CMS Releases Medicare Advantage and Part D Proposed Rule

King & Spalding

On January 6, 2022, CMS published a proposed rule (Proposed Rule) which would revise Medicare Advantage (Part C) and Medicare Prescription Drug Benefit (Part D) regulations. CMS simultaneously released a fact sheet (Fact Sheet) stating that the Proposed Rule is intended to lower out-of-pocket Medicare Part D prescription drug costs and improve consumer protections, among other things. Notably, the Proposed Rule would revise Medicare Advantage and Part D regulations relating to marketing and communications, provider network adequacy requirements, and medical loss ratio reporting. Set forth below is a high-level summary of certain significant changes in the Proposed Rule.

  • Prescription Drug Costs. The Proposed Rule would require Part D plans to apply all price concessions received from network pharmacies to the price received at the point of sale when determining the negotiated drug price which is reported to CMS. The Fact Sheet states that CMS is proposing this change to target a practice by which Part D plans have entered into arrangements with pharmacies providing for discounts if the pharmacy fails to meet certain criteria, which results in plans reporting a negotiated price which is higher than the final payment to the pharmacies. The Fact Sheet states that revising the definition to require incorporating discounts will “reduce beneficiary out-of-pocket costs and improve price transparency and competition in the Part D program.”

  • Marketing. The Proposed Rule would implement new regulations which are applicable to certain third-party marketing organizations (TPMOs) which sell multiple Medicare Advantage and Part D products. TPMOs would be required to include certain disclaimers when marketing Medicare Advantage and Part D products. Any plan that does business with a TPMO would be subject to new oversight requirements to ensure that the TPMO adheres to any requirements applicable to the plan.

  • Network Adequacy. Applicants seeking to offer new Medicare Advantage plans would be required to demonstrate compliance with network adequacy standards as part of the application process for new and expanding service areas. CMS would give a credit of 10% toward meeting the proposed target established for the percentage of beneficiaries residing within published time and distance standards (used to measure network adequacy) prior to the start of the coverage year. After the coverage year begins, the credit would no longer apply, and the plan must be in full compliance. The Fact Sheet states that the credit is intended to avoid imposing a burdensome requirement for a plan to have a fully built-out network during the application process, which takes place almost a year in advance of the contract year.

  • Medical Loss Ratio (MLR) Reporting. The enhanced MLR reporting standards that were in effect from 2014–17 would be reinstated. Medicare Advantage and Part D plans would be required to report underlying cost and revenue information necessary for verifying the reported MLR and the amount of any remittance owed for failure to meet the minimum MLR of 85%. Medicare Advantage plans would also be required to report how much they spend on supplemental benefits not covered under traditional Medicare, such as dental and vision benefits.

  • Access During Disasters and Emergencies. Medicare Advantage regulations currently include special requirements for plans to cover services by non-contracted providers and waive gatekeeper referral requirements during emergencies, including during a public health emergency. The Proposed Rule would clarify that these special requirements will continue throughout any declared disaster or emergency period.

  • Plan Request Denials. The Proposed Rule would expand the list of reasons for which CMS can deny a new contract for a Medicare Advantage plan or Part D sponsor to include having a Star Rating of 2.5 or lower, filing for bankruptcy and having a number of compliance actions which exceeds a threshold to be established by CMS.

Comments on the Proposed Rule are due by March 7, 2022.

The Proposed Rule, Contract Year 2023 Policy and Technical Changes to the Medicare Advantage and Medicare Prescription Drug Benefit Programs, is available here. A CMS fact sheet summarizing the Proposed Rule is available here.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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