals when updating the CMS-HCC model for the MA
program. One significant goal of the revised model was to conduct a fresh model build in order
to clinically revise the model. Though CMS annually maps new ICD-9 codes into the existing
HCCs, the base groupings in the CMS-HCC model are still based on ICD-9 codes from the late
1990s. CMS has not conducted a fresh model build since the model was created. Thus, a key
feature of the proposed restructuring of the condition categories proposed for CY 2014 was
29

achieved by taking into account ICD-9 codes that have been created in the decade since the
original model was created. We also considered whether the condition categories predict
expenditures, whether the diagnostic classifications measure disease burden, and whether
diagnosis codes subject to discretionary or inappropriate coding should be excluded.
Comment: A few commenters asked that CMS wait until we have MA diagnoses that would
support the clinical revision.
Response: The main purpose of the clinical revision was to rebuild the HCCs to reflect the
changes in ICD-9 codes since the late 1990s, when the current HCCs were created. The HCCs
are clusters of diagnoses that have similar clinical and cost implications. As with all costs in the
model, including those used in a regular recalibration, the source of costs is FFS. However, the
determination of clinical similarity is made based on input of a panel of clinical experts.
Changes to HCCs in the Model
Comment: One commenter believed that changes in HCC numbers could present challenges in
maintaining which historical HCCs map to current ones.
Response: CMS understands the system changes that need to be undertaken to accommodate the
changes in the numbering of the HCCs, since we will need to make system changes as well.
Because the 2014 CMS-HCC model revises the groupings of the HCCs, some HCCs in the
previous model have been split, while some have been newly formulated. Because we want the
HCCs to be in a logical order, we undertook a renumbering of the HCCs, so that like categories
are numbered close together. Given the restructuring of the HCCs, we did not think it was
possible to retain all of the previous HCCs numberings.
Comment: Some commenters contended that, by focusing risk adjustment changes on diagnoses
that are reported at higher rates by MA organizations than by FFS providers, these changes
penalize beneficiaries who benefit from disease and care management programs targeted to
address their needs and plan efforts to identify the diagnoses important to their care.
Response: CMS understands the clinical value of disease and care management programs in
targeting conditions early and preventing or slowing the progression of disease, improving the
health of beneficiaries, and potentially saving health care costs. The goal of risk adjusted
payments is to pay accurately using the appropriate relative risk for a beneficiary. Therefore, a
key objective when we develop a risk adjustment model is to measure risk in the best way
possible. As long as we have a model based on FFS costs and diagnoses patterns, differences in
MA coding, relative to FFS coding patterns, results in relative risk that is measured incorrectly.
Specifically, when MA plans report more diagnoses than FFS providers, risk scores are
overstated. We do note that when specified HCCs are removed from the model, the model is
recalibrated and the same costs are predicted with the new set of HCCs. The relative factors for

30

conditions that are comorbid with the excluded HCC may increase, as may the various
demographic factors.
Comment: Some commenters asked that certain lower-level kidney HCCs be included in the
2014 CMS-HCC model. These include: Chronic Kidney Disease (CKD) stage 3; CKD stages 12 or unspecified; unspecified renal failure; and/or nephritis.
Response: CMS understands the clinical significance of these conditions and the importance of
appropriately managing patients to slow the progression of kidney disease. However, we are
also concerned that MA organizations code the renal-related conditions much more often than in
FFS. Compared to the 2013 CMS-HCC model, there is increased granularity in the renal-related
HCCs in the 2014 CMS-HCC model. Since the most aggressive treatment occurs for CKD
stages 4 and 5, we decided to include these higher level CKD stages in the 2014 CMS-HCC
model.
We decided to exclude CKD stages 1-2 or unspecified, unspecified renal failure, and nephritis
since these conditions are relatively mild and non-specific. We also decided to exclude CKD
stage 3 because of the clinical variability in this stage, which leads to greater variability in
diagnosing and coding. MA plans have a greater incentive than FFS to conduct routine eGFR
test on a patient in order to pick up a lab finding that might qualify for staging. The stage is
easily computed from the creatinine level as part of a panel of blood tests. Treatment itself in
stage 3 would usually be with prescription drugs, frequently for other symptoms, such as high
blood pressure. We note that if nephritis or unspecified renal failure is associated with
deteriorating renal function, then it will likely be captured in the higher level CKD codes,
particularly for those that have nephritis over a long period of time. Unspecified renal failure is a
vague diagnosis that could cover a wide range of failure and the stage should be determined.
Although some kidney-related diagnoses are not in the 2014 CMS-HCC model, the model still
predicts beneficiaries total costs, including costs associated with these conditions. For example,
beneficiaries with kidney disease may also experience associated cardiac comorbidities. Costs
associated with cardiac conditions are captured by the cardiac HCCs, which are higher than they
would be if these lower-level kidney conditions were in the model. To the extent that drug costs
are incurred by beneficiaries with any level of CKD, these are captured by the RxHCC model,
which includes these lower-level kidney HCCs.
Comment: One commenter would like for certain diagnoses that were in the 2013 CMS-HCC
model to be retained in the 2014 CMS-HCC model. These diagnoses include: history of
myocardial infarction, hypoxia, and/or celiac disease.
Response: While all diagnoses with ICD-9 codes are mapped to a condition category, not all
condition categories are included in the model used in payment. The decision to include a
condition category in the model is made after balancing several considerations, including each
categorys ability to predict costs for Medicare Parts A and B benefits, whether the diagnostic
31

classifications measure disease burden, and whether diagnosis codes that are subject to
discretionary or inappropriate coding should be excluded. The model also focuses on conditions
that require active treatment and not those that could be the result of testing or screening an
entire population. For these reasons, history of myocardial infarction and hypoxia are not in the
2014 CMS-HCC model; however, some of the costs associated with history of myocardial
infarction and hypoxia are captured by the heart and lung HCCs in the 2014 CMS-HCC model
and the RxHCC model. Celiac disease is not strongly predictive of Medicare costs and treated
mainly by control of components of a persons diet.
Comment: Many commenters recommended that an HCC for dementia be included in the
proposed risk adjustment model. They expressed concern that not recognizing dementia in the
model will disproportionally affect payment rates for the sickest beneficiaries, which runs
counter to the express purpose of risk adjustment. Several commenters noted that the proposed
model failed to recognize the growing prevalence of dementia in the Medicare population. Other
commenters emphasized the particular impact on SNPs, especially FIDE SNPs and I-SNPs, due
to the failure to account for dementia-related costs. Finally, commenters felt that the CMS
explanation not to include dementia was inadequate, and they were unclear how CMS could
conclude that a dementia diagnosis is not predictive of resource use and costs.
Response: CMS understands that the treatment of dementia can be costly and that including
dementia in the model would potentially increase the risk scores of beneficiaries who have been
diagnosed with dementia. Our concern focuses on the diagnosis and coding of dementia, and the
broad clinical definitions that have been developed in order to identify the disease. We fully
support these efforts to identify and treat dementia. We are concerned, however, that the broad
clinical definition of dementia may result in dementia being coded at greater levels in MA,
relative to FFS, such that payment will be inaccurate. In addition, many of the costs directly
associated with dementia are not Medicare Part A and B costs.
Comment: We received several comments regarding diabetes in the 2014 CMS-HCC model.
Specifically, one commenter thought that the proposed diabetes HCC groupings would
disproportionately affect payment rates for the neediest beneficiaries, whereas another
commenter found the average risk scores for their diabetic population would be unchanged. Two
commenters noted that the 2014 CMS-HCC model has two fewer diabetes interactions as
compared with the 2013 CMS-HCC model, one of whom asked whether we expected the
average diabetic risk score to decrease.
Response: Plans with a non-random distribution in their patient population may experience
varying risk scores impacts; the actual change in risk score of any beneficiary with diabetes will
depend on the totality of their risk profile, including their demographic factors and other
diagnoses. When developing the 2014 CMS-HCC model, we found that the empirical strength
of the two diabetes-related interactions that were in the 2013 CMS-HCC model were not strong
enough to retain. However, beneficiaries that have the individual elements of an interaction term
32

will still receive credit for those individual conditions in the risk scores for their enrollees with
diabetes.
Comment: One commenter observed that the relative factor for a continuing community enrollee
with HIV/AIDS has fallen considerably from the 2009 to the 2013 and 2014 CMS-HCC models.
Response: Drug therapy and early detection for HIV/AIDS has improved markedly in recent
years. As more recent underlying data was used to develop the 2013 and 2014 CMS-HCC
models, the relative factors reflect these changes. Specifically, for the 2009 model used in 20092012, diagnoses from 2004 were used to predict costs in 2005. For the 2013 CMS-HCC model,
2008 diagnoses were used to predict 2009 costs.
Comment: A number of commenters emphasized that PACE organizations have limited ability to
respond to reductions in payments from CMS; several commenters also mentioned the 2 percent
payment cut due to sequestration. Commenters stated that PACE organizations cannot modify
benefits and cannot make up reductions in payments by increasing beneficiaries premiums or
cost sharing. Many commenters thus requested that for 2014, CMS retain the current CMS-HCC
risk adjustment model that has been used to risk adjust payments to PACE organizations in 2012
and 2013. Commenters were concerned that the model proposed in the Advance Notice deletes
the HCCs for dementia, noting that almost half of PACE enrollees have a dementia diagnosis and
require more careful monitoring to ensure compliance with their care plans and more services
overall than those without dementia. Some commenters were also concerned about the removal
of HCCs related to chronic kidney disease, of which there is a high prevalence among PACE
members, and felt that the proposed elimination of HCCs related to this condition would lead to
an under prediction of PACE costs.
Response: We have reviewed the comments requesting that CMS apply the same risk adjustment
model for the PACE program in 2014 as used for 2012 and 2013, and in response to the
arguments made in these comments, have determined that we will not implement the model
proposed in the Advance Notice for PACE organizations. For 2014, for the PACE program, we
will retain the current model used for 2013 PACE payments. (This model is described in the
2012 Rate Announcement, Tables 9 through 11).
New enrollee segments
Comment: One commenter asked whether the CMS-HCC relative factors for new enrollees with
ages below 65 were displayed in the correct column in Table 2 of the 2014 Advance Notice.
Response: New enrollees who are currently below age 65 and who are first entitled to Medicare
by disability are indicated in the non-originally disabled column. The originally disabled
category distinguishes beneficiaries who are currently age 65 or over, but were first entitled to
Medicare before age 65 due to disability.

33

New enrollee Risk Scores for Chronic SNPs

Comment: Several commenters requested that CMS develop a New Enrollee Risk Score Model
not only for C-SNPS but for all types of SNPs, including FIDE SNPs and I-SNPs, arguing that
the rationale for the creation of New Enrollee risk scores for C-SNPs would apply to other types
of SNPs. One commenter emphasized that the SNPs not eligible for the C-SNP new enrollee
factor or the frailty adjustment (applicable to qualifying FIDE SNPs) experience higher costs due
to uncompensated risk and higher administrative costs for multiple mandates from Congress
(such as the costs of implementing Model of Care rules, additional quality reporting, and NCQA
approval for licensure). A number of commenters stated that CMS should develop a new
enrollee risk factor methodology for the PACE program that reflects the high acuity of PACE
organizations enrollees, who must meet their states eligibility criteria for nursing home level of
care. As a result, the average risk for a new PACE enrollee is substantially higher than that of
the average MA enrollee.
Response: Chronic SNP enrollees must, as a condition of enrollment, have specific conditions;
thus, we previously determined that the average new enrollee risk score used for all other MA
plans was likely to understate these beneficiaries risk. CMS is not considering applying similar
new enrollee risk scores to dual SNPs, including FIDE SNPs, or to PACE organizations because
we believe that dual SNPs new enrollee risk scores are adequate to address aggregate risk faced
by these plans.
The new enrollee segment of the CMS-HCC model is used in Part C payment for beneficiaries
enrolled in MA plans or PACE organizations who do not have adequate diagnoses to calculate a
risk score. Operationally, we identify these beneficiaries as those who do not have 12 months of
Part B in the data collection period, and the vast majority of new enrollees are new to Medicare.
The new enrollee segment of the CMS-HCC model comprises demographic factors: age, sex,
Medicaid status, and originally disabled status. Since the main new enrollee risk score model
captures the additional costs due to Medicaid status, we believe that it is appropriate for paying
for new enrollees across plan type.
Phase in of 2014 CMS-HCC Model
Comment: Several commenters asked how the 2.5 percent adjustment to the denominator
affected the model. Some asked how we knew it was an appropriate adjustment amount or how
it differed from the MA coding adjustment factor. Several commenters requested that CMS
implement the new model in a budget neutral fashion at the plan level, instead of at the industry
level.
Response: In response to these comments, for 2014 we will transition to the new model by
blending the risk scores calculated using the 2013 CMS-HCC model and the 2014 CMS-HCC
model. With this transition, we will not be adjusting the denominator of the 2014 CMS-HCC

34

model. This approach to calculating 2014 risk scores will minimize the impact on individual risk
scores and on plan average risk scores.
Section E. MA Enrollee Risk Assessments
Comment: Many commenters either opposed the policy to require a subsequent submission of a
diagnosis to receive payment or requested that CMS delay implementation until after data are
collected, analyzed, and the policy proposal is commented on by MA plans.
Response: As noted above, CMS is delaying the collection of flags for these assessments until
2014 dates of service. Risk adjusted payments for 2014 will not be affected by this policy. We
will propose and finalize a policy on the extent to which diagnoses from 2014 Enrollee Risk
Assessments will be used to calculate risk scores for payment year 2015 in the 2015 Advance
Notice and Rate Announcement.
Comment: Many commenters raised concerns with how CMS defines a Medicare Advantage
Enrollee Risk Assessment. Some questioned the link between the MA Enrollee Risk
Assessment and the Health Risk Assessment required as part of an Annual Wellness Visit.
Response: CMS recognizes that the term risk assessment is used to describe a variety of different
encounters between providers and beneficiaries. We acknowledge that a more detailed definition
will need to be provided for the purposes of data collection and risk adjustment. CMS will
provide this guidance prior to the start of data collection.
Comment: A few commenters raised a concern that requiring treatment for payment conflicts
with CMS HCC risk adjustment methodology and that to exclude diagnoses not associated with
treatment in calculating risk adjustment is inconsistent with how risk adjustment coefficients are
calculated. A couple of other commenters suggested that if diagnoses captured from the MA
Enrollee Risk Assessment were excluded, CMS would need to recalibrate the model based on
FFS data that also excludes diagnoses from FFS risk assessments. While some other
commenters indicated that not all chronic conditions require active treatment but should be
captured to treat enrollees holistically.
Response: We appreciate these comments and will take them into consideration as we develop
the proposed policy for 2015 and future years.
Comment: Several commenters raised concerns that implementing this policy will result in fewer
risk assessments being completed and will negatively impact care to beneficiaries.
Response: CMS continues to strongly encourage these assessments to identify health conditions
and to further promote the development of treatment plans and follow-up care for Medicare
beneficiaries. CMS does not believe that any requirement to flag these assessments should
negatively affect Medicare beneficiaries. However, CMS remains concerned that, while these

35

risk assessments can be valuable, they may sometimes be used as a vehicle to maximize MA
revenue without follow-up care or treatment being provided to the beneficiary by the plan.
Comment: From a data perspective, a few commenters contended that submitting a subsequent
encounter would be costly and administratively burdensome. Some commenters requested
additional guidance on how CMS is planning to operationally flag diagnosis codes in the risk
adjustment data submitted to CMS. A few commenters raised concerns with requiring a flag for
diagnoses with 2013 dates of service, stating it would be burdensome to do so soon and
requested a delay.
Response: As noted above, CMS is delaying the collection of flags for these assessments until
2014 dates of service to provide more lead time and allow for more planning. At this time it
should be noted that, CMS is only asking that plans flag the encounters for 2014 dates of service,
and is not requiring data filtering. CMS will release operational guidance as to how these
assessments will be flagged prior to the start date.
Comment: A few commenters shared CMS concern that data obtained from MA Enrollee Risk
Assessments should not be used for the sole purpose of collecting diagnoses for risk adjustment.
They agree it should be used to identify the needs of the patient and ensure appropriate treatment
or intervention is provided.
Response: CMS appreciates the support.
Section F. Adjustment for MA Coding Pattern Differences
Comment: A number of commenters argued that the changes to the risk adjustment model to
address coding intensity are duplicative of the MA coding adjustment factor.
Response: We understand that different model versions may affect the coding difference trend
differently and, when CMS determines the MA coding adjustment factor, we take into account
the version of the model that will be in use during the payment year. Because we make
determinations regarding the appropriate level of the MA coding adjustment by taking into
account the impact on coding of the risk model, the model adjustments made to address coding
does not duplicate the MA coding adjustment factor applied to the risk scores.
Comment: One commenter believed that the coding adjustment factor applied to PACE
organizations is inconsistent with PACE coding over time. This commenter stated that coding
for beneficiaries staying in the PACE program increased by approximately the same increase as
in the FFS program and significantly less than the increase in the MA program. The application
of a coding adjustment factor to PACE, based on coding changes in the MA program, results in a
reduction in risk scores, and consequently payment, that this commenter did not believe would
be supported by PACEs coding experience over time.

36

Response: CMS applies the MA coding adjustment by developing a uniform adjustment factor.
Similar in approach to the normalization factor, the goal is to set the average risk score to the
correct level by adjusting for trends in the overall market.
Comment: One commenter questioned the appropriateness of modifying new member risk scores
by the MA coding adjustment factor because these members have no MA coding that would
differ from FFS coding that would necessitate an adjustment.
Response: MA coding adjustment is a methodological adjustment to risk scores to ensure
payment accuracy given differential coding patterns in MA and FFS. The coding adjustment
factor is calculated using data collected over a defined set of consecutive years from a cohort of
beneficiaries continuously enrolled in MA or continuously enrolled in FFS over the entire
collection period, otherwise known as the stayer cohort. The coding adjustment factor also
accounts for varying lengths in enrollment in MA. For operational purposes, we apply the
coding adjustment factor to all MA risk scores, but adjust the factor by the percentage of stayers
in the year prior to the payment year. By making this downward adjustment to the factor, we
take into account that MA plans cannot affect the coding of these new members.
Section G. Normalization Factors
G1. Normalization for the CMS-HCC Model (aged/disabled beneficiaries enrolled in MA
plans)
For 2014, CMS is blending the risk scores from the 2013 CMS-HCC model with the risk scores
from the 2014 CMS-HCC model to calculate the risk scores used for payment. Therefore, two
normalization factors, i.e., one normalization factor for the 2013 CMS-HCC model and one
normalization factor for the 2014 CMS-HCC model, will be calculated to adjust the risk scores
using each respective model. The normalized risk scores will then be blended for payment
purposes with the risk scores from the 2014 model weighted at 75 percent and the risk scores
from the 2013 model weighted at 25 percent.
The final normalization factor for the 2013 CMS-HCC model is 1.041 and for the 2014 CMSHCC model is 1.026.

The Part C normalization factor is used to normalize the following risk scores:
Aged/disabled community, aged/disabled institutional, aged/disabled new enrollee, and
C-SNP new enrollee.
Population used to calculate annual trend: FFS beneficiaries.

CMS estimates an annual trend using a linear function applied to the following years risk
scores:

37

Year
2008
2009
2010
2011
2012

2013 CMS-HCC Model

0.959
0.975
0.990
1.000
1.015

2014 CMS-HCC Model

0.947
0.963
0.979
0.988
1.000

The linear annual trend over these five years (2008-2012) using the 2013 CMS-HCC model is
0.0135 and using the 2014 CMS-HCC model is 0.0130. These annual trends are applied for the
years between the denominator years and the 2014 payment year. For the 2014 CMS-HCC
model, we will account for the trend between the 2012 denominator year and 2014 payment year
by taking it to the second power. For the 2013 CMS-HCC model, we will account for the trend
between the 2011 denominator year and 2014 payment year by taking that annual trend to the
third power. The normalization factors are obtained as follows:
2013 CMS-HCC model

1.01353 = 1.041

2014 CMS-HCC model

1.01302 = 1.026

G2. Normalization Factor for the Rx Hierarchical Condition Category (RxHCC) Model
Due to a technical revision, the final 2014 normalization factor for the RxHCC model is 1.030.

The Part D normalization factor is used to normalize all Part D risk scores.
Population used to calculate annual trend: PDP and MA-PD enrollees.

CMS estimates an annual trend using a linear function applied to the following years risk
scores:
Year
2007
2008
2009
2010
2011

Current RxHCC Model

0.964
0.970
0.981
0.995
1.000

The linear annual trend over these five years (2007-2011) is 0.010. This annual trend is applied
for the years between the denominator year (2011) and the payment year (2014) by taking it to
the third power. The normalization factor is obtained as follows: 1.0103 = 1.030.
Comment: Four commenters requested CMS to downwardly adjust the normalization factor to
account for lower projected FFS costs and trends and changes in risk scores in the FFS
population due to the influx of baby boomers. One commenter requested that CMS compare
consistency of its calculations of normalization and projections of the national per capita growth
rate, and to consider using a method more sensitive to changes in the FFS cost trends in
38

calculating the normalization factors. One commenter recommended a phase-in of the

normalization reduction.
Response: The calculation of the normalization factors is based on the annual trend in risk scores
over a defined set of consecutive years, and the number of years between the denominator year
(when the 1.0 average risk score is determined) and the payment year. We incorporate a rolling
five years of risk scores specifically to smooth the annual trend. Changes in trends due to
fluctuations in FFS costs or enrollment will be reflected over time in future calculations of
normalization factors. No adjustment will be made to the normalization factor calculation for
projected costs and enrollment.
Comment: One commenter asked for a separate normalization factor for PACE.
Response: Normalization factors are calculated annually for each model to create an average 1.0
risk score in the payment year. Since we will continue to use the risk adjustment model used in
2012 and 2013 for PACE, we will continue to have separate normalization factor for PACE.
Section G. Frailty Adjustment
The 2014 frailty factors for PACE organizations are the same frailty factors posted in the 2013
Advance Notice. There are two sets of FIDE SNP frailty factors for 2014; we will calculate
frailty scores using the frailty factors associated with the 2014 CMS-HCC model and using the
frailty factors associated with the 2013 CMS-HCC model. The FIDE SNP frailty factors
associated with the 2014 CMS-HCC model are finalized in this Announcement. The FIDE SNP
frailty factors associated with the 2013 CMS-HCC model are posted in the 2013 Advance
Notice. CMS will separately calculate frailty scores for FIDE SNPs using each set of factors and
blend the two frailty scores in the same manner as the 2014 risk scores. These blended frailty
scores will be used both to determine a FIDE SNPs eligibility for frailty payments and, if
eligibility is met, for payment.
Comment: One commenter supports frailty as part of Medicare payment.
Response: We appreciate the support.
Comment: Four commenters recommended that CMS consider the application of frailty program
wide and at the beneficiary level.
Response: CMS has explored ways of capturing frailty by all MA plans and found challenges
with a number of approaches (see the Evaluation of the CMS-HCC Risk Adjustment Model,
published March 2011, at https://www.cms.gov/Medicare/Health-Plans/
MedicareAdvtgSpecRateStats/Downloads/Evaluation_Risk_Adj_Model_2011.pdf). The CMSHCC model is intended to accurately pay plans with average risk profiles, unlike PACE
organizations and qualifying FIDE SNPs that have higher than average risk profiles and are
39

eligible to receive frailty payments. Additionally, the application of a frailty adjustment to all
MA plans would need to be done on a budget neutral basis with consideration to the fact that
some enrollees would have a negative adjustment. Also, frailty adjustments are calculated using
survey data submitted by PACE organizations and FIDE SNPs (from a subset of their enrollees),
and, therefore, are calculated at the contract level for PACE organizations and at the plan level
for FIDE SNPs.
Comment: Two commenters suggested that CMS apply the same survey consistently to programs
for frailty score determination.
Response: We appreciate this suggestion and are evaluating it.
Comment: One commenter asked about the timing of the publication of 2014 frailty adjustment
and inclusion in the MMR.
Response: The PACE frailty factors that we will use in 2014 are published in the 2013 Advance
Notice. The FIDE SNP frailty factors associated with the 2013 CMS-HCC model are published
in the 2013 Advance Notice; the frailty factors associated with the 2014 CMS-HCC model are
published below. Frailty scores will be calculated using each model, and then these two scores
will be blended for 2014 payment in the same manner as the 2014 risk scores. The 2014 PACE
and FIDE SNP specific frailty scores will be calculated in late 2013 and will be made available
in HPMS.
Recalibrated FIDE SNP Frailty Factors Associated with the 2014 CMS-HCC Model
ADL
0
1-2
3-4
5-6

Non-Medicaid
-0.074
0.143
0.278
0.278

Medicaid
-0.156
0.000
0.195
0.446

Section H. Medical Loss Ratio (MLR) Requirements for the MA and the Medicare
Prescription Drug Benefit Programs
Comment: Commenters noted they will be submitting comments on the medical loss ratio
requirements through the notice and comment process and urged us to finalize the regulation as
soon as possible.
Response: Proposed regulation CMS-4173 on the medical loss ratio requirements went on
display on February 15, 2013 in the Federal Register. CMS appreciates the desire of plans to
have final guidance on the medical loss ratio requirement. Comments on the proposed rule are
due no later than April 16th, and we intend to publish a final medical loss ratio regulation as soon
as possible thereafter.

40

Section I. Part D Benefit Administration and Prescription Drug Event (PDE) Reporting
Comment: Commenters stated their support for A1(a), which maintains the current policy of
placing the dispensing fee and vaccine administration fee outside of the coverage gap phase to
the greatest extent possible on straddle claims. Commenters also stated their support for A1(b),
in which the dispensing fee and vaccine administration fee liability for beneficiaries will be
commensurate with the coinsurance percentage. If the beneficiary pays a copay, the beneficiary
liability for the dispensing fee and vaccine administration fee will be commensurate with the
percentage of the total Part D claim cost attributed to the before-discount copay. Two
commenters reported typos in the TrOOP Accumulators in the examples. Some commenters
requested additional examples to ensure consistent application of the proposed methods.
Response: The values presented in the example TrOOP Accumulators were accurate. Additional
language has been added to this document to clarify the TrOOP eligible fields and the TrOOP
accumulator amounts in those examples to facilitate better understanding. CMS will provide
additional examples of the adopted policies in forthcoming operational guidance.
Comment: The majority of commenters were in support of option A2(a), in which each cost
component of the negotiated price, with the exception of dispensing fee and vaccine
administration fees that would be subject to the coverage gap straddle claim policy proposed in
section A1(a), will be calculated proportional to beneficiary and plan liability for the entire
negotiated price in all phases of the benefit. Some commenters felt that option A2(b) would be
too complex for beneficiaries to understand and would be too complex to implement. Some
commenters asked if there would be a requirement to start reporting the negotiated price on a
PDE by phase for each component. Some commenters requested additional examples to ensure
consistent application of the proposed method.
Response: CMS will not require PDE reporting of the negotiated price by benefit phase for each
component. The specific purpose of these examples was to provide an extra level of detail to
explain how this policy applies so that plans can determine the correct cost that is used for PDE
reporting. Our PDE reporting requirements are not changed by this policy; rather, this policy
will clarify the payment liability. None of the examples were intended to serve as specific
operational submission guidance. Such guidance would be beyond the scope of this policy
document. CMS will provide additional examples of the adopted policy in forthcoming
operational guidance.
Comment: Commenters were in support of the option in A3 where sponsors will report negative
Patient Liability Reduction due to Other Payer (PLRO) amount in situations in which the other
health insurance (OHI) coverage results in increased beneficiary liability. Commenters felt that
the PDE should reflect what the beneficiary pays at point of sale. Some commenters were
concerned about adopting the policy for low income eligible beneficiaries. Some commenters

41

requested additional PDE information to the example provided. Other commenters requested
additional examples to ensure consistent application of the proposed method.
Response: As a condition of payment, all Part D plans must submit data and information
necessary for CMS to carry out payment provisions (1860D-15(c)(1)(C) and (d)(2) of the Act,
and 42 CFR 423.322). Ideally, a PDE based on information available at point of sale (POS) can
comply with the reporting requirements necessary for accurate payment. However, in certain
cases new information (e.g., PLRO not known at POS) can alter one or more PDE payment
fields that subsequently affect reconciled Part D payments. The PDE should reflect the
appropriate incurred costs. Accordingly, we are adopting a policy that plan sponsors should
report negative PLRO, where applicable, for all beneficiaries in all plan types. Moreover, while
it has been assumed that OHI generally provides benefits in the form of reduced cost sharing,
CMS has a policy interest in studying the actual impact. We are aware of certain situations
where OHI results in the beneficiary paying higher cost sharing for certain dispensing events.
The PDE will allow CMS to evaluate the extent to which secondary payers may be diminishing
the value of the Part D benefit. Additional PDE information has been added to the existing
example in this document. CMS will provide additional examples of the adopted policy in
forthcoming operational guidance.
Comment: Two commenters agreed with eliminating operational EA mapping Rule 4, which was
proposed in A4. One commenter indicated that beneficiaries will pay 12.5 percent more in the
coverage gap for brand drugs as a result of this policy change.
Response: EA mapping Rule 4 has been an operational instruction for certain PDE submissions
in enhanced alternative plans. From data analysis over time and discussions with industry, CMS
now believes that operational EA mapping Rule 4 is both overly burdensome and could
potentially lead to inaccuracies in reconciled payments. Thus, the purpose of eliminating the
operational EA mapping Rule 4 is to both simplify the PDE reporting process and to ensure
accurate reconciled Part D payments.
CMS acknowledges that, in rare instances, the beneficiary may pay more for brand drugs on tiers
that are excluded from supplemental coverage in the gap by changing this PDE reporting
instruction. However, if EA mapping Rule 4 remained, similar impacts would exist in certain
situations.
For CY2014, if operational EA mapping Rule 4 remains, the plan would map 15 percent of
applicable drug cost to CPP while defined standard plans would report 2.5 percent of applicable
drug costs as CPP in CY2014. For CY2014, if a beneficiary is in the coverage gap, where
operational EA mapping Rule 4 would have applied, and the EA plan does not offer
supplemental coverage on a brand drug, the beneficiary will pay 12.5 percent more in the
coverage gap (i.e., the difference between CPP operational EA mapping Rule 4 amount of 15
percent and the operational EA mapping Rule 3 amount of 2.5 percent) but if the EA plan offers
42

supplemental coverage, the 12.5 percent would continue to be plan liability but would be
reported as Non Covered Plan Paid (NPP) amount.
As the coverage gap phase continues to close with increased sponsor cost sharing in the coverage
gap, the Covered D Plan Paid (CPP) amount in the coverage gap for applicable drugs will
increase to 25 percent in CY2020 for Defined Standard plans. If operational EA mapping Rule 4
were to remain in place in 2020, EA plans would map 15 percent of applicable drug cost to CPP
while defined standard plans would report 25 percent of applicable drug costs as CPP in
CY2020. If we continued to use the operational EA mapping Rule 4, in CY2020, the beneficiary
would pay 10 percent more for a brand drug that is on a tier that is not part of the EA plans
supplemental coverage in the gap compared to a beneficiary in a defined standard plan in the
coverage gap (i.e., the difference between the operational EA mapping Rule 3 CPP amount of 25
percent and the operational EA mapping Rule 4 amount of 15 percent).
The beneficiary impact of eliminating operational EA mapping Rule 4 will be limited to drugs in
which the EA plan does not offer supplemental coverage in the gap and this impact will go away
in 2018 for brand drugs when the CPP amount in the coverage gap is 15 percent for defined
standard plans, which is equivalent to the current operational EA mapping Rule 4 amount of 15
percent. When there is supplemental coverage in the gap, the elimination of operational EA
mapping Rule 4 will shift plan liability from CPP to NPP beginning in CY2014 and ending in
CY2018 when CPP is 15 percent in the coverage gap.
The elimination of operational EA mapping Rule 4 does not change existing payment policy; it
makes certain that payments are more accurate through reporting that is more consistent with
existing payment policy, reduces administrative burden on sponsors, and reduces beneficiary
cost sharing in the long term as sponsors continue to increase coverage in the coverage gap
phase. In addition, because the costs in operational EA mapping rule 4 are not allowable risk
corridor costs as defined under 1860D-15 (e)(1)(B) of the Social Security Act we will eliminate
operational EA mapping Rule 4 effective with benefit year 2014.
Section J. Update of the RxHCC Model
Comment: Three commenters did not support updating the RxHCC risk adjustment model
because it is not required by statute, would result in administrative costs, and would have a
negative effect on payments.
Response: The RxHCC risk model predicts plan liability under the Part D benefit. As the
coverage gap closes, plan liability in the gap increases each year until the coverage gap is
effectively closed for applicable beneficiaries by contract year 2020. Therefore, for the reasons
stated in the Advance Notice, we are recalibrating the RxHCC model yearly as the gap closes to
reflect the increasing plan liability in the gap for applicable beneficiaries.

43

Comment: One commenter inquired about inclusion of generics on the market since 2011 in the
RxHCC model.
Response: The RxHCC model was recalibrated for 2014 using 2010 diagnoses and PDE
expenditures submitted with 2011 dates of service, since 2012 expenditures are not yet fully
reported.
Section K. Medicare Part D Benefit Parameters: Annual Adjustments for Defined
Standard Benefit in 2014
Comment: One commenter asked about plan liability in the coverage gap for 2014.
Response: In 2014, plan liability in the coverage gap for non-applicable (generic) drugs increases
by 7 percent and remains the same for applicable (brand) drugs. The Affordable Care Act, as
enacted in section 3301 and amended by section 1101 of HCERA, phases in a reduction in
beneficiary cost sharing for drugs in the coverage gap phase of the Medicare Part D benefit by
reducing beneficiary coinsurance for drugs in the gap for applicable beneficiaries. This
reduction in cost sharing began in CY 2011 and continues through CY 2020, ultimately resulting
in 75 percent cost sharing for applicable drugs, prior to the application of any manufacturer
discounts, and 25 percent cost sharing for other covered Part D drugs (non-applicable
drugs). Applicable drugs are defined at section 1860D-14A(g)(2) of the statute and are generally
brand covered Part D drugs that are either approved under a new drug application (NDA) under
section 505(b) of the Federal Food, Drug, and Cosmetic Act or, in the case of a biologic, licensed
under section 351 of the Public Health Service Act (BLA). Non-applicable drugs are covered
Part D drugs that do not meet the definition of an applicable drug (i.e., generic drugs). The
reductions in cost sharing, in conjunction with the coverage gap discount program, will serve to
effectively close the Medicare Part D benefit coverage gap for non-LIS beneficiaries by CY
2020.
In 2014, the coinsurance under basic prescription drug coverage for certain beneficiaries is
further reduced from 2013 for non-applicable covered Part D drugs purchased during the
coverage gap phase of the Part D benefit. The coinsurance charged to eligible beneficiaries will
be equal to 72 percent. Also in 2014, the coinsurance under basic prescription drug coverage for
certain beneficiaries for applicable covered Part D drugs purchased during the coverage gap
phase of the Part D benefit will stay the same as in 2013 and will be equal to 47.5 percent of the
negotiated price.
To be eligible for reduced cost sharing for non-applicable and applicable drugs, a Part D enrollee
must have gross covered drug costs above the initial coverage limit and true out-of-pocket costs
(TrOOP) below the out-of-pocket threshold. Medicare beneficiaries will not be eligible for this
reduced cost sharing if they are enrolled in a qualified retiree prescription drug plan or are
entitled to the low-income subsidy.

44

The 72 percent coinsurance for non-applicable drugs and 47.5 percent coinsurance for applicable
drugs in the coverage gap represent an increase in plan liability and a reduction in beneficiary
cost sharing. Therefore, we further specify that these increased plan liability amounts do not
count towards TrOOP. Part D sponsors must account for the reductions in cost sharing and
increased plan liability when developing their Part D bids for payment year 2014.
Comment: We received several comments in support of the Part D benefit parameters
decreasing, for the most part, from the prior year.
Response: We appreciate the support.
Comment: One commenter noted that a couple of the parameters are going up and encouraged us
to communicate this to plans and pharmacies to avoid beneficiary confusion.
Response: We will take this suggestion into consideration.
Comment: One commenter suggested that the annual percentage trend of -2.76 percent may be
too low due to CMS underestimating drug costs during August 2012-July 2013, which used PDE
data incurred from August to December 2012 and was projected through July 2013.
Response: As 2013 PDE data will not be finalized until after the payment year, we used PDE
data submitted in 2012 for projecting January 2013 through July 2013 drug costs. Because PDE
data are the best source for actual Part D drug costs, the -2.76 percent annual percentage trend
for July 2013 is the most accurate estimate we can provide at this time.

45

Attachment IV. Changes in the Payment Methodology for Medicare Part D for CY 2014
Section A. Part D Benefit Administration and Prescription Drug Event (PDE) Reporting
CMSs goal is to establish one clear set of standards that all Part D plans can implement so that
we can ensure: 1) uniform treatment of beneficiary liability across all Part D plans, 2) accurate
calculation of the coverage gap discount amount, and 3) consistency of benefit administration
across all phases of the benefit. In working with industry to prepare for benefit changes resulting
from the Affordable Care Act of 2010 and the upcoming change to the regulatory definition of
Part D supplemental benefits, we believe there is a need for additional guidance relating to:
A1. Applicable Beneficiary and Plan Dispensing/Vaccine Administration Fee Liability on
a) Applicable Drug Claims that Straddle the Coverage Gap (applicable to all Part D
plans)
b) Applicable Drug Coverage Gap Claims for Enhanced Alternative (EA) Plans
offering Part D Supplemental Coverage in the Gap
A2. Beneficiary and Plan Negotiated Price Cost Component Liability (applicable to all
Part D plans)
A3. Other Health Insurance (OHI) including Employer Group Waiver Plans (EGWPs)
(applicable to all Part D plans)
A4. Enhanced Alternative Plan Mapping Rules.
A1. Applicable Beneficiary and Plan Dispensing/Vaccine Administration Fee Liability on:
a) Applicable Drug Claims that Straddle the Coverage Gap and
b) Applicable Drug Coverage Gap Claims under EA Plans offering Part D
Supplemental Coverage in the Gap.
In the 2013 Advance and Final Rate Notices, respectively, CMS proposed and adopted the policy
that plans and beneficiaries will share dispensing/vaccine administration fee liability on coverage
gap claims for applicable drugs. Specifically, the beneficiary liability for such fee(s) on a
coverage gap claim will be determined by applying the beneficiarys coverage gap coinsurance
to the dispensing fee and the plan liability will be calculated as the balance. In 2013, this means
that the beneficiary will pay 47.5 percent of the dispensing fee and the plan will pay 52.5 percent
on coverage gap claims without supplemental coverage in the gap.
CMS is adopting the following policies beginning with CY2014:
a) Coverage Gap Straddle Claims
Applicable to all Part D plans
The dispensing and vaccine administration fees will be included in the negotiated price to the
greatest extent possible. In effect, this policy will maintain the current policy that the
dispensing/vaccine administration fee for any coverage gap straddle claim is included in the
46

portion of the negotiated price that falls below the ICL or above the annual out-of-pocket
threshold to the greatest extent possible. We believe this is the most beneficiary friendly
approach that ensures uniform treatment of beneficiary liability across all Part D plans and
the accurate calculation of the coverage gap discount amount.
The following two examples demonstrate how this proposed policy would be implemented
for PDE reporting. The examples use benefit year 2013 parameters.
Example 1 Defined Standard Benefit
When claim adjudication begins, the TGCDC Accumulator is $6,924.52 and the TrOOP
Accumulator is $4,720.75. The plan offers a defined standard benefit. The claim begins in
the coverage gap and ends in the catastrophic coverage phase. The beneficiary purchases a
brand drug that cost $202.00, which includes a $2.00 dispensing fee. The dispensing fee will
be placed in the catastrophic coverage phase of the benefit.
PDE Fields

Claim Total

Total Gross Covered Drug Cost Accumulator

$6,924.52

True Out of Pocket Accumulator

$4,720.75

Beginning Benefit Phase

Ending Benefit Phase

Pricing Exception Code

<blank>

Non-Standard Format Code

<blank>

Distribution of Drug Cost across benefit phases

Benefit Phase
Coverage Gap
Catastrophic Coverage
Phase
Total

Drug Cost within each

Ingredient cost

Dispensing

phase

paid

fee

$30.00

$30.00

$0.00

$172.00

$170.00

$2.00

$202.00

$200.00

$2.00

PDE Reporting of Coverage Gap PDEs with no Part D supplemental coverage in the gap:
1. Determine the costs that fall in the Coverage Gap: $30.00
2. Determine Discount Eligible Cost: $30.00

47

3. Calculate Gap Discount: $30.00 50% = $15.00. The Gap Discount amount is TrOOP
eligible.
4. Determine Beneficiary cost sharing in the Coverage Gap: $30.00 47.5% = $14.25.
The Patient pay amount is TrOOP eligible. The TrOOP amount in the Coverage Gap
Phase is $29.25 ($15.00 in Reported Gap Discount plus $14.25 in Patient Pay amount).
5. Calculate Covered Portion of Plan Paid Cost sharing: $30.00 2.5% = $.75
In the catastrophic phase, Covered D Plan Paid (CPP) amount is the lesser of (1) 95
percent of the drug cost in the catastrophic phase or (2) the amount representing drug cost
in the catastrophic phase - $6.60. In this example, the CPP is $163.40.
6. Determine beneficiary liability for cost falling outside of the Coverage Gap:
The beneficiary pays the greater of 5 percent of the drug cost in the catastrophic phase or
$6.60. In this example, the beneficiary pays $8.60.
Pt. Pay Amount Reported Gap Discount
Coverage Gap
Catastrophic Coverage
PDE Fields

CPP

$14.25

$15.00

$0.75

$8.60

$0.00

$163.40

$22.85

$15.00

$164.15

In preparation for the next claim, the TGCDC Accumulator will be $7,126.52 ($6,924.52 +
$202.00) and the TrOOP Accumulator will be $4,750 ($4,720.75 + $15.00 Reported Gap
Discount + $14.25 Patient Pay Amount in the Coverage Gap phase).
Example 2 EA Benefit
When claim adjudication begins, the TGCDC Accumulator is $6,700.00 and the TrOOP
Accumulator is $4,720.00. The plan offers an enhanced alternative benefit. The claim
begins in the coverage gap and ends in the catastrophic coverage phase. The beneficiary
purchases a brand drug that cost $202.00, which includes a $2.00 dispensing fee. There is a
30 percent co-insurance in the coverage gap.
PDE Fields

Claim Total

Total Gross Covered Drug Cost Accumulator

$6,700.00

True Out of Pocket Accumulator

$4,720.00

Beginning Benefit Phase

Ending Benefit Phase

Pricing Exception Code

<blank>

Non-Standard Format Code

<blank>

Distribution of Drug Cost across benefit phases

48

Benefit Phase

Drug Cost within each

phase

Ingredient cost
paid

Dispensing fee

Coverage Gap

$100.00

$100.00

$0.00

Catastrophic Coverage Phase

$102.00

$100.00

$2.00

Total

$202.00

$200.00

$2.00

PDE Reporting of Coverage Gap PDEs for EA plans with supplemental gap coverage:
1.
2.
3.
4.

Determine the costs that fall in the Coverage Gap: $100.00

Determine Plan liability: $100.00 $30.00 = $70.00
Determine Discount Eligible Cost: $100.00 $70.00 = $30.00
Calculate Gap Discount: $30.00 50% = $15.00. The Gap Discount amount is TrOOP
eligible.
5. Determine Beneficiary cost sharing in the Coverage Gap: $30.00 $15.00 = $15.00.
The beneficiary cost sharing is TrOOP eligible. The TrOOP amount in the Coverage Gap
Phase is $30.00 (Gap Discount amount $15.00 plus Patient Pay amount $15.00).
6. Determine CPP and Non-covered Plan Paid Amount (NPP):
Determine CPP and NPP in the Coverage Gap phase:
CPP is 2.5 percent of the ingredient cost and sales tax
2.5% $100.00 = $2.50
The dispensing fee is not included in the coverage gap.
NPP in the coverage gap is $100.00 ($15.00 + $15.00 + $2.50) = $67.50.
Determine CPP and NPP for cost falling outside of the Coverage Gap phase:
The CPP amount is the lesser of 95 percent of the drug cost in the catastrophic phase or
Drug cost in the catastrophic phase - $6.60. The CPP in the catastrophic phase is $102
$6.60 = $95.40.
NPP in the catastrophic phase is $0.00.
7. Determine beneficiary liability for dispensing fee and vaccine administration fee:
In this example, the dispensing fee is in the catastrophic phase and will be considered
when determining beneficiary liability for cost falling outside of the Coverage Gap.
8. Determine beneficiary liability for cost falling outside of the Coverage Gap:
In the catastrophic phase, the beneficiary pays the greater of $6.60 or 5 percent of the
drug cost in the catastrophic phase. In this example, the beneficiary pays $6.60.

49

Pt. Pay
Amount
Coverage Gap
Catastrophic Coverage
PDE Fields

Reported Gap
Discount

CPP

NPP

$15.00

$15.00

$2.50

$67.50

$6.60

$0.00

$95.40

$0.00

$21.60

$15.00

$97.90

$67.50

In preparation for the next claim, the TGCDC Accumulator will be $6,902.00($6,700.00 +
$202.00) and the TrOOP Accumulator will be $4,750 ($4,720.00 + $15.00 Reported Gap
Discount + $15.00 Patient Pay Amount in the Coverage Gap Phase).
a) Coverage Gap Claims under EA plans with Part D supplemental coverage in the gap
We are implementing the policy originally adopted in the Final Rate Notice for CY 2013 that
specified the dispensing/vaccine administration fee liability on applicable drug coverage gap
claims under EA plans with Part D supplemental coverage in the gap would be
commensurate with the coinsurance percentage. For example, if the coinsurance percentage
under the benefit is 25 percent, the beneficiary will pay 25 percent of the dispensing/vaccine
administration fee and the plan will pay 75 percent of the dispensing/vaccine administration
fee. The manufacturer discount will be calculated as 50 percent of the beneficiary
coinsurance percentage as applied to the coverage gap negotiated price (as defined in 42 CFR
423.2305).
Similarly, if the EA plan has a fixed copay, then the beneficiary liability for the
dispensing/vaccine administration fee will be commensurate with the percentage of total Part
D claim cost attributed to the before-discount copay. For example, if the copay under the
benefit is $25 and the total Part D claim cost is $100 ($98 ingredient cost and $2 dispensing
fee), then the beneficiary will pay 25 percent of the dispensing fee and the plan will pay 75
percent of the dispensing fee. The manufacturer discount will be calculated as 50 percent of
the result (copay minus 25 percent of dispensing fee). Therefore, the manufacturer will pay
$12.25, the beneficiary will pay $12.75 and the plan will pay $75.00.
This approach to applicable drug coverage gap claims under EA plans aligns with our shared
responsibility approach on applicable drug coverage gap claims under basic benefits that is
needed to correctly implement 1860D-2(b)(2)(D) of the Social Security Act. Moreover, it is
consistent with the proportional plan and beneficiary liability for other negotiated price cost
components discussed in Section A2 of Attachment IV and, therefore, will help ensure
uniform treatment of beneficiary liability across all Part D plans.
The following example demonstrates how this policy will be implemented for PDE reporting
for EA plans with supplemental coverage in the gap. The example uses benefit year 2013
parameters.
50

When claim adjudication begins, the TGCDC Accumulator is $3,000.00 and the TrOOP
Accumulator is $1,110.00. The plan offers an enhanced alternative benefit. The claim falls
in the coverage gap phase. The beneficiary purchases a brand drug that cost $202.00, which
includes a $2.00 dispensing fee. There is a 30 percent co-insurance in the coverage gap.
PDE Fields

Claim Total

Total Gross Covered Drug Cost

Accumulator

$3,000.00

True Out of Pocket Accumulator

$1,110.00

Beginning Benefit Phase

Ending Benefit Phase

Pricing Exception Code

<blank>

Non-Standard Format Code

<blank>

PDE Reporting of Coverage Gap PDEs for EA plans with supplemental gap coverage:
1. Determine the costs that fall in the Coverage Gap: $202.00
2. Determine Plan liability: $202.00 $60.60 = $141.40
3. Determine Discount Eligible Cost: The beneficiary pays 30 percent of the ingredient
cost and 30 percent of the dispensing fee within the gap. The discount eligible cost is the
drug cost in the gap minus the plan liability and beneficiary liability for the dispensing
fee. In this example, the discount eligible cost is $202 $141.40 (plan liability) - $0.60
(beneficiary cost share of the dispensing fee in the coverage gap phase) = $60.00
4. Calculate Gap Discount: $60.00 50% = $30.00
5. Determine Beneficiary cost sharing in the Coverage Gap (for the Discount Eligible
Cost): $60.00 $30.00 = $30.00
6. Determine CPP and NPP amounts:
Determine CPP and NPP in the Coverage Gap phase:
CPP is 2.5 percent of the ingredient cost and sales tax plus 52.5 percent of the dispensing
fee in the gap
2.5% $200.00 = $5.00
52.5% $2.00 = $1.05
NPP is $202.00 ($30.60 + $30.00 + $6.05) = $135.35
7. Determine beneficiary liability for dispensing fee and vaccine administration fee
within the coverage gap phase:
The beneficiary pays 30 percent of the dispensing fee falling within the gap. The
beneficiary liability for the dispensing fee is $0.60.

51

The table below shows the PDE fields for this example. The patient pay amount is the
sum of the beneficiarys portion of the discount eligible cost ($30.00) and the
beneficiarys portion of the dispensing fee ($0.60).
Pt. Pay Amount Reported Gap Discount CPP
PDE Fields

$30.60

$30.00

NPP

$6.05 $135.35

In preparation for the next claim, the TGCDC Accumulator will be $3,202.00 ($3,000.00 +
$202.00) and the TrOOP Accumulator will be $1,170.60 ($1,110.00 + $30.00 Reported Gap
Discount + $30.60 Patient Pay Amount)
Additional examples of both policies will be provided in forthcoming guidance.
A2. Beneficiary and Plan Negotiated Price Cost Component Liability
Applicable to all Part D plans
In the Advance Notice for CY 2013, we proposed that plan and beneficiary liability for each cost
component of the negotiated price be calculated proportional to plan and beneficiary liability for
the entire negotiated price in all phases of the benefit. The reasons for doing so included
ensuring a level playing field, uniform treatment of beneficiary liability across all Part D plans,
and consistency of benefit administration across all phases of the benefit. For example, if a
claim is adjusted post-point-of-sale to eliminate one price component, such as sales tax or
dispensing fee, there would be one consistent basis for reimbursing the beneficiary. In light of
technical challenges we did not change existing policy for CY 2013.
We are implementing a policy for CY 2014 that makes beneficiary and plan liability for each
cost component of the negotiated price proportional to the beneficiary and plan liability for the
entire negotiated price when the claim falls squarely in one phase of the Part D benefit. For
example, if a beneficiary has a 25 percent coinsurance on a claim in the initial coverage phase
with a $100 negotiated price that includes a $2 dispensing fee and $5 sales tax, the beneficiary
would be responsible for 25 percent of the ingredient cost, 25 percent of the dispensing fee and
25 percent of the sales tax, and the plan would be responsible for the remainder of each cost
component.
However, if a claim straddles benefit phases, we are adopting the following policy for
determining beneficiary and plans negotiated price cost component liability:
a) Implement the policy proposed in the Advance Notice for CY 2013 and adopted in the Final
Rate Notice for CY 2013 that each cost component of the negotiated price, except for
dispensing and vaccine administration fees that will be subject to the coverage gap straddle
claim policy in section A1(a) of Attachment IV, be calculated proportional to beneficiary and
plan liability for the entire negotiated price in all phases of the benefit. Under this policy, a
52

plan can either apply programming logic that calculates the proportional liability of each cost
component in each phase or alternatively calculate the proportional liability based upon the
aggregate beneficiary/plan liability for the claim. Either methodology will take into account
the differing proportional liability in each phase of the benefit and will ensure that the plan
can consistently determine individual negotiated price cost component liability when
necessary. Note that this policy would not change the existing straddle claim rules described
in current PDE guidance (April 26, 2007 HPMS memorandum titled, A Q and A that
addresses claims straddling co-payment benefit phases and rules and examples provided in
the 2011 PDE Participant Guide).
The following example demonstrates how this policy will be implemented for PDE reporting.
The example uses benefit year 2013 parameters.
When claim adjudication begins, the TGCDC Accumulator is $6,700.00 and the TrOOP
Accumulator is $4720.00. The plan offers an enhanced alternative benefit. The claim begins
in the coverage gap and ends in the catastrophic coverage phase. The beneficiary purchases a
brand drug that cost $202.00, which includes a $2.00 dispensing fee and $10.00 sales tax.
There is a 30 percent co-insurance in the coverage gap.
PDE Fields

Claim Total

Total Gross Covered Drug Cost

Accumulator

$6,700.00

True Out of Pocket Accumulator

$4720.00

Beginning Benefit Phase

Ending Benefit Phase

Pricing Exception Code

<blank>

Non-Standard Format Code

<blank>

Distribution of Drug Cost across benefit phases

Benefit Phase

Drug Cost Percentage of drug cost

Ingredient Dispensing Sales
within each (excluding dispensing fee)
cost paid
fee
tax
phase
within each phase

Coverage Gap

$100.00

50.00%

$95.00

$0.00

$5.00

Catastrophic
Coverage Phase

$102.00

50.00%

$95.00

$2.00

$5.00

Total

$202.00

$190.00

$2.00

$10.00

100%

PDE Reporting of Coverage Gap PDEs for EA plans with supplemental gap coverage:
53

1. Determine the costs that fall in the Coverage Gap: $100.00

2. Determine Plan liability: $100.00 $30.00 = $70.00
3. Determine Discount Eligible Cost: $100.00 $70.00 = $30.00. The $30.00 coinsurance contains ($28.50 ingredient cost and $1.50 sales tax).
4. Calculate Gap Discount: $30.00 50% = $15.00. The Gap Discount amount is TrOOP
eligible.
5. Determine Beneficiary cost sharing in the Coverage Gap: $30.00 $15.00 = $15.00.
The beneficiary pays $14.25 in ingredient cost and $0.75 in sales tax. The beneficiary
cost sharing amount is TrOOP eligible. The TrOOP amount in the Coverage Gap phase
is $30.00 ($15.00 Reported Gap Discount plus $15.00 Patient Pay Amount).
6. Determine CPP and NPP amounts:
Determine CPP and NPP in the Coverage Gap phase:
CPP is 2.5 percent of the ingredient cost and sales tax
2.5% $100.00 = $2.50
The dispensing fee is not included in the coverage gap.
NPP is $100.00 ($15.00 + $15.00 + $2.50) = $67.50.
Determine CPP and NPP for cost falling outside of the Coverage Gap phase:
The plan amount is the lesser of 95 percent of the drug cost in the catastrophic phase or
Drug cost in the catastrophic phase - $6.60. In this example, the CPP in the catastrophic
phase is $95.40.
NPP in the catastrophic phase is $0.00.
7. Determine beneficiary liability for dispensing fee and vaccine administration fee:
In this example, the dispensing fee is in the catastrophic phase and will be considered
when determining beneficiary liability for cost falling outside of the Coverage Gap.
8. Determine beneficiary liability for cost falling outside of the Coverage Gap:
In the catastrophic phase, the beneficiary pays the greater of $6.60 or 5 percent of the
drug cost in the catastrophic phase. In this example, the beneficiary pays $6.60.
Pt. Pay Amount Reported Gap Discount
Coverage Gap
Catastrophic Coverage Phase
PDE Fields

$15.00

$15.00

$6.60

$0.00

$21.60

$15.00

CPP

NPP

$2.50 $67.50
$95.40

$97.90 $67.50

In preparation for the next claim, the TGCDC Accumulator will be $6,902.00 ($6,700.00 +
$202.00) and the TrOOP Accumulator will be $4,750 ($4,720.00 + $15.00 Reported Gap
Discount + $15.00 Patient Pay Amount in the Coverage Gap).

54

$0.00

A3. Other Health Insurance (OHI) including Employer Group Waiver Plans (EGWPs)
Applicable to all Part D plans
EGWPs currently provide additional coverage as either: 1) Medicare Part D supplemental
benefits, reported on PDEs as Non Covered Plan Paid Amount (NPP) or 2) Non-Medicare OHI,
reported on PDEs as patient liability reduction due to other payer (PLRO) amount. Beginning in
2014, all additional coverage provided by EGWPs will be considered OHI and reported as
PLRO.
We believe the PDE should reflect actual point-of-sale incurred costs, and we need to know
whether EGWP sponsors are providing creditable coverage and to what extent secondary payers
are diminishing the value of the Part D benefit; therefore, we are adopting the following policy
when OHI results in beneficiary cost sharing that is greater than it would be under the Part D
plan benefit for an individual market basic or EA plan, or that is greater than it would be under
the defined standard benefit for an EGWP:
If the OHI increases the amount the patient pays at the pharmacy then the Patient Pay Amount on
the PDE reflects what the patient pays at POS and PLRO is negative. CMS has always
interpreted that beneficiary payments for covered Part D drugs are TrOOP eligible; therefore, the
amount reported in the Patient Pay Amount field counts toward TrOOP.
For example, the beneficiary purchases a $100.00 drug in the initial coverage phase. The
beneficiary has a $30.00 copay with their OHI. In the defined standard benefit, the beneficiary
would pay $25.00 and the plan would pay $75.00. PLRO is determined by taking the patient pay
amount under the defined standard benefit and subtracting the patient pay amount under the OHI.
In this example, the PLRO is -$5.00 ($25.00- $30.00). The Patient Pay Amount on the PDE
would be $30.00.
PDE Fields

Patient Pay Amount

$30.00

CPP
$75.00

PLRO
-$5.00

The Patient Pay amount field is TrOOP eligible; therefore, $30.00 is the TrOOP amount for this
PDE.
If the beneficiary is LICS then the Part D sponsor will take the following steps to populate the
PDE:
1. Determine beneficiary cost sharing.
2. Determine LICS based upon the patient pay compared to the LICS co-pay amount.
3. Determine PLRO based upon the OHI using the existing formula for determining
PLRO.

55

If PLRO is negative, the negative PLRO offsets the LICS amount. In such instances,
by having cost sharing in excess of the standard benefit, even though the coverage as
a whole is required to be actuarially equivalent to or better than defined standard, the
sponsor is electing to forego LICS because the sponsor did not subsidize the LIS
beneficiarys cost sharing amount by charging the lower LIS copay amount.
The following two examples will illustrate the steps outlined above.
A low income beneficiary purchases a brand drug in the initial coverage phase. The low income
beneficiary is a category two low income beneficiary in which the co-pay for a brand drug is
$3.50. The cost of the drug is $100.00. In the initial coverage phase, a non-low income
beneficiary would pay $25.00 for this drug.
Example 1: Under the OHI benefit, the beneficiary pays $40.00.
Step 1: In a defined standard benefit the beneficiary would pay $25.00.
Step 2: The LICS amount is the difference between the non-low income beneficiary amount
($25.00) and the category two co-pay amount ($3.50), which is $21.50.
Step 3: The beneficiary has OHI in which the co-pay is $40.00. To determine PLRO, the OHI
patient pay amount ($40.00) is subtracted from the original patient pay amount ($3.50). The
PLRO amount is $36.50.
The negative PLRO will completely offset the LICS amount and LICS is adjusted to zero. PLRO
is then adjusted using the following calculation: LICS + PLRO. In this example, PLRO will be
$21.50 + - $36.50 = - $15.00.
PDE fields

Patient Pay Amount

CPP

PLRO

LICS

$40.00

$75.00

-$15.00

$0.00

Patient pay ($40.00) and LICS ($0.00) are TrOOP eligible fields; therefore, the TrOOP amount
for this PDE is $40.00.
Example 2: Under the OHI, the beneficiary pays $20.00.
Step 1: In a defined standard benefit the beneficiary would pay $25.00.
Step 2: The LICS amount is the difference between the non-low income beneficiary amount
($25.00) and the category two co-pay amount ($3.50), which is $21.50.
Step 3: The beneficiary has OHI in which the co-pay is $20.00. To determine PLRO, the OHI
patient pay amount ($20.00) is subtracted from the original patient pay amount ($3.50). The
PLRO amount is $16.50.
56

The negative PLRO offsets a portion of the LICS amount. The updated LICS amount is
calculated as $21.50 - $16.50 = $5.00. PLRO is zero.
PDE fields

Patient Pay
Amount

CPP

PLRO

LICS

$20.00

$75.00

$0.00

$5.00

Additional PDE examples will be provided in forthcoming guidance.

A4. Enhanced Alternative Plan Mapping Rule 4
Currently, under EA Mapping Rule 4 in operational guidance, if the YTD Gross Covered Drug
cost is greater than the estimated total covered Part D spending at the Out-of-Pocket threshold,
but True Out-of-Pocket (TrOOP) cost is less than or equal to the Out-of-Pocket (OOP) threshold,
the Part D plan maps 15 percent of the ingredient cost, sales tax, and any fees falling within this
rule (dispensing fee or vaccine administration fee) to covered plan paid amount (CPP).
As a result of the Affordable Care Act changes to the Defined Standard Benefit that began
closing the coverage gap for non-applicable drugs in 2011 and begins closing the coverage gap
for applicable drugs in 2013, CMS has been asked if EA Mapping Rule 4 will change. CMS is
eliminating EA Mapping Rule 4 beginning in CY2014. EA sponsors are already being paid for
the additional 15 percent through supplemental beneficiary premiums and more importantly,
YTD Gross Covered Drug costs greater than the estimated total covered Part D spending at the
OOP threshold when TrOOP is less than or equal to the OOP threshold are not allowable risk
corridor costs under 1860D-15(e)(1)(B) of the Social Security Act. Therefore, we will no longer
credit the additional amount as CPP so that our operational guidance for PDE reporting more
accurately aligns with existing payment policy. EA plans will always use EA Mapping Rule 3 to
map to the basic Part D benefit when a beneficiary has drug spend above the initial coverage
limit but TrOOP is less than or equal to the OOP threshold.

57

Attachment V. Final Updated Part D Benefit Parameters for Defined Standard Benefit,
Low-Income Subsidy, and Retiree Drug Subsidy
Annual Percentage Increases
Annual
percentage trend
for 2013
2.76%
1.80%

Applied to all parameters but (1)

CPI (all items, U.S. city average): Applied to (1)

Prior year
revisions
1.31%
0.16%

Annual
percentage
increase for
2013
4.03%
1.96%

Part D Benefit Parameters

2013
Standard Benefit
Deductible
Initial Coverage Limit
Out-of-Pocket Threshold
Total Covered Part D Spend at Out-of-Pocket Threshold for Non-Applicable
Beneficiaries (2)
Estimated Total Covered Part D Spending at Out-of-Pocket Threshold for
Applicable Beneficiaries (3)
Minimum Cost sharing in Catastrophic Coverage Portion of the Benefit
Generic/Preferred Multi-Source Drug
Other
Full Subsidy-Full Benefit Dual Eligible (FBDE) Individuals
Deductible
Copayments for Institutionalized Beneficiaries [category code 3]
Copayments for Beneficiaries Receiving Home and Community-Based
Services (4) [category code 3]
Maximum Copayments for Non-Institutionalized Beneficiaries
Up to or at 100% FPL [category code 2]
Up to Out-of-Pocket Threshold (1)
Generic/Preferred Multi-Source Drug (2)
Other (2)
Above Out-of-Pocket Threshold
Over 100% FPL (category code 1)
Up to Out-of-Pocket Threshold
Generic/Preferred Multi-Source Drug
Other
Above Out-of-Pocket Threshold
Full Subsidy-Non-FBDE Individuals
Eligible for QMB/SLMB/QI, SSI or applied and income at or below 135% FPL
and resources $8,580 (individuals) or $13,620 (couples) (6)[category code 1]
Deductible
Maximum Copayments up to Out-of-Pocket Threshold
Generic/Preferred Multi-Source Drug
Other
Maximum Copayments above Out-of-Pocket Threshold

58

2014

$325
$2,970
$4,750

$310
$2,850
$4,550

$6,733.75

$6,455.00

$6,954.52

$6,690.77

$2.65
$6.60

$2.55
$6.35

$0.00
$0.00

$0.00
$0.00

$0.00

$0.00

$1.15
$3.50
$0.00

$1.20
$3.60
$0.00

$2.65
$6.60
$0.00

$2.55
$6.35
$0.00

$0.00

$0.00

$2.65
$6.60
$0.00

$2.55
$6.35
$0.00

2013
Partial Subsidy
Applied and income below 150% FPL and resources below $13,300 (individual)
or $26,580 (couples)(6)(category code 4)
Deductible
Coinsurance up to Out-of-Pocket Threshold
Maximum Copayments above Out-of-Pocket Threshold
Generic/Preferred Multi-Source Drug
Other
Retiree Drug Subsidy Amounts
Cost Threshold
Cost Limit

2014

$66.00
15%

$63.00
15%

$2.65
$6.60

$2.55
$6.35

$325
$6,600

$310
$6,350

(1) CPI adjustment applies to copayments for non-institutionalized beneficiaries up to or at 100% FPL.
(2) For beneficiaries who are not considered an "applicable beneficiary" as defined at section 1860D-14A(g)(1) and are not
eligible for the coverage gap program, this is the amount of total drug spending required to reach the out-of-pocket threshold in
the defined standard benefit. Enhanced alternative plans must use this value when mapping enhanced alternative plans to the
defined standard benefit for the purpose of calculating covered plan paid amounts (CPP) reported on prescription drug event
(PDE) records.
(3) For beneficiaries who are considered an "applicable beneficiary" as defined at section 1860D-14A(g)(1) and are eligible for
the coverage gap discount program, this is the estimated average amount of total drug spending required to reach the out-ofpocket threshold in the defined standard benefit. Enhanced alternative plans must use this value when mapping enhanced
alternative plans to the defined standard benefit for the purpose of calculating covered plan paid amounts (CPP) reported on
prescription drug event (PDE) records.
(4) Per section 1860D-14(a)(1)(D)(i), full-benefit dual eligibles who would be institutionalized individuals (or couple) if the
individual (couple) was not receiving home and community-based services qualify for zero cost sharing as of January 1, 2013, as
specified by the Secretary.
(5) The increases to the LIS deductible, generic/preferred multi-source drugs and other drugs copayments are applied to the
unrounded 2013 values of $66.14, $1.16, and $3.49, respectively.
(6) The actual amount of resources allowable will be updated for contract year 2014.

59

Attachment VI. Medicare Part D Benefit Parameters for the Defined Standard Benefit:
Annual Adjustments for 2014
The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) directs
CMS to update the statutory parameters for the defined standard Part D drug benefit each year.
These parameters include the standard deductible, initial coverage limit, and catastrophic
coverage threshold, and minimum copayments for costs above the annual out-of-pocket
threshold. In addition, CMS is statutorily required to update the parameters for the low income
subsidy benefit and the cost threshold and cost limit for qualified retiree prescription drug plans
eligible for the Retiree Drug Subsidy. Included in this notice are: (i) the methodologies for
updating these parameters, (ii) the updated parameter amounts for the Part D defined standard
benefit and low-income subsidy benefit for 2014, and (iii) the updated cost threshold and cost
limit for qualified retiree prescription drug plans.
As required by statute, the parameters for the defined standard benefit formula are indexed to the
percentage increase in average per capita total Part D drug expenses for Medicare beneficiaries.
Accordingly, the actuarial value of the drug benefit increases along with any increase in drug
expenses, and the defined standard Part D benefit continues to cover a constant share of drug
expenses from year to year.
All of the Part D benefit parameters are updated using one of two indexing methods specified by
statute: (i) the annual percentage increase in average expenditures for Part D drugs per eligible
beneficiary, and (ii) the annual percentage increase in the Consumer Price Index (CPI) (all items,
U.S. city average).
Section A. Annual Percentage Increase in Average Expenditures for Part D Drugs per
Eligible Beneficiary
Section 1860D-2(b)(6) of the Social Security Act defines the annual percentage increase as
the annual percentage increase in average per capita aggregate expenditures for covered Part D
drugs in the United States for Part D eligible individuals, as determined by the Secretary for the
12-month period ending in July of the previous year using such methods as the Secretary shall
specify. The following parameters are updated using the annual percentage increase:
Deductible: From $325 in 2013 and rounded to the nearest multiple of $5.
Initial Coverage Limit: From $2,970 in 2013 and rounded to the nearest multiple
of $10.
Out-of-Pocket Threshold: From $4,750 in 2013 and rounded to the nearest multiple
of $50.

60

Minimum Cost sharing in the Catastrophic Coverage Portion of the Benefit: From
$2.65 per generic or preferred drug that is a multi-source drug, and $6.60 for all other
drugs in 2013, and rounded to the nearest multiple of $0.05.
Maximum Copayments below the Out-of-Pocket Threshold for certain Low Income
Full Subsidy Eligible Enrollees: From $2.65 per generic or preferred drug that is a
multi-source drug, and $6.60 for all other drugs in 2013, and rounded to the nearest
multiple of $0.05.
Deductible for Low Income (Partial) Subsidy Eligible Enrollees: From $66 1 in 2013
and rounded to the nearest $1.
Maximum Copayments above the Out-of-Pocket Threshold for Low Income
(Partial) Subsidy Eligible Enrollees: From $2.65 per generic or preferred drug that
is a multi-source drug, and $6.60 for all other drugs in 2013, and rounded to the
nearest multiple of $0.05.
Section B. Annual Percentage Increase in Consumer Price Index, All Urban Consumers
(all items, U.S. city average)
Section 1860D-14(a)(4) of the Social Security Act specifies that the annual percentage increase
in the CPI, All Urban Consumers (all items, U.S. city average) as of September of the previous
year is used to update the maximum copayments below the out-of-pocket threshold for full
benefit dual eligible enrollees with incomes that do not exceed 100 percent of the Federal
poverty line. These copayments are increased from $1.15 per generic or preferred drug that is a
multi-source drug, and $3.50 for all other drugs in 2013 2, and rounded to the nearest multiple of
$0.05 and $0.10, respectively.
Section C. Calculation Methodology
Annual Percentage Increase
For the 2007 and 2008 contract years, the annual percentage increases, as defined in section
1860D-2(b)(6) of the Social Security Act, were based on the National Health Expenditure (NHE)
prescription drug per capita estimates because sufficient Part D program data was not available.
1

Consistent with the statutory requirements of 1860D-14(a)(4)(B) of the Social Security Act, the
update for the deductible for low income (partial) subsidy eligible enrollees is applied to the
unrounded 2013 value of $66.14.
2

Consistent with the statutory requirements of 1860D-14(a)(4)(A) of the Social Security Act, the
copayments are increased from the unrounded 2013 values of $1.16 per generic or preferred drug
that is a multi-source drug, and $3.49 for all other drugs.
61

Beginning with the 2009 contract year, the annual percentage increases are based on Part D
program data. For the 2014 contract year benefit parameters, Part D program data is used to
calculate the annual percentage trend as follows:
2012 - 2013 $2,807.26
=
= 0.9724
2011 - 2012 $2,887.05

In the formula, the average per capita cost for August 2011 July 2012 ($2,887.05) is calculated
from actual Part D prescription drug event (PDE) data and the average per capita cost for August
2012 July 2013 ($2,807.26) is calculated based on actual Part D PDE data incurred from
August December, 2012 and projected through July, 2013.
The 2014 benefit parameters reflect the 2013 annual percentage trend as well as a revision to the
prior estimates for prior years annual percentage increases. Based on updated NHE prescription
drug per capita costs and PDE data, the annual percentage increases are now estimated as
summarized by Table IV-1.
Table IV-1. Revised Prior Years Annual Percentage Increases
Year

Prior Estimates of Annual

Percentage Increases

Revised Annual Percentage

Increases

2007

7.31%

7.30%

2008

5.97%

5.92%

2009

4.25%

4.25%

2010

3.08%

3.09%

2011

2.44%

2.45%

2012

2.27%

2.46%

2013

3.31%

1.83%

Accordingly, the 2014 benefit parameters reflect a multiplicative update of -1.31% for prior year
revisions. In summary, the 2014 parameters outlined in Section A are updated by -4.03% for
2014 as summarized by Table IV-2.
Table IV-2. Annual Percentage Increase
Annual percentage trend for July 2013

2.76%

Prior year revisions

1.31%

Annual percentage increase for 2014

4.03%

Note: Percentages are multiplicative, not additive. Values are carried

to additional decimal places and may not agree to the rounded values
presented above.

62

Annual Percentage Increase in Consumer Price Index, All Urban Consumers (all items, U.S. city
average)
The annual percentage increase in the CPI as of September of the previous year, referenced in
section 1860D-14(a)(4)(A)(ii), is interpreted to mean that, for contract year 2014, the September
2013 CPI should be used in the calculation of the index. To ensure that plan sponsors and CMS
have sufficient time to incorporate the cost sharing requirements into benefit, marketing material
and systems development, the methodology to calculate this update includes an estimate of the
September 2013 CPI based on the projected amount included in the Presidents FY2014 Budget.
The September 2012 value is from the Bureau of Labor Statistics. The annual percentage trend
in CPI for contract year 2014 is calculated as follows:
Projected September 2013 CPI
235.567

= 1.0180
Actual September 2012 CPI
231.410

(Source: Presidents FY2014 Budget and Bureau of Labor Statistics, Department of Labor)

The 2014 benefit parameters reflect the 2013 annual percentage trend in the CPI, as well as a
revision to the prior estimate for the 2012 annual percentage increase. The 2013 parameter
update reflected an annual percentage trend in CPI of 1.83 percent. Based on the actual reported
CPI for September 2012, the September 2012 CPI increase is now estimated to be 2.00 percent.
Thus, the 2014 update reflects a multiplicative 0.16 percent correction for prior year revisions.
In summary, the cost sharing items outlined in Section B are updated by 1.96 percent for 2014 as
summarized by Table IV-3.
Table IV-3. Cumulative Annual Percentage Increase in CPI
Annual percentage trend for September 2013 1.80%
Prior year revisions

0.16%

Annual percentage increase for 2013

1.96%

Note: Percentages are multiplicative, not additive. Values are carried to

additional decimal places and may not agree to the rounded values presented
above.

Section D. Estimated Total Covered Part D Spending at Out-of-Pocket Threshold for

Applicable Beneficiaries
For 2014, the total covered Part D spending at out-of-pocket threshold for applicable
beneficiaries is $6,690.77. It is calculated as the ICL plus 100 percent beneficiary cost sharing
divided by the weighted gap coinsurance factor. The factor is calculated assuming 100 percent
cost sharing in the deductible phase, 25 percent in the initial coverage phase and in the coverage
gap, 72 percent for non-applicable (generic) drugs and 97.5 percent for applicable (brand) drugs.
In this estimate, it is assumed that the dispensing and vaccine administration fees account for
63

0.26 percent of the gross covered brand drug costs used by non-LIS beneficiaries in the coverage
gap. Therefore, a 52.5 percent reduction in cost sharing for dispensing and vaccine
administration fees results in an overall reduction of 0.13 percent to 97.37 percent in cost sharing
for applicable (brand) drugs in the coverage gap.
The estimated total covered Part D spending at out-of-pocket threshold for applicable
beneficiaries is calculated as follows:

ICL +

100% beneficiary cost sharing in the gap

weighted gap coinsurance factor

$2,850 +

$3,605.00
= $6,690.77
93.861%

One hundred percent beneficiary cost sharing in the gap is the estimated total drug
spending in the gap assuming 100% coinsurance.

One hundred percent beneficiary cost sharing in the gap is calculated as follows:
OOP threshold OOP costs up to the ICL or

$4,550 $945.00 = $3,605.00

Weighted gap coinsurance factor is calculated as follows:

(Brand GDCB % for non-LIS 97.37% cost sharing for applicable drugs) + (Generic
GDBC % for non-LIS 72% cost sharing for non-applicable drugs)
or
(86.2% 97.37%) + (13.2% 72%) = 93.861%

Brand GDCB % for non-LIS is the percentage of gross covered drug costs below the outof-pocket threshold for applicable beneficiaries attributable to applicable (brand) drugs as
reported on the 2012 PDEs.

Gap cost sharing for applicable drugs is the coinsurance incurred by applicable
beneficiaries for applicable (brand) drugs in the coverage gap, where:
Coinsurance for applicable drugs = [(percentage of gross covered brand drug costs
attributable to ingredient cost + sales tax) * (cost sharing percentage) + (percentage of
gross covered brand drug costs attributable to dispensing + vaccine administration fees) *
(cost sharing coinsurance percentage)]
or
97.37% = [(99.74% 97.5%) + (0.26% 47.5%)]

Generic GDCB % for non-LIS is the percentage of gross covered drug costs below the
out-of-pocket threshold for applicable beneficiaries attributable to non-applicable
(generic) drugs as reported on the 2012 PDEs.

Gap cost sharing for non-applicable drugs is the coinsurance incurred by applicable
beneficiaries for non-applicable (generic) drugs in the coverage gap.
64

Section E. Retiree Drug Subsidy Amounts

As outlined in 423.886(b)(3) of the regulations implementing the Part D benefit, the cost
threshold and cost limit for qualified retiree prescription drug plans that end in years after 2006
are adjusted in the same manner as the annual Part D deductible and out-of-pocket threshold are
adjusted under 423.104(d)(1)(ii) and (d)(5)(iii)(B), respectively. Specifically, they are adjusted
by the annual percentage increase as defined previously in this document and the cost
threshold is rounded to the nearest multiple of $5 and the cost limit is rounded to the nearest
multiple of $50. The cost threshold and cost limit are defined as $320 and $6,500, respectively,
for plans that end in 2012, and as $325 and $6,600, respectively, for plans that end in 2013. For
2014, the cost threshold is $310, and the cost limit is $6,350.

65

Attachment VII. CMS-HCC and RxHCC Risk Adjustment Factors

Table 1. 2014 CMS-HCC Model Relative Factors for Community and Institutional
Beneficiaries ...................................................................................................................67
Table 2. 2014 CMS-HCC Model Relative Factors for Aged and Disabled New Enrollees ....71
Table 3. 2014 CMS-HCC Model Relative Factors for New Enrollees in Chronic
Condition Special Needs Plans (C-SNPs) ......................................................................72
Table 4. Disease Hierarchies for the 2014 CMS-HCC Model.................................................73
Table 5. Comparison of 2013 and 2014 CMS-HCC Risk Adjustment Model HCCs .............74
Table 6. RxHCC Model Relative Factors for Continuing Enrollees .......................................79
Table 7. RxHCC Model Relative Factors for New Enrollees, Non-Low Income ...................83
Table 8. RxHCC Model Relative Factors for New Enrollees, Low Income ...........................84
Table 9. RxHCC Model Relative Factors for New Enrollees, Institutional ............................85
Table 10. List of Disease Hierarchies for the Revised RxHCC Model ..................................86

66

Table 1. 2014 CMS-HCC Model Relative Factors for Community and Institutional
Beneficiaries
Variable
Female
0-34 Years
35-44 Years
45-54 Years
55-59 Years
60-64 Years
65-69 Years
70-74 Years
75-79 Years
80-84 Years
85-89 Years
90-94 Years
95 Years or Over
Male
0-34 Years
35-44 Years
45-54 Years
55-59 Years
60-64 Years
65-69 Years
70-74 Years
75-79 Years
80-84 Years
85-89 Years
90-94 Years
95 Years or Over
Medicaid and Originally Disabled Interactions with Age and Sex
Medicaid_Female_Aged
Medicaid_Female_Disabled
Medicaid_Male_Aged
Medicaid_Male_Disabled
Originally Disabled_Female
Originally Disabled_Male
Disease Coefficients
Description Label
HCC1
HIV/AIDS
Septicemia, Sepsis, Systemic Inflammatory
HCC2
Response Syndrome/Shock
HCC6
Opportunistic Infections
HCC8
Metastatic Cancer and Acute Leukemia
HCC9
Lung and Other Severe Cancers
HCC10
Lymphoma and Other Cancers
HCC11
Colorectal, Bladder, and Other Cancers
Breast, Prostate, and Other Cancers and
HCC12
Tumors
HCC17
Diabetes with Acute Complications
HCC18
Diabetes with Chronic Complications
HCC19
Diabetes without Complication
HCC21
Protein-Calorie Malnutrition
HCC22
Morbid Obesity

67

Community

Institutional

0.197
0.205
0.263
0.326
0.392
0.288
0.348
0.437
0.539
0.677
0.815
0.840

1.169
0.949
0.915
0.981
0.986
1.237
1.145
1.033
0.922
0.836
0.705
0.533

0.121
0.124
0.181
0.269
0.311
0.288
0.356
0.442
0.543
0.683
0.848
1.028

1.162
0.894
0.910
0.951
1.081
1.388
1.431
1.391
1.327
1.252
1.076
0.948

0.151
0.085
0.177
0.086
0.239
0.163

0.067
0.067
0.067
0.067
0.013
0.013

0.470
0.535

1.904
0.575

0.440
2.484
0.973
0.672
0.317
0.154

0.344
1.203
0.674
0.412
0.296
0.198

0.368
0.368
0.118
0.713
0.365

0.474
0.474
0.182
0.399
0.579

Variable
HCC23
HCC27
HCC28
HCC29
HCC33
HCC34
HCC35
HCC39
HCC40
HCC46
HCC47
HCC48
HCC54
HCC55
HCC57
HCC58
HCC70
HCC71
HCC72
HCC73
HCC74
HCC75
HCC76
HCC77
HCC78
HCC79
HCC80
HCC82
HCC83
HCC84
HCC85
HCC86
HCC87
HCC88
HCC96
HCC99
HCC100
HCC103
HCC104
HCC106
HCC107
HCC108
HCC110
HCC111

Other Significant Endocrine and Metabolic

Disorders
End-Stage Liver Disease
Cirrhosis of Liver
Chronic Hepatitis
Intestinal Obstruction/Perforation
Chronic Pancreatitis
Inflammatory Bowel Disease
Bone/Joint/Muscle Infections/Necrosis
Rheumatoid Arthritis and Inflammatory
Connective Tissue Disease
Severe Hematological Disorders
Disorders of Immunity
Coagulation Defects and Other Specified
Hematological Disorders
Drug/Alcohol Psychosis
Drug/Alcohol Dependence
Schizophrenia
Major Depressive, Bipolar, and Paranoid
Disorders
Quadriplegia
Paraplegia
Spinal Cord Disorders/Injuries
Amyotrophic Lateral Sclerosis and Other
Motor Neuron Disease
Cerebral Palsy
Myasthenia Gravis/Myoneural Disorders and
Guillain-Barre Syndrome/Inflammatory and
Toxic Neuropathy
Muscular Dystrophy
Multiple Sclerosis
Parkinson's and Huntington's Diseases
Seizure Disorders and Convulsions
Coma, Brain Compression/Anoxic Damage
Respirator Dependence/Tracheostomy Status
Respiratory Arrest
Cardio-Respiratory Failure and Shock
Congestive Heart Failure
Acute Myocardial Infarction
Unstable Angina and Other Acute Ischemic
Heart Disease
Angina Pectoris
Specified Heart Arrhythmias
Cerebral Hemorrhage
Ischemic or Unspecified Stroke
Hemiplegia/Hemiparesis
Monoplegia, Other Paralytic Syndromes
Atherosclerosis of the Extremities with
Ulceration or Gangrene
Vascular Disease with Complications
Vascular Disease
Cystic Fibrosis
Chronic Obstructive Pulmonary Disease

68

Community
0.245

Institutional
0.282

0.923
0.399
0.251
0.310
0.286
0.302
0.498
0.374

1.083
0.351
0.351
0.384
0.095
0.318
0.340
0.351

1.136
0.521
0.252

0.794
0.519
0.164

0.420
0.420
0.490
0.330

0.053
0.053
0.311
0.311

1.234
1.052
0.509
0.958

0.650
0.539
0.280
0.367

0.045
0.408

0.300

0.565
0.556
0.691
0.284
0.570
1.520
0.802
0.329
0.368
0.275
0.258

0.215
0.173
0.144
0.104
1.769
1.169
0.442
0.229
0.515
0.515

0.141
0.295
0.339
0.317
0.581
0.396
1.413

0.474
0.262
0.216
0.216
0.061
0.061
0.886

0.410
0.299
0.417
0.346

0.301
0.107
0.364
0.364

Variable
HCC112
HCC114
HCC115
HCC122
HCC124
HCC134
HCC135
HCC136
HCC137
HCC157
HCC158
HCC161
HCC162
HCC166
HCC167
HCC169
HCC170
HCC173
HCC176
HCC186
HCC188
HCC189
Disease Interactions
CANCER_IMMUNE
CHF_COPD
CHF_RENAL
COPD_CARD_RESP_FAIL
DIABETES_CHF
SEPSIS_CARD_RESP_FAIL
ARTIF_OPENINGS_
PRESSURE_ULCER
ASP_SPEC_BACT_PNEUM_
PRES_ULCER
COPD_ASP_SPEC_
BACT_PNEUM
SCHIZOPHRENIA_CHF
SCHIZOPHRENIA_COPD
SCHIZOPHRENIA_SEIZURES

Fibrosis of Lung and Other Chronic Lung

Disorders
Aspiration and Specified Bacterial
Pneumonias
Pneumococcal Pneumonia, Empyema, Lung
Abscess
Proliferative Diabetic Retinopathy and
Vitreous Hemorrhage
Exudative Macular Degeneration
Dialysis Status
Acute Renal Failure
Chronic Kidney Disease (Stage 5)
Chronic Kidney Disease, Severe (Stage 4)
Pressure Ulcer of Skin with Necrosis Through
to Muscle, Tendon, or Bone
Pressure Ulcer of Skin with Full Thickness
Skin Loss
Chronic Ulcer of Skin, Except Pressure
Severe Skin Burn or Condition
Severe Head Injury
Major Head Injury
Vertebral Fractures without Spinal Cord Injury
Hip Fracture/Dislocation
Traumatic Amputations and Complications
Complications of Specified Implanted Device
or Graft
Major Organ Transplant or Replacement
Status
Artificial Openings for Feeding or Elimination
Amputation Status, Lower Limb/Amputation
Complications
Cancer*Immune Disorders
Congestive Heart Failure*Chronic Obstructive
Pulmonary Disease
Congestive Heart Failure*Renal Disease
Chronic Obstructive Pulmonary
Disease*Cardiorespiratory Failure
Diabetes*Congestive Heart Failure
Sepsis*Cardiorespiratory Failure
Artificial Openings for Feeding or
Elimination*Pressure Ulcer
Aspiration and Specified Bacterial
Pneumonias*Pressure Ulcer
Chronic Obstructive Pulmonary
Disease*Aspiration and Specified Bacterial
Pneumonias
Schizophrenia*Congestive Heart Failure
Schizophrenia*Chronic Obstructive
Pulmonary Disease
Schizophrenia*Seizure Disorders and
Convulsions

69

Community
0.274

Institutional
0.260

0.672

0.285

0.200

0.285

0.203

0.433

0.335
0.476
0.476
0.224
0.224
2.488

0.166
0.509
0.509
0.509
0.294
1.050

1.338

0.435

0.536
0.411
0.570
0.163
0.497
0.446
0.265
0.566

0.311
0.327
0.104
0.228
0.122
0.522

0.891

0.515

0.651
0.779

0.594
0.468

0.947
0.259

0.221

0.317
0.456

0.506

0.182
0.214
-

0.189
0.282

0.495

0.319

0.212
0.389

0.452

Variable
SEPSIS_ARTIF_OPENINGS
SEPSIS_ASP_SPEC_
BACT_PNEUM
SEPSIS_PRESSURE_ULCER
Disabled/Disease Interactions
DISABLED_HCC6
DISABLED_HCC34
DISABLED_HCC39
DISABLED_HCC46
DISABLED_HCC54
DISABLED_HCC55
DISABLED_HCC77
DISABLED_HCC85
DISABLED_HCC110
DISABLED_HCC161
DISABLED_HCC176
DISABLED_PRESSURE_ULCER

Sepsis*Artificial Openings for Feeding or

Elimination
Sepsis*Aspiration and Specified Bacterial
Pneumonias
Sepsis*Pressure Ulcer
Disabled, Opportunistic Infections
Disabled, Chronic Pancreatitis
Disabled, Bone/Joint Muscle
Infections/Necrosis
Disabled, Severe Hematological Disorders
Disabled, Drug/Alcohol Psychosis
Disabled, Drug/Alcohol Dependence
Disabled, Multiple Sclerosis
Disabled, Congestive Heart Failure
Disabled, Cystic Fibrosis
Disabled, Chronic Ulcer of the Skin, Except
Pressure Ulcer
Disabled, Complications of Specified
Implanted Device or Graft
Disabled, Pressure Ulcer

Community
-

Institutional
0.553

0.339

0.522

0.451
0.548
-

0.383

1.347
0.331
2.415
-

0.407
0.441
0.430

0.503

0.270

Notes:
1. The denominator is $9,276.26.
2. In the disease interactions and disabled interactions, the variables are defined as follows:
Sepsis = HCC 2.
Opportunistic Infections = HCC 6.
Cancer = HCCs 8-12.
Diabetes = HCCs 17, 18, 19.
Bone/Joint/Muscle Infections/Necrosis = HCC 39.
Immune Disorders = HCC 47.
Schizophrenia = HCC 57.
Multiple Sclerosis = HCC 77.
Seizure Disorders and Convulsions = HCC 79.
Cardiorespiratory Failure = HCCs 82-84.
Congestive Heart Failure = HCC 85.
Chronic Obstructive Pulmonary Disease = HCCs 110-111.
Aspiration and Specified Bacterial Pneumonias = HCC 114.
Renal Disease = HCCs 134-137.
Pressure Ulcer = HCCs 157-158. HCCs 159-160 are no longer included in the pressure ulcer interaction
terms.
Chronic Ulcer of Skin, except Pressure = HCC 161.
Artificial Openings for Feeding or Elimination = HCC 188.
Sources:
RTI International analysis of 2010-2011 Medicare 100% data and RTI International analysis of 2010-2011 Medicare
100% institutional sample.

70

Table 2. 2014 CMS-HCC Model Relative Factors for Aged and Disabled New Enrollees

Female
0-34 Years
35-44 Years
45-54 Years
55-59 Years
60-64 Years
65 Years
66 Years
67 Years
68 Years
69 Years
70-74 Years
75-79 Years
80-84 Years
85-89 Years
90-94 Years
95 Years or Over
Male
0-34 Years
35-44 Years
45-54 Years
55-59 Years
60-64 Years
65 Years
66 Years
67 Years
68 Years
69 Years
70-74 Years
75-79 Years
80-84 Years
85-89 Years
90-94 Years
95 Years or Over

Non-Medicaid &
Non-Originally
Disabled

Medicaid &
Non-Originally
Disabled

Non-Medicaid &
Originally
Disabled

Medicaid &
Originally
Disabled

0.677
0.827
0.908
0.971
1.123
0.510
0.504
0.535
0.570
0.627
0.673
0.857
0.972
1.237
1.237
1.237

0.912
1.092
1.252
1.323
1.434
1.031
0.980
0.980
0.980
0.980
0.984
1.159
1.434
1.617
1.617
1.617

1.169
1.228
1.228
1.228
1.228
1.228
1.228
1.228
1.228
1.228
1.228

1.491
1.642
1.642
1.642
2.118
2.118
2.118
2.118
2.118
2.118
2.118

0.422
0.610
0.796
0.845
0.884
0.515
0.522
0.581
0.647
0.679
0.783
1.036
1.303
1.507
1.507
1.507

0.773
1.024
1.288
1.467
1.536
1.163
1.058
1.208
1.208
1.208
1.208
1.388
1.743
1.891
1.891
1.891

0.873
0.934
0.934
1.244
1.244
1.244
1.244
1.244
1.244
1.244
1.244

1.601
1.601
2.164
2.164
2.164
2.164
2.164
2.164
2.164
2.164
2.164

Notes:
1.

2.

For payment purposes, a new enrollee is a beneficiary who did not have 12 months of Part B eligibility in
the data collection year. CMS-HCC new enrollee models are not based on diagnoses, but include factors for
different age and gender combinations by Medicaid and the original reason for Medicare entitlement.
The denominator is $9,276.26.

71

Table 3. 2014 CMS-HCC Model Relative Factors for New Enrollees in Chronic Condition
Special Needs Plans (C-SNPs)
Non-Medicaid &
Non-Originally
Disabled
Female
0-34 Years
35-44 Years
45-54 Years
55-59 Years
60-64 Years
65 Years
66 Years
67 Years
68 Years
69 Years
70-74 Years
75-79 Years
80-84 Years
85-89 Years
90-94 Years
95 Years or Over
Male
0-34 Years
35-44 Years
45-54 Years
55-59 Years
60-64 Years
65 Years
66 Years
67 Years
68 Years
69 Years
70-74 Years
75-79 Years
80-84 Years
85-89 Years
90-94 Years
95 Years or Over

Medicaid & NonOriginally

Disabled

Non-Medicaid &
Originally
Disabled

Medicaid &
Originally
Disabled

1.383
1.383
1.383
1.485
1.582
0.927
0.927
0.998
0.998
0.998
1.173
1.395
1.589
1.813
1.813
1.813

1.433
1.433
1.788
1.889
1.950
1.497
1.497
1.547
1.547
1.547
1.686
1.876
2.065
2.309
2.309
2.309

1.672
1.672
1.675
1.675
1.675
1.859
1.970
2.252
2.252
2.252
2.252

2.103
2.103
2.124
2.124
2.124
2.346
2.464
2.642
2.642
2.642
2.642

1.314
1.314
1.380
1.495
1.526
0.957
0.957
1.010
1.010
1.010
1.220
1.431
1.677
1.936
1.936
1.936

1.326
1.326
1.740
1.910
1.922
1.617
1.617
1.651
1.651
1.651
1.872
1.962
2.186
2.439
2.439
2.439

1.604
1.604
1.653
1.653
1.653
1.827
1.939
2.181
2.181
2.181
2.181

2.116
2.116
2.189
2.189
2.189
2.344
2.547
2.547
2.547
2.547
2.547

Notes:
1.

2.

For payment purposes, a new enrollee is a beneficiary who did not have 12 months of Part B eligibility in
the data collection year. CMS-HCC new enrollee models are not based on diagnoses, but include factors for
different age and gender combinations by Medicaid and the original reason for Medicare entitlement.
The relative factors in this table were calculated by estimating the incremental amount to the standard new
enrollee risk model needed to predict the risk scores of continuing enrollees in C-SNPs.

Source: RTI analysis of 2010-2011 Medicare C-SNP community continuing enrollees.

72

Table 4. Disease Hierarchies for the 2014 CMS-HCC Model

Hierarchical
Condition
Category
(HCC)
8
9
10
11
17
18
27
28
46
54
57
70
71
72
82
83
86
87
99
103
106
107
110
111
114
134
135
136
157
158
166

If the HCC Label is listed in this column

Hierarchical Condition Category (HCC) Label

Metastatic Cancer and Acute Leukemia
Lung and Other Severe Cancers
Lymphoma and Other Cancers
Colorectal, Bladder, and Other Cancers
Diabetes with Acute Complications
Diabetes with Chronic Complications
End-Stage Liver Disease
Cirrhosis of Liver
Severe Hematological Disorders
Drug/Alcohol Psychosis
Schizophrenia
Quadriplegia
Paraplegia
Spinal Cord Disorders/Injuries
Respirator Dependence/Tracheostomy Status
Respiratory Arrest
Acute Myocardial Infarction
Unstable Angina and Other Acute Ischemic Heart Disease
Cerebral Hemorrhage
Hemiplegia/Hemiparesis
Atherosclerosis of the Extremities with Ulceration or Gangrene
Vascular Disease with Complications
Cystic Fibrosis
Chronic Obstructive Pulmonary Disease
Aspiration and Specified Bacterial Pneumonias
Dialysis Status
Acute Renal Failure
Chronic Kidney Disease (Stage 5)
Pressure Ulcer of Skin with Necrosis Through to Muscle, Tendon, or Bone
Pressure Ulcer of Skin with Full Thickness Skin Loss
Severe Head Injury

Then drop the

HCC(s) listed in this
column

9,10,11,12
10,11,12
11,12
12
18,19
19
28,29,80
29
48
55
58
71,72,103,104,169
72,104,169
169
83,84
84
87,88
88
100
104
107,108,161,189
108
111,112
112
115
135,136,137
136,137
137
158,161
161
80,167

How Payments are Made with a Disease Hierarchy -- EXAMPLE: If a beneficiary triggers Disease Groups 135
(Acute Renal Failure) and 136 (Chronic Kidney Disease (Stage 5)), then DG 136 will be dropped. In other words,
payment will always be associated with the HCC in column 1, if a HCC in column 3 also occurs during the same
collection period. Therefore, the organizations payment will be based on HCC 135 rather than HCC 136.

73

Table 5. Comparison of 2013 and 2014 CMS-HCC Risk Adjustment Model HCCs
2013 CMS-HCC Model (with 70 HCCs)

2014 CMS-HCC Model (with 79 HCCs)

HCC

Description

HCC

Description

HCC1
HCC2

HIV/AIDS
Septicemia/Shock

HCC1
HCC2

HCC5
HCC7

Opportunistic Infections
Metastatic Cancer and Acute
Leukemia
Lung, Upper Digestive Tract, and
Other Severe Cancers
Lymphatic, Head and Neck, Brain,
and Other Major Cancers
Breast, Prostate, Colorectal and Other
Cancers and Tumors

HCC6
HCC8

HIV/AIDS
Septicemia, Sepsis, Systemic Inflammatory Response
Syndrome/Shock
Opportunistic Infections
Metastatic Cancer and Acute Leukemia

HCC9

Lung and Other Severe Cancers

HCC10

Lymphoma and Other Cancers

HCC11

Colorectal, Bladder, and Other Cancers

HCC12
HCC17

Breast, Prostate, and Other Cancers and Tumors

Diabetes with Acute Complications

HCC18

Diabetes with Chronic Complications

HCC19

Diabetes without Complication

HCC21
HCC22
HCC23

Protein-Calorie Malnutrition
Morbid Obesity
Other Significant Endocrine and Metabolic Disorders

HCC27
HCC28
HCC29
HCC33
HCC34
HCC35
HCC39

End-Stage Liver Disease

Cirrhosis of Liver
Chronic Hepatitis
Intestinal Obstruction/Perforation
Chronic Pancreatitis
Inflammatory Bowel Disease
Bone/Joint/Muscle Infections/Necrosis

HCC40

Rheumatoid Arthritis and Inflammatory Connective

Tissue Disease

HCC8
HCC9
HCC10

HCC15
HCC16
HCC17
HCC18
HCC19
HCC21

HCC25
HCC26
HCC27
HCC31
HCC32
HCC33
HCC37
HCC38

Diabetes with Renal or Peripheral

Circulatory Manifestation
Diabetes with Neurologic or Other
Specified Manifestation
Diabetes with Acute Complications
Diabetes with Ophthalmologic or
Unspecified Manifestation
Diabetes without Complication
Protein-Calorie Malnutrition

End-Stage Liver Disease

Cirrhosis of Liver
Chronic Hepatitis
Intestinal Obstruction/Perforation
Pancreatic Disease
Inflammatory Bowel Disease
Bone/Joint/Muscle
Infections/Necrosis
Rheumatoid Arthritis and
Inflammatory Connective Tissue
Disease

74

Category Short Name

Infection

Neoplasm

Diabetes

Metabolic

Liver

Gastrointestinal

Musculoskeletal

2013 CMS-HCC Model (with 70 HCCs)

2014 CMS-HCC Model (with 79 HCCs)

HCC

Description

HCC

Description

HCC44
HCC45

Severe Hematological Disorders

Disorders of Immunity

HCC46
HCC47
HCC48

HCC51
HCC52
HCC54
HCC55

HCC54
HCC55
HCC57
HCC58
HCC70

Quadriplegia

HCC68
HCC69
HCC70

Drug/Alcohol Psychosis
Drug/Alcohol Dependence
Schizophrenia
Major Depressive, Bipolar, and
Paranoid Disorders
Quadriplegia, Other Extensive
Paralysis
Paraplegia
Spinal Cord Disorders/Injuries
Muscular Dystrophy

Severe Hematological Disorders

Disorders of Immunity
Coagulation Defects and Other Specified Hematological
Disorders
Drug/Alcohol Psychosis
Drug/Alcohol Dependence
Schizophrenia
Major Depressive, Bipolar, and Paranoid Disorders

HCC71
HCC72
HCC73

HCC71
HCC72

Polyneuropathy
Multiple Sclerosis

HCC74
HCC75

HCC73

Parkinson's and Huntington's

Diseases
Seizure Disorders and Convulsions
Coma, Brain Compression/Anoxic
Damage

HCC76

Paraplegia
Spinal Cord Disorders/Injuries
Amyotrophic Lateral Sclerosis and Other Motor Neuron
Disease
Cerebral Palsy
Myasthenia Gravis/Myoneural Disorders and GuillainBarre Syndrome/Inflammatory and Toxic Neuropathy
Muscular Dystrophy

HCC77
HCC78

Multiple Sclerosis
Parkinson's and Huntington's Diseases

HCC79
HCC80
HCC82

Seizure Disorders and Convulsions

Coma, Brain Compression/Anoxic Damage
Respirator Dependence/Tracheostomy Status

HCC83
HCC84
HCC85
HCC86
HCC87

Respiratory Arrest
Cardio-Respiratory Failure and Shock
Congestive Heart Failure
Acute Myocardial Infarction
Unstable Angina and Other Acute Ischemic Heart Disease

HCC88

Angina Pectoris

HCC96

Specified Heart Arrhythmias

HCC67

HCC74
HCC75

HCC77
HCC78
HCC79
HCC80
HCC81
HCC82
HCC83
HCC92

Respirator
Dependence/Tracheostomy Status
Respiratory Arrest
Cardio-Respiratory Failure and Shock
Congestive Heart Failure
Acute Myocardial Infarction
Unstable Angina and Other Acute
Ischemic Heart Disease
Angina Pectoris/Old Myocardial
Infraction
Specified Heart Arrhythmias

75

Category Short Name

Blood

Substance Abuse
Psychiatric

Spinal

Neurological

Arrest

Heart

2013 CMS-HCC Model (with 70 HCCs)

2014 CMS-HCC Model (with 79 HCCs)

HCC

Description

HCC

Description

HCC95
HCC96
HCC100
HCC101

HCC99
HCC100
HCC103
HCC104

Cerebral Hemorrhage
Ischemic or Unspecified Stroke
Hemiplegia/Hemiparesis
Monoplegia, Other Paralytic Syndromes

HCC104

Cerebral Hemorrhage
Ischemic or Unspecified Stroke
Hemiplegia/Hemiparesis
Cerebral Palsy and Other Paralytic
Syndromes
Vascular Disease with Complications

HCC106

HCC105

Vascular Disease

HCC107
HCC108

Cystic Fibrosis
Chronic Obstructive Pulmonary
Disease
Aspiration and Specified Bacterial
Pneumonias
Pneumococcal Pneumonia,
Empyema, Lung Abscess

HCC107
HCC108
HCC110
HCC111

Atherosclerosis of the Extremities with Ulceration or

Gangrene
Vascular Disease with Complications
Vascular Disease
Cystic Fibrosis
Chronic Obstructive Pulmonary Disease

HCC112

Fibrosis of Lung and Other Chronic Lung Disorders

HCC114

Aspiration and Specified Bacterial Pneumonias

HCC115
HCC122

HCC158

Pneumococcal Pneumonia, Empyema, Lung Abscess

Proliferative Diabetic Retinopathy and Vitreous
Hemorrhage
Exudative Macular Degeneration
Dialysis Status
Acute Renal Failure
Chronic Kidney Disease (Stage 5)
Pressure Ulcer of Skin with Necrosis Through to Muscle,
Tendon, or Bone
Pressure Ulcer of Skin with Full Thickness Skin Loss

HCC161
HCC162
HCC166
HCC167
HCC169

Chronic Ulcer of Skin, Except Pressure

Severe Skin Burn or Condition
Severe Head Injury
Major Head Injury
Vertebral Fractures without Spinal Cord Injury

HCC170
HCC173
HCC176

Hip Fracture/Dislocation
Traumatic Amputations and Complications
Complications of Specified Implanted Device or Graft

HCC186

Major Organ Transplant or Replacement Status

HCC111
HCC112

HCC119

Proliferative Diabetic Retinopathy

and Vitreous Hemorrhage

HCC130
HCC131
HCC132
HCC148

Dialysis Status
Renal Failure
Nephritis
Decubitus Ulcer of Skin

HCC149

Chronic Ulcer of Skin, Except

Decubitus
Extensive Third-Degree Burns

HCC150
HCC154
HCC155
HCC157
HCC158
HCC161
HCC164
HCC174

Severe Head Injury

Major Head Injury
Vertebral Fractures w/o Spinal Cord
Injury
Hip Fracture/Dislocation
Traumatic Amputation
Major Complications of Medical
Care and Trauma
Major Organ Transplant Status

HCC124
HCC134
HCC135
HCC136
HCC157

76

Category Short Name

Cerebrovascular Disease

Vascular

Lung

Eye

Kidney

Skin

Injury

Complications
Transplant

2013 CMS-HCC Model (with 70 HCCs)

2014 CMS-HCC Model (with 79 HCCs)

HCC

Description

HCC

Description

HCC176

Artificial Openings for Feeding or

Elimination
Amputation Status, Lower
Limb/Amputation Complications

HCC188

Artificial Openings for Feeding or Elimination

HCC189

Amputation Status, Lower Limb/Amputation

Complications

HCC177

Category Short Name

Openings
Amputation

Community Model Interactions

D_HCC5

Disabled_Opportunistic Infections

D_HCC6

Disabled, Opportunistic Infections

D_HCC44

D_HCC34

Disabled, Chronic Pancreatitis

D_HCC51
D_HCC52
D_HCC107

Disabled_Severe Hematological
Disorders
Disabled_Drug/Alcohol Psychosis
Disabled_Drug/Alcohol Dependence
Disabled_Cystic Fibrosis

D_HCC46
D_HCC54
D_HCC55
D_HCC110
D_HCC176

INT1

DM_CHF

INT2

DM_CVD

INT3
INT4

CHF_COPD
COPD_CVD_CAD

SEPSIS_CARD_
RESP_FAIL
CANCER_
IMMUNE
DIABETES_CHF
CHF_COPD

Disabled, Severe Hematological Disorders

Disabled, Drug/Alcohol Psychosis
Disabled, Drug/Alcohol Dependence
Disabled, Cystic Fibrosis
Disabled, Complications of Specified Implanted Device or
Graft
Sepsis*Cardiorespiratory Failure

INT5
INT6

RF_CHF
RF_CHF_DM

CHF_RENAL
COPD_CARD_
RESP_FAIL

Disabled/
Disease
Interactions

Disease
Interactions

Cancer*Immune Disorders
Diabetes*Congestive Heart Failure
Congestive Heart Failure*Chronic Obstructive Pulmonary
Disease
Congestive Heart Failure*Renal Disease
Chronic Obstructive Pulmonary Disease*Cardiorespiratory
Failure

Institutional Model Interactions

D_HCC5
D_HCC44
D_HCC51
D_HCC52
D_HCC107

Disabled_Opportunistic Infections
Disabled_Severe Hematological
Disorders
Disabled_Drug/Alcohol Psychosis
Disabled_Drug/Alcohol Dependence
Disabled_Cystic Fibrosis

D_HCC85
D_PRESSURE_
ULCER
D_HCC161
D_HCC39
D_HCC77
D_HCC6

Disabled, Congestive Heart Failure

Disabled, Pressure Ulcer
Disabled, Chronic Ulcer of the Skin, Except Pressure Ulcer
Disabled, Bone/Joint Muscle Infections/Necrosis
Disabled, Multiple Sclerosis
Disabled, Opportunistic Infections

77

Disabled/
Disease
Interactions

2013 CMS-HCC Model (with 70 HCCs)

2014 CMS-HCC Model (with 79 HCCs)

HCC

Description

DM_CHF1

Diabetes_Congestive Heart Failure

CHF_COPD

DM_CVD_

Diabetes_Cerebrovascular Disease

CHF_COPD

Congestive Heart Failure_Chronic

Obstructive Pulmonary Disease

COPD_CVD_
CAD_

Chronic Obstructive Pulmonary

Disease_Cerebrovascular
Disease_Coronary Artery Disease
Renal Failure_Congestive Heart
Failure

COPD_CARD_
RESP_FAIL
SEPSIS_
PRESSURE_
ULCER
SEPSIS_ARTIF_
OPENINGS

RF_CHF1

RF_CHF_DM

Renal Failure_Congestive Heart

Failure_Diabetes

HCC

Description
Congestive Heart Failure*Chronic Obstructive Pulmonary
Disease
Chronic Obstructive Pulmonary Disease
*Cardiorespiratory Failure
Sepsis*Pressure Ulcer

Sepsis*Artificial Openings for Feeding or Elimination

ART_OPENINGS_
PRESSURE_
ULCER
DIABETES_CHF

Artificial Openings for Feeding or Elimination*Pressure

Ulcer

COPD_ASP_
SPEC_
BACT_PNEUM
ASP_SPEC_
BACT_PNEUN
PRES_ULC
SEPSIS_ASP_
SPEC_BACT_
PNEUM
SCHIZOPHRENIA
_COPD
SCHIZOPHRENIA
_CHF
SCHIZOPHRENIA
_SEIZURES

Chronic Obstructive Pulmonary Disease*Aspiration and

Specified Bacterial Pneumonias

Diabetes*Congestive Heart Failure

Aspiration and Specified Bacterial Pneumonias*Pressure

Ulcer
Sepsis*Aspiration and Specified Bacterial Pneumonias

Schizophrenia*Chronic Obstructive Pulmonary Disease

Schizophrenia*Congestive Heart Failure
Schizophrenia*Seizure Disorders and Convulsions

Source: RTI International.

78

Category Short Name

Disease
Interactions

Table 6. RxHCC Model Relative Factors for Continuing Enrollees

Variable

Disease Group

Continuing Enrollee (CE) RxHCC Model Segments

Community, Community, Community,
Community,
Non-Low
Non-Low
Low
Low Income,
Institutional
Income,
Income,
Income,
Age<65
Age65
Age<65
Age65

Female
0-34 Years

0.164

0.453

1.720

35-44 Years

0.359

0.656

1.682

45-54 Years

0.470

0.746

1.509

55-59 Years

0.499

0.746

1.467

60-64 Years

0.488

0.719

1.408

65-69 Years

0.331

0.522

1.455

70-74 Years

0.326

0.537

1.388

75-79 Years

0.329

0.531

1.318

80-84 Years

0.337

0.526

1.255

85-89 Years

0.337

0.501

1.177

90-94 Years

0.325

0.465

1.067

95 Years or Over

0.283

0.385

0.887

0-34 Years

0.165

0.476

1.657

35-44 Years

0.309

0.612

1.593

45-54 Years

0.422

0.678

1.521

55-59 Years

0.437

0.668

1.406

60-64 Years

0.439

0.634

1.329

65-69 Years

0.353

0.431

1.363

70-74 Years

0.346

0.460

1.318

75-79 Years

0.325

0.451

1.268

80-84 Years

0.302

0.451

1.217

85-89 Years

0.279

0.427

1.170

90-94 Years

0.269

0.418

1.080

95 Years or Over

0.265

0.413

0.949

Male

Originally Disabled Interactions with Sex

Originally Disabled_Female

0.054

0.110

0.047

Originally Disabled_Male

0.097

0.047

Disease Coefficients

Description Label

RXHCC1

HIV/AIDS

2.129

2.715

2.429

2.756

1.220

RXHCC5

Opportunistic Infections

0.105

0.082

0.072

0.079

0.054

RXHCC8

Chronic Myeloid Leukemia

2.811

3.045

3.196

3.819

1.686

1.738

2.179

1.466

1.811

0.695

0.130

0.167

0.200

0.239

0.065

RXHCC9
RXHCC10

Multiple Myeloma and Other

Neoplastic Disorders
Breast, Lung, and Other Cancers
and Tumors

79

Variable
RXHCC11

Disease Group
Prostate and Other Cancers and
Tumors

Community, Community, Community,

Non-Low
Non-Low
Low
Income,
Income,
Income,
Age65
Age<65
Age65

Community,
Low Income,
Age<65

Institutional

0.011

0.021

0.072

0.030

0.026

RXHCC14

Diabetes with Complications

0.276

0.211

0.344

0.341

0.289

RXHCC15

Diabetes without Complication

0.184

0.151

0.255

0.261

0.204

RXHCC18

Diabetes Insipidus and Other

Endocrine and Metabolic Disorders

0.402

1.012

0.358

0.815

0.115

RXHCC19

Pituitary, Adrenal Gland, and Other

Endocrine and Metabolic Disorders

0.056

0.074

0.021

0.065

0.066

RXHCC20

Thyroid Disorders

0.046

0.093

0.056

0.110

0.047

RXHCC21

Morbid Obesity

0.045

0.038

0.026

0.094

RXHCC23

Disorders of Lipoid Metabolism

0.101

0.097

0.150

0.181

0.078

RXHCC25

Chronic Viral Hepatitis

0.138

0.171

0.285

0.190

0.016

RXHCC30

Chronic Pancreatitis

0.113

0.061

0.055

0.065

0.041

RXHCC31

Pancreatic Disorders and Intestinal

Malabsorption, Except Pancreatitis

0.060

0.056

0.055

0.065

0.041

RXHCC32

Inflammatory Bowel Disease

0.289

0.216

0.210

0.397

0.122

RXHCC33

Esophageal Reflux and Other

Disorders of Esophagus

0.088

0.074

0.136

0.151

0.069

RXHCC38

Aseptic Necrosis of Bone

0.063

0.115

0.061

0.196

0.122

RXHCC40

Psoriatic Arthropathy

0.338

0.460

0.736

1.252

0.558

RXHCC41

Rheumatoid Arthritis and Other

Inflammatory Polyarthropathy

0.161

0.210

0.222

0.420

0.103

RXHCC42

Systemic Lupus Erythematosus,

Other Connective Tissue Disorders,
and Inflammatory Spondylopathies

0.133

0.210

0.165

0.255

0.101

RXHCC45

Osteoporosis, Vertebral and

Pathological Fractures

0.042

0.126

0.121

0.156

RXHCC47

Sickle Cell Anemia

0.111

0.244

0.043

0.614

0.320

RXHCC48

Myelodysplastic Syndromes,
Except High-Grade

0.259

0.389

0.316

0.321

0.343

RXHCC49

Immune Disorders

0.183

0.211

0.198

0.226

0.148

RXHCC50

Aplastic Anemia and Other

Significant Blood Disorders

0.030

0.027

0.025

0.087

0.025

RXHCC54

Alzheimer`s Disease

0.453

0.229

0.245

0.151

RXHCC55

Dementia, Except Alzheimer`s

Disease

0.232

0.127

0.100

0.020

RXHCC58

Schizophrenia

0.341

0.429

0.551

0.861

0.341

RXHCC59

Bipolar Disorders

0.301

0.310

0.355

0.564

0.291

RXHCC60

Major Depression

0.254

0.275

0.316

0.401

0.237

RXHCC61

Specified Anxiety, Personality, and

Behavior Disorders

0.156

0.183

0.181

0.384

0.163

RXHCC62

Depression

0.118

0.142

0.122

0.215

0.134

RXHCC63

Anxiety Disorders

0.041

0.080

0.083

0.176

0.110

RXHCC65

Autism

0.156

0.260

0.406

0.509

0.163

80

Variable
RXHCC66

RXHCC67

RXHCC68

RXHCC71

Disease Group
Profound or Severe Mental
Retardation/Developmental
Disability
Moderate Mental
Retardation/Developmental
Disability
Mild or Unspecified Mental
Retardation/Developmental
Disability
Myasthenia Gravis, Amyotrophic
Lateral Sclerosis and Other Motor
Neuron Disease

Community, Community, Community,

Non-Low
Non-Low
Low
Income,
Income,
Income,
Age65
Age<65
Age65

Community,
Low Income,
Age<65

Institutional

0.062

0.260

0.403

0.325

0.022

0.100

0.271

0.231

0.022

0.018

0.134

0.097

0.187

0.266

0.175

0.404

0.052

RXHCC72

Spinal Cord Disorders

0.058

0.112

0.046

0.050

RXHCC74

Polyneuropathy

0.083

0.167

0.084

0.154

0.079

RXHCC75

Multiple Sclerosis

0.858

1.384

0.837

2.004

0.327

RXHCC76

Parkinson`s Disease

0.378

0.442

0.240

0.224

0.154

RXHCC78

Intractable Epilepsy

0.196

0.408

0.161

0.632

0.033

RXHCC79

Epilepsy and Other Seizure

Disorders, Except Intractable
Epilepsy

0.108

0.094

0.054

0.172

RXHCC80

Convulsions

0.049

0.053

0.040

0.121

RXHCC81

Migraine Headaches

0.096

0.167

0.122

0.126

0.102

RXHCC83

Trigeminal and Postherpetic

Neuralgia

0.073

0.143

0.103

0.130

0.110

RXHCC86

Pulmonary Hypertension and Other

Pulmonary Heart Disease

0.248

0.513

0.303

0.458

0.128

RXHCC87

Congestive Heart Failure

0.152

0.081

0.257

0.116

0.127

RXHCC88

Hypertension

0.143

0.067

0.244

0.113

0.076

RXHCC89

Coronary Artery Disease

0.180

0.097

0.169

0.066

0.031

RXHCC93

Atrial Arrhythmias

0.069

0.039

0.017

0.021

RXHCC97

Cerebrovascular Disease, Except

Hemorrhage or Aneurysm

0.078

0.017

0.058

RXHCC98

Spastic Hemiplegia

0.159

0.187

0.070

0.133

0.035

RXHCC100

Venous Thromboembolism

0.035

0.088

0.022

RXHCC101

Peripheral Vascular Disease

0.054

0.051

0.102

0.060

RXHCC103

Cystic Fibrosis

0.237

1.285

0.272

1.778

0.163

RXHCC104

Chronic Obstructive Pulmonary

Disease and Asthma

0.237

0.135

0.272

0.230

0.163

RXHCC105

Pulmonary Fibrosis and Other

Chronic Lung Disorders

0.127

0.135

0.108

0.230

0.038

RXHCC106

Gram-Negative/Staphylococcus
Pneumonia and Other Lung
Infections

0.011

0.020

RXHCC111

Diabetic Retinopathy

0.124

0.074

0.104

0.071

0.074

RXHCC113

Open-Angle Glaucoma

0.189

0.153

0.232

0.188

0.179

RXHCC120

Kidney Transplant Status

0.191

0.191

0.254

0.271

0.192

RXHCC121

Dialysis Status

0.131

0.196

0.240

0.522

0.203

81

Variable

Disease Group

Community, Community, Community,

Non-Low
Non-Low
Low
Income,
Income,
Income,
Age65
Age<65
Age65

Community,
Low Income,
Age<65

Institutional

RXHCC122

Chronic Kidney Disease Stage 5

0.111

0.126

0.138

0.156

0.104

RXHCC123

Chronic Kidney Disease Stage 4

0.111

0.126

0.124

0.156

0.104

RXHCC124

Chronic Kidney Disease Stage 3

0.090

0.126

0.101

0.156

0.062

RXHCC125

Chronic Kidney Disease Stage 1, 2,

or Unspecified

0.039

0.060

0.034

0.060

0.030

RXHCC126

Nephritis

0.039

0.060

0.034

0.060

0.030

RXHCC142

Chronic Ulcer of Skin, Except

Pressure

0.043

0.056

0.016

0.044

0.023

RXHCC145

Pemphigus

0.182

0.154

0.205

0.048

RXHCC147

Psoriasis, Except with Arthropathy

0.111

0.149

0.232

0.384

0.169

RXHCC156

Narcolepsy and Cataplexy

0.373

0.437

0.389

0.640

0.285

RXHCC166

Lung Transplant Status

0.825

0.747

0.891

1.017

0.199

RXHCC167

Major Organ Transplant Status,

Except Lung, Kidney, and Pancreas

0.552

0.255

0.437

0.326

0.199

RXHCC168

Pancreas Transplant Status

0.191

0.191

0.254

0.229

0.192

NonAged_RXHCC1

NonAged * HIV/AIDS

1.071

NonAged_RXHCC58

NonAged * Schizophrenia

0.306

NonAged_RXHCC59

NonAged * Bipolar Disorders

0.207

NonAged_RXHCC60

NonAged * Major Depression

0.117

NonAged_RXHCC61

NonAged * Specified Anxiety,

Personality, and Behavior
Disorders

0.101

NonAged_RXHCC62

NonAged * Depression

0.086

NonAged_RXHCC63

NonAged * Anxiety Disorders

0.015

NonAged_RXHCC65

NonAged * Autism

0.101

NonAged_RXHCC75

NonAged * Multiple Sclerosis

0.710

NonAged_RXHCC78

NonAged * Intractable Epilepsy

0.107

NonAged_RXHCC79

NonAged * Epilepsy and Other

Seizure Disorders, Except
Intractable Epilepsy

NonAged_RXHCC80

NonAged * Convulsions

Non-Aged Disease
Interactions

Note: The 2011 denominator of $1,182.35 used to calculate the 2013 RxHCC model factors is the national predicted
average annual cost under the model.
Source: RTI Analysis of 100% 2011 PDE, 2010 Carrier NCH, 2010 Inpatient SAF, 2010 Outpatient SAF, 2011
HPMS, 2011 CM, 2010-2011 Denominator, and Part D Final Intermediate File.

82

Table 7. RxHCC Model Relative Factors for New Enrollees, Non-Low Income
Variable

Baseline Not
Concurrently ESRD, Not
Originally Disabled

Concurrently ESRD, Not

Originally Disabled

Originally Disabled, Not

Concurrently ESRD

Originally Disabled,
Concurrently ESRD

Female
0-34 Years

0.488

0.524

35-44 Years

0.747

0.758

45-54 Years

0.943

1.166

55-59 Years

1.023

1.354

60-64 Years

1.047

1.389

65 Years

0.587

1.391

1.018

1.391

66 Years

0.630

1.391

1.018

1.391

67 Years

0.641

1.391

0.803

1.391

68 Years

0.663

1.391

0.803

1.391

69 Years

0.668

1.391

0.803

1.391

70-74 Years

0.642

1.391

0.642

1.391

75-79 Years

0.627

1.391

0.627

1.391

80-84 Years

0.515

1.391

0.515

1.391

85-89 Years

0.429

1.391

0.429

1.391

90-94 Years

0.231

1.391

0.231

1.391

95 Years or Over

0.231

1.391

0.231

1.391

0-34 Years

0.301

0.524

35-44 Years

0.586

0.758

45-54 Years

0.811

1.036

55-59 Years

0.862

1.226

60-64 Years

0.954

1.367

65 Years

0.632

1.450

0.918

1.450

66 Years

0.686

1.450

0.757

1.450

67 Years

0.696

1.450

0.757

1.450

68 Years

0.714

1.450

0.757

1.450

69 Years

0.713

1.450

0.757

1.450

70-74 Years

0.693

1.450

0.693

1.450

75-79 Years

0.636

1.450

0.636

1.450

80-84 Years

0.510

1.450

0.510

1.450

85-89 Years

0.379

1.450

0.379

1.450

90-94 Years

0.200

1.450

0.200

1.450

95 Years or Over

0.200

1.450

0.200

1.450

Male

Notes:
1.

The Part D Denominator used to calculate relative factors is $1,182.35. This Part D Denominator is based on
the combined PDP and MA-PD populations.

2.

Originally Disabled is defined as originally entitled to Medicare by disability only (OREC = 1).

3.

For new enrollees, the concurrent ESRD marker is defined as at least one month in the payment year of ESRD
statusdialysis, transplant, or post-graft.

Source: RTI Analysis of 100% 2011 PDE, 2010 Carrier NCH, 2010 Inpatient SAF, 2010 Outpatient SAF, 2011
HPMS, 2011 CME, 2010-2011 Denominator, and Part D Final Intermediate File.

83

Table 8. RxHCC Model Relative Factors for New Enrollees, Low Income
Variable

Baseline Not
Concurrently ESRD, Not
Originally Disabled

Concurrently ESRD, Not

Originally Disabled

Originally Disabled, Not

Concurrently ESRD

Originally Disabled,
Concurrently ESRD

Female
0-34 Years

0.965

1.570

35-44 Years

1.342

1.707

45-54 Years

1.400

1.817

55-59 Years

1.316

1.817

60-64 Years

1.249

1.803

65 Years

1.025

1.817

1.148

1.817

66 Years

0.719

1.817

0.822

1.817

67 Years

0.719

1.817

0.822

1.817

68 Years

0.719

1.817

0.822

1.817

69 Years

0.719

1.817

0.822

1.817

70-74 Years

0.733

1.817

0.798

1.817

75-79 Years

0.766

1.817

0.798

1.817

80-84 Years

0.824

1.817

0.824

1.817

85-89 Years

0.805

1.817

0.805

1.817

90-94 Years

0.682

1.817

0.682

1.817

95 Years or Over

0.682

1.817

0.682

1.817

0-34 Years

0.849

1.668

35-44 Years

1.171

1.740

45-54 Years

1.190

1.748

55-59 Years

1.087

1.635

60-64 Years

0.991

1.672

65 Years

0.835

1.553

0.887

1.553

66 Years

0.515

1.553

0.584

1.553

67 Years

0.515

1.553

0.584

1.553

68 Years

0.515

1.553

0.584

1.553

69 Years

0.515

1.553

0.584

1.553

70-74 Years

0.552

1.553

0.579

1.553

75-79 Years

0.576

1.553

0.576

1.553

80-84 Years

0.576

1.553

0.576

1.553

85-89 Years

0.576

1.553

0.576

1.553

90-94 Years

0.613

1.553

0.613

1.553

95 Years or Over

0.613

1.553

0.613

1.553

Male

Notes:
1.

The Part D Denominator used to calculate relative factors is $1,182.35. This Part D Denominator is based on
the combined PDP and MA-PD populations.

2.

Originally Disabled is defined as originally entitled to Medicare by disability only (OREC = 1).

3.

For new enrollees, the concurrent ESRD marker is defined as at least one month in the payment year of ESRD
statusdialysis, transplant, or post-graft.

Source: RTI Analysis of 100% 2011 PDE, 2010 Carrier NCH, 2010 Inpatient SAF, 2010 Outpatient SAF, 2011
HPMS, 2011 CME, 2010-2011 Denominator, and Part D Final Intermediate File.

84

Table 9. RxHCC Model Relative Factors for New Enrollees, Institutional

Variable

Baseline Not Concurrently ESRD

Concurrently ESRD

Female
0-34 Years

2.160

2.476

35-44 Years

2.160

2.476

45-54 Years

2.293

2.476

55-59 Years

2.058

2.476

60-64 Years

2.022

2.476

65 Years

2.126

2.476

66 Years

1.931

2.476

67 Years

1.931

2.476

68 Years

1.931

2.476

69 Years

1.931

2.476

70-74 Years

1.718

2.476

75-79 Years

1.606

2.476

80-84 Years

1.557

2.476

85-89 Years

1.274

2.476

90-94 Years

1.274

2.476

95 Years or Over

1.274

2.476

0-34 Years

2.175

2.316

35-44 Years

2.404

2.316

45-54 Years

2.193

2.316

55-59 Years

1.955

2.316

60-64 Years

1.932

2.316

65 Years

1.915

2.316

66 Years

1.769

2.316

67 Years

1.769

2.316

68 Years

1.769

2.316

69 Years

1.769

2.316

70-74 Years

1.708

2.316

75-79 Years

1.667

2.316

80-84 Years

1.566

2.316

85-89 Years

1.410

2.316

90-94 Years

1.410

2.316

95 Years or Over

1.410

2.316

Male

Notes:
1.

The Part D Denominator used to calculate relative factors is $1,182.35. This Part D Denominator is based on
the combined PDP and MA-PD populations.

2.

Originally Disabled is defined as originally entitled to Medicare by disability only (OREC = 1).

3.

For new enrollees, the concurrent ESRD marker is defined as at least one month in the payment year of ESRD
statusdialysis, transplant, or post-graft.

Source: RTI Analysis of 100% 2011 PDE, 2010 Carrier NCH, 2010 Inpatient SAF, 2010 Outpatient SAF, 2011
HPMS, 2011 CME, 2010-2011 Denominator, and Part D Final Intermediate File.

85

Table 10. List of Disease Hierarchies for the Revised RxHCC Model
Rx Hierarchical
Condition Category
(RxHCC)

If the Disease Group is listed in this column

Then drop the RxHCC(s)

listed in this column

Rx Hierarchical Condition Category (RxHCC) LABEL

Chronic Myeloid Leukemia

Multiple Myeloma and Other Neoplastic Disorders

10

Breast, Lung, and Other Cancers and Tumors

11

14

Diabetes with Complications

15

18

Diabetes Insipidus and Other Endocrine and Metabolic Disorders

19

30
40

Chronic Pancreatitis
Psoriatic Arthropathy

41

Rheumatoid Arthritis and Other Inflammatory Polyarthropathy

42

47

Sickle Cell Anemia

50

48

Myelodysplastic Syndromes, Except High-Grade

50

54

Alzheimer's Disease

58
59

Schizophrenia
Bipolar Disorders

59,60,61,62,63,65,66,67,68
60,61,62,63

60

Major Depression

61,62,63

61

Specified Anxiety, Personality, and Behavior Disorders

62

Depression

65

Autism

66
67

Profound or Severe Mental Retardation/Developmental Disability

Moderate Mental Retardation/Developmental Disability

67,68
68

78

Intractable Epilepsy

79,80

79

Epilepsy and Other Seizure Disorders, Except Intractable Epilepsy

86

Pulmonary Hypertension and Other Pulmonary Heart Disease

87
103

Congestive Heart Failure

Cystic Fibrosis

104

Chronic Obstructive Pulmonary Disease and Asthma

120

Kidney Transplant Status

121

Dialysis Status

122

Chronic Kidney Disease Stage 5

123,124,125,126

123
124

Chronic Kidney Disease Stage 4

Chronic Kidney Disease Stage 3

124,125,126
125,126

125

Chronic Kidney Disease Stage 1, 2, or Unspecified

166

Lung Transplant Status

167

Major Organ Transplant Status, Except Lung, Kidney, and Pancreas

9,10,11,48,50
10,11,48,50

31
41,42,147

55

62,63
63
61,62,63,66,67,68

80
87,88
88
104,105
105
121,122,123,124,125,126,168
122,123,124,125,126

126
167,168

Source: RTI International.

86

168

Attachment VIII. 2014 Call Letter

2014 Announcement
Table of Contents
Attachment VIII. 2014 Call Letter .................................................................................................87
How to Use This Call Letter ....................................................................................................90
Section I Parts C and D .........................................................................................................91
Annual Calendar ................................................................................................................91
Plan Corrections .................................................................................................................97
Incomplete Bid Submissions..............................................................................................98
Formulary Submission Deadline........................................................................................99
Star Ratings Changes .......................................................................................................100
Plan/Sponsor Continuity of Operations (COOP) .............................................................114
Revisions to Good Cause Processes ................................................................................114
Year 7 Agent/Broker Compensation Guidance ...............................................................115
Capitated Financial Alignment Demonstrations ..............................................................115
Section II Part C ..................................................................................................................117
Benefit Flexibility for Certain Special Needs Plans ........................................................117
SNP Annual Notice of Change (ANOC) and Evidence of Coverage (EOC)
Requirements .......................................................................................................119
Updates to the Qualification Process for Fully Integrated Dual Eligible (FIDE)
Special Needs Plans .............................................................................................119
Supplemental Benefits Guidance .....................................................................................119
Rewards and Incentives Programs for Medicare Advantage Organizations ...................120
Provider / Beneficiary Shared Decision Making ..........................................................120
Inappropriate shifting of drug coverage from Medicare Part B to Part D .......................121
Plans with Low Enrollment .............................................................................................122
Overview of CY 2014 Benefits Bid Review....................................................................122
Meaningful Difference (Duplicative Plan Offerings) ......................................................123
Total Beneficiary Cost (TBC) ..........................................................................................125
87

Maximum Out of Pocket (MOOP) Limits .......................................................................126

Transferability of an MA enrollees annual contribution toward their maximum outof-pocket cost sharing limit (MOOP) ..................................................................128
Service Category Cost Sharing Requirements .................................................................128
Part C Optional Supplemental Benefits ...........................................................................130
Part C Crosswalks: Segmentation ....................................................................................130
Exceptions to Policies Permitting Plans to Limit Durable Medical Equipment to
Certain Brands and Manufacturers ......................................................................131
Cost Plan Competition Requirements ..............................................................................132
Expanding use of the Blue Button Initiative ..................................................................132
Medicare Advantage Part C EOB ....................................................................................133
Summary of Benefits (SB) Update ..................................................................................133
PBP Notes Update for CY 2014 ......................................................................................134
Section 6055 of the Internal Revenue Code ....................................................................134
Section III Part D ................................................................................................................134
Payment for Hospice and ESRD Beneficiaries under Part D ..........................................134
Daily Cost Sharing Requirements ....................................................................................139
Hospital Outpatient Drug Supplies During Observation Services ...................................141
Withdrawal of Part D Bids after CMS Approval .............................................................142
Inappropriate Use of Prior Authorization (PA) Forms ....................................................143
Auto-Ship Refill Programs in Part D ...............................................................................144
Incremental Fills of Schedule II Controlled Substances Prescriptions ............................146
Real-time, Direct Access to Systems that Adjudicate Claims and Process Appeals
and Grievances .....................................................................................................147
Applicability of Rewards and Incentives in Part D .........................................................148
Payment of Extemporaneous Compounds from Compounding Pharmacies ...................148
Million HeartsTM Initiatives .............................................................................................149
Expansion of Part D Policy on Improving Utilization Review Controls .........................151
Drug Class Quantity Limits .............................................................................................151
Change in Part D Barbiturate Coverage...........................................................................152
Part D Benefit Parameters for Non-Defined Standard Plans ...........................................153
88

Employer Group Waiver Plan (EGWP) Supplemental Prescription Drug Benefits ........156
PDE Guidance on Post-Point-Of-Sale Claim Adjustments .............................................157
Post Point-of-Sale Per Claim Administrative Fees ..........................................................164
Medication Therapy Management ...................................................................................165
Antipsychotic Data...........................................................................................................172
Improvements to the Prescription Drug Plan Information Files ......................................173
Coordination of Benefits (COB) User Fee.......................................................................174
Part D Low Enrollment ....................................................................................................174
Preferred / Non-Preferred Pharmacy Networks ...............................................................175
Appendix 1 Additional Gap Coverage ................................................................................177
Appendix 2 Contract Year 2014 Guidance for Prescription Drug Plan (PBP) Renewals
and Non-Renewals .......................................................................................................180
Appendix 3 Contract Year 2014 Guidance for Prescription Drug Plan (PBP) Renewals
and Non-Renewals - Table ...........................................................................................185
Appendix 4 Contract Year 2014 Guidance for PDP PBP Renewal Option 6 Special
Disenrollment Model Notice ........................................................................................189
Appendix 5 - Summary of Comments on the Draft Call Letter .............................................191

89

Attachment VIII: Call Letter 2014

How to Use This Call Letter
The 2014 Call Letter contains information on the Part C and Part D programs that Medicare
Advantage Organizations (MAOs) and Part D sponsors need to take into consideration in
preparing their 2014 bids.
CMS has designed the policies contained in this Call Letter to improve the overall management
of the Medicare Advantage and Prescription Drug programs with four major outcomes in mind.
These outcomes are to ensure continued program 1) vibrancy and stability, 2) value for
beneficiaries and tax-payers, 3) quality improvement, and 4) compliance improvement. This
year, to achieve these somewhat overlapping outcomes, CMS Call Letter activities follow four
major themes: improving bid review, decreasing costs, promoting creative benefit designs, and
improving beneficiary protections.
We expect this information will strengthen the Part C and D programs and will be helpful as Part
C and D organizations prepare either to offer a plan for the first time or continue offering plans
under the MA and/or Part D programs.
If you have questions concerning this Call Letter, please contact: Vanessa Sammy at
[email protected] (Part C issues) and Stephanie Hammonds at
[email protected] (Part D issues).

90

Section I Parts C and D

Annual Calendar
Below is a combined calendar listing of side-by-side key dates and timelines for operational
activities that pertain to MA, MA-PD, PDP, MMP, and cost-based plans. The calendar provides
important operational dates for all organizations such as the date CMS bids are due, the date that
organizations must inform CMS of their contract non-renewal, and dates for beneficiary
mailings.
2014*Note: The dates listed under Part C include MA and MA-PD plans. The
dates listed under Part D Sponsors also apply to MA and cost-based plans
offering a Part D benefit.
January 10, 2013 Release of the 2014 MAO/MA-PD/PDP/Service Area
Expansion Applications.
January 9 & 16,
Industry training on 2014 Applications.
2013
February 21, 2013 2014 Applications are due to CMS.

*Part C

*Part D
Sponsors

Late February
2013

Submission of meaningful use HITECH attestation for

qualifying MA Employer Plans and MA-affiliated hospitals.

March 1, 2013

CMS releases guidance concerning updates to Parent

Organization designations in HPMS.
Initial Submission deadline for risk adjustment data with dates
of service January 1, 2012 through December 31, 2012.

D-SNP deadline to notify CMS of intent to offer additional

supplemental benefits as a result of meeting the qualifying
criteria.
Parent Organization Update requests from sponsors due to CMS
(instructional memo to be released in February 2013).

Mid-Late March,
2013

Release of CY 2014 Formulary Training Video

March 22, 2013

Release of the of the Fiscal Soundness Module in HPMS.

March 1, 2013

March 4, 2013

March 15, 2013

March/April, 2013 CMS contacts Medicare Advantage Organizations (MAO) and

PDPs with low enrollment plans.
Early April 2013 CY 2014 Out-of-pocket cost (OOPC) estimates for each plan
and an OOPC model in SAS will be made available to MAOs to
download from the CMS website that will assist plans in
meeting meaningful difference and MA total beneficiary cost
requirements prior to bid submission.
Early April, 2013 Information about renewal options for contract year 2014
(including HPMS crosswalk charts) will be provided to plans.

91

Cost

2014*Note: The dates listed under Part C include MA and MA-PD plans. The
dates listed under Part D Sponsors also apply to MA and cost-based plans
offering a Part D benefit.
April 2013
Conference call with industry to discuss the 2014 Call Letter.

*Part C

*Part D
Sponsors

Cost

April 2013

Industry training dedicated to Annual Part D Formulary and

Benefit Compliance Training

April 1, 2013

2014 Final Call Letter released.

Announce CY 2014 MA Capitation Rates and MA and Part D
Payment Policies. (Applies to Part C and Part D Sponsors only)
Industry training on CY 2014 Formulary Submission

Release of the 2014 Plan Benefit Package (PBP) online training

module
Release of the 2014 Plan Creation Module, PBP, and Bid
Pricing Tool (BPT) software in HPMS.
Release of the 2014 Medication Therapy Management (MTM)
Program Submission Module in HPMS.

May 6, 2013

Final ANOC/EOC, LIS rider, Part D EOB, formularies,

transition notice, provider directory, and pharmacy directory
models for 2013 will be available for all organizations.
D-SNPs that applied to offer additional supplemental benefits
are notified by CMS as to whether they meet required
qualifications
CMS strongly encourages MA, MA-PD and PDP plans to notify
us of its intention to non-renew a county (ies) for individuals,
but continue the county (ies) for 800 series EGWP members,
convert to offering employer-only contracts, or reduce its
service area at the contract level, by May 2, 2013. This will
allow CMS to make the required changes in HPMS to facilitate
the correct upload of bids in June.
2014 MTM Program submission deadline.

May 6, 2013

Medicare Advantage and Part D Spring Conference

May 10, 2013

Release of the 2014 Bid Upload Functionality in HPMS

May 13, 2013

Release of Health Plan System (HPMS) Formulary Submission

Module

April 3, 2013

April 5, 2013
April 5, 2013
April 22, 2013

May, 2013

Early May, 2013

May 2, 2013

92

2014*Note: The dates listed under Part C include MA and MA-PD plans. The
dates listed under Part D Sponsors also apply to MA and cost-based plans
*Part C
offering a Part D benefit.
May 31, 2013
2014 Formulary Submissions due from all sponsors offering

Part D including Medicare-Medicaid Plans (11:59 p.m. PDT).

Transition Attestations due to CMS
PA/ST Attestations due to CMS
P&T Attestations due to CMS
Late May/Early
Release of the 2014 Medicare Marketing Guidelines in HPMS

June, 2013
(Chapter 3 of the Medicare Managed Care Manual/Chapter 2 of
the Prescription Drug Benefit Manual)
Late May/June,
CMS sends qualification determinations to applicants based on

2013
review of the 2014 applications for new contracts or service
area expansions.
Late May/June to CMS completes review and approval of 2014 bid data.

Early September, Submit attestations, contracts, and final actuarial certifications.

2013
May 31, 2013
Release of the 2012 DIR Submission Module in HPMS.

May 31, 2013

May 31, 2013

June 3, 2013

June 7, 2013

June 7, 2013

June 24, 2013

Plans / Part D Sponsors may begin to upload agent/broker

compensation information in HPMS.
Release of the 2014 Marketing Module in HPMS.
Note: Plans / Part D Sponsors may begin to submit 2014
marketing materials.
Deadline for submission of CY 2014 bids for all MA plans,
MA-PD plans, PDP, cost-based plans offering a Part D benefit,
Medicare-Medicaid Plans, 800 series EGWP and direct
contract EGWP applicants and renewing organizations; deadline
for cost-based plans wishing to appear in the 2014 Medicare
Plan Finder to submit PBPs (11:59 p.m. PDT).
Deadline for MA plans, MA-PD plans, PDPs and Medicare
cost-based contractors and cost-based sponsors to submit a
contract non-renewal, service area reduction notice to CMS for
CY 2014. Deadline also applies to an MAO that intends to
terminate a current MA and/or MA-PD plan benefit package
(i.e., Plan 01, Plan 02) for CY 2014.
Deadline for submitting Supplemental Formulary files, Free
First Fill file, Partial Gap file, Excluded Drug file, Over the
Counter (OTC) drug file, and Home Infusion file through
HPMS.
Deadline for submission of Additional Demonstration Drug
(ADD) file (Medicare-Medicaid Plans Only)
Release of the CY 2014 Summary of Benefits (SB) hard copy
change request module in HPMS.

93

*Part D
Sponsors

Cost

2014*Note: The dates listed under Part C include MA and MA-PD plans. The
dates listed under Part D Sponsors also apply to MA and cost-based plans
*Part C
offering a Part D benefit.
Late June, 2013
CMS sends an acknowledgement letter to all MA, MA-PD, PDP

and Medicare cost-based plans that are non-renewing or

reducing their service area.
June 30, 2013
Final date to submit CY 2013 marketing materials to ensure

timely CMS review and approval. NOTE: Plans/Part D

Sponsors may continue to submit CY 2013 file and use
materials as these may be filed in HPMS five calendar days
prior to their use.
Early July, 2013
2014 Plan Finder pricing test submissions begin

July 1, 2013
July 1, 2013

July 5, 2013

Deadline for Dual Eligible SNPs to have uploaded their required

State Medicaid Agency Contract and Contract Matrix to HPMS
Deadline for Dual Eligible SNPs requesting to be reviewed as
Fully Integrated Dual Eligible SNPs to submit their FIDE SNP
Matrix to HPMS.
Plans are expected to submit non-model Low Income Subsidy
(LIS) riders to the appropriate Regional Office for review.

July 31, 2013

2014 MTM Program Annual Review completed.

Mid-Late July,
2013

CY 2014 Limited Formulary Update Window

Late July, 2013

Submission deadline for agent/broker compensation information

via HPMS.

Late July/Early
August, 2013

CMS encourages cost-based plans to submit their summary of

benefits (SBs) by this date so that materials can be reviewed and
approved prior to the publishing of Medicare Plan Finder and
the Medicare & You handbook. SBs must be submitted by this
date to be assured of being included.
CMS releases the 2014 Part D national average monthly bid
amount, the Medicare Part D base beneficiary premium, the Part
D regional low-income premium subsidy amounts, the Medicare
Advantage regional PPO benchmarks, and the de minimis
amount.
Rebate reallocation period begins after release of the above bid
amounts.
Plans are expected to submit model Low Income Subsidy (LIS)
riders in HPMS.
CMS informs currently contracted organizations of its decision
to not renew a contract for 2014.

Early August,
2013

Early August,
2013
August 1, 2013
August 1, 2013

94

*Part D
Sponsors

Cost

2014*Note: The dates listed under Part C include MA and MA-PD plans. The
dates listed under Part D Sponsors also apply to MA and cost-based plans
*Part C
offering a Part D benefit.
August 22-26,
First CY 2014 preview of the 2014 Medicare & You plan data in

2013
HPMS prior to printing of the CMS publication (not applicable
to EGWPs).
August 28
First CY 2014 Medicare Plan Finder (MPF) Preview and Out
August 30, 2013
of-Pocket Cost (OOPC) Preview in HPMS.
Late August 2013 Contracting Materials submitted to CMS.

*Part D
Sponsors

Cost

End of
Plan preview periods of Star Ratings in HPMS.
August/Early
September 2013
September 6, 2013 Initial Submission deadline for risk adjustment data with dates
of service from July 1, 2012 through June 30, 2013.

Mid-September
2013
Mid- September
2013

CMS begins accepting plan correction requests upon contract

approval.
All 2014 contracts fully executed (signed by both parties: Part
C/Part D Sponsor and CMS).

September 10 September13,
2013
September 16
30, 2013
September 30,
2013

Second CY 2014 Medicare Plan Finder (MPF) Preview and

Out-of-Pocket Cost (OOPC) Preview in HPMS.

CMS mails the 2014 Medicare & You handbook to Medicare

beneficiaries
CY 2014 standardized, combined Annual Notice of Change
(ANOC)/Evidence of Coverage (EOC) is due to current
members of all MA plans, MA-PD plans, PDPs and cost-based
plans offering Part D. MA and MA-PD plans must ensure
current members receive the combined ANOC/EOC by
September 30. Plans have the option to include
Pharmacy/Provider directories in this mailing.

All plans offering Part D must mail their LIS riders and
abridged or comprehensive formularies with the ANOC/EOC to
ensure current member receipt by September 30.

Late September,
2013
Early October,
2013

Note: With the exception of the ANOC/EOC, LIS Rider,

directories, and abridged or comprehensive formularies, no
additional materials may be sent prior October 1.
D-SNPs that requested review for Fully Integrated Dual Eligible
(FIDE) Special Needs Plan (SNP) determination notified as to
whether they meet required qualifications.
Release of the online CY 2014 Notice of Intent to Apply for a
New Contract or a Contract Expansion (MA, MA-PD, PDPs,
and 800 series EGWPs and Direct Contract EGWPs)

95

2014*Note: The dates listed under Part C include MA and MA-PD plans. The
dates listed under Part D Sponsors also apply to MA and cost-based plans
offering a Part D benefit.
October 1, 2013
Organizations may begin marketing their CY 2014 plan
benefits.
Note: Once an organization begins marketing CY 2014 plans,
the organization must cease marketing CY 2013 plans through
mass media or direct mail marketing (except for age-in
mailings). Organizations may still provide CY 2013 materials
upon request, conduct one-on-one sales appointments and
process enrollment applications.
October 1, 2013
Deadline for Part D sponsors, cost-based, MA and MA-PD
organizations to request a plan correction to the plan benefit
package (PBP) via HPMS.
Deadline for Part D sponsors, cost-based, MA and MA-PD
organizations to request any SB hard copy change.
October 1, 2013
Tentative date for 2014 plan and drug benefit data to be
displayed on Medicare Plan Finder on Medicare.gov (not
applicable to EGWPs).
October 2, 2013
The final personalized beneficiary non-renewal notification
letter must be received by PDPs, MA plan, MA-PD plans, and
cost-based plan enrollees.
PDPs, MA plans, MA-PD plans, and Medicare cost-based
organizations may not market to beneficiaries of non-renewing
plans until after October 2, 2013.
October 8, 2013
Star Ratings go live on medicare.gov on or around October 8,
2013.
October 15, 2013 Part D sponsors must post PA and ST criteria on their websites
for the 2014 contract year.
October 15, 2013

2014 Annual Election Period begins. All

organizations/sponsors must hold open enrollment (for EGWPs,
see Chapter 2 of the Medicare Managed Care Manual, Section
30.1).
November 9, 2013 Notices of Intent to Apply (NOIA) for CY 2015 due for MA,
MA-PD, PDPs, and 800 series EGWPs and Direct Contract
EGWPs.
Late November,
Display measures data are posted in HPMS for plan preview.
2013
Late November,
2014 Readiness Assessment due to CMS
2013
November
CMS issues close out information and instructions to MA
December, 2013
plans, MA-PD plans, PDPs, and cost-based plans that are nonrenewing or reducing service areas.
December 1, 2013 Enrollees in Medicare cost-based plans not offering Part D must
receive the combined ANOC/EOC.

96

*Part C

*Part D
Sponsors

Cost

2014*Note: The dates listed under Part C include MA and MA-PD plans. The
dates listed under Part D Sponsors also apply to MA and cost-based plans
offering a Part D benefit.
December 1, 2013 Cost-based plans must publish notice of non-renewal.

*Part C

*Part D
Sponsors

Cost

December 7, 2013 End of the Annual Election Period.

Mid- December,
2013
2014

Display measures data on CMS.GOV updated.

January 1, 2014

Plan Benefit Period Begins

January 1
Annual 45-Day Medicare Advantage Disenrollment Period
February 14, 2014 (MADP).

Early January
2014

Mid-January, 2014 Industry training on CY 2015 applications.

January 31, 2014

Late February
2014
March 7, 2014

Release of CY 2015 MAO/MA-PD/PDP/SAE/EGWP

applications.

Final Submission deadline for risk adjustment data with dates of

service January 1, 2012 through December 31, 2012.
Applications due for CY 2015.

Initial Submission deadline for risk adjustment data with dates

of service January 1, 2013 through December 31, 2013
September 5, 2014 Initial Submission deadline for risk adjustment data with dates
of service from July 1, 2013 through June 30, 2014

Plan Corrections
CMS expects that requests for MA, cost plan and PDP corrections for CY 2014 will be minimal.
As required by 42 CFR 422.254, 423.265(c)(3) and 423.505(k)(4), submission of the final
actuarial certification and the bid attestation serves as documentation that the final bid
submission has been verified and is complete and accurate at the time of submission. A request
for a plan correction indicates the presence of inaccuracies and/or the incompleteness of a bid
and calls into question an organizations ability to submit correct bids and the validity of the final
actuarial certification and bid attestation.
After bids are approved, CMS will not reopen the submission gates to correct errors identified by
the plan until the plan correction window in September. The plan correction window will be
open from mid September to October 1, 2013. Only changes to the PBP that are supported by
the BPT are allowed during the plan corrections period.
97

CMS has determined that given the limited timeframe for review of the corrected PBP in relation
to the initial posting of plan data in Medicare Plan Finder (MPF), the affected plans will be
suppressed in MPF for the initial release until the bid is corrected and approved, and the MPF is
updated for the second release in early November. Please also be advised that an organization
requesting a plan correction will receive a compliance notice. An organization that previously
received a compliance notice for CY 2013 may receive a more severe type of compliance action
if it requests a plan correction for CY 2014.
Incomplete Bid Submissions
Per Sections 1854(a)(1)(A) and 1860D-11(b) of the Social Security Act, initial bid submissions
for all Part C and Part D plans are due the first Monday in June and shall be in a form and
manner specified by the Secretary. Therefore, for CY2014, the bid submission deadline is June
3, 2013 at 11:59 PM Pacific Daylight Time.
The following components are required, if applicable to comprise a complete bid submission:

Plan Benefit Package (PBP) and Bid Pricing Tool (BPT)

Service Area Verification (SAV)
Plan Crosswalk (if applicable)
Formulary Crosswalk (if offering a Part D plan)
Substantiation (support documentation for pricing)

Organizations are responsible for ensuring complete and accurate bids are submitted by the June
deadline. This year, CMS is making clear that all components required for an organizations bid
must be submitted by the deadline to constitute a complete submission. If any one of the
required components are not submitted by the deadline, the bid submission will be considered
incomplete and will not be accepted by CMS absent extraordinary circumstances. This
requirement is consistent with previous years (please refer to HPMS Memo Release of Contract
Year (CY) 2013 Bid Upload Functionality in HPMS, dated May 11, 2012.)
The Health Plan Management System (HPMS) Bid Upload functionality, made available each
May, allows all organizations to submit each required component of their bids well in advance of
the deadline and reporting tools track those components which were successfully submitted and
which are still outstanding. Given the resources available to organizations to monitor and verify
the status of bid submissions, CMS expects that all components of a bid will be submitted
successfully and accurately by the submission deadline.
All organizations are expected to contact CMS about any technical upload or validation errors
well in advance of the bid submission deadline. CMS may give consideration to late submissions
in rare situations if the late submission is the result of a technical issue beyond the
Organizations control. All organizations should ensure that appropriate personnel are available
98

both before and after the bid submission deadline to address any ongoing bid upload and/or
validation issues that are preventing the bid from proceeding to desk review.
Formulary Submission Deadline
In the December 19, 2012 HPMS memo entitled CY 2014 Formulary Submission Deadline,
CMS announced that the CY 2014 Health Plan Management System (HPMS) formulary
submission window will be open later this year than in past years, from 12:00 am PDT on May
13, 2013 to 11:59 pm PDT on May 31, 2013. In addition, CMS must be in receipt of a
successfully submitted and validated formulary submission by the deadline of May 31, 2013 in
order for it to be considered for review.
The decision to change the CY 2014 formulary submission window and deadline was made after
consideration was given to the valuable feedback CMS received from Part D plan sponsors with
respect to the proposed changes. We have evaluated the impact of the formulary submission
deadline date change with respect to Formulary Reference File (FRF) release dates, formulary
submission windows, and the Part D out-of-pocket cost (OOPC) analyses. CMS released the first
CY 2014 FRF in March 2013. The March FRF release will be used in the production of the
OOPC model tool, scheduled to be released in April 2013, in order to assist plan sponsors in
meeting meaningful difference and MA total beneficiary cost requirements prior to bid
submission. Sponsors should note that the OOPC model released in April will not be modified to
incorporate any subsequent FRF updates, as described below.
Based on plan sponsor feedback, CMS is planning to provide a May 2013 release of the 2014
FRF just prior to the new formulary submission deadline. In their comments, sponsors cited the
advantage of having the most up-to-date FRF information available to them at the time of their
formulary submission as the basis for their support of having an additional FRF release prior to
the formulary submission deadline. Given the limited timeframe between the May release of the
2014 FRF and the new formulary submission deadline, CMS will be unable to accommodate an
updated version of the 2014 OOPC model to incorporate the May FRF changes, as noted above.
Therefore, CMS cautions plan sponsors that any newly added drugs on the May release of the
2014 FRF will not be included in the 2014 OOPC model.
CMS notes that there will be a change in the current formulary submission process beginning for
CY 2014, as follows: while CMS will continue to offer a summer formulary update, formulary
changes during this particular update submission will be limited to: 1) the addition of drugs that
are new to the summer release of the FRF (historically posted in July); and 2) the submission of
negative changes on brand drugs, only if the equivalent generic is added to the summer FRF and
corresponding formulary file. Thus, plan sponsors need to carefully consider any newly added
drugs on the May release of the FRF 2014, since additional limitations will be imposed on the
summer formulary update window, as noted in the December 19, 2012 HPMS Memo entitled
CY 2014 Formulary Submission Deadline.
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Star Ratings Changes

For the 2014 Star Ratings, CMS is continuing to improve the current methodology to further
align it with our policy goals. In this section, we describe the enhancements for the 2014 Star
Ratings and unless noted below, we do not anticipate the methodology changing from the 2013
Star Ratings. The 2013 methodology document (Technical Notes) can be found at
www.cms.gov/Medicare/Prescription-Drug-Coverage/PrescriptionDrugCovGenIn/
PerformanceData.html under the 2013 Plan Ratings link. The star cut points for all measures and
case-mix coefficients for the Consumer Assessment of Healthcare Providers and Systems
(CAHPS) survey and Health Outcomes Survey (HOS) will be updated with the most current data
available.
In November 2012, CMS sent out a Request for Comments to Part C and D sponsors,
stakeholders, and advocates that described CMS proposed methodology for the 2014 Star
Ratings and beyond for Medicare Advantage (MA) and Prescription Drug Plans (PDP). The
purpose of this comment period was to provide plans and advocates with additional notice of the
methodology so that CMS could identify any needed changes in advance of the Call Letter. We
received approximately 80 comment letters. We incorporated this feedback in developing the
enhancements proposed in the draft Call Letter. Based on the feedback received, we are making
changes to methodologies on current measures, but we are not introducing new measures for
2014. Appendix 5 contains a summary of the comments received on the draft Call Letter and
CMS response. As announced in previous years, we will annually review the quality of the data
across all measures, variation among contracts, and the measures accuracy and validity before
making a final determination about inclusion of measures in the Star Ratings.
Changes to the Methodology of Current Measures
CMS is modifying the methodology for the following measures:

Call Center Foreign Language Interpreter and TTY Availability (Part C and D).
Affects Puerto Rico Plans only. Recognizing that Spanish is the predominant language in
Puerto Rico, beginning in 2013 CMS will measure English as a foreign language for
contracts for which Puerto Rico is the exclusive service area. We are replacing nonEnglish language with foreign language in the metric to reflect this change.

Quality Improvement (Part C and D). CMS methodology currently includes a hold
harmless provision for contracts with overall ratings of 4 or more stars that would have
their overall rating decreased with the addition of the improvement measure(s). CMS is
modifying the methodology so contracts are also held harmless if their individual
measure stars are 5 stars in the two years being evaluated for improvement. That is, if a
contract receives 5 stars in an individual measure for the two years being measured, and
demonstrates a statistically significant decline (at the 0.05 significance level) on the
eligible measure, then this measure will not be included in the contracts improvement
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measure calculation. Contracts must have data for at least half of the eligible measures
used to calculate the improvement score to be eligible for the improvement
measure. Measures that are held harmless as described here will be included in the count
of eligible measures used to determine eligibility for the measure. Improvement scores of
0 (equivalent to no net change on the eligible measures included in the improvement
calculation) will receive 3 stars when assigning the star ratings for the improvement
measure.

High-Risk Medication Use (Part D). This measure is based on the Pharmacy Quality
Alliance (PQA)-endorsed Use of High-Risk Medications in the Elderly (HRM) measure.
The HRM measure is defined as the percentage of Medicare Part D enrollees 65 years or
older who received two or more fills of at least one HRM (i.e., the same HRM drug)
during the measurement year. CMS is making the following clarification to the
measures technical notes: This measure calculates the percentage of Medicare Part D
beneficiaries 65 years or older who received two or more prescription fills for the same
HRM drug with a high risk of serious side effects in the elderly. CMS methodology
already takes into account 2 or more fills for the same HRM (active ingredient); please
refer to the Report User Guide on the Patient Safety Analysis Website for more
information.
The PQA updated the HRM measure specifications and National Drug Code (NDC) list
as a result of the American Geriatrics Society (AGS) recommendations to the Beers List.
CMS evaluated the new HRM list, and there is approximately a 50% overlap in drugs that
are included on both the prior HRM drug list and the updated list. CMS provided notice
in the 2013 Call Letter that it would evaluate implementing this new list on either
CY2012 or CY2013 PDE data, for the 2014 or 2015 Star Ratings, to determine when
these revised specifications would become effective. CMS will make the following
changes:

The original PQA HRM list (i.e. the one used for the 2013 Star Ratings) will
continue to be applied to calculate the HRM measure for the 2014 Star Ratings
using 2012 Prescription Drug Event (PDE) data.

The updated PQA HRM list, based on the AGS recommendations to the Beers
List, will be applied to calculate the HRM measure for the 2015 Star Ratings
using 2013 PDE data.

Since CMS began using the updated PQA HRM medication list to calculate the
2012 HRM rates provided to contracts via the Patient Safety Analysis Website in
August 2012, CMS will redesign the reports to also include 2012 HRM rates

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using the original PQA HRM list. The timing for the revised reports is still being
determined. We also anticipate releasing 2013 reports by May of 2013.
Part D coverage of barbiturates (used in the treatment of epilepsy, cancer, or a chronic
mental health disorder) and benzodiazepines began in January 2013. The updated PQA
HRM list includes barbiturates, not benzodiazepines. Therefore, the measure calculation
will reflect Part D coverage changes, and Part D covered barbiturates would be included
in the calculation for the 2015 Star Ratings using the 2013 PDE data. We expect that a
pre-determined 4-star threshold will not be set for this measure for several years, and that
this measure will continue to be excluded from the Improvement measure, given the
specification changes. CMS will continue to base star cutpoints on statistical analyses
and the relative ranking of contracts scores.

Medication Adherence for Diabetes Medications (Part D). This measure is currently
defined as the percentage of Medicare Part D beneficiaries 18 years or older that adhere
to their prescribed drug therapy across four classes of oral diabetes medications:
biguanides, sulfonylureas, thiazolidinediones, and DiPeptidyl Peptidase (DPP)-IV
Inhibitors. Per PQA-endorsed specifications, beneficiaries who have one or more
prescriptions for insulin in the measurement period are excluded. CMS is adopting
PQAs changes to this measures specifications for the 2015 Star Ratings (using 2013
PDE data), specifically the addition of two additional drug classes to the numerator and
denominator (meglitinides and incretin mimetic agents). We are also renaming the
measure to: Medication Adherence for Diabetes Medications. The new proportion of
days covered (PDC) calculation would determine if the beneficiary is covered by at least
one drug from any of the six classes of diabetes drugs. We would also like to note that
for the Medication Adherence measures for Diabetes, Hypertension, and Cholesterol, we
will continue to use a slightly modified PDC calculation to adjust for overlapping
prescriptions for the same drug using generic name (ingredient name). PQAs
specifications use Generic Code Numbers (GCNs) (which includes strength).
Considering medication adherence is measured using claim fill dates and days supply as a
proxy for utilization, there are some scenarios where using GCN may be too restrictive.
For this reason, we will continue to use the broader interpretation of the PDC calculation
using generic name.

Rounding of measure data. CMS will round measure data and cut points used for CMS
Star Ratings (including Part D Patient Safety measures) to whole numbers, in order to
avoid small differences in decimal values that result in differences in performance
ratings, except for the following measures: Part C and D Complaints about the Health and
Drug Plan measures, Health and Drug Plan Quality Improvement measures, and Part D
Appeals Auto-Forward. For the measures rounded to whole numbers, we will use
standard rounding rules where raw measure scores that end in less than 0.50 are rounded
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down and raw measure scores that end in 0.50 or more are rounded up. The Complaints
measures are rounded to two decimal points, the Improvement measures are rounded to
three decimal points and Part D Appeals Auto-forward is rounded to one decimal point.
The rounding discussed here does not apply to the overall and summary ratings.

Other Changes. As usual, CMS expects to update existing measures with current
specifications or underlying data. For example, CMS will refresh analyses to include
updated NDC lists provided by the PQA for the respective patient safety measures.
These changes are typically reflected in ongoing information shared with Plans, e.g.,
Patient Safety Website reports, prior to the release of Star Ratings. Beginning with the
2015 Star Ratings and Display measures (using 2013 PDE data), we will implement the
PQAs specification change to account for obsolete NDCs. NDCs will be included in the
measure calculation if the obsolete date is within the period of measurement
(measurement year). Other updates to CMS monitoring and audit protocols may be
reflected as well.

Four Star Thresholds

Similar to 2013, CMS will continue to apply previously pre-set 4-star thresholds, unless
significant changes have been made to a measures technical specifications. There are no
measures for the 2014 Star Ratings that have significant technical changes that would necessitate
a change from the current pre-set 4-star thresholds. The current cut-points for all other measures
can be found in the Technical Notes available at https://www.cms.gov/Medicare/PrescriptionDrug-Coverage/PrescriptionDrugCovGenIn/PerformanceData.html under the 2013 Plan Ratings
link.
In the draft Call Letter, CMS proposed additional pre-set 4-star thresholds for measures that have
been part of the Star Ratings for at least two years based on the historical data. We are delaying
the setting of any new pre-set 4-star thresholds for the 2014 Star Ratings based on feedback
received from sponsors on the changes to the overall rating methodology. CMS is concerned
that pre-setting 4-star thresholds could contribute to potential misclassification. We are not
establishing any new pre-set 4-star thresholds for the 2014 Star Ratings while we complete a
more comprehensive analysis of the impact of the pre-set 4-star thresholds.
CMS has emphasized the importance of supporting the Million HeartsTM initiative. A number of
measures in the Star Ratings are consistent with this aim, as they monitor cardiovascular care,
blood pressure, and medication adherence. High quality in these measures is expected to reduce
risks for heart attack, hypertension, kidney disease, and stroke for Medicare beneficiaries. For
the 2015 Star Ratings, we anticipate setting and/or raising the pre-set 4-star thresholds for the
following measures that are relevant to Million HeartsTM to encourage quality improvement by
plans on these six measures:
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Cardiovascular Care Cholesterol Screening (Part C)

Controlling Blood Pressure (Part C)
Diabetes Treatment (Part D)
Medication Adherence for Diabetes Medications (Part D)
Medication Adherence for Hypertension (RAS antagonists) (Part D)
Medication Adherence for Cholesterol (Statins) (Part D)
The proposed pre-set 4-star thresholds are as follows beginning with the 2015 Star Ratings. For
all measures with existing 4-star thresholds we have set up to a 2-percentage point increase. For
these measures we have seen in the trend data increases in performance so this change reflects
continuous improvement in these areas.
Table 1: Revised Pre-set Thresholds for 2015 Star Ratings
Measure

2015 4-star Threshold

Cardiovascular Care- Cholesterol Screening

87%

Controlling Blood Pressure

65%

Diabetes Treatment

MA-PDs 87%; PDPs 84%

Medication Adherence for Diabetes Medications

MA-PDs 78%; PDPs 79%

Medication Adherence for Hypertension (RAS antagonists)

MA-PDs 79%; PDPs 81%

Medication Adherence for Cholesterol (Statins)

MA-PDs 74%; PDPs 76%

Changes in the Calculation of the Overall Rating and the Part C and D Summary Ratings
In constructing Star Ratings for public reporting and the Quality Bonus Payment (QBP) program,
a key concern is the possibility of generating Star Ratings that do not reflect a contracts true
performance. This possibility is called the risk of misclassifying a contract (e.g., scoring a
true 4-star contract as a 3-star contract). Additionally, beginning with the 2015 Star Ratings,
CMS intends to propose the inclusion of low-enrollment contracts in the Star Rating program.
The change discussed here becomes more critical in 2015 since the risk of performance
misclassification for all contracts increases when including low-enrollment contracts. To address
this issue, CMS has been evaluating several analytic strategies in order to determine an approach
to mitigate the risk of misclassification. There were a number of comments to the draft Call
Letter on the proposed change to the calculation of the overall rating and Part C and D summary
ratings, including requests for additional clarifications and a delay in implementation.
Currently, the plans overall/summary ratings are calculated by averaging the individual
measures stars rather than the underlying scores that plans achieve on each of the measures. By
using the average of the individual measure stars, we lose information about the actual
performance on the individual measures. In the draft Call Letter, CMS had proposed a new
method for computing the overall/summary ratings that would have averaged the underlying
measures scores. The new method would improve the correspondence between a plans true
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performance in measures and its overall/summary stars by directly averaging the unrounded
underlying individual measure scores. By avoiding rounding of performance, CMS proposal
would improve the precision of the calculation of plans overall ratings and avoid potential
misclassification of plans.
As we have looked at issues around the precision of the overall rating calculations, CMS is
concerned that the pre-set 4-star thresholds may also be contributing to the issue. CMS has
decided to delay implementing modifications to the calculation of the overall/summary ratings
until additional research can be done. Thus, the same methodology used in prior years to
calculate the overall/summary ratings will be used for the 2014 Star Ratings. If we intend to
change the overall rating methodology in future years, we will give advance notice to plans on
the proposed methodology. We hope to present the results of our additional research to plans
this summer. We will also help plans understand the impact of the proposed changes by
calculating what their revised overall rating would be under a new methodology as part of an
HPMS preview.
Low Performer Icon
CMS currently assigns the Low Performer Icon (LPI) to contracts receiving less than 3 stars for
their Part C or Part D summary ratings for the last 3 consecutive years. Concerns have been
raised by stakeholders over this definition, specifically that an MA-PD contract under the current
definition may switch back and forth from poor performance in Part C to poor performance in
Part D from year to year and these contracts will not receive the LPI for poor performance. For
example, under the current methodology, a contract can avoid being assigned the LPI if they
previously had three years of low performance (2.5 stars or lower) on Part C but raised it to 3
stars in the current year, although they may have one or more years of low performance on Part
D. In order to avoid providing potentially misleading information to beneficiaries, as well as
creating inequality in CMS monitoring and outreach activities for LPI contracts, starting with
the 2014 Star Ratings CMS will assign the LPI to any MA-PD contract receiving 2.5 stars or
lower for any combination of their Part C or their Part D summary ratings for three consecutive
years. Contracts are responsible for providing adequate care and services across both Part C and
D. This change will encourage consistent improvement in the quality of care across all of the
Part C and D measures for MA-PD contracts.
Weighting Categories of Measures
We will keep the same weighting categories used for the 2013 Star Ratings, in which outcome
and intermediate outcome measures are 3 times the weight of process measures, while patient
experience and access measures are 1.5 times the weight of process measures. We will assign
new Star Ratings measures a weight of 1 in the first year, and then the weight in the second
year would depend on the weighting category. The following tables list the proposed 2014 Star
Ratings measures and their weighting categories.
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Table 2: Part C Measure Weights

Part C
Summary

MA-PD
Overall

Measure Name

Weighting Category

Breast Cancer Screening

Process Measure

Colorectal Cancer Screening

Process Measure

Cardiovascular Care Cholesterol Screening

Process Measure

Diabetes Care Cholesterol Screening

Process Measure

Glaucoma Testing

Process Measure

Annual Flu Vaccine

Process Measure

Improving or Maintaining Physical Health

Outcome Measure

Improving or Maintaining Mental Health

Outcome Measure

Monitoring Physical Activity

Process Measure

Adult BMI Assessment

Process Measure

Care for Older Adults Medication Review

Process Measure

Care for Older Adults Functional Status

Assessment

Process Measure

Care for Older Adults Pain Screening

Process Measure

Osteoporosis Management in Women who had a

Fracture

Process Measure

Diabetes Care Eye Exam

Process Measure

Diabetes Care Kidney Disease Monitoring

Process Measure

Diabetes Care Blood Sugar Controlled

Intermediate Outcome Measure

Diabetes Care Cholesterol Controlled

Intermediate Outcome Measure

Controlling Blood Pressure

Intermediate Outcome Measure

Rheumatoid Arthritis Management

Process Measure

Improving Bladder Control

Process Measure

Reducing the Risk of Falling

Process Measure

Plan All-Cause Readmissions

Outcome Measure

Getting Needed Care

Patients Experience and

Complaints Measure

1.5

1.5

Getting Appointments and Care Quickly

Patients Experience and

Complaints Measure

1.5

1.5

Customer Service

Patients Experience and

Complaints Measure

1.5

1.5

Overall Rating of Health Care Quality

Patients Experience and

Complaints Measure

1.5

1.5

Overall Rating of Plan

Patients Experience and

Complaints Measure

1.5

1.5

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Part C
Summary

MA-PD
Overall

Measure Name

Weighting Category

Care Coordination

Patients Experience and

Complaints Measure

1.5

1.5

Complaints about the Health Plan

Patients Experience and

Complaints Measure

1.5

1.5

Beneficiary Access and Performance Problems

Measures Capturing Access

1.5

1.5

Members Choosing to Leave the Plan

Patients Experience and

Complaints Measure

1.5

1.5

Health Plan Quality Improvement

Outcome Measure

Plan Makes Timely Decisions about Appeals

Measures Capturing Access

1.5

1.5

Reviewing Appeals Decisions

Measures Capturing Access

1.5

1.5

Call Center Foreign Language Interpreter and

TTY Availability

Measures Capturing Access

1.5

1.5

Table 3: Part D Measure Weights

Part D
Summary

MA-PD
Overall

Measure Name

Weighting Category

Call Center Foreign Language Interpreter and

TTY Availability

Measures Capturing Access

1.5

1.5

Appeals AutoForward

Measures Capturing Access

1.5

1.5

Appeals Upheld

Measures Capturing Access

1.5

1.5

Complaints about the Drug Plan

Patients Experience and

Complaints Measure

1.5

1.5

Beneficiary Access and Performance Problems

Measures Capturing Access

1.5

1.5

Members Choosing to Leave the Plan

Patients Experience and

Complaints Measure

1.5

1.5

Drug Plan Quality Improvement

Outcome Measure

Rating of Drug Plan

Patients Experience and

Complaints Measure

1.5

1.5

Getting Needed Prescription Drugs

Patients Experience and

Complaints Measure

1.5

1.5

MPF Price Accuracy

Process Measure

High Risk Medication

Intermediate Outcome Measure

Diabetes Treatment

Intermediate Outcome Measure

Medication Adherence for Diabetes Medications

Intermediate Outcome Measure

Medication Adherence for Hypertension (RAS

antagonists)

Intermediate Outcome Measure

Medication Adherence for Cholesterol (Statins)

Intermediate Outcome Measure

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Integrity of Star Ratings

The data used for CMS Star Ratings must be accurate and reliable. CMS has taken several steps
in the past years to protect the integrity of the data; however we continue to guard against new
vulnerabilities when inaccurate or biased data are included. CMS policy is to reduce a
contracts measure rating to 1 star if it is identified that biased or erroneous data have been
submitted by the plan or identified by CMS. This would include cases where CMS finds plans
mishandling of data, inappropriate processing or implementation of incorrect practices have
resulted in biased or erroneous data. Examples would include, but are not limited to: a contracts
failure to adhere to HEDIS, HOS, or CAHPS reporting requirements; a contracts failure to
adhere to Plan Finder data requirements; a contracts errors in processing coverage
determinations and exceptions; compliance actions taken against the contract due to errors in
operational areas that would directly impact the data reported or processed for specific measures;
and a contracts failure to pass data validation directly related to data reported for specific
measures.
Disaster Implications
The effects of Hurricane Sandy were significant for Medicare beneficiaries in a number of areas,
as well as the Parts C and D organizations that provide important medical care and prescription
drug coverage for them. After the storm, plans raised concerns that their Star Ratings could be
adversely affected by the disruption in medical and drug services. As referenced in the
November 7, 2012 HPMS memo on Reminder of Pharmacy and Provider Access during a
Federal Disaster or Other Public Health Emergency Declaration, areas potentially impacted
would be those found at the Disaster Federal Register Notice section on Federal Emergency
Management Agencys (FEMAs) web site (http://www.fema.gov/news/disasters.fema).
As announced by CMS in the December 10, 2012 HPMS memorandum, affected plans were to
contact CMS through the Part C and D Star Ratings mailboxes if they believed their operations
and/or clinical care experienced major issues as a result of the storm that would impact their Star
Ratings measures. Plans that contacted CMS about storm-related issues related to Star Ratings
measures are providing detailed information about the zip codes impacted, the specific relief
being requested and justification for why the relief is warranted. In responding to issues raised
by some comments on the draft Call Letter, we consider this type of information essential to help
establish standard procedures for accommodating effects of future disasters. We ask that in the
future, plans impacted by other disasters contact the [email protected] and/or
[email protected] so that CMS can evaluate each contracts unique circumstances on a
case-by-case basis.
Measures Being Removed from Star Ratings and New Measures for the Display Page
Display measures on http://www.cms.gov are not part of the Star Ratings. These may be
measures that have been transitioned from the Star Ratings, new measures that are being tested
before inclusion into the Star Ratings, or measures displayed for informational purposes only.
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CMS will give advance notice if we are moving display measures to the Star Ratings. Similar to
the 2013 display page, plans have the opportunity to preview their data on the display measures
prior to release on CMS website. Data on measures moved to the display page will continue to
be collected and monitored, and poor scores on display measures are subject to compliance
actions by CMS.
CMS is transitioning the Enrollment Timeliness, Getting Information from Drug Plan, and Call
CenterPharmacy Hold Time measures from the Star Ratings to the 2014 display page. The
Enrollment Timeliness measure is being moved to the display page due to the lack of variation in
the scores across contracts with the scores being skewed very high. Getting Information from
Drug Plan is being moved to the display page since there is little variation in the scores across
contracts with the scores being skewed very high. The Call CenterPharmacy Hold Time is
being moved to the display page since sponsors performances have been consistently high for
several years.
We plan to introduce the following measures to the 2014 display page in preparation for them
potentially being included as new 2015 Star Rating measures:

Pharmacotherapy Management of COPD Exacerbation (PCE) (Part C). The percentage

of COPD exacerbations for members 40 years of age and older who had an acute
inpatient discharge or emergency department encounter on or between January 1
November 30 of the measurement year and who were dispensed appropriate medications.
This measure includes two rates: 1) Dispensed a systemic corticosteroid within 14 days
of the event; and, 2) Dispensed a bronchodilator within 30 days of the event. See HEDIS
2012 Technical Specifications, Volume 2 for more information about data specifications.
Analysis of submitted data suggests that there is little missing data for this measure.

Initiation and Engagement of Alcohol and Other Drug Dependence Treatment (IET)
(Part C). We are considering adding the percentage of adult members with a new
episode of alcohol or other drug (AOD) dependence who received: 1) Initiation of AOD
Treatmentthe percentage of members who initiate treatment through an inpatient AOD
admission, outpatient visit, intensive outpatient encounter or partial hospitalization within
14 days of the diagnosis; 2) Engagement of AOD Treatmentthe percentage of members
who initiated treatment and who had two or more additional services with a diagnosis of
AOD within 30 days of the initiation visit. See HEDIS 2012 Technical Specifications,
Volume 2 for more information about data specifications. The measure used would focus
on the 18 years old and above. Analysis of submitted data suggests that there is little
missing data for this measure.

HEDIS Scores for Low Enrollment Contracts (Part C). As a precursor to including low
enrollment contracts in the 2015 Star Ratings, CMS will publish HEDIS scores for low
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enrollment contracts as part of the 2014 display page. Contracts with less than 1,000
enrollees are first submitting HEDIS data to CMS in the summer of 2013. These data
will be analyzed and presented on the display page prior to these data becoming part of
the Star Ratings in 2015.

Variation of MPF Price Accuracy (Part D). The current MPF Price Accuracy star rating
measure compares a Prescription Drug Event (PDE) unit cost to the corresponding
advertised Medicare Plan Finders (MPF) unit cost, and does not account for instances
where the PDE unit cost is lower than the MPF unit cost. CMS is interested in evaluating
these instances and determining if there are potentially discriminatory pricing intended to
dissuade certain patient populations from joining a plan. Incorporation of this
information into the current MPF Price Accuracy measure may occur for 2015.

We also plan to continue displaying the following measures on the 2014 display page in
preparation for the possibility of adding them to the 2015 Star Ratings measures:

Special Needs Plan (SNP) Care Management measure (Part C SNPs). This measure
captures the completion of initial and annual standardized health risk assessments among
SNPs. See http://www.cms.gov/Medicare/Health-Plans/HealthPlansGenInfo/Downloads/
PartCTechSpecs_Oct11.pdf for more information about data specifications.

Medication Therapy Management Program Completion Rate for Comprehensive

Medication Reviews (Part D). This measure is based on the PQA-endorsed measure,
Completion Rate for Comprehensive Medication Review (CMR), which measures the
percentage of beneficiaries who met eligibility criteria for the Medication Therapy
Management (MTM) program and who received a CMR. We will keep this measure as a
Display Measure for 2014 (using validated 2012 beneficiary-level plan-reported MTM
data collected as part of the Part D reporting requirements). For 2014, it will continue to
be defined as the percent of non-Long Term Care (non-LTC) MTM program enrollees
who received a CMR. The denominator is the number of non-LTC beneficiaries who
were at least 18 years or older as of the beginning of the reporting period and who were
enrolled in the MTM program for at least 60 days during the reporting period. The
numerator is the number of beneficiaries from the denominator who received a CMR
during the reporting period.
LTC beneficiaries are excluded from this measure calculation using the plan-reported
LTC enrollment element, in which plans indicate for each beneficiary eligible for MTM
if the beneficiary was a LTC resident for the entire time they were enrolled in MTM
during the reporting period. CMS has conducted additional testing and has concerns
about the accurate exclusion of MTM program enrollees based on plan-reported LTC
status. CMS initial attempts to validate the plan-reported LTC status of MTM program
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enrollees against data on nursing home stays from the Minimum Data Set (MDS) found
that approximately 25% of MTM program enrollees reported by plans as LTC
beneficiaries for the entire time they were enrolled in MTM were reported in MDS as
never being a LTC resident (conversely, 75% of MTM program enrollees reported as
LTC beneficiaries were reported in MDS as being a LTC resident). In contrast, CMS
found plans reporting of beneficiaries as not being in LTC settings, or with unknown
LTC status matched MDS records. As a result of these findings, CMS is concerned that
there is a risk of plans incorrectly reporting a beneficiary as being a LTC resident in order
to exclude them from the CMR completion rate calculation when a CMR was not
delivered in order to improve their rates. This would prevent accurate comparisons of
plans MTM programs by CMS. CMS already provides plans with a long term care
institutional indicator to assist in identifying beneficiaries with SNF or other LTC status
and believes that this data source is preferable to plan-reported data. To better meet
plans needs, CMS will begin providing the long term care institutional indicator report
on a quarterly basis in 2013 (exact dates for distribution to be determined). CMS is also
considering continued use of plan-reported LTC status, but only excluding those MTM
enrollees reported as LTC residents from the denominator for the 2014 Display Measure
if LTC status is verified in MDS.
Beginning in 2013, LTC beneficiaries are no longer exempt from the CMR requirement,
and sponsors are required to offer CMRs to all beneficiaries enrolled in the MTM
program at least annually regardless of setting. In the HPMS memo dated April 10, 2012
titled CY 2013 Medication Therapy Management Program Guidance and Submission
Instructions, CMS provided additional definition and guidance for the delivery of CMRs.
Also, as of January 1, 2013, an individualized, written summary in CMS standardized
format must be provided following each CMR. The provision of the written summary in
the standardized format requires certain minimum service levels and will help further
standardize the delivery of CMRs across sponsors. For these reasons, CMS proposes
adding this measure to the Star Ratings in 2015 using 2013 data with the inclusion of
LTC beneficiaries in the measure calculation. CMS will also explore if further
refinement of the measure calculation is warranted considering the targeting criteria and
size of the MTM eligible population may significantly vary by plan sponsor. Sponsors
should not restrict their MTM eligibility criteria to limit the number and percent of
beneficiaries who qualify for these programs and who they must offer a CMR.
We are considering the following changes to measure specifications on the 2015 display page:

Drug-Drug Interactions Measure (Part D). This measure is adapted from the PQA DrugDrug Interactions measure. It is defined as the percent of Medicare Part D beneficiaries
who received a prescription for a target medication during the measurement period and
who were dispensed a prescription for a contraindicated medication with or subsequent to
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the initial prescription. The PQA reviewed and updated the list of drug-drug interactions.
We propose to continue to use the current PQA DDI measure list for the 2014 Display
Measure (using 2012 PDE data) and to test and implement the updated PQA DDI
measure list for the 2015 Display Measure (using 2013 PDE data). The changes made to
the DDI list include:

Delete the DDIs - carbamazepine and propoxyphene; tamoxifen and SSRIs;

warfarin and cimetidine; warfarin and fibrates (fenofibrate, fenofibric acid,
gemfibrozil).
Add the DDIs - carbamazepine and clarithromycin, erythromycin and
telithromycin.

It is expected that all other 2013 display measures will continue to be shown on http://www.cms.gov.
Forecasting to 2015 and Beyond
Potential new measures we are considering for 2015 include:

Disenrollment Reasons. CMS has implemented a PDP and MA Plan Disenrollment

Reasons survey in 2013. A random sample of voluntary disenrollees at each contract will
be surveyed as close as possible to the actual disenrollment. In the previous pilot testing
of this survey, beneficiaries frequently cited the following reasons for disenrollment:
financial reasons, prescription drug benefits and coverage, patient experience with regard
to prescription drugs, patient experience with regard to health plan, and coverage of
doctors and hospitals. The primary reasons for disenrollment may be considered for new
measure(s) to be included in Star Ratings in the future. This is similar to the
disenrollment reasons information that CMS used to make publicly available for plans
prior to 2006 when the reasons for disenrollment were linked to the disenrollment rates
information. CMS will be providing reports back to contracts with results for their
enrollees with comparisons to state, region, and national estimates. The primary purpose
of the plan reports is to assist MA and PDP contracts with quality improvement efforts,
and to that end, we will provide both summary measures and drill-down item
information.

Changes to Measure Specifications or Calculations

Breast Cancer Screening for HEDIS 2014. The National Committee for Quality Assurance
is considering making the following modifications to this measure:
Raising the denominator upper age to 74 years;
Stratifying the measure into two age group-based rates: 40-49 years and 50-74 years;
and
Changing the numerator time frame from 24 months to 30 months.
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NCQAs public comment period has recently ended and they are in the process of reviewing
the comments received. NCQA will make final recommendations to the Committee for
Performance Measurement for final approval of any changes. Updated specifications will be
available by July 2013 as part of volume 2 of the HEDIS 2014 Technical Specifications.
HOS Calculations. The Star Ratings incorporate health outcome measures from the Health
Outcomes Survey (HOS). CMS is exploring alternative scoring approaches such as a model
that combines multiple health dimensions into a score from 0 to 1, where 0 represents death
and 1 represents optimum functioning. Work is underway to assess reliability and validity of
the model. CMS will provide plans with additional details on this model as they become
available in the fall of 2013. If the additional work proves successful, CMS would consider
adding the measure derived from this model to the 2015 display page and potentially to Star
Ratings in subsequent years.

Measures for Informational Purposes Only

We are considering introducing the following measures to the 2014 display page for
informational purposes only (i.e., they would not have an effect on Star Ratings).

CAHPS measures about contact from a doctors office, health plan, pharmacy, or
prescription drug plan. For example, measures include questions that ask about
reminders for appointments, tests or treatment, to get a flu shot or other immunization, or
screening tests such as breast cancer or colorectal cancer screening; follow up after a
hospital stay; reminders to fill or refill a prescription, and to ensure medications are taken
as directed.

Use of Highly Rated Hospitals. Using the Hospital Value-based Purchasing scores,
develop an enrollment weighted measure of hospital utilization. Inclusion of this measure
on the display page is pending ongoing analysis.

CAHPS Complaint Resolution. CMS is interested in using beneficiaries responses

regarding their satisfaction with the resolution of their complaints as a new display
measure for informational purposes. This information would complement the
information currently available on complaint rates.

Additional measures under consideration for the future include:

CAHPS Health Information Technology EHR measures. There are many local,
regional, and national initiatives to accelerate the adoption of electronic health records
that will result in changes in terms of how care is delivered. Given this significant
change in the healthcare delivery system, it is important to assess the use of electronic
health records from the perspective of patients. CMS is considering adding a small set of
questions to the CAHPS survey to obtain information on the use of electronic health
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records from the patient perspective. CMS is currently exploring modifying for the
health plan setting a subset of questions that have previously been developed for the
Clinician & Group CAHPS Survey that focus on:

Use of a computer or handheld device during office visits

Use of a computer or handheld device to look up test results or other information
about patient during office visits
Use of a computer or handheld device to show patient information
Use of a computer or handheld device to order prescription medicines
Whether patient found providers use of a computer or handheld device helpful
Whether patient found it harder or easier to talk to provider when provider used
computer or handheld device
If CMS goes forward with these items, they would be implemented in the 2014 CAHPS
survey. CMS recognizes that this is an evolving area so initially these measures would be
collected and fed back to plans as part of their annual CAHPS Plan Reports for quality
improvement.
Plan/Sponsor Continuity of Operations (COOP)
In the draft 2014 Advance notice / Call Letter, we indicated that we were considering developing
regulations that would establish COOP requirements for MA organizations and Part D sponsors.
These standards would help ensure the continuity of essential functions, operational areas, and
critical IT support systems, and ultimately, continued access to coverage and care for
beneficiaries in the event of an emergency, such as Hurricane Sandy last year. We requested
comments from MA organizations and Part D sponsors on what minimum requirements should
be established, and specifically, what key operations must be available or be recoverable in the
immediate aftermath of an event.
We received a number of comments from stakeholders on issues we should consider if we decide
to proceed with rulemaking. We thank the commenters for their feedback and insights.
Revisions to Good Cause Processes
In the draft Call Letter, we indicated CMS was considering making changes to the good cause
process, which allows reinstatement into a MA or Part D plan when an individual is disenrolled
for failure to pay premiums or the Part D income-related monthly adjustment amount (Part D
IRMAA), but is determined to have good cause. Specifically, we stated that we were exploring
expanding the plans role in the process to include accepting the initial requests for reinstatement
by former plan members and gathering information prior to submitting the requests to CMS.
These changes would build upon operational improvements already implemented based on
feedback from plans during the first year of this policy implementation, help streamline the
process and possibly lessen the number of good cause requests in CTM inappropriately directed
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to plans for resolution. We requested comments from MA organizations and Part D sponsors on
ways CMS might improve the process to receive and review good cause requests for
reinstatement.
We received a number of comments from stakeholders on issues we should consider if we decide
to proceed with rulemaking or guidance changes. We thank the commenters for their feedback
and insights.
Year 7 Agent/Broker Compensation Guidance
Section 1851(j)(2) of the Social Security Act gives the Secretary the authority to establish
limitations on agent and broker compensation so as to create incentives for them to enroll
individuals into Medicare Advantage plans intended to best meet the individuals health care
needs. Section 1860D-4(l) extends these same limitations to the Part D program. The
implementing regulations found at 42 CFR 422.2274 and 423.2274 establish the limitations on
compensation including: the definition of total compensation amount, the 6-year compensation
cycle, initial and renewal compensation amounts, and rules for when and how compensation is
paid. The Medicare Marketing Guidelines (section 120) provide sub-regulatory guidance for
plans to operationalize the regulatory requirements.
While CMS established a 6-year compensation requirement for MA organizations and PDP
sponsors to pay independent agents/brokers, it was silent about what plans may do after the 6year cycle expires. We are now approaching the end of the first 6-year cycle, and a number of
plans have asked us whether they can continue to pay agents/brokers beyond the 6-year cycle.
As an interim step, we have advised MA organizations and PDP sponsors in our MMG (section
120.4.3) that they can, at their own discretion, continue to pay renewal compensation beyond the
six years.
We are concerned that agents/brokers may have an incentive to move beneficiaries to another
plan after year 6 in order to start a new 6-year compensation cycle. As a result, we intend to
propose rules in 2013 (for the 2015 contract year) addressing agent/broker compensation
requirements, including allowing MA organizations and PDP sponsors to continue to pay
agents/brokers compensation at an amount up to the renewal amount for years seven and beyond.
Capitated Financial Alignment Demonstrations
In the draft 2014 Advance Notice/Call Letter we discussed certain aspects relating to the
Capitated Financial Alignment Demonstration, including auto and facilitated assignment,
enrollment, marketing, and coordination with annual reassignment of low income beneficiaries.
The language remains unchanged and is reiterated below.
We thank the commenters for their feedback. Throughout the development of the Capitated
Financial Alignment Demonstration, we have worked with numerous stakeholders, including
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beneficiary advocacy groups and States, and considered beneficiary protection a top priority.
We will continue to work with the stakeholders involved to provide beneficiaries with clear,
concise information about their options.
Annual Low Income Beneficiary Reassignment
While each participating States demonstration model may be different, generally, under the
capitated model, certain beneficiaries who would have otherwise been reassigned under CMSs
annual reassignment process to a Part D plan may instead be passively enrolled into an
MMP. However, if a beneficiary is not passively enrolled, but instead is included in the CMS
reassignment to a new PDP effective January, 2014 (for example, if CMS and a state implement
a demonstration on a date other than January, 2014), the individual will not be eligible for
passive enrollment into an MMP until January, 2015.
In addition to those individuals who would have been otherwise included in Part D reassignment
in 2014, other Medicare and Medicaid enrollees may be passively enrolled into an MMP
including beneficiaries currently enrolled in other Medicare health or drug plans that would not
be part of the reassignment process. Please refer to http://www.cms.gov/Medicare-MedicaidCoordination/Medicare-and-Medicaid-Coordination/Medicare-Medicaid-CoordinationOffice/FinancialModelstoSupportStatesEffortsinCareCoordination.html for more information
about the demonstrations.
CMS will provide additional information about the states in which we will implement a
demonstration in 2014.
Passive Enrollment of the Newly Dually Eligible
New Medicare-Medicaid beneficiaries may be passively enrolled into an MMP instead of a Part
D sponsor in some demonstration states. CMS will provide additional information when this
policy is finalized.
Enrollment
While certain Medicare-Medicaid beneficiaries may be offered passive enrollment into an MMP,
beneficiaries may opt out of enrollment at any time and an MMP may not lock enrollees into its
plan. Beneficiaries may use any of the existing election periods available to them as outlined in
MA and PDP guidance to elect other Medicare coverage options.
Marketing
MAOs and PDPs operating in prospective demonstration areas must ensure that their agents,
brokers, contracted providers, and/or plan representatives do not distribute marketing materials
that are materially inaccurate, misleading, or otherwise make material misrepresentations about
the possible impacts of the demonstration on Medicare Advantage (MA) plans and Prescription
Drug Plan (PDP) Medicare-Medicaid enrollees.
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CMS and States will monitor enrollments and disenrollments for both evaluation purposes and
for compliance with applicable marketing and enrollment laws regulations and CMS policies, for
the purposes of identifying any inappropriate or illegal marketing practices. As part of this
analysis, CMS and States will monitor any unusual shifts in enrollment by individuals identified
for passive enrollment into a particular MMP to an MA plan operated by the same parent
organization. If those shifts appear to be due to inappropriate or illegal marketing practices, CMS
and the State may discontinue further passive enrollment into an MMP. Any illegal marketing
practices will be referred to appropriate agencies for investigation.
Section II Part C
Benefit Flexibility for Certain Special Needs Plans
Regulations at 42 CFR 422.102(e) allow dual eligible special needs plans (D-SNPs) that meet a
high standard of integration and minimum performance and quality-based standards to offer
supplemental benefits beyond those currently permitted for MA plans. Below, we remind MA
plans of those qualifying criteria for CY2014. Additional information, including the qualifying
criteria listed below and the list of applicable benefits may also be found in the updated Medicare
Managed Care Manual Chapter 16b Special Needs Plans that will be issued in early Spring
2013.
(a) Contract Design Requirements for Plans to Qualify for Benefits Flexibility
In order to meet the minimum contract requirements for the purposes of qualifying for benefits
flexibility in CY 2014, the D-SNPs must:

Be a specialized MA plan for special needs individuals described in section

1859(b)(6)(B)(ii) of the Act;
Be operational in CY 2014, and have operated in CY 2013;
Facilitate access to all covered Medicare benefits and all Medicaid benefits covered in the
State Medicaid plan;
Have a capitated contract covering the current year with a State Medicaid agency that
includes coverage of specified primary, acute, and long term care benefits and services,
when such coverage is consistent with State policy;
Coordinate delivery of covered Medicare and Medicaid primary, acute, and long term
care services throughout its entire service area; and
Possess a valid contract arrangement with the State, in accordance with CMS policy and
the requirements at 42 CFR 422.107.

We will apply these contract design requirements at the individual SNP plan (i.e., SNP plan
benefit package) level.

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(b) Qualifying Standards for Benefits Flexibility Eligibility

The D-SNP must:
(1) Have received a 3-year approval of its model of care most recently reviewed by the National
Committee for Quality Assurance (NCQA); and
(2) Either be in a contract with a 3 star (or higher) overall rating for CY 2013 on the Medicare
Plan Finder website; or if the D-SNP is part of a contract that does not have sufficient enrollment
to generate a star rating, the ratings will be based upon CY 2013 SNP plan-level HEDIS
measures.
(3) In addition, the D-SNP must not be a poor performer, i.e., not be part of a contract with a
score of 2 points or more on either the Part C or the Part D portion of the 2014 application cycle
past performance review methodology. 3
In accordance with the draft Call Letter, as a condition of offering any of the additional
supplemental benefits, we are requiring qualified D-SNPs to attest, at the time of bid submission,
that the additional supplemental benefit(s) they describe in the plan benefit package (PBP) do not
inappropriately duplicate an existing service(s) that enrollees are eligible to receive under a
waiver, the State Medicaid plan, Medicare Part A or B, or through the local jurisdiction in which
they reside.
As indicated in the draft Call Letter, D-SNPs that believe they met the qualifying criteria set
forth above, and that wished to offer additional supplemental benefits were required to notify us
of their intent by March 4, 2013. Technical questions regarding specific eligibility
determinations will be addressed individually for those plans that indicated their intent to offer
supplemental benefits. We will review those requests and notify each applicable plan about
whether or not it will be eligible to offer additional benefits in early May 2013. Qualified DSNPs would include their specific proposed benefits as a part of their PBPs during bid
submission, and we will approve D-SNPs specific new supplemental benefits, as appropriate.

The 2014 past performance methodology is described in our 2014 Application Cycle Past Performance Review
Methodology Update memo issued via the Health Plan Management System (HPMS) on January 17, 2013. The
past performance methodology analyzes the performance of MA and Part D contracts in 11 distinct performance
categories, assigning negative points to contracts with poor performance in each category. The analysis uses a 14month look-back period; thus, for example, the 2014 application cycle analysis looks at performance from January
1, 2012 through February 28, 2013. While this analysis is done at the contract level, the results are rolled up to the
legal entity level for purposes of denying applications based on past performance. We propose to use the contractlevel results for purposes of the SNP quality formula.

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SNP Annual Notice of Change (ANOC) and Evidence of Coverage (EOC) Requirements
FIDE SNPs must mail CY 2014 Annual Notice of Change (ANOC) with the Summary of
Benefits (SB) for member receipt by September 30, 2013 and then send the Evidence of
Coverage (EOC) for member receipt by December 31, 2013. Dual eligible SNPs that send a
combined, standardized ANOC/EOC for member receipt by September 30, 2013 are not required
to send an SB to current members; however, the SB must be made available upon request.
Updates to the Qualification Process for Fully Integrated Dual Eligible (FIDE) Special
Needs Plans
For CY 2014, D-SNPs that wish to be reviewed as a Fully Integrated Dual Eligible (FIDE)
Special Needs Plan (SNP) must have attested that they would like to be reviewed as a FIDE SNP
in HPMS by February 21, 2013. Those D-SNPs that requested to be reviewed for FIDE SNP
qualification must upload a completed FIDE SNP Contract Review Matrix (found in the CY
2014 SNP Proposal) in HPMS by July 1, 2013. Plans should use this matrix to identify where
each FIDE SNP element is met within their State Medicaid Agency Contract (SMAC). The
matrix will be used to assist CMS in reviewing the SMAC to determine whether a D-SNP
qualifies as a FIDE-SNP under 42 CFR 422.2, i.e., that the D-SNP: 1) provides dual eligible
beneficiaries access to Medicare and Medicaid benefits under a single managed care
organization; 2) has a capitated contract with a State Medicaid Agency that includes coverage of
specified primary, acute, and long term care benefits and services consistent with State policy; 3)
coordinates the delivery of covered Medicare and Medicaid health and long term care services
using aligned care management and specialty care network methods for high-risk beneficiaries:
and 4) employs policies and procedures approved by CMS and the State to coordinate or
integrate member materials, enrollment, communications, grievance and appeals, and quality
improvement. CMS will issue its determination electronically to the D-SNPs that wish to be
reviewed as FIDE SNPs in late September 2013. Medicare Advantage Organizations Offering
D-SNPs that have questions about FIDE qualification should send them to
[email protected].
Supplemental Benefits Guidance
Pap Smear /Pelvic Exam
As stated in our CY 2014 draft Call Letter, MAOs will be required to adhere to the Medicare
Part B benefits schedule, and will not be allowed to offer the $0 cost sharing preventive services,
screening Pap smears and screening pelvic exams annually as supplemental benefits. Our
interests are in ensuring that beneficiaries receive high quality, effective health care services
from their MA plans, and we are concerned that not adhering to the schedule for screening
services adopted by Original Medicare is inconsistent with that goal. That schedule calls for
covered $0 cost sharing screening Pap smears and screening pelvic exams once every 24 months
for women not at high risk for developing cervical or vaginal cancer. For beneficiaries who are
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at high risk of developing cervical or vaginal cancer or are of childbearing age with an abnormal
Pap smear within the previous 3 years, the screenings are covered annually. As for all Medicare
Part B benefits, plans must cover all medically necessary pap smears and pelvic exams.
Thus, beginning CY 2014, we will adopt the Original Medicare schedule for $0 cost share
preventive screening Pap smears and pelvic exams and will not allow plans to offer those
services as supplemental benefits.
We received comments asking whether employer MA plans could receive a waiver to continue
offering annual screening pap smears and pelvic exams. While an MAO may request an
employer group waiver for this requirement, CMS would not expect to approve the waiver at this
time given our policy to adopt the Original Medicare schedule for the screening services and
thus, creating consistent coverage across all Medicare beneficiaries.
CMS is also taking this opportunity to clarify that MAOs and section 1876 cost contractors may
continue to offer additional sessions of smoking and tobacco cessation counseling and nonMedicare covered medical nutrition therapy as supplemental benefits as described in the
Medicare Managed Care Manual, Chapter 4.
Rewards and Incentives Programs for Medicare Advantage Organizations
In the draft Call Letter, CMS expressed an interest in exploring how our existing rewards and
incentive policy and guidelines may be expanded further to promote innovative programs to
improve health outcomes and lower healthcare costs. In order to fully consider whether, and
how, we could expand current Part C rewards and incentives policy, we asked for information
from Medicare Advantage Organizations regarding the experience and impact of rewards and
incentives programs currently offered in the commercial market.
CMS is continuing to evaluate possible options for expanding its current rewards and incentives
program guidance and expects to issue further guidance soon, for the 2014 contract year. In
developing such guidance, we will certainly consider concerns raised by some commenters that
rewards programs could discriminate against the disabled, frail elderly, and minority
beneficiaries. We will also examine ways to ensure that those types of rewards and incentives
permitted are likely to lead to meaningful and sustained changes in health behaviors and
outcomes.
Provider / Beneficiary Shared Decision Making
Sec. 3506 of the Affordable Care Act includes a provision to facilitate shared decision making in
an effort to enable collaborative processes between patients, caregivers, and clinical staff.
Additionally, there have been a number of recent studies that have demonstrated the value of
high quality shared decision-making in reducing costs and potentially unnecessary care. Shared
decision-making programs are geared to enhancing the patients understanding of their medical
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condition, services and procedures, and the options available for treatment. Research suggests
shared decision-making is especially helpful when there is no clear "best" treatment option for an
individual.
In addition to discussion with the provider, the provider may also offer decision aid information
that will help the patient reach an informed decision about the care he or she would like to
receive. In a shared decision-making environment, the patient:

Understands the likely outcomes of various treatment options;

Considers what is important about the risks and benefits of each option, based on
personal values and preferences; and
Fully participates in decisions about his or her medical care.

CMS is interested in facilitating shared decision-making as a feature of MA plans through the

identification of current programs or unique approaches that have demonstrated effectiveness. In
the draft Call Letter, we asked MAOs to share proposals or descriptions of their current shared
decision-making programs that may help CMS establish standards for such approaches.
Responses to our solicitation supported our efforts to encourage shared decision-making
programs. We will consider the comments we received, and may issue guidance on shareddecision making in the Part C program in the future.
Inappropriate shifting of drug coverage from Medicare Part B to Part D
Some drugs that are covered under Medicare Part B when provided incident to a physician
service may be covered under Medicare Part D when dispensed upon a prescription from a
pharmacy. Enrollees in an MA plan offering Part D coverage may elect to have a drug dispensed
from a pharmacy and bring it to their MA plan physician for administration in the physicians
office. This practice is not prohibited under Part C or Part D when the beneficiary elects, as a
matter of personal preference, to obtain a drug from a pharmacy under Part D that is otherwise a
Part B-covered drug when furnished at a physicians office out of the physicians own stock.
Nevertheless, an MA organization may not require enrollees to engage in this practice in order to
force the enrollee to obtain drug coverage under Medicare Part D when coverage would
otherwise be available under Medicare Part B. In other words, the decision to forgo Part B
coverage for Part D coverage of a drug that would ordinarily be covered under Part B when
furnished at a physicians office out of the physicians own stock rests entirely with the enrollee
(and their physician) and such decision may not be mandated or influenced by the MA
organization. This does not affect the MA organizations ability to contractually require its
network physicians to obtain Part B drugs from specified suppliers that bill the MA organization
directly as long as such arrangements do not result in coverage being shifted from Part B to Part
D (see Chapter 6, Appendix C of the Medicare Prescription Drug Benefit Manual Part B
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Covered Drugs in the Context of a Professional Service). Please note this guidance applies to
all MA and Cost Plans offering Part D Coverage.
Plans with Low Enrollment
At the end of March, CMS sent each MAO a list of plans that have been in existence for three or
more years as of March 2013 (three annual election periods), and have fewer than 500 enrollees
for non-SNP plans or fewer than 100 enrollees for SNP plans. The lists did not include plans
with low enrollment that CMS determines are located in service areas that do not have a
sufficient number of competing options of the same plan type.
Under our authority at 42 CFR 422.506(b)(1)(iv), MAOs must confirm through return email,
that each of the low enrollment plans identified by CMS will be eliminated, consolidated with
another of the organizations plans for CY 2014, or provide a justification for the renewal. If
CMS does not find that there is a unique or compelling reason for maintaining a plan with low
enrollment, CMS will instruct the organization to eliminate or consolidate the plan. Instructions
and the timeframe for submitting business cases and what information is required in those
submissions were included with the list of low enrollment plans sent to the MAO.
CMS recognizes there may be reasonable factors, such as specific populations served and
geographic location, that lead to a plans low enrollment. SNPs, for example, may legitimately
have low enrollments because of their focus on a subset of enrollees with certain medical
conditions. CMS will consider all such information when evaluating whether specific plans
should be non-renewed based on insufficient enrollment. MAOs are to follow the CY 2014
renewal/non-renewal guidance in the final Call Letter to determine whether a low enrollment
plan may be consolidated with another plan(s).
Overview of CY 2014 Benefits Bid Review
Portions of this guidance apply to section 1876 cost plans, MA plans, including employer group
plans, Dual-Eligible Special Needs Plans (D-SNPs), Chronic Care Special Needs Plans (C-SNPs)
and Institutional Special Needs Plans (I-SNPs). Employer group plans, D-SNPs, and section
1876 cost plans are excluded from our evaluation to identify duplicative plans, also referred to as
the meaningful difference evaluation. Similarly, employer group plans and section 1876 cost
plans also are not evaluated for low enrollment. The Financial Alignment Demonstration for
Medicare-Medicaid Plans is not subject to the requirements summarized in the table below. The
Financial Alignment Demonstration for Medicare-Medicaid Plan guidance will be provided
separately. Note: CMS reserves the right to review employer group plans for low enrollment
and/or meaningful difference in future years.
The following chart displays major MA benefit review criteria and identifies which criteria apply
to the plan types identified in the column headings.
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Table 1. Plan Types and Applicable Bid Review Criteria

Bid Review Criteria

Low Enrollment
Meaningful Difference
Total Beneficiary Cost
Maximum Out-of Pocket
(MOOP) Limits
PMPM Actuarial Equivalent
Cost Sharing
Service Category Cost Sharing

Applies to NonEmployer Plans

(Excluding Dual
Eligible SNPs)
Yes
Yes
Yes

Applies to NonApplies to 1876

Employer Dual
Cost Plans
Eligible SNPs

Applies to
Employer
Plans

Yes
No
No

No
No
No

No
No
No

Yes

Yes

No

Yes

Yes

Yes

No

Yes

Yes

Yes

Yes1

Yes

Section 3202 of the ACA established that MA plans and 1876 Cost Plans may not charge enrollees higher cost
sharing than is charged under Original Medicare for chemotherapy administration, skilled nursing care and renal
dialysis services (42 CFR 417.454(e) and 422.100(j)).

We have made changes to service category cost sharing amounts, PMPM Actuarial Equivalence
factors, and Total Beneficiary Cost (TBC) limits for CY 2014 and have provided explanations of
these changes in each applicable section below. While we understand that MAOs are being
required to address new requirements that are being implemented under the Affordable Care Act,
such as the medical loss ratio and health insurance providers fee, it is our expectation that MAOs
address these issues independently of our requirements for benefits bid review. Therefore, we
are not making specific adjustments or allowances for these changes in our requirements for
benefits bid review.
Meaningful Difference (Duplicative Plan Offerings)
MAOs offering more than one plan in a given service area must ensure that beneficiaries can
easily identify the differences between those plans in order to determine which plan provides the
highest value at the lowest cost to address their needs. For CY 2014, CMS will use plan-specific
per member per month (PMPM) out-of-pocket cost (OOPC) estimates to identify meaningful
differences among the same plan types.
OOPC estimates are based on a nationally representative cohort of more than 12,000 Medicare
beneficiaries represented in the 2008 and 2009 Medicare Current Beneficiary Survey data and
are used to provide estimated plan cost information to beneficiaries on Medicare Plan Finder.
Estimated out-of-pocket costs for each plan benefit package are calculated on the basis of
utilization patterns for the MCBS cohort. The calculation includes Parts A, B, and D services
and certain mandatory supplemental benefits, but not optional supplemental benefits. The plans
current enrollment and risk scores will not affect the OOPC calculation. The CY 2014 OOPC
model incorporates updated PBP and formulary data, as well as more precise brand and generic
drug cost sharing estimates for gap coverage, which utilize Food and Drug Administration data.
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All documentation and instructions associated with running the OOPC model are posted on the
CMS website at: http://www.cms.gov/Medicare/Prescription-Drug-Coverage/
PrescriptionDrugCovGenIn/OOPCResources.html
As explained in our draft Call Letter, CMS proposed to combine HMO and HMO-POS as one
plan type for evaluating meaningful difference. A reasonable business case can be made that
HMO-POS plans are very similar to HMO plans in those instances where few benefits are
offered on an out-of-network basis. Hence, with minimal benefits offered out-of-network,
beneficiaries may be unable to differentiate the value between two plans in making their MA
selection.
We received comments describing potential alternative solutions and how delaying
implementation of this change may be advantageous to beneficiaries. After further
consideration, we have determined that HMO and HMO POS will remain two separate plan
types for purposes of the CY 2014 meaningful difference review. CMS will analyze the CY
2014 bids to establish a minimum POS out-of-network benefit requirement for purposes of next
years (CY 2015) meaningful difference evaluation. For example, at a minimum an HMO-POS
may be required to cover all Parts A and B services out-of-network in order to be considered
meaningfully different from an HMO plan.
CMS will evaluate meaningful differences among CY 2014 non-employer and non-cost
contractor plans offered by the same MAO, in the same county, as follows:
1.
The MAOs non-SNP plan offerings will be separated into five plan type groups on a
county basis: (1) HMO; (2) HMO POS; (3) Local PPO; (4) Regional PPO; and (5) PFFS.
2.
SNP plan offerings will be further separated into groups representing the specific target
populations served by the SNP. Chronic Care SNPs will be separated by the chronic disease
served and Institutional SNPs will be separated into the following three categories: Institutional
(Facility); Institutional Equivalent (Living in the Community); and a combination of Institutional
(Facility) and Institutional Equivalent (Living in the Community). D-SNPs are excluded from
the meaningful difference evaluation.
3.
Plans within each plan type group will be further divided into MA-only and MA-PD subgroups for evaluation. That is, the presence or absence of a Part D benefit is considered a
meaningful difference.
4.
The combined Part C and Part D OOPC PMPM estimate will be calculated for each plan.
There must be a difference of at least $20.00 PMPM between the combined OOPC for each plan
offered by the same MAO in the same county to be considered meaningfully different. Plan
premium is not included in the meaningful difference evaluation.
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Please note that using different providers or serving different ethnic populations are not
considered meaningfully different characteristics between two plans of the same type.
CMS expects MAOs to submit CY 2014 plan bids that meet the meaningful difference
requirements, but will not prescribe how the MAOs should redesign benefit packages to achieve
the differences. Furthermore, CMS may choose not to allow MAOs to revise their bid
submissions if a plans initial bid does not comply with meaningful difference requirements
because MAOs have access to the necessary tools to calculate OOPC estimates for each plan
prior to bid submission. CMS will not approve plan bids that do not meet these requirements.
MAOs must follow the CY 2014 renewal/non-renewal guidance in the final Call Letter to
determine if their plans may be consolidated with other plans.
Total Beneficiary Cost (TBC)
CMS will again exercise its authority under section 1854(a)(5)(C)(ii) of the Affordable Care Act
to deny MAO bids, on a case-by-case basis, if it determines that the bid proposes too significant
an increase in cost sharing or decrease in benefits from one plan year to the next through the use
of the TBC requirement. A plans TBC is the sum of plan-specific Part B premium, plan
premium, and estimated beneficiary out-of-pocket costs. The change in TBC from one year to
the next captures the combined financial impact of premium changes and benefit design changes
(i.e., cost sharing changes) on plan enrollees; an increase in TBC is indicative of a reduction in
benefits. By limiting excessive increases in the TBC from one year to the next, CMS is able to
ensure that beneficiaries who continue enrollment in the same plan are not exposed to significant
cost increases. As in past years, CMS will evaluate TBC for non-employer plans (excluding DSNPs).
In the draft Call Letter, we proposed to reduce the allowed TBC change amount from $36.00 per
member per month (PMPM) to $30.00 PMPM for CY 2014 bids. We received numerous
comments from Medicare Advantage Organizations describing potential challenges complying
with the TBC requirement, given the number of payment-related changes and the new health
insurance providers fee. In past years, CMS has incorporated adjustments in the TBC calculation
for payment rate and quality bonus changes, along with other technical adjustments for changes
in the PBP software. Consistent with that policy, we will refine the adjustment factor for CY
2014 to also account for changes in the coding intensity adjustment. In addition, we are
establishing the TBC threshold at $34.00 PMPM for CY 2014 to provide some flexibility in
navigating other changes that will occur in CY 2014. Thus, a plan experiencing a net increase in
benchmark, bonus payment, and/or coding intensity impact will have an effective TBC change
amount below the $34.00 per member per month (PMPM) requirement. Conversely, a plan
experiencing a net decrease in benchmark, bonus payment, and/or coding intensity impact will
have an effective TBC change amount above the $34.00 PMPM requirement.

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In response to comments, we remind MAOs that the Office of the Actuary extends flexibility on
margin requirements so that MAOs can meet the TBC requirement. CMS will provide detailed
operational guidance via an HPMS memo and will post TBC adjustment factors in HPMS, both
in mid-April.
CMS reserves the right to further examine and request additional changes to a plan bid even if a
plans TBC is within the required amount, if we find it is in the best interest of the MA program.
We believe this approach not only protects beneficiaries from significant increases in cost
sharing or decreases in benefits, but also ensures beneficiaries have access to viable and
sustainable MA plan offerings. For plans that consolidate multiple CY 2013 plans into a single
CY 2014 plan, CMS will use the enrollment-weighted average of the CY 2013 plan values to
calculate the TBC. Otherwise, these plans will be treated as any other plan for the purpose of
enforcing the TBC requirement.
Maximum Out of Pocket (MOOP) Limits
Table 2 below displays the CY 2014 mandatory and voluntary MOOP amount and the combined
(catastrophic) MOOP amount limits applicable to LPPOs and RPPOs. A plans adoption of a
MOOP limit that qualifies as a voluntary MOOP ($0 - $3,400) results in greater flexibility for
individual service category cost sharing.
As codified at 42 CFR 422.100(f)(4), (5) and (6), MA plans, including employer group plans
and SNPs, must establish limits on enrollee out-of-pocket spending that do not exceed the annual
maximum amounts set by CMS. MA plans may establish as a MOOP any amount within the
ranges shown in the table. We chose to display the ranges of cost sharing within which plans
may establish their MOOPs in order to illustrate that MOOP limits may be lower than the CMSestablished maximum amounts and what MOOP amounts qualify as mandatory and voluntary
MOOP limits.
Table 2. CY 2014 Voluntary and Mandatory MOOP Range Amounts By Plan Type
Plan Type

Voluntary

Mandatory

HMO

$0 - $3,400

$3,401 - $6,700

HMO POS

$0 - $3,400 In-network

$3,401 - $6,700 In-network

Local PPO

$0 - $3,400 In-network and $0 $5,100 Combined

$3,401 - $6,700 In-network and $3,401 $10,000 Combined

Regional PPO

$0 - $3,400 In-network and $0 $5,100 Combined

$3,401 - $6,700 In-network and $3,401 $10,000 Combined

PFFS (full network)

$0 - $3,400 Combined

$3,401 - $6,700 Combined

PFFS (partial network)

$0 - $3,400 Combined

$3,401 - $6,700 Combined

PFFS (non-network)

$0 - $3,400

$3,401 - $6,700

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Per Member Per Month (PMPM) Actuarial Equivalent (AE) Cost Sharing Maximums
Total MA cost sharing for Parts A and B services must not exceed cost sharing for those services
in Original Medicare on an actuarially equivalent basis. CMS will also apply this requirement
separately to the following service categories for CY 2014: Inpatient Facility, Skilled Nursing
Facility (SNF), Home Health, Durable Medical Equipment (DME), and Part B drugs. Please
note that factors for Inpatient and SNF in Column 4 of the table below (Part B Adjustment Factor
to Incorporate Part B Cost Sharing) have been updated for CY 2014.
Whether in the aggregate, or on a service-specific basis, excess cost sharing is identified by
comparing two values found in Worksheet 4 of the Bid Pricing Tool (BPT). Specifically, a
plans PMPM cost sharing for Medicare covered services (BPT Worksheet 4, Section IIA,
column l) is compared to Original Medicare actuarially equivalent cost sharing (BPT Worksheet
4, Section IIA, column n). For inpatient facility and SNF services, the AE Original Medicare
cost sharing values, unlike plan cost sharing values, do not include Part B cost sharing; therefore,
an adjustment factor is applied to these AE Original Medicare values to incorporate Part B cost
sharing and to make the comparison valid.
Once the comparison amounts have been determined, excess cost sharing can be identified.
Excess cost sharing is the difference (if positive) between the plan cost sharing amount
(column #1) and the comparison amount (column #5). The chart below uses illustrative values to
demonstrate the mechanics of this determination.
Table 3. Illustrative Comparison of Service-Level Actuarial Equivalent Costs to Identify
Excessive Cost Sharing
#1

#2

#3

#4

#5

#6

BPT
Benefit
Category

PMPM
Plan Cost
Sharing
(Parts
A&B)
(BPT Col.
l)

Inpatient

$33.49

$331.06

$25.30

1.398

$35.37

$0.00

Pass

SNF

$10.83

$58.19

$9.89

1.071

$10.59

$0.24

Fail

Home
Health1

$0.01

$0.30

$0.00

0.150

$0.05

$0.00

Pass

DME

$3.00

$11.37

$2.65

1.000

$2.65

$0.35

Fail

Part B-Rx

$0.06

$1.42

$0.33

1.000

$0.33

$0.00

Pass

Original
Medicare
Allowed
(BPT Col.
m)

Original
Medicare AE
Cost sharing
(Part A only)
(BPT Col. n)

Part B Adjustment
Factor to Incorporate
Part B Cost Sharing
(Based on FFS data)

Comparison
Amount

(#3 #4)

Excess
Cost
Sharing

#7

(#1 #5,
min of
$0)

Home health has no cost sharing under Original Medicare, so the comparison amount (#5) is calculated by
multiplying the Medicare allowed amount (#2) by the Part B Adjustment Factor (#4).

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Pass/
Fail

Transferability of an MA enrollees annual contribution toward their maximum out-ofpocket cost sharing limit (MOOP)
MAO plans have asked whether an enrollees dollar contribution toward its MA plans annual
MOOP is transferable when the enrollee makes a mid-year election of another MA plan of the
same type offered by the MAO. Starting in contract year 2014, when an enrollee moves from
one MA plan type (i.e., HMO, PPO, PFFS, SNP) to another MA plan of the same type offered
under the same contract (i.e., H# or R#) in the same contract year, his/her accrued contribution
toward the annual MOOP limit will count toward the annual MOOP in his/her new MA plan.
CMS will consider expanding the transferability of the MOOP contribution to include all MA
plans of the same type offered by the same MAO in the future.
Service Category Cost Sharing Requirements
As stated in the draft Call Letter, we are continuing our current policy of affording MA plans
greater flexibility in establishing Parts A and B cost sharing by adopting a lower voluntary
MOOP limit than is available to plans that adopt a higher, mandatory MOOP limit. Table 4
below summarizes the standards and cost sharing amounts by MOOP type (e.g., mandatory or
voluntary) for local and regional MA plans. CY 2014 bids must reflect enrollee cost sharing for
in-network services that is not greater than the amounts displayed below. For LPPOs and RPPOs,
these standards will be applied only to in-network services. All standards and cost sharing are
inclusive of applicable service category deductibles, copayments and coinsurance, but do not
include plan level deductibles.
The following list provides an overview of changes for CY 2014:

Inpatient and home health requirements have been updated to reflect estimated changes in
Original Medicare costs for 2014.

The Skilled Nursing Facility (SNF) cost sharing requirement for the first 20 days has
been reduced from $100 to $50 per day for voluntary MOOP plans and from $50 to $25
per day for mandatory MOOP plans to provide greater protection for beneficiaries. The
allowable cost sharing requirement for SNF days 21 to 100 has been updated to reflect
estimated changes in Original Medicare costs for 2014. Since cost sharing for the overall
SNF benefit (i.e., both benefit periods) must be actuarially equivalent with Original
Medicare, the cost sharing requirement change for the first benefit period should not
impact the overall plan costs associated with the SNF benefit.

Partial Hospitalization cost sharing has been added as a requirement for 2014.

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Table 4. CY 2014 In-Network Service Category Cost Sharing Requirements

Cost Sharing Limits
PBP Section B data Voluntary
entry field
MOOP

Service Category

Mandatory
MOOP

Inpatient - 60 days

1a

N/A

$3,973

Inpatient - 10 days

1a

$2,310

$1,848

Inpatient - 6 days

1a

$2,098

$1,678

Mental Health Inpatient - 60 days

1b

$2,475

$1,980

Mental Health Inpatient - 15 days

1b

$1,854

$1,483

2a

$50/day

$25/day

2a

$152/day

$152/day

Emergency Care/Post Stabilization Care

4a

$65

$65

Urgently Needed Services

4b

$65

$65

Partial Hospitalization

$55/day

$55/day

Home Health

6a

20% or $35

$0

Primary Care Physician

7a

$35

$35

Chiropractic Care

7b

$20

$20

Physician Specialist

7d

$50

$50

Psychiatric and Mental Health Specialty Services

7e and 7h

$40

$40

Therapeutic Radiological Services

8b

20% or $60

20% or $60

DME-Equipment

11a

N/A

20%

DME-Prosthetics

11b

N/A

20%

DME-Medical Supplies

11b

N/A

20%

DME-Diabetes Monitoring Supplies

11c

N/A

20% or $10

DME-Diabetic Shoes or Inserts

11c

N/A

20% or $10

Renal Dialysis

12

20% or $30

20% or $30

Part B Drugs-Chemotherapy

15

20% or $75

20% or $75

Part B Drugs-Other

15

20% or $50

20% or $50

Skilled Nursing Facility First 20 Days1

Skilled Nursing Facility Days 21 through 100

Section 3202 of the ACA established that MA plans and 1876 Cost Plans may not charge enrollees higher cost
sharing than is charged under Original Medicare for chemotherapy administration, skilled nursing care and renal
dialysis services (42 CFR 417.454(e) and 422.100(j)).
2

MA plans may have cost sharing for the first 20 days of a SNF stay, consistent with cost sharing guidance. The
per-day cost sharing for days 21 through 100 must not be greater than the Original Medicare SNF amount. Total
cost sharing for the overall SNF benefit must be actuarially equivalent with Original Medicare.

Part B Drugs - Chemotherapy cost sharing displayed is for services provided on an outpatient basis and includes
administration services.

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In response to comments, we wish to clarify that MAOs have the option to charge either
coinsurance or a copayment for most service category benefits. For example, based on the cost
sharing requirements indicated above for Part B Drugs Chemotherapy, a plan can choose to
either assign a 20% coinsurance or $75 copayment to that particular benefit. In addition, the cost
sharing requirement for Partial Hospitalization may not exceed $55 per day regardless of
whether the plan offers a mandatory or voluntary MOOP. The validation rule in the PBP had not
been updated at the time of beta testing and will be corrected.
We also received comments regarding the cost sharing requirement for SNF being lowered
during the first 20 days to enhance beneficiary protection. MA plans are required to meet the Per
Member Per Month Actuarial Equivalence requirement for the overall SNF benefit, which
encompasses days 1-100. The cost sharing requirement for SNF is separated into two periods to
reflect Original Medicare: days 1 to 20 and days 21 to 100. Although Original Medicare has no
cost sharing during the first 20 days, MA plans may charge some cost sharing during the first 20
days as defined annually by CMS. If a plan exercises the option to have cost sharing during the
first 20 days, it will have to offset those charges by setting the cost sharing amounts for days 21100 at less than $152 per day in order to satisfy the Per Member Per Month Actuarial
Equivalence requirement.
Part C Optional Supplemental Benefits
As stated in the draft Call Letter, CMS will review non-employer bid submissions to ensure that
beneficiaries electing optional supplemental benefits are receiving reasonable value. MAOs
must ensure that the total value of all optional supplemental benefits offered to non-employer
plans under each contract comply with the following requirements: (a) margin is no greater than
15% and (b) retention, defined as margin plus administrative expenses, is no greater than 30%.
In response to comments, we understand that some supplemental benefits are contracted on a
multi-year basis, but the plan bids submitted each year are evaluated based on that particular plan
year. CMS would like to clarify this is not a new policy; we have been evaluating optional
supplemental benefits for the past few years and work with plans on a case-by-case basis to
address their specific issues. CMS is taking this opportunity to be more transparent on how
plans will be evaluated for CY 2014.
Part C Crosswalks: Segmentation
CMS has determined that organizations are permitted to change from a non-segmented plan to a
segmented plan and crosswalk beneficiaries from the non-segmented plan to the segmented
plan. This crosswalk must be completed through a crosswalk exception request. CMS will
provide technical instructions for completing a crosswalk exception request in guidance to be
released later this year. We will update Chapter 4 of the Medicare Managed Care Manual in the
next release.
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Exceptions to Policies Permitting Plans to Limit Durable Medical Equipment to Certain

Brands and Manufacturers
As codified at 42 CFR 422.100(l)(2), MA organizations may, within specific categories of
durable medical equipment (DME), limit coverage to certain brands or manufacturers. Limiting
DME based on brand or manufacturer is permitted for categories of DME in which the items are
essentially interchangeable. CMS has determined that the items within certain categories of
DME are specifically tailored to individual needs and, consequently, coverage of those items
may not be limited. Section 42 CFR 422.100(l)(2)(vii) codifies the requirement that MA plans
provide full coverage, without limitation on brand and manufacturer, to all DME categories or
subcategories annually determined by CMS to require full coverage.
We have identified the following categories of DME that may not be subject to full limitation
based on brand/manufacturer for CY 2014:
Speech-Generating Devices: People who require speech-generating devices frequently have
other disabilities; the speech-generating device is tailored to meet the individuals needs. For
example, a child with cerebral palsy (CP) could accidentally change a setting on some devices
and therefore, should be furnished with a device that is sensitive to the movements of a child
with CP. Consequently, MA plans must furnish any medically-necessary speech-generating
device purchased by an enrollee.
The following four categories of DME may be subject to partial limitation based on brand or
manufacturer. Partial limitation means that plans may limit coverage based on brand or
manufacturer, provided that the plan covers all items in the subcategories below:
(1) Oxygen: Plans may limit oxygen by brand and manufacturer provided that all modalities
concentrator, liquid and gaseous are made available.
(2) Wheelchairs: Plans may limit brands and manufacturers of standard manual and power
wheelchairs within HCPCS codes, but must provide all categories (i.e., HCPCS codes) of Group
I and II wheelchairs.
(3) Powered Mattress Systems (HCPCS code E0277): There is no medical evidence that one
type of powered mattress system is more effective than others in preventing pressure ulcers.
However, for this code, there are two major, distinct technologies: alternating pressure, and low
air loss. Consequently, MA plans may limit brands and manufacturers of these items, but must
furnish at least one product from each of the two distinct technologies.
(4) Diabetic supplies: We allow plans to limit diabetic supplies by brand and manufacturer
provided that both large-font monitors for the visually impaired and large-button monitors for
individuals with arthritis are furnished.
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Cost Plan Competition Requirements

In accordance with the American Taxpayer Relief Act of 2012, beginning Contract Year (CY)
2014, CMS will non-renew cost plans in service areas or portions of service areas in which at
least two competing MA local or two MA regional coordinated care plans that meet specified
enrollment thresholds are available. Affected cost contractors will not be able to operate in
affected service areas in 2015.
We will non-renew any portion of a cost plans service area if there are at least two competing
MA local or two MA regional coordinated care plans with a minimum of 5,000 enrollees (urban
areas) or 1,500 enrollees (non-urban areas) for the entire year prior to the non-renewal. We will
use 2013 enrollment data to determine the cost plans subject to non-renewal and contact affected
plans at the end of 2013 to permit cost contractors wishing to convert to Medicare Advantage
plans for CY 2015 time to make the necessary arrangements, including filing a notice of intent to
apply with CMS.
For purposes of plan renewal, the MA local and/or regional coordinated care plans must meet
minimum enrollment requirements for the entire year prior to the non-renewal year in order to
trigger mandatory cost-based plan non-renewal or service area reduction. However, for purposes
of a cost plans mid-year service area expansion, the MA plans must only meet minimum
enrollment requirements as of the date of the proposed expansion. (See 42 CFR 417.402 and 76
FR p. 21448 (April 15, 2011) for additional information on minimum enrollment and other
requirements related to the cost plan competition provisions.)
Cost plans may offer a mid-year service area expansion consistent with 42 CFR 417.402 and as
noted above. Cost plans that offer Part D as Cost-PD plans are also subject to the same restriction
on mid-year service area expansions as MA-PD plans in that they cannot expand into an area
served by an MA-PD or PDP plan.
Expanding use of the Blue Button Initiative
In the draft Call Letter, CMS indicated our interest in expanding use of the Blue Button
Initiative among Medicare Advantage Organizations, which allows Medicare beneficiaries to
download personal health information to a printer, computer, memory, or mobile device in the
Blue Button format(s) and share that information with their health care team and care
providers. We recommended that MAOs add the Blue Button icon and functionality to existing
or new plan portals or websites, thereby providing beneficiaries with one-click secure access to
download and/or print their health information. We further clarify that CMS is only
recommending MAOs to take part in this voluntary initiative; MAOs are not required to
implement this functionality in CY 2014.
We believe the type of functionality offered by the BlueButton Initiative has the potential to
further advance CMSs overall quality strategy and supports efforts to empower beneficiaries to
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understand their health information and make informed decisions. Moreover, this functionality
has the potential to improve care coordination by allowing beneficiaries to readily and easily
share up-to-date health information with their health care providers, health care team, as well as
family members. We solicited and received many comments from MAOs on how best to expand
the use of the Blue Button Initiative. Through the comments, we learned there are other
existing and emerging tools which are similar in functionality that exist within the industry. We
do not wish to limit MAOs to any specific tool and clarify that MAOs have the flexibility to
utilize other available tools that provide the same or similar functionality as the Blue Button
Initiative. Furthermore, we will continue working with industry to promote practices such as the
Blue Button Initiative in order to improve care coordination.
We share commenters concern regarding potential fraud opportunities and will ensure any
future policy enables MAOs to maintain compliance with the Health Insurance Portability and
Accountability Act of 1996 (HIPAA).
Medicare Advantage Part C EOB
In the draft Call Letter, CMS noted that, in our October 18, 2012 HPMS memo entitled, Final
Part C EOB Models and Implementation of the Part C EOB, we originally expected to require
use of the model EOB by October 2, 2013. (Note that Section 1876 cost plans are not required to
issue a Part C EOB, and, as explained in the above-mentioned HPMS memo, we have decided to
not require plans (including D-SNPs) to provide an EOB to dual eligible enrollees. We are
continuing to review comments that were submitted in response to our memorandum and the
Paperwork Reduction Act notice published in the Federal Register on November 26, 2012, and
will issue further guidance regarding the Part C EOB (including the final EOB templates) in June
2013. In response to comments received, we intend to shorten the draft templates considerably.
We are also delaying implementation until January 1, 2014.
Summary of Benefits (SB) Update
During the past year CMS evaluated the purpose, function, and effectiveness of the Summary of
Benefits (SB). Pursuant to CMS Medicare Marketing Guidelines, the SB is a standardized
document that plans must distribute with an enrollment form, and provides consumers an
overview of plan benefits in a consistent and uniform manner, so that individuals can compare
plans.
CMS sought feedback from beneficiaries, advocates, Medicare Advantage Organizations, and
Prescription Drug Plans regarding the SB in a variety of ways, including the draft Call Letter.
Overall, plans and partner organizations favored revisions to the SB. Specifically, respondents
agreed that the document should be streamlined, and that much of the technical language should
be replaced with plain language for ease of beneficiary understanding.
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CMS will consider incorporating many of the comments received and provide simplified
language for ease of beneficiary understanding. In addition, CMS posted a subset of SB
templates in HPMS for industry feedback in March 2013, and will consider these comments as
we refine the SB templates. We expect to release the new templates in the April 2014 HPMS
PBP/SB production release for required use beginning in the 2015 contract year.
PBP Notes Update for CY 2014
CMS has generally allowed MAOs to include additional information about the benefit being
offered in the notes sections in the PBP. The information in the notes sections is not to contain
any cost sharing for the benefit/service that is not reflected in the PBP data entry field for the
benefit/service. In addition, any information in a note must be consistent with the benefit/service
as it is reflected in the PBP data entry fields. MAOs may not use the notes fields to specify
conditions for coverage or cost sharing charges, because information entered in the notes fields is
not captured to generate summary of benefits (SB) sentences. All cost sharing must be
transparent and readily accessible to beneficiaries as they make plan comparisons.
An appropriate note contains only information applicable to the service category in which the
note section is located and provides relevant information that reviewers need for bid evaluation;
it does not repeat the cost sharing information entered in the data entry field. We have taken
several steps to help plans present benefits without the need for extensive notes. We will include
additional, minor clarifications regarding a number of acceptable supplemental benefits in a
future HPMS memo. We realize that in the past, notes have often been used to support marketing
material; therefore, we will continue to coordinate our efforts with our marketing review staff to
limit plans use of notes to providing additional information and not as duplication, verbatim of
the benefit descriptions.
Section 6055 of the Internal Revenue Code
In the draft Call Letter, CMS provided an update on Section 6055 (Reporting of Health Insurance
Coverage) which requires every health insurance issuer to provide notice of minimum essential
coverage to the Internal Revenue Service (IRS) and impacted individuals on an annual basis
beginning in 2015. We thank the commenters for their feedback and will consider their
suggestions as we implement the reporting requirements. Additional guidance will be
forthcoming.
Section III Part D
Payment for Hospice and ESRD Beneficiaries under Part D
Introduction
Drugs and biologics covered under the Medicare Part A per-diem payment to a hospice program
or included in the Part B bundled payment to an end-stage renal disease (ESRD) dialysis facility
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are not covered under Part D. To assist Part D sponsors in appropriately excluding these drugs
from Part D payment, CMS previously issued guidance directing sponsors to place prior
authorization (PA) requirements on the categories of ESRD drugs that are always considered
ESRD-related. For other drugs that may be ESRD-related and included in the bundled payment
to ESRD facilities, and for drugs that may be covered under the hospice per-diem payment, our
guidance has previously been to pay for the drug and retrospectively determine payment
responsibility. If the drug was later determined to be the responsibility of the hospice or dialysis
facility, the sponsor had to recover the Part D payment from the pharmacy and reverse the PDE.
This approach, which is similar to the approach employed in certain Medicare secondary payer
situations, has proven problematic for sponsors, pharmacies, and beneficiaries.
When we initially proposed the pay-and-chase approach, we thought that in the vast majority
of situations, the respective parties would reliably follow Medicare rules and bill appropriately.
For ESRD, the Medicare bundled payment to the dialysis facility includes all drugs and biologics
used in the treatment of ESRD except oral-only drugs. For hospice, the Medicare per-diem
payments cover drugs and biologics used primarily for the relief of pain and symptom control
related to the terminal condition as well as related conditions. We now better understand that a
hospice or ESRD dialysis facility may be uncertain about these definitions. A Part D sponsor
will therefore be similarly uncertain about whether payment is the responsibility of either the
hospice or dialysis facility or Part D. Therefore, we have learned this approach is often placing a
significant financial burden on the pharmacy and beneficiary when payment for a drug is later
determined to be the responsibility of the hospice or dialysis facility. In those instances, the Part
D sponsor would have recovered the erroneous payment from the pharmacy, leaving the
pharmacy to attempt recovery from the hospice or dialysis facility. The beneficiary who had
paid the Part D cost sharing to the pharmacy would have instead been liable for the coinsurance
payment to the hospice (which may not exceed $5) or the ESRD cost sharing (which is 20% of
the total bundled payment for ESRD-related services, which includes ESRD-related drugs). The
pay-and-chase approach also continues to provide the erroneous impression to hospice providers
or ESRD facilities and their patients that the drugs are coverable under Part D.
2014 Hospice Drug Policy
CMS requires that Part D sponsors ensure that Part D does not pay for drugs and biologics that
may be covered under the Medicare Part A per-diem payment to a hospice program. (As
specified in section 1861(dd) of the Social Security Act and in Federal regulations at Part 418,
the hospice is responsible for covering all drugs or biologics for the palliation and management
of the terminal and related conditions. In its 1983 Final Rule, which implemented the hospice
benefit, CMS interpreted related conditions broadly, and wrote that hospices are required to
cover virtually all the palliative care needed by terminally ill patients (48 FR 56010).) Drugs for
the palliation and management of the terminal illness and related conditions are the responsibility
of the hospice, and as CMS has noted in rulemaking, at the end of life, most conditions are
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related. Thus, when a sponsor receives a transaction reply report (TRR) showing a beneficiary
has elected hospice, the sponsor must have controls in place to comply with this requirement.
Although we strongly encourage sponsors to place beneficiary-level PA requirements on four
categories of prescription drugs, including: analgesics, antinauseants (antiemetics), laxatives,
and antianxiety drugs, we permit sponsors to use other approaches, such as pay-and-chase, to
resolve payment responsibility in these situations. The four categories for prior authorization are
drugs identified by the DHHS Office of Inspector General (OIG) as typically used to treat the
symptoms generally experienced by hospice beneficiaries during the end of life. The OIG
documented this finding in their review of Medicare payments for prescription drugs for
beneficiaries in hospice in their final report (A-06-10-00059) dated June 28, 2012.
In their review, the OIG also identified 8 drug classes that included 54 drugs prescribed for
chronic obstructive pulmonary disease (COPD) and 1 drug class for the 1 drug prescribed for
amyotrophic lateral sclerosis (ALS). We solicited comment on whether to extend the
beneficiary-level prior authorization proposal to include these COPD and ALS drugs as well, but
based on the comments we received, we will neither require nor encourage extraordinary
utilization management of these drugs for beneficiaries receiving hospice services at this
time. We note, however, that CMS may strengthen this guidance in the future.
Some commenters noted that delays in the flow of hospice election information cause retroactive
updates to the information sent to sponsors on the TRR and requested that CMS improve the
timeliness of the hospice data and include additional information, such as identification of the
hospice provider, on the TRR. We agree there are issues with the data flow. A sample of data
suggests that currently, when a hospice program receives a signed notice of election, since the
notice must be submitted prior to the first billing many organizations customarily either submit
the notice promptly or hold it to submit to the Medicare Administrative Contractor (MAC) with
its next billing for other patients. However, our sample showed that approximately 12 percent of
notices were held for periods longer than a month and the timely filing limits permissible for
hospice claims allow the notice to be held as long as a year. Once received, the MAC sends the
notice to CMS for processing and posting to the Common Working File (CWF); a process which
takes 1-5 days. The election is then entered into the CWF Master beneficiary Record and a daily
extract record from the CWF is sent to update the Medicare Beneficiary Database (MBD). The
MBD normally updates within 12 hours, and the Medicare Advantage/Prescription Drug system
(MARx) includes the hospice election information on the next daily TRR to the Part D sponsor.
We are exploring ways to expedite the information flow to ensure timelier reporting of the data
to plan sponsors, including specifying shorter timeframes for submission of the notice of election
by the hospice to the MAC and for reporting from the MAC to CMS. CMS strongly encourages
the hospice programs to submit the notices of election as soon as they are received to prevent the
delays which affect the ability to correctly determine payment responsibility for drugs for
hospice beneficiaries.
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We are also exploring adding fields to the TRR or to the eligibility query (E1) response to
identify the beneficiarys hospice provider. It is important to note that improvements to the data
flow may shorten the delays, but will not eliminate them. As a result, sponsors will continue to
receive retroactive updates to the hospice information on the TRR. Thus, all sponsors, including
those electing to impose PA requirements on hospice drugs, must retroactively determine
responsibility for claims paid during the retroactive election period and recover erroneous
payments from the pharmacy. Prompt updating of sponsor systems with the hospice information
on the daily TRR will enable sponsors to minimize the number of these retroactive adjustments.
Some commenters expressed concern that PA requirements would impose a significant burden
on pharmacies, prescribers and sponsors. In 2012, a total of 1.2 million beneficiaries elected the
Medicare hospice benefit. If all of these were enrolled in Part D plans, they would represent
approximately 3.5 percent of Part D enrollees; however, not all of the beneficiaries electing
hospice have Part D coverage. Moreover, we have no reason to believe that all beneficiaries
receiving hospice services are being asked to fill hospice-related prescriptions outside a hospice
pharmacy. Since these would be beneficiary-level PA requirements that would require
additional effort only if a prescription was directed to Part D, and that would affect only a small
percentage of any one sponsors total enrollment, we do not believe the level of effort associated
with prior authorization will be more burdensome than making conditional payment,
retrospectively determining payment responsibility and recovering erroneous payments has been.
For sponsors electing this approach, the imposition of PA requirements means that payment for
drugs in the hospice categories would stop and the pharmacy would receive a reject code on the
response to the pharmacys billing transaction indicating that prior authorization is required for
adjudication of the claim. The pharmacy would need to initiate dialogue between the parties to
resolve payment responsibility. This approach will prevent the payment of drugs by Part D that
should have been covered by the hospice program facility. Sponsors choosing to do so may also
implement these PA requirements in 2013. Drugs not paid by Part D would be furnished by the
hospice facility or dispensed by the pharmacy and billed to the hospice facility. Hospices remain
responsible for all drugs needed for palliation and management of the terminal illness and related
conditions.
A commenter questioned whether these PA requirements would apply to transition fills. As
noted in CMS guidance, a drug for which coverage is available under Part A, as it is being
prescribed and dispensed or administered with respect to the individual, is excluded from the
definition of a Part D drug. Transition requirements apply only to Part D drugs. Therefore, the
PA requirements will apply to transition fills to allow the A vs. D determination to be made
prospectively.

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2014 ESRD Drug Policy

Part D sponsors must ensure that they do not pay for drugs and biologics that are included in the
Medicare Part B bundled payment to an ESRD dialysis facility (as specified in section
1881(b)(14) of the Social Security Act and in Federal regulations at Part 413). Thus, when a
sponsor receives a TRR showing an ESRD beneficiary is receiving renal dialysis services, the
sponsor must have controls in place to comply with this requirement. Similar to the approach for
hospice, we strongly encourage sponsors to place beneficiary-level PA requirements on seven
categories of prescription drugs that may be ESRD-related; however, we permit sponsors to use
other approaches, such as pay-and-chase, to resolve payment responsibility for these drugs. The
seven categories of drugs listed in Table 5 in the preamble to the prospective payment final rule
(CMS-1418-F, which appeared in the Federal Register on August 12, 2010), are determined to be
ESRD-related when furnished to an ESRD patient and used as specified in the table. These
include:
Table 1: Seven categories of prescription drugs that may be ESRD-related
Antiemetic

Drugs used to prevent or treat nausea and vomiting secondary to

dialysis, excluding antiemetics used in conjunction with
chemotherapy as these are covered under a separate benefit category.

Anti-infectives

Drugs used to treat infections. These may include antibacterial and

antifungal drugs.

Antipruritic

Drugs in this category have multiple clinical indications, but are

included for their action to treat itching secondary to dialysis.

Anxiolytic

Drugs in this category have multiple actions, but are included for the
treatment of restless leg syndrome secondary to dialysis.

Excess fluid management

Drugs/fluids used to treat fluid excess/overload.

Fluid and electrolyte management including

volume expanders

Intravenous drugs/fluids used to treat fluid and electrolyte needs.

Pain management

Drugs used to treat graft site pain and to treat pain medication
overdose.

We note that although the payment of oral-only ESRD drugs and biologics (for example,
Sensipar, Phoslo, and Sevelamer) was to be included under the ESRD prospective payment
beginning January 1, 2014, the American Taxpayer Relief Act of 2012 delayed implementation
of this change until January 1, 2016. As a result, these drugs will continue to be eligible for
reimbursement under Part D.
Some commenters noted that delays in the flow of ESRD information cause retroactive updates
to the information to sponsors on the TRR and requested that CMS improve the timeliness of the
data and include additional information, such as identification of the ESRD dialysis facility, on
the TRR. We agree and are exploring ways to expedite the communication of information to
sponsors. We are also exploring adding fields to the TRR or to the eligibility query (E1)
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response to identify the beneficiarys dialysis facility. It is important to note that improvements
to the data flow may shorten the delays, but will not eliminate them. As a result, sponsors will
continue to receive retroactive updates to the dialysis data on the TRR. Thus, all sponsors,
including those electing to impose PA requirements on ESRD-related drugs, must retroactively
determine responsibility for claims paid during the retroactive election period and recover
erroneous payments from the pharmacy. Prompt updating of sponsor systems with the ESRD
data reported on the daily TRR will enable sponsors to minimize the number of these retroactive
adjustments.
Some commenters expressed concern that PA requirements would impose a significant burden
on pharmacies, prescribers and sponsors. Approximately 365,000 beneficiaries are receiving
ESRD dialysis services. This represents approximately 1.0 percent of Part D enrollees; however,
not all of the beneficiaries receiving dialysis have Part D coverage. Since these would be
beneficiary-level PA requirements and would only be expected to affect a small percentage of
any one sponsors total enrollment, we do not believe the level of effort associated with prior
authorization will be significantly more burdensome than the current approach of making
conditional payment, retrospectively determining payment responsibility and recovering
erroneous payments.
For sponsors electing this approach, beneficiary-level prior authorization will require that
pharmacies facilitate a dialogue with prescribers at point-of-sale for drugs that may be ESRDrelated for ESRD beneficiaries receiving renal dialysis services. This will limit the financial risk
for pharmacies and beneficiaries in comparison to the pay-and-chase approach. Given the
extensive reports of payment errors that have resulted from conditional payment, we believe this
is a better and more efficient approach. We expect that the prior authorization process will
prompt discussion between the prescriber and the plan sponsor in order to establish whether the
drug is, in fact, Part D or Part B. Thus, once the sponsor, pharmacy and prescriber have
established payment responsibility, there will be no further delay in the beneficiary appropriately
accessing the drug on this and future occasions. Sponsors choosing to do so may also implement
these PA requirements in 2013.
A commenter questioned whether these PA requirements would apply to transition fills. As
noted in CMS guidance, a drug for which coverage is available under Part B, as it is being
prescribed and dispensed or administered with respect to the individual, is excluded from the
definition of a Part D drug. Transition requirements apply only to Part D drugs. Therefore, the
PA requirements will apply to transition fills to allow the B vs. D determination to be made.
Daily Cost Sharing Requirements
Beginning January 1, 2014, Part D sponsors are reminded that they must establish and apply a
daily cost sharing rate whenever certain prescriptions (depending on the drug dispensed) are
dispensed by a network pharmacy for less than a 30 days supply in accordance with
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42 CFR 423.153(b)(4)(i). An example of the benefit of this requirement is that it provides Part
D enrollees, in consultation with their prescribers, the option of shorter days supplies of initial
fills of new prescriptions without the disincentive of the enrollees having to pay a full months
copayment or coinsurance. We provided this example as enrollees are expected to be most likely
to inquire of their prescribers whether a fill of less than a months supply would be appropriate
when first prescribed a chronic medication, particularly when faced with high cost sharing, such
as when purchasing the drug in the deductible phase of the benefit or in the coverage gap.
Prescribers are expected to be particularly supportive of this prescribing option when the
prescription is for a drug that has significant side effects, is frequently poorly tolerated, and when
less than a months supply of the prescription is clinically appropriate. Another example of the
benefit of this requirement is that it also allows beneficiaries the ability to synchronize their
prescriptions in consultation with their pharmacists without having to pay a full months cost
sharing when less than a months supply of medication(s) is dispensed during the
synchronization process until all medications are on the same thirty or more days refill schedule.
We intend to include language in future Medicare & You and Part D Evidence of Coverage
(EOC) documents on the availability of daily cost sharing rates, and on when and how
beneficiaries should consider taking advantage of them.
In preparing bids for CY 2014, sponsors should take note that, in the case of a copayment, there
will be a mandatory daily copayment field in the PBP for any tier where the plan has a
copayment included in the cost sharing. The maximum amount that can be entered for the Daily
Copayment field will be based on the one-month copayment amount divided by the actual
number of days entered for that one month supply for that specific tier. For example: If a plan
enters a 31 day supply as a one-month supply and a one-month copayment of $35 for Tier 1, then
the Daily Copayment entered for that tier cannot be higher than $1.12. ($35/31=$1.129). This
data entry validation is to assist plans in complying with the requirement that the daily
copayment cannot be an amount that would require the enrollee to pay more for a months
supply of the prescription than would otherwise be the case. Where a plan must round to a dollar
and cents figure, the highest amount the plan could round to would be the nearest lower dollar
and cents amount, as shown in the example.
Although this section is only a reminder of an upcoming regulatory requirement, we received a
number of comments about it on the draft version of this Call Letter. We appreciate the
supportive comments but note that several comments were similar to ones we addressed in the
rule that implemented the daily cost sharing requirement. Therefore, we refer sponsors to the
rule, which is available at 77 Fed. Reg. 22072 (April 12, 2012).
Also, we want to specifically note that the daily cost sharing requirement does not address how
pharmacy dispensing fees are to be negotiated, calculated or paid. However, we have heard that
some sponsors are prorating dispensing fees as part of implementing the short cycle dispensing
requirement in long-term care facilities in 2013 and may be incorrectly referencing the upcoming
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daily cost sharing requirement as the reason. To be clear, there is no necessary connection
between daily cost sharing amounts charged to beneficiaries and how dispensing fees are paid to
pharmacies. Further, if the reports of prorating dispensing fees are accurate, we are disappointed
that sponsors would reimburse dispensing fees in a way that incentivizes wasteful dispensing of
maximum amounts and at the same time financially penalizes the most efficient dispensing
methodologies to reduce unnecessary waste and cost in the Part D program.
Hospital Outpatient Drug Supplies During Observation Services
Medicare patients utilizing hospital observation services will generally continue their
maintenance medications that are not necessarily related to the observation services themselves.
Generally, only medications related to observation services are covered under Part B. Moreover,
hospital billing systems, Part D reimbursement rates, and drug utilization review requirements
make it difficult for hospitals to participate as a Part D provider for drugs dispensed in these nonpharmacy outpatient settings. Maintenance medications not related to the observation services,
when obtained from the hospitals inpatient pharmacy, often come at much greater cost, and
must be paid directly by the patient. Complicating matters, consistent with 42 CFR 423.124(b),
Part D sponsors are only required to reimburse out-of-network claims at the amount they would
have been paid in-network. Thus, many beneficiaries cannot recover a significant portion of
their out-of-pocket expenses for these drugs.
In May 2012, CMS issued a final rule (77 FR 29075) to amend 42 CFR 482.23, the hospital
Conditions of Participation (CoP) for nursing services to allow a patient (or his or her caregiver /
support person where appropriate) to self-administer both hospital-issued medications and the
patients own medications brought into the hospital, as defined and specified in the hospitals
policies and procedures. As discussed in the preamble to the proposed rule, this new provision
might provide hospitals with a means to make care more patient-centered and adaptable to
patient and caregiver/support person needs. Additionally, effective self-administration of
medications policies afford hospitals an opportunity to teach patient adherence to the proper
medication regimen that could have a positive impact on reducing hospital lengths of stay and
readmission. Although hospitals are still at liberty to disallow patients own supplies for liability
reasons, Part D sponsors need to be aware of this important change to the Medicare hospital
CoPs in order to be prepared to accurately address enrollee questions.
Part D pharmacy access standards do not require Part D plans to contract with hospitals for
dispensing drugs in these situations, and most hospitals have not been interested in contracting
with Part D sponsors. If the beneficiary is unable to take his or her own supply of maintenance
medications and has to obtain the medications from the hospitals inpatient pharmacy, the
beneficiary may submit a request for reimbursement to the Part D plan for out-ofnetwork reimbursement. We would expect that Part D plans will reimburse the beneficiary if the
situation warranted out-of-network access (i.e. beneficiary could not reasonably have received
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drug from a network pharmacy and access is not routine), and if the dispensed drug is on the Part
D plans formulary or is otherwise covered under the plan pursuant to a formulary
exception. Consistent with 423.124(b), the Part D plan is only required to reimburse the
beneficiary the amount that it would have paid had the beneficiary obtained the drugs at a
network pharmacy. The beneficiary remains responsible for any differential between what the
hospital charged and the Part D plan reimbursement, although the entire amount paid by the
beneficiary would count toward the true-out-of-pocket (TrOOP) expenses.
We expect plan sponsors to ensure that customer service representatives are aware of this policy
change so they may assist beneficiaries in understanding their options. When beneficiaries
contact the plan with questions about coverage of Part D drugs during hospital observation
services, customer service representatives should be prepared to advise the callers to discuss with
the hospital to determine if they have the option to avoid paying out-of-network differential
charges by self-administering their own supply of Part D medications (not related to observation
services) as a result of this important change in Medicare CoPs.
CMS shares commenters concerns about beneficiary foresight to bring medications to the
hospital with them. CMS also recognizes that Part D sponsors do not receive timely notification
of a beneficiarys need for observation services. Thus, we wish to clarify that our guidance to
plan sponsors is that they should be prepared to address beneficiary questions that may arise.
Withdrawal of Part D Bids after CMS Approval
CMS is concerned about recent instances where new applicants for stand-alone Part D plans
withdrew their approved bids and applications following the announcement of the Low Income
Subsidy (LIS) benchmark. CMS strongly disapproves of this practice because it is disruptive to
the operation of the Part D program and because it indicates that the withdrawing applicant was
not prepared to administer the benefit.
CMS uses the information submitted during the bid process to calculate the national average bid
amount and LIS benchmarks, which are announced in early August of each year. Plans whose
premiums are at or below the LIS benchmark in a region are eligible for auto-enrollment and
reassignment of LIS beneficiaries. It is important that the bid data used to calculate the
benchmark accurately reflects the premiums all PDPs will charge during the contract year.
Although new applicants have no enrollment in their proposed plans and thus cannot affect the
calculation of the benchmarks, we must apply this policy consistently across the program.
Throughout the application and bid process, new applicants attest that the information they
submit for the bid and application is accurate and reflects the anticipated cost of administering
the benefit for the full range of Medicare beneficiaries in the regions in which they intend to
operate. Applicants also attest that they are prepared to administer the benefit in accordance with
all applicable requirements, including accepting auto-enrollments and reassignments of LIS
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beneficiaries as applicable. The bid submissions and attestations are not supposed to be based on
any assumptions about whether the applicant will be eligible for auto-enrollments and
reassignments in the following contract year. When an applicant withdraws after the LIS
benchmark is announced, this act calls into question whether the applicant attested truthfully and
whether the assumptions and data underlying its bid accurately represented the cost of
administering the benefit.
For these reasons, we strongly discourage new applicants from withdrawing their applications
after the announcement of the LIS benchmark. We expect that all applicants whose applications
and bids have been approved at that time will enter into a contract with CMS and operate their
plans throughout the contract year for which they applied, regardless of whether or not they are
eligible for auto-enrollments and reassignments of LIS-eligible beneficiaries. Furthermore,
because late withdrawals call into question the accuracy and truthfulness of applicants bids and
attestations, CMS will apply additional scrutiny to future applications from new applicants who
have withdrawn bids and applications after the announcement of the LIS benchmark.
Inappropriate Use of Prior Authorization (PA) Forms
Consistent with 42 CFR 423.153, Part D sponsors are directed to establish utilization
management controls, such as prior authorizations, in order to reduce costs when medically
appropriate and to prevent over- and under-utilization of prescribed medications. To obtain the
information necessary to process prior authorizations, CMS is aware that some sponsors have
designed prior authorization forms that require more information or more criteria than CMS has
approved. Some of these more comprehensive forms contain the elements under applicable state
laws to technically constitute a valid prescription.
We are aware that such prior authorization forms have subsequently been used as prescriptions to
be filled by the sponsors and/or PBMs own mail-order pharmacy, instead of the pharmacy at
which the beneficiary presented the original prescription. According to Part D rules, this practice
is not permitted and bypasses protections required by 42 CFR 423.120(a)(10), which afford the
beneficiaries the ability to use the pharmacy of their choice.
As a result of the inappropriate use of prior authorization forms as prescriptions, and despite
guidance issued in the HPMS memo on May 4, 2012 entitled Reminder or Prescription Transfer
Requirements, we continue to receive complaints that beneficiaries have not been able to obtain
medications which required prior authorization at the pharmacy of their choice, and which were
ultimately dispensed by the sponsors and/or PBMs own mail-order pharmacy. We remind
sponsors that this practice violates CMS requirements and should be discontinued immediately.
The choice of which network pharmacy to use is at the sole discretion and convenience of the
beneficiary and non-compliant plans will be subject to CMS compliance actions.

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In response to the complaints referenced above, we have reviewed a number of drug specific
prior authorization forms. Through this review, we identified several non-allowable practices
that cannot be included on prior authorization forms, examples of which are provided below:

Requirements more restrictive than CMS-approved prior authorization criteria.

Limited Access or Step Therapy restrictions not consistent with the CMS-approved
formulary.
Quantity Limits inconsistent with FDA max dosing or not consistent with the CMSapproved formulary.
Prior Authorization criteria not submitted for HPMS approved formulary medications.
Steering of physicians or beneficiaries to a sponsors and/or PBMs own mail order
pharmacy.
Steering of physicians or beneficiaries to a sponsors and/or PBMs own specialty
pharmacy for drugs which are not Limited Access eligible.

Auto-Ship Refill Programs in Part D

To improve adherence, pharmacies often employ refill reminders to notify patients that a
medication is soon due to be filled, or that a medication has already been filled and is ready for
pickup. Consistent with fraud, waste, and abuse requirements in retail settings, medications that
are not picked up by the patient must be returned to stock, and the claim must be reversed.
However, some retail and mail-service pharmacies also employ automatic refill services that
automatically trigger delivery of medications to the patient. While these pharmacies obtain an
initial beneficiary consent to provide the automatic refill service, the pharmacies do not
invariably verify that the beneficiary still needs the medication before each refill is delivered. In
a related issue, CMS has received complaints indicating that some mail-service pharmacies
automatically deliver new prescriptions that were phoned in or e-prescribed from the physicians
office without confirming that the patient wants the prescription filled and delivered.
As a result of the automatic delivery practices described above, CMS has received complaints
that beneficiaries have had medications delivered that had been previously discontinued or were
otherwise unwanted and unnecessary at the time of delivery. Once the prescription is delivered,
pharmacies are unable to return the medication to stock and generally do not reverse the claim if
the patient does not want the prescription. Consequently, automatic delivery practices are
potentially generating significant waste and unnecessary additional costs for beneficiaries and
the Part D program overall. While proponents of these programs tout improved adherence, it
remains unclear to us that they can provide evidence of actual improvement in adherence, or that
permitting such programs to continue without reorder confirmation is cost-effective.
Therefore, to help control fraud, waste, and abuse as required by 42 CFR 423.504, and ensure
that Medicare beneficiaries only receive new prescriptions and refills that are requested, for
coverage year 2014, Part D sponsors should require their network retail and mail pharmacies to
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obtain patient consent to deliver a prescription, new or refill, prior to each delivery. We believe
unintended waste and costs could be avoided if pharmacies confirmed with the patient that a
refill, or new prescription received directly from the physician, should be delivered. Such
confirmation is unnecessary when the beneficiary personally initiates the refill or new
prescription request. This policy does not affect retail refill reminder programs that require the
patient to pick-up the prescription and does not apply to long-term care pharmacy dispensing and
deliveries.
While we expect this policy to be implemented no later than January 1, 2014, we strongly
encourage sponsors to make this a requirement of their network pharmacies that offer such
automatic refill programs for the rest of 2013 as well.
We received some comments citing concerns that requiring beneficiary confirmation prior to
each delivery will negatively affect beneficiary adherence based upon the current adherence
measures. On the contrary, we believe this policy will make the adherence measure more
meaningful by at least ensuring the beneficiary confirms a need for the medication. Although
auto-ship programs undoubtedly improve adherence measure scores by simply ensuring more
refills are processed on a schedule, such automatic refills may diminish the accuracy of the
adherence measure by including unwanted and unnecessary refills that do not reflect actual
adherence. Shipment of unwanted medications is not only wasteful, but also a source of
significant beneficiary aggravation and a financial imposition that can negatively affect enrollee
satisfaction with the plan. Supporting this idea, we received a number of comments that indicate
beneficiaries return large quantities of unneeded medications to community pharmacies for takeback programs because they were unable to stop auto-ship refill programs. Commenters were
divided as to whether the policy should apply to all fills, refills, or only first-fills. The policy
will apply to all fills, and CMS will re-evaluate its efficacy at a future time.
We invited commenters to propose alternative interventions that would be effective in addressing
this problem. Several plans shared their current systems for obtaining enrollee consent in
automatic refill services. Although some sponsors have existing systems, those systems should
be improved, such that, at the initial enrollment, it is impressed upon enrollees that if they wish
to use the service, they must provide a reliable means of communication that will enable
effective confirmation outreach. If the beneficiary is unable or unwilling to do so, then mailorder or pharmacy delivery services may not be the appropriate way for that individual to access
this benefit. We maintain that shipments should be predicated on a beneficiarys confirmation
that he or she still wants the medication.
Some commenters stated that this policy undermines the goals of e-prescribing. E-prescribing
provides a more efficient way of transmitting information between prescribers and dispensers,
thereby decreasing errors and costs. However, prescribing and dispensing remain distinct
operations. Providers sometimes prescribe in anticipation of a condition becoming worse.
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Moreover, a beneficiary has the right to put filling a prescription on hold or even to refuse a
treatment. Therefore, it is counter-intuitive and contrary to its goals to use e-prescribing as a
rationale for automatically delivering prescriptions that the beneficiary may not need or want.
Finally, we are concerned that the practice of plans offering powerful incentives such as $0 or
other very low cost sharing for 30-day supplies at mail-service, without offering the same cost
sharing at their retail network, is driving purchasing behavior for beneficiaries for whom mailservice may not be a good option. This would include beneficiaries that have limited means of
communication, some LIS beneficiaries, and beneficiaries filling non-maintenance medications
who may need them immediately. Significant mail-service incentives make it difficult for any of
these beneficiaries to choose to obtain 30-day supplies of their medications at retail even if it
otherwise is in their best interest. Moreover, mail-service historically has been designed for
extended-day supplies of maintenance medications, which allow for appropriate reorder and
delivery timeframes. Generally, we do not believe that mail-service order processes and delivery
timeframes are conducive to ensuring beneficiaries receive their 30-day prescriptions timely.
We have already seen high complaint rates and numerous access problems around this issue in
2013. Furthermore, we received comments from community pharmacies indicating that their
staff spend a lot of time helping their customers resolve problems with switching to mail-order
service. Consequently, we are reconsidering the appropriateness of such 30-day mail-service
benefit designs for the Part D program and Part D sponsors should anticipate that CMS may not
approve 2014 benefit designs with extremely attractive mail-service cost sharing incentives for
30-day supplies if such cost sharing is not also available throughout their retail network.
Incremental Fills of Schedule II Controlled Substances Prescriptions
As part of their compliance plans to detect, prevent, and correct fraud, waste, and abuse,
sponsors must have internal controls in place that prevent Part D payment for illegal refills of
Schedule II controlled substances prescriptions. In addition, these internal controls must ensure
that any PDEs that are submitted for actual illegal refills of Schedule II drugs are promptly
adjusted or deleted. The Drug Enforcement Agency (DEA) regulates Schedule II drugs, and the
Controlled Substance Act prohibits the refilling of prescriptions for them. (See 21 U.S.C.
829(a)). Schedule II controlled substances have the highest potential for abuse of any
prescription drugs legally available in the United States.
We encourage the industry to promptly address the known limitation of the current HIPAA
prescription drug billing standard with respect to distinguishing partial or incremental fills of an
original prescription from refills. CMS understands that this limitation may currently result in
partial fills of Schedule II controlled substances being billed in a manner that cannot be
distinguished from refills, particularly in the LTC setting. Partial fills of Schedule II controlled
substances are permissible under Federal law under certain circumstances and occur when a
pharmacist does not dispense all doses of the prescribed medication at one time. Partial fills are
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not considered refills. A September 2012 OIG report found that three-quarters of Part D
sponsors inappropriately paid $25 million for Schedule II controlled substances that were billed
as refills in 2009. The OIG acknowledged that some of these drugs may have been inaccurately
billed, and CMS believes these claims more likely represent legally dispensed partial fills as
opposed to illegal refills. (See https://oig.hhs.gov/oei/reports/oei-02-09-00605.asp).
CMS understands from comments received on the draft version of this Call Letter that the
industry is actively addressing the limitation in the billing standard through the National Council
for Prescription Drug Programs. Nevertheless, the limitation in the billing standard does not
obviate the requirement for sponsors to have internal controls in place that prevent Part D
payment for illegal refills of Schedule II controlled substances prescriptions. Until a billing
solution is implemented by the industry that permits sponsors to compare the amounts billed to
the total amount prescribed on the original prescription at the time of claim processing, CMS
expects sponsors to ensure compliance through retrospective auditing. We also expect sponsors
to ensure that any PDEs that have been erroneously submitted for illegal refills of Schedule II
drugs are promptly adjusted or deleted.
Real-time, Direct Access to Systems that Adjudicate Claims and Process Appeals and
Grievances
CMS is concerned that certain Part D sponsors have been unable to monitor effectively or
respond promptly to problems created by the performance of the first tier, downstream, and
related entities (i.e., delegated entities) to which the sponsors have delegated the performance
of claims adjudication or appeals and grievances processing. CMS has seen that problems often
arise in these areas because sponsors do not have real-time access to the systems delegated
entities use to perform these functions on the sponsors behalf. CMS is therefore clarifying that it
expects sponsors to have real-time access to these and other critical systems in order to
effectively monitor the performance of their delegated entities.
Pursuant to 42 CFR 423.505(i)(1), a Part D sponsor is responsible for all activities under its
contract with CMS, regardless of whether those activities are performed by a delegated entity
under contract with the sponsor. Furthermore, pursuant to 42 CFR 423.505(i)(4)(iii), the
contract between a sponsor and a delegated entity must specify that the sponsor will monitor the
delegated entitys performance on an ongoing basis.
CMS does not believe that it is possible for a sponsor to fulfill its monitoring and performance
obligations without real-time, direct access to systems that adjudicate claims, process appeals
and grievances, and perform other critical functions. Lack of access can and has prevented
sponsors from identifying, and has delayed their responses to, problems with, for example,
ensuring beneficiaries claims are appropriately processed in accordance with the CMS-approved
formulary. Therefore, CMS expects all sponsors to make arrangements with their delegated
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entities to have direct, real-time access to these critical systems in order to perform their
responsibilities under their Part D contract with CMS.
In 2013 and 2014, CMS will not take compliance action against sponsors solely for failing to
have real-time access to critical systems. However, effective immediately, if CMS determines
that a lack of real-time access causes a delay in a sponsors identification of, or response to, an
underlying performance problem, CMS may issue a more serious compliance action against the
sponsor than it otherwise would have.
Applicability of Rewards and Incentives in Part D
In the draft Call Letter, CMS expressed an interest in exploring if something analogous to the
existing rewards and incentives section in the Medicare Marketing Guidelines could be
implemented in the Part D program. In order to fully consider whether, and how, we could offer
corollary guidance to Part D sponsors on the existing rewards and incentives policy, we asked for
information from Part D sponsors regarding the experience and impact of rewards and incentives
programs currently offered in the commercial market. We will consider the comments we
received, and may issue guidance on rewards and incentives in the Part D program in the future.
Payment of Extemporaneous Compounds from Compounding Pharmacies
In accordance with 42 CFR 423.120(d), Part D sponsors may cover extemporaneously
compounded multi-ingredient compounds, including sterile compounds, which include at least
one ingredient that independently meets the definition of a Part D drug. The Part D sponsors
determine which, if any, of these compounds are on formulary, off-formulary, and/or are subject
to prior authorization requirements. If a Part D sponsor covers a compound, in addition to the
dispensing fee, it may only pay for the ingredient costs for those ingredients that independently
meet the definition of a Part D drug.
In 2012, less than 0.1% of Part D claims were reported to CMS on prescription drug events
(PDEs) as multi-ingredient compounds (Part D compounds). Our initial analyses of these
compound PDEs show that more than 50% of the Part D compounds were from either a long
term care (LTC) or home infusion pharmacy, which can be attributed in part to the increased use
of sterile compounds dispensed in these settings. While only 33% of all Part D compounds
likely were sterile compounds based on the drug reported on the PDE, more than 80% of these
sterile compounds were from LTC and home infusion pharmacies. Of the remaining likely
sterile compound claims from pharmacies that were not easily identifiable as home infusion or
LTC based on NPI taxonomy, further analysis of the pharmacy names and types of drugs
associated with these claims would appear to indicate that the vast majority likely originated
from home infusion and specialty pharmacies as well. Of those Part D compounds that were
filled at pharmacies other than LTC or home infusion, it appears that almost 90% are non-sterile
Part D compounds, the majority of which have a Part D drug that is typically used to make
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mouthwashes for mucositis or oral ulcer pain, oral liquid preparations, and topical preparations
that are not otherwise available as FDA-approved combinations. Overall, these analyses appear
to indicate that the small number of claims for compounds being covered by the Part D program
is limited to the types of compounds one would expect are necessary to address legitimate
medical needs that cannot be met with commercially-available FDA-approved combination
products.
Part D sponsors cannot cover compounds made entirely from non-Part D drug ingredients, such
as bulk powders or active pharmaceutical ingredients. However, some compounds include Part
D drugs and get covered under Medicare Part D (e.g. intravenous antibiotic solutions provided in
the home). While states regulate the pharmacies that extemporaneously compound patientspecific sterile products and establish the requirements that pharmacies must meet (e.g. USP 797
compliance), recent events involving non-Part D sterile compounds call into question whether or
not we need additional safeguards to help ensure the safety and quality of sterile compounds
covered under the Medicare Part D program.
In order to ensure that Part D only covers medically necessary Part D compounds, in the draft
Call Letter, we solicited comments on whether we should require Part D plans to consistently
obtain justification via prior authorization from the prescriber as to why no FDA approved
product is clinically suitable for the patient, or on any other ideas to increase controls over the
quality and safety of extemporaneously compounded products covered under Part D. We agree
with a number of commenters to wait for the results of other pending Federal actions. We thank
the stakeholder community for their comments and will review comments received for potential
future policy making.
Million HeartsTM Initiatives
Million HeartsTM, a U.S. Department of Health and Human Services initiative co-led by the
Centers for Medicare & Medicaid Services (CMS) and the Centers for Disease Control and
Prevention (CDC) and executed by a host of federal, state, and private sector partners, aims to
prevent one million heart attacks and strokes by 2017. More information about the Million
HeartsTM initiative can be found at http://millionhearts.hhs.gov/index.html.
A recent study by Roger and colleagues (Circulation. 2012; 125:e2-e220) found that each year,
Americans suffer 2 million heart attacks and strokes and 800,000 citizens die from heart attacks,
stroke, and other cardiovascular diseases. The trauma of these largely preventable events affects
families, workplaces, and communities and costs the nation over $444 billion in lost productivity
and treatment as found by Heidenriech and colleagues (Circulation. 2011; 123:933-4).
Along with community-focused efforts to reduce tobacco use and sodium and trans fat
consumption, the primary clinical aim in Million HeartsTM is to achieve excellence in the
ABCS: aspirin for those at risk, blood pressure control, cholesterol management, and smoking
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cessation. Getting to excellence means making the ABCS a priority for professionals, health
systems, insurers, employers, and people with or at risk for cardiovascular disease and by
deploying effective teams, health information technology, and incentives for high performance.
The first target of the Million HeartsTM initiative is to control high blood pressure. Nearly one
in three American adults (67 million) has high blood pressure, and more than half (36 million)
are not under control. According to the Medicare Current Beneficiary Survey (MCBS), overall,
more than 66 percent of Medicare beneficiaries have high blood pressure. High blood pressure
contributes to nearly 1,000 deaths per day and accounts for nearly $131 billion in direct
healthcare costs a year. Reducing the average systolic blood pressure by 12-13 mmHg could
reduce stroke by 37%, coronary heart disease by 21%, cardiovascular disease mortality by 25%,
and all-cause mortality by 13%.
The 36 million people with uncontrolled hypertension fall into the following three categories:

16 million are aware of their diagnosis and on treatment, but their hypertension is still
uncontrolled;
14.1 million are not even aware that they have high blood pressure; and
5.7 million are aware but untreated.

Viewed through the insurance lens, of those with uncontrolled hypertension:

14. 1 million are Medicare beneficiaries;

14.06 million have private insurance;
2.3 million have other public insurance; and
5.26 million have no insurance.

Medicare Advantage Organizations (MAOs) and Part D Plan (PDP) Sponsors are wellpositioned to contribute to rapid improvement in detection and control of hypertension. Drawing
attention to the scope of the problem and prioritizing control is a first step. Improving access to
blood pressure medication by removing financial barriers such as co-pays could improve blood
pressure control. Furthermore, MAOs and PDP sponsors can contribute to better detection and
control by facilitating home blood pressure monitoring, the sharing of those data with the
treating provider, and the timely return of treatment advice to the patient.
CMS is suggesting several actions that MAOs and PDP Sponsors could take to improve access
and adherence to anti-hypertensive medications.
First, for those plans that offer a $0 or a very low cost-share tier, we encourage, but do not
require, sponsors to place blood pressure medications on this tier.
Second, we encourage, but do not require, sponsors to offer Medication Therapy Management
(MTM) to beneficiaries who fill one or more prescriptions for anti-hypertensive medications.
The CMS requirements for targeting beneficiaries for the MTM program are considered to be a
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minimum; sponsors are encouraged to offer MTM services to an expanded population of

beneficiaries who may not meet the eligibility criteria per CMS specifications, but who could
benefit from MTM services. Offering MTM, including a comprehensive medication review, to
this population could help improve their blood pressure control, increase their adherence to these
vital medications, and empower these beneficiaries to self-manage their medications and their
health condition. However, this would not result in additional payment under Medicare Part D.
We also encourage sponsors to consider other interventions, aside from a comprehensive
medication review as part of MTM, such as adherence programs, targeted medication reviews,
etc., which may improve outcomes for this population and support the initiative.
Expansion of Part D Policy on Improving Utilization Review Controls
The section entitled, Improving Drug Utilization Review Controls in Part D, of the Final CY
2013 Call Letter, set forth how Medicare Part D sponsors can comply with drug utilization
management (DUM) requirements of 42 C.F.R 423.153 et seq. to prevent overutilization of
prescribed covered Part D drugs. We have consolidated various documents related to this policy
at http://www.cms.gov/Medicare/Prescription-Drug-Coverage/PrescriptionDrugCovContra/
RxUtilization.html.
In both the Final CY 2013 Call Letter and the HPMS memo of September 6, 2012, we indicated
that our guidance applied only to overutilization of opioids. In the HPMS memo we also
provided a possible targeting methodology that sponsors could use to identify potential instances
of overutilization of opioids for case management.
In the September 2011 GAO report that identified instances of questionable access to
prescription drugs, hydrocodone and oxycodone were noted as the most prevalent of the 14
classes of frequently abused drugs analyzed. While these drugs represented over 80 percent of
the instances of potential doctor shopping that were identified, there were still 20 percent of
instances that did not involve hydrocodone and oxycodone.
The comments we received on the draft version of this Call Letter both supported and opposed
our expanding the Part D Policy on Improving Utilization Review Controls to other drugs or
classes of drugs, such as anti-psychotic drugs, amphetamine derivatives, benzodiazepines and
non-benzodiazepine sleep aids. In addition, the supportive comments were not in agreement on
which drugs or classes of drugs would be appropriate or inappropriate to target. Therefore, we
will not expand our guidance beyond the opioid class at this time, but note that a sponsor may
voluntarily do so, which would include notifying CMS and the affected beneficiaries of any
beneficiary-level claim edits that will be implemented.
Drug Class Quantity Limits
In the supplemental guidance to the Improving Drug Utilization Review Controls in Part D
section of the CY 2013 Call Letter, we stated that we would develop a submission mechanism
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for plan-level point of sale (POS) edits based upon cumulative daily morphine equivalent dose
(MED) across the opioid class. We did not receive any comments on the draft version of this
Call Letter supportive of a cumulative MED level that could be implemented at POS that would
not only be an effective safety measure, but also one that would not inappropriately restrict
access to medically necessary drugs. Rather, comments received indicated that sponsors are
generally not ready to implement plan-level cumulative MED point of sale edits across the
opioid class. While this will not be a requirement for CY 2014, we will accept plan-level POS
edits based upon cumulative MED across the opioid class for review from sponsors who will
have the capability to implement them for CY 2014. Such information will not be provided as
part of the HPMS formulary submission process; however, we will provide instruction on how to
submit them to CMS for review. CMS strongly encourages all sponsors to develop the ability to
implement plan-level POS edits based upon cumulative MED across the opioid class as soon as
possible.
We also note that sponsors who implement a plan-level POS edit based upon cumulative MED
across the opioid class will be expected to submit QLs for all individual opioids as part of the
HPMS formulary submission for our review. Utilizing the existing QL fields, QL amount and
QL days, these Part D sponsors will submit the lesser of either the plan-approved QL for
individual opioids or the QL that is equivalent to the cumulative MED level to be applied across
the opioid class. This will provide for transparency in that both types of QLs would be displayed
in Medicare Plan Finder. We recognize that claims for quantities below the QL could reject at
point-of-sale (POS) depending upon previously dispensed quantities of other opioids due to the
plan-level POS edit based upon cumulative MED. However, it is not feasible to collect
additional quantity limit information based on all of the various possible combinations of
opioids.
With respect to sponsors who do not plan to submit plan-level POS edits based upon cumulative
MED across the opioid class, we would encourage these sponsors to submit QLs for opioids with
their HPMS formulary submission. As we noted in the CY 2013 Call Letter, Part D sponsors
may apply QLs to opioids even though there is no clearly defined maximum dose in the
approved labeling.
Change in Part D Barbiturate Coverage
Under the Medicare Improvements for Patients and Providers Act (MIPPA) of 2008, as codified
in 42 CFR 423.100, Medicare Part D began covering barbiturates (used for epilepsy, cancer, or
chronic mental health disorder) and benzodiazepines as of January 1, 2013. Effective January 1,
2014, section 2502 of the Affordable Care Act (ACA) of 2010 revised 1927(d)(2) of the Social
Security Act (the Act) by removing smoking cessation agents, barbiturates and benzodiazepines
from the list of drugs that states may exclude from coverage under the Medicaid Program. By

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removing barbiturates and benzodiazepines from 1927(d)(2), these drug categories are no
longer included in the list of drugs excluded from Medicare Part D under 1860D-2(e)(2).
Consequently, the practical effect of the ACA revision to 1927(d)(2) is that, beginning on
January 1, 2014, the restriction on barbiturate coverage under Part D (i.e., the limitation that
permits coverage only for epilepsy, cancer, and chronic mental health disorder indications), is
removed. Thus, beginning January 1, 2014, barbiturates that otherwise meet the definition of a
Part D drug under 1860D-2(e) may be covered under Part D for any medically accepted
indication (as defined in 1927(k)(6)). However, despite the removal of the restrictions on
barbiturates coverage, we do not believe that there are many more barbiturates that currently
would meet the definition of a Part D drug. A preliminary review has identified only a few
potential additional products likely to qualify as Part D drugs in 2014, the most notable being
FDA-approved butalbital-containing products used for the treatment of headaches.
Part D Benefit Parameters for Non-Defined Standard Plans
Each year, in order to implement certain regulations, we set forth certain benefit parameters,
which are based on updated data analysis, and therefore, are subject to change from year to year.
Specifically, pursuant to 423.272(b)(3)(i), CMS will only approve a bid submitted by a Part D
sponsor if its plan benefit package (other than defined standard) or plan cost structure is
substantially different from those of other plan offerings by the sponsor in the service area with
respect to key characteristics such as premiums, cost sharing, formulary structure, or benefits
offered; and, pursuant to 42 CFR 423.104(d)(2)(iii), tiered cost sharing for non-defined
standard benefit designs may not exceed levels annually determined by CMS to be
discriminatory. Since no changes have occurred in how we establish these parameters for CY
2014, nor in the applicable regulations, the benefit parameters for CY 2014 are set forth in
Table 1 below.
CMS will continue to scrutinize the expected cost sharing amounts incurred by beneficiaries
under coinsurance tiers in order to more consistently compare copay and coinsurance cost
sharing impacts. If a sponsor submits coinsurance values (instead of copayment values) for its
non-specialty tiers that are greater than the standard benefit of 25%, CMS will compare the
average expected cost sharing amounts submitted by sponsors in the PBP to the established
copay thresholds to determine whether the coinsurance values are discriminatory. (Please note
that for the Select Care/Diabetic Drug Tiers, although the maximum allowable coinsurance value
is less than 25%, CMS will conduct the same cost sharing analysis for these tiers).
As for CY 2013, the CY 2014 out-of-pocket costs (OOPC) model incorporates updated PBP and
formulary data used for CY 2014 bid submissions, as well as more precise brand and generic
drug determinations for gap coverage cost sharing estimates, which utilize Food and Drug
Administration (FDA) data and are more in line with the way the Part D benefit is administered.
Using this model, the minimum monthly cost sharing OOPC difference between basic and
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enhanced plan offerings will be $21. The minimum monthly cost sharing OOPC difference
between enhanced plan offerings will be $18. In addition, CMS still expects PDP sponsors that
are offering two enhanced alternative plans within a service area, to include additional gap
coverage of at least some (>10% to <65% of formulary drugs) brand drugs on the second
enhanced plan. (Please see a request for industry comments on OOPCs for CY 2015 at the end
of this section.)
We note that tier labeling and hierarchy requirements remain unchanged and are included in the
Plan Benefit Package (PBP) tool, and that the review of specific tier cost sharing is in addition to
the review for actuarial equivalence to the standard benefit across all tiers. To make the Specialty
Tier methodology transparent, we will post it at: http://www.cms.gov/Medicare/PrescriptionDrug-Coverage/PrescriptionDrugCovGenIn/ProgramReports.html.
Regulation (42 CFR 423.578(a)(7)) allows Part D sponsors to exempt a formulary tier, in which
it places very high cost and unique items, from tiered cost sharing exceptions. This tier is
referred to as the specialty tier. Cost sharing associated with the specialty tier is limited to
25% after the deductible and before the initial coverage limit or to an equivalent total amount for
sponsors with decreased or no deductible under alternative prescription drug coverage designs.
(Example: a $325 deductible and 25% cost sharing of an initial coverage limit of $2790 is
essentially the equivalent of $986.25 in out-of-pocket expenses, whereas no deductible and 33%
cost sharing of the same initial coverage limit is essentially the equivalent of $980.10 in out-ofpocket expenses.)
Only Part D drugs with sponsor negotiated prices that exceed the dollar-per-month amount
established by CMS in the annual Call Letter may be placed in the specialty tier. These are
referred to as specialty tier-eligible drugs. By placing these drugs on a specialty tier, plan
sponsors are restricted to charging cost sharing no greater than that permitted under the defined
standard benefit. In return Part D sponsors are shielded from tier exceptions for the most
expensive drugs, and need not increase their bids and all Part D premiums to maintain actuarial
equivalence for an estimate of increased plan liabilities arising from approved tier exceptions.
This year the minimum specialty tier eligibility threshold remains $600. Refer to Table 1.
Table 1: Benefit Parameters
CY2014
Threshold Values
Minimum Meaningful Differences (OOPC)1
1st Enhanced Alternative Plan vs Basic Plan

$21

1st Enhanced Alternative Plan vs 2nd Enhanced Alternative Plan

$18

Maximum Pre-ICL and Additional Gap Coverage Copay (R &

NP) - 3 or more tiers

154

R/NP3, 4

CY2014
Threshold Values
Preferred Generic/Generic Tier

$10

Non-Preferred Generic Tier

$33

Preferred Brand/Brand Tier

$45

Non-Preferred Brand Tier

$95

Injectable Tier

$95
5

Select Care/Diabetic Tiers

$10

Maximum Pre-ICL Coinsurance (R &NP)

3 or more tiers

R/NP3, 4

Preferred Generic/Generic Tier

25%

Non-Preferred Generic Tier

25%

Preferred Brand/Brand Tier

25%

Non-Preferred Brand Tier

50%

Injectable tier

33%
5

Select Care/Diabetic Tiers

15%
2

Maximum Additional Gap Coverage Coinsurance

R &NP) - 3 or more tiers

R/NP3, 4

Preferred Generic/Generic Tier

50%

Non-Preferred Generic Tier

50%

Preferred Brand/Brand Tier

69%

Non-Preferred Brand Tier

69%

Injectable tier

69%

Select Care/Diabetic Tiers

69%

Minimum Specialty Tier Eligibility

1 month supply at in-network retail pharmacy

$600

These thresholds are based on the 95th percentile of the CY2013 December Bid Data run through the CY2014
OOPC model which incorporates CY2014 PBP and Formulary Data, 2008/9 MCBS Data, and FDA Data for
brand/generic determinations related to coverage gap cost sharing estimates.
2

We have provided background information in Appendix 1 regarding our analysis to determine how much
additional coverage in the gap over the basic benefit would be considered to be substantially different. If additional
gap coverage of a brand tier includes generic drugs, then the coinsurance maximum for generic drugs of 50% applies
to all drugs on that tier. Injectable, Select Care and Select Diabetic Drug tiers for which additional gap coverage is
offered, if any, will be analyzed in the same manner as brand labeled tiers with respect to coinsurance maximums.

These thresholds are based on the 95th percentile. They are subject to change based on an analysis of plans using
the 95th percentile after CY 2014 bids are received. As in previous years, we will also set similar thresholds for
plans with atypical tiering structures, such as a two tier formulary and for meaningful benefit offering tiers that have
low or $0 cost sharing (i.e., special needs plans targeting one or more specific conditions).
4

R in the above chart refers to in-network retail pharmacy and NP refers to in-network non-preferred retail
pharmacy. An in-network retail (R) can only be designated as an in-network preferred retail pharmacy (P) if it

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offers a lower level of cost sharing than an in-network non-preferred pharmacy (NP) in accordance with Section
50.9 of Chapter 5 of the Medicare Prescription Drug Benefit Manual.
5

The Select Care Drug and Select Diabetic Drug Tiers must provide a meaningful benefit offering with low or $0
beneficiary cost sharing for drugs targeting specific conditions (e.g. $0 tier for drugs related to diabetes and/or
smoking cessation). The coinsurance threshold for these tiers is derived from an average expected copayment
amount using PDE data for drugs submitted on preferred cost sharing tiers.

With respect to our concerns with plans offering benefits with extremely attractive incentives
such as $0 or very low cost sharing for 30-day supplies at mail service, unless offering the same
cost sharing at their retail network, we refer sponsors to the section Auto-Ship Refill Programs in
Part D, above.
CMS received one supportive comment on the coinsurance threshold maximum proposed for the
Select Care and Select Diabetic Drug tiers requested in the draft version of this Call Letter.
Other comments reflected that sponsors were unaware that this tier option already existed.
CMS did receive industry comments regarding a possible change to the OOPC calculation
methodology for CY 2015 as requested in the draft version of this Call Letter. We thank the
industry for these comments and will consider them for CY 2015.
Employer Group Waiver Plan (EGWP) Supplemental Prescription Drug Benefits
Beginning January 1, 2014, Part D sponsors are reminded that CMS will implement the change
to the definition of Part D supplemental benefits in 42 CFR 423.100 (issued in CMS-4157-FC
on April 12, 2012) that specifically excludes all supplemental benefits offered through EGWPs.
This means that all supplemental prescription drug benefits offered through EGWPs will be nonMedicare benefits and considered other health insurance (OHI). Accordingly, if the nonMedicare supplemental benefits provide supplemental gap coverage for applicable drugs, these
benefits are OHI that apply after the Coverage Gap Discount is calculated.
The change of the regulatory status of EGWP Part D supplemental coverage from a Medicare
benefit to a non-Medicare benefit potentially subjects all such coverage to state or ERISA
requirements. The Center for Consumer Information and Insurance Oversight (CCIIO) issued
guidance that addresses regulatory status questions concerning non-Medicare supplemental
prescription drug benefits that may be offered by EGWP sponsors (see http://cciio.cms.gov/
resources/files/part-d-bulletin-1-25-2013.pdf). Although these will be non-Medicare
supplemental prescription drug benefits, as a practical matter, such benefits will remain subject
to Part D requirements because nearly all of the Part D supplemental coverage provided by
EGWPs reduces cost sharing on claims that already are covered under the basic Part D benefit.

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PDE Guidance on Post-Point-Of-Sale Claim Adjustments

Purposes of the PDE Record
(This discussion of the purposes of the PDE record is intended to provide a succinct summary of
current guidance and does not represent new policy.) CMS requires the PDE to be an accurate
record of how the benefit was administered in order to be able to validate plan sponsor
compliance with approved benefit designs, as well as the delivery of appropriate Part D benefits
such as low-income cost sharing subsidies and coverage gap discount payments. For instance,
we must be able to confirm that the prescription drugs provided to beneficiaries and the cost
sharing charged are both consistent with the formulary and benefit package approved by CMS.
In addition, we must be able to calculate the federal risk sharing, reinsurance and low-income
cost sharing subsidies due to Part D sponsors in annual reconciliations, and be able to recalculate
those subsidies at any later time if coverage year reconciliations are reopened. We must also
maintain a record of the coverage gap discount amount on applicable drugs advanced by the
sponsor at point-of-sale that must be reimbursed by the manufacturer of the applicable drug.
PDE records must represent actual transactions and remain available for inspection and
reconciliation, not only by CMS, but also by other parties, such as manufacturers and oversight
agencies. These records are critical not only for accurate payment, but also for a wide range of
sponsor compliance assessment activities, and other Part D program integrity audits.
Existing PDE Rules
Current PDE guidance states that the PDE is both an accurate record of how the benefit was
administered through the point-of-sale transaction (plus any subsequent financial adjustments)
and the final adjudication status of each Part D claim. For instance, from the 2011 PDE
Participant Guide:
PDE data also reflect how a plan has administered its Part D benefit package The PDE
is a summary record that documents the final adjudication of a dispensing event. Since
the PDE record summarizes multiple transactions, the plan must maintain audit trails to
PDE source data. CMS expects that the plan will be able to directly link any PDE to the
individual claim transactions from which the PDE was extracted and replicate the
summarization.
This policy exists to ensure the validity and accountability of the data necessary for Part D
payment, as well as for program oversight and evaluation, as discussed above. Current guidance
also states that any adjustments to amounts paid on claims must be reflected in adjusted or
deleted PDEs. [For instance, see the 2011 PDE Participant Guide, Sections 3.6, 4.5.2, and 8.3.3.
Also see the October 6, 2011 HPMS Memo Revision to Previous Guidance Titled, Timely
Submission of Prescription Drug Event (PDE) Records and Resolution of Rejected PDEs.]
Therefore, in order to provide for accurate payment reconciliation, any adjustments to financial
fields on Part D claims must be addressed through one of two methods permitted under current
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guidance: either (1) deletion of the original PDEs and the resubmission of corrected PDEs, or
(2) the submission of adjusted PDEs. Either of these approaches will ensure that CMS data
reflect the corrected amounts actually paid to the provider.
Discussions between CMS and both pharmacies and sponsors reveal that retrospective audits of
previous years claims are resulting, in some cases, in complete recoupment of the amount
originally paid to the pharmacy when data that do not affect the financial calculations on a claim
(non-financial data, or administrative data), such as prescription origin codes or prescriber
identifiers, are determined to be erroneous. The increasing incidence of these adjustments for
routine clerical errors rather than errors in data that result in incorrect payment amounts
(financial data) may be related to the incentives in contingency reimbursement arrangements
with claim audit vendors. We are concerned that the growing practice of post-audit total claim
recoupments from pharmacies is distorting Part D payment, as well as compromising Part D data
integrity and impairing our ability to oversee the program.
With respect to claim adjustments attributable to errors in data that do not affect the financial
calculations on a claim (administrative errors), we see no way that both foundational PDE
requirements i.e., that the PDE accurately document (1) benefit administration and (2) the
final status of the claimcan be satisfied if a legitimate Part D claim is accurately adjudicated at
point of sale, but then 100% of the claim amount paid to the pharmacy is later recouped as a
penalty for administrative data error. From our perspective, if a claim payment is fully recouped,
the final adjudication status of the claim is appropriately $0.00 regardless of whether the
recoupment was transacted via the reversal of a claim or a deduction from amounts payable on a
remittance. In other words, if a PDEs final adjudication status is appropriately $0.00, then it
would need to be because the claim never should have been paid, and the other elements of the
PDE that reflect the beneficiarys cost sharing, low-income cost sharing (LICS) subsidy, or
coverage gap discount would necessarily also be $0.00. The alternative would be that the claim
has been treated as payable for purposes of beneficiary cost sharing, LICS and coverage gap
discount, but treated as non-payable for purposes of the plan paid amount. In our view, such a
result is inappropriate. The submission of a PDE record claiming to represent amounts actually
paid greater than zero for a claim with a final status equal to zero is arguably the
misrepresentation of the status of the claim and the submission of erroneous information. An
adjustment in the DIR report not only does not rectify this error, but also it creates other payment
distortions, as will be discussed below. For these reasons, the correction of errors in any
administrative data field required on the PDE that alters the financial transaction as it actually
occurred at the point-of-sale (as reflected on file with CMS) distorts Part D payment and is
inconsistent with the purpose of the PDE. This is not to say that contractual arrangements
between Part D sponsors or their intermediaries and network pharmacies cannot specify financial
penalties for administrative errorsonly that a penalty consisting of full recoupment of the claim

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is incompatible with our requirements to submit a PDE record that simultaneously represents (1)
how the benefit was administered and (2) costs actually paid that are eligible for reconciliation.
Therefore, we believe full claim recoupment (followed by PDE deletion) should only take place
if the plan learns that a claim should not have been paid under Part D at all; for example, because
it is fraudulent. In such cases, it would be correct to remove the record of the transaction from
CMS databases because coverage and payment are prohibited under federal law.
In this final Call Letter, we are therefore clarifying our requirements for the submission of PDE
data with respect to corrections of three types of claim errors: financial, administrative, and
coverage errors. Financial errors are errors that result in incorrect payment calculation on claims
that were otherwise appropriate for coverage; administrative errors are errors in fields that do not
affect the financial calculations required on a claim; coverage errors are errors in paid
adjudication of claims that should not have been covered under Part D because, for instance, they
are fraudulent. Specifically, we are clarifying that:

the practice of recoupment of claims costs for administrative errors is not compatible
with existing PDE guidance and the data submission requirements under 42 CFR
423.505(b)(8) and (9);
any adjustment to claim payments for financial errors must be reported to CMS via
corrected PDEs; and
only PDEs that represent transactions that should not have been paid under Part D at all
pursuant to the Part D regulations or other federal laws should be completely deleted
from CMS databases.

Issues with Earlier Guidance

We acknowledge that previous CMS guidance and practice has permitted reporting of pharmacy
payment adjustments as a component of DIR. However, for the reasons discussed above, we
now better understand that such reported pharmacy payment adjustments are, in fact, claim
adjustments that should be reflected solely in PDE adjustments to ensure appropriate payment.
Therefore, we are eliminating the previous ambiguity that permitted claim adjustments to be
reported in two different ways, and are clarifying that PDE adjustment or deletion is the only
reporting methodology consistent with payment accuracy.
Since the beginning of the program, the DIR instructions have provided the opportunity to report
DIR in the category of pharmacy payment adjustments. When we originally designated this
category, we anticipated these would be rare events, such as the results of risk sharing
adjustments, not claims corrections although adjustments for claims corrections have been
permitted to date. We have observed that these amounts have been growing, and understand that
many of these adjustments are occurring as the result of retrospective audits of previous years
claims. Numerous pharmacy complaints, discussions with several sponsors and analysis of data
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submitted to CMS reveal that some sponsors have been retracting or recouping 100% of prior
payment on claims from pharmacies because of payment inaccuracies due to routine clerical
errors, rather than incorrect payment amounts and including these amounts as pharmacy
payment adjustments when reporting their DIR.
If such adjustments are reported to CMS in DIR, as opposed to corrected PDE submissions, both
the accuracy of Part D payment, as well as the reliability and utility of PDE data, are
compromised. While DIR amounts directly offset drug costs in risk-sharing reconciliation, DIR
amounts do not fully offset reinsurance subsidies and do not at all offset LICS subsidies. Thus,
reporting of claims adjustments via DIR reporting as opposed to corrected PDE submissions may
result in overpayment of these subsidies to the plan sponsor. Therefore, as discussed above, any
adjustments to amounts paid on claims must be reflected in adjusted or deleted PDEs. In order to
provide for accurate payment reconciliation, any adjustments to financial fields on Part D claims
that continue to result in a positive non-zero payment amount after adjustment must be addressed
through deletion of the original PDEs and the resubmission of corrected PDEs that reflect the
corrected amounts actually paid to the provider. While we acknowledge that our guidance has
been ambiguous for DIR reporting for coverage years 2006 through 2011, we believe this
guidance clarifies our requirements for reporting of claim adjustments to financial amounts on
paid claims going forward. We will further clarify the purpose of the pharmacy payment
adjustments field in the 2012 DIR reporting instructions.
We received a large number of comments on this section; most of these were from pharmacies.
Pharmacies all offered strong support for our clarification that total claim recoupments should
only be allowed to occur when the claim never should have been paid, such as when true fraud
has happened. They stated that when a patient, upon their request, receives the medication that
has been prescribed for them, there is no fraud involved. Most pharmacies also requested that
CMS introduce consistent standards across Part D plans regarding all PBM audit practices, but
such action is beyond the scope of this call letter.
Several Part D sponsors and several PBMs submitted comments on this section. Most of these
comments were partially supportive of our clarification and requested additional clarifications.
Payers were primarily concerned about those situations where, despite good faith efforts by the
Part D sponsor, the pharmacy does not submit the correct information, and such information is
required in order for CMS to accept the PDE. Anything short of full recoupment for defective
claims, these payers assert, would result in the Part D sponsor bearing the cost of the pharmacys
error, which would not only be unfair, but would also fail to provide appropriate incentives to the
pharmacy to correct such defects. We understand these concerns, but there is no reason to
believe that, when given a reasonable amount of time, a network pharmacy would not amend and
resubmit a claim for an error in administrative data fields required by CMS on PDEs when that
data is generated by the pharmacy itself, including the prescription origin code, and effective
2/28/13: pharmacy service type, patient residence, and submission clarification code. However,
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if for some unforeseen reason this occurs, CMS still requires the PDE record of how the claim
was administered, so in accordance with this guidance, the PDE must be submitted as
administered and the claim cannot be recouped on this basis alone.
We received several comments that utilized the example of an unrecoupable NPI error on a claim
as leading to a Part D sponsor unfairly bearing the cost of the pharmacys error. The prescriber
identifier field is a special case that we have specifically addressed in final regulations at 42 CFR
423.120(c)(5). Like this PDE guidance, in order to preserve access to benefits and the integrity
of the point-of-sale transaction, paragraph (iv) of that provision states that the Part D sponsor
must not later recoup payment from a network pharmacy for a claim that does not contain an
active and valid individual prescriber NPI on the basis that it does not contain one, unless the
sponsor: (1) Has complied with the POS requirements under paragraphs (c)(5)(ii) and (iii) of that
provision; (2) has verified that a submitted NPI was not in fact active and valid; and (3) the
agreement between the parties explicitly permits such recoupment. [77 FR 22146] Thus, we
caution sponsors that the regulations must be read in conjunction with our PDE requirements.
In light of the comments received on this section concerning NPI reporting, we would like to
take this opportunity to correct an apparent misunderstanding. In particular, we would like to
emphasize here the meaning of the word verify, as set forth in 423.120(c)(5)(iv)(2). If the
pharmacy and the sponsor have not been able to resolve any discrepancy concerning the NPI
within 24 hours (or on weekends by the next business day), the requirement to verify the NPI
effectively requires sponsors (not pharmacies) to investigate an apparently erroneous NPI with
the prescriber in order to affirmatively establish the status of the submitted NPI. The same is
true for prescriptions written by prescribers who have not yet obtained an NPI; sponsors must
also assume responsibility for contacting these prescribers to verify the status of their NPI, and if
applicable, requesting that they obtain and disclose an NPI. Therefore, we have imposed the
duty to resolve a missing or apparently incorrect NPI error on the sponsor, not the pharmacy.
This is not unfair to sponsors, because after May 6, 2013, most prescribers who do not already
have an NPI will have to obtain one pursuant to new requirements at 45 CFR 162.410(b).
Under 162.410(b), organization covered health care providers must require prescribers that are
members of the organization or whom the organization employs or contracts with, to obtain and
disclose NPIs. Therefore, a prescribers failure to obtain and disclose an NPI, in accordance with
162.410(b), may be reported to HHS/CMS/OESS as a possible violation of HIPAA
Administrative Simplification requirements by an organization-covered health care provider.
Please visit http://www.cms.gov/Regulations-and-Guidance/HIPAA-AdministrativeSimplification/Enforcement/index.html to learn more about the HIPAA Enforcement process and
how to file a complaint. CMS continues to work with industry representatives through the
NCPDP Work Group 1 Definition of a Valid Prescriber Task Group to address industry
questions on implementing the NPI reporting policy.
Other sponsor concerns involved:
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The effective date of this guidanceAs we state above, while we acknowledge that our
guidance has been ambiguous for DIR reporting for coverage years 2006 through 2011,
we believe this guidance clarifies our requirements for reporting of claim adjustments on
paid claims going forward. Since the 90-day minimum timely filing limits required
under Part D for coverage year 2012 have barely expired, we have no reason to believe
that any appreciable amount of claim auditing has already taken place. As one
commenter stated, retrospective audits of pharmacy providers are routinely conducted
beyond the plan year. Therefore, there is no reason to believe that applying this
clarification to claims submitted for coverage year 2012 would be problematic.
Moreover, any total claim recoupments for errors in administrative data fields that may
have already occurred for 2012 dates of service can still be restored and corrected in time
for the 2012 reconciliation window.
As previously noted, we will further clarify the purpose of the pharmacy payment
adjustments field in the 2012 DIR reporting instructions in the near future. We would
expect these instructions to address such issues as changes to pharmacy reimbursement
that are not known at the time of the point-of-sale transaction.

Whether CMS will allow plans more than 30 days to submit a valid PDE to CMS for
those claims that are submitted with the submission clarification code where further
outreach is required by the plan to obtain the valid NPISponsors should make their
best effort to follow our timely submission guidance, but we understand that there may
be some exceptions to this rule and that rare extenuating circumstances, such as delays in
obtaining an NPI from a provider who has not yet obtained one, will not be viewed as
being out of compliance with the timely submission requirements.

Comments suggesting that some did not fully understand the distinction we were trying
to make between adjustments to financial fields for reasons such as changes in LIS
levels or an overpayment to the pharmacy versus total claim recoupment for pharmacy
errors in non-financial or administrative fields on a claimConsequently we have
made two changes to our guidance in this final version. First, we have substituted more
precise language in the policy description, above. Second, we provide examples of the
policy applied to specific scenarios raised in payer comments to better clarify our intent
in the following chart.

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Table 1. Examples of PDE Requirements for Various Types of Errors on Claims

#

Financial
Error

Situation

Admin
Error

Coverage
Error

Amend
Claim &
Adjust
PDE

Recoup
Claim &
Delete
PDE**

An incorrect compound code (i.e. pharmacy

billing a compounded product with compound
code 1)

Claim submitted by an LTC pharmacy using an

inappropriate override code

Claim submitted with an incorrect DAW code

(and the claim would have rejected had the
correct DAW code been entered originally)

Claim that was billed for the incorrect drug

and/or directions as verified against the hard
copy prescription

Claim for a compounded medication that is billed

with an NDC number that was not used in the
actual compound

Claim that was billed with the incorrect quantity

and/or days supply when the claim would have
rejected for refill too soon had and the quantity
and/or days supply been submitted accurately by
the pharmacy

Wrong prescription origin code

Wrong NPI

Wrong pharmacy service type

10

Wrong patient residence

11

Fraudulent claim

12

Claim or prescription from excluded provider

13

Duplicate claim

14

No valid prescription can be produced by the

pharmacy (i.e., copies of original prescription or
physician order)

15

Prescription that is missing components required

on a valid prescription under applicable state or
federal law

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16

Situation

Financial
Error

Prescription dispensed using an adulterated or

outdated prescription drug

Admin
Error

Coverage
Error

Amend
Claim &
Adjust
PDE

Recoup
Claim &
Delete
PDE**

** PDE deletion also requires deduction of claim from benefit accumulators, including TrOOP and Total Drug Cost
Post Point-of-Sale Per Claim Administrative Fees
We have received a number of questions regarding the imposition of per-claim administrative
fees, levied by Part D sponsors or their intermediaries on pharmacies. Some examples we have
heard of include charging a pharmacy $1.00 per claim to participate in the sponsors preferred
pharmacy network or chargeback of the dispensing fee. Upon consideration, we believe that any
such post-point-of-sale claim adjustments violate our current guidance on negotiated prices. We
have clearly stated that negotiated prices the amounts on which beneficiary cost sharing and
TrOOP calculations, as well as government subsidies are based must be the amounts ultimately
paid to the pharmacy.
42 CFR 423.100Negotiated Pricesare prices that [the] network entity [pharmacy] will
receive, in total, for a particular drug. (Emphasis added.)
We believe that the practical effect, if not the intention, of per-claim fees deducted post point-ofsale is overstatement of negotiated prices at point-of-sale. If negotiated prices are overstated,
then beneficiary cost sharing, beneficiary advancement through the Part D benefit phases, and
government payment subsidies are overstated in contravention of our rules on negotiated prices.
Therefore, we do not believe that per-claim administrative fees that alter the price ultimately paid
to the pharmacy are consistent with Part D rules. In the draft call letter, we solicited comments
on this conclusion, as well as on whether and to what extent these types of adjustments have
been or are currently in effect in the Part D market.
We received a large number of comments in response to our request; most of these were from
pharmacies. Almost every commenter on this section acknowledged that such fees are being
assessed currently, at least by some large payers. Some comments suggested these fees are
associated primarily with preferred networks, and other comments suggested they are more
widespread. One commenter characterized per-claim administrative fees as commonplace in the
market for Medicare, Medicaid, and Commercial plans. A pharmacy trade association stated
We can confirm that such arrangements of plan sponsors charging pharmacies $1.00 (or more)
per claim to participate in a preferred pharmacy network exist, and believe this current practice
in the Part D market is more the rule rather than the exception. Such DIR fees are fairly common
for preferred pharmacy network participation.
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Most pharmacies characterized these fees as pay to play price concessions that should
rightfully be considered part of the negotiated price. Several Part D sponsors and several PBMs
submitted comments on this section. All but one of these payer commenters acknowledged these
fees to be price concessions. However, they offered various arguments and regulatory
interpretations permitting the reporting of these price concessions as DIR. Having reviewed
these arguments, we acknowledge that our definition of negotiated prices at 42 CFR 423.100
could be interpreted as permitting these kinds of arrangements, despite our intent that negotiated
prices transparently reflect all price concessions that a pharmacy has agreed to up-front on a perdrug-claim basis. Consequently, we believe that notice and comment rulemaking would be
necessary in order to require sponsors to consider these fees as part of the negotiated price. We
will consider the comments we have received on this question in weighing the policy basis for
revising the definition of negotiated price. In the meantime, we will not consider sponsors noncompliant with our negotiated prices rules as long as all such fees are fully reported as price
concessions through DIR reporting, effective with fees assessed on claims as of January 1, 2012.
Medication Therapy Management
Targeted beneficiaries for a Part D plans MTM program, in general, are enrollees who meet all
of the following criteria: have multiple chronic diseases, are taking multiple Part D drugs, and
are likely to incur annual Part D drug costs that meet or exceed a certain threshold. Per Sec.
423.153(d), for 2012 and subsequent years, the annual cost threshold for targeting beneficiaries
is specified as costs for covered Part D drugs in an amount greater than or equal to $3,000
increased by the annual percentage specified in 423.104(d)(5)(iv). The 2013 MTM program
annual cost threshold is $3,144. The MTM program annual cost threshold is updated for 2014
using the annual percentage increase of -4.03%, as specified in the Calendar Year (CY) 2014
Medicare Advantage Capitation Rates and Medicare Advantage and Part D Payment Policies.
Therefore, the 2014 MTM program annual cost threshold is $3,017.
We thank the 49 organizations and individual entities who commented on MTM. There was
support for general expansion of eligibility criteria for MTM targeting or offering MTM to all
beneficiaries. Therefore, we continue to encourage sponsors to optimize their programs,
including their targeting criteria, to offer MTM to beneficiaries who will benefit the most from
these services. We remind sponsors that the CMS eligibility targeting requirements are
established as the minimum threshold. Sponsors may also offer MTM services to an expanded
population of beneficiaries who do not meet the eligibility criteria under section 423.153(d). The
comments we received to broaden MTM eligibility requirements will also inform potential future
rule-making.
Several commenters offered their support for the Million HeartsTM Initiatives, but questioned the
burden and effectiveness of MTM and a comprehensive medication review (CMR) for
beneficiaries who fill at least one prescription anti-hypertensive medication. We received some
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comments that other mechanisms may be more appropriate to improve outcomes for this
population instead of a comprehensive MTM approach such as adherence programs, targeted
medication reviews, etc. We note that sponsors are encouraged, but not required, to offer MTM
services or other interventions to this population to support this initiative to control high blood
pressure and improve access and adherence to these medications.
We have heard that some high performing plans have used MTM to improve their Part D Star
Ratings in certain areas. Growing evidence of the value of MTM to improve beneficiaries
therapeutic outcomes indicates that more beneficiaries may benefit from these services. Some
organizations shared positive findings from their studies; we encourage them to publish their
data on the value of MTM.
In June 2011, CMS initiated a two-year project to examine the impact of Part D MTM programs
on the Medicare Part D beneficiary population, with a particular focus on specific high-risk
populations with strong clinical incentive to maintain drug therapy. A retrospective study cohort
design was used to identify the impact of 2010 Part D MTM programs on high cost, high risk
beneficiaries with congestive heart failure (CHF) and chronic obstructive pulmonary disease
(COPD). For the initial quantitative analysis, the study outcomes were divided into two
categories (1) drug therapy (e.g., use of and adherence to evidence-based medications) and (2)
resource utilization (e.g., all-cause and disease-specific hospitalizations and emergency room
visits). The interim report is available at: http://innovation.cms.gov/Data-and-Reports.
Based on this study, we found that MTM programs effectively targeted high-risk individuals who
had problems with their drug-therapy regimens and had high rates of hospital and emergency
room visits before enrollment as well as those that experienced a recent visit to the hospital or
emergency room. There was evidence that Medicare beneficiaries with CHF and COPD who
were enrolled in MTM programs in 2010 particularly those who received annual
comprehensive medication reviews (CMRs) experienced significant improvements in drug
therapy outcomes when compared to beneficiaries who did not receive any MTM services. This
supports the hypothesis that the annual CMR may be one of the more crucial elements of MTM.
Improvements in drug therapy outcomes included increased adherence to evidence-based
medications for individuals chronic conditions, and discontinuation of high-risk medications.
At the overall PDP and MA-PD levels, there were significant cost savings associated with allcause hospitalizations but not with disease-specific (e.g., CHF-specific or COPD-specific)
hospitalizations. This may be explained because MTM is a comprehensive approach to improve
medication use, and reduce the risk of adverse events, and is not disease-specific disease
management. Also, these findings support statements made in a recent Congressional Budget
Office report that programs and services that manage the benefit well or improve prescription
drug use might result in medical savings (Congressional Budget Office, Offsetting Effects of
Prescription Drug Use on Medicares Spending for Medical Services, November 2012).
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The next stage of this project will involve additional quantitative analysis to evaluate the effect
of MTM on individuals with diabetes, investigate outcomes for beneficiaries with high costs or a
high-prevalence of medication issues, and drill down on one or two case studies to evaluate the
impact of narrowly defined drug therapy interventions. Qualitative analyses will also be
performed, including in-depth case studies of how Part D MTM program services are
implemented and their effectiveness, especially around what procedures may support the
successful delivery of CMRs. At the conclusion of this study, a final report will be made
available to the public. Best practices will also be examined which could result in more
standardization of MTM service definitions and requirements in the future. We received
comments in support of the study and findings, and suggestions for additional research which
will be considered for future projects.
Coordination of Care
MTM can be used to promote the coordination of care. Beneficiaries should be encouraged to
complete their annual CMR prior to their annual wellness visit, and to take their standardized
medication action plan and personal medication list from their CMR to their annual wellness
visit or any medical encounter (primary care physician or specialist visit, hospital admission,
etc.). This summary can serve as a valuable tool to share information across providers and help
reduce duplicate therapy and drug-drug interactions. CMS plans to include this message to
beneficiaries beginning with the 2014 Medicare & You Handbook or other beneficiary
communications. Part D sponsors are encouraged to communicate this recommendation to
beneficiaries when notifying beneficiaries of their enrollment in the MTM program and when
offering or scheduling CMRs, and to explore other opportunities to use MTM to better
coordinate care. For example, CMRs may be beneficial after a transition in care or after a
hospitalization. Commenters supported these recommendations to coordinate care. Some
commenters recommended that CMS not specify specific timing requirements for a CMR after a
transition of care, to allow physician referrals in addition to CMS required targeting criteria, and
require sponsors to send the CMR summary to the beneficiaries prescribers. These
recommendations will be considered in the future. However, the current Part D regulations
would not prohibit sponsors from sharing the CMR summary with the beneficiaries prescribers
to coordinate care, provided all other legal requirements are satisfied, or offering MTM to
beneficiaries outside of the CMS MTM eligibility requirements who may have been referred by
their physicians.
Plan sponsors are encouraged to adopt standardized health information technology (HIT) for
documentation of MTM services. Structured, universal codes (e.g., SNOMED) are available for
clinical coding of MTM services delivered to beneficiaries, such as findings, recommendations,
and outcomes. The use of standardized coding systems improves the efficiency of
documentation by the MTM provider, supports consistent clinical record keeping, facilitates the
transfer of information between health care providers and beneficiaries, and will allow better
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collection and analysis of the impact of MTM services on beneficiaries care. CMS is
considering the expansion of the MTM reporting requirements to collect the findings and
recommendations that are discussed during CMRs and listed in the beneficiarys medication
action plan. Additional details on the 2014 Part D reporting requirements for MTM will be
provided during the associated PRA public comment periods and OMB clearance process.
Combining standardized coding systems and industry-supported templates (e.g., NCPDP/HL7
MTM Template CDA, see http://www.hl7.org/special/Committees/projman/
searchableProjectIndex.cfm?action=edit&ProjectNumber=842) will also enable sponsors to
update and print summaries of CMRs in a standardized format based on standard elements in
databases and EHRs rather than manipulating free-form text documents. Commenters expressed
general support for standardizing HIT for MTM service documentation. We will continue to
work with the industry to encourage development and uptake of standards. We agree with
commenters that significant lead time would be needed for plan sponsors to implement any
standards if required in the future.
Optimizing the Delivery of MTM in LTC Settings
Sponsors must offer a CMR to all beneficiaries enrolled in their MTM program at least annually,
and beginning January 1, 2013, this includes enrollees who are in long term care (LTC) settings.
Although we received comments citing concerns or opposition to providing MTM to LTC
beneficiaries, this is a statutory requirement. Otherwise, the comments were supportive of the
guidance to improve the delivery of MTM in LTC and the need for any additional clarification
will be considered for future guidance based on the recommendations received.
MTM and CMRs for beneficiaries in LTC provide new opportunities to serve this vulnerable
population and improve their medication use and quality of care. While there is some overlap
between the monthly drug regimen reviews (DRR) required in LTC and Part D MTM reviews, a
CMR must meet the CMS service-level definition. For each CMR, the pharmacist or other
qualified provider must conduct an interactive, person-to-person, or telehealth medication review
and consultation of the beneficiarys medications (including prescriptions, over-the-counter
(OTC) medications, herbal therapies, and dietary supplements). It must be performed in realtime with the beneficiary (or the beneficiarys caregiver or other authorized representative who
may take part in the CMR if the beneficiary cannot participate). It must provide a written
summary of the results of the review in the CMS standardized format to the individual. The
summary includes a personalized medication action plan and medication list for the beneficiary
and/or their caregiver or authorized representative.
There may be different issues and opportunities to improve medication use through MTM for
beneficiaries in the LTC setting compared to ambulatory settings. In the ambulatory setting,
goals include ensuring the beneficiary is on the right drug and dose and improving medication
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adherence. In LTC, adherence is less of an issue, and MTM can be used to identify overuse,
medications without a clear indication, suboptimal dosing, and polypharmacy. Also, MTM
could be used as an opportunity to align medication use with the beneficiarys goals and wishes
in addition to the care teams. However, as noted by one commenter, adherence may still be a
concern in settings such as assisted living facilities.
Sponsors should ensure that their policies and procedures for offering and delivering CMRs, per
CMS requirements, are effective for beneficiaries taking into consideration how to reach the
beneficiary according to their setting and needs. Regardless of setting, sponsors are expected to
use more than one approach when possible to reach all eligible targeted beneficiaries (or their
authorized representatives, if the beneficiary is cognitively impaired or otherwise unable to
participate) to offer MTM services versus only reaching out via passive offers. In the LTC
setting, a greater risk of both physical and cognitive issues may impact the beneficiarys ability
to conduct a phone interview. Sponsors should consider using qualified providers to perform the
CMR who have experience engaging beneficiaries and prescribers in the LTC setting, such as
involvement of a pharmacist who has a relationship with the LTC facility. To avoid conflicting
recommendations, the MTM provider should coordinate the recommendations for drug therapy
changes as a result of a MTM encounter with the beneficiarys treating physician and healthcare
team at the facility, their caregiver or authorized representative, when applicable, and consultant
pharmacist. Additional consideration could be given to coordinate MTM activities with the care
plan meeting to assess current treatment regimens. The beneficiary or authorized representative
should be invited to these meetings, and often the facility has an understanding of which
beneficiaries are interested in being involved in their care and which defer to their authorized
representatives.
In the event the beneficiary is unable to accept the offer to participate, the pharmacist or
qualified provider may perform the CMR with the beneficiary's caregiver, other authorized
individual, such as the beneficiarys health care proxy or legal guardian, or prescriber. To the
extent possible, preference should be given to involving the beneficiarys caregiver to further
engage them in the management of the beneficiarys medications. Regardless of cognitive
status, many LTC residents may prefer to involve their authorized representative or caregiver in
the CMR, and this should be considered when serving this population. Furthermore,
beneficiaries in LTC are less likely to self-administer their own medications and cognition can
vary on any given day even if it was determined that the beneficiary is not severely cognitively
impaired. The nursing staff, including but not limited to the Director of Nursing, may be a
valuable asset to ascertain information about a beneficiarys functional status, cognitive status,
and medications, as well as caregiver(s) or authorized representative(s). If asked, plan sponsors
should be able to present documentation or a rationale for determining a beneficiary to be
cognitively impaired or otherwise unable to participate in the CMR.

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Previously, we recommended that when a targeted beneficiary moves to a LTC facility, Part D
plan sponsors should identify the appropriate contact for each beneficiary. This contact could be
the authorized representative, caregiver, or prescriber. Sponsors, or the MTM providers, could
contact the admissions coordinator, MDS coordinator, Director of Nursing, or other appropriate
facility staff person to ascertain if an authorized representative has been designated in the
beneficiarys medical record or chart. Sponsors are encouraged to develop processes and
procedures to contact the facility in the least burdensome manner to request assistance from the
facility to identify beneficiaries who are not cognitively impaired and may be receptive to
receiving a CMR, and beneficiaries who have a health care proxy. In the event that the
definition of authorized representative differs by State or in settings other than LTC, we defer to
State law.
One tool that could be used in nursing homes to identify if a beneficiary is cognitively impaired
or able to participate in the CMR is the Brief Interview of Mental Status (BIMS) in the Minimum
Data Set 3.0. Currently, Surveyors determine whether a resident is interviewable. Residents
may be identified as interviewable if they have a BIMS score of 8-15; at a score of 0-7 or 99,
the resident may be identified as a Family Interview Candidate or as needing some other
authorized representative. 4 A similar process could be used by MTM providers to evaluate if a
beneficiary is interviewable and can participate in the CMR. The following algorithm could
be applied using MDS 3.0.
IF
1. MDS item C0500 [Brief Interview for Mental Status (BIMS) Summary Score] = 8-15
BIMS Summary Scoring
13 - 15: Cognitively intact
8 - 12: Moderately impaired
0 -7: Severe impairment
AND
2. MDS Item B0700 ("Makes Self Understood") = 0 or l
"Makes Self Understood" Scoring
0 = Understood
1 = Usually understood
2 = Sometimes understood
3 = Rarely/never understood

Memo from the Director, Survey and Certification Group. September 27, 2012. Advance Copy of Interim
Guidance - Revisions to State Operations Manual (SOM), Appendix P-Traditional Survey Protocol for Long Term
Care (LTC) Facilities and Chapter 9/Exhibits including Survey Forms 672, 802, 802S and 802P.

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AND
3. MDS Item B0800 ("Ability to Understand Others") = 0 or l
Ability to Understand Others Scoring
0 = Understands
1 = Usually understands
2 = Sometimes understands
3 = Rarely/never understands
THEN: The resident should be considered able to receive a CMR.
Commenters supported the use of the algorithm above. We did not receive many comments
regarding other tools that could be used in LTC settings and in the community and assisted living
settings where greater variation in available tools exists. One commenter suggested that a 3-part
HIPAA verification process from the ambulatory setting may be useful to determine cognitive
status (i.e., if the member cannot verify their address, phone number and DOB, then consider
cognitively impaired. Listing one of their medications could be substituted if one of the three
pieces of information is missing from the plans data).
We will also expand the distribution of the Long Term Institutionalized (LTI) Resident Report to
plans from two times per year to quarterly to assist sponsors in the identification of enrollees in
LTC. Some commenters requested more frequent reporting than quarterly, and this will be
considered as the budget allows.
Promoting Beneficiary Awareness
To promote beneficiaries awareness of these valuable programs, we will continue to enhance the
information about MTM in the Medicare & You Handbook and on Medicare.gov. On the
Medicare Plan Finder (MPF), a new MTM tab will be developed on the Your Plan Details
page which will allow beneficiaries to view the plans MTM program eligibility information and
a link to the plans MTM program web page. Therefore, beginning with the 2014 Health Plan
Management System (HPMS) MTM Program Submission Module, sponsors will be required to
report their MTM program web page URL with their program description (as part of the annual
submission process). Additional MTM definitions will be added into the general tabs on
Medicare.gov (such as Manage Your Health and Help & Resources) and glossaries. Examples
include but are not limited to: Medication Review or Manage your Medications.
Currently, Part D sponsors are encouraged to post a blank Personal Medication List from the
CMR standardized format on their website or provide information to beneficiaries about how to
obtain a blank copy and to reach customer service. Commenters supported these efforts to
promote beneficiary awareness of MTM, as well as the requirements for plan sponsors MTM
web pages listed below. However, there were a significant number of comments raising
concerns about the feasibility, issues, and costs to implement an interactive tool for beneficiaries
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to input their information and determine if they may be eligible for the plans MTM program.
CMS understands these concerns and is not implementing the requirement at this time.
Currently, the plans website should provide at a minimum the plans MTM eligibility
requirements, who to contact for more information, and a high level summary of services offered
as part of the MTM program.
Beginning in 2014, sponsors will be required to have a dedicated Medication Therapy
Management Program page linked from their Medicare drug plan website (such as the services
or benefits page) with specific information about their MTM program written in plain language
appropriate for beneficiaries including:

The plans specific MTM eligibility requirements,

Who to contact for more information, with customer service personnel prepared to
answer questions about the MTM program,
A high level summary of services offered as part of the MTM program, explanation of
the purpose and benefits of MTM, and that this is a free service for eligible beneficiaries,
A description of how the beneficiary will be notified that they are eligible and enrolled in
the MTM program, how they will be contacted and offered services, including the
comprehensive medication review and targeted medication reviews, and a description of
how the reviews are conducted and delivered, including time commitments and materials
beneficiaries will receive, and
How the beneficiary may obtain MTM service documents, including a blank copy of the
Personal Medication List.

If possible, this page should be accessible by clicking through a maximum of two links.
Antipsychotic Data
CMS continues to pursue strategies to increase awareness of antipsychotic use in long term care.
To that end, we are calculating a new metric defined as the percent of Medicare Part D
beneficiaries 65 years and older who are continuously enrolled in a nursing home and who
received atypical antipsychotic (AA) medication fills during the period measured. Based on
2011 Prescription Drug Event (PDE) data, Enrollment data, and Minimum Data Set (MDS)
Assessments, the new metric is now posted for all contracts with more than 10 beneficiaries who:
Had institutional versus community status for payment purposes as identified via the
Monthly Long Term Institutional (LTI) flag for all months of the measurement period or
until death;
Were alive for at least 90 days at the beginning of the measurement period;
Were enrolled in Part D for all months of the measurement period that they were alive;
and
Whose first reason for Medicare enrollment was aging-in.
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These data are included for informational purposes only on the 2013 Display Measures page now
available on the CMS Web site at http://www.cms.gov/Medicare/Prescription-Drug-Coverage/
PrescriptionDrugCovGenIn/ PerformanceData.html. The data show 2011 atypical antipsychotic
drug rates by contract that range from 3.03% to 66.67%. The table below reports the average
rate for each organization type. Currently, CMS does not plan to integrate the data into the Star
Ratings. At this point, we do not know what a good or expected rate is, but we want to inform
sponsors of their rates. If a sponsor sees its rate is high, we would encourage them to work with
the care team at the LTC facility to investigate whether the beneficiaries truly need the atypical
antipsychotic drugs.
Based on a review of Medicare payments for atypical antipsychotic drugs in nursing homes, the
DHHS Office of Inspector General (OIG) found 22 percent of the atypical antipsychotic drugs
associated with the sampled claims did not comply with CMS standards regarding unnecessary
drugs in nursing homes. The reasons cited in the OIG final report (OEI-07-08000150, May
2011) for noncompliance with CMS standards included excessive dose, excessive duration,
inadequate indication for use, inadequate monitoring and/or the presence of adverse
consequences that indicated that the dose should be reduced or discontinued. Given this finding,
our expectation is that we will see these rates generally decline in the future as a result of MTM
services and other increased efforts to curtail atypical antipsychotic drug use in LTC.
Table 1: Rates of Atypical Antipsychotic Drugs by Organization Type
Organization Type

Atypical Antipsychotic Drug Rate

MA Only

25.0

MA-PD

21.3

PDP

24.3

Low Income Newly Eligible Transition (LINET) Contractor

24.5

Two related nursing home quality measures which became available on the Medicare Nursing
Home Finder Web site in 2012 will continue to be posted. Based on resident assessment
information reported in the MDS, these quality measures reflect antipsychotic drug use by shortterm stay and long term stay facility residents.
Improvements to the Prescription Drug Plan Information Files
We remain committed to improving Medicare Plan Finder (MPF) data that are available to the
public. Currently, the Quarterly - Prescription Drug Plan Formulary, Pharmacy Network, and
Pricing Information public use file includes a 30 day cost (average monthly cost at in-area retail
pharmacies) by NDC. CMS will expand the pricing data to include extended day supply pricing
for retail and mail order, when offered under a plan benefit package. Extended day supply
pricing is already reported by sponsors as part of the Medicare Plan Finder pricing data
requirements, so this change imposes no additional burden on sponsors. We expect this
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enhancement to be implemented in the first CY 2014 Quarterly - Prescription Drug Plan

Formulary, Pharmacy Network, and Pricing Information public use file.
Coordination of Benefits (COB) User Fee
CMS is authorized to impose user fees on Part D sponsors for the transmittal of certain
information necessary for benefit coordination between sponsors and other entities providing
prescription drug coverage. We review and update this user fee annually to reflect the costs
associated with COB activities for the specific year. Funding estimates for 2013 included some
projects and contingent contract recompete transition costs for a number of COB-related systems
that ultimately were not needed, resulting in a significant surplus. Upon this review of
anticipated costs for COB activities for the upcoming contract year, we have determined that we
will not be imposing COB user fees for contract year 2014. Please note that for contract year
2015, we anticipate imposing user fees again.
In contract year 2014, we will use the surplus 2013 COB user fees for activities including:
Part D Transaction Facilitator operation and maintenance;
Coordination of Benefits Contractor (COBC) operation and maintenance;
Drug data processing system management, which is used to collect prescription drug
event (PDE) data for Part D payment purposes, including coordination of benefits with
other payers, and to produce invoices for the coverage gap discount program;
Medicare Advantage and Prescription Drug (MARx) system management of COB data;
Creation and maintenance of a web-based portal that allows Part C plans and Part D
sponsors to retroactively process enrollments, which helps ensure that COB information
is accurate;
Implementation of an automatic notification process that will advise other health insurers
whenever a beneficiarys Part D COB information changes; and
Review of Workers Compensation settlement set-aside funds, which ensure that medical
services are paid for by the appropriate party.
Part D Low Enrollment
CMS has the authority under 42 CFR 423.507(b)(1)(iii) to non-renew Part D plans (at the
benefit package level) that do not have sufficient number of enrollees to establish that they are
viable plan options. While we are particularly concerned with plans that have fewer than 500
enrollees, we urge sponsors to voluntarily withdraw or consolidate any stand-alone plan with less
than 1,000 enrollees. Sponsors are strongly encouraged to view data on plan enrollment at:
http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/
MCRAdvPartDEnrolData/index.html to determine if any of their plans meet this criterion. In
April 2013, we will notify plans with less than 1,000 enrollees of available
consolidation/withdrawal options. We reserve the right to require low enrollment plans to
consolidate/withdraw in the future based on the marketplace at that time to ensure that all Part D
174

plans offered in the marketplace are attractive to beneficiaries and do not add to their confusion
in selecting a plan best suited to their prescription drug coverage needs.
Preferred / Non-Preferred Pharmacy Networks
We remind Part D sponsors that the regulations that permit lower cost sharing at some network
pharmacies also require that such cost sharing reductions must not increase CMS payments to the
plans:
42 CFR 423.120(a)(9) Differential cost sharing for preferred pharmacies. A Part
D sponsor offering a Part D plan that provides coverage other than defined standard
coverage may reduce copayments or coinsurance for covered Part D drugs obtained
through a preferred pharmacy relative to the copayments or coinsurance applicable for
such drugs when obtained through a non-preferred pharmacy. Such differentials are taken
into account in determining whether the requirements under 423.104(d)(2) and (d)(5)
and 423.104(e) are met. Any cost sharing reduction under this section must not increase
CMS payments to the Part D plan under 423.329.
We have begun to scrutinize Part D drug costs in PDPs with preferred networks, and comparing
these to costs in the non-preferred networks, as well as to costs in PDPs without preferred
networks. We are concerned because our initial results suggest that aggregate unit costs
weighted by utilization (for the top 25 brand and top 25 generic drugs) may be higher in
preferred networks than in non-preferred networks in some plans. Combined with lower cost
sharing, we believe these higher unit costs may violate the requirement not to increase payments
to such plans. We have contacted the plan sponsors identified in our analysis to initiate the
validation of our findings.
We received a large number of comments in responding to this section. A few commenters
supported our concern, and one pharmacy association referred us to the findings of a study it had
conducted which appears to corroborate our concerns. Most comments were from pharmacies
complaining about barriers to participation in preferred networks. We strongly believe that
including any pharmacy that can meet the terms and conditions of the preferred arrangements in
the sponsors preferred network is the best way to encourage price competition and lower costs
in the Part D program. Doing so would also likely mitigate some beneficiary disruption and
travel costs, especially in rural areas. However, mandating this policy is beyond the scope of this
call letter.
Comments received in response to the section on Post Point-of-Sale Per-Claim Administrative
Fees, above, suggest to us that some sponsors may consider the net result of the negotiated price
applied at point of sale plus this type of per-claim price concession to meet the requirement not
to increase CMS payments. For the reasons laid out in the section on PDE Guidance on PostPoint-Of-Sale Claim Adjustments, above, we believe the reporting of this sort of price
175

concession through DIR instead of through negotiated prices applied at the point-of-sale shifts
costs to the beneficiary and the government, and potentially to pharmaceutical manufacturers in
the Coverage Gap Discount Program as well. This is because price concessions reported in DIR
do not offset all of the costs to which they are attributable in reinsurance and low-incomesubsidy cost sharing subsidies. They also do not offset the additional degree to which the
beneficiary is moved through the benefit from phases in which the plan liability is greater to
those in which the plans liability is substantially less. To the extent that this occurs in lieu of
lower point-of-sale negotiated prices, CMS payments to the Part D plan will have been increased
through higher reconciled reinsurance and LICS subsidy payments.
As noted in the previous section, we acknowledge that our definition of negotiated prices at 42
CFR 423.100 could be interpreted to permit these arrangements despite our intent that
negotiated prices transparently reflect all the price concessions that a pharmacy has agreed to upfront on a per-drug-claim basis. However, despite that ambiguity, we believe that such
arrangements are likely still not compliant with the requirement not to increase payments to the
plan under 42 CFR 423.120(a)(9), due to the cost shifts explained above. Thus we caution
sponsors that they must ensure that their preferred network pricing arrangements comply with
this requirement. This will only be transparently the case when the negotiated prices applicable
at point-of-sale in the preferred network are less than the negotiated prices applicable at point-ofsale in the non-preferred network.
We also remind all sponsors that beneficiary communications concerning preferred networks
must be clear and unambiguous. Under no circumstances may sponsors inform LIS-entitled
beneficiaries that they must fill prescriptions at preferred network pharmacies in order to get LIS
copays. This means that both written and verbal communications between plan representatives
and Medicare beneficiaries must be differentiated by LIS status, whether through mailings or
Customer Service Representative (CSR) scripts.
We also remind sponsors that the designation of preferred and non-preferred networks in the plan
benefit packages and Medicare Plan Finder pricing file submissions must be accurate. At the
time of bid submission, each sponsor attests to the accuracy of all information submitted. If a
plan sponsor does not have contracted preferred pharmacy arrangements at the time of bid
submission, that sponsor may not indicate the offering of a preferred network in the PBP, in any
associated marketing materials, or in Plan Finder pricing file submissions. Conversely, any
preferred pharmacy arrangements must be accurately identified in the PBP, in any associated
marketing materials, or in Plan Finder pricing file submissions in accordance with CMS
instructions. A pharmacy may only be associated with the plans preferred network in any of
these materials if a lower differential cost sharing applies to some tiers of formulary drugs at that
pharmacy than actually applies at pharmacies in the non-preferred network. If a sponsor does
not differentiate cost sharing between preferred and non-preferred networks, it may not designate
any pharmacies in its network as preferred.
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Appendix 1 Additional Gap Coverage

Consistent with our bid submission requirements provided at 42 CFR 423.265, a Part D
sponsors bid submission must reflect differences in benefit packages or plan costs that we
determine to represent substantial differences relative to a sponsors other bid submissions. In
2014, the standard drug benefit will provide 28% of generic drug and 2.5% of brand drug
coverage in the gap. We expect that the additional gap coverage of drugs offered by plans will
reflect meaningful enhancements over the standard prescription drug benefit.
To determine how much additional cost sharing coverage in the coverage gap over the basic
benefit would be recognized as substantially different, we considered the amount of additional
coverage provided by the Part D sponsors in their plan benefit packages for CY 2013. Based on
this analysis, we are setting the maximum copay cost sharing thresholds at the pre-ICL
thresholds values set for CY 2014 (see also Part D Benefit Parameters, Table 1 above). Similar
to the pre-ICL cost sharing analysis, we completed an analysis of the additional gap coverage
copay cost sharing associated with the 95th percentile across all initially submitted bids
consisting of three or more tiers. Table 1 below shows the results of the threshold analysis of the
CY 2013 bid submissions, as well as the 2014 copay thresholds. Note the 95th percentile was at
or below the established pre-ICL thresholds, except for the Select Diabetic Tier which included
coverage of only applicable drugs in the gap therefore the effective beneficiary cost sharing was
at the threshold level.
With respect to coinsurance cost sharing, we found that the 95th percentile of plans offering
coverage in the gap had cost sharing levels for generics (including tiers with a mix of brands and
generic drugs) of 50% coinsurance. This was the maximum coinsurance level allowed in
CY2013 for tiers with additional gap coverage that included generic drugs. Because the standard
gap coverage benefit for generic drugs is increasing to 28% for CY2014, we are setting the
maximum coinsurance threshold for generics drugs at a beneficiary cost sharing of 50%, which
provides a benefit that is approximately 2 times the standard benefit of 28% for CY 2014. This
is consistent with our approach last year. With respect to brand drugs, for which the standard
benefit is 2.5% for CY 2014, we will maintain last years threshold and require that the plans
benefit has beneficiary cost sharing during the coverage gap that is equal to or less than 69%
coinsurance. Table 2 below shows the results of the threshold analysis of the CY 2013 bid
submissions, as well as the 2014 coinsurance thresholds.

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Table 1. CY 2014 Maximum Copay cost sharing for additional

gap coverage offered by EA plans (MA-PD & PDP)
Tier
Label1

# of
plans

25th

50th

75th

95th

2014
Threshold

Preferred Generic/Generic Drugs

R

1121

$0

$4

$6

$8

$10

207

$0

$2

$3

$5

$10

NP

207

$3

$7

$10

$10

$10

Non-Preferred Generic Drugs

R

667

$5

$10

$12

$20

$33

65

$5

$5

$10

$12

$33

NP

65

$7

$7

$10

$17

$33

Preferred Brand Drugs

R

491

$40

$45

$45

$45

$45

32

$40

$40

$40

$40

$45

NP

32

$45

$45

$45

$45

$45

Non-Preferred Brand Drugs

R

444

$80

$86

$95

$95

$95

32

$76

$76

$76

$76

$95

NP

32

$95

$95

$95

$95

$95

Select Care Drugs

R

44

$0

$0

$0

$0

$10

NA

NA

NA

NA

NA

$10

NP

NA

NA

NA

NA

NA

$10

Select Diabetic Drugs

R

$20

$20

$20

$20

$10

NA

NA

NA

NA

NA

$10

NP

NA

NA

NA

NA

NA

$10

Please note that R refers to In-network retail pharmacy; P refers to In-network preferred retail pharmacy;
and NP refers to in-network non-preferred retail pharmacy.

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Table 2. CY 2013 Maximum Coinsurance cost sharing

for additional gap coverage offered by EA plans (MA-PD & PDP)
Tier
Label1

# of
plans

25th

50th

75th

95th

2014
Threshold

Preferred Generic/Generic Drugs

R

50%

50%

50%

50%

50%

39

1%

1%

1%

50%

50%

NP

39

59%

59%

59%

59%

50%

Non-Preferred Generic Drugs

R

NA

NA

NA

NA

NA

50%

50%

50%

50%

50%

50%

NP

50%

50%

50%

50%

50%

Preferred Brand Drugs

R

47

25%

25%

50%

69%

69%

69

30%

30%

50%

50%

69%

NP

69

35%

35%

55%

55%

69%

Non-Preferred Brand Drugs

R

67

41%

43%

44%

49%

69%

36

40%

50%

50%

50%

69%

NP

36

53%

55%

55%

55%

69%

Please note that R refers to In-network retail pharmacy, P refers to In-network preferred retail pharmacy,
and NP refers to In-network non-preferred retail pharmacy. There was no additional gap coverage offered in
2013 for tiers labeled as Injectable, Select Care or Select Diabetic Drugs.
2

The minimum additional gap coverage benefit of 50% for generic drugs and 69% for brand drugs is inclusive of
the standard gap coverage drug benefit of 28% and 2.5% respectively in CY 2014.

179

Appendix 2 Contract Year 2014 Guidance for Prescription Drug Plan (PBP) Renewals
and Non-Renewals
Prescription Drug Plan (PDP) regions are defined by CMS and consist of one or more entire
states (refer to Appendix 3, Chapter 5, of the Prescription Drug Benefit Manual for a map of the
34 PDP regions). Each PDP sponsors Plan Benefit Packages (PBPs) must be offered in at least
one entire region and a PDP sponsors PBP cannot be offered in only part of a region. Please
note that PDP bidding rules require PDP sponsors to submit separate bids for each region to be
covered. HPMS only accepts a PDP sponsors PBPs to cover one region at a time for individual
market plans (e.g., a PDP sponsor offering a national PDP must submit 34 separate PBP bids
in order to cover all PDP regions).
A PDP sponsor may expand the service area of its offerings by submitting additional bids in the
PDP regions the sponsor expects to enter in the following contract year, provided the sponsor
submits a PDP Service Area Expansion (SAE) application and CMS approves that application
and then approves the sponsors submitted bids for the new region or regions. For more
information about the application process, refer to: http://www.cms.gov/Medicare/PrescriptionDrug-Coverage/PrescriptionDrugCovContra/RxContracting_ApplicationGuidance.html.
Conversely, a PDP sponsor may reduce its service area by electing not to submit bids for those
regions from which it expects to withdraw. A PDP sponsor must notify CMS in writing (by
sending an email to [email protected]) of its intent to non-renew one or more plans
under a contract by the first Monday in June (June 3, 2013) pursuant to 42 CFR
423.507(a)(2)(i). The same procedure applies to PDPs converting contracts from offering both
individual and employer products to employer-only products. However, even absent written
notification to CMS, a PDP sponsors failure to submit a timely bid to CMS constitutes a
voluntary non-renewal by the sponsor. (Note that PDP sponsors reducing their service areas
must provide notice of their action to affected beneficiaries consistent with regulatory
requirements, CMS PDP Eligibility, Enrollment, and Disenrollment Guidance, Chapter 3 of the
Prescription Drug Benefit Manual and annual summer CMS non-renewal and service area
reduction guidance.)
Each renewal/non-renewal option available to PDP sponsors for CY 2014 is summarized below
and defined in Appendix 3. All but one of these actions can be effectuated by PDP sponsors in
the HPMS Plan Crosswalk.
1. New Plan Added
A PDP sponsor may create a new PBP for the following contract year with no link to a PBP it
offers in the current contract year in the HPMS Plan Crosswalk. In this situation, beneficiaries
electing to enroll in the new PBP must complete enrollment requests, and the PDP sponsor
offering the PBP must submit enrollment transactions to MARx. No beneficiary notice is
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required in this case beyond receipt of the Evidence of Coverage (EOC), and other documents as
required by current CMS guidance, following enrollment.
2. Renewal Plan
A PDP sponsor may continue to offer a current PBP that retains all of the same service area for
the following year. The renewing plan must retain the same PBP ID number as in the previous
contract year in the HPMS Plan Crosswalk. Current enrollees are not required to make an
enrollment election to remain enrolled in the renewal PBP, and the sponsor will not submit
enrollment transactions to MARx for current enrollees. New enrollees must complete enrollment
requests, and the sponsor will submit enrollment transactions to MARx for those new enrollees.
Current enrollees of a renewed PBP must receive a standard Annual Notice of Change (ANOC)
notifying them of any changes to the renewing plan.
3. Consolidated Renewal Plan
PDP sponsors are permitted to combine two or more entire PBPs offered in the current contract
year into a single renewal plan in the HPMS Plan Crosswalk. A PDP sponsor may not split a
current PBP among more than one PBP for the following contract year. A PDP sponsor
consolidating one or more entire PBPs must designate which of the renewal PBP IDs will be
retained following the consolidation; the organizations designated renewal plan ID must remain
the same in order for CMS to consolidate the beneficiarys election by moving him or her into
the designated renewal plan ID. This is particularly important with respect to minimizing
beneficiary confusion when a plan consolidation affects a large number of enrollees. When
consolidating two existing PBPs into a single renewal PBP, it is permissible for the single
renewal PBP to result in a change from:

A basic benefit design (meaning either defined standard, actuarially equivalent standard,
or basic alternative benefit designs) to another basic benefit design;
An enhanced alternative benefit design to a basic benefit design; or
An enhanced alternative benefit design to another enhanced alternative benefit design.

Current enrollees of a plan or plans being consolidated into a single renewal plan will not be
required to take any enrollment action, and the sponsor will not submit enrollment transactions to
MARx for those current members, although it may need to submit updated 4Rx data to CMS for
the current enrollees affected by the consolidation. New enrollees must complete enrollment
requests, and the sponsor will submit enrollment transactions to MARx for those new enrollees.
Current enrollees of a consolidated renewal plan must receive a standard ANOC.
4. Renewal Plan with a Service Area Expansion (800 Series EGWPs only)
A PDP sponsor offering an 800 series EGWP PBP in the current contract year may expand its
EGWP service area to include additional PDP regions for the following contract year through the

181

Part D application process. In order for currently enrolled beneficiaries to remain in the renewed
PBP, the sponsor must retain the same PBP identification number for the following contract year.
Current enrollees will not be required to take any enrollment action, and the sponsor will not
submit enrollment transactions to MARx for those current enrollees. New enrollees must
complete enrollment requests, and the sponsor will submit enrollment transactions to MARx for
those new enrollees. Current enrollees of a renewed PBP with a SAE must receive a standard
ANOC notifying them of any changes to the renewing plan.
5. Terminated Plan (Non-Renewal)
A PDP sponsor may elect to terminate a current PBP for the following contract year and must
notify CMS in writing (by sending an email to [email protected]) by June 3, 2013. In
this situation, the sponsor will not submit disenrollment transactions to MARx for affected
enrollees. When a sponsor terminates a PBP, plan enrollees must make a new election for their
Medicare coverage in the following contract year. To the extent that a current enrollee of a
terminated PBP elects to enroll in another plan offered by the current or another PDP sponsor
or, alternatively, elects to enroll in an MA plan he/she must complete an enrollment request,
and the enrolling organization or sponsor must submit enrollment transactions to MARx so that
those individuals are enrolled. Enrollees of terminated PBPs will be sent a model termination
notice that includes notification of a special election period, as well as information about
alternative options.
6. Consolidated Plans under a Parent Organization
For purposes of ensuring compliance with transition requirements following an acquisition or
merger under our significant differences policy, or to make plan transitions following a novation,
CMS may elect to combine two or more entire PBPs offered under different contracts (the
contracts may be offered by the same legal entity or represent different legal entities). PDP
sponsors must complete this renewal option by submitting a crosswalk exception request through
HPMS. CMS will provide detailed technical instructions for completing a crosswalk exception
request through HPMS in forthcoming guidance. Requests will be reviewed and, if approved,
the action will be completed on behalf of the requesting PDP. Current enrollees of a plan or plans
being consolidated across contracts in this manner will not be required to take any enrollment
action, and the sponsor will not submit enrollment transactions to MARx for those current
members, although it may need to submit updated 4Rx data to CMS for the current enrollees
affected by the consolidation. New enrollees must complete enrollment requests, and the
sponsor will submit enrollment transactions to MARx for those new enrollees.
Current enrollees of a consolidated renewal plan must receive a special notice along with a
standard ANOC. Plan sponsors should use the CMS model for this special notice provided in
Appendix 4 of this Call Letter.
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Requests to Change a Basic Plan to an Enhanced Plan

PDP sponsors should note that, as a general matter, CMS will not permit renewal or
consolidation of a PBP when it involves moving enrollees from a basic benefit design to an
enhanced alternative benefit design, unless very limited conditions are met.
Such renewals or consolidations must always be pre-approved by CMS. We have approved such
requests in a very limited number of situations when a sponsor has determined how to provide a
significantly more efficient basic benefit in the next coverage year (including a meaningfully
different OOPC). We would generally expect these to be one-time events for a sponsor. In these
cases, the reclassification of the plan type and transfer of enrollees from a basic plan design to an
enhanced plan has made sense because the enhanced plan provided a more comparable year-toyear benefit transition compared to the new level of benefits in the new proposed basic plan. The
transfer of enrollees in these cases has kept the beneficiaries in a plan with comparable benefits,
while allowing more efficient basic plans with lower premiums to be offered on the market.
We will not approve this sort of change if the existing basic plan under consideration has a
premium below the LIS benchmark or de minimis premium in the current coverage year. This is
to ensure that auto-enrollees are not moved to a plan with a supplemental premium and a reduced
premium subsidy, as well as to ensure the requested change in classification of plan type is not
aimed at reducing the number of enrollees who had been previously auto-enrolled. For existing
basic plans that are above the benchmark and had not elected to waive de minimis premium,
enrollees with LIS are not auto-enrollees, but are instead choosers. As such, they are assumed to
have previously agreed to be enrolled in a plan where premium was not fully subsidized.
In general, the conditions that must be met in order for us to approve such a renewal or
consolidation include (but may not be limited to) all of the following:
a) the existing basic benefit PBP must not be under the benchmark premium in the
current year;
b) the premium of the enhanced alternative benefit PBP in the next coverage year must
the same or less than the existing basic PBP;
c) the benefits of the enhanced alternative benefit PBP in the next coverage year must be
better than or similar to the existing basic benefit PBP;
d) all of the sponsors plans must continue to meet the minimum meaningful differences
OOPC threshold values; and
e) the PDP sponsor must move all enrollees into the same enhanced benefit design PBP.
These policies would also apply if a sponsor had one PBP with a basic benefit design and wished
to terminate this plan and offer a new basic plan. That is, the sponsor would have to redesignate
the previous basic plan as an enhanced plan, and move all of the enrollees into that new
enhanced plan, in order to offer a new basic plan.
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Organizations must also request a crosswalk exception for requests to change a basic plan to an
enhanced plan and receive permission from CMS prior to submitting such bids. However, this
does not guarantee that the actual bid submission will be approved by CMS during the bid
review process.

184

Appendix 3 Contract Year 2014 Guidance for Prescription Drug Plan (PBP) Renewals and Non-Renewals - Table
Activity
1 New Plan (PBP) Added

Definitions
A PDP sponsor creates
a new PBP.

2 Renewal Plan

A PDP sponsor
continues to offer a CY
2013 PBP in CY 2014.
The same PBP ID
number must be
retained in order for all
current enrollees to
remain in the same PBP
in CY 2014.

HPMS Plan Crosswalk

HPMS Plan Crosswalk
Definition:
A new plan added for
2014 that is not linked
to a 2013 plan.
HPMS Plan Crosswalk
Designation:
New Plan
HPMS Plan Crosswalk
Definition:
A 2014 plan that links
to a 2013 plan and
retains all of its plan
service area from 2013.
The 2014 plan must
retain the same plan ID
as the 2013 plan.
HPMS Plan Crosswalk
Designation:
Renewal Plan

185

Systems Enrollment
Activities
The PDP sponsor must
submit enrollment
transactions.

The renewal PBP ID

must remain the same
so that current enrollees
will remain in the same
PBP ID.
The PBP sponsor does
not submit enrollment
transactions for current
enrollees.

Enrollment Procedures
New enrollees must
complete an enrollment
request.

No enrollment request
for current enrollees to
remain enrolled in the
renewal PBP in 2014.
New enrollees must
complete enrollment
request.

Beneficiary
Notifications
None.

Current enrollees are

sent a standard ANOC.

Activity
3 Consolidated Renewal
Plan

Definitions
A PDP sponsor
combines two or more
PBPs offered in CY
2013 into a single
renewal PBP for CY
2014. The PDP sponsor
must designate which
of the renewal PBP IDs
will be retained in CY
2014 after
consolidation.

HPMS Plan Crosswalk

HPMS Plan Crosswalk
Definition:
Two or more 2013
plans that consolidate
into one 2014 plan. The
2014 plan ID must be
the same as one of the
consolidating 2013 plan
IDs.
HPMS Plan Crosswalk
Designation:
Consolidated Renewal
Plan

4 Renewal Plan with an

SAE (applicable only to
employer/union group
waiver plans)

A PDP sponsor
continues to offer an
800 series CY 2013
prescription drug PBP
in CY 2014 and
expands its EGWP
service area to include
additional regions. The
PDP sponsor must
retain the same PBP ID
number in order for all
current enrollees to
remain in the same PBP
in CY 2014.

HPMS Plan Crosswalk

Definition:
A 2014 800-series plan
that links to a 2013
800-series plan and
retains all of its plan
service area from 2013,
but also adds one or
more new regions. The
2014 plan must retain
the same plan ID as the
2013 plan.
HPMS Plan Crosswalk
Designation:
Renewal Plan with an
SAE

186

Systems Enrollment
Activities
The PDP sponsors
designated renewal
PBP ID must remain
the same so that CMS
can consolidate current
enrollees into the
designated renewal
PBP ID.
The PDP sponsor does
not submit enrollment
transactions for current
enrollees. Sponsors
may need to submit
updated 4RX data for
enrollees affected by
the consolidation.
The renewal PBP ID
must remain the same
so that current enrollees
in the current service
area will remain in the
same PBP ID.
The PDP sponsor does
not submit enrollment
transaction for current
enrollees.

Enrollment Procedures
No enrollment request
for current enrollees to
remain enrolled in the
renewal PBP in 2014.

No enrollment request
for current enrollees to
remain enrolled in the
renewal PBP in 2014.
New enrollees must
complete enrollment
request.

Beneficiary
Notifications
Current enrollees are
sent a standard ANOC.

Current enrollees are

sent a standard ANOC.

Activity
5 Terminated Plan (NonRenewal)

Definitions
A PDP sponsor
terminated the offering
of a 2013 PBP.

HPMS Plan Crosswalk

HPMS Plan Crosswalk
Definition:
A 2013 plan that is no
longer offered in 2014.
HPMS Plan Crosswalk
Designation:
Terminated Plan

187

Systems Enrollment
Activities
The PDP sponsor does
not submit
disenrollment
transactions.
If the terminated
enrollee elects to enroll
in another PBP with the
same or another PDP
sponsor or MAO, the
enrolling PDP sponsor
or organization must
submit enrollment
transactions to enroll
the terminated
enrollees.

Enrollment Procedures
Terminated enrollees
must complete an
enrollment request if
they choose to enroll in
another PBP, even a
PBP offered by the
same PDP sponsor.

Beneficiary
Notifications
Terminated enrollees
are sent a CMS model
termination notice
including SEP
information and receive
a written description of
options for obtaining
prescription drug
coverage in the service
area.

Activity
6 Consolidated Plans
across Contracts under
the Same Parent
Organization

Definitions
A parent organization
combines two or more
whole PBPs under
different contracts (the
contracts may be the
same legal entity or
represent different legal
entities) as a result of a
merger, acquisition, or
novation. A PDP
sponsor cannot
complete this renewal
option in the HPMS
Plan Crosswalk.

HPMS Plan Crosswalk

Exceptions Crosswalk
Request: Sponsors must
submit an exceptions
request to CMS, which
will complete the
crosswalk on behalf of
the sponsor
HPMS Plan Crosswalk
Designation:
The plan being
crosswalked must be
marked as a terminated
plan in the HPMS
crosswalk.
The remaining 2014
plan must be active and
contain the applicable
service area from the
terminated plan being
crosswalked.

188

Systems Enrollment
Activities
PDP sponsors cannot
complete this renewal
option in the HPMS
Plan Crosswalk. CMS
will effectuate this
renewal option and
HPMS will record the
consolidation of one or
more whole PBPs. The
PDP sponsor does not
submit enrollment
transactions for current
enrollees.
Sponsors may need to
submit updated 4RX
data for enrollees
affected by the
consolidation.

Enrollment Procedures
No enrollment election
for current enrollees to
remain enrolled in the
renewal PBP in 2014.
New enrollees must
complete enrollment
request.

Beneficiary
Notifications
Current enrollees are
sent a special notice
(based on the CMS
model in Appendix 4)
along with a standard
ANOC.

Appendix 4 Contract Year 2014 Guidance for PDP PBP Renewal Option 6 Special
Disenrollment Model Notice
CMS Model Notice
Contract Year 2014 Guidance for PDP PBP Renewal Option 6 Special Disenrollment Notice
<Insert Date>
IMPORTANT NOTICE: Your Medicare Prescription Drug Coverage Is Changing
Dear <member name>,
<Organization name> will no longer offer <terminating plan name> after December 31, 2013. To
make sure you continue to have the same level of Medicare Prescription Drug coverage, youll
be enrolled in our <receiving plan name> starting January 1, 2014.
Your new plan coverage starts January 1
<Organization name> has approval from Medicare to transfer your enrollment into our
<receiving plan name> for 2014. Medicare approved this transfer because the prescription drug
benefits in <receiving plan name> are similar to the prescription drug benefits youve been
getting in <terminating plan name>. See the attached information about this new plan.
Heres what to do next
If you do nothing, youll be a member of <receiving plan name> starting January 1, 2014. After
reviewing your ANOC/EOC, if you have questions about your prescription drug benefits or how
this new plan works, including what your costs will be or which pharmacies you can use call
<receiving plan name> at <receiving plan phone number>. You should use this letter as proof of
coverage under <receiving plan name> until you get your membership card.
You should look carefully at the prescription drug benefits of <receiving plan name> to see if
they meet your needs. Although the prescription drug benefits are similar to the prescription
drug benefits you have now, they may be different in ways that are important to you.
What if you dont want to be in this plan?
If you dont want to be in <receiving plan name> in 2014, you have the right to choose another
Medicare Prescription Drug Plan anytime between October 15 and December 7. Your new
coverage will start on January 1, 2014.
Here are your options for Medicare Prescription Drug coverage:
Option 1: If you do nothing, youll get prescription drug coverage from <receiving plan>
starting January 1, 2014.
Option 2: You can join another Medicare Prescription Drug Plan. Joining a new plan will
automatically disenroll you from <receiving plan name>. You should compare the plans
available in your area. You can call the plans to get more information about their rules and
coverage and find a plan that meets your needs.
189

Option 3: You may be able to join a Medicare Advantage plan.

You can join a Medicare Advantage plan if you have both Part A and Part B. Medicare
Advantage plans cover all your Part A and Part B services and usually include additional
coverage, such as prescription drugs (Part D). Costs, extra coverage and rules vary by plan.
Joining a new plan will automatically disenroll you from <receiving plan name>. You should
compare the plans available in your area. You can call the plans to get more information about
their rules and coverage and find a plan that meets your needs.
Other information you need to know:
If you qualify for Extra Help (the low-income subsidy) for 2014, you have the right to change
plans at any time.
If you have an employer or union group health plan, VA benefits, or TRICARE for Life, call
your insurer or benefits administrator to find out how to join a new plan.
If you get help from the Medicaid program, contact <State Medicaid Agency and phone
number> to learn how joining a new plan affects your Medicaid coverage.
Get help and more information about your options
If you need more information about your changing coverage, please call us at <Phone Number>
<Days & Hours>. TTY users should call <insert number >. Tell the customer service
representative you got this notice.
To join another Medicare Prescription Drug Plan, you should compare available plans and
join one that meets your needs. You should find out which plans cover the prescriptions you
take. For help comparing plans and joining a plan that works for you, visit
http://www.medicare.gov, or call 1-800-MEDICARE (1-800-633-4227). TTY users should call
1-877-486-2048. You can also call your State Health Insurance Assistance Program for free
personalized counseling at <SHIP phone number>.
To see if your state has a program for people with limited income and resources, call your
State Medical Assistance Office at <State Medical Assistance Office Number>. You may be
able to get help paying Medicare premiums, deductibles and coinsurance. TTY users should
call <State Medical Assistance Office> at <TTY Number>.
Sincerely,
<CEO or other official of PDP organization>
[Insert Federal contracting statement.]
[Insert Material ID number][insert CMS Approved followed by mm/dd/yyyy]
[Model Beneficiary Notice for CMS Approved Crosswalk Situations- (material submission
code # 2054).]
190

Appendix 5 - Summary of Comments on the Draft Call Letter

On February 15, 2013 CMS sent out an Advance Payment Notice and Draft Call Letter to Part C
and D sponsors, stakeholders and advocates that described CMS proposed methodology for the
2014 Star Ratings for Medicare Advantage (MA) and Prescription Drug Plans (PDP), along with
CMS responses to comments received on an earlier Request for Comments (November 30,
2012). We received 72 comments on the Draft Call Letter from organizations representing plans,
pharmaceutical companies, consumer groups and measurement development organizations. This
attachment provides a summary of the comments received and how we addressed these
comments in the final Payment Notice and Call Letter.
Changes in the Calculation of the Part C and D Ratings and the Overall Rating
Summary of Comments:
Many commenters were confused by this proposal and requested clarification and a delay of
implementation.
Some were concerned that it would penalize high-performing contracts.
A few suggested that low enrollment contracts should not be incorporated.
Revised Proposed Change:
CMS proposal was intended to improve the precision of the calculation of the overall rating and
avoid misclassification of contracts. In response to these comments, CMS will delay
implementing any modification until additional research is done. We are concerned that the 4star thresholds may be contributing to the issue of misclassification. Before we move forward on
changing the overall rating methodology, we will give advance notice to contracts on the
proposed methodology through the Advance Notice process. We will also help contracts
understand the impact of any proposed changes by calculating their contract scores using the
proposed method as part of an HPMS preview.
Four Star Thresholds
Summary of Comments:
Commenters did not have comments on the proposed 4-star thresholds for 2014 for measures that
have been part of the Star Ratings for at least 2 years.
Some commenters supported the revised thresholds, which we intend to implement for 2015
Ratings
A few were very concerned that it would be difficult to meet the new thresholds and requested
delayed implementation or limiting annual increases to only 1-percentage point.

191

Revised Proposed Change:

The changes we intend to propose for 2015 support the Million HeartsTM initiative. However,
the concerns regarding the calculation of the overall rating lead us to evaluate the impact of
setting any 4-star thresholds. We therefore do not recommend making any changes to thresholds
in the final Call Letter. We will be conducting a comprehensive analysis of the 4-star thresholds.
Low Performer Icon (LPI)
Summary of Comments:
Some commenters supported the modified rules.
Some commenters proposed the LPI be assigned to plans with less than 3 stars for two
consecutive years or to plans with three non-consecutive years less than 3 stars within a five-year
period.
A few opposed due to Star Ratings calculation changes or because more plans would be assigned
the LPI.
Revised Proposed Change:
We are planning to implement this change that affects few additional contracts. Contracts are
responsible for providing adequate care and services across both Part C and D.
Changes to the Methodology of Current Measures
Summary of Comments:
Commenters generally supported the proposed Quality Improvement methodology, the proposal
for rounding measure data, the proposal to maintain the current specifications for the High-Risk
Medication Use measure for 2014 Ratings.
Most commenters support delaying changes to the drug list until 2015 Ratings, however some
requested we further delay until 2016 Ratings.
Commenters supported the proposed addition of two drug classes for the Medication Adherence
for Diabetes Medications measure for 2015 Ratings.
Revised Proposed Change:
CMS will implement the proposed Quality Improvement measure changes and rounding
methodology. CMS will continue the HRM measure for 2014 Ratings, and intend to apply the
updated drug list for 2015 Ratings. CMS also intends to implement the proposed changes to the
Medication Adherence for Diabetes Medications measure for 2015 Ratings.

192

Weighting Categories of Measures

Summary of Comments:
The majority of commenters supported maintaining the same weighting categories.
A few commenters suggested that patient experience measures be given a weight of 1 or 3
instead, or measures with any technical specification changes be given a weight of 1.
Revised Proposed Change:
CMS will keep the same weighting categories used for the 2013 Star Ratings.
Integrity of Star Ratings
Summary of Comments:
Several commenters supported this policy.
A few requested more transparency and that it be applied only for egregious violations.
Revised Proposed Change:
CMS will continue its current approach to ensure that data are accurate and reliable.
Disaster Implications
Summary of Comments:
Commenters supported this clarification.
One commenter requested that CMS consider extending the 2/28/13 deadline and establishing a
permanent process going forward.
Another commenter asked how national averages and cut points would be affected.
Revised Proposed Change:
Contracts are responsible for contacting CMS in the event of a disaster so that CMS can evaluate
circumstances on a case-by-case basis.
Measures Being Removed from Star Ratings and New Measures for the Display Page
Summary of Comments:
Several commenters supported the change.
A few commenters expressed concerns and requested more details about the specifications.

193

Revised Proposed Change:

CMS will provide technical specifications for these measures during the display measures plan
preview period. A measure is moved from Star Ratings to display when most contracts are
performing at a high level.
Measures to be Continued on Display Page and Possible 2015 Star Rating
Summary of Comments:
A few commenters requested further guidance for the SNP Care Management measure. They
had concerns about the methodology and data lag.
There continues to be general support for CMS to evaluate MTM services as a component of the
Star Ratings.
Many commenters suggested alternative methods of evaluating MTM outcomes than CMR
completion rates. Some commenters questioned the inclusion of LTC residents for MTM
services.
Revised Proposed Change:
CMS will move forward with these as display measures and will provide additional guidance as
needed. The current measure of MTM CMR completion rate is the first phase of evaluating
MTM services, and CMS will consider other outcomes-based MTM measures once endorsed by
measure development organizations. MTM regulatory requirements, such as the inclusion of
LTC residents, are outside the scope of Star Ratings and Call Letter.
Forecasting to 2015 and Beyond
Summary of Comments:
Some commenters contended that the Disenrollment Reasons survey would be subjective.
Some commenters had specific questions about the survey questionnaire and methodology.
Revised Proposed Change:
CMS is currently in the survey implementation stage. More information will be shared with
contracts in the near future.
Changes to Measure Specifications or Calculations
Summary of Comments:
All commenters were supportive of CMS using NCQAs specifications for Breast Cancer
Screening.
194

For the HOS calculations, commenters were concerned about the reliability and validity of the
measures. One commenter urged CMS to work with the industry to develop these measures.
Revised Proposed Change:
CMS always welcomes feedback on these or any measure at any time. As stated in the Call
Letter, CMS is testing the reliability and validity of an alternative scoring methodology for HOS.
Measures for Informational Purposes Only
Summary of Comments:
Commenters preferred that CMS use objective data instead of what they viewed as subjective
survey data.
One commenter contended that health plans have little control over whether a provider uses
EHR.
Some commenters did not want these measures to be included as display measures.
Revised Proposed Change:
These CAHPS surveys are for informational purposes only and should provide plans valuable
feedback on how their beneficiaries feel about different aspects of the healthcare provided to
them.

195