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M+C

Medicare Plus Choice (M+C): Interim Final Rule

Medicare
Plus Choice (M+C): Interim Final Rule

 Federal Register: June
26, 1998 (Volume 63, Number 123)] [Pages 34967-35016]

INTRODUCTION ~ SUBPART A ~ SUBPART B ~ SUBPART C ~ SUBPART D ~ SUBPART E ~ SUBPART F ~ SUBPART G ~ SUBPART H ~ SUBPART I ~ SUBPART K ~ SUBPART L ~ SUBPART M ~ SUBPART N ~ SUBPART O ~ MEDICAL SAVINGS
ACCOUNTS ~ FEE FOR
SERVICE PLANS ~ REGULATORY IMPACT
STATEMENT

Table of
Contents

———————————————————————–

42 CFR Part 400, et al.

Medicare Program; Establishment of the Medicare+Choice
Program; Final Rule

[[Page 34968]]

———————————————————————-

DEPARTMENT OF HEALTH AND HUMAN SERVICES

Health Care Financing Administration

42 CFR Parts 400, 403, 410, 411, 417, and 422

[HCFA-1030-IFC]

RIN 0938-AI29

Medicare Program; Establishment of the Medicare+Choice Program

AGENCY: Health Care Financing Administration (HCFA), HHS.

ACTION: Interim final rule with comment period.

———————————————————————–

SUMMARY: The Balanced Budget Act of 1997 (BBA) establishes a new
Medicare+Choice (M+C) program that significantly expands the health
care options available to Medicare beneficiaries. Under this program,
eligible individuals may elect to receive Medicare benefits through
enrollment in one of an array of private health plan choices beyond
the original Medicare program or the plans now available through
managed care organizations under section 1876 of the Social Security
Act. Among the alternatives that will be available to Medicare
beneficiaries are M+C coordinated care plans (including plans offered
by health maintenance organizations, preferred provider
organizations, and provider-sponsored organizations), M+C “MSA”
plans, that is, a combination of a high deductible M+C health
insurance plan and a contribution to an M+C medical savings account
(MSA), and M+C private fee-for-service plans.

The introduction of the M+C program will have a profound effect on
Medicare beneficiaries and on the health plans and providers that
furnish care. The new provisions of the Medicare statute, set forth
as Part C of title XVIII of the Social Security Act, address a wide
range of areas, including eligibility and enrollment, benefits and
beneficiary protections, quality assurance, participating providers,
payments to M+C organizations, premiums, appeals and grievances, and
contracting rules. This interim final rule explains and implements
these provisions.

In addition, we are soliciting letters of intent from
organizations that intend to offer M+C MSA plans to Medicare
beneficiaries and/or to serve as M+C MSA trustees.

DATES: Effective date: This interim final rule is effective July
27, 1998.

Comment period: Comments will be considered if received at the
appropriate address, as provided below, no later than September 24,
1998.

ADDRESSES: Mail written comments (1 original and 3 copies) to the
following address: Health Care Financing Administration, Department
of Health and Human Services, Attention: HCFA-1030-IFC, P.O. Box
26688, Baltimore, MD 21207.

If you prefer, you may deliver your written comments (1 original
and 3 copies) to one of the following addresses:

Room 309-G, Hubert H. Humphrey Building, 200 Independence Avenue,
SW., Washington, DC 20201, or Room C5-09-26, 7500 Security Boulevard,
Baltimore, MD 21244-1850.

Because of staffing and resource limitations, we cannot accept
comments by facsimile (FAX) transmission. In commenting, please refer
to file code HCFA-1027-IFC Comments received timely will be available
for public inspection as they are received, generally beginning
approximately 3 weeks after publication of a document, in Room 309-G
of the Department’s offices at 200 Independence Avenue, SW.,
Washington, DC, on Monday through Friday of each week from 8:30 a.m.
to 5 p.m. (phone: (202) 690-7890).

FOR FURTHER INFORMATION CONTACT:

  • Provider Sponsored Organizations, Aaron Brown, 410-786-1033.
  • M+C Private Fee-For Service Plans, Anita Heygster,
    410-786-4486.

  • M+C MSA Plans, Cindy Mason, 410-786-6680.
  • Applications, Robert King, 410-786-7623.
  • Quality Assurance, Brian Agnew, 410-786-5964.
  • Payment/ACRs, Al D’Alberto, 410-786-1100.
  • Encounter Data, Cynthia Tudor, 410-786-6499.
  • Federal/State, Rebecca Cardozo, 410-786-0300.
  • Beneficiary Appeals, Valerie Hart, 410-786-6690.
  • Enrollment, Debe McKeldin, 410-786-9159.
  • Information Campaign, Jan Drass, 410-786-1354.
  • Contracts, Chris Eisenberg, 410-786-5509.
  • General Issues, Tony Hausner, 410-786-8290.
  • General Issues, Dorothea Musgrave, 410-786-8290.

SUPPLEMENTARY INFORMATION:

I. Background

A. Balanced Budget Act of 1997

Health care benefits covered under the Medicare program are
divided into two parts: hospital insurance, also known as “Part A,”
and supplementary medical insurance, also known as “Part B.” Health
care services covered under Part A include: inpatient hospital care,
skilled nursing facility care, home health agency care, and hospice
care. Part B coverage is optional and requires payment of a monthly
premium. Part B covers physician services (in both hospital and
nonhospital settings) and services furnished by certain nonphysician
practitioners. It also covers certain other services, including:
clinical laboratory tests, durable medical equipment, medical
supplies, diagnostic tests, ambulance services, prescription drugs
that cannot be self- administered, certain self-administered
anti-cancer drugs, some other therapy services, certain other health
services, and blood not covered under Part A.

Section 4001 of the Balanced Budget Act of 1997 (BBA) (Public Law
105-33), enacted August 5, 1997, added sections 1851 through 1859 to
the Social Security Act (the Act) to establish a new Part C of the
Medicare program, known as the “Medicare+Choice Program.” Note that
hereinafter, unless otherwise indicated references to the statute are
references to the Act. (The existing Part C of the statute, which
included provisions in section 1876 governing existing Medicare
health maintenance organization (HMO) contracts, has been
redesignated as Part D.) Under section 1851(a)(1), every individual
entitled to Medicare Part A and enrolled under Part B, except for
individuals with end-stage renal disease, may elect to receive
benefits through either the existing Medicare fee-for-service program
or a Part C M+C plan.

The introduction of the M+C program represents what is arguably
the most significant change in the Medicare program since its
inception in 1965. As its name implies, the primary goal of the M+C
program is to provide Medicare beneficiaries with a wider range of
health plan choices to complement the Original Medicare option.
Alternatives available to beneficiaries under the M+C program include
both the traditional managed care plans (such as HMOs) that have
participated in Medicare on a capitated payment basis under section
1876 , as well as a broader range of plans comparable to those now
available through private insurance. Specifically, effective January
1, 1999, section 1851(a)(2) provides for three types of M+C plans:

  • M+C coordinated care plans, including HMO plans (with or
    without point of service options), provider-sponsored organization
    (PSO) plans, and preferred provider organization (PPO)
    plans.[[Page 34969]]

  • M+C medical savings account (MSA) plans (that is, combinations
    of a high deductible M+C health insurance plan and a contribution
    to an M+C MSA).

  • M+C private fee-for-service plans.

In addition to expanding the types of available health plans, the
M+C program introduces several other fundamental changes to the
private health plan sector of the Medicare program. These changes
include:

  • Establishment of an expanded array of quality assurance
    standards and other consumer protection requirements.

  • Introduction of an annual coordinated election period. This
    election period, to be conducted in November for a January
    effective date, will feature a phased in lock-in of enrollees to
    the plan they have elected during this coordinated election
    period. In addition, the annual coordinated election period will
    include the distribution by HCFA of uniform, comprehensive
    information about participating plans that is needed to promote
    informed choices by beneficiaries.

  • Revisions in the way we calculate payment rates to the plans
    that will narrow the amount of payment variation across the
    country and increase incentives for plans to operate in diverse
    geographic areas.

  • Establishment of requirements concerning participation
    procedures for physicians and other health care professionals in
    M+C plans, including prohibitions on interference with advice to
    enrollees.

These requirements will bring about changes for beneficiaries, for
physicians and other health care providers, for managed care
organizations that now contract with Medicare as well as those that
will be able to contract with Medicare for the first time, and for
HCFA and the States. The specific areas addressed by the different
sections of the statute are as follows:

  • Section 1851–Eligibility, election and enrollment
  • Section 1852–Benefits and beneficiary protections
  • Section 1853–Payments to M+C organizations
  • Section 1854–Premiums
  • Section 1855–Organizational and financial requirements for
    M+C organizations

  • Section 1856–Establishment of standards
  • Section 1857–Contracts with M+C organizations
  • Section 1859–Definitions and miscellaneous provisions

As provided for in section 1856(b)(1), this interim final rule (1)
incorporates the new M+C provisions into the Medicare regulations,
(2) interprets the new statutory provisions in Part C, and (3)
establishes by regulation new standards under the M+C program. Other
provisions of the BBA addressed in this interim final rule include:

  • Section 4002–Transitional rules for current HMO Medicare
    program.

  • Section 4003–Conforming changes in the Medigap program.
  • Section 4006–M+C MSAs.

We note that in February, 1998, the President issued an Executive
Order directing the Secretary to comply to the extent possible
through administrative activities with the standards contained in the
Consumer Bill of Rights and Responsibilities. Therefore, as discussed
in several sections of this preamble, we have taken these standards
into consideration in developing the regulations contained in this
interim final rule. We have also incorporated conforming provisions
consistent with other parts of the Medicare statute, such as
exempting services under M+C coordinated care plans from the
anti-referral provisions in section 1877.

In several places in this preamble, we indicate that HCFA intends
to develop additional policy guidance or instructions. In doing so,
we will use a formal rulemaking process and allow for review by the
Office of Management and Budget pursuant to the requirements of the
Paperwork Reduction Act of 1995, wherever it is appropriate to do
so.

B. Codification of Regulations

The regulations text set forth in this interim final rule is
codified in 42 CFR Part 422–Medicare+Choice Program. (Note that new
part 422 was established in our April 14, 1998 interim final rule on
PSOs (63 FR 18124).) The current Medicare regulations for managed
care organizations that contract with HCFA under section 1876, or for
health care prepayment plans (HCPPs) that are paid under section
1833(a)(1)(A), will continue to be located in 42 CFR part 417, Health
Maintenance Organizations, Competitive Medical Plans, and Health Care
Prepayment Plans. Although the part 422 provisions will eventually
supersede the regulations in part 417 for contracts with risk-bearing
HMOs and competitive medical plans (CMPs), there are some purposes
for which the part 417 provisions will continue in effect for a
transitional period. Also, various provisions of section 4002 of the
BBA provide for the continuation of cost-based contracts under
section 1876 and of agreements with HCPPs under section 1833(a).
Thus, the part 422 regulations cannot entirely replace the part 417
regulations at this time. (Both transitional provisions and those
relating to cost- based contracts and HMOs are discussed in detail
below in the appropriate sections of this interim final rule.)

For the convenience of organizations that contract with HCFA only
under the M+C program, we are including in part 422 both new
requirements that implement newly enacted provisions in Part C and
existing requirements from part 417 that also will be imposed under
Part C. For transitional requirements, which could logically appear
in both parts, we are setting forth the full requirements in part 422
and referencing them in part 417. Requirements that apply to
organizations that contract with HCFA, or are paid by HCFA, only
under section 1876 or 1833(a) will remain in part 417. Regulations
implementing the provisions of section 1310 of the Public Health
Service Act concerning Federally-qualified HMOs also remain in part
417.

C. Organizational Overview of Part 422

The major subjects covered in each subpart of part 422 are as
follows:

  • Subpart A–Definitions, including definition of types of
    plans, application process, and user fees.

  • Subpart B–Requirements concerning beneficiary eligibility,
    election, enrollment and disenrollment procedures, and plan
    information and marketing materials.

  • Subpart C–Requirements concerning benefits, point of service
    options, disclosure of information, access to services,
    confidentiality of enrollee records, advance directives, and
    beneficiary protection against liability.

  • Subpart D–Quality assurance standards, external review, and
    deeming of accredited organizations.

  • Subpart E–Organizational relationships with participating
    entities including the prohibition against interference with
    health care professionals’ advice to enrollees, physician
    incentive requirements, and special rules for M+C private
    fee-for-service plans and private contracts with health care
    professionals.

  • Subpart F–Payment methodology for M+C organizations, coverage
    that begins or ends during inpatient hospital stays, hospice care,
    and encounter data requirements.

  • Subpart G–Requirements concerning terms and conditions for
    receiving capitated payments, limits on premiums and cost sharing,
    determination of adjusted community rate, and prohibition of
    State- imposed premium taxes. [[Page 34970]]

  • Subpart H–Requirements concerning provider-sponsored
    organizations (PSOs).

  • Subpart I–Organization compliance with State law and
    preemption by Federal law.

  • Subpart K–General contract and enrollment requirements,
    administration and management, and procedures for nonrenewal or
    termination of contracts.

  • Subpart L–Effect of change of ownership or leasing of
    facilities during term of contract.

  • Subpart M–Requirements concerning beneficiary grievances and
    organization determinations and appeals.

  • Subpart N–Requirements and procedures for contractor appeals
    of nonrenewals or terminations of contracts.

  • Subpart O–Procedures for imposing intermediate sanctions.

Each of these subparts is discussed below in section II of this
preamble. Sections III and IV consist of separate discussions of
provisions of the part 422 regulations that specifically concern M+C
MSA plans and M+C private fee-for-service plans, respectively.

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