SubF

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

Subpart F–Payments to Medicare+Choice Organizations

Sec. 422.249 Terminology.

In this subpart–

(a) The terms “per capita rate” and “capitation rate” (see
Sec. 422.252) are used interchangeably; and

(b) In the term “area-specific,” “area” refers to any of the
payment areas described in Sec. 422.250(c).

Sec. 422.250 General provisions.

(a) Monthly payments–(1) General
rule. Except as provided in paragraph (a)(2) of this section, HCFA
makes advance monthly payments equal to \1/12\th of the annual M+C
capitation rate for the payment area described in paragraph (c) of
this section adjusted for such demographic risk factors as an
individual’s age, disability status, sex, institutional status, and
other such factors as it determines to be appropriate to ensure
actuarial equivalence. Effective January 1, 2000, HCFA adjusts for
health status as provided in Sec. 422.256(c). When the new risk
adjustment is implemented, \1/12\th of the annual capitation rate for
the payment area described in paragraph (c) of this section will be
adjusted by the risk adjustment methodology under Sec. 422.256(d).
(2) Special rules. (i) Enrollees with end-stage renal disease. (A)
For enrollees determined to have end-stage renal disease (ESRD), HCFA
establishes special rates that are determined under an actuarially
equivalent approach to that used in establishing the rates under
original Medicare. (B) HCFA reduces the payment rate by the
equivalent of 50 cents per renal dialysis treatment. These funds will
be used to help pay for the ESRD network program in the same manner
as similar reductions are used in original Medicare. (ii) MSA
enrollees. For MSA enrollees, HCFA makes advanced monthly payments as
described in paragraph (a)(1) less the amount (if any) identified in
Sec. 422.262(c)(1)(ii) to be deposited in the M+C MSA. In addition,
HCFA deposits in the M+C MSA the lump sum amounts (if any) determined
in accordance with Sec. 422.262(c). (iii) RFB plan enrollees. For RFB
plan enrollees, HCFA adjusts the capitation payments otherwise
determined under this subpart to ensure that the payment level is
appropriate for the actuarial characteristics and experience of these
enrollees. Such adjustment can be made on an individual or
organization basis.

(b) Adjustment of payments to reflect number
of Medicare enrollees–General rule. HCFA adjusts payments
retroactively to take into account any difference between the actual
number of Medicare enrollees and the number on which HCFA based an
advance monthly payment.

(c) Payment areas–(1) General rule.
Except as provided in paragraph (e) of this section, the M+C payment
area is a county or an equivalent geographic area specified by HCFA.
(2) Special rule for ESRD enrollees. For ESRD enrollees, the M+C
payment [[Page 35091]] area is a State or other geographic area
specified by HCFA.

(d) Terminology. As used in paragraph
(e) of this section, “metropolitan statistical area,” “consolidated
metropolitan statistical area,” and “primary metropolitan statistical
area” mean any areas so designated by the Secretary of Commerce.

(e) Geographic adjustment of payment
areas. For contract years beginning after 1999– (1) State
request. A State’s chief executive may request, no later than
February 1 of any year, a geographic adjustment of the State’s
payment areas for the following calendar year. The chief executive
may request any of the following adjustments to the payment area
specified in paragraph (c)(1) of this section: (i) A single Statewide
M+C payment area. (ii) A metropolitan-based system in which all
nonmetropolitan areas within the State constitute a single payment
area and any of the following constitutes a separate M+C payment
area: (A) All portions of each single metropolitan statistical area
within the State. (B) All portions of each primary metropolitan
statistical area within each consolidated metropolitan statistical
area within the State. (iii) A consolidation of noncontiguous
counties. (2) HCFA response. In response to the request, HCFA makes
the payment adjustment requested by the chief executive. (3) Budget
neutrality adjustment for geographically adjusted payment areas. If
HCFA adjusts a State’s payment areas in accordance with paragraph
(e)(2) of this section, HCFA at that time, and each year thereafter,
adjusts the capitation rates so that the aggregate Medicare payments
do not exceed the aggregate Medicare payments that would have been
made to all the State’s payments areas, absent the geographic
adjustment.

(f) Determination and applicability of
payment rates. (1) All payment rates are annual rates,
determined and promulgated no later than March 1st, for the following
calendar year. (2) For purposes of paragraphs (b) and (c) of Sec.
422.252, except as provided in Sec. 422.254(e)(4), the “capitation
payment rate for 1997” is the rate determined under section
1876(a)(1)(c) of the Act.

Sec. 422.252 Annual capitation rates.

Subject to the adjustments specified in this subpart, the annual
capitation rate for a particular payment area is equal to the largest
of the following:

(a) Blended capitation rate. The
blended capitation rate is the sum of– (1) The area-specific
percentage (specified in Sec. 422.254(a)) for the year multiplied by
the annual area-specific capitation rate for the payment area as
determined under Sec. 422.254(e) for the year, and (2) The national
percentage (specified in Sec. 422.254(a)) for the year multiplied by
the national input-price-adjusted capitation rate for the payment
area as determined under Sec. 422.254(g) for the year. (3) Multiplied
by the budget neutrality adjustment factor determined under Sec.
422.254(d).

(b) Minimum amount rate. (1) For
1998– (i) For the 50 States and the District of Columbia, the
minimum amount rate is 12 times $367. (ii) For all other
jurisdictions the minimum amount rate is the lesser of the rate
described in (b)(1)(i) or 150 percent of the capitation payment rate
for 1997. (2) For each succeeding year, the minimum amount rate is
the minimum amount rate for the preceding year, increased by the
national per capita growth percentage (specified in Sec. 422.254(b))
for the year.

(c) Minimum percentage increase rate.
(1) For 1998, the minimum percentage increase rate is 102
percent of the annual capitation rate for 1997. (2) For each
succeeding year, the minimum percentage increase rate is 102 percent
of the annual capitation rate for the preceding
year.

Sec. 422.254 Calculation and adjustment factors.

The following are the factors used in calculating the per capita
payment rates:

(a) Area-specific and national
percentages. For purposes of Sec. 422.252(a)(1), the
area-specific percentage and the national percentage, for each year,
are as follows:

table

(b) National per capita growth
percentage. For purposes of Sec. 422.252(a)(2), (1) The
national per capita growth percentage for a year is HCFA’s estimate
of the rate of growth in per capita expenditures, reduced by the
percentage points specified in paragraph (b)(2) of this section for
the year. HCFA may make separate estimates for aged enrollees,
disabled enrollees, and enrollees who have ESRD. (2) The percentage
points that HCFA uses to reduce its estimates are as follows: (i) For
1998, 0.8 percentage points. (ii) For years 1999-2002, 0.5 percentage
points. (iii) For years after 2002, 0 percentage points.

(c) Medical education payment
adjustments. For purposes of paragraph (e)(2) the medical
education payment adjustments are amounts that HCFA estimates were
payable to teaching hospitals during 1997 for– (1) the indirect
costs of medical education under section 1886(d)(5)(B) of the Act;
and (2) The direct costs of graduate medical education under section
1886(h) of the Act.

(d) General budget neutrality factor.
For each year, HCFA applies a budget neutrality factor to the
blended capitation rates under Sec. 422.252(a) so that the estimated
aggregate payments made under this part equal the estimated aggregate
payments that would have been made if based entirely on area-specific
capitation rates.

(e) Annual Area-specific capitation rate
(1) Basic rule. Subject to the provisions of paragraphs (e)(2)
and (e)(3) of this section, the annual area-specific capitation rate
for a particular payment area is– (i) For 1998, subject to paragraph
(e)(4) of this section, the per capita rate determined for that area
for 1997 under section 1876(a)(1)(c) of the Act, increased by the
national per capita growth percentage for 1998; and (ii) For a
subsequent year, the area-specific capitation rate determined for the
previous year, increased by the national per capita growth percentage
for the year. (2) Exclusion of medical education costs. In
calculating the area- specific capitation rates, the following
percentages of the amounts estimated by HCFA under Sec. 422.254(c) as
medical education payment adjustments to hospitals, are excluded:

For 1998…………………………… 20 percent.

For 1999…………………………… 40 percent.

For 2000…………………………… 60 percent.

For 2001…………………………… 80 percent.

For years after 2001………………..100 percent.

(3) Payments under the State hospital reimbursement system. To the
extent that HCFA estimates that a 1997 per [[Page 35092]] capita rate
reflects payments to hospitals under section 1814(b)(3) of the Act,
HCFA makes a payment adjustment that is comparable to the adjustment
that would have been made under paragraph (e)(2) of this section if
the hospitals had not been reimbursed under section 1814(b)(3) of the
Act. (4) Areas with highly variable per capita rates. With respect to
a payment area for which the per capita rate for 1997 varies by more
than 20 percent from the per capita rate for 1996, HCFA may
substitute for the 1997 rate a rate that is more representative of
the costs of the enrollees in the area.

(f) National standardized annual capitation
rate. The national standardized annual capitation rate is
equal to– (1) The sum, for all payment areas, of the products of–
(i) The annual area-specific capitation rate and (ii) The average
number of Medicare beneficiaries residing in the area multiplied by
the average of the risk-factor weights used to adjust payments under
Sec. 422.256(c); (2) Divided by the sum, for all payment areas, of
the products specified in paragraph (f)(1)(ii) of this section for
all payment areas.

(g) The input-price-adjusted annual national
capitation rate–(1) General rule. The input-price-adjusted
annual national capitation rate for a M+C payment area for a year is
equal to the sum, for all the types of Medicare services (as
classified by HCFA), of the product (for each service) of– (i) The
national standardized annual M+C capitation rate (determined under
paragraph (f) of this section) for the year; (ii) The proportion of
such rates for the year which is attributable to such type of
services; and (iii) An index that reflects (for that year and that
type of services) the relative input price of such services in the
area compared to the national average input price for such services.
(2) HCFA may, subject to the special rules for 1988, use indices that
are used in applying or updating national payment rates for
particular areas and localities. (3) Special rules for 1988. In
applying this paragraph for 1998– (i) Medicare services are
classified as Part A and Part B services; (ii) The proportion
attributable to Part A services is the ratio (expressed as a
percentage) of the national average per capita rate of payment for
Part A services for 1997 to the national average per capita rate of
payment for Part A and Part B services for that year; (iii) The
proportion attributed to part B services is 100 percent minus the
ratio described in paragraph (g)(3)(ii) of this section; (iv) For
Part A services, 70 percent of the payments attributable to those
services are adjusted by the index used under section 1886(d)(3)(E)
of the Act to adjust payment rates for relative hospital wage levels
for hospitals located in the particular payment area; and (v) For
part B services– (A) 66 percent of payments attributable to those
services are adjusted by the index of the geographic area factors
under section 1848(e) of the Act used to adjust payment rates for
physician services in the particular payment area; and (B) Of the
remaining 34 percent, 40 percent is adjusted by the index specified
in paragraph (g)(3)(iv) of this section.

Sec. 422.256 Adjustments to capitation rates and aggregate
payments.

(a) Adjustment for over or under projection
of national per capita growth percentages. (1) Beginning with
rates for 1999, HCFA adjusts all area-specific and national
capitation rates for the previous year to reflect any differences
between the projected national per capita growth percentages for that
year and previous years, and the current estimates of those
percentages for such years. (2) Beginning with rates for 2000, HCFA
also adjusts the minimum amount rate (calculated under Sec.
422.252(b)) in the same manner.

(b) Adjustment for national coverage
determination (NCD) services. If HCFA determines that the cost
of furnishing an NCD service is “significant,” HCFA adjusts
capitation rates for the next calendar year to take account of the
cost of that service. Until the new capitation rates are in effect,
the M+C organization is paid for the “significant cost” service on a
fee-for-service basis as provided under section 422.105(b).

(c) Risk adjustment: General rule.
Capitation payments are adjusted for age, gender, institutional
status, and other appropriate factors, including health status.

(d) Risk adjustment: Health
status--(1) Data collection. To adjust for health status, HCFA
applies a risk factor based on data obtained in accordance with Sec.
422.257. (2) Initial implementation. HCFA applies this adjustment
factor to payments beginning January 1, 2000. (3) Uniform
application. Except as provided for M+C RFB plans under Sec.
422.250(a)(2)(iii), HCFA applies this adjustment factor to all types
of plans.

Sec. 422.257 Encounter data.

(a) Data collection: Basic rule. Each
M+C organization must submit to HCFA (in accordance with HCFA
instructions) all data necessary to characterize the context and
purposes of each encounter between a Medicare enrollee and a
provider, supplier, physician, or other practitioner.

(b) Types of service and timing of
submittal. M+C organizations must submit data as follows: (1)
Beginning on a date determined by HCFA, inpatient hospital care data
for all discharges that occur on or after July 1, 1997. (2) HCFA will
provide advance notice to M+C organizations to collect and submit
data for services that occur on or after July 1, 1998, as follow: (i)
Physician, outpatient hospital, SNF, and HHA data beginning no
earlier than October 1, 1999; and (ii) All other data HCFA deems
necessary beginning no earlier than October 1, 2000.

(c) Sources and extent of data. (1)
To the extent required by HCFA, the data must account for services
covered under the original Medicare program, for Medicare covered
services for which Medicare is not the primary payor, or for other
additional or supplemental benefits that the M+C organization may
provide. (2) The data must account separately for each provider,
supplier, physician, or other practitioner that would be permitted to
bill separately under the Medicare fee-for-service program, even if
they participate jointly in the same encounter.

(d) Other data requirements. The data
must– (1) Conform to the requirements for equivalent data for
Medicare fee-for-service when appropriate, and to all relevant
national standards; and (2) Be submitted electronically to the
appropriate HCFA contractor.

(e) Validation of data. M+C
organizations and their providers and practitioners will be required
to submit medical records for the validation of encounter data, as
prescribed by HCFA.

(f) Use of data. HCFA uses the data
obtained under this section to determine the risk adjustment factor
that it applies to annual capitation rates under Sec. 422.256(c).
HCFA may also use the data for other purposes.

Sec. 422.258 Announcement of annual capitation rates and
methodology changes.

(a) Capitation rates. (1) No later
than March 1 of each year, HCFA announces to M+C organizations and
other interested parties the capitation rates for the following
calendar year. [[Page 35093]] (2) HCFA includes in the announcement a
description of the risk and other factors and explains the
methodology in sufficient detail to enable M+C organizations to
compute monthly adjusted capitation rates for individuals in each of
its payment areas.

(b) Advance notice of changes in
methodology. (1) No later than January 15 of each year, HCFA
notifies M+C organizations of changes it proposes to make in the
factors and the methodology it used in the previous determination of
capitation rates. (2) The M+C organizations have 15 days to comment
on the proposed changes.

Sec. 422.262 Special rules for beneficiaries enrolled in M+C
MSA plans.

(a) Establishment and designation of medical
savings account (MSA). A beneficiary who elects coverage under
an M+C MSA plan– (1) Must establish an M+C MSA with a trustee that
meets the requirements of paragraph (b) of this section; and (2) If
he or she has more than one M+C MSA, designate the particular account
to which payments under the M+C MSA plan are to be made.

(b) Requirements for MSA trustees. An
entity that acts as a trustee for an M+C MSA must– (1) Register with
HCFA; (2) Certify that it is a licensed bank, insurance company, or
other entity qualified, under sections 408(a)(2) or 408(h) of the IRS
Code, to act as a trustee of individual retirement accounts; (3)
Agree to comply with the M+C MSA provisions of section 138 of the IRS
Code of 1986; and (4) Provide any other information that HCFA may
require.

(c) Deposit in the M+C MSA. (1) The
payment is calculated as follows: (i) The monthly M+C MSA premium is
compared with \1/12\ of the annual capitation rate for the area
determined under Sec. 422.252. (ii) If the monthly M+C MSA premium is
less than \1/12\ of the annual capitation rate, the difference is the
amount to be deposited in the M+C MSA for each month for which the
beneficiary is enrolled in the MSA plan. (2) HCFA deposits the full
amount to which a beneficiary is entitled under paragraph (c)(1)(ii)
of this section for the calendar year, beginning with the month in
which M+C MSA coverage begins. (3) If the beneficiary’s coverage
under the M+C MSA plan ends before the end of the calendar year, HCFA
recovers the amount that corresponds to the remaining months of that
year.

Sec. 422.264 Special rules for coverage that begins or ends
during an inpatient hospital stay.

(a) Applicability. This section
applies to inpatient services in a “subsection (d) hospital” as
defined in section 1886(d)(1)(B) of the Act.

(b) Coverage that begins during an inpatient
hospital stay. If coverage under an M+C plan offered by an M+C
organization begins while the beneficiary is an inpatient in a
subsection (d) hospital– (1) Payment for inpatient services until
the date of the beneficiary’s discharge is made by the previous M+C
organization or original Medicare, as appropriate. (2) The M+C
organization offering the newly-elected M+C plan is not responsible
for the inpatient services until the date after the beneficiary’s
discharge; and (3) The M+C organization offering the newly-elected
M+C plan is paid the full amount otherwise payable under this
subpart.

(c) Coverage that ends during an inpatient
hospital stay. If coverage under an M+C plan offered by an M+C
organization ends while the beneficiary is an inpatient in a
subsection (d) hospital– (1) The M+C organization is responsible for
the inpatient services until the date of the beneficiary’s discharge;
(2) Payment for those services during the remainder of the stay is
not made by original Medicare or by any succeeding M+C organization
offering a newly-elected M+C plan; and (3) The M+C organization that
no longer provides coverage receives no payment for the beneficiary
for the period after coverage ends.

Sec. 422.266 Special rules for hospice care.

(a) Information. An M+C organization
that has a contract under subpart K of this part must inform each
Medicare enrollee eligible to elect hospice care under section
1812(d)(1) of the Act about the availability of hospice care (in a
manner that objectively presents all available hospice providers,
including a statement of any ownership interest in a hospice held by
the M+C organization or a related entity) if– (1) A Medicare hospice
program is located within the plan’s service area; or (2) It is
common practice to refer patients to hospice programs outside that
area.

(b) Enrollment Status. Unless the
enrollee disenrolls from the M+C plan, a beneficiary electing hospice
continues his or her enrollment in the M+C plan and is entitled to
receive, through the M+C plan, any benefits other than those that are
the responsibility of the Medicare hospice.

(c) Payment. During the time the
hospice election is in effect, HCFA’s monthly capitation payment to
the M+C organization is reduced to an amount equal to the adjusted
excess amount determined under Sec. 422.312. In addition, HCFA pays
through the original Medicare program (subject to the usual rules of
payment)– (1) The hospice program for hospice care furnished to the
Medicare enrollee; and (2) The M+C organization, provider or supplier
for other Medicare- covered services furnished to the
enrollee.

Sec. 422.268 Source of payment and effect of election of the
M+C plan election on payment.

(a) Source of payments. Payments
under this subpart, to M+C organizations or M+C MSAs, are made from
the Federal Hospital Insurance Trust Fund or the Supplementary
Medical Insurance Trust Fund. HCFA determines the proportions to
reflect the relative weight that benefits under Part A, and benefits
under Part B represents of the actuarial value of the total benefits
under title XVIII of the Act.

(b) Payments to the M+C organization.
Subject to Secs. 412.105(g) and 413.86(d) of this chapter and Secs.
422.105, 422.264, and 422.266, HCFA’s payments under a contract with
an M+C organization (described in Sec. 422.250) with respect to an
individual electing an M+C plan offered by the organization are
instead of the amounts which (in the absence of the contract) would
otherwise be payable under original Medicare for items and services
furnished to the individual.

(c) Only the M+C organization entitled to
payment. Subject to Sec. 422.262, 422.264, 422.266, and
422.520 of this part and sections 1886(d)(11) and 1886(h)(3)(D) of
the Act, only the M+C organization is entitled to receive payment
from HCFA under title XVIII of the Act for items and services
furnished to the individual.

---

Health Hippo ©1996-2015