M+C CFR

CFR Chapter IV is amended
as set forth below.

A. PART 400–INTRODUCTION; DEFINITIONS

1. The authority citation for part 400 continues to read as
follows: Authority: Secs. 1102 and 1871 of the Social Security Act
(42 U.S.C. 1302 and 1395hh) and 44 U.S.C. chapter 35.

2. In Sec. 400.200, the definition for “PRO” is revised and the
following definitions are added in alphabetical order to read as
follows.

 

Sec. 400.200 General definitions.

ALJ stands for administrative law judge.

NCD stands for national coverage determination.

Peer review organization means an organization that has a
contract with HCFA, under part B of title XI of the Act, to
perform utilization and quality control review of the health
care furnished, or to be furnished, to Medicare beneficiaries.

PRO stands for peer review organization.

RRB stands for Railroad Retirement Board.

3. In Sec. 400.202 a definition of “national coverage
determination” is added in alphabetical order to read as follows.

Sec. 400.202 Definitions specific to Medicare.

National coverage determination (NCD) means a national policy
determination regarding the coverage status of a particular
service, that HCFA [[Page 35066]] makes under section 1862(a)(1)
of the Act, and publishes as a Federal Register notice or HCFA
Ruling. (The term does not include coverage changes mandated by
statute.)

B. PART 403–SPECIAL PROGRAMS AND PROJECTS

1. The authority citation for part 403 continues to read as
follows: Authority: Secs. 1102 and 1871 of the Social Security Act
(42 U.S.C. 1302 and 1395hh).

2. In Sec. 403.205, paragraph (d) introductory text is revised to
read as follows:

Sec. 403.205 Medicare supplemental policy.

(d) Medicare supplemental policy does not include a
Medicare+Choice plan or any of the following health insurance
policies or health benefit plans:

C. PART 410–SUPPLEMENTARY MEDICAL INSURANCE (SMI) BENEFITS

1. The authority citation for part 410 continues to read as
follows: Authority: Secs. 1102 and 1871 of the Social Security Act
(42 U.S.C. 1302 and 1395hh).

2. Part 410 is amended as set forth below.

a. Section 410.57 is revised to read as follows:

Sec. 410.57 Pneumococcal vaccine and flu vaccine. (a) Medicare
Part B pays for pneumococcal vaccine and its administration when
reasonable and necessary for the prevention of disease, if the
vaccine is ordered by a doctor of medicine or osteopathy. (b)
Medicare Part B pays for the influenza virus vaccine and its
administration.

b. Section 410.152 is amended to add a paragraph (1) to read as
follows:

Sec. 410.152 Amounts of Payment. (1) Amount of
payment: Flu vaccine. Medicare Part B pays 100 percent of the
Medicare allowed charge.

D. PART 411–EXCLUSIONS FROM MEDICARE AND LIMITATIONS ON
MEDICARE PAYMENT

1. The authority citation for part 411 continues to read as
follows: Authority: Secs. 1102 and 1871 of the Social Security Act
(42 U.S.C. 1302 and 1395hh).

2. In Sec. 411.15, in paragraph (e), the following changes are
made: a. The “and” at the end of paragraph (e)(2) is removed. b. A
semicolon and the word “and” are added at the end of paragraph
(e)(3). c. A new paragraph (e)(4) is added, to read as follows:

 

Sec. 411.15 Particular services excluded from coverage.

(e)(4) Influenza vaccinations that are reasonable and
necessary for the prevention of illness.

3. In Sec. 411.355, a new paragraph (c)(5) is added, to read as
follows:

Sec. 411.355 General exceptions to referral prohibitions
related to both ownership/investment and compensation.

(c)(5) A coordinated care plan (within the meaning of section
1851(a)(2)(A) of the Act) offered by an organization in accordance
with a contract with HCFA under section 1857 of the Act and part
422 of this chapter. E. Part 417

E. PART 417–HEALTH MAINTENANCE ORGANIZATIONS, COMPETITIVE
MEDICAL PLANS, AND HEALTH CARE PREPAYMENT PLANS

1. The authority citation for part 417 continues to read as
follows: Authority: Secs. 1102 and 1871 of the Social Security Act
(42 U.S.C. 1302 and 1395hh), secs. 1301, 1306, and 1310 of the
Public Health Service Act (42 U.S.C. 300e, 300e-5, and 300e-9);
and 31 U.S.C. 9701.

2. Section 417.402 is revised to read as follows:

Sec. 417.402 Effective date of initial regulations. (a) The
changes made to section 1876 of the Act by section 114 of the Tax
Equity and Fiscal Responsibility Act of 1982 became effective on
February 1, 1985, the effective date of the initial implementing
regulations. (b) The changes made to section 1876 of the Act by
section 4002 of the Balanced Budget Act (BBA) of 1997 are
incorporated in section 422 except for 1876 cost contracts. Upon
enactment of the BBA (August 5, 1997) no new cost contracts or
service area expansions are accepted by HCFA except for current
Health Care Prepayment Plans that may convert to 1876 cost
contracts. Also, 1876 cost contracts may not be extended or
renewed beyond December 31, 2002.

3. In Sec. 417.413, paragraphs (d)(1) and (d)(2) introductory text
are revised and new paragraphs (d)(2) (iii) and (d)(8) are added to
read as follows:

Sec. 417.413 Qualifying condition: Operating experience and
enrollment.

(d) Standard: Composition of enrollment. (1) Requirement.
Except as specified in paragraphs (d)(2) and (e) of this section,
not more than 50 percent of an HMO’s or CMP’s enrollment may be
Medicare beneficiaries. (2) Waiver of composition of enrollment
standard. HCFA may waive compliance with the requirements of
paragraph (d)(1) of this section if the HMO or CMP has made and is
making reasonable efforts to enroll individuals who are not
Medicare beneficiaries and it meets one of the following
requirements: (iii) The HMO or CMP requests waiver of the
composition rule because it is in the public interest. The
organization provides documentation that supports one of the
following: (A) The organization serves a medically underserved
rural or urban area. (B) The organization demonstrates a long-term
business and community service commitment to the area. (C) The
organization believes that a waiver is necessary to promote
managed care choices in an area with limited or no managed care
choices.

(8) Termination of composition standard. The 50 percent
composition of Medicare beneficiaries terminates for all managed
care plans on December 31, 1998.

4. In Sec. 417.426, a new paragraph (a)(4) is added to read as
follows:

Sec. 417.426 Open enrollment requirements.

(a) Basic requirements.

(4) An HMO or CMP with a risk contract must accept
applications from eligible Medicare beneficiaries during the month
of November 1998.

5. Section 417.428 is revised to read as follows: [[Continued on
page 35067]]

Sec. 417.428 Marketing activities. The requirements
and prohibitions set forth in Sec. 422.80 of this chapter, for M+C
organizations, apply also to HMOs and CMPs with contracts under
section 1876 of the Act.

6. In Sec. 417.472, paragraph (h) is revised to read as follows:

Sec. 417.472 Basic contract requirements.

(h) Collection of fees from risk HMOs and CMPs. (1) The rules
set forth in Sec. 422.10 of this chapter for M+C plans also apply
to collection of fees from risk HMOs and CMPs. (2) In applying the
part 422 rules, references to “M+C organizations” or “M+C plans”
must be read as references to “risk HMOs and CMPs”.

7. Sections 417.520, 417.522 and 417.523 of subpart M are
redesignated as Secs. 422.550, 422.522 and 422.553 in a new subpart L
in part 422, and the heading for the new subpart L to part 44 is
added to read “Change of Ownership and Leasing of Facilities: Effect
on Medicare Contract, under part 422, Medicare+Choice Program”.

8. A new Sec. 417.520 is added to subpart M to read as follows:

Sec. 417.520 Effect on HMO and CMP contracts. (a) The
provisions set forth in subpart L of part 422 of this chapter also
apply to Medicare contracts with HMOs and CMPs under section 1876 of
the Act. (b) In applying these provisions, references to “M+C
organizations” must be read as references to “HMOs and CMPs”. (c) In
Sec. 422.550, reference to “subpart K of this part” must be read as
reference to “subpart L of part 417 of this chapter”. (d) In Sec.
422.553, reference to “subpart K of this part” must be read as
reference to “subpart J of part 417 of this chapter”.

9. In Sec. 417.584, a new paragraph (e) is added to read as
follows:

Sec. 417.584 Payment to HMOs or CMPs with risk contracts.

(e) Determination of rate for calendar year 1998. For calendar
year 1998, HMOs or CMPs with risk contracts will be paid in
accordance with principles contained in subpart F of part 422 of
this chapter.

10. In subpart Q, Secs. 417.600 through 417.638 are removed.

11. A new Sec. 417.600 is added to subpart Q as follows:

Sec. 417.600 Beneficiary appeals and grievances. (a) The
rights, procedures, and requirements relating to beneficiary
appeals and grievances set forth in subpart M of part 422 of this
chapter also apply to Medicare contracts with HMOs and CMPs under
section 1876 of the Act. (b) In applying those provisions,
references to section 1852 of the Act must be read as references
to section 1876 of the Act; and references to M+C organizations as
references to HMOs and CMPs.

12. In Sec. 417.800 paragraph (a) introductory text is republished
and the definition for “Health care prepayment plan” is revised to
read as follows:

Sec. 417.800 Payment to HCPPs: Definitions and basic rules.

(a) Definitions: As used in this subpart, unless the context
indicates otherwise– Health care prepayment plan (HCPP) means an
organization that– (1) Is union or employer sponsored; (2) Does
not provide, or arrange for the provision of any in patient
hospital services. Current HCPPs must meet this definition on
January 1, 1999 and 1998 applicants must meet the definitions as
of the effective date of the HCPP agreement. As of January 1,
1999, HCPPs are not required to meet Medigap requirements. (3) Is
responsible for the organization, financing and delivery of
covered Part B services to a defined population on a prepayment
basis; (4) Meets the conditions specified in paragraph (b) of this
section; and (5) Elects to be reimbursed on a reasonable cost
basis.

F. PART 422–MEDICARE+CHOICE PROGRAM

1. The authority citation continues to read as follows:
Authority: Secs. 1102, 1851 through 1857, 1859, and 1871 of the
Social Security Act (42 U.S.C. 1302, 1395w-21 through 1395w-27,
and 1395hh).

2. Subparts A through G are added as follows:

Subpart A–General Provisions

422.1 Basis and scope.

422.2 Definitions.

422.4 Types of M+C plans.

422.6 Application requirements.

422.8 Evaluation and determination procedures.

422.10 Cost-sharing in enrollment-related costs.

Subpart B–Eligibility, Election, and Enrollment

422.50 Eligibility to elect an M+C plan.

422.54 Continuation of enrollment

422.56 Limitations on enrollment in an M+C MSA plan.

422.57 Limited enrollment under M+C RFB plans.

422.60 Election process

422.62 Election of coverage under an M+C plan.

422.64 Information about the M+C program.

422.66 Coordination of enrollment and disenrollment through
M+C organizations.

422.68 Effective dates of coverage and change of coverage.

422.74 Disenrollment by the M+C organization.

422.80 Approval of marketing materials and application
forms.

Subpart C–Benefits and Beneficiary Protections

422.100 General requirements.

422.101 Requirements relating to basic benefits.

422.102 Supplemental benefits.

422.103 Benefits under an M+C MSA plan.

422.104 Special rules for supplemental benefits for M+C MSA
plans.

422.105 Special rules for point of service option.

422.106 Special arrangements with employer groups.

422.108 Medicare secondary payer (MSP) procedures.

422.109 Effect of national coverage determinations (NCDs).

422.110 Discrimination against beneficiaries prohibited.

422.111 Disclosure requirements.

422.112 Access to services.

422.114 Access to services under an M+C private
fee-for-service plan.

422.118 Confidentiality and accuracy of enrollee records.

422.128 Information on advance directives.

422.132 Protection against liability and loss of benefits.

Subpart D–Quality Assurance

422.152 Quality assessment and performance improvement
program.

422.154 External review.

422.156 Compliance deemed on the basis of accreditation.

422.157 Accreditation organizations.

422.158 Procedures for approval of accreditation as a basis
for deeming compliance.

Subpart E–Relationships With Providers

422.200 Basis and scope.

422.202 Participation procedures.

422.204 Provider credentialing and provider rights.

422.206 Interference with health care professionals’ advice
to enrollees prohibited. [[Page 35068]]

422.208 Physician incentive plans: requirements and
limitations.

422.210 Disclosure of physician incentive plans

422.212 Limitations on provider indemnification.

422.214 Special rules for services furnished by noncontract
providers.

422.216 Special rules for M+C fee-for-service plans.

422.220 Exclusion of services furnished under a private
contract.

Subpart F–Payments to Medicare+Choice Organizations

422.249 Terminology

422.250 General provisions.

422.252 Annual capitation rates.

422.254 Calculation and adjustment factors.

422.256 Adjustments to capitation rates and aggregate
payments.

422.257 Encounter data.

422.258 Announcement of annual capitation rates and
methodology changes.

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

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

422.266 Special rules for hospice care.

422.268 Source of 42 payment and effect of election of the
M+C plan election on payment.

Subpart G–Premiums and Cost-Sharing

422.300 Basis and scope.

422.302 Terminology.

422.304 Rules governing premiums and cost-sharing.

422.306 Submission of proposed premiums and related
information.

422.308 Limits on premiums and cost-sharing amounts.

422.309 Incorrect collections of premiums and cost-sharing.

422.310 Adjusted community rate (ACR) approval process.

422.312 Requirement for additional
benefits.

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Subpart A–General Provisions

Sec. 422.1 Basis and scope.

(a) Basis. This part is based on the
indicated provisions of the following sections of the Act:
1851–Eligibility, election, and enrollment. 1852–Benefits and
beneficiary protections. 1853–Payments to Medicare+Choice (M+C)
organizations. 1854–Premiums. 1855–Organization, licensure, and
solvency of M+C organizations. 1856–Standards. 1857–Contract
requirements. 1859–Definitions; enrollment restriction for certain
M+C plans.

(b) Scope. This part establishes
standards and sets forth the requirements, limitations, and
procedures for Medicare services furnished, or paid for, by
Medicare+Choice organizations through Medicare+Choice
plans.

Sec. 422.2 Definitions.

As used in this part–

• ACR stands for adjusted community rate.
• Additional benefits are health care services not covered by
  Medicare, and reductions in premiums or cost-sharing for Medicare
  covered services, funded from adjusted excess amounts as
  calculated in the ACR.

• Adjusted community rate (ACR) is the equivalent of the maximum
  amount allowed under Sec. 422.310.

• Arrangement means a written agreement between an M+C
  organization and a provider or provider network, under which– (1)
  The provider or provider network agrees to furnish for a specific
  M+C plan(s) specified services to the organization’s M+C
  enrollees; (2) The organization retains responsibilities for the
  services; and (3) Medicare payment to the organization discharges
  the enrollee’s obligation to pay for the services.

• Balance billing generally refers to an amount billed by a
  provider that represents the difference between the amount the
  provider charges an individual for a service and the sum of the
  amount the individual’s health insurer (for example, the original
  Medicare program) will pay for the service plus any cost-sharing
  by the individual.

• Basic benefits means all Medicare-covered benefits, except
  hospice services, and additional benefits.

• Benefits are health care services that are intended to
  maintain or improve the health status of enrollees, for which the
  M+C organization incurs a cost or liability under an M+C plan, and
  that are approved in the Benefit/ACR process.

• Coinsurance is a fixed percentage of the total amount paid for
  a health care service that can be charged to an M+C enrollee on a
  per- service basis.

• Copayment is a fixed amount that can be charged to an M+C plan
  enrollee on a per-service basis.

• Cost-sharing includes deductibles, coinsurance, and
  copayments.

• Emergency medical condition means a medical condition
  manifesting itself by acute symptoms of sufficient severity
  (including severe pain) such that a prudent layperson, with an
  average knowledge of health and medicine, could reasonably expect
  the absence of immediate medical attention to result in– (1)
  Serious jeopardy to the health of the individual or, in the case
  of a pregnant woman, the health of the woman or her unborn child;
  (2) Serious impairment to bodily functions; or (3) Serious
  dysfunction of any bodily organ or part.

• Emergency services means covered inpatient and outpatient
  services that are– (1) Furnished by a provider qualified to
  furnish emergency services; and (2) Needed to evaluate or
  stabilize an emergency medical condition.

• Licensed by the State as a risk-bearing entity means the
  entity is licensed or otherwise authorized by the State to assume
  risk for offering health insurance or health benefits coverage,
  such that the entity is authorized to accept prepaid capitation
  for providing, arranging, or paying for comprehensive health
  services under an M+C contract.

• M+C stands for Medicare+Choice.
• M+C eligible individual means an individual who meets the
  requirements of Sec. 422.50.

• M+C organization means a public or private entity organized
  and licensed by a State as a risk-bearing entity (with the
  exception of provider-sponsored organizations receiving waivers)
  that is certified by HCFA as meeting the M+C contract
  requirements.

• M+C plan means health benefits coverage offered under a policy
  or contract by an M+C organization that includes a specific set of
  health benefits offered at a uniform premium and uniform level of
  cost-sharing to all Medicare beneficiaries residing in the service
  area of the M+C plan.

• M+C plan enrollee is an M+C eligible individual who has
  elected an M+C plan offered by an M+C organization.

• Mandatory supplemental benefits are services not covered by
  Medicare that an M+C enrollee must purchase as part of an M+C plan
  that are paid for directly by (or on behalf of) Medicare
  enrollees, in the form of premiums or cost-sharing.

• MSA stands for medical savings account.
• MSA trustee means a person or business with which an enrollee
  establishes an M+C MSA. A trustee may be a bank, an insurance
  company, or any other entity that– (1) Is approved by the
  Internal Revenue Service to be a trustee or custodian of an
  individual retirement account (IRA); and (2) Meets the
  requirements of Sec. 422.262(b).

• Original Medicare means health insurance available under
  Medicare Part A and Part B through the traditional fee-for service
  payment system.

• Optional supplemental benefits means health benefits normally
  not covered by Medicare purchased at the option of the M+C
  enrollee and that are [[Page 35069]] paid for directly by (or on
  behalf of) the Medicare enrollee, in the form of premiums or
  cost-sharing. These services may be grouped or offered
  individually.

• Point of service (POS) is a benefit option that an M+C
  coordinated care plan can offer to its Medicare enrollees as an
  additional, mandatory supplemental, or optional supplemental
  benefit. Under the POS benefit option, the M+C plan allows members
  the option of receiving specified services outside of the M+C
  plan’s provider network. In return for this flexibility, members
  typically have higher cost-sharing requirements for services
  received and, where offered as a mandatory or optional
  supplemental benefit, may also be charged a premium for the POS
  benefit option.

• Provider means– (1) Any individual who is engaged in the
  delivery of health care services in a State and is licensed or
  certified by the State to engage in that activity in the State;
  and (2) Any entity that is engaged in the delivery of health care
  services in a State and is licensed or certified to deliver those
  services if such licensing or certification is required by State
  law or regulation.

• Provider network means the providers with which an M+C
  organization contracts or makes arrangements to furnish covered
  health care services to Medicare enrollees under an M+C
  coordinated care or network MSA plan.

• Religious and Fraternal (RFB) Society means an organization
  that– (1) Is described in section 501(c)(8) of the Internal
  Revenue Code of 1986 and is exempt from taxation under section
  501(a) of that Act; and (2) Is affiliated with, carries out the
  tenets of, and shares a religious bond with, a church or
  convention or association of churches or an affiliated group of
  churches.

• RFB plan means a coordinated care plan that is offered by an
  RFB society.

• Service area means a geographic area approved by HCFA within
  which an M+C eligible individual may enroll in a particular M+C
  plan offered by the organization. For coordinated care plans and
  network medical savings account (MSA) plans only, the service area
  also is the area within which a network of providers exists that
  meets the access standards in Sec. 422.112. The service area also
  defines the area where a uniform benefit package is offered. In
  deciding whether to approve a service area proposed by an M+C
  organization for an M+C plan, HCFA considers the M+C
  organization’s commercial service area for the type of plan in
  question (if applicable), community practices generally, whether
  the boundaries of the service area are discriminatory in effect,
  and, in the case of coordinated care and network MSA plans, the
  adequacy of the provider network in the proposed service area.
  HCFA may approve single county M+C non-network MSA plans even if
  the M+C organization has a different commercial service area.

• Urgently needed services means covered services provided when
  an enrollee is temporarily absent from the M+C plan’s service (or,
  if applicable, continuation) area (or, under unusual and
  extraordinary circumstances, provided when the enrollee is in the
  service or continuation area but the organization’s provider
  network is temporarily unavailable or inaccessible) when such
  services are medically necessary and immediately required– (1) As
  a result of an unforeseen illness, injury, or condition; and (2)
  It was not reasonable given the circumstances to obtain the
  services through the organization offering the M+C
  plan.

Sec. 422.4 Types of M+C plans.

(a) General rule. An M+C plan may be
a coordinated care plan, a combination of an M+C MSA plan and a
contribution into an M+C MSA established in accordance with Sec.
422.262, or an M+C private fee-for- service plan. (1) A coordinated
care plan. A coordinated care plan is a plan that includes a network
of providers that are under contract or arrangement with the
organization to deliver the benefit package approved by HCFA. (i) The
network is approved by HCFA to ensure that all applicable
requirements are met, including access and availability, service
area, and quality. (ii) Coordinated care plans may include mechanisms
to control utilization, such as referrals from a gatekeeper for an
enrollee to receive services within the plan, and financial
arrangements that offer incentives to providers to furnish high
quality and cost-effective care. (iii) Coordinated care plans include
health maintenance organizations (HMOs), provider-sponsored
organizations (PSOs) and preferred provider organizations (PPOs),
RFBs, and other network plans (except network MSA plans).(2) A
combination of an M+C MSA plan and a contribution into the M+C MSA
established in accordance with Sec. 422.262. (i) M+C MSA plan means a
plan that– (A) Pays at least for the services described in Sec.
422.101, after the enrollee has incurred countable expenses (as
specified in the plan) equal in amount to the annual deductible
specified in Sec. 422.103(d); and (B) Meets all other applicable
requirements of this part. (ii) An M+C MSA plan may be either a
network plan or a non-network plan. (A) M+C network MSA plan means an
MSA plan under which enrollees must receive services through a
defined provider network that is approved by HCFA to ensure that all
applicable requirements are met, including access and availability,
service area, and quality. (B) M+C non-network MSA plan means an MSA
plan under which enrollees are not required to receive services
through a provider network. (iii) M+C MSA means a trust or custodial
account– (A) That is established in conjunction with an MSA plan for
the purpose of paying the qualified expenses of the account holder;
and (B) Into which no deposits are made other than contributions by
HCFA under the M+C program, or a trustee-to-trustee transfer or
rollover from another M+C MSA of the same account holder, in
accordance with the requirements of sections 138 and 220 of the
Internal Revenue Code.(3) M+C private fee-for-service plan. An M+C
private fee-for- service plan is an M+C plan that– (i) Pays
providers of services at a rate determined by the plan on a
fee-for-service basis without placing the provider at financial risk;
(ii) Does not vary the rates for a provider based on the utilization
of that provider’s services; and (iii) Does not restrict enrollees’
choices among providers that are lawfully authorized to provide
services and agree to accept the plan’s terms and conditions of
payment.

(b) Multiple plans. Under its
contract, an M+C organization may offer multiple plans, regardless of
type, provided that the M+C organization is licensed or approved
under State law to provide those types of plans (or, in the case of a
PSO plan, has received from HCFA a waiver of the State licensing
requirement). If an M+C organization has received a waiver for the
licensing requirement to offer a PSO plan, that waiver does not apply
to the licensing requirement for any other type of M+C
plan.

Sec. 422.6 Application requirements.

(a) Scope. This section sets forth
application requirements for entities that seek a contract as an M+C
organization offering an M+C plan. [[Page 35070]]

(b) Completion of an application. (1)
In order to obtain a determination on whether it meets the
requirements to become an M+C organization and is qualified to
provide a particular type of M+C plan, an entity, or an individual
authorized to act for the entity (the applicant) must complete a
certified application, in the form and manner required by HCFA,
including the following: (i) Documentation of appropriate State
licensure or State certification that the entity is able to offer
health insurance or health benefits coverage that meets
State-specified standards applicable to M+C plans, and is authorized
by the State to accept prepaid capitation for providing, arranging,
or paying for the comprehensive health care services to be offered
under the M+C contract; or (ii) Federal waiver as described in
subpart H of this part. (2) The authorized individual must describe
thoroughly how the entity and M+C plan meet, or will meet, the
requirements described in this part.

(c) Responsibility for making
determinations. HCFA is responsible for determining whether an
entity qualifies as an M+C organization and whether proposed M+C
plans meet the requirements of this part.

(d) Resubmittal of application. An
application that has been denied by HCFA may not be resubmitted for 4
months after the date of the notice from HCFA denying the
application.

(e) Disclosure of application information
under the Freedom of Information Act. An applicant submitting
material that he or she believes is protected from disclosure under 5
U.S.C. 552, the Freedom of Information Act, or because of exceptions
provided in 45 CFR part 5 (the Department’s regulations providing
exceptions to disclosure), should label the material “privileged” and
include an explanation of the applicability of an exception described
in 45 CFR part 5.

Sec. 422.8 Evaluation and determination procedures.

(a) Basis for evaluation and
determination. (1) HCFA evaluates an application for an M+C
contract on the basis of information contained in the application
itself and any additional information that HCFA obtains through
on-site visits, public hearings, and any other appropriate
procedures. (2) If the application is incomplete, HCFA notifies the
entity and allows 60 days from the date of the notice for the entity
to furnish the missing information. (3) After evaluating all relevant
information, HCFA determines whether the entity’s application meets
the applicable requirements of Sec. 422.6.

(b) Use of information from a prior
contracting period. If an entity has failed to comply with the
terms of a previous year’s contract with HCFA under title XVIII of
the Act as an HMO, competitive medical plan, health care prepayment
plan, or M+C organization or an entity has failed to complete a
corrective action plan during the term of the contract, HCFA may deny
an application based on the entity’s failure to comply with that
prior contract with HCFA even if the entity meets all of the current
requirements.

(c) Notice of determination. HCFA
notifies each entity that applies for an M+C contract under this part
of its determination and the basis for the determination. The
determination may be approval, intent to deny, or denial.

(d) Approval of application. If HCFA
approves the application, it gives written notice to the M+C
organization, indicating that it meets the requirements for an M+C
contract.

(e) Intent to deny. (1) If HCFA finds
that the entity does not appear to meet the requirements of an M+C
organization and appears to be able to meet those requirements within
60 days, HCFA gives the entity notice of intent to deny qualification
and a summary of the basis for this preliminary finding. (2) Within
60 days from the date of the notice, the entity may respond in
writing to the issues or other matters that were the basis for HCFA’s
preliminary finding and may revise its application to remedy any
defects HCFA identified.

(f) Denial of application. If HCFA
denies the application, it gives written notice to the M+C
organization indicating– (1) That the M+C organization does not meet
the contract requirements under part C of title XVIII of the Act; (2)
The reasons why the M+C organization does not meet the contract
requirements; and (3) The M+C organization’s right to request
reconsideration in accordance with the procedures specified in
subpart N of this part.

(g) Oversight of continuing
compliance. (1) HCFA oversees an entity’s continued compliance
with the requirements for an M+C organization. (2) If an entity no
longer meets those requirements, HCFA terminates the contract in
accordance with Sec. 422.510.

Sec. 422.10 Cost-sharing in enrollment-related costs.

(a) Basis and scope. This section
implements that portion of section 1857 of the Act that pertains to
cost-sharing in enrollment- related costs. It sets forth the
procedures that HCFA follows to assess the required fees on M+C plans
offered by M+C organizations.

(b) Purpose of assessment. Section
1857(e)(2) of the Act authorizes HCFA to charge and collect from each
M+C plan offered by an M+C organization its pro rata share of fees
for administering section 1851 of the Act, relating to dissemination
of enrollment information; and section 4360 of the Omnibus Budget
Reconciliation Act of 1990, relating to the health insurance
counseling and assistance program.

(c) Applicability. The fee assessment
also applies to those demonstrations for which enrollment is effected
or coordinated under section 1851 of the Act.

(d) Collection of fees–(1) Timing of
collection. HCFA collects the fees over nine consecutive months
beginning with January of each fiscal year. (2) Amount to be
collected. The aggregate amount of fees for a fiscal year is the
lesser of the following: (i) The estimated costs to be incurred by
HCFA in that fiscal year to carry out the activities described in
paragraph (b) of this section. (ii) The amount authorized in the DHHS
appropriation for the fiscal year.

(e) Assessment methodology. (1) The
amount assessed is a percentage of the total Medicare payments to
each organization. HCFA determines the percentage rate using the
following formula: A times B divided by C where– A is the total of
the estimated January payments to all organizations subject to
assessment; B is the nine-month (January through September)
assessment period; and C is the total assessment amount authorized
for the particular fiscal year in accordance with paragraph (d)(2) of
this section. (2) HCFA determines each organization’s pro rata share
of the annual fee on the basis of that organization’s calculated
monthly payment amount during the nine consecutive months beginning
with January. HCFA calculates each organization’s monthly pro rata
share by multiplying the established percentage rate by the total
monthly calculated Medicare payment amount to the organization as
recorded in HCFA’s payment system on the first day of the month. (3)
HCFA deducts the organization’s fee from the amount of Federal funds
otherwise payable to the organization for that month under the M+C
program. (4) If assessments reach the amount authorized for the year
before the end of [[Page 35071]] September, HCFA discontinues
assessment. (5) If there are delays in determining the amount of the
annual aggregate fees specified in paragraph (d)(2) of this section
or the fee percentage rate specified in paragraph (e), HCFA may
adjust the assessment time period and the fee percentage
amount.

---

Subpart B–Eligibility, Election, and Enrollment

Sec. 422.50 Eligibility to elect an M+C plan.

(a) an individual is eligible to elect an M+C plan if he or she–
(1) Is entitled to Medicare under Part A and enrolled in Part B
(except that an individual entitled only to Part B and who is (or
was) enrolled in an HMO or CMP with a risk contract under part 417 of
this chapter on December 31, 1998 may continue to be enrolled in the
M+C organization may continue to be enrolled in the M+C organization
as an M+C plan enrollee); (2) Has not been medically determined to
have end-stage renal disease, except that an individual who develops
end-stage renal disease while enrolled in an M+C plan or in a health
plan offered by the M+C organization offering an M+C plan in the
service area or continuation area in which the individual resides may
continue to be enrolled in the M+C organization as an M+C plan
enrollee; (3) Resides in the service area of the plan, except that an
individual who resides in a continuation area of an M+C plan while
enrolled in a health plan offered by the M+C organization may
continue to be enrolled in the M+C organization as an M+C plan
enrollee; (4) Completes and signs an election form and gives
information required for enrollment; and (5) Agrees to abide by the
rules of the M+C organization after they are disclosed to him or her
in connection with the election process.

(b) An M+C eligible individual may not be enrolled in more than
one M+C plan at any given time.

Sec. 422.54 Continuation of enrollment.

(a) Definition. Continuation area
means an additional area (outside the service area) within which the
M+C organization furnishes or arranges for furnishing services to its
continuation-of-enrollment enrollees. Enrollees must reside in a
continuation area on a permanent basis. A continuation area does not
expand the service area of any plan.

(b) Basis rule. An M+C organization
may offer a continuation of enrollment option to enrollees when they
no longer reside in the service area of a plan and permanently move
into the geographic area designated by the M+C organization as a
continuation of enrollment area. The intent to no longer reside in an
area and permanently live in another area is verified through
documentation that establishes residency, such as, driver’s license,
voter registration.

(c) General requirements. (1) An M+C
organization that wishes to offer a continuation of enrollment option
must meet the following requirements: (i) Obtain HCFA’s approval of
the continuation area, the marketing materials that describe the
option, and the M+C organization’s assurances of access to services.
(ii) Describe the option(s) in the member materials it offers and
make the option available to all enrollees residing in the
continuation area. (2) An enrollee who moves out of the service area
and into the geographic area designated as the continuation area has
the choice of continuing enrollment or disenrolling from the plan.

(d) Specific requirements–(1) Basic
benefits. The M+C organization must, at a minimum, provide or arrange
for the Medicare-covered benefits described in Sec. 422.101(a). (2)
Reasonable access. The M+C organization must ensure reasonable access
in the continuation area– (i) Through contracts with providers, or
through direct payment of claims that satisfy the requirements in
Sec. 422.100(b)(2), to other providers who meet requirements in
subpart E of this part; and (ii) By ensuring that the access
requirements of Sec. 422.112 are met. (3) Reasonable cost-sharing.
For services furnished in the continuation area, an enrollee’s
cost-sharing liability is limited to– (i) The cost-sharing amounts
required in the M+C plan’s service area (in which the enrollee no
longer resides) if provided by contract providers; (ii) The
cost-sharing amounts required by the continuation area plan if
provided through agreements with another M+C plan; or (iii) The
amount for which a beneficiary would be liable under original
Medicare if noncontracting providers furnish the services. (4)
Protection of enrollee rights. An M+C organization that offers a
continuation of enrollment option must convey all enrollee rights
conferred under this rule, with the understanding that– (i) The
ultimate responsibility for all appeals and grievance requirements
remain with the organization that is receiving payment from HCFA; and
(ii) Organizations that require enrollees to give advance notice of
intent to use the continuation of enrollment option, must stipulate
the notification process in the marketing materials.

(e) Capitation payments. HCFA’s
capitation payments to all M+C organizations, for all Medicare
enrollees, are based on rates established on the basis of the
enrollee’s permanent residence, regardless of where he or she
receives services.

Sec. 422.56 Limitations on enrollment in an M+C MSA plan.

(a) General. An individual is not
eligible to elect an M+C MSA plan– (1) If the number of individuals
enrolled in M+C MSA plans has reached 390,000; (2) Unless the
individual provides assurances that are satisfactory to HCFA that he
or she will reside in the United States for at least 183 days during
the year for which the election is effective; or (3) On or after
January 1, 2003, unless the enrollment is the continuation of an
enrollment in effect as of that date.

(b) Individuals eligible for or covered
under other health benefits program. An individual who is
enrolled in a Federal Employee Health Benefit plan under 5 U.S.C.
chapter 89, or is eligible for health care benefits through the
Veteran’s Administration under 10 U.S.C. chapter 55 or the Department
of Defense under 38 U.S.C. chapter 17, may not enroll in an M+C MSA
plan.

(c) Individuals eligible for Medicare
cost-sharing under Medicaid State plans. An individual who is
entitled to coverage of Medicare cost-sharing under a State plan
under title XIX of the Act is not eligible to enroll in an M+C MSA
plan.

(d) Other limitations. An individual
who receives health benefits that cover all or part of the annual
deductible under the M+C MSA plan may not enroll in an M+C MSA plan.
Examples of this type of coverage include, but are not limited to,
primary health care coverage other than Medicare, current coverage
under the Medicare hospice benefit, supplemental insurance policies
not specifically permitted under Sec. 422.103, and retirement health
benefits.

Sec. 422.57 Limited enrollment under M+C RFB plans.

An RFB society that offers an M+C RFB plan may offer that plan
only to members of the church, or convention or group of churches
with which the society is affiliated. [[Page 35072]]

Sec. 422.60 Election process.

(a) Acceptance of enrollees: General
rule. (1) Except for the limitations on enrollment in an M+C MSA plan
provided by Sec. 422.62(d)(1) and except as specified in paragraph
(a)(2) of this section, each M+C organization must accept without
restriction (except for an M+C RFB plan as provided by Sec. 422.57)
individuals who are eligible to elect an M+C plan that M+C
organization offers and who elect an M+C plan during initial coverage
election periods, annual election periods, and special election
periods specified in Sec. 422.62 (a)(1), (a)(2), and (b). (2) M+C
organizations must accept elections during the open enrollment
periods specified in Sec. 422.62(a)(3), (a)(4), and (a)(5) if their
M+C plans are open to new enrollees.

(b) Capacity to accept new enrollees.
(1) M+C organizations must submit information on enrollment
capacity of plans they offer by May 1 of each year as provided by
Sec. 422.306(a)(2). (2) If HCFA determines that an M+C plan offered
by an M+C organization has a capacity limit, and the number of M+C
eligible individuals who elect to enroll in that plan exceeds the
limit, the M+C organization offering the plan may limit enrollment in
the plan under this part, but only if it provides priority in
acceptance as follows: (i) First, for individuals who elected the
plan prior to the HCFA determination that capacity has been exceeded,
elections will be processed in chronological order by date of receipt
of their election forms. (ii) Then for other individuals in a manner
that does not discriminate on the basis of any factor related to
health as described in Sec. 422.110.

(c) Election forms. (1) The election
form must comply with HCFA instructions regarding content and format
and have been approved by HCFA as described in Sec. 422.80. The form
must be completed and signed by the M+C eligible individual
beneficiary (or the individual who will soon become entitled to
Medicare benefits) and include authorization for disclosure and
exchange of necessary information between the U.S. Department of
Health and Human Services and its designees and the M+C organization.
Persons who assist beneficiaries in completing forms must sign the
form and indicate their relationship to the beneficiary. (2) The M+C
organization must file and retain election forms for the period
specified in HCFA instructions.

(d) When an election is considered to have
been made. An election in an M+C plan is considered to have
been made on the date the election form is received by the M+C
organization.

(e) Handling of election forms. The
M+C organization must have an effective system for receiving,
controlling, and processing election forms. The system must meet the
following conditions and requirements: (1) Each election form is
dated as of the day it is received. (2) Election forms are processed
in chronological order, by date of receipt. (3) The M+C organization
gives the beneficiary prompt written notice of acceptance or denial
in a format specified by HCFA. (4) In a format specified by HCFA, a
notice of acceptance– (i) Promptly informs the beneficiary of the
date on which enrollment will be effective under Sec. 422.68; and
(ii) If the M+C plan is enrolled to capacity, explains the procedures
that will be followed when vacancies occur. (5) A notice of denial
explains the reasons for denial in a format specified by HCFA. (6)
Within 30 days from receipt of the election form (or from the date a
vacancy occurs for an individual who was accepted for future
enrollment), the M+C organization transmits the information necessary
for HCFA to add the beneficiary to its records as an enrollee of the
M+C organization.

Sec. 422.62 Election of coverage under an M+C plan.

(a) General: Coverage election
periods–(1) Initial coverage election period. The initial coverage
election period is the period during which a new M+C eligible
individual may make an initial election. This period begins 3 months
prior to the month the individual is first entitled to both Part A
and Part B and ends the last day of the month preceding the month of
entitlement. (2) Annual election period. (i) Beginning in 1999, the
month of November is the annual election period for the following
calendar year. Organizations offering M+C plans in January 1999 must
open enrollment to Medicare beneficiaries in November 1998. (ii)
During the annual election period, an individual eligible to enroll
in an M+C plan may change his or her election from an M+C plan to
original Medicare or to a different M+C plan, or from original
Medicare to an M+C plan. (3) Open enrollment and disenrollment
opportunities through 2001. From 1998 through 2001, the number of
elections or changes that an M+C eligible individual may make is not
limited (except as provided for in paragraph (d) of this section for
M+C MSA plans). Subject to the M+C plan being open to enrollees as
provide under Sec. 422.60(a)(2), an individual eligible to elect an
M+C plan may change his or her election from an M+C plan to original
Medicare or to a different M+C plan, or from original Medicare to an
M+C plan. (4) Open enrollment and disenrollment during 2002. (i)
Except as provided in paragraphs (a)(4)(ii) and (a)(4)(iii) of this
section, an individual who is eligible to elect an M+C plan in 2002
may elect an M+C plan or change his or her election from an M+C plan
to original Medicare or to a different M+C plan, or from original
Medicare to an M+C plan, but only once during the first 6 months of
the year. (ii) Newly eligible M+C individual. An individual who
becomes an M+C eligible individual during 2002 may elect an M+C plan
or original Medicare and then change his or her election once during
the period that begins the month the individual is entitled to both
Part A and Part B and ends on the last day of the 6th month of such
entitlement, or on December 31, whichever is earlier. The individual
can change the election from an M+C plan to original Medicare or to a
different M+C plan, or from original Medicare to an M+C plan during
this period. (iii) The limitation to one election or change in
paragraphs (a)(4)(i) and (a)(4)(ii) of this section does not apply to
elections or changes made during the annual election period specified
in (a)(2) of this section or during a special enrollment period
specified in paragraph (b) of this section. (5) Open enrollment and
disenrollment beginning in 2003. (i) For 2003 and subsequent years,
except as provided in paragraphs (a)(5)(ii) and (a)(5)(iii) of this
section, an individual who is eligible to elect an M+C plan may elect
an M+C plan or change his or her election from an M+C plan to
original Medicare or to a different M+C plan, or from original
Medicare to an M+C plan, but only once during the first 3 months of
the year. (ii) Newly eligible M+C individual. An individual who
becomes an M+C eligible individual during 2003 or later may elect an
M+C plan or original Medicare and then change his or her election
once during the period that begins the month the individual is
entitled to both Part A and Part B and ends on the last day of the
3rd month of such entitlement, or on December 31, whichever is
earlier. The individual can change the election from an M+C plan to
original Medicare or to a different [[Page 35073]] M+C plan, or from
original Medicare to an M+C plan during this period. (iii) The
limitation to one election or change in paragraphs (a)(5)(i) and
(a)(5)(ii) of this section does not apply to elections or changes
made during the annual election period specified in paragraph (a)(2)
of this section or during a special election period specified in
paragraph (b) of this section.

(b) Special election periods.
Effective as of January 1, 1999 for M+C plans, and as of
January 1, 2002, for all MSA other types of M+C MSA plans, an
individual may at any time (that is, not limited to the annual
election period) discontinue the election of an M+C plan offered by
an M+C organization and change his or her election, in the form and
manner specified by HCFA, from an M+C plan to original Medicare or to
a different M+C plan under any of the following circumstances: (1)
HCFA has terminated the organization’s contract for that plan or the
organization has terminated or discontinued offering the plan in the
service area or continuation area in which the individual resides.
(2) The individual is not eligible to remain enrolled in the plan
because of a change in his or her place of residence to a location
out of the service area or continuation area or other change in
circumstances as determined by HCFA but not including terminations
resulting from a failure to make timely payment of an M+C monthly or
supplemental beneficiary premium, or from disruptive behavior. (3)
The individual demonstrates to HCFA, in accordance with guidelines
issued by HCFA, that– (i) The organization offering the plan
substantially violated a material provision of its contract under
this part in relation to the individual, including, but not limited
to the following: (A) Failure to provide the beneficiary on a timely
basis medically necessary services for which benefits are available
under the plan. (B) Failure to provide medical services in accordance
with applicable quality standards; or (ii) The organization (or its
agent, representative, or plan provider) materially misrepresented
the plan’s provisions in marketing the plan to the individual. (4)
The individual meets such other exceptional conditions as HCFA may
provide.

(c) Special election period for individual
age 65. Effective January 1, 2002, an M+C eligible individual
who elects an M+C plan during the initial coverage election period,
as defined under section 1837(d) of the Act, that surrounds his or
her 65th birthday (this period begins 3 months before and ends 3
months after the month of the individual’s 65th birthday) may
discontinue the election of that plan and elect coverage under
original Medicare at any time during the 12- month period that begins
on the effective date of enrollment in the M+C plan.

(d) Special rules for M+C plans–(1)
Enrollment. An individual may enroll in an M+C plan only during an
initial or annual election period described in paragraphs (a)(1) and
(a)(2) of this section or during November 1998. (2) Disenrollment.
(i) Except as provided in paragraph (d)(2)(ii) of this section, an
individual may disenroll from an M+C plan only during– (A) November
1998; (B) An annual election period; or (C) The special election
period described in paragraph (b) of this section. (ii) Exception. An
individual who elects an M+C MSA plan during an annual election
period and has never before elected an M+C MSA plan may revoke that
election, no later than December 15 of that same year, by submitting
to the organization that offers the M+C MSA plan a signed and dated
request in the form and manner prescribed by HCFA or by filing the
appropriate disenrollment form through other mechanisms as determined
by HCFA.

Sec. 422.64 Information about the M+C program.

(a) Source of information. Each M+C
organization must provide, on an annual basis and in a format and
using standard terminology that may be specified by HCFA, the
information necessary to enable HCFA to provide to current and
potential beneficiaries the information they need to make informed
decisions with respect to the available choices for Medicare
coverage.

(b) Timing and recipients of the
information. HCFA mails a notice containing the information
described in paragraph (c) of this section– (1) At least 15 days
before each annual election period, to each individual eligible to
elect an M+C plan; and (2) To the extent practicable, not later than
30 days before his or her initial coverage election period to each
individual who will become eligible to elect an M+C plan.

(c) Content of notice–(1) Benefits
under original Medicare. (i) Covered services. (ii) Beneficiary cost
sharing, such as deductibles, coinsurance, and copayment amounts.
(iii) Any beneficiary liability for balance billing. (2) Enrollment
procedures. Information and instructions on how to exercise election
options under this subpart. (3) Rights. A general description of
procedural rights (including grievance and appeals procedures) under
original Medicare and the M+C program and the right to be protected
against discrimination based on factors related to health status in
accordance with Sec. 422.110. (4) Medigap and Medicare Select. A
general description of the benefits, enrollment rights, and
requirements applicable to Medicare supplemental policies under
section 1882 of the Act, and provisions relating to Medicare Select
policies under section 1882(t) of the Act. (5) Potential for contract
termination. The fact that an M+C organization may terminate or
refuse to renew its contract, or reduce the service area included in
its contract, and the effect that any of those actions may have on
individuals enrolled in that organization’s M+C plan. (6) Comparative
information. A list of M+C plans that are or will be available to
residents of the service area in the following calendar year, and,
for each available plan, information on the aspects described in
paragraphs (c)(7) through (c)(11) of this section, presented in a
manner that facilitates comparison among the plans. (7) Benefits. (i)
Covered services beyond those provided under original Medicare. (ii)
Any beneficiary cost sharing. (iii) Any maximum limitations on
out-of-pocket expenses. (iv) In the case of an M+C MSA plan, the
amount of the annual MSA deposit and the differences in cost-sharing,
enrollee premiums, and balance billing, as compared to M+C plans. (v)
In the case of a M+C private fee-for-service plan, differences in
cost-sharing, enrollee premiums, and balance billing, as compared to
M+C plans. (vi) The extent to which an enrollee may obtain benefits
through out-of-network health care providers. (vii) The types of
providers that participate in the plan’s network and the extent to
which an enrollee may select among those providers. (viii) The
coverage of emergency and urgently needed services. (8) Premiums. (i)
The M+C monthly basic beneficiary premiums. (ii) The M+C monthly
supplemental beneficiary premium. (9) The plan’s service area. (10)
Quality and performance indicators for benefits under a plan to
[[Page 35074]] the extent they are available as follows (and how they
compare with indicators under original Medicare): (i) Disenrollment
rates for Medicare enrollees for the 2 previous years, excluding
disenrollment due to death or moving outside the plan’s service area,
calculated according to HCFA guidelines. (ii) Medicare enrollee
satisfaction. (iii) Health outcomes. (iv) Plan-level appeal data. (v)
The recent record of plan compliance with the requirements of this
part, as determined by the Secretary. (vi) Other performance
indicators. (11) Supplemental benefits. Whether the plan offers
mandatory supplemental benefits or offers optional supplemental
benefits and the premiums and other terms and conditions for those
benefits.

(d) Format and updating. The
information is written and formatted using language that is easily
understandable, and is updated at least annually.

(e) Mailing. The mailing is
coordinated, to the extent practicable, with the mailing of the
annual notice of Medicare benefits under section 1804 of the
Act.

Sec. 422.66 Coordination of enrollment and disenrollment
through M+C organizations.

(a) Enrollment. An individual who
wishes to elect an M+C plan offered by an M+C organization may make
or change his or her election during the election periods specified
in Sec. 422.62 by filing the appropriate election form with the
organization or through other mechanisms as determined by HCFA.

(b) Disenrollment–(1) Basic rule. An
individual who wishes to disenroll from an M+C plan may change his or
her election during the election periods specified in Sec. 422.62 in
either of the following manners: (i) Elect a different M+C plan by
filing the appropriate election form with the M+C organization or
through other mechanisms as determined by HCFA. (ii) Submit a signed
and dated request for disenrollment to the M+C organization in the
form and manner prescribed by HCFA or file the appropriate
disenrollment form through other mechanisms as determined by HCFA.
(2) When a disenrollment request is considered to have been made. A
disenrollment request is considered to have been made on the date the
disenrollment request is received by the M+C organization. (3)
Responsibilities of the M+C organization. The M+C organization must–
(i) Submit a disenrollment notice to HCFA within 15 days of receipt;
(ii) Provide the enrollee with a copy of the request for
disenrollment; and (iii) In the case of a plan where lock-in applies,
also provide the enrollee with a statement explaining that he or
she– (A) Remains enrolled until the effective date of disenrollment;
and (B) Until that date, neither the M+C organization nor HCFA pays
for services not provided or arranged for by the M+C plan in which
the enrollee is enrolled; and (iv) File and retain disenrollment
requests for the period specified in HCFA instructions. (4) Effect of
failure to submit disenrollment notice to HCFA promptly. If the M+C
organization fails to submit the correct and complete notice required
in paragraph (b)(3)(i) of this section, the M+C organization must
reimburse HCFA for any capitation payments received after the month
in which payment would have ceased if the requirement had been met
timely. (5) Retroactive disenrollment. HCFA may grant retroactive
disenrollment in the following cases: (i) There never was a legally
valid enrollment. (ii) A valid request for disenrollment was properly
made but not processed or acted upon.

(c) Election by default: Initial
coverage election period. An individual who fails to make an election
during the initial coverage election period is deemed to have elected
original Medicare.

(d) Conversion of enrollment (seamless
continuation of coverage)— (1) Basic rule. An M+C plan
offered by an M+C organization must accept any individual (residing
in the service area or continuation area of the M+C plan) who is
enrolled in a health plan offered by an M+C organization (regardless
of whether the individual has end-stage renal disease) during the
month immediately preceding the month in which he or she is entitled
to both Part A and Part B as provided by Sec. 422.50(a)(2) and
(a)(3). (2) Reserved vacancies. Subject to HCFA’s approval, an M+C
organization may set aside a reasonable number of vacancies in order
to accommodate enrollment of conversions. Any set aside vacancies
that are not filled within a reasonable time must be made available
to other M+C eligible individuals. (3) Effective date of conversion.
Unless the individual chooses to disenroll from the health plan
offered by the M+C organization, the individual’s conversion to an
M+C enrollee is effective the month in which he or she is entitled to
both Part A and Part B. (4) Prohibition against disenrollment. The
M+C organization may disenroll an individual who is converting under
the provisions of paragraph (a) of this section only under the
conditions specified in Sec. 422.74. (5) Election form. The
individual who is converting must complete and sign an election form
as described in Sec. 422.60(c)(1). (6) Submittal of information to
HCFA. The M+C organization must transmit the information necessary
for HCFA to add the individual to its records as specified in Sec.
422.60(e)(6).

(e) Maintenance of enrollment. An
individual who has made or is deemed to have made an election under
this section is considered to have continued to have made that
election until either of the following, whichever occurs first: (1)
The individual changes the election under this section. (2) The
elected M+C plan is discontinued or no longer serves the service area
in which the individual resides, and the organization does not offer
or the individual does not elect the option of continuing enrollment,
as provided in Sec. 422.54.

422.68 Effective dates of coverage and change of coverage.

(a) Initial coverage election period.
An election made during an initial coverage election period as
described in Sec. 422.62(a)(1) is effective as of the first day of
the month of entitlement to both Part A and Part B.

(b) Annual election periods. For an
election or change of election made during an annual election period
as described in Sec. 422.62(a)(2), coverage is effective as of the
first day of the following calendar year.

(c) Open enrollment periods. For an
election or change of election made during an open enrollment period
as described in Sec. 422.62(a)(3) through (a)(5), coverage is
effective as of the first day of the first calendar month following
the month in which the election is made.

(d) Special election periods. For an
election or change of election made during a special election period
as described in Sec. 422.62(b), the effective date of coverage shall
be determined by HCFA, to the extent practicable, in a manner
consistent with protecting the continuity of health benefits
coverage.

(e) Special election period for individual
age 65. For an election of coverage under original Medicare
made during a special election period for an individual age 65 as
described in [[Page 35075]] Sec. 422.62(c), coverage is effective as
of the first day of the first calendar month following the month in
which the election is made.

Sec. 422.74 Disenrollment by the M+C organization.

(a) General rule. Except as provided
in paragraphs (b) through (d) of this section, an M+C organization
may not– (1) Disenroll an individual from any M+C plan it offers; or
(2) Orally or in writing, or by any action or inaction, request or
encourage an individual to disenroll.

(b) Basis for disenrollment--(1)
Optional disenrollment. An M+C organization may disenroll an
individual from an M+C plan it offers in any of the following
circumstances: (i) Any monthly basic and supplementary beneficiary
premiums are not paid on a timely basis, subject to the grace period
for late payment established under paragraph (d)(1) of this section.
(ii) The individual has engaged in disruptive behaviors specified at
paragraph (d)(2) of this section. (iii) The individual provides
fraudulent information on his or her election form or permits abuse
of his or her enrollment card as specified in paragraph (d)(3) of
this section. (2) Required disenrollment. An M+C organization must
disenroll an individual from an M+C plan it offers in any of the
following circumstances: (i) The individual no longer resides in the
M+C plan’s service area as specified in paragraph (d)(4) of this
section, and optional continued enrollment has not been offered or
elected pursuant to Sec. 422.54. (ii) The individual loses
entitlement to Part A or Part B benefits as described in paragraph
(d)(5) of this section. (iii) Death of the individual as described in
paragraph (d)(6) of this section. (3) Plan termination or reduction
of service area or continuation area. An M+C plan offered by an M+C
organization that terminates with respect to all M+C individuals in
the area where the individual resides or is terminated or reduces
service area or continuation area must comply with the process for
disenrollment set forth at paragraph (d)(7) of this section.

(c) Notice requirement. If the
disenrollment is for any of the reasons specified in paragraphs
(b)(1) through (b)(2)(i) and (b)(3) of this section, that is, other
than death or loss of entitlement to Part A or Part B, the M+C
organization must give the individual a written notice of the
disenrollment with an explanation of why the M+C organization is
planning to disenroll the individual. (1) The notice must be mailed
to the individual before submission of the disenrollment notice to
HCFA. (2) The notice must include an explanation of the individual’s
right to a hearing under the M+C organization’s grievance procedures.

(d) Process for disenrollment–(1)
Monthly basic and supplementary premiums are not paid timely. An M+C
organization may disenroll an individual from the M+C plan for
failure to pay any basic or supplementary premiums if the M+C
organization– (i) Makes a reasonable effort to collect unpaid
premium amounts by sending a written notice of nonpayment to the
enrollee within 20 days after the date that the delinquent charges
were due– (A) Alerting the individual that the premiums are
delinquent; (B) Providing the individual with an explanation of the
disenrollment procedures and any lock-in requirements of the M+C
plan; and (C) Advising that failure to pay the premiums within the
90-day grace period will result in termination of M+C coverage; (ii)
Only disenrolls a Medicare enrollee when the organization has not
received payment within 90 days after the date it has sent the notice
of nonpayment to the enrollee; and (iii) Gives the individual a
written notice of disenrollment that meets the requirements set forth
in paragraph (c) of this section. (2) Disenrollment for disruptive
behavior–(i) Basis for disenrollment. An M+C organization may
disenroll an individual from the M+C plan if the individual’s
behavior is disruptive, unruly, abusive, or uncooperative to the
extent that his or her continued enrollment in the plan seriously
impairs the M+C plan’s ability to furnish services to either the
particular individual or other individuals enrolled in the plan. (ii)
Effort to resolve the problem. The M+C organization must make a
serious effort to resolve the problems presented by the individual,
including the use (or attempted use) of the M+C organization’s
grievance procedures. The beneficiary has a right to submit any
information or explanation that he or she may wish to submit to the
M+C organization. (iii) Consideration of extenuating circumstances.
The M+C organization must establish that the individual’s behavior is
not related to the use of medical services or to diminished mental
capacity. (iv) Documentation. The M+C organization must document the
enrollee’s behavior, its own efforts to resolve any problems, and any
extenuating circumstances, as described in paragraphs (d)(2)(i)
through (d)(2)(iii) of this section. (v) HCFA review of the M+C
organization’s proposed disenrollment. (A) HCFA decides after
reviewing the documentation submitted by the M+C organization and any
information submitted by the beneficiary (which the M+C organization
must forward to HCFA) whether the M+C organization has met the
disenrollment requirements. (B) HCFA makes the decision within 20
working days after receipt of the documentation and notifies the M+C
organization within 5 working days after making its decision. (vi)
Effective date of disenrollment. If HCFA permits an M+C organization
to disenroll an individual for disruptive behavior, the termination
is effective the first day of the calendar month after the month in
which the M+C organization gives the individual written notice of the
disenrollment that meets the requirements set forth in paragraph (c)
of this section. (3) Individual commits fraud or permits abuse of
enrollment care. (i) Basis for disenrollment. An M+C organization may
disenroll the individual from an M+C plan if the individual– (A)
Knowingly provides, on the election form, fraudulent information that
materially affects the individual’s eligibility to enroll in the M+C
plan; or (B) Intentionally permits others to use his or her
enrollment card to obtain services under the M+C plan. (ii) Notice of
disenrollment. The M+C organization must give the individual a
written notice of the disenrollment that meets the requirements set
forth in paragraph (c) of this section. (iii) Report to HCFA. The M+C
organization must report to HCFA any disenrollment based on fraud or
abuse by the individual. (4) Individual no longer resides in the M+C
plan’s service area– (i) Basis for disenrollment. Unless
continuation of enrollment is elected under Sec. 422.54, the M+C
organization must disenroll an individual who moves out of a plan’s
service area if the M+C organization establishes, on the basis of a
written statement from the individual, or other evidence acceptable
to HCFA, that the individual has moved out of a plan’s service area
for over 12 months. (ii) Notice of disenrollment. The M+C
organization must give the individual a written notice of the
disenrollment that [[Page 35076]] meets the requirements set forth in
paragraph (c) of this section. (5) Loss of entitlement to Part A or
Part B benefits. If an individual is no longer entitled to Part A or
Part B benefits, HCFA notifies the M+C organization that the
disenrollment is effective the first day of the calendar month
following the last month of entitlement to Part A or Part B benefits.
(6) Death of the individual. If the individual dies, disenrollment is
effective the first day of the calendar month following the month of
death. (7) Plan termination or area reduction. (i) If the plan
terminates or is terminated or the service area or continuation area
are reduced with respect to all M+C enrollees in the area in which
they reside, the M+C organization must give each Medicare enrollee a
written notice of the effective date of the plan termination or area
reduction and a description of alternatives for obtaining benefits
under the M+C program. (ii) The notice must be sent before the
effective date of the plan termination or area reduction.

(e) Consequences of
disenrollment–(1) Disenrollment for non- payment of premiums,
disruptive behavior, fraud or abuse, loss of Part A or Part B. An
individual who is disenrolled under paragraph (b)(1)(i), (b)(1)(ii),
(b)(1)(iii), or paragraph (b)(2)(ii) of this section is deemed to
have elected original Medicare. (2) Disenrollment based on plan
termination, area reduction, or individual moves out of area. (i) An
individual who is disenrolled under paragraph (b)(2)(i) or (b)(3) of
this section has a special election period in which to make a new
election as provided in Sec. 422.62(b)(1) and (b)(2). (ii) An
individual who fails to make an election during the special election
period is deemed to have elected original Medicare.

Sec. 422.80 Approval of marketing materials and election
forms.

(a) HCFA review of marketing materials.
An M+C organization may not distribute any marketing materials
(as defined in paragraph (b)), or election forms, or make such
materials or forms available to individuals eligible to elect an M+C
plan, unless– (1) At least 45 days before the date of distribution
the M+C organization has submitted the material or form to HCFA for
review under the guidelines in paragraph (c); and (2) HCFA has not
disapproved the distribution of the material or form.

(b) Definition of marketing materials.
Marketing materials include any informational materials
targeted to Medicare beneficiaries which: (1) Promote the M+C
organization, or any M+C plan offered by the M+C organization; (2)
Inform Medicare beneficiaries that they may enroll, or remain
enrolled in, an M+C plan offered by the M+C organization; (3) Explain
the benefits of enrollment in an M+C plan, or rules that apply to
enrollees; (4) Explain how Medicare services are covered under an M+C
plan, including conditions that apply to such coverage; (5) Examples
of marketing materials include, but are not limited to: (i) General
audience materials such as general circulation brochures, newspapers,
magazines, television, radio, billboards, yellow pages, or the
internet. (ii) Marketing representative materials such as scripts or
outlines for telemarketing or other presentations. (iii) Presentation
materials such as slides and charts. (iv) Promotional materials such
as brochures or leaflets, including materials for circulation by
third parties (e.g., physicians or other providers). (v) Membership
communication materials such as membership rules, subscriber
agreements (evidence of coverage), member handbooks, and newsletters.
(vi) Letters to members about contractual changes; changes in
providers, premiums, benefits, plan procedures etc. (vii) Membership
or claims processing activities (e.g., materials on rules involving
non-payment of premiums, confirmation of enrollment or disenrollment,
or annual notification information).

(c) Guidelines for HCFA Review. In
reviewing marketing material or election forms under paragraph (a) of
this section, HCFA determines that the marketing materials: (1)
Provide, in a format (and, where appropriate, print size), and using
standard terminology that may be specified by HCFA, the following
information to Medicare beneficiaries interested in enrolling: (i)
Adequate written description of rules (including any limitations on
the providers from whom services can be obtained), procedures, basic
benefits and services, and fees and other charges. (ii) Adequate
written description of any supplemental benefits and services. (iii)
Adequate written explanation of the grievance and appeals process,
including differences between the two, and when it is appropriate to
use each. (iv) Any other information necessary to enable
beneficiaries to make an informed decision about enrollment. (2)
Notify the general public of its enrollment period (whether
time-limited or continuous) in an appropriate manner, through
appropriate media, throughout its service and continuation area. (3)
Include in the written materials notice that the organization is
authorized by law to refuse to renew its contract with HCFA, that
HCFA also may refuse to renew the contract, and that termination or
non-renewal may result in termination of the beneficiary’s enrollment
in the plan. (4) Contain no statements that are inaccurate or
misleading or otherwise make misrepresentations. (5) For markets with
a significant non-English speaking population, provide materials in
the language of these individuals.

(d) Deemed approval (one-stop shopping).
If HCFA has not disapproved the distribution of marketing
material or forms submitted by an M+C organization with respect to an
M+C plan in an area, HCFA is deemed not to have disapproved the
distribution in all other areas covered by the M+C plan and
organization except with regard to any portion of the material or
form that is specific to the particular area.

(e) Standards for M+C organization
marketing. (1) In conducting marketing activities, M+C
organizations may not: (i) Provide for cash or other monetary rebates
as an inducement for enrollment or otherwise. This does not prohibit
explanation of any legitimate benefits the beneficiary might obtain
as an enrollee of the M+C plan, such as eligibility to enroll in a
supplemental benefit plan that covers deductibles and coinsurance, or
preventive services. (ii) Engage in any discriminatory activity such
as, for example, attempts to recruit Medicare beneficiaries from
higher income areas without making comparable efforts to enroll
Medicare beneficiaries from lower income areas. (iii) Solicit
door-to-door for Medicare beneficiaries. (iv) Engage in activities
that could mislead or confuse Medicare beneficiaries, or misrepresent
the M+C organization, the M+C organization may not claim that it is
recommended or endorsed by HCFA or Medicare or that HCFA or Medicare
recommends that the beneficiary enroll in the M+C plan. It may,
however, explain that the organization is approved for participation
in Medicare. (v) Distribute marketing materials for which, before
expiration of the 45-day [[Page 35077]] period, the M+C organization
receives from HCFA written notice of disapproval because it is
inaccurate or misleading, or misrepresents the M+C organization, its
marketing representatives, or HCFA. (2) In its marketing, the M+C
organization must: (i) Demonstrate the HCFA’s satisfaction that
marketing resources are allocated to marketing to the disabled
Medicare population as well as beneficiaries age 65 and over. (ii)
Establish and maintain a system for confirming that enrolled
beneficiaries have in fact, enrolled in the M+C plan, and understand
the rules applicable under the plan.

(f) Employer group retiree Marketing.
HCFA may permit M+C organizations to develop marketing materials
designed for members of an employer group who are eligible for
employer-sponsored benefits through the M+C organization, and to
furnish these materials only to such group members. While such
materials must be submitted for approval under paragraph (a) of this
section, HCFA will only review potions of these materials that
related to M+C plan benefits.

---

Subpart C–Benefits and Beneficiary Protections

Sec. 422.100 General requirements.

(a) Basic rule. Subject to the
conditions and limitations set forth in this subpart, an M+C
organization offering an M+C plan must provide enrollees in that plan
with coverage of the basic benefits described in Sec. 422.101 (and,
to the extent applicable, the benefits described in Sec. 422.102) by
furnishing the benefits directly or through arrangements, or by
paying for the benefits. HCFA reviews these benefits subject to the
requirements of Sec. 422.100(g) and the requirements in subpart G of
this part.

(b) Services of noncontracting providers and
suppliers. (1) An M+C organization must make timely and
reasonable payment to or on behalf of the plan enrollee for the
following services obtained from a provider or supplier that does not
contract with the M+C organization to provide services covered by the
M+C plan: (i) Emergency services as defined in Sec. 422.2. (ii)
Urgently needed services as defined Sec. 422.2. (iii) Renal dialysis
services provided while the enrollee was temporarily outside the
plan’s service area. (iv) Post-stabilization care services that
were– (A) Pre-approved by the organization; or (B) Were not
pre-approved by the organization because the organization did not
respond to the provider of post-stabilization care services’ request
for pre-approval within 1 hour after being requested to approve such
care, or could not be contacted for pre-approval. (v) Services for
which coverage has been denied by the M+C organization and found
(upon appeal under subpart M of this part) to be services the
enrollee was entitled to have furnished, or paid for, by the M+C
organization. (2) An M+C plan (other than an M+C MSA plan) offered by
an M+C organization satisfies paragraph (a) of this section with
respect to benefits for services furnished by a noncontracting
provider if that M+C plan provides payment in an amount the provider
would have received under original Medicare (including balance
billing permitted under Medicare Part A and Part B).

(c) Types of benefits. An M+C plan
may include two types of benefits: (1) Basic benefits as defined in
Sec. 422.2. (2) Supplemental benefits, which consist of– (i)
Mandatory supplemental benefits as defined in Sec. 422.2; and (ii)
Optional supplemental benefits as defined in Sec. 422.2.

(d) Availability and structure of plans.
An M+C organization offering an M+C plan must offer it– (1)
To all Medicare beneficiaries residing in the service area of the M+C
plan; (2) At a uniform premium; and (3) With a uniform level of
cost-sharing, as defined in Sec. 422.2.

(e) Terms of M+C plans. Terms of M+C
plans described in instructions to beneficiaries, as required by Sec.
422.111, will include basic and supplemental benefits and terms of
coverage for those benefits.

(f) Multiple plans in one service area.
An M+C organization may offer more than one M+C plan in the
same service area subject to the conditions and limitations set forth
in this subpart for each M+C plan.

(g) HCFA review and approval of M+C plans.
HCFA reviews and approves each M+C plan to ensure that the
plan does not– (1) Promote discrimination; (2) Discourage
enrollment; (3) Steer specific subsets of Medicare beneficiaries to
particular M+C plans; or (4) Inhibit access to services.

(h) Benefits affecting screening
mammography, influenza vaccine, and pneumococcal vaccine. (1)
Enrollees of M+C organizations may directly access (through
self-referral) screening mammography and influenza vaccine. (2) M+C
organizations may not impose cost-sharing for influenza vaccine and
pneumococcal vaccine. (i) Requirements relating to Medicare
conditions of participation. Basic benefits must be provided through
providers meeting the requirements in Sec. 422.204(a)(3).

(j) Choice of practitioners.
Consistent with the requirements of Sec. 422.204 relating to the
prohibition of discrimination against providers, if more than one
type of practitioner is qualified to furnish a particular service,
the M+C organization may select the type of practitioner to be
used.

Sec. 422.101 Requirements relating to basic benefits.

Except as specified in Sec. 422.264 (for entitlement that begins
or ends during a hospital stay) and Sec. 422.266 (with respect to
hospice care), each M+C organization must–

(a) Provide coverage of, through the provision of or payment for,
all services that are covered by Part A and Part B of Medicare (if
the enrollee is entitled to benefits under both parts) or by Medicare
Part B (if entitled only under Part B) and that are available to
beneficiaries residing in the geographic area in which services are
covered under the M+C plan (or to Part A and Part B services obtained
outside the geographic area if it is common practice to refer
patients to sources outside that geographic area); and

(b) Comply with– (1) HCFA’s national coverage decisions; and (2)
Written coverage decisions of local carriers and intermediaries with
jurisdiction for claims in the geographic area in which services are
covered under the M+C plan.

Sec. 422.102 Supplemental benefits.

(a) Mandatory supplemental benefits.
(1) Subject to HCFA’s approval, an M+C organization may require
Medicare enrollees of an M+C plan other than an MSA plan to accept
and pay for services in addition to those included in the basic
benefits described in Sec. 422.101. (2) If the M+C organization
imposes mandatory supplemental benefits, it must impose them on all
Medicare beneficiaries enrolled in the M+C plan. (3) HCFA approves
mandatory supplemental benefits if it determines that imposition of
the mandatory benefits will not substantially discourage Medicare
beneficiaries from enrolling in the M+C plan.

(b) Optional supplemental benefits.
Except as provided in Sec. 422.104 in the [[Page 35078]] case
of MSA plans, each M+C organization may offer (for election by the
enrollee and without regard to health status) services that are in
addition to those included in the basic benefits described in Sec.
422.101 and any mandatory supplemental benefits described in
paragraph (a) of this section. Optional supplemental benefits must be
offered to all Medicare beneficiaries enrolled in the M+C plan.

(c) Payment for supplemental services.
All supplemental benefits are paid for directly by (or on
behalf of) the enrollee of the M+C plan.

Sec. 422.103 Benefits under an M+C MSA plan.

(a) General rule. An M+C organization
offering an M+C MSA plan must make available to an enrollee, or
provide reimbursement for, at least the services described under in
Sec. 422.101 after the enrollee incurs countable expenses equal to
the amount of the plan’s annual deductible.

(b) Countable expenses. An M+C
organization offering an M+C MSA plan must count toward the annual
deductible at least all amounts that would be paid for the particular
service under original Medicare, including amounts that would be paid
by the enrollee as deductibles or coinsurance.

(c) Services after the deductible.
For services received by the enrollee after the annual
deductible is satisfied, an M+C organization offering an M+C MSA plan
must pay, at a minimum, the lesser of the following amounts: (1) 100
percent of the expense of the services. (2) 100 percent of the
amounts that would have been paid for the services under original
Medicare, including amounts that would be paid by the enrollee as
deductibles and coinsurance.

(d) Annual deductible. The annual
deductible for an M+C MSA plan– (1) For contract year 1999, may not
exceed $6,000; and (2) For subsequent contract years may not exceed
the deductible for the preceding contract year, increased by the
national per capita growth percentage determined under Sec.
422.252(b).

Sec. 422.104 Special rules on supplemental benefits for M+C MSA
plans.

(a) An M+C organization offering an M+C MSA plan may not provide
supplemental benefits that cover expenses that count towards the
deductible specified in Sec. 422.103(d).

(b) In applying the limitation of paragraph (a) of this section,
the following kinds of policies are not considered as covering the
deductible: (1) A policy that provides coverage (whether through
insurance or otherwise) for accidents, disability, dental care,
vision care, or long-term care. (2) A policy of insurance in which
substantially all of the coverage relates to liabilities incurred
under workers’ compensation laws, tort liabilities, liabilities
relating to use or ownership of property, and any other similar
liabilities that HCFA may specify by regulation. (3) A policy of
insurance that provides coverage for a specified disease or illness
or pays a fixed amount per day (or other period) of
hospitalization.

Sec. 422.105 Special rules for point of service option.

(a) A POS benefit is an option that an M+C
organization may offer in an M+C coordinated care plan or
network M+C MSA plan to provide enrollees with additional choice in
obtaining specified health care services from individuals or entities
that do not have a contract with the M+C organization to provide
service through the M+C coordinated care plan or network M+C MSA plan
offering the POS option. The plan may offer a POS option– (1) Under
a coordinated care plan only as an additional benefit as described in
Sec. 422.312; (2) Under a coordinated care plan only as a mandatory
supplemental benefit as described in Sec. 422.102(a); or (3) Under a
coordinated care plan or network MSA plan as an optional supplemental
benefit as described in Sec. 422.102(b).

(b) Approval required. An M+C
organization may not implement a POS benefit until it has been
approved by HCFA.

(c) Ensuring availability and continuity of
care. An M+C network plan that includes a POS benefit must
continue to provide all benefits and ensure access as required under
this subpart.

(d) Enrollee information and disclosure.
The disclosure requirements specified in Sec. 422.111 apply in
addition to the following requirements: (1) Written rules. M+C
organizations must maintain written rules on how to obtain health
benefits through the POS benefit. (2) Evidence of coverage document.
The M+C organization must provide to beneficiaries enrolling in a
plan with a POS benefit an “evidence of coverage” document, or
otherwise provide written documentation, that specifies all costs and
possible financial risks to the enrollee, including– (i) Any
premiums and cost-sharing for which the enrollee is responsible; (ii)
Annual limits on benefits and on out-of-pocket expenditures; (iii)
Potential financial responsibility for services for which the plan
denies payment because they were not covered under the POS benefit,
or exceeded the dollar limit for the benefit; and (iv) The annual
maximum out-of-pocket expense an enrollee could incur.

(e) Prompt payment. Health benefits payable under the POS benefit
are subject to the prompt payment requirements in Sec. 422.520.

(f) POS Related Data. An M+C
organization that offers a POS benefit must report data on the POS
benefit in the form and manner prescribed by HCFA.

Sec. 422.106 Special arrangements with employer groups.

An M+C organization may negotiate with an employer group to
provide benefits to members of the employer group who are enrolled in
an M+C plan offered by the organization. While these negotiated
employer group benefits may be designed to complement the benefits
available to Medicare beneficiaries enrolled in the M+C plan, they
are offered by the employer group independently as the product of
private negotiation. Examples of such employer-benefits include the
following:

(a) Reductions in the portion of the premium that the M+C
organization charges to the beneficiary.

(b) Reductions in portion of other cost sharing amounts the M+C
organization charges to the beneficiary.

(c) The addition of benefits that may require additional premium
and cost sharing. The addition of benefits and the charges for those
benefits are not subject to HCFA review or
approval.

Sec. 422.108 Medicare secondary payer (MSP) procedures.

(a) Basic rule. HCFA does not pay for
services to the extent that Medicare is not the primary payer under
section 1862(b) of the Act and part 411 of this chapter.

(b) Responsibilities of the M+C
organization. The M+C organization must, for each M+C plan–
(1) Identify payers that are primary to Medicare under section
1862(b) of the Act and part 411 of this chapter; (2) Determine the
amounts payable by those payers; and (3) Coordinate its benefits to
Medicare enrollees with the benefits of the primary payers.

(c) Charges to other entities. The
M+C organization may charge, or authorize a provider to charge, other
individuals or entities for covered Medicare services [[Page 35079]]
for which Medicare is not the primary payer, as specified in
paragraphs (d) and (e) of this section.

(d) Charge to other insurers or the
enrollee. If a Medicare enrollee receives from an M+C
organization covered services that are also covered under State or
Federal workers’ compensation, any no-fault insurance, or any
liability insurance policy or plan, including a self- insured plan,
the M+C organization may charge, or authorize a provider to charge
any of the following– (1) The insurance carrier, the employer, or
any other entity that is liable for payment for the services under
section 1862(b) of the Act and part 411 of this chapter. (2) The
Medicare enrollee, to the extent that he or she has been paid by the
carrier, employer, or entity for covered medical expenses.

(e) Charge to group health plans (GHPs) and
large group health plans (LGHPs). An M+C organization may
charge a GHP or LGHP for services it furnishes to a Medicare enrollee
who is also covered under the GHP or LGHP and may charge the Medicare
enrollee to the extent that he or she has been paid by the GHP or
LGHP.

Sec. 422.109 Effect of national coverage determinations
(NCDs).

(a) If HCFA determines and announces that an
NCD meets the criteria for “significant cost” described in
paragraph (c) of this section, an M+C organization is not required to
assume risk for the costs of that service until the contract year for
which the annual M+C capitation rate is determined on a basis that
includes the cost of the NCD service.

(b) The M+C organization must furnish,
arrange or pay for an NCD “significant cost” service prior to
the adjustment of the annual M+C capitation rate. The following rules
apply to such services: (1) Medicare payment for the service is: (i)
In addition to the capitation payment to the M+C organization; and
(ii) Made directly by the fiscal intermediary and carrier to the M+C
organization in accordance with original Medicare payment rules,
methods, and requirements. (2) NCD costs for which HCFA
intermediaries and carriers will not make payment and are the
responsibility of the M+C organization are– (i) Services necessary
to diagnose a condition covered by the NCD; (ii) Most services
furnished as follow-up care to the NCD service; (iii) Any service
that is already a Medicare-covered service and included in the annual
M+C capitation rate; and (iv) Any service, including the costs of the
NCD service itself, to the extent the M+C organization is already
obligated to cover it as an additional benefit under Sec. 422.312 or
supplemental benefit under Sec. 422.102. (3) NCD costs for which HCFA
intermediaries and carriers make payment are– (i) Costs relating
directly to the provision of services related to the NCD that were
noncovered services prior to the issuance of the NCD; and (ii) A
service that is not included in the M+C per capita payment rate. (4)
If the M+C organization does not provide or arrange for the service
consistent with HCFA’s NCD, enrollees may obtain the services through
qualified providers not under contract to the M+C organization, and
the organization will pay for the services consistent with Sec.
422.109(c). (5) Beneficiaries are liable for Part A deductible and
any applicable coinsurance amounts.

(c) The term “significant cost” as it
relates to a particular NCD means either of the following: (1) The
average cost of furnishing a single service exceeds a cost threshold
that– (i) For calendar years 1998 and 1999, is $100,000; (ii) For
calendar year 2000 and subsequent calendar years, is the preceding
year’s dollar threshold adjusted to reflect the national per capita
growth percentage described in Sec. 422.254(b). (2) The estimated
cost of all of Medicare services furnished nationwide as a result of
a particular NCD represents at least 0.1 percent of the national
standardized annual capitation rate (see Sec. 422.254(f)), multiplied
by the total number of Medicare beneficiaries nationwide for the
applicable calendar year.

Sec. 422.110 Discrimination against beneficiaries
prohibited.

(a) General prohibition. Except as
provided in paragraph (b) of this section, an M+C organization may
not deny, limit, or condition the coverage or furnishing of benefits
to individuals eligible to enroll in an M+C plan offered by the
organization on the basis of any factor that is related to health
status, including, but not limited to the following: (1) Medical
condition, including mental as well as physical illness. (2) Claims
experience. (3) Receipt of health care. (4) Medical history. (5)
Genetic information. (6) Evidence of insurability, including
conditions arising out of acts of domestic violence. (7) Disability.

(b) Exception. An M+C organization
may not enroll an individual who has been medically determined to
have end-stage renal disease. However, an enrollee who develops
end-stage renal disease while enrolled in a particular M+C
organization may not be disenrolled for that reason. An individual
who is an enrollee of a particular M+C organization, and resides in
the M+C plan service area at the time he or she first becomes M+C
eligible, is considered to be “enrolled” in the M+C organization for
purposes of the preceding sentence.

(c) Plans are required to observe the
provisions of the Civil Rights Act, Age Discrimination Act, and
Americans with Disabilities Act (see Sec.
422.501(h)).

Sec. 422.111 Disclosure requirements.

(a) Detailed description of plan provisions.
An M+C organization must disclose the information specified in
Sec. 422.64 and in paragraph (b) of this section– (1) To each
enrollee electing an M+C plan it offers; (2) In clear, accurate, and
standardized form; and (3) At the time of enrollment and at least
annually thereafter.

(b) Content of plan description. The
description must include the following information: (1) Service area.
The M+C plan’s service area and any enrollment continuation area. (2)
Benefits. The benefits offered under the plan, including applicable
conditions and limitations, premiums and cost-sharing (such as
copayments, deductibles, and coinsurance) and any other conditions
associated with receipt or use of benefits; and for purposes of
comparison– (i) The benefits offered under original Medicare,
including the content specified in Sec. 422.64(c); (ii) For an M+C
MSA plan, the benefits under other types of M+C plans; and (iii) The
availability of the Medicare hospice option and any approved hospices
in the service area, including those the M+C organization owns,
controls, or has a financial interest in. (3) Access. The number,
mix, and distribution (addresses) of providers from whom enrollees
may obtain services; any out-of network coverage; any
point-of-service option, including the supplemental premium for that
[[Page 35080]] option; and how the M+C organization meets the
requirements of Secs. 422.112 and 422.114 for access to services
offered under the plan. (4) Out-of-area coverage. Out-of-area
coverage provided by the plan. (5) Emergency coverage. Coverage of
emergency services, including– (i) Explanation of what constitutes
an emergency, referencing the definitions of emergency services and
emergency medical condition at Sec. 422.2; (ii) The appropriate use
of emergency services, stating that prior authorization cannot be
required; (iii) The process and procedures for obtaining emergency
services, including use of the 911 telephone system or its local
equivalent; and (iv) The locations where emergency care can be
obtained and other locations at which contracting physicians and
hospitals provide emergency services and post-stabilization care
included in the M+C plan. (6) Supplemental benefits. Any mandatory or
optional supplemental benefits and the premium for those benefits.
(7) Prior authorization and review rules. Prior authorization rules
and other review requirements that must be met in order to ensure
payment for the services. The M+C organization must instruct
enrollees that, in cases where noncontracting providers submit a bill
directly to the enrollee, the enrollee should not pay the bill, but
submit it to the M+C organization for processing and determination of
enrollee liability, if any. (8) Grievance and appeals procedures. All
grievance and appeals rights and procedures. (9) Quality assurance
program. A description of the quality assurance program required
under Sec. 422.152. (10) Disenrollment rights and responsibilities.

(c) Disclosure upon request. Upon
request of an individual eligible to elect an M+C plan, an M+C
organization must provide to the individual the following
information: (1) The information required under Sec. 422.64(c). (2)
The procedures the organization uses to control utilization of
services and expenditures. (3) The number of disputes, and the
disposition in the aggregate, in a manner and form described by the
Secretary. Such disputes shall be categorized as (i) Grievances
according to Sec. 422.564; and (ii) Appeals according to Sec. 422.578
et. seq. (4) A summary description of the method of compensation for
physicians. (5) Financial condition of the M+C organization,
including the most recently audited information regarding, at least,
a description of the financial condition of the M+C organization
offering the plan.

(d) Changes in rules. If an M+C
organization intends to change its rules for an M+C plan, it must–
(1) Submit the changes for HCFA review under the procedures of Sec.
422.80; and (2) Give notice to all enrollees 30 days before the
intended effective date of the changes.

(e) Changes to provider network. The
M+C organization must make a good faith effort to provide written
notice of a termination of a contracted provider within 15 working
days of receipt or issuance of a notice of termination, as described
in Sec. 422.204(c)(4), to all enrollees who are patients seen on a
regular basis by the provider whose contract is terminating,
irrespective of whether the termination was for cause or without
cause. When a contract termination involves a primary care
professional, all enrollees who are patients of that primary care
professional must also be notified.

Sec. 422.112 Access to services.

(a) Rules for coordinated care plans and
network M+C MSA plans. An M+C organization that offers an M+C
coordinated care plan or network M+C MSA plan may specify the
networks of providers from whom enrollees may obtain services if the
following conditions are met: (1) The M+C organization ensures that
all covered services, including additional or supplemental services
contracted for by (or on behalf of) the Medicare enrollee, are
available and accessible under the plan. To do this, the M+C
organization must do the following: (i) Maintain and monitor a
network of appropriate providers that is supported by written
agreements and is sufficient to provide adequate access to covered
services to meet the needs of the population served. These providers
are typically utilized in the network as primary care providers
(PCPs), specialists, hospitals, skilled nursing facilities, home
health agencies, ambulatory clinics, and other providers. (ii) Select
the panel of PCPs from which the enrollee selects a PCP. (iii)
Provide or arrange for necessary specialty care, and in particular–
(A) Women enrollees may choose direct access to a women’s health
specialist within the network for women’s routine and preventive
health care services provided as basic benefits (as defined in Sec.
422.2) while the plan maintains a PCP or some other means for
continuity of care; and (B) Plans must have procedures approved by
HCFA for– (1) Identification of individuals with complex or serious
medical conditions; (2) Assessment of those conditions, including
medical procedures to diagnose and monitor them on an ongoing basis;
and (3) Establishment and implementation of a treatment plan
appropriate to those conditions, with an adequate number of direct
access visits to specialists to accommodate the treatment plan.
Treatment plans must be time-specific and updated periodically by the
PCP. (2) In the case of involuntary termination of an M+C plan or
specialist(s) for a reason other than for cause, the M+C organization
must do the following: (i) Inform beneficiaries, at the time of
termination, of their right to maintain access to specialists. (ii)
Provide the names of other M+C plans in the area that contract with
specialists of the beneficiary’s choice, as well as an explanation of
the process the beneficiary would need to follow should he or she
decide to return to original Medicare. (iii) If seeking a service
area expansion for an M+C plan, demonstrate that the number and type
of providers available to plan enrollees are sufficient to meet
projected needs of the population to be served. (iv) Demonstrate to
HCFA that its providers in an M+C plan are credentialed through the
process set forth at Sec. 422.204(a). (v) Establish written standards
for– (A) Timeliness of access to care and member services that meet
or exceed standards established by HCFA. Timely access to care and
member services within a plan’s provider network must be continuously
monitored to ensure compliance with these standards, and the M+C
organization must take corrective action as necessary; (B) Policies
and procedures (coverage rules, practice guidelines, payment
policies, and utilization management) that allow for individual
medical necessity determinations; and (C) Provider consideration of
beneficiary input into the provider’s proposed treatment plan. (vi)
Ensure that the hours of operation of its M+C plan providers are
convenient to the population served by the plan and do not
discriminate against Medicare enrollees. (vii) Ensure services are
provided in a culturally competent manner to all enrollees, including
those with limited [[Page 35081]] English proficiency or reading
skills, diverse cultural and ethnic backgrounds, and physical or
mental disabilities. (viii) Make plan services available 24 hours a
day, 7 days a week, when medically necessary. (ix) Provide coverage
for emergency and urgent care services in accordance with paragraph
(b) of this section. (3) The M+C organization must ensure continuity
of care and integration of services through arrangements that
include, but are not limited to– (i) Use of a practitioner who is
specifically designated as having primary responsibility for
coordinating the enrollee’s overall health care; (ii) Policies that
specify whether services are coordinated by the enrollee’s primary
care practitioner or through some other means; (iii) An ongoing
source of primary care, regardless of the mechanism adopted for
coordination of services; (iv) Programs for coordination of care that
coordinate services with community and social services generally
available through contracting or noncontracting providers in the area
served by the M+C plan, including nursing home and community-based
services; (v) Procedures to ensure that the M+C organization and its
provider network have the information required for effective and
continuous patient care and quality review, including procedures to
ensure that– (A) An initial assessment of each enrollee’s health
care needs is completed within 90 days of the effective date of
enrollment. (B) Each provider, supplier, and practitioner furnishing
services to enrollees maintains an enrollee health record in
accordance with standards established by the M+C organization, taking
into account professional standards; and (C) Appropriate and
confidential exchange of information among provider network
components; (vi) Procedures to ensure that enrollees are informed of
specific health care needs that require follow-up and receive, as
appropriate, training in self-care and other measures they may take
to promote their own health; and (vii) Systems to address barriers to
enrollee compliance with prescribed treatments or regimens.

(b) Special rules for all M+C organizations
for emergency and urgently needed services. (1) The M+C
organization covers emergency and urgently needed services– (i)
Regardless of whether the services are obtained within or outside the
organization; and (ii) Without required prior authorization. (2) The
M+C organization may not deny payment for a condition that– (i) Is
an emergency medical condition as defined in Sec. 422.2; or (ii) A
plan provider or other M+C organization representative instructs an
enrollee to seek emergency services within or outside the plan. (3)
The physician treating the enrollee must decide when the enrollee may
be considered stabilized for transfer or discharge, and that decision
is binding on the M+C organization. (4) For emergency services
obtained outside the M+C plan’s provider network, the organization
may not charge the enrollee more than $50 or what it would charge the
enrollee if he or she obtained the services through the organization,
whichever is less.

Sec. 422.114 Access to services under an M+C private
fee-for-service plan.

(a) Sufficient access. (1) An M+C
organization that offers an M+C private fee-for-service plan must
demonstrate to HCFA that it has sufficient number and range of
providers willing to furnish services under the plan. (2) HCFA finds
that an M+C organization meets the requirement in paragraph (a)(1) of
this section if, with respect to a particular category of health care
providers, the M+C organization has– (i) Payment rates that are not
less than the rates that apply under original Medicare for the
provider in question; (ii) Contracts or agreements with a sufficient
number and range of providers to furnish the services covered under
the M+C private fee- for-service plan; or (iii) A combination of
paragraphs (a)(2)(i) and (a)(2)(ii) of this section.

(b) Freedom of choice. M+C
fee-for-service plans must permit enrollees to obtain services from
any entity that is authorized to provide services under Medicare Part
A and Part B and agrees to provide services under the terms of the
plan.

Sec. 422.118 Confidentiality and accuracy of enrollee
records.

For any medical records or other health and enrollment information
it maintains with respect to enrollees, an M+C organization must
establish procedures to do the following:

(a) Safeguard the privacy of any information
that identifies a particular enrollee. Information from, or
copies of, records may be released only to authorized individuals,
and the M+C organization must ensure that unauthorized individuals
cannot gain access to or alter patient records. Original medical
records must be released only in accordance with Federal or State
laws, court orders, or subpoenas.

(b) Maintain the records and
information in an accurate and timely manner.

(c) Ensure timely access by enrollees
to the records and information that pertain to them.

(d) Abide by all Federal and State
laws regarding confidentiality and disclosure for mental
health records, medical records, other health information, and
enrollee information.

Sec. 422.128 Information on advance directives.

(a) Each M+C organization must maintain
written policies and procedures that meet the requirements for
advance directives, as set forth in subpart I of part 489 of
this chapter. For purposes of this part, advance directive has the
meaning given the term in Sec. 489.100 of this chapter.

(b) An M+C organization must maintain
written policies and procedures concerning advance directives
with respect to all adult individuals receiving medical care by or
through the M+C organization. (1) An M+C organization must provide
written information to those individuals with respect to the
following: (i) Their rights under the law of the State in which the
organization furnishes services (whether statutory or recognized by
the courts of the State) to make decisions concerning their medical
care, including the right to accept or refuse medical or surgical
treatment and the right to formulate advance directives. Providers
may contract with other entities to furnish this information but
remain legally responsible for ensuring that the requirements of this
section are met. The information must reflect changes in State law as
soon as possible, but no later than 90 days after the effective date
of the State law. (ii) The M+C organization’s written policies
respecting the implementation of those rights, including a clear and
precise statement of limitation if the M+C organization cannot
implement an advance directive as a matter of conscience. At a
minimum, this statement must do the following: (A) Clarify any
differences between institution-wide conscientious objections and
those that may be raised by individual physicians. [[Page 35082]] (B)
Identify the state legal authority permitting such objection. (C)
Describe the range of medical conditions or procedures affected by
the conscience objection. (D) Provide the information specified in
paragraph (a)(1) of this section to each enrollee at the time of
initial enrollment. If an enrollee is incapacitated at the time of
initial enrollment and is unable to receive information (due to the
incapacitating condition or a mental disorder) or articulate whether
or not he or she has executed an advance directive, the M+C
organization may give advance directive information to the enrollee’s
family or surrogate in the same manner that it issues other materials
about policies and procedures to the family of the incapacitated
enrollee or to a surrogate or other concerned persons in accordance
with State law. The M+C organization is not relieved of its
obligation to provide this information to the enrollee once he or she
is no longer incapacitated or unable to receive such information.
Follow-up procedures must be in place to ensure that the information
is given to the individual directly at the appropriate time. (E)
Document in a prominent part of the individual’s current medical
record whether or not the individual has executed an advance
directive. (F) Not condition the provision of care or otherwise
discriminate against an individual based on whether or not the
individual has executed an advance directive. (G) Ensure compliance
with requirements of State law (whether statutory or recognized by
the courts of the State) regarding advance directives. (H) Provide
for education of staff concerning its policies and procedures on
advance directives. (I) Provide for community education regarding
advance directives that may include material required in paragraph
(a)(1)(i) of this section, either directly or in concert with other
providers or entities. Separate community education materials may be
developed and used, at the discretion of the M+C organization. The
same written materials are not required for all settings, but the
material should define what constitutes an advance directive,
emphasizing that an advance directive is designed to enhance an
incapacitated individual’s control over medical treatment, and
describe applicable State law concerning advance directives. An M+C
organization must be able to document its community education
efforts. (2) The M+C organization– (i) Is not required to provide
care that conflicts with an advance directive; and (ii) Is not
required to implement an advance directive if, as a matter of
conscience, the M+C organization cannot implement an advance
directive and State law allows any health care provider or any agent
of the provider to conscientiously object. (3) The M+C organization
must inform individuals that complaints concerning noncompliance with
the advance directive requirements may be filed with the State survey
and certification agency.

Sec. 422.132 Protection against liability and loss of
benefits.

Enrollees of M+C organizations are entitled to the protections
specified in Sec. 422.502(g).

---

Subpart D–Quality Assurance

Sec. 422.152 Quality assessment and performance improvement
program.

(a) General rule. Each M+C
organization that offers one or more M+C plans must have, for each of
those plans, an ongoing quality assessment and performance
improvement program that meets the applicable requirements of this
section for the services it furnishes to its M+C enrollees.

(b) Requirements for M+C coordinated care
plans and network M+C MSA plans. An organization offering an
M+C coordinated care plan or M+C network MSA plan must do the
following: (1) Meet the requirements in paragraph (c)(1) of this
section concerning performance measurement and reporting. With
respect to an M+C coordinated care plan, an organization must also
meet the requirements of paragraph (c)(2) of this section concerning
the achievement of minimum performance levels. The requirements of
paragraph (c)(2) of this section do not apply with respect to an M+C
MSA plan. (2) Conduct performance improvement projects as described
in paragraph (d) of this section. These projects must achieve,
through ongoing measurement and intervention, demonstrable and
sustained improvement in significant aspects of clinical care and
nonclinical care areas that can be expected to have a favorable
effect on health outcomes and enrollee satisfaction. (3) In
processing requests for initial or continued authorization of
services, follow written policies and procedures that reflect current
standards of medical practice. (4) Have in effect mechanisms to
detect both underutilization and overutilization of services. (5)
Make available to HCFA information on quality and outcomes measures
that will enable beneficiaries to compare health coverage options and
select among them, as provided in Sec. 422.64(c)(10).

(c) Performance measurement and reporting.
The organization offering the plan must do the following: (1)
Measure performance under the plan, using standard measures required
by HCFA, and report its performance to HCFA. The standard measures
may be specified in uniform data collection and reporting instruments
required by HCFA, and will relate to– (i) Clinical areas including
effectiveness of care, enrollee perception of care, and use of
services; and (ii) Nonclinical areas including access to and
availability of services, appeals and grievances, and organizational
characteristics. (2) Achieve any minimum performance levels that HCFA
establishes locally, regionally, or nationally with respect to the
standard measures. (i) In establishing minimum performance levels,
HCFA considers historical plan and original Medicare performance data
and trends. (ii) HCFA establishes the minimum performance levels
prospectively upon contract initiation and renewal. (iii) The
organization must meet the minimum performance levels by the end of
the contract year. (iv) In accordance with Sec. 422.506, HCFA may
decline to renew the organization’s contract in the year that HCFA
determines that it did not meet the minimum performance levels.

(d) Performance improvement projects.
(1) Performance improvement projects are organization initiatives
that focus on specified clinical and nonclinical areas and that
involve the following: (i) Measurement of performance. (ii) System
interventions, including the establishment or alteration of practice
guidelines. (iii) Improving performance. (iv) Systematic follow-up on
the effect of the interventions. (2) Each project must address the
entire population to which the measurement specified in paragraph
(d)(1)(i) of this section is relevant. (3) HCFA establishes M+C
organization and M+C plan-specific obligations for the number and
distribution of projects among the required clinical and nonclinical
areas, in accordance with paragraphs (d)(4) and (d)(5) of this
section, to ensure that the projects are representative of the entire
spectrum of clinical and nonclinical care areas associated with a
plan. [[Page 35083]] (4) The required clinical areas include: (i)
Prevention and care of acute and chronic conditions. (ii) High-volume
services. (iii) High-risk services. (iv) Continuity and coordination
of care. (5) The required nonclinical areas include: (i) Appeals,
grievances, and other complaints. (ii) Access to, and availability
of, services. (6) In addition to requiring that the organization
initiate its own performance improvement projects, HCFA may require
that the organization– (i) Conduct particular performance
improvement projects that are specific to the organization; and (ii)
Participate in national or statewide performance improvement
projects. (7) For each project, the organization must assess
performance under the plan using quality indicators that are– (i)
Objective, clearly and unambiguously defined, and based on current
clinical knowledge or health services research; and (ii) Capable of
measuring outcomes such as changes in health status, functional
status and enrollee satisfaction, or valid proxies of those outcomes.
(8) Performance assessment on the selected indicators must be based
on systematic ongoing collection and analysis of valid and reliable
data. (9) Interventions must achieve improvement that is significant
and sustained over time. (10) The organization must report the status
and results of each project to HCFA as requested.

(e) Requirements for non-network M+C MSA
plans and M+C private fee- for-service plans. An organization
offering an M+C non-network MSA plan or an M+C private
fee-for-service plan must do the following: (1) Measure performance
under the plan using standard measures required by HCFA and report
its performance to HCFA. The standard measures may be specified in
uniform data collection and reporting instruments required by HCFA
and will relate to– (i) Prevention and care of acute and chronic
conditions; (ii) High-volume services; (iii) High-risk services; and
(iv) Enrollee satisfaction. (2) Evaluate the continuity and
coordination of care furnished to enrollees. (3) If the organization
uses written protocols for utilization review, the organization
must– (i) Base those protocols on current standards of medical
practice; and (ii) Have mechanisms to evaluate utilization of
services and to inform enrollees and providers of services of the
results of the evaluation.

(f) Requirements for all types of
plans— (1) Health information. For all types of plans that it
offers, an organization must– (i) Maintain a health information
system that collects, analyzes, and integrates the data necessary to
implement its quality assessment and performance improvement program;
(ii) Ensure that the information it receives from providers of
services is reliable and complete; and (iii) Make all collected
information available to HCFA. (2) Program review. For each plan,
there must be in effect a process for formal evaluation, at least
annually, of the impact and effectiveness of its quality assessment
and performance improvement program.

Sec. 422.154 External review.

(a) Basic rule. Except as provided in
paragraph (c) of this section, each M+C organization must, for each
M+C plan it operates, have an agreement with an independent quality
review and improvement organization (review organization) approved by
HCFA to perform functions of the type described in part 466 of this
chapter.

(b) Terms of the agreement. The
agreement must be consistent with HCFA guidelines and include the
following provisions: (1) Require that the organization– (i)
Allocate adequate space for use of the review organization whenever
it is conducting review activities; and (ii) Provide all pertinent
data, including patient care data, at the time the review
organization needs the data to carry out the reviews and make its
determinations. (2) Except in the case of complaints about quality,
exclude review activities that HCFA determines would duplicate review
activities conducted as part of an accreditation process or as part
of HCFA monitoring.

(c) Exceptions. The requirement of
paragraph (a) of this section does not apply for an M+C private
fee-for-service plan or a non-network M+C MSA plan if the
organization does not carry out utilization review with respect to
the plan.

Sec. 422.156 Compliance deemed on the basis of
accreditation.

(a) General rule. An M+C organization
may be deemed to meet any of the requirements of paragraph (b) of
this section if– (1) The M+C organization is fully accredited (and
periodically reaccredited) by a private, national accreditation
organization approved by HCFA; and (2) The accreditation organization
used the standards approved by HCFA for the purposes of assessing the
M+C organization’s compliance with Medicare requirements.

(b) Deeming requirements. The
following requirements are deemable: (1) The quality assessment and
performance improvement requirements of Sec. 422.152. (2) The
confidentiality and accuracy of enrollee records requirements of Sec.
422.118.

(c) Effective date of deemed status.
The date on which the organization is deemed to meet the
applicable requirements is the later of the following: (1) The date
on which the accreditation organization is approved by HCFA. (2) The
date the M+C organization is accredited by the accreditation
organization.

(d) Obligations of deemed M+C organizations.
An M+C organization deemed to meet Medicare requirements
must– (1) Submit to surveys by HCFA to validate its accreditation
organization’s accreditation process; and (2) Authorize its
accreditation organization to release to HCFA a copy of its most
recent accreditation survey, together with any survey- related
information that HCFA may require (including corrective action plans
and summaries of unmet HCFA requirements).

(e) Removal of deemed status. HCFA
removes part or all of an M+C organization’s deemed status for any of
the following reasons: (1) HCFA determines, on the basis of its own
survey or the results of the accreditation survey, that the M+C
organization does not meet the Medicare requirements for which deemed
status was granted. (2) HCFA withdraws its approval of the
accreditation organization that accredited the M+C organization. (3)
The M+C organization fails to meet the requirements of paragraph (d)
of this section.

(f) Enforcement authority. HCFA
retains the authority to initiate enforcement action against any M+C
[[Page 35084]] organization that it determines, on the basis of its
own survey or the results of an accreditation survey, no longer meets
the Medicare requirements for which deemed status was
granted.

Sec. 422.157 Accreditation organizations.

(a) Conditions for approval. HCFA may
approve an accreditation organization with respect to a given
standard under this part if it meets the following conditions: (1) In
accrediting M+C organizations, it applies and enforces standards that
are at least as stringent as Medicare requirements with respect to
the standard or standards in question. (2) It complies with the
application and reapplication procedures set forth in Sec. 422.158.
(3) It is not controlled, as defined in Sec. 413.17 of this chapter,
by the entities it accredits.

(b) Notice and comment--(1) Proposed
notice. HCFA publishes a proposed notice in the Federal Register
whenever it is considering granting an accreditation organization’s
application for approval. The notice– (i) Specifies the basis for
granting approval; (ii) Describes how the accreditation
organization’s accreditation program meets or exceeds all of the
Medicare requirements for which HCFA would deem compliance on the
basis of the organization’s accreditation; and (iii) Provides
opportunity for public comment. (2) Final notice. (i) After reviewing
public comments, HCFA publishes a final Federal Register notice
indicating whether it has granted the accreditation organization’s
request for approval. (ii) If HCFA grants the request, the final
notice specifies the effective date and the term of the approval,
which may not exceed 6 years.

(c) Ongoing responsibilities of an approved
accreditation organization. An accreditation organization
approved by HCFA must undertake the following activities on an
ongoing basis: (1) Provide to HCFA in written form and on a monthly
basis all of the following: (i) Copies of all accreditation surveys,
together with any survey- related information that HCFA may require
(including corrective action plans and summaries of unmet HCFA
requirements). (ii) Notice of all accreditation decisions. (iii)
Notice of all complaints related to deemed M+C organizations. (iv)
Information about any M+C organization against which the accrediting
organization has taken remedial or adverse action, including
revocation, withdrawal or revision of the M+C organization’s
accreditation. (The accreditation organization must provide this
information within 30 days of taking the remedial or adverse action.)
(v) Notice of any proposed changes in its accreditation standards or
requirements or survey process. If the organization implements the
changes before or without HCFA approval, HCFA may withdraw its
approval of the accreditation organization. (2) Within 30 days of a
change in HCFA requirements, submit to HCFA– (i) An acknowledgment
of HCFA’s notification of the change; (ii) A revised cross-walk
reflecting the new requirements; and (iii) An explanation of how the
accreditation organization plans to alter its standards to conform to
HCFA’s new requirements, within the time-frames specified in the
notification of change it receives from HCFA. (3) Permit its
surveyors to serve as witnesses if HCFA takes an adverse action based
on accreditation findings. (4) Within 3 days of identifying, in an
accredited M+C organization, a deficiency that poses immediate
jeopardy to the organization’s enrollees or to the general public,
give HCFA written notice of the deficiency. (5) Within 10 days of
HCFA’s notice of withdrawal of approval, give written notice of the
withdrawal to all accredited M+C organizations.

(d) Continuing Federal oversight of approved
accreditation organizations. This paragraph establishes
specific criteria and procedures for continuing oversight and for
withdrawing approval of an accreditation organization. (1)
Equivalency review. HCFA compares the accreditation organization’s
standards and its application and enforcement of those standards to
the comparable HCFA requirements and processes when– (i) HCFA
imposes new requirements or changes its survey process; (ii) An
accreditation organization proposes to adopt new standards or changes
in its survey process; or (iii) The term of an accreditation
organization’s approval expires. (2) Validation review. HCFA or its
agent may conduct a survey of an accredited organization, examine the
results of the accreditation organization’s own survey, or attend the
accreditation organization’s survey, in order to validate the
organization’s accreditation process. At the conclusion of the
review, HCFA identifies any accreditation programs for which
validation survey results– (i) Indicate a 20 percent rate of
disparity between certification by the accreditation organization and
certification by HCFA or its agent on standards that do not
constitute immediate jeopardy to patient health and safety if unmet;
(ii) Indicate any disparity between certification by the
accreditation organization and certification by HCFA or its agent on
standards that constitute immediate jeopardy to patient health and
safety if unmet; or (iii) Indicate that, irrespective of the rate of
disparity, there are widespread or systematic problems in an
organization’s accreditation process such that accreditation no
longer provides assurance that the Medicare requirements are met or
exceeded. (3) Onsite observation. HCFA may conduct an onsite
inspection of the accreditation organization’s operations and offices
to verify the organization’s representations and assess the
organization’s compliance with its own policies and procedures. The
onsite inspection may include, but is not limited to, reviewing
documents, auditing meetings concerning the accreditation process,
evaluating survey results or the accreditation status decision making
process, and interviewing the organization’s staff. (4) Notice of
intent to withdraw approval. If an equivalency review, validation
review, onsite observation, or HCFA’s daily experience with the
accreditation organization suggests that the accreditation
organization is not meeting the requirements of this subpart, HCFA
gives the organization written notice of its intent to withdraw
approval. (5) Withdrawal of approval. HCFA may withdraw its approval
of an accreditation organization at any time if HCFA determines
that– (i) Deeming based on accreditation no longer guarantees that
the M+C organization meets the M+C requirements, and failure to meet
those requirements could jeopardize the health or safety of Medicare
enrollees and constitute a significant hazard to the public health;
or (ii) The accreditation organization has failed to meet its
obligations under this section or under Sec. 422.156 or Sec. 422.158.
(6) Reconsideration of withdrawal of approval. An accreditation
organization dissatisfied with a determination to withdraw HCFA
approval may request a reconsideration of that determination in
accordance with subpart D of part 488 of this chapter. [[Page
35085]]

Sec. 422.158 Procedures for approval of accreditation as a
basis for deeming compliance.

(a) Required information and materials.
A private, national accreditation organization applying for
approval must furnish to HCFA all of the following information and
materials. (When reapplying for approval, the organization need
furnish only the particular information and materials requested by
HCFA.) (1) The types of M+C plans that it would review as part of its
accreditation process. (2) A detailed comparison of the
organization’s accreditation requirements and standards with the
Medicare requirements (for example, a crosswalk). (3) Detailed
information about the organization’s survey process, including– (i)
Frequency of surveys and whether surveys are announced or
unannounced. (ii) Copies of survey forms, and guidelines and
instructions to surveyors. (iii) Descriptions of– (A) The survey
review process and the accreditation status decision making process;
(B) The procedures used to notify accredited M+C organizations of
deficiencies and to monitor the correction of those deficiencies; and
(C) The procedures used to enforce compliance with accreditation
requirements. (4) Detailed information about the individuals who
perform surveys for the accreditation organization, including– (i)
The size and composition of accreditation survey teams for each type
of plan reviewed as part of the accreditation process; (ii) The
education and experience requirements surveyors must meet; (iii) The
content and frequency of the in-service training provided to survey
personnel; (iv) The evaluation systems used to monitor the
performance of individual surveyors and survey teams; and (v) The
organization’s policies and practice with respect to the
participation, in surveys or in the accreditation decision process by
an individual who is professionally or financially affiliated with
the entity being surveyed. (5) A description of the organization’s
data management and analysis system with respect to its surveys and
accreditation decisions, including the kinds of reports, tables, and
other displays generated by that system. (6) A description of the
organization’s procedures for responding to and investigating
complaints against accredited organizations, including policies and
procedures regarding coordination of these activities with
appropriate licensing bodies and ombudsmen programs. (7) A
description of the organization’s policies and procedures with
respect to the withholding or removal of accreditation for failure to
meet the accreditation organization’s standards or requirements, and
other actions the organization takes in response to noncompliance
with its standards and requirements. (8) A description of all types
(for example, full, partial) and categories (for example,
provisional, conditional, temporary) of accreditation offered by the
organization, the duration of each type and category of accreditation
and a statement identifying the types and categories that would serve
as a basis for accreditation if HCFA approves the accreditation
organization. (9) A list of all currently accredited M+C
organizations and the type, category, and expiration date of the
accreditation held by each of them. (10) A list of all full and
partial accreditation surveys scheduled to be performed by the
accreditation organization as requested by HCFA. (11) The name and
address of each person with an ownership or control interest in the
accreditation organization.

(b) Required supporting
documentation. A private, national accreditation organization
applying or reapplying for approval must also submit the following
supporting documentation: (1) A written presentation that
demonstrates its ability to furnish HCFA with electronic data in HCFA
compatible format. (2) A resource analysis that demonstrates that its
staffing, funding, and other resources are adequate to perform the
required surveys and related activities. (3) A statement
acknowledging that, as a condition for approval, it agrees to comply
with the ongoing responsibility requirements of Sec. 422.157(c).

(c) Additional information. If HCFA
determines that it needs additional information for a determination
to grant or deny the accreditation organization’s request for
approval, it notifies the organization and allows time for the
organization to provide the additional information.

(d) Onsite visit. HCFA may visit the
accreditation organization’s offices to verify representations made
by the organization in its application, including, but not limited
to, review of documents, and interviews with the organization’s
staff.

(e) Notice of determination. HCFA
gives the accreditation organization a formal notice that– (1)
States whether the request for approval has been granted or denied;
(2) Gives the rationale for any denial; and (3) Describes the
reconsideration and reapplication procedures.

(f) Withdrawal. An accreditation
organization may withdraw its application for approval at any time
before it receives the formal notice specified in paragraph (e) of
this section.

(g) Reconsideration of adverse
determination. An accreditation organization that has received
notice of denial of its request for approval may request
reconsideration in accordance with subpart D of part 488 of this
chapter.

(h) Request for approval following denial.
(1) Except as provided in paragraph (h)(2) of this section, an
accreditation organization that has received notice of denial of its
request for approval may submit a new request if it– (i) Has revised
its accreditation program to correct the deficiencies on which the
denial was based; (ii) Can demonstrate that the M+C organizations
that it has accredited meet or exceed applicable Medicare
requirements; and (iii) Resubmits the application in its entirety.
(2) An accreditation organization that has requested reconsideration
of HCFA’s denial of its request for approval may not submit a new
request until the reconsideration is administratively
final.

---

Subpart E–Relationships with Providers.

422.200 Basis and scope.

This subpart is based on sections 1852(a)(1), (a)(2), (b)(2),
(c)(2)(D), (j), and (k) of the Act; section 1859(b)(2)(A) of the Act;
and the general authority under 1856(b) of the Act requiring the
establishment of standards. It sets forth the requirements and
standards for the M+C organization’s relationships with providers
including physicians, other health care professionals, institutional
providers and suppliers, under contracts or arrangements or deemed
contracts under M+C private fee-for-service plans. This subpart also
contains some requirements that apply to noncontracting providers.
[[Page 35086]]

Sec. 422.202 Participation procedures.

(a) Notice and appeal rights. An M+C
organization that operates a coordinated care plan or network MSA
plan must provide for the participation of individual health care
professionals, and the management and members of groups of health
care professionals, through reasonable procedures that include the
following: (1) Written notice of rules of participation such as terms
for payment, utilization review, quality improvement programs,
credentialing, data reporting, confidentiality, guidelines or
criteria for the furnishing of particular services, and other rules
related to administrative policy. (2) Written notice of material
changes in participation rules before the changes are put into
effect. (3) Written notice of participation decisions that are
adverse to health care professionals. (4) A process for appealing
adverse decisions, including the right of physicians and other health
care professionals to present information and their views on the
decision. In the case of a termination of a provider contract by the
M+C organization, this process must conform to the rules in Sec.
422.204(c).

(b) Consultation. The M+C
organization must consult with the physicians, and other health care
professionals who have agreed to provide services under an M+C plan
offered by the organization, regarding the organization’s medical
policy, quality assurance program, and medical management procedures
and ensure that the following standards are met: (1) Practice
guidelines and utilization management guidelines– (i) Are based on
reasonable medical evidence or a consensus of health care
professionals in the particular field; (ii) Consider the needs of the
enrolled population; (iii) Are developed in consultation with
contracting health care professionals; and (iv) Are reviewed and
updated periodically. (2) The guidelines are communicated to
providers and, as appropriate, to enrollees. (3) Decisions with
respect to utilization management, enrollee education, coverage of
services, and other areas in which the guidelines apply are
consistent with the guidelines.

(c) An M+C organization that operates an M+C
plan through subcontracted physician groups or other
subcontracted networks of health care professionals must provide that
the participation procedures in this section apply equally to
physicians and other health care professionals within those
subcontracted groups.

Sec. 422.204 Provider credentialing and provider rights.

(a) Basic requirements. An M+C
organization must follow a documented process with respect to
providers and suppliers who have signed contracts or participation
agreements that– (1) For providers (other than physicians and other
health care professionals) requires determination, and
redetermination at specified intervals, that each provider– (i)
Licensed to operate in the State, and in compliance with any other
applicable State or Federal requirements; and (ii) Reviewed and
approved by an accrediting body, or meets the standards established
by the organization itself; (2) For physicians and other health care
professionals, including members of physician groups, covers– (i)
Initial credentialing that includes written application, verification
of licensure and other information from primary sources, disciplinary
status, eligibility for payment under Medicare, and site visits as
appropriate. The application must be signed and dated and include an
attestation by the applicant of the correctness and completeness of
the application and other information submitted in support of the
application; (ii) Recredentialing at least every 2 years that updates
information obtained during initial credentialing and considers
performance indicators such as those collected through quality
assurance programs, utilization management systems, handling of
grievances and appeals, enrollee satisfaction surveys, and other plan
activities, and that includes an attestation of the correctness and
completeness of the new information; and (iii) A process for
receiving advice from contracting health care professionals with
respect to criteria for credentialing and recredentialing; and (iv)
Requiring that, to the extent applicable, the requirements in
paragraphs (a)(2)(i) and (a)(2)(iii) of this section are satisfied;
and (3)(i) Specify that basic benefits must be provided through, or
payments must be made to, providers that meet applicable requirements
of title XVIII and part A of title XI of the Act. In the case of
providers meeting the definition of “provider of services” in section
1861(u), basic benefits may only be provided through such providers
if they have a provider agreement with HCFA permitting them to
provide services under original Medicare. (ii) Ensures compliance
with the requirements at Sec. 422.752(a)(8) that prohibit employment
or contracts with individuals (or with an entity that employs or
contracts with such an individual) excluded from participation under
Medicare and with the requirements at Sec. 422.220 regarding
physicians and practitioners who opt out of Medicare.

(b) Discrimination prohibited–(1)
General rule. An M+C organization may not discriminate, in terms of
participation, reimbursement, or indemnification, against any health
care professional who is acting within the scope of his or her
license or certification under State law, solely on the basis of the
license or certification. (2) Construction. The prohibition in
paragraph (b)(1) of this section does not preclude any of the
following by the M+C organization: (i) Refusal to grant participation
to health care professionals in excess of the number necessary to
meet the needs of the plan’s enrollees (except for M+C
private-fee-for-service plans, which may not refuse to contract on
this basis). (ii) Use of different reimbursement amounts for
different specialties. (iii) Implementation of measures designed to
maintain quality and control costs consistent with its
responsibilities.

(c) Denial, suspension, or termination of
contract. The requirements in this paragraph (c) apply to an
M+C organization that operates a coordinated care plan or network MSA
plan providing benefits through contracting providers. (1) Notice to
health care professional. An M+C organization that denies, suspends,
or terminates an agreement under which the health care professional
provides services to M+C plan enrollees must give the affected
individual written notice of the following: (i) The reasons for the
action. (ii) The standards and the profiling data the organization
used to evaluate the health care professional. (iii) The numbers and
mix of health care professionals the organization needs. (iv) The
affected health care professional’s right to appeal the action and
the process and timing for requesting a hearing. (2) Composition of
hearing panel. The M+C organization must ensure that the majority of
the hearing panel members are peers of the affected health care
professional. [[Page 35087]] (3) Notice to licensing or disciplinary
bodies. An M+C organization that suspends or terminates a contract
with a health care professional because of deficiencies in the
quality of care must give written notice of that action to licensing
or disciplinary bodies or to other appropriate authorities. (4)
Timeframes. An M+C organization and a contracting provider must
provide at least 60 days written notice to each other before
terminating the contract without cause.

Sec. 422.206 Interference with health care professionals’
advice to enrollees prohibited.

(a) General rule. (1) An M+C
organization may not prohibit or otherwise restrict a health care
professional, acting within the lawful scope of practice, from
advising, or advocating on behalf of, an individual who is a patient
and enrolled under an M+C plan about– (i) The patient’s health
status, medical care, or treatment options (including any alternative
treatments that may be self-administered), including the provision of
sufficient information to the individual to provide an opportunity to
decide among all relevant treatment options; (ii) The risks,
benefits, and consequences of treatment or non- treatment; or (iii)
The opportunity for the individual to refuse treatment and to express
preferences about future treatment decisions. (2) Health care
professionals must provide information regarding treatment options in
a culturally-competent manner, including the option of no treatment.
Health care professionals must ensure that individuals with
disabilities have effective communications with participants
throughout the health system in making decisions regarding treatment
options.

(b) Conscience protection. The
general rule in paragraph (a) of this section does not require the
M+C plan to cover, furnish, or pay for a particular counseling or
referral service if the M+C organization that offers the plan– (1)
Objects to the provision of that service on moral or religious
grounds; and (2) Through appropriate written means, makes available
information on these policies as follows: (i) To HCFA, with its
application for a Medicare contract, or within 10 days of submitting
its ACR proposal, as appropriate. (ii) To prospective enrollees,
before or during enrollment. (iii) With respect to current enrollees,
the organization is eligible for the exception provided in paragraph
(a)(1) of this section if it provides notice within 90 days after
adopting the policy at issue; however, under Sec. 422.111(d), notice
of such a change must be given in advance.

(c) Construction. Nothing in
paragraph (b) of this section may be construed to affect disclosure
requirements under State law or under the Employee Retirement Income
Security Act of 1974.

(d) Sanctions. An M+C organization
that violates the prohibition of paragraph (a) of this section or the
conditions in paragraph (b) of this section is subject to
intermediate sanctions under subpart O of this
part.

Sec. 422.208 Physician incentive plans: requirements and
limitations.

(a) Definitions. In this subpart, the
following definitions apply:

• Bonus means a payment made to a physician or physician group
  beyond any salary, fee-for-service payments, capitation, or
  returned withhold.

• Capitation means a set dollar payment per patient per unit of
  time (usually per month) paid to a physician or physician group to
  cover a specified set of services and administrative costs without
  regard to the actual number of services provided. The services
  covered may include the physician’s own services, referral
  services, or all medical services.

• Physician group means a partnership, association, corporation,
  individual practice association, or other group of physicians that
  distributes income from the practice among members. An individual
  practice association is defined as a physician group for this
  section only if it is composed of individual physicians and has no
  subcontracts with physician groups.

• Physician incentive plan means any compensation arrangement to
  pay a physician or physician group that may directly or indirectly
  have the effect of reducing or limiting the services provided to
  any plan enrollee.

• Potential payments means the maximum payments possible to
  physicians or physician groups including payments for services
  they furnish directly, and additional payments based on use and
  costs of referral services, such as withholds, bonuses,
  capitation, or any other compensation to the physician or
  physician group. Bonuses and other compensation that are not based
  on use of referrals, such as quality of care furnished, patient
  satisfaction or committee participation, are not considered
  payments in the determination of substantial financial risk.

• Referral services means any specialty, inpatient, outpatient,
  or laboratory services that a physician or physician group orders
  or arranges, but does not furnish directly.

• Risk threshold means the maximum risk, if the risk is based on
  referral services, to which a physician or physician group may be
  exposed under a physician incentive plan without being at
  substantial financial risk. This is set at 25 percent risk.

• Substantial financial risk, for purposes of this section,
  means risk for referral services that exceeds the risk threshold.

• Withhold means a percentage of payments or set dollar amounts
  deducted from a physician’s service fee, capitation, or salary
  payment, and that may or may not be returned to the physician,
  depending on specific predetermined factors.

(b) Applicability. The requirements
in this section apply to an M+C organization and any of its
subcontracting arrangements that utilize a physician incentive plan
in their payment arrangements with individual physicians or physician
groups. Subcontracting arrangements may include an intermediate
entity, which includes but is not limited to, an individual practice
association that contracts with one or more physician groups or any
other organized group such as those specified in Sec. 422.4.

(c) Basic requirements. Any physician
incentive plan operated by an M+C organization must meet the
following requirements: (1) The M+C organization makes no specific
payment, directly or indirectly, to a physician or physician group as
an inducement to reduce or limit medically necessary services
furnished to any particular enrollee. Indirect payments may include
offerings of monetary value (such as stock options or waivers of
debt) measured in the present or future. (2) If the physician
incentive plan places a physician or physician group at substantial
financial risk (as determined under paragraph (d) of this section)
for services that the physician or physician group does not furnish
itself, the M+C organization provides aggregate or per-patient
stop-loss protection in accordance with paragraph (f) of this
section, and conducts periodic surveys in accordance with paragraph
(g) of this section. (3) For all physician incentive plans, the M+C
organization provides to HCFA the information specified in Sec.
422.210.

(d) Determination of substantial financial
risk–(1) Basis. Substantial financial risk occurs when risk
is based on the use or costs of referral services, [[Page 35088]] and
that risk exceeds the risk threshold. Payments based on other
factors, such as quality of care furnished, are not considered in
this determination. (2) Risk threshold. The risk threshold is 25
percent of potential payments. (3) Arrangements that cause
substantial financial risk. The following incentive arrangements
cause substantial financial risk within the meaning of this section,
if the physician’s or physician group’s patient panel size is not
greater than 25,000 patients, as shown in the table at paragraph
(f)(2)(iii) of this section: (i) Withholds greater than 25 percent of
potential payments. (ii) Withholds less than 25 percent of potential
payments if the physician or physician group is potentially liable
for amounts exceeding 25 percent of potential payments. (iii) Bonuses
that are greater than 33 percent of potential payments minus the
bonus. (iv) Withholds plus bonuses if the withholds plus bonuses
equal more than 25 percent of potential payments. The threshold bonus
percentage for a particular withhold percentage may be calculated
using the formula–Withhold % = -0.75 (Bonus %) +25%. (v) Capitation
arrangements, if– (A) The difference between the maximum potential
payments and the minimum potential payments is more than 25 percent
of the maximum potential payments; (B) The maximum and minimum
potential payments are not clearly explained in the contract with the
physician or physician group. (vi) Any other incentive arrangements
that have the potential to hold a physician or physician group liable
for more than 25 percent of potential payments.

(e) An M+C fee-for-service plan may not
operate a physician incentive plan.

(f) Stop-loss protection
requirements. (1) Basic rule. The M+C organization must assure
that all physicians and physician groups at substantial financial
risk have either aggregate or per-patient stop- loss protection in
accordance with the following requirements: (2) Specific
requirements. (i) Aggregate stop-loss protection must cover 90
percent of the costs of referral services that exceed 25 percent of
potential payments. (ii) For per-patient stop-loss protection if the
stop-loss protection provided is on a per-patient basis, the
stop-loss limit (deductible) per patient must be determined based on
the size of the patient panel and may be a combined policy or consist
of separate policies for professional services and institutional
services. In determining patient panel size, the patients may be
pooled in accordance with paragraph (g) of this section. (iii)
Stop-loss protection must cover 90 percent of the costs of referral
services that exceed the per patient deductible limit. The
per-patient stop-loss deductible limits are as follows:

Panel size	Single combined deductible	Separate institutional deductible	Separate professional deductible
1-1000	$6000	$10,000	$3000
1001-5000	30,000	40,000	10,000
5001-8000	40,000	60,000	15,000
8001-10,000	75,000	100,000	20,000
10,001-25,000	150,000	200,000	25,000
25,000+	*	*	*

* None.

(g) Pooling of patients. Any entity
that meets the pooling conditions of this section may pool
commercial, Medicare, and Medicaid enrollees or the enrollees of
several M+C organizations with which a physician or physician group
has contracts. The conditions for pooling are as follows: (1) It is
otherwise consistent with the relevant contracts governing the
compensation arrangements for the physician or physician group. (2)
The physician or physician group is at risk for referral services
with respect to each of the categories of patients being pooled. (3)
The terms of the compensation arrangements permit the physician or
physician group to spread the risk across the categories of patients
being pooled. (4) The distribution of payments to physicians from the
risk pool is not calculated separately by patient category. (5) The
terms of the risk borne by the physician or physician group are
comparable for all categories of patients being pooled.

(h) Periodic surveys of current and former
enrollees. An M+C organization must conduct periodic surveys
of current and former enrollees where substantial financial risk
exists. These periodic surveys must– (1) Include either a sample of,
or all, current Medicare/Medicaid enrollees in the M+C organization
and individuals disenrolled in the past 12 months for reasons other
than– (i) The loss of Medicare or Medicaid eligibility; (ii)
Relocation outside the M+C organization’s service area; (iii) For
failure to pay premiums or other charges; (iv) For abusive behavior;
and (v) Retroactive disenrollment. (2) Be designed, implemented, and
analyzed in accordance with commonly accepted principles of survey
design and statistical analysis; (3) Measure the degree of
enrollees/disenrollees’ satisfaction with the quality of the services
provided and the degree to which the enrollees/disenrollees have or
had access to the services provided under the M+C organization; and
(4) Be conducted no later than 1 year after the effective date of the
M+C organization’s contract and at least annually thereafter. (i)
Sanctions. An M+C organization that fails to comply with the
requirements of this section is subject to intermediate sanctions
under subpart O of this part.

Sec. 422.210 Disclosure of physician incentive plans

(a) Disclosure to HCFA–(1) Basic
requirement. Each M+C organization must provide to HCFA descriptive
information about its physician incentive plan in sufficient detail
to enable HCFA to determine whether that plan complies with the
requirements of Sec. 422.208. Reporting should be on the HCFA PIP
Disclosure Form (OMB No. 0938-0700). (2) Content. The information
must include at least the following: (i) Whether services not
furnished by the physician or physician group are covered by the
incentive plan. (ii) The type or types of incentive arrangements,
such as, withholds, bonus, capitation. [[Page 35089]] (iii) The
percent of any withhold or bonus the plan uses. (iv) Assurance that
the physicians or physician group has adequate stop-loss protection,
and the amount and type of stop-loss protection. (v) The patient
panel size and, if the plan uses pooling, the pooling method. (vi) If
the M+C organization is required to conduct enrollee surveys, a
summary of the survey results. (3) When disclosure must be made to
HCFA. An M+C organization must disclose annually to HCFA the
physician incentive arrangements that are effective at the start of
each year. In addition, HCFA does not approve an M+C organization’s
application for a contract unless the M+C organization discloses the
physician incentive arrangements effective for that contract.

(b) Disclosure to Medicare
beneficiaries–Basic requirement. An M+C organization must
provide the following information to any Medicare beneficiary who
requests it: (1) Whether the M+C organization uses a physician
incentive plan that affects the use of referral services. (2) The
type of incentive arrangement. (3) Whether stop-loss protection is
provided. (4) If the M+C organization was required to conduct a
survey, a summary of the survey results.

Sec. 422.212 Limitations on provider indemnification.

An M+C organization may not contract or otherwise provide,
directly or indirectly, for any of the following individuals,
organizations, or entities to indemnify the organization against any
civil liability for damage caused to an enrollee as a result of the
M+C organization’s denial of medically necessary care:

(a) A physician or health care professional.

(b) Provider of services.

(c) Other entity providing health care services.

(d) Group of such professionals, providers, or
entities.

Sec. 422.214 Special rules for services furnished by
noncontract providers.

(a) Services furnished to enrollees of
coordinated care plans by providers. (1) Any provider (other
than a provider of services as defined in section 1861(u) of the Act)
that does not have in effect a contract establishing payment amounts
for services furnished to a beneficiary enrolled in an M+C
coordinated care plan must accept, as payment in full, the amounts
that the provider could collect if the beneficiary were enrolled in
original Medicare. (2) Any statutory provisions (including penalty
provisions) that apply to payment for services furnished to a
beneficiary not enrolled in an M+C plan also apply to the payment
described in paragraph (a)(1) of this section.

(b) Services furnished by providers of
service. Any provider of services as defined in section
1861(u) of the Act that does not have in effect a contract
establishing payment amounts for services furnished to a beneficiary
enrolled in an M+C coordinated care plan must accept as payment in
full the amounts (less any payments under Secs. 412.105(g) and
413.86(d)) that it could collect if the beneficiary were enrolled in
original Medicare.

Sec. 422.216 Special rules for M+C private fee-for-service
plans.

(a) Payment to providers–(1) Payment
rate. (i) The M+C organization must establish uniform payment rates
for items and services that apply to all contracting providers,
regardless of whether the contract is signed or deemed under
paragraph (f) of this section. (ii) Contracting providers must be
reimbursed on a fee-for-service basis. (iii) The M+C organization
must make information on its payment rates available to providers
that furnish services that may be covered under the M+C private
fee-for-service plan. (2) Payment to contract providers. For each
service, the M+C organization pays a contract provider (including one
deemed to have a contract) an amount that is equal to the payment
rate under paragraph (a)(1) of this section minus any applicable
cost-sharing. (3) Noncontract providers. The organization pays for
services of noncontract providers in accordance with Sec.
422.100(b)(2). (4) Service furnished by providers of service. Any
provider of services as defined in section 1861(u) of the Act that
does not have in effect a contract establishing payment mounts for
services furnished to a beneficiary enrolled in an M+C private
fee-for-service plan must accept as payment in full the amounts (less
any payments under Secs. 412.109(g) and 413.86(d) of this chapter)
that it could collect if the beneficiary were enrolled in original
Medicare.

(b) Charges to enrollees–(1)
Contract providers. (i) Contract providers and “deemed” contract
providers may charge enrollees no more than the cost-sharing and,
subject to the limit in paragraph (b)(1)(ii) of this section, balance
billing amounts that are permitted under the plan, and these amounts
must be the same for “deemed” contract providers as for those that
have signed contracts in effect. (ii) The organization may permit
balance billing no greater than 15 percent of the payment rate
established under paragraph (a)(1) of this section. (iii) The M+C
organization must specify the amount of cost-sharing and balance
billing in its contracts with providers and these amounts must be the
same for “deemed” contract providers as for those that have signed
contracts in effect. (iv) The M+C organization is subject to
intermediate sanctions under Sec. 422.752(a)(7), under the rules in
subpart O of this part, if it fails to enforce the limit specified in
paragraph (b)(1)(i) of this section. (2) Noncontract providers. A
noncontract provider may not collect from an enrollee more than the
cost-sharing established by the M+C private fee-for-service plan as
specified in Sec. 422.308(b).

(c) Enforcement of limit--(1)
Contract providers. An M+C organization that offers an M+C
fee-for-service plan must enforce the limit specified in paragraph
(b)(1) of this section. (2) Noncontract providers. An M+C
organization that offers an M+C private fee-for-service plan must
monitor the amount collected by noncontract providers to ensure that
those amounts do not exceed the amounts permitted to be collected
under paragraph (b)(2) of this section. The M+C organization must
develop and document violations specified in instructions and must
forward documented cases to HCFA.

(d) Information on enrollee
liability–(1) General information. An M+C organization that
offers an M+C fee-for-service plan must provide to plan enrollees,
for each claim filed by the enrollee or the provider that furnished
the service, an appropriate explanation of benefits. The explanation
must include a clear statement of the enrollee’s liability for
deductibles, coinsurance, copayment, and balance billing. (2) Advance
notice for hospital services. In its terms and conditions of payment
to hospitals, the M+C organization must require the hospital, if it
imposes balance billing, to provide to the enrollee, before
furnishing any services for which balance billing could amount to not
less than $500– (i) Notice that balance billing is permitted for
those services; (ii) A good faith estimate of the likely amount of
balance billing, based on the enrollees presenting condition; and
[[Page 35090]] (iii) The amount of any deductible, coinsurance, and
copayment that may be due in addition to the balance billing amount.

(e) Coverage determinations. The M+C
organization must make coverage determinations in accordance with
subpart M of this part.

(f) Rules describing deemed contract
providers. Any provider furnishing health services to an
enrollee in an M+C private fee-for- service plan, and who has not
previously entered into a contract or agreement to furnish services
under the plan, is treated as having a contract in effect and is
subject to the limitations of this section that apply to contract
providers if the following conditions are met: (1) The services are
covered under the plan and are furnished– (i) To an enrollee of an
M+C fee-for-service plan; and (ii) Provided by a provider including a
provider of services (as defined in section 1861(u) of the Act) that
does not have in effect a signed contract with the M+C organization.
(2) Before furnishing the services, the provider– (i) Was informed
of the individual’s enrollment in the plan; and (ii) Was informed (or
given a reasonable opportunity to obtain information) about the terms
and conditions of payment under the plan, including the information
described in Sec. 422.202(a)(1). (3) The information was provided in
a manner that was reasonably designed to effect informed agreement
and met the requirements of paragraphs (g) and (h) of this section.

(g) Enrollment information.
Enrollment information was provided by one of the following methods
or a similar method: (1) Presentation of an enrollment card or other
document attesting to enrollment. (2) Notice of enrollment from HCFA,
a Medicare intermediary or carrier, or the M+C organization itself.

(h) Information on payment terms and
conditions. Information on payment terms and conditions was
made available through either of the following methods: (1) The M+C
organization used postal service, electronic mail, FAX, or telephone
to communicate the information to one of the following: (i) The
provider. (ii) The employer or billing agent of the provider. (iii) A
partnership of which the provider is a member. (iv) Any party to
which the provider makes assignment or reassigns benefits. (2) The
M+C organization has in effect a procedure under which– (i) Any
provider furnishing services to an enrollee in an M+C private
fee-for-service plan, and who has not previously entered into a
contract or agreement to furnish services under the plan, can receive
instructions on how to request the payment information; (ii) The
organization responds to the request before the entity furnishes the
service; and (iii) The information the organization provides includes
the following: (A) Billing procedures. (B) The amount the
organization will pay towards the service. (C) The amount the
provider is permitted to collect from the enrollee. (D) The
information described in Sec. 422.202(a)(1). (3) Announcements in
newspapers, journals, or magazines or on radio or television are not
considered communication of the terms and conditions of payment.

(i) Provider credentialing
requirements. Contracts with providers must provide that, in
order to be paid to provide services to plan enrollees, providers
must meet the requirements specified in Sec. 422.204(a)(1) and
(a)(1)(iii).

Sec. 422.220 Exclusion of services furnished under a private
contract.

An M+C organization may not pay, directly or indirectly, on any
basis, for services (other than emergency or urgently needed services
as defined in Sec. 422.2) furnished to a Medicare enrollee by a
physician (as defined in section 1861(r)(1) of the Act) or other
practitioner (as defined in section 1842(b)(18)(C) of the Act) who
has filed with the Medicare carrier an affidavit promising to furnish
Medicare-covered services to Medicare beneficiaries only through
private contracts under section 1802(b) of the Act with the
beneficiaries. An M+C organization must pay for emergency or urgently
needed services furnished by a physician or practitioner who has not
signed a private contract with the beneficiary.

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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.

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