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CMS's Proposed Rule for Contract Year 2019 Is a Mixed Bag for Medicare Advantage Organizations and Prescription Drug Plan Sponsors

Client Alert | 20 min read | 11.30.17

On November 28, 2017, CMS issued a notice of a proposed rulemaking for contract year 2019 policy and technical changes for the Medicare Advantage and Medicare Prescription Drug Programs. The major provisions of the Proposed Rule address implementation of the Comprehensive Addiction and Recovery Act of 2016 to combat the opioid epidemic, updating Part D E-prescribing standards, revisions to disclosure requirements, and the development of a preclusion list for providers. Additionally, the Proposed Rule modifies the medical loss ratio (MLR) requirement to allow Medicare Advantage organizations (MAOs) and Part D Plan (PDP) sponsors to include the full value of fraud reduction expenses, fraud prevention activities and medication therapy management programs as quality improvement activities in the numerator of the MLR. The Proposed Rule also simplifies the MLR reporting obligation for MAOs and PDP sponsors. CMS characterizes many of the proposed changes as implementation of President Trump’s Inauguration Day Executive Order directing agencies to alleviate regulatory burdens and costs imposed by the Affordable Care Act. Comments on the Proposed Rule, summarized below, are due January 16, 2018.

Table of Contents

II.A. Supporting Innovative Approaches to Improving Quality, Accessibility, and Affordability

  1. Implementation of the Comprehensive Addiction and Recovery Act of 2016 (CARA) Provisions


    The Proposed Rule describes CMS’s plans for implementing section 704 of the Comprehensive Addiction and Recovery Act of 2016. Section 704, which amends Section 1860D-4(c) of the Social Security Act (the Act), provides CMS with new authority to establish a voluntary drug utilization management (DUM) program targeted to beneficiaries “at risk for prescription drug abuse or misuse” for standalone PDP sponsors and Medicare Advantage Prescription Drug (MA-PD) plans effective January 1, 2019. This authority allows CMS to define processes for PDP sponsors and MA-PD plans for identifying and communicating with providers and beneficiaries engaged in high-risk drug prescribing and utilization practices, respectively; to provide and monitor care management; and to implement “lock-in” programs that limit beneficiaries to obtaining drugs from specific pharmacies or prescribers.

    The Precedent Behind the “New” Provisions, With New Policy Drivers

    Not surprisingly, CMS’s release of the Proposed Rule’s voluntary DUM provisions aligns with the attention that the Trump Administration has dedicated to addressing the opioid crisis and the October 26, 2017 declaration by the HHS Acting Secretary that the opioid crisis is a “nationwide Public Health Emergency.” But PDP sponsors and MA-PD plans will quickly see that the proposed regulations largely codify already existing DUM program policy established through guidance related to the Part D Opioid Drug Utilization Review (DUR) Policy and Overutilization Monitoring System (OMS) first announced in the April 2012 Final Call Letter, formally established in July 2013, then updated in subsequent years (defined as the “current policy” in the Proposed Rule).

    Under the current policy, PDP sponsors were expected to implement the following medication safety-focused approach regarding beneficiaries’ potential misuse and abuse of opioids:

    • appropriate plan-level claim controls at point-of-sale (POS); 
    • identification of beneficiaries at high risk for opioid-related adverse events through retrospective drug utilization reviews; and
    • case management with prescribers to identified beneficiaries followed by beneficiary-specific POS edits to prevent Part D coverage of opioid overutilization. 


    CMS proposes to add the voluntary DUM program definitions and required processes to existing regulations at 42 CFR §§ 423.100, 423.153, and 423.38. Overall, these provisions follow the detailed framework provided at new section 1850D-4(c)(5) of the Act to provide additional layers of due process for PDP sponsors and MA-PD plans to adhere to when running their opioid-related DUMs, but provide less discretion to PDP sponsors and MA-PD plans to implement their own internal processes to identify drugs and beneficiaries as candidates for DUM. 

    New Definitions and Processes for Voluntary DUM Programs Focused on Opioids

    Key definitions include the “clinical guidelines” PDP sponsors and MA-PD plans must use to determine who are “at-risk beneficiaries;” what “frequently abused drugs” are; and “exempted beneficiaries” whom PDP sponsors and MA-PD plans would not need to account for in implementing their DUM programs (e.g., hospice or cancer patients, or residents of a facility that receives drugs through single-pharmacy contracts).

    “Frequently abused drugs” currently only include opioids, but the proposed provisions would allow for the HHS Secretary to add other drugs to this category based on schedule designation by the Drug Enforcement Administration, government or professional guidelines that describe a drug as frequently abused or misused, and other analyses of Medicare drug utilization or scientific data. CMS anticipates publishing updates to the list of “frequently abused drugs” in annual Call Letters or other guidance subject to public comment. For 2019, CMS proposes the following “clinical guidelines” to identify “at-risk beneficiaries:” 

    • average daily use of opioids greater than or equal to of 90 mg (morphine milligram equivalent units) for any duration in the most recent six months; and
    • either:
      • four or more opioid prescribers and four or more dispensing pharmacies; or
      • six or more opioid prescribers, regardless of the number of opioid dispensing pharmacies.


    Of note, “prescribers associated with the same single Tax Identification Number” would be counted as a single prescriber, and pharmacies with multiple locations that “share real-time electronic data” would be collectively treated as one pharmacy (e.g., chain pharmacy locations). 

    The voluntary DUM program procedure-related provisions in the Proposed Rule (which would be codified at § 423.153(f)) require PDP sponsors and MA-PD plans to document programs in written policies and procedures approved by their Pharmacy & Therapeutics (P&T) Committees that meet CMS’s standards for retroactively identifying at-risk beneficiaries and for case management in collaboration with prescribers. These procedure-related regulatory proposals also set forth specific notice and appeal requirements that PDP sponsors and MA-PD plans must implement when contacting prescribers for at-risk beneficiaries to pursue case management, and when communicating at-risk determinations to the beneficiaries themselves. 

    CMS plans to develop language for PDP sponsors and MA-PD plans to use for initial notices sent to beneficiaries under the CARA-authorized voluntary DUM programs. In these notices, potential at-risk beneficiaries would first receive information about: (1) why they were identified as such; (2) the availability of and how to access state and federal public health resources aimed at addressing prescription drug abuse; (3) their ability to submit additional information to the PDP sponsor or MA-PD plan to inform the final determination and provide their choices of prescribers or pharmacies if the beneficiary becomes the subject of “lock-in” limitations; and (4) the “meaning and consequences of being identified as an at-risk beneficiary.” One such consequence other than the imposition of “lock-in” limitations is that individuals are restricted from switching plans through certain special enrollment periods (SEPs) because of being identified as a potential at-risk beneficiary.1 

    Even where a beneficiary can switch plans, the determination as a potential at-risk beneficiary (or as an at-risk beneficiary) may follow them, so the PDP sponsor or MA-PD plan may rely on those determinations for their own proprietary DUM programs, if they implement one. This continuity also allows efficiency for data sharing purposes and for advancing the voluntary DUM program through the case management phase through lock-in limitation, beneficiary-specific POS edits, or, ideally, the successful reduction or elimination of the identified drug misuse and abuse. PDP sponsors and MA-PD plans would still have to ensure that at-risk beneficiaries maintain reasonable access to frequently abused drugs where beneficiary-specific claim edits or “lock-in” limitations imposed, which would account for the geographic location and proximity, beneficiary preference, or the beneficiary’s “predominant usage” of a prescriber, pharmacy, or both.

    The regulations then require a second notice to the at-risk beneficiaries (as well as to their prescribers through reasonable efforts) to inform them of the PDP sponsor or MA-PD plan’s determination regarding at-risk status, any limitations imposed due to that determination, and the beneficiaries’ rights to seek a redetermination by the PDP sponsor or MA-PD plan. The fulfillment of the two-step notice requirement, except under limited circumstances where an identified at-risk beneficiary switches plans, is a prerequisite to the PDP sponsor or MA-PD plan implementing “lock-in” restrictions against a beneficiary to certain prescribers or pharmacies. Furthermore, the proposed regulations would require the PDP sponsors and MA-PD plans to obtain the prescribers’ agreement to such limitations as well. Any restrictions imposed by a PDP sponsor or MA-PD plan would be limited to a 12-month period or the demonstration by the beneficiary that he or she is no longer an at-risk beneficiary. 

    The Proposed Rule’s preamble discusses how it takes six months of data to even identify beneficiaries as “potentially at-risk”, and that it takes three to six months on average to pursue case management. Furthermore, the beneficiary notice requirements impose timing requirements ranging from 30 to 90 days. As a result, there is a long lead time to the imposition of restrictions on beneficiaries identified as at-risk. The Proposed Rule does not specifically address how CMS would handle the identification of problem prescribers and pharmacies, but the provisions at § 423.153(f)(9) allow a PDP sponsor or MA-PD plan to “override” the beneficiary’s choice of prescriber or pharmacy if there is strong evidence of inappropriate action by the prescribe, pharmacy, or beneficiary such that using the beneficiary’s preferred prescriber or pharmacy would “contribute to prescription drug abuse or drug diversion by the beneficiary.” Presumably, the CARA provisions that expanded the activities of Medicare Drug Integrity Contractors and other fraud prevention-related sections provide additional ways that CMS intends to address problem prescribers and pharmacies. 

    Areas for Stakeholder Comment

    Ultimately, the purpose of these voluntary DUM provisions is to identify at-risk beneficiaries who may be receiving unsafe doses of opioids from multiple prescribers and/or pharmacies, then require the PDP sponsors and MA-PD plans to engage directly with prescribers to reduce abuse and misuse of the drugs at issue. Among other topics, CMS is specifically seeking comment on the following aspects of the CARA-related regulations as proposed:

    • whether CMS should incorporate or codify additional features of the current policy;
    • whether CMS should allow PDP sponsors and MA-PD plans to continue implementing the current policy for non-opioid medications (e.g., claim edits);
    • on the alternative clinical guidelines proposed in the Regulatory Impact Analysis section of the Proposed Rule and other proposals that may increase or decrease the number of identified at-risk beneficiaries;
    • whether additional categories of beneficiaries should be exempted from the voluntary DUM provisions (e.g., those receiving palliative or end-of-life care or recipients of medication-assisted treatment for substance abuse disorders);
    • whether prescriber agreement should be required prior to implementing pharmacy lock-in limitations; and
    • whether the six-month waiting period required to precede any imposition of limitations on an at-risk beneficiary would reduce provider burden sufficiently to outweigh the additional case management, clinical contact and prescriber verification that providers may experience if a sponsor believes a beneficiary’s access to coverage should be limited. 


    CMS is counting on the success of the existing OMS program to continue through the implementation of the CARA-related regulations. The agency estimates that the implementation of the new provisions will result in $13 million in net savings in 2019 due to reduced unnecessary opioid prescriptions, with an anticipated increase of these annual savings to about $14 million in 2023. CMS expects that the implementation of the process enumerated in the new provisions will cost PDP sponsors and MA-PD plans approximately $2.8 million per year. However, CMS did not provide a dollar estimate associated with the general “benefits of preventing opioid dependency in beneficiaries,” and the DUM program as proposed is merely voluntary. The Proposed Rule essentially nullifies current policy, so unless PDP sponsor and MA-PD plan participation in the new, more prescriptive regulatory framework would be on par with what occurs under current policy, the estimated benefits might be overstated. The Government Accountability Office has already been tasked with assessing the effectiveness of the at-risk beneficiaries for prescription drug abuse drug management programs authorized by section 1860D-4(c)(5), but the report will not be due to Congress until July 2019, after the voluntary DUM program is implemented. 

  2. Flexibility in the Medicare Advantage Uniformity Requirements


    The Proposed Rule reflects a change in CMS’s interpretation of the uniformity requirements related to Part C benefits. Previously, CMS required MA plans to offer all enrollees access to the same benefits at the same level of cost sharing. Under the new interpretation, CMS will permit MA organizations the ability to reduce cost sharing for certain covered benefits, offer specific tailored supplemental benefits, and offer lower deductibles for beneficiaries who meet specific medical criteria.

    CMS cautioned that as MAOs consider this new flexibility they must still ensure compliance with non-discrimination rules. CMS will be concerned about potential discrimination if an MA plan is targeting cost sharing reductions and supplemental benefits for a large number of disease conditions while excluding other higher-cost conditions. MA plans must use medical criteria that are objective and measurable, and enrollees must be diagnosed by a plan provider or have their existing diagnosis certified by a plan provider. 

    CMS is considering whether to issue further clarification regarding this new flexibility.

  3. Segment Benefits Flexibility


    Previously, CMS allowed MA plans to vary premium and cost sharing by each segment of an MA plan. Segments are county-level portions of a plan’s overall service area. Under the Proposed Rule, MA plans could vary supplemental benefits, in addition to premium and cost sharing, by each segment of an MA plan. The benefits, premium, and cost sharing would still have to be uniform within each segment of an MA plan’s service area. 

  4. Maximum Out-of-Pocket Limit for Medicare Parts A and B Services (§§ 422.100 and 422.101)


    Currently, MA plans must establish limits on enrollee out-of-pocket cost sharing for Parts A and B services that do not exceed the annual limits CMS establishes. All cost sharing (deductibles, coinsurance, and copayments) for Parts A and B services, excluding plan premium, must be included in each plan’s Maximum Out-of-Pocket (MOOP) amount. CMS affords greater flexibility in establishing Parts A and B cost sharing to MA plans that adopt a lower, voluntary MOOP limit than to plans that adopt the higher, mandatory MOOP limit. Still, the percentage of eligible Medicare beneficiaries with access to an MA plan offering a voluntary MOOP limit decreased from 97.7% in 2011 to 68.1% in 2017. 

    CMS’s goal is to establish future MOOP limits based on the most relevant and available data that reflects beneficiary health care costs in the MA program and maintains benefit stability over time. Currently, Medicare Fee-for-Service (FFS) data is the most relevant and available data. Under CMS’s current methodology to set MOOP limits, it uses the 85th and 95th percentiles of projected beneficiary out-of-pocket Medicare FFS spending. 

    While CMS intends to continue using this methodology to set MA MOOP limits for the immediate future, CMS proposes to amend the regulation to incorporate authority for CMS to balance other factors. These factors include:

    • increasing the voluntary MOOP limit;
    • increasing the number of service categories that have higher cost sharing in return for plans offering a lower MOOP limit;
    • additional levels of MOOP limits; and
    • modifying cost sharing to encourage plan offerings with lower MOOP limits. 


    Prior to bid submission, CMS will continue to publish annual limits and a description of how the methodology was used in the annual Call Letter. This will allow MAOs to comment and prepare for changes.

  5. Cost Sharing Limits for Medicare Parts A and B Services (§§ 417.454 and 422.100)


    CMS determines on an annual basis the level at which certain cost sharing for Parts A and B services becomes discriminatory under § 422.100(f)(6). CMS identifies the presumptively discriminatory level by using FFS data to analyze parameters of Parts A and B services that are more likely to have a discriminatory impact on beneficiaries. The Proposed Rule would amend § 422.100(f)(6) to clarify that CMS may use Medicare FFS data to establish non-discriminatory cost sharing limits.

    CMS also intends to use MA encounter data to inform patient utilization scenarios in its setting of presumptively discriminatory levels of cost sharing. CMS is soliciting comment on whether to codify the use of MA encounter data in this analysis. 

    CMS notes that the change would permit CMS to use the most “relevant and appropriate” information in determining cost sharing thresholds.

  6. Meaningful Differences in Medicare Advantage Bid Submissions and Bid Review (§§422.254 and 422.256)


    Currently, CMS will only approve a bid submitted by an MAO if its plan benefit package is substantially different than those of other plans offered by the MAO in the same service area based on CMS’s meaningful difference evaluation standards. CMS proposes to eliminate this meaningful difference requirement. 

    CMS is concerned that the current meaningful difference methodology forces MAOs to design benefit packages to meet CMS standards rather than beneficiary needs. For example, MAOs may have to change benefit coverage or cost sharing in certain plans to satisfy the meaningful difference requirement, even if substantial difference exists based on factors CMS does not incorporate into the evaluation (such as tiered cost sharing and unique benefit packages based on enrollee health conditions).

    By removing the meaningful difference requirement, CMS seeks to promote innovative benefit designs that address beneficiary needs and affordability. CMS does not anticipate an increase in the number of similar plan options offered by the same MAO or increased confusion in beneficiary decision-making as a result of this change.

  7. Coordination of Enrollment and Disenrollment Through MA Organizations and Effective Dates of Coverage and Change of Coverage (§§ 422.66 and 422.68)


    CMS proposes to establish limits and requirements for default enrollments into MA plans by individuals currently enrolled in a non-MA plan offered by an MAO at the time he or she becomes eligible for Medicare. Specifically, the Proposed Rule seeks to limit default enrollments to enrollment into dual eligible special needs plans (D-SNPs) and subject them to 5 substantive conditions:

    • The individual is enrolled in an affiliated Medicaid managed care plan and is dually eligible for Medicare and Medicaid;
    • The state has approved the use of the default enrollment processes and has provided Medicare eligibility information to the MAO;
    • The individual does not opt out of the default enrollment;
    • The MAO provides notice to the individual that meets certain CMS requirements; and
    • CMS has approved the MAO to use the default enrollment process.


    CMS seeks to limit default enrollment, in part, due to the statutory requirement that CMS remove SSNs from all Medicare cards by April 2019. With this new requirement, MAOs will be limited in their ability to enroll newly eligible Medicare beneficiaries without their Medicare numbers. Organizations operating Medicaid managed care plans have better access to member data through the state, including the individual’s Medicare number.

    With respect to CMS’s approval of MA plans’ default enrollment, CMS requests comment regarding whether to place a time limit on the approval (e.g., two to five years), such that CMS would have to routinely re-evaluate the processes used by an MA organization in order to ensure compliance with the regulation.

    CMS also seeks to permit a simplified election process for individuals who are electing coverage in an MA plan offered by the same entity as the individual’s non-Medicare coverage. This new mechanism would allow for a less burdensome process for MAOs to offer enrollment in their MA plans to their non-Medicare members who are newly eligible for Medicare.

  8. Passive Enrollment Flexibilities to Protect Continuity of Integrated Care for Dually Eligible Beneficiaries. (§ 422.60(g)).


    CMS proposes to expand its regulatory authority to initiate passive enrollment for certain dually eligible beneficiaries in an effort to protect the continuity of integrated care for dually eligible beneficiaries. Integrated care provides dually eligible beneficiaries with the full array of Medicaid and Medicare benefits for which they are eligible through a single delivery system. 

    The current regulation at § 422.60 limits the use of passive enrollment to two situations: (1) where there is an immediate termination of an MA contract; and (2) when CMS determines that remaining enrolled in a plan poses potential harm to beneficiaries. CMS proposes to add authority to passively enroll full-benefit dually eligible beneficiaries who are currently enrolled in an integrated D-SNP into another integrated D-SNP under the following conditions:

    • When necessary to promote integrated care and continuity of care;
    • Where such action is taken in consultation with the state Medicaid agency;
    • Where the D-SNP receiving passive enrollment contracts with the state Medicaid agency to provide Medicaid services; and
    • Where certain other conditions are met to promote continuity and quality of care.


    The Proposed Rule includes use of the existing notification and opt-out procedures and special election period under the current passive enrollment authority. It also would require that, in order to receive passive enrollments, the D-SNP must meet minimum quality standards based on MA Star Ratings. CMS’s goal with this proposed requirement is to ensure that D-SNPs receiving passive enrollments provide high quality care, coverage, and administration of benefits.

  9. Part D Tiering Exceptions (§§ 423.560, 423.578(a) and (c)).


    Enrollees in a Part D plan with a tiered formulary can request an exception to higher copays or cost sharing associated with drugs in a higher tier if that drug is determined by the plan to be medically necessary. Plans are required to establish a process to evaluate such requests. This process has generally permitted plans to exclude generic and specialty tiers from the exceptions process.

    CMS proposes to change the exceptions process to make it more congruent with the increasing complexity of tiered formularies. The preamble noted that nearly all plans now have five or six tiers, including two generic-labeled tiers, which might also include brand name drugs. Because a plan sponsor can currently exempt any dedicated generic tier from its tiering exceptions procedures, according to CMS, almost two-thirds of all tiered PBPs could exempt three of their five or six tiers from tiering exceptions without any consideration of medical need or placement of preferred alternative drugs.

    The proposed revisions would establish rules that base eligibility for tiering exceptions on the lowest applicable cost sharing for the tier containing the preferred alternative drug for treatment of the enrollee’s health condition in relation to the cost sharing of the requested, higher-cost drug, and not based on tier labels, such as preferred, non-preferred, brand or generic.

    CMS proposes to revise § 423.578(a)(6) to specify that a Part D plan sponsor could refuse to offer a tiering exception for a brand name drug to a preferred cost-sharing level that applies only to generic alternatives. Plans would be required to approve tiering exceptions for non-preferred generic drugs when the plan determines that the enrollee cannot take the preferred generic alternative, regardless whether the lower tier includes only generic or a mix of generic and brand alternatives.

    CMS also proposes at § 423.578(a)(6) to establish specific tiering exceptions policy for biological products. “If a Part D plan sponsor maintains a specialty tier . . . the sponsor may design its exception process so that Part D drugs and biological products on the specialty tier are not eligible for a tiering exception.” However, while plans can limit tiering exceptions for drugs on the specialty tier to a more preferable cost sharing tier, the specialty tier is not exempt from being considered a preferred tier for purposes of tiering exceptions, if the specialty drug has more favorable cost sharing compared to alternatives.

    CMS also proposes to allow plans to limit the availability of tiering exceptions for the following drug types to a preferred tier that contains the same type of alternative drug(s) for treating the enrollee’s condition:

    • Brand name drugs for which an application is approved under section 505(c) of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 355(c)), including an application referred to in section 505(b)(2) of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 355(b)(2)); and
    • Biological products, including follow-on biologics, licensed under section 351 the Public Health Service Act.


    Likewise, CMS would codify at § 423.578(a)(6)(i) that plans are not required to offer tiering exceptions for brand name drugs or biological products at the cost-sharing level of alternative drugs for treating the enrollee’s condition, where the alternatives include only the following drug types:

    • Generic drugs for which an application is approved under section 505(j) of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 355(j)), or
    • Authorized generic drugs as defined in section 505(t)(3) of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 355(t)(3)).


    Finally, CMS intends to codify current policy that cost sharing for an approved tiering exception request is assigned at the lowest applicable tier when preferred alternatives sit on multiple lower tiers. Under this proposal, assignment of cost sharing for an approved tiering exception must be at the most favorable cost-sharing tier containing alternative drugs, unless such alternative drugs are not applicable pursuant to limitations set forth under proposed § 423.578(a)(6).

  10. Establishing Limitations for the Part D Special Election Period (SEP) for Dually Eligible Beneficiaries (§423.38)


    Currently, all subsidy-eligible beneficiaries—such as full-benefit dual eligible (FDBE) and low-income subsidy (LIS) beneficiaries—are permitted to make Part D enrollment changes at any time during the year via a continuous SEP. CMS is required, under the MMA, to enroll FBDE beneficiaries into a PDP if they do not enroll in a Part D Plan. The SEP was intended to provide beneficiaries the opportunity to select a different Part D Plan if they so choose, without having to wait for the annual election process.

    Now, having reviewed more than a decade of plan experience and trends, CMS is proposing to limit the SEP as follows:

    • Dual or other LIS-eligible beneficiaries who also meet the newly proposed definition of an at-risk beneficiary or potentially at-risk beneficiary in § 423.100, could use the SEP once per year;
    • Dual or other LIS-eligible beneficiaries who have been assigned to a plan by CMS or a state could use the SEP either before the assignment is effective or within two months of their enrollment in the assigned plan; and
    • Dual or other LIS-eligible beneficiaries who have a change in their Medicaid or LIS-eligible status could use the SEP the later of two months within the change in status or two months within their notice of the change.


    CMS proposes that these SEP would be considered separate and unique from one another such that an eligible beneficiary could make use of multiple SEPs depending on the circumstances. The SEP otherwise would be limited to one use per year.

    CMS has invited comment on this proposal as well as two alterna






























































































































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This restriction does not apply to beneficiaries who become newly eligible or ineligible for Medicaid or low-income status subsidies for drug coverage plans.

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