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CMS Completes Review of 2009 Medicare Advantage and Prescription Drug Program Agent and Broker Compensation Structures

January 6, 2009

Author: Christine M. Clements.

In a memorandum dated December 24, 2008, the Centers for Medicare & Medicaid Services (CMS) summarized the results of its review of the agent and broker compensation structures submitted by Medicare Advantage (MA) organizations and Prescription Drug Plan (PDP) Sponsors. A total of 292 parent organizations submitted compensation data to CMS. CMS indicated that it analyzed approximately 15,000 compensation data records for 2009 (compensation schedule / plan combinations) and another 4,000 records (by plan, agent type, and year) on historical fees for 2006 and 2007.

As a result of its review, CMS has established the following amounts as the national cut-off for fair market values for initial compensation: $400 for MA and Cost plans and $50 for standalone prescription drug plans. CMS also established the following state-specific exceptions for MA and Cost plans: $450 for Connecticut, Pennsylvania, and the District of Columbia; and $500 for California and New Jersey. There are no PDP exceptions.

In a rule published on November 14, 2008, CMS indicated that the compensation paid for enrollment must be fair market value, and an organization could be required to adjust its compensation rates if they were determined not to be reasonable or if the rates do not ensure that beneficiaries' interests are not harmed by excessive compensation paid. According to the memorandum, 50% of the PDPs and 30% of the MA / Cost plans submitted compensation schedules that required revision.

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Christine M. Clements
Partner – Washington, D.C.
Phone: +1 202.624.2595