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CMS Proposes Modifications to Compliance and Contract Review Requirements for Medicare Advantage and Part D Drug Plans


Email Alert

May 23, 2007

CMS also proposes to codify and clarify certain Part D policies

On May 21, 2007, the Centers for Medicare and Medicaid Services (CMS) announced through proposed rulemaking that it would strengthen its oversight requirements and clarify penalties for Medicare Advantage (MA) and Medicare Part D prescription drug plans. The rule proposes clarifications to Medicare provisions relating to contract determinations involving MA organizations and Part D prescription drug plan sponsors.

These clarifications would:

  • Eliminate the reconsideration process for review of contract determinations;
  • Revise provisions related to appeals of contract determinations; and
  • Clarify the process for MA organizations and Part D sponsors to complete corrective action plans.

The proposed rule would also strengthen compliance oversight of MA organizations and Part D sponsors by:

  • Clarifying intermediate sanction and civil money penalty provisions that apply to MA organizations and Part D sponsors;
  • Modifying elements of the compliance plans for MA organizations and Part D sponsors to include mandatory self-reporting to help expose potential fraud or misconduct; and
  • Revising provisions to ensure that HHS has access to books and records of MA organizations and Part D sponsor' first tier, downstream, and related entities.

In a press release, the Acting Administrator for CMS, stated, "While the majority of Medicare Advantage and Medicare Prescription Drug Plans that offer important benefits to beneficiaries are conducting themselves professionally, it is important for CMS to be able to take swift action to safeguard beneficiaries from unlawful or questionable business practices."

In addition, CMS proposes a separate rule to codify and further clarify prior explanations of its policies associated with Part D. The rule proposes the following:

  • Codifying expectations of Part D sponsors to provide adequate access to home infusion pharmacies that can meet certain standards for the delivery of covered home infusion drugs and proposing a standard for the timely delivery of such drugs within 24 hours of discharge;
  • Codifying guidance that certain supplies associated with the inhalation of insulin are included in the definition of Part D drugs;
  • Refining the definition of what may be included in the drug costs Part D sponsors use as the basis for calculating beneficiary cost sharing, reporting drug costs to CMS for the purposes of reinsurance reconciliations and risk sharing, as well as submitting bids to CMS;
  • Reiterating its previous guidance explaining how it interprets the statutory exclusion from the definition of a Part D drug for any drug when used for the treatment of sexual or erectile dysfunction, unless that drug was used for an FDA-approved purpose other than sexual or erectile dysfunction; and
  • Codifying its guidance on plan-to-plan reconciliation and reconciliation to a payer other than the Part D plan of record.

In addition, CMS is correcting the regulations to ensure that they reflect the appropriate subsidy for partial subsidy individuals subject to a late enrollment penalty. CMS also proposes changes to the retiree drug subsidy regulations, including permitting non-calendar year plans to choose between the current year's or the subsequent year's Part D cost limits in certain circumstances and codifying its previous guidance on aggregating plan options for purposes of meeting the net test for actuarial equivalence.

The proposed rules are lengthy and merit close attention to ensure that MA organizations and Part D sponsors will be ready to comply. The proposed rules have been submitted to the Office of the Federal Register and are currently available for public viewing on the CMS website pending publication in the Federal Register at: and There will be a 60-day comment period from the date of publication in the Federal Register.

View the CMS Press Release.

We would like to thank Kathie McDonald-McClure (Wyatt Tarrant & Combs LLP, Louisville, KY) for providing this email alert.

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