Health Industry Washington Watch : Washington DC Healthcare Industry Law Firm : Reed Smith : Health Industry Washington Watch : Regulations, Medicare/Medicaid, Governmental Organizations

CMS is soliciting comments on proposed changes to the 2013 Part D drug plan reporting requirements in the areas of (1) unused drugs in long-term care, and (2) medication therapy management programs. Comments will be accepted until January 31, 2011. CMS also has issued a memo to Part D sponsors regarding the processes that must be followed to update 2012 Part D plan formularies. Another recent memo announces that the collection of the Pharmaceutical Manufacturer Rebates, Discounts, and Other Price Concessions report is suspended for contract year 2011 because it duplicates data in the Part D sponsors’ Summary and Detailed DIR (direct and indirect remuneration) Report.

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CMS has issued guidance to Medicare Part D prescription drug plan (PDP) sponsors on steps they should take to prevent overutilization of Medicare Part D drugs, particularly painkillers such as opioids. Among other things, CMS: clarifies that regulations requiring prompt payment of clean claims do not require sponsors to pay claims they believe to be fraudulent, provided that pharmacies are given timely notifications of all defects or improprieties rendering the claim not a clean claim; reviews guidance on reporting cases of suspected fraudulent activity and drug-seeking behavior; discusses prior authorization options and retrospective review for protected class drugs, indicating that where a pattern of overutilization of opioids is determined through beneficiary-level retrospective review, sponsors can require documentation to determine medical necessity and deny payment for subsequent claims if insufficient evidence is obtained to substantiate Part D coverage eligibility; suggests that PDP sponsors promote less than 30 day prescribing of drugs that are more susceptible to abuse or diversion, especially opioids; and notes that CMS will be monitoring the use of these tools, and will issue compliance notices to sponsors that establish inappropriate controls.

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In two recent reports, the OIG identified gaps in CMS oversight of Part D PDP sponsors. The first report, “Audits of Medicare Prescription Drug Plan Sponsors,” examined the extent to which CMS conducted seven types of audits developed to identify problems and correct deficiencies in the Part D program: auto-enrollment readiness audits; benefit integrity audits; bid audits; compliance plan audits; long-term-care pharmacy contract audits; pharmacy access audits; and program audits.  Note that there is no legal requirement for CMS to conduct these audits; mandatory financial audits of PDP sponsors are being examined by the OIG for a separate report. The OIG found that CMS did not conduct any of the seven types of audits for 50 of the 125 stand-alone PDP sponsors in 2006 through 2009. For the audits that were conducted, 79% identified problems (the majority of which involved beneficiaries’ coverage status or payment issues). The OIG recommends that CMS establish a comprehensive Part D auditing strategy that ensures that each plan sponsor is audited within a certain timeframe. While CMS plans to complete a bid audit of every PDP parent organization, CMS believes a comprehensive oversight/performance monitoring strategy is more effective than an auditing strategy. CMS concurred with a second recommendation that it ensure that evidence is available to show that corrective actions have been implemented.

A second report, “Review of Excluded Providers in the Medicare Part D Program,” found CMS improperly accepted prescription drug event (PDE) data submitted by PDP sponsors for prescriptions written by excluded providers. Specifically, CMS accepted PDE data with gross drug costs totaling $15.1 million for prescriptions written by excluded providers for 2006 through 2008, and information was inconclusive to determine whether CMS accepted an additional $2 million in such drug costs because the prescriptions did not contain unique prescriber identifiers. The OIG recommended that CMS resolve identified improper Part D payments made for prescriptions written by excluded providers and take a series of steps to strengthen internal controls to prevent such payment in the future. 

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The Congressional Budget Office has issued an Economic and Budget Issue Brief on "Spending Patterns for Prescription Drugs Under Medicare Part D," which reviews patterns of Medicare Part D utilization and spending among the low-income subsidy (LIS) and non-LIS populations in 2008. 

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A new OIG review found that CMS did not fully comply with federal requirements that it audit financial records for one-third of Part D drug plan sponsors in 2006 through 2008. According to the OIG report, “Review of the Centers for Medicare & Medicaid Services’ Audits of Part D Sponsors’ Financial Records,” CMS excluded certain contracts subject to audit because CMS interpreted the statutory requirement as allowing it to do so. The OIG also found that CMS had not updated its audit resolution standard operating procedure (SOP) to reflect actual practices and to ensure that sponsors reported corrective actions to CMS in a timely manner. The OIG recommended that CMS audit one-third of all Part D sponsors and update its SOP; CMS generally concurred with the recommendations.

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MedPAC is meeting on December 15 and 16, 2011 to discuss payment adequacy of Medicare payment for a variety of provider types, along with ways to encourage the use of lower-cost medications by Medicare Part D low-income subsidy beneficiaries.

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According to a recent OIG report, “Ensuring That Medicare Part D Reimbursement Is Limited to Drugs Provided for Medically Accepted Indications,” Medicare Prescription Drug Plan (PDP) sponsors do not have access to information necessary to ensure that Medicare Part D reimbursement is limited to drugs provided for medically-accepted indications (e.g., uses approved by Food and Drug Administration and supported by one or more of three specified compendia). For instance, three PDP sponsors included in the OIG review do not routinely collect diagnosis information except when using prior authorization, but CMS limits the use of prior authorization for antipsychotic drugs. All three PDP sponsors reported using postpayment review as a general safeguard to prevent fraud and abuse, but these reviews do not usually focus on medically-accepted indications. The OIG continues to recommend that CMS facilitate PDP sponsors’ access to information necessary to ensure appropriate reimbursement of Part D claims. In response to the OIG report, CMS notes a number of hurdles to implementing the OIG’s recommendation. For instance, CMS does not have the statutory authority to require physicians to include diagnosis information on prescriptions (and such diagnosis information may not provide sufficient granularity to determine appropriateness), while prior authorization can be costly and burdensome. CMS maintains that its current approach, permitting PDP sponsors to use prior authorization to target drugs that are at high risk for being prescribed without a medically accepted indication, is the appropriate balance.

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The OIG has created a “spotlight page” on its website to highlight its reports and findings involving the Medicaid drug rebate program. The page features comparisons of drug spending under Medicaid and Medicare Part D, manufacturer compliance with Average Manufacturer Price reporting requirements, manufacturer development of new versions of existing brand-name drugs to minimize rebate obligations, and state collection of drug rebates, among other issues. Another new spotlight page concentrates on OIG investigations involving the IHS program. Previous OIG spotlight pages have focused on independent diagnostic testing facilities, hospice care, power wheelchairs, and Medicaid personal care services. 

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CMS has provided updated information on certain Medicare Part D Coverage Gap Discount Program issues. Specifically, in an October 28, 2011 memo to plan sponsors and drug manufacturers, CMS discusses its policies regarding invoicing manufacturers for certain low-volume claims, Electronic Fund Transfer requirements for discount payments, and changes to the appeals timeline after an unfavorable third party administrator determination or expiration of the dispute resolution timeframe. Separately, CMS has issued a memo to states on implementation of section 3309 of the ACA, which eliminates Part D cost-sharing for full benefit dual eligible individuals receiving home and community-based services, effective January 1, 2012.  The CMS memo discusses the data that CMS needs from states regarding eligible individuals, and the process for beneficiaries to correct HBCS status.

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The Medicare Payment Advisory Commission (MedPAC) will be meeting November 3-4, 2011 to discuss a number of Medicare policy issues, including: reforming Medicare’s benefit design; Medicare Part D/beneficiaries with high drug spending; coordinating care for dual-eligible beneficiaries through the PACE program; reforming the Medicare SNF PPS; hospitals’ capacity to serve Medicare patients; payment rate differences across ambulatory sectors; and Medicare coverage of and payment for home infusion.

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On October 11, 2011, the Centers for Medicare & Medicaid Services (CMS) published a proposed rule that would revise Medicare Advantage (MA) and Part D prescription drug benefit program (Part D) regulations. Among many other things, the proposed rule would:

• Implement new statutory requirements, including codifying Medicare Part D Coverage Gap Discount Program rules under the Affordable Care Act (ACA) and finalizing Medicare Improvements for Patients and Providers Act of 2008 (MIPPA) requirements related to coverage of benzodiazepines and barbiturates;
• Terminate the contract of MA and Part D plan sponsors that have failed to achieve at least a 3-star rating under CMS’s 5-star plan rating system for a period of three years;
• Modify rules for medication therapy management comprehensive medication reviews for beneficiaries in long term care (LTC) settings;
• Allow physicians to request Independent Review Entity reconsideration of a denied Part D prescription on their patient’s behalf without obtaining a signed authorized representative form;
• Require Part D sponsors to provide beneficiaries with the option of a daily prorated cost-sharing rate for prescriptions for fewer than 30 days in certain circumstances;
• Require Part D sponsors to include the prescriber’s National Provider Identifier on prescription drug event records to enhance CMS efforts to address fraud and abuse;
• Increase transparency by requiring Part D pharmacy benefit managers to report additional financial information; and
• Allow MA plans to limit coverage of durable medical equipment (DME) to specific manufacturers or brands if certain conditions are met (discussed in greater detail below). 

CMS also requested comment (without proposing regulatory text) on a potential new requirement for LTC facility consultant pharmacists to be independent of the LTC facility pharmacy, pharmaceutical manufacturers or distributors, or any affiliate of these entities. Comments on the rule will be accepted until December 12, 2011.

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CMS is inviting comments from Part D sponsors and other interested stakeholders on how the Medicare Part D program can more successfully address inappropriate overutilization of drugs. By “overutilization,” CMS means the filling of multiple prescriptions written by different prescribers at different pharmacies for the same or therapeutically equivalent drugs in excess of all medically-accepted norms of dosing (particularly for opioids, antiretrovirals, and atypical antipsychotics). CMS notes that these patterns are considered highly-indicative of drug-seeking behavior due to drug abuse or diversion. CMS is accepting comments until October 31, 2011. 

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The Government Accountability Office (GAO) has released a report entitled "Medicare Part D: Instances of Questionable Access to Prescription Drugs." The GAO found indications of Medicare Part D "doctor shopping" (where individuals see several doctors and pharmacies, receiving more of a drug than was intended by any single physician) for 14 categories of frequently-abused prescription drugs. Specifically, about 170,000 beneficiaries (about 1.8% of beneficiaries receiving the 14 categories of drugs) acquired the same class of frequently abused drugs, primarily hydrocodone and oxycodone, from five or more medical practitioners during 2008 at a cost of about $148 million (about 5% of the total cost for these drugs). The GAO recommends that CMS consider steps such as a restricted recipient program for identified doctor shoppers. CMS agreed with the overall recommendation to improve efforts to curb overutilization in Part D, but disagreed that a restricted recipient program is necessarily the appropriate Part D control.

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CMS is seeking comments regarding whether the agency should revise a requirement that pharmaceutical manufacturers make payments to Medicare Part D drug plans under the Medicare Coverage Gap Discount Program Agreement via electronic fund transfer (EFT).   Some manufacturers have raised concerns that EFT is not practical when an invoice amount is very low because of bank minimum EFT thresholds and transaction fees. CMS is requesting input on whether it should allow an exception to the EFT requirement, and if so, what the exception should be (e.g., payment by check instead). Comments are due October 7, 2011.

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This post was written by Debra A. McCurdy and Susan A. Edwards.

On September 19, 2011, President Obama presented his deficit reduction plan – including $320 billion in proposed federal health spending cuts – to the Joint Select Committee on Deficit Reduction, which was created by the Budget Control Act of 2011 to craft a legislative package to cut the federal deficit by at least $1.5 trillion. If legislation is not adopted to achieve deficit reduction targets by January 2012, $1.2 trillion in across-the-board spending cuts (sequestration) would be triggered, effective January 2013.

The health care industry has a significant stake in the outcome of the Joint Select Committee’s work, since Medicare spending in particular is expected to figure prominently in the Committee’s package. Under President Obama’s plan (which the Joint Select Committee is not obligated to follow), Medicare spending would be cut by about $248 billion over 10 years, with more than half of the savings coming from new Medicare drug rebates. Medicaid and other health funding also would be reduced by about $72 billion. If sequestration ultimately is triggered, on the other hand, Medicare provider payments also would be subject to reduction; but the Congressional Budget Office (CBO) recently estimated that the level of Medicare cuts under sequestration would be approximately $123 billion between 2013 and 2021.

This Alert provides an overview of the Budget Control Act, including the two possible mechanisms for lowering the federal deficit: (1) enactment of the Joint Select Committee’s proposal; and (2) sequestration. In addition, this Alert discusses recent developments, including President Obama’s deficit reduction plan, and provides a timeline for action under the Budget Control Act.

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On September 1, 2011, CMS published a final rule implementing certain provisions of the Medicare Improvements to Patients and Providers Act (MIPPA) of 2008 that revise Medicare Advantage (MA) and Medicare Part D prescription drug benefit regulations (note that these provisions were addressed previously through a series of interim final rules in 2008 and a final rule with comment period in 2009). Among other things, the final rule strengthens MA and Part D plan marketing requirements, including limits on agent/broker commissions; finalizes requirements that Private Fee-for-Service plans contract with a sufficient number and range of providers to meet access and availability standards; and clarifies various standards for Medicare Special Needs Plans. Except as otherwise specified, these regulations are effective on October 31, 2011.

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An HHS Office of Inspector General (OIG) report released August 16, 2011 found that Medicaid’s net unit drug costs (i.e., pharmacy reimbursement minus rebates) were much lower than under Medicare Part D because of substantially higher Medicaid rebates for brand-name drugs. Specifically, while Part D sponsors and state Medicaid agencies paid pharmacies similar prices for the top 100 brand-name drugs, Medicaid recouped 45% of its drug spending in rebates compared to Part D sponsor recoupment of 19% of their drug spending in rebates. Rebates for the top 100 generic drugs under both programs were negligible. In the report, “Higher Rebates for Brand-Name Drugs Result in Lower Costs for Medicaid Compared to Medicare Part D,” the OIG recommends that CMS continually examine differences in rebates across Medicaid and Part D.  

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The GAO has sent a letter to Congress describing how CMS monitors Medicare Part D prescription drug plan sponsors' compliance with mid-year formulary change requirements. CMS oversight activities include reviews of requests prior to implementation; discussions with trade groups, advocates, and other patient representatives; and targeted audit activities. Based on a review of mid-year formulary changes sponsors made in 2008 and 2009, the GAO found that most of these changes (87.4% and 88.6%, respectively) were formulary enhancements that added a drug to the formulary or removed/loosened restrictions. In 2008, about 5% of beneficiaries filled a prescription for a drug that was later affected by a negative mid-year change.

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The OIG has released a report on "Medicare Prescription Drug Sponsors’ Training to Prevent Fraud, Waste, and Abuse."  CMS requires all Medicare Part D prescription drug plan sponsors to have compliance plans that include effective annual training and education for network pharmacies to prevent fraud, waste, and abuse. Based on a survey of all Part D sponsors and a random sample of 528 pharmacies, the OIG found that nearly all Part D network pharmacies received such training in 2009, but not all sponsors documented the training. Furthermore, over one-third of the training materials reviewed failed to include information on the Health Insurance Portability and Accountability Act, and more than half of the materials were developed by pharmacies' corporate offices, contrary to CMS guidance. The OIG also reports that some sponsors did not assess or were unable to determine the extent to which training was effective in preventing fraud, waste, and abuse. The OIG recommends that CMS: reiterate to sponsors their fraud training responsibilities; monitor to determine sponsors' compliance with the training requirements; and ensure that such training is effective in preventing, detecting, and responding to fraud, waste, and abuse. CMS concurred with the recommendations.

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The Government Accountability Office (GAO) has issued a report entitled "Medicare Part D: Changes in Utilization Similar for Randomly Reassigned and Other Low-Income Subsidy Beneficiaries." The report describes how drug coverage and access to pharmacies compared between benchmark (i.e., plans with premiums at or below the benchmark CMS establishes for a given geographic region) and nonbenchmark prescription drug plans (PDPs) from 2007 through 2010. In short, drug coverage was somewhat more limited for benchmark compared to nonbenchmark PDPs and became gradually more restrictive for all PDPs from 2007 through 2010, while pharmacy access was comparable. Benchmark PDPs also imposed utilization management requirements on a similar to slightly greater share of drugs than other PDPs. The extent to which randomly reassigned low-income subsidy (LIS) beneficiaries experienced changes in their drug and pharmacy utilization after reassignment was comparable to the extent of such changes among other LIS beneficiaries from 2007 to 2008. HHS generally agreed with the GAO’s findings.

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CMS has posted a June 29, 2011 memo to pharmaceutical manufacturers on certain ACA Medicare Coverage Gap Discount Program issue. In brief, the memo sets forth CMS’s proposed short- and long-term solutions to a problem with providing to manufacturers “Medicare Part D Discount Information” related to certain low-volume claims while protecting beneficiary identities. It also proposes technical corrections to the deadline for appeals related to coverage gap discount agreements. CMS will accept comments on its proposals until August 1, 2011. The memo also announces that CMS intends to undertake a formal rulemaking process to codify aspects of the Discount Program, including a new definition of “Medicare Part D Discount information.” CMS expects to issue a proposed rule in the fall and a final rule in the spring of 2012.

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On May 31, 2011, CMS issued revised guidance for pharmaceutical manufacturers regarding appealing invoiced discount payments under the Medicare Part D Drug Coverage Gap Discount Program. The revised guidance reflects comments received on CMS's April 7, 2011 draft version of the document. 

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According to a recent OIG report, "Review of Medicare Payments to Prescription Drug Plans on Behalf of Deceased Enrollees," CMS has yet to collect approximately $3.61 million in improper payments made to Medicare Part D prescription drug plans on behalf of deceased Medicare enrollees. The OIG observes that while CMS had correctly stopped payments for the vast majority of deceased enrollees, its systems did not always identify and prevent the improper payments. The OIG recommended that CMS recoup improper payments in a timely manner and implement system enhancements to prevent and detect future improper payments for deceased enrollees. 

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According to a new ACA-mandated OIG report, "Part D Plans Generally Cover Drugs Commonly Used By Dual Eligibles," Part D plan formularies on average include 96% of the 191 drugs commonly used by dual eligible beneficiaries (those that quality for both Medicare and Medicaid). Moreover, 90% of dual eligibles are enrolled in Part D plans with formularies that include at least 90% of the commonly-used drugs. Part D plans vary in the extent to which they apply utilization management tools to the drugs commonly used by dual eligibles. The OIG did not make any related recommendations.  

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On April 15, 2011, CMS is publishing a final rule to update Medicare Advantage (MA) and Part D prescription drug benefit regulations to reflect Affordable Care Act (ACA) requirements and make other program changes for contract year 2012. Specifically, the rule implements ACA provisions that, among other things: limit beneficiary cost sharing for certain services under MA plans; clarify the Secretary’s authority to deny certain MA and Part D plan bids; permit MA and Part D plans to waive a de minimis monthly beneficiary premium for low income subsidy (LIS) eligible enrollees and make related changes to LIS reassignment rules; provide for an income-related increase in Part D monthly premiums; eliminate Part D cost-sharing for full-benefit dual eligible individuals who are receiving certain home and community-based services; codify statutory changes to close the Part D coverage gap; implement a more uniform Part D exceptions and appeals process; codify changes to the MA benchmark calculation and rebate amounts; update the methodology for using quality ratings to determine MA bonus payments; and provide for more frequent dispensing of certain branded drugs for Part D beneficiaries residing in long term care facilities to reduce waste (note that in the final rule, CMS is requiring dispensing in increments of 14 days or less effective January 1, 2013, rather than its proposal for dispensing every 7 days or less effective January 1, 2012). In addition to these ACA provisions, the rule clarifies program requirements to: prevent certain Part D and MA executives whose plans are barred from participation from serving in similar capacities in other plans; establish new standards regarding MA plan employment of appropriate personnel to make certain medical policy determinations; strengthen various beneficiary protection provisions; establish training requirements for MA and Part D sponsor agents and brokers; and establish plan fiscal solvency standards.   While the rule generally is effective June 14, 2011, a number of provisions have earlier or later effective dates (as outlined in tables 1 and 2). CMS estimates that the rule will reduce Medicare spending by about $76 billion for fiscal years (FYs) 2011 through 2016, mainly as a result of the ACA’s reforms to MA payments. The official version of the rule will be available April 15.

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CMS has released an April 7, 2011 memo to pharmaceutical manufacturers seeking comments on draft guidance regarding the bases for invoice-related appeals involving manufacturer discounts provided under the ACA Medicare Coverage Gap Discount Program. Comments will be accepted until April 23, 2011. CMS also has posted the 2012 Medicare Advantage Capitation Rates and Medicare Advantage and Part D Payment Policies and Final Call Letter.

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The ACA requires Part D plans to provide an annual comprehensive review of the participating beneficiary’s medications, which may result in the preparation of a medication action plan or other instructions for the beneficiary. CMS has released its draft standardized format for such medication review action plans. In addition, CMS has issued guidance to Part D plan sponsors on the process for CY 2012 medication therapy management program submissions and related change requests. CMS also has issued a memo on CY 2012 formulary submissions, including timelines. 

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The OIG has released the March 2011 “Compendium of Unimplemented Recommendations,” which summarizes significant OIG recommendations that, if implemented, would result in cost savings and/or improvements in program efficiency and effectiveness. While the OIG recommendations address a wide range of provider and supplier types, high-priority recommendations address, among other things: hospital bad debt policy, hospice services provided to nursing facility residents; Medicare supplier enrollment standards and reimbursement policy; Medicare Advantage payment and marketing policies; Part D bid accuracy and fraud and abuse safeguards; Medicaid prescription drug reimbursement and rebate policies; and clinical investigator disclosure of financial interests.

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Under CMS rules, all Part D sponsors must have compliance plans that include measures to detect, correct, and prevent fraud, waste, and abuse. According to a Government Accountability Office (GAO) report, "Medicare Part D: CMS Conducted Fraud and Abuse Compliance Plan Audits, but All Audit Findings Are Not Yet Available." CMS conducted on-site compliance plan audits of 33 of the 290 sponsors in 2010 to enforce this requirement. While CMS has not yet released the audit findings, agency officials reported that as of December 2010, CMS had issued five marketing and enrollment sanctions and one contract termination action based in part on the audit findings. Separately, the OIG has reported that CMS accepted $3.1 million in noncovered Medicare Part D drug costs for erectile dysfunction drugs approved only for the treatment of sexual or erectile dysfunction in 2007 and 2008. The OIG recommends that CMS determine whether it can impose financial adjustments on sponsors that were paid for such drugs, and that the agency strengthen internal controls to prevent such claims. 

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The Congressional Budget Office (CBO) has issued a report entitled "Reducing the Deficit: Spending and Revenue Options," a compendium of budget options to reduce the federal deficit. Many of the proposals would impact the Medicare and Medicaid programs and health insurance provided under the ACA. Highlights of the options include: adding a “public plan” to the ACA health insurance exchanges; repealing the individual health insurance mandate; limiting medical malpractice torts; converting the federal share of Medicaid’s payments for long-term care services into a block grant; reducing the floor on federal Medicaid matching rates; expanding cost-sharing for beneficiaries receiving SNF and home health services; reducing Medicare rates across the board in high-spending areas; eliminating the Medicare critical access hospital, Medicare-dependent hospital, and sole community hospital programs; and requiring manufacturers to pay a minimum rebate on Medicare Part D drugs for low-income beneficiaries. For each option, the CBO presents the potential fiscal impact and policy ramifications. 

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The HHS Office of Inspector General (OIG) has issued its annual report on top HHS management and performance challenges. One of the key areas identified by the OIG is incorporating program integrity into ACA implementation, given “[t]he magnitude of expenditures and impact on providers, insurers, employers, and beneficiaries from financial and health perspectives.” Areas of particular concern related to ACA implementation include, among others: programs implemented under expedited timeframes; ensuring accuracy of payments involving risk corridors, reconciliation payments, or similar payment structures; changes to Part D and other Medicare and Medicaid payments; and insurance scams and other activities that put patients at risk. 

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The OIG has issued a report entitled "Concerns With Rebates in the Medicare Part D Program." According to the OIG, Medicare Part D drug plan sponsors underestimated manufacturer rebates in 69% of their bids for plan year 2008, which can lead to increased beneficiary premiums. The OIG also discusses rebates associated with encouraged use of certain drugs, the transparency of plan sponsor relationships with their pharmacy benefit managers (PBMs), and how PBM fees received from manufacturers are reported. In response to its findings, the OIG recommends that CMS: require sponsors to more accurately include expected rebates in their bids, require sponsors to use methods CMS deems reasonable to allocate rebates across plans, provide sponsors with sufficient audit rights and access to rebate information, and ensure that sponsors appropriately report fees that PBMs collect from manufacturers. CMS disagreed with certain aspects of the recommendations.

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The OIG has issued a report entitled “Oversight of the Prescriber Identifier Field in Prescription Drug Event Data for Schedule II Drugs." Based on an audit of Prescription Drug Event (PDE) records for Schedule II drugs, the OIG found that approximately 228,000 PDE records with invalid prescriber identifiers accounted for about $20.6 million in gross drug costs in 2007. The OIG recommends that CMS take steps to ensure that Part D plan sponsors include a valid Drug Enforcement Administration number on all PDE records involving Schedule II drugs. CMS did not concur with the OIG’s recommendations, citing the need to ensure that Medicare beneficiaries have access to critical medications. 

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CMS has posted updated guidance to Part D drug plan sponsors on a variety of issues, including CY 2011 Formulary Updates, Exclusion of Part D Payment for Drugs Included in the End-Stage Renal Disease Prospective Payment, Final Medicare Part D Reporting Requirements for Contract Year 2011, and Lessons Learned from the Medicare Part C and Part D Reporting Requirements.

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CMS has released revised draft Medicare Marketing Guidelines, which clarify existing language and incorporate recent policy issuances needed to enhance marketing operations under both the Medicare Advantage (MA) and Medicare Part D prescription drug programs. Comments will be accepted until January 20, 2011. Separately, CMS has posted the 2012 Part C, Part D, Special Needs Plan and Employer/Union-Only Group Waiver Plan Applications.  

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On December 27, 2010, the Centers for Medicare & Medicaid Services (CMS) published a notice requesting comments on an ACA provision that requires the expansion of the RAC program to Medicare Parts C and D (the RAC program currently applies only to fee-for-service Medicare). The goal of the RAC program is to identify improper payments to Medicare providers, and RACs are paid contingency fees based on overpayments collected from providers and for underpayments identified. CMS will accept comments on the notice until February 25, 2011. 

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The OIG has issued a report on "Medicare Part D Pharmacy Discounts for 2008,” which reviews how six prescription drug plan sponsors negotiate discounts with pharmacies, how discounts differ among brand-name and generic drugs, and whether sponsors are passing such discounts on to beneficiaries and the government. For all six plan sponsors, the OIG found that pharmacy benefit managers (PBMs) negotiated lower drug prices with pharmacies in exchange for the pharmacies being in the sponsors’ networks. Pharmacy discounts for brand-name drugs were based on average wholesale prices and varied by the length of supply, pharmacy type, and geographic location, while discounts for generic drugs were based on prices established by the PBMs. The OIG also concluded that five of the six sponsors did not always pass on pharmacy discounts to beneficiaries and the government.  

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On November 22, 2010, CMS is publishing a proposed rule that would update Medicare Advantage (MA) and Part D prescription drug benefit regulations to reflect ACA requirements and make other program changes for contract year 2012. Specifically, the proposed rule would implement ACA provisions that, among other things: limit beneficiary cost sharing for certain services under MA plans; clarify the Secretary’s authority to deny certain MA and Part D plan bids; permit MA and Part D plans to waive a de minimis monthly beneficiary premium for low income subsidy (LIS) eligible enrollees and make related changes to LIS reassignment rules; provide for an income-related increase in Part D monthly premiums; eliminate Part D cost-sharing for full-benefit dual eligible individuals who are receiving certain home and community-based services; codify statutory changes to close the Part D coverage gap (sometimes referred to as the “donut hole”); update the methodology for using quality ratings to determine MA bonus payments; and provide for more frequent dispensing of certain branded drugs for Part D beneficiaries residing in long term care facilities to reduce waste. In addition to these ACA provisions, the rule would clarify program requirements to: prevent certain Part D and MA executives whose plans are barred from participation from serving in similar capacities in other plans; establish new standards regarding MA plan employment of personnel to make certain medical policy determinations; strengthen various beneficiary protection provisions; establish training requirements for MA and Part D sponsor agents and brokers; and establish plan fiscal solvency standards.  CMS will accept comments for 60 days after publication. In a related development, CMS has posted the 2011 Medicare Plan Star Ratings and announced a 3-year demonstration to provide MA plans with financial incentives to provide high-quality care.

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Under the Medicare Coverage Gap Discount Program, which takes effect January 1, 2011, Medicare beneficiaries in the Part D coverage gap will have access to manufacturer discounts equal to 50% of the negotiated price of applicable drugs (that is, prescription drugs approved or licensed under new drug applications or biologic license applications). In order to participate, manufacturers must sign an agreement with CMS to provide the discount on all of its applicable drugs. CMS has announced that for those manufacturers not participating in the coverage gap discount program in 2011, the deadline for returning the signed agreements and labeler code spreadsheet is January 30, 2011 for the 2012 benefit year.

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The OIG has issued a report examining Medicare Part D payments for “terminated drugs” – drugs that are discontinued, have passed their shelf life, or have been pulled from the market for health or safety reasons. According to the OIG, in 2006 and 2007, CMS accepted Medicare Part D sponsors’ prescription drug event (PDE) data totaling $112.1 million associated with 2,967 terminated drugs. The OIG recommended that CMS issue regulations to prohibit Medicare Part D coverage of terminated drugs and, in the interim, publish a list of these drugs on its web site. CMS did not concur with the findings or recommendation. Among other things, CMS disagreed that terminated drugs were actually dispensed to Medicare beneficiaries, and the agency asserted that the only authoritative source of data on product expiration dates at the national drug code level is information officially submitted by manufacturers to FDA. CMS concluded that a new regulatory requirement without more complete information from FDA would not solve the problem. The OIG disagreed and maintains its recommendation.

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Under the Medicare Coverage Gap Discount Program, which takes effect January 1, 2011, Medicare beneficiaries in the Part D coverage gap (sometimes called the "donut hole") will have access to manufacturer discounts equal to 50% of the negotiated price of applicable drugs (that is, prescription drugs approved or licensed under new drug applications or biologic license applications). In order to participate, manufacturers must sign an agreement with CMS to provide the discount on all of its applicable drugs. CMS has posted a complete list of applicable drug labeler codes for the 2011 calendar year (as of October 1, 2010). Beginning January 1, 2011; applicable Part D drugs may be covered under Part D only if they are marketed under labeler codes specified on the CMS list. While CMS does not anticipate many changes to this list during 2011, CMS notes that a manufacturer could add new labeler codes that currently are not marketed or currently are marketed by another manufacturer; in such case, CMS will promptly notify Part D sponsors.

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In response to questions on previous memoranda, CMS has issued additional guidance on "Closing the Coverage Gap in 2011.” The new guidance addresses: enhanced alternative benefits designs without an initial coverage limit; non-calendar year employer group waiver plans; covered Part D drugs that are not applicable drugs under the Medicare coverage gap discount program; Part D vaccine administration fees; discounts on direct member reimbursements for prescriptions filled at out-of-network pharmacies; Part D compounds; and brand-only deductibles. 

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On August 16, 2010, CMS announced changes to 2011 Medicare Part C and D plan ratings on the new Medicare “Plan Finder Tool,” including the use of a “consistently low performer” notation when health and/or drug plan summary ratings fall under 3 stars for at least 3 consecutive years. The notation includes the following message: “Caution: For three years in a row, the Medicare program has given this plan a low overall rating. If you are considering enrolling in this plan, look closely at the detailed ratings for this plan.” 

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A new OIG report, "Review of Less-Than-Effective Drugs in the Medicare Part D Program," examines Medicare Part D coverage of drugs the FDA approved before 1962 but subsequently found to be less than effective, and which should not be covered by Part D. The OIG found that CMS accepted $43.3 million in Medicare Part D sponsors' prescription drug event (PDE) data for calendar years 2006 and 2007 that was associated with less-than-effective drugs. While CMS claims edits identified and rejected the vast majority of PDE data associated with less-than-effective drugs, it missed some drugs because of incomplete data (the OIG notes that there is no definitive list of less-than-effective drugs). The OIG recommended that CMS determine whether it can impose financial adjustments on sponsors that were paid for furnishing less-than-effective drugs. The OIG also recommends that CMS collaborate with FDA to create and maintain a comprehensive list of less-than-effective drugs, regularly disseminate this list to all sponsors, and use this list to reject PDE data for less-than-effective drugs.

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CMS has finalized the model Manufacturer Agreement and model Third Party Administrator Agreement for the ACA Medicare Coverage Gap Discount Program. Under the Discount Program, which takes effect January 1, 2011, Medicare beneficiaries in the Part D coverage gap (sometimes called the "donut hole") will have access to manufacturer discounts equal to 50% of the negotiated price of applicable drugs (that is, prescription drugs approved or licensed under new drug applications or biologic license applications). In order to participate, manufacturers must sign an agreement with CMS to provide the discount on all of its applicable drugs. Notably, in response to comments received on the Draft Model Manufacturer Agreement released in May, the final Manufacturer Agreement requires manufacturers to pay quarterly invoices within 38 days of receipt, rather than 14 days. CMS also will provide certain claims-level utilization data to manufacturers with the invoices, and, upon audit, CMS will provide certain prescription drug event cost elements for a statistically significant sample size to allow manufacturers to validate discount calculations (CMS will not provide beneficiary-identifiable information, even upon audit). The deadline for manufacturers to return signed agreements and an associated labeler code spreadsheet is September 1, 2010.

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CMS is seeking input from Medicare Advantage (MA) and Prescription Drug Plan sponsors and other interested parties on the Contract Year 2011 bid submission process in the Health Plan Management System. Comments will be accepted until July 30.
 

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On July 1, 2010, CMS published an interim final rule with comment period that identifies the National Council for the Prescription Drug Programs (NCPDP) Prescriber/ Pharmacist Interface SCRIPT standard, Implementation Guide, Version 10, Release 6 (Version 10.6) -- or NCPDP SCRIPT 10.6 -- as a backward compatible update of the adopted NCPDP SCRIPT 8.1. As such, the NCPDP SCRIPT 10.6 may be used for conducting certain e-prescribing transactions for the Medicare Part D electronic prescription drug program. The rule is effective July 1, 2010; comments will be accepted until August 30, 2010.

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The OIG has issued a report on "Invalid Prescriber Identifiers on Medicare Part D Drug Claims." Prescriber identifiers on Medicare Part D drug claims are intended to indicate that legitimate practitioners have prescribed medications for Medicare enrollees. In a review of 2007 Part D claims, the OIG concluded that more than 18 million claims representing more than $1.2 billion contained invalid prescriber identifiers (e.g., identifiers were not listed as valid identifiers in the National Provider Identifier, DEA number, or Unique Physician Identification Number registry databases, or they were deactivated or retired). The OIG recommended procedures to improve detection of invalid prescriber identifiers.

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The ACA provides a tax-free, one-time $250 check for beneficiaries who reach the Part D coverage gap during 2010 and are not eligible for low-income subsidies. A June 10, 2010 CMS memo to Part D plan sponsors provides additional information on implementation of coverage gap rebate. The memo notes that prompt submission of prescription drug event (PDE) records is necessary to ensure that eligible beneficiaries receive rebates in a timely manner. CMS also instructs sponsors on how to prepare to address situations such as: the enrollee has not received a rebate check because of an address change or unsubmitted PDE records; the enrollee does not understand how they reached the coverage gap; or the enrollee mistakenly believes they reached the coverage gap, but did not. HHS also has announced a media campaign and other outreach efforts to protect beneficiaries from potential scams associated with the rebate checks. In addition to rebate checks, the ACA provides for a Part D drug discount program under which Medicare beneficiaries in the Part D coverage gap will have access to manufacturer discounts equal to 50% of the negotiated price of the drug (except generic drugs), effective January 1, 2011. CMS continues to provide guidance on this program, including a June 2, 2010 memo to Part D plan sponsors addressing: determinations regarding the applicable discount if the sponsor offers Part D supplemental benefits with fixed copays in the coverage gap; Employer Group Waiver Plan requirements to submit attestations and to make benefit information available for audit; the application of the discount before Platino coverage is applied; and coordination of benefits with other non-Part D payers that incorrectly paid primary to Medicare.

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The OIG released a report entitled "Medicare Part D - Prescription Drug Event Reconciliation Process." The OIG contracted with a certified public accounting firm to audit CMS's Medicare Part D PDE reconciliation process. Under this process, CMS compares estimated subsidy payments made to plan sponsors throughout the year with the cost data submitted by plan sponsors through PDE records and direct or indirect remuneration (DIR) data to determine any residual payments required by CMS to plan sponsors or plan sponsors to CMS. The audit recommended that CMS (1) strengthen controls over the bid review and audit process, (2) improve controls over the accuracy and completeness of PDE and true out-of-pocket accumulation, (3) strengthen controls to ensure completeness and accuracy of DIR data before reconciliation, and (4) conduct more plan sponsor audit procedures throughout the benefit year. CMS generally agreed with the recommendations.

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The Centers for Medicare & Medicaid Services (CMS) has released a memo to Part D Plan Sponsors on "Additional Guidance on 2011 Coverage for Generic Drugs in the Coverage Gap." The memo responds to questions CMS has received about 2011 bid submissions and the new provision regarding coverage for generic drugs in the coverage gap included in the Affordable Care Act.

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On June 10, 2010, CMS is publishing a document correcting technical and typographical errors in its April 15, 2010 final rule entitled "Medicare Program; Policy and Technical Changes to the Medicare Advantage and the Medicare Prescription Drug Benefit Programs."

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Recent guidance and summary documents regarding Affordable Care Act implementation include the following:

• CMS has released a brochure for Medicare beneficiaries with details on the tax-free, one-time $250 check for beneficiaries who reach the Part D coverage gap during 2010 and are not eligible for low-income subsidies. The first checks will be mailed June 10 and additional payments will be made monthly thereafter to newly-eligible beneficiaries.
• On May 24, 2010, CMS sent an email announcement to providers regarding the impact of the Affordable Care Act on payments under the skilled nursing facility (SNF) PPS for FY 2011. The announcement highlights the interaction between provisions that delay the introduction of the Resource Utilization Groups, version 4 (RUG-IV) case mix classification system until FY 2012, require that version 3.0 of the Minimum Data Set (MDS 3.0) Resident Assessment Instrument be implemented as planned in FY 2011, and require the concurrent therapy and look-back revisions to be applied in FY 2011.
• HHS and the Department of Justice (DOJ) have issued a press release highlighting provisions in the new health reform law that will build on current anti-fraud initiatives.
• CMS is sending a mailing to Medicare beneficiaries on "immediate benefits they may see from the enactment of the Affordable Care Act," including changes to the Medicare Part D drug program, preventive benefits, Medicare Advantage program, and insurance reforms.

 

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On May 21 CMS issued a revised version of its program instructions for the Medicare Coverage Gap Discount Program, which was established by the Patient Protection and Affordable Care Act (PPACA) as amended by the Health Care and Education Reconciliation Act of 2010, including CMS's responses to public comments received on its April 30 draft document. By way of background, effective January 1, 2011, the Discount Program generally will make available to Medicare beneficiaries in the Part D coverage gap (sometimes called the "donut hole") manufacturer discounts equal to 50% of the negotiated price of the drug, except with respect to generic drugs. Among many other things, in the updated guidance, CMS: states that it expects all manufacturers of applicable drugs will sign discount agreements and that it does not intend to apply its "extenuating circumstances" authority for 2011 to allow Part D coverage for manufacturers which do not do so; indicates that it expects manufacturers will continue to negotiate with Part D sponsors and other entities to provide rebates on Part D drugs purchased throughout the Part D benefit, and specifically during the coverage gap; reminds Part D sponsors that they will have the opportunity to make formulary changes during the August update window if necessary to address contracting changes; requires retroactive adjustments to applicable discounts when necessary to reflect the retroactive changes to the claim or beneficiary eligibility; states that the invoices to be sent to manufacturers will include "certain claim-level detail"; and indicates that employer group waiver plans will be subject to the program if their benefit designs include a coverage gap, but that they would not receive prospective payments for the program.

Also on May 21, 2010, CMS released a draft model agreement to be used by the HHS Secretary and manufacturers under the Medicare Coverage Gap Discount Program. The draft model agreement released by CMS on May 21 lists 13 specific responsibilities for Part D drug manufacturers. In addition to agreeing to provide the 50% discount for covered Part D drugs, the manufacturer is expected to, among other things: pay each Part D sponsor via electronic funds transfer within 14 days of being invoiced by the CMS contractor for the total quarterly applicable discounts; collect and make available relevant data, including utilization and pricing information; and submit to periodic audits of this data; agree to comply with all requirements imposed by the Secretary for purposes of administering the program; comply with all applicable confidentiality requirements of HIPAA; and provides a dispute resolution mechanism for invoiced amounts disputed by manufacturers, with ultimate appeal to the CMS Administrator, whose decision is final and binding. Contrary to the statement in the revised program instructions, the draft agreement does not provide for any claims-level information to be provided to manufacturers, instead defining the information to be provided as only "summary-level." CMS will not revise the standard agreement based on negotiations with individual manufacturers. Comments on the draft model agreement, which was published in the Federal Register on May 26, will be accepted until June 21, 2010.

The CMS notice also announces a public meeting on June 1, 2010 in Baltimore, Maryland to discuss the draft agreement. At the meeting, CMS will review the Discount Program and draft model agreement, and the agency intends to hear panels of various stakeholders and allow time for questions and answers. 

Separately, on May 21, CMS posted a document entitled “Delayed, Incorrect, and Non-Reporting of Monthly & Quarterly AMP."  The document responds to instances in which drug manufacturers submit information to CMS on why they cannot submit Medicaid average manufacturer price (AMP) data by the required deadline, or why reported AMPs were not calculated according to CMS guidance. CMS is "notifying manufacturers that submitting documentation to CMS explaining the reasons for delayed, incorrect, or non-reporting of AMP data for any reporting period does not discharge the manufacturer from its reporting requirements under Section 1927 of the Act, nor does it shield the manufacturer from possible penalties authorized by section 1927(b)(3)." CMS points out, however, that, there are regulatory provisions addressing situations in which a manufacturer becomes aware that its pricing data may be incomplete or its assumptions may have been incorrect and the manufacturer will not be able to correct or update its pricing in time for monthly or quarterly data submission deadlines. In such cases, the manufacturer may make certain reasonable assumptions and calculate monthly AMPs based on the best data available at the time of submission and then update the pricing data as soon as possible, according to the terms of the statute and rebate agreement.

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CMS has released for comment draft program instructions to Part D plan sponsors regarding implementation of the Medicare Coverage Gap Discount Program, enacted by the PPACA as amended by the Health Care and Education Reconciliation Act of 2010 (Reconciliation Act). In short, effective January 1, 2011, the Discount Program generally will make available to Medicare beneficiaries in the Part D coverage gap (sometimes called the "donut hole") manufacturer discounts equal to 50% of the negotiated price of the drug, except with respect to generic drugs. The draft instructions state that, with the exception of 2011, a drug will only be covered under Part D if the manufacturer has a signed agreement with CMS to provide the discount on coverage gap claims for all of its applicable drugs. CMS notes that because of the timing of Part D plan formulary submissions, CMS must allow coverage in 2011 of Part D drugs irrespective of manufacturer discount agreements, which could mean that some brand-name drugs on plan formularies will not be discounted in the coverage gap next year. CMS will provide additional guidance if this situation occurs. As also discussed in the draft program instructions, Part D sponsors will be required to provide the applicable discounts at point-of-sale, using funds provided by CMS through monthly prospective payments to pay pharmacies. CMS proposes to use a contractor to collect discount payments from manufacturers quarterly, based on new information to be submitted by Part D plan sponsors to CMS as part of prescription drug event (PDE) data. The guidance also covers such issues as enrollee dispute resolution, program monitoring/oversight, and discounts for beneficiaries with supplemental drug coverage. CMS will accept comments on the draft program instructions until May 14, 2010, and the agency will issue final program instructions after considering all public comments.

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On April 15, 2010, CMS published a final rule that revises Medicare Advantage (MA) and Part D prescription drug benefit regulations. Among other things, the rule strengthens various program participation and exit requirements; strengthens beneficiary protections, including in the area of cost sharing limitations; ensures that plan offerings to beneficiaries include meaningful differences; improves plan payment rules and processes; improves data collection for oversight and quality assessment, implements a new Part D formulary policy, and clarifies certain existing program policies. While the rule is effective June 7, 2010, the provisions will not be applicable prior to contract year January 1, 2011, except where otherwise noted.

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On April 5, 2010, CMS released the final 2011 Call Letter for MA and Part D plans, along with the capitation rates for Medicare Advantage plans for 2011, which reflect certain PPACA and Reconciliation Act provisions. Most notably, as required by the Reconciliation Act, the MA capitation rates for 2011 are the same as the capitation rates for 2010. Moreover, as mandated by the PPACA, CMS will calculate government Part D premium subsidies for low-income beneficiaries using plans' basic Part D premiums before the premiums are reduced by Part C rebates. CMS also includes a brief discussion of the PPACA and Reconciliation Act provisions that begin to close the Part D coverage gap in 2011, including the manufacturer discount program, and the effect of these provisions on plans' Part D bids. Other changes to the Advance Notice and draft Call Letter address the methodology that will be used account for the predicted costs of full risk enrollees in chronic care special needs plan; reimbursement for clinical trial services; and reassignment of low-income beneficiaries.

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The Senate Special Committee on Aging held two recent hearings on prescription drug issues, one focusing on rising drug prices under the Medicare Part D program and the other addressing prescription drugs in the nursing home setting. In addition, the House Energy and Commerce Health Subcommittee held a hearing on National Cancer Institute’s progress on cancer research. The Energy and Commerce Health Subcommittee also has scheduled the first Congressional post-health reform hearing on April 21, 2010, focusing on the impact of health care reform law on large employers.

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The Medicare Payment Advisory Commission (MedPAC) has released its March 2010 Data Book on the Medicare Part D Program. Among other things, the report includes data on Part D enrollment, spending and utilization, Part D risk scores, top therapeutic classes, generic dispensing levels, and pharmacy participation levels.

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A number of recent Congressional hearings have focused on health policy issues, including: 

• A House Energy and Commerce Health Subcommittee hearing on “Drug Safety: An Update from the FDA”;
• A Senate Homeland Security and Governmental Affairs Committee, Federal Financial Management Subcommittee hearing on oversight challenges in the Medicare Part D prescription drug program;
• Two House hearings focused on efforts to combat health care fraud and abuse, one by the Judiciary Subcommittee on Crime, Terrorism and Homeland Security, and the other by the Appropriations Labor-HHS Subcommittee; and
• A House Oversight and Government Reform Committee hearing on “Prostate Cancer: New Questions About Screening and Treatment.” 

In addition, the Senate Special Committee on Aging has scheduled a March 17 hearing on rising drug prices and the Part D program.

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The Government Accountability Office (GAO) has issued a report entitled "Medicare Part D: Spending, Beneficiary Cost Sharing, and Cost-Containment Efforts for High-Cost Drugs Eligible for a Specialty Tier." The report provides a variety of information regarding high-cost drugs eligible for a specialty tier in 2007 (such as immunosuppressant drugs, those used to treat cancer, and antiviral drugs). The GAO reports that specialty tier-eligible drugs accounted for 10%, or $5.6 billion, of the $54.4 billion in total Medicare Part D drug spending in 2007. Medicare beneficiaries who received a low-income subsidy accounted for 70% of this specialty tier-eligible drug spending. Among all beneficiaries who used at least one specialty tier-eligible drug in 2007, 55% reached the catastrophic coverage threshold, compared to 8% of those who did not use a specialty tier-eligible drug. Plan sponsors reported having little leverage to negotiate price concessions from manufacturers for most specialty-tier drugs, in part because of CMS's limitation on sponsors’ ability to exclude drugs from their formularies in favor of competing drugs, although price concessions were more likely for drugs with more competitors on the market. Plan sponsors also used practices such as prior authorization to manage beneficiaries’ utilization of specialty tier drugs somewhat more frequently than for lower-cost Part D drugs.

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On March 11, 2010, the Office of Inspector General (OIG) of the Department of Health and Human Services (HHS) published its “2010 Compendium of Unimplemented Office of Inspector General Recommendations,” which outlines previous OIG recommendations designed to achieve savings and increase the effectiveness of HHS programs. The OIG highlights priority recommendations in a number of areas, including (among others): hospital bad debt payments; processing of remedies associated with noncompliant nursing homes; hospice claims for nursing facility beneficiaries; medical equipment supplier compliance with Medicare enrollment standards; Medicare payments for oxygen and inhalation drugs; Medicare payments to Medicare Advantage (MA) organizations; Medicare Part D drug plan payments and program integrity safeguards; Medicaid prescription drug reimbursement and rebate calculations; and oversight of clinical investigator and NIH grantee conflicts of interest. 

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A number of recent hearings in the House of Representatives have focused on health policy issues, including: 

• An Oversight and Government Reform Federal Workforce Subcommittee hearing on H.R. 4489, the "Federal Employees Health Benefits Program Prescription Drug Integrity, Transparency, and Cost Savings Act." 
• A Science and Technology Committee hearing on "How Can NIST (National Institute of Standards and Technology) Better Serve the Needs of the Biomedical Research Community in the 21st Century?"
• An Energy and Commerce Oversight and Investigations Subcommittee hearing entitled "Anthem Blue Cross Premium Hike." 

In addition, today the House Energy and Commerce Health Subcommittee is holding a hearing on medical radiation, and on March 3, the Senate Homeland Security and Governmental Affairs Committee, Federal Financial Management Subcommittee will review oversight challenges in the Medicare Part D prescription drug program.   Two health care fraud hearings have been scheduled for Thursday, March 4. The House Judiciary Subcommittee on Crime, Terrorism and Homeland Security has scheduled a hearing entitled “The Enforcement of the Criminal Laws Against Medicare and Medicaid Fraud,"  and the House Appropriations Labor-HHS Committee is holding a hearing on "Combating Health Care Fraud and Abuse."

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The Centers for Medicare & Medicaid Services (CMS) has issued its “Advance Notice” of changes to payment methodologies for Medicare Advantage (MA) organizations and Medicare Part D prescription drug plans for calendar year 2011. This year CMS is combining the Advance Notice with the annual “Call Letter” to health plans outlining upcoming non-payment policy changes. Among other thing, the Advance Notice includes: a preliminary estimate of a 1.38% change in the national per capita MA growth percentage; changes in risk adjustment payment methodologies; a 3.41% risk adjustment to reflect differences in coding patterns between MA plans and fee-for-service providers; and an update to the standard Part D benefit parameters. Other issues addressed in the Call Letter include practices to curb waste of unused drugs, reassignment, release of data, and drug coverage for beneficiaries with ESRD. Comments will be accepted until March 5, 2010. 

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On February 18, 2010, the Department of Health and Human Services (HHS) announced that it will be providing states with an additional $4.3 billion in federal funding to offset the cost of Medicare Part D prescription drug coverage for individuals eligible for both Medicare and Medicaid. The increased aid results from HHS applying the temporary enhanced Federal Medical Assistance Percentage (FMAP) payments authorized by the American Recovery and Reinvestment Act (ARRA) to state “clawback” payments (state payments designed to offset the added expense to Medicare Part D for assuming drug costs for dual eligibles). The temporary adjustment in the clawback payments will apply for the period of October 1, 2008 through December 31, 2010. 

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On March 18, 2010, CMS is hosting its second Part D Data Symposium at CMS headquarters.  The conference will consist of educational sessions dealing with Part D research and outcomes presentations from both CMS and industry experts. Pre-registration is required. 

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On December 9, HHS published a final rule that will implement the procedures that HHS will follow at the Administrative Law Judge and Medicare Appeals Council levels in deciding appeals brought by individuals who have enrolled in the Medicare prescription drug benefit program. In addition, the regulation will implement the reopening procedures that will be followed at all levels of appeal. HHS also published a separate final rule regarding changes to the Medicare claims appeal procedures. The rule allows Medicare beneficiaries and, under certain circumstances, providers and suppliers of health care services, to appeal certain adverse determinations regarding Medicare Part A and Part B claims. Both rules are effective January 8, 2010.

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 The OIG has issued a report on Midyear Formulary Changes in Medicare Prescription Drug Plans, which concludes that Part D drug plan sponsors and CMS are managing midyear formulary changes without major problems.  The OIG found that all drug plan sponsors made formulary changes in 2008, but the majority (64%) of these changes were positive (i.e., they added new drugs, reduced cost sharing, or removed utilization controls).  Of the changes that were more restrictive (which must be approved by CMS), 62% promoted generic drug substitution. According to the OIG, most plan sponsors met beneficiary notification requirements for formulary changes.

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The OIG has issued a report examining the extent to which Medicare Drug Integrity Contractors (MEDICs) identify Medicare Part D prescription drug fraud and abuse. The OIG found that 87% of potential incidents identified by the MEDICs in FY 2008 were identified through external sources, such as complaints, rather than proactive methods such as data analysis. According to the OIG, the MEDICs’ use of innovative techniques for data analysis was hampered by problems with accessing and using Medicare prescription drug event and Part B data, along with the MEDICs lack of authority to directly obtain information from downstream entities such as pharmacies, pharmacy benefit managers, and physicians. The OIG made a series of recommendations to improve the MEDICs’ access to accurate and comprehensive data, some of which would require statutory and/or regulatory changes.

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The HHS Office of Inspector General (OIG) has issued two reports on electronic prescribing (e-prescribing) in the Medicare Part D program. First, a report entitled "Medicare Part D E-Prescribing Standards: Early Assessment Shows Partial Connectivity" discusses the extent to which Part D plan sponsors have implemented Part D e-prescribing standards promulgated by CMS. Based on a survey of all plan sponsors between August and September 2008, nearly 80% of plan sponsors reported at least partial plan-to-prescriber connectivity, but few reported complete connectivity. Most plan sponsors had complete plan-to-dispenser connectivity. A second report, "Medicare Part D Plan Sponsor Electronic Prescribing Initiatives,” found that plan sponsors have launched voluntary e-prescribing initiatives to increase prescriber adoption of e-prescribing. As of September 2008, more than a third of sponsors had implemented or planned such initiatives, which included such components as free or discounted software, hardware, training, internet connectivity, or financial incentives. Some sponsors who implemented such initiatives reported an increase in generic substitutions and formulary compliance. 

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On October 9, 2009, the Centers for Medicare & Medicaid Services (CMS) released a proposed rule that would make numerous changes to the requirements for sponsors of Medicare Advantage (MA) and Medicare Part D drug plans intended to strengthen beneficiary protections, improve plan payment rules, and clarify various program participation requirements. Among many other things, the rule would: enhance CMS’s ability to identify and approve qualified drug and health plans and remove consistently-poor performers; clarify plan requirements relating to beneficiary cost-sharing; eliminate duplication in drug and health plan bids submitted by the same organization by requiring a meaningful difference between an organization’s product offerings; expand the collection of prescription drug event data elements; clarify Part D protected drug categories and classes; and make other refinements and technical changes to the Part C and Part D regulations. CMS will accept comments on the proposed rule until December 8, 2009. The official version of the rule is scheduled to be published in the Federal Register on October 22, 2009. CMS also has released information on 2010 Medicare Part D and MA plan options and premium and copayment amounts.

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The OIG has issued a report on “Medicare Part D Reconciliation Payments for 2006 and 2007." The OIG found that Part D sponsors owe $18 million to Medicare for the 2007 Part D payment reconciliation, compared to $4.4 billion that sponsors owed for 2006. Despite this improvement, the OIG asserts that sponsors continue to submit inaccurate bids and make large unexpected profits. The OIG recommends that CMS: (1) ensure that sponsors' bids more accurately reflect their costs of providing the benefit to Medicare beneficiaries, (2) hold sponsors more accountable for bid inaccuracies, (3) determine whether changes to the risk corridors are appropriate, (4) determine whether alternative methodologies would better align payments with sponsors' costs for the low-income cost-sharing and reinsurance subsidies, and (5) follow up with the sponsors that owe funds for 2006.

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On August 13, 2009, CMS announced that the average monthly premium for standard Part D prescription drug coverage will be $30 in 2010, up $2 from the 2009 average premium. For 2010, CMS will be conducting a “Medicare Demonstration to Revise the Part D Low-Income Benchmark Calculation,” which will have the effect of decreasing the number of low-income beneficiary reassignments to plans with premiums below the 2010 subsidy amount. Nevertheless, CMS estimates that approximately 800,000 Medicare beneficiaries who are eligible for low-income subsidies will need to change plans in 2010 to remain in a zero-premium plan. CMS also released the 2010 national average monthly bid; the base beneficiary premium; the regional low-income subsidy premium amounts for 2010; and the 2010 Medicare Advantage regional preferred provider organization benchmarks. In addition, CMS has revised its Medicare Marketing Guidelines to reflect Medicare Improvements for Patients and Providers Act changes, effective August 7, 2009.

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An OIG report on the Medicare Prescription Drug Plan Finder found that Plan Finder Part D drug price data frequently overestimate the charges to beneficiaries when they have their prescriptions filled at the pharmacy. Specifically, based on a review of 10 drugs commonly used by seniors, the Plan Finder drug prices were a median of 28% higher than actual drug costs, and exceeded actual drug costs for 92% of claims. The OIG recommended that CMS take steps to ensure that Plan Finder drug prices accurately reflect actual drug costs. 

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The White House has proposed $313 billion in new Medicare and Medicaid cuts over 10 years, in addition to the provisions included in the Administration's proposed FY 2010 budget. Among other things, the Administration is endorsing: incorporating productivity adjustments into Medicare payment updates; reducing hospital subsidies for treating the uninsured as coverage increases; paying "better" prices for Medicare Part D drugs (including reducing reimbursement for beneficiaries dually eligible for Medicare and Medicaid); increasing the equipment utilization factor for advanced imaging from 50 percent to 95 percent; adopting MedPAC’s recommendations for 2010 payments to skilled nursing facilities, inpatient rehabilitation facilities, and long-term care hospitals; and cutting waste, fraud, and abuse (including prepayment review for physicians in high-risk areas or those that order a high volume of high-risk services such as durable medical equipment, home health, and home infusion services).

The following chart summarizes the Obama Administration's health reform financing proposals released to date:

Source	Health Care Reserve Fund ($ in billions)
	10 years
FY 2010 Budget -  Medicare and Medicaid Savings -  Revenues	$635 $309 $326
Additional Medicare and Medicaid Savings -  Incorporate productivity adjustments into Medicare payment      updates -  Reduce hospital subsidies for treating the uninsured as       coverage increases -  Pay better prices for Medicare Part D drugs -  Other	$313 $110  $106  $75 $22
Total	$948

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CMS is seeking White House Office of Management and Budget (OMB) approval of revisions to the draft 2010 Medicare Part D prescription drug plan reporting requirements (see ). OMB will accept comments on the revised forms through June 22, 2009.

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The OIG has issued a report entitled “Medicare Part D Payments for Beneficiaries in Part A Skilled Nursing Facility Stays in 2006.” The OIG concluded that the majority of the $75 million in Medicare Part D payments on behalf of beneficiaries in Part A SNF stays in 2006 “were most likely inappropriate,” since they may have been used in the facility or to facilitate the beneficiaries’ discharge, in which case they should have been excluded from Part D (with certain exceptions). The OIG recommends that CMS: provide additional guidance about when Parts A and D can pay for drugs for beneficiaries preparing for discharge; educate SNFs, pharmacies, and Part D sponsors that drugs covered under Parts A or B for beneficiaries in SNF stays are not eligible for Part D coverage; implement retrospective reviews; and follow up with the SNFs and pharmacies responsible for a large percentage of Part D payments for beneficiaries in Part A SNF stays.

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Today Senate Finance Committee Chairman Max Baucus and Ranking Member Chuck Grassley released a policy paper setting forth options for financing health reform. This is the third and final set of policy options for discussion before the Finance Committee marks up legislation in June. The Finance Committee has scheduled a member "walk through" to discuss the financing policy options on May 20, 2009. The financing options include, among other things: adjusting annual market basket updates and imposing “productivity adjustments” for various Medicare fee-for-service providers; a variety of payment changes impacting hospitals and home health agencies; Part B payment reforms (targeting potentially-overvalued Part B services and utilization of advanced diagnostic imaging services); improvements to promote payment accuracy for durable medical equipment; a variety of reforms pertaining to Medicaid drug rebates; policy options to reduce inappropriate spending variations across and within geographic areas; revisions to beneficiary cost-sharing obligations, including Part D means testing; and a variety of tax code changes involving the exclusion for employer-provided health coverage, changes to the itemized deduction for medical expenses, and excise tax provisions affecting alcohol and sugar-sweetened beverages.  The Finance Committee will accept comments on the health reform financing options through May 26, 2009.

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On June 1, 2009, the Practicing Physicians Advisory Council (PPAC) is holding its quarterly meeting to discuss certain proposed changes in regulations and manual instructions related to physicians' services. Agenda topics include value-based purchasing, Recovery Audit Contractors (RAC), IPPS issues, DMEPOS surety bond, and various Medicare Part C and D issues. Registration is required. 

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On March 30, 2009, CMS issued its annual “Call Letter” for potential sponsors of Medicare Advantage (MA) and Part D Prescription Drug Plans (PDPs) in 2010. In announcing the Call Letter, CMS stated that it is taking steps to ensure that MA plan cost-sharing frameworks do not expose sicker beneficiaries to excessive out-of-pocket charges. MA organizations also are being directed to streamline their plan offerings to facilitate beneficiary plan selection. PDP sponsors also will be required to provide more information to beneficiaries on their utilization management criteria and their policies on drugs during the coverage gap. MA and PDP sponsors will be asked to conduct audits on the data provided to CMS about the operation of their plans, and existing program compliance audits will be more targeted, data-driven, and risk-based.  In addition, on April 6, 2009, CMS announced the 2010 Medicare Advantage growth trend and 2010 payment policies for MA and PDP organizations . CMS notes that for the first time, CMS will make a “coding pattern differences adjustment” to Medicare Advantage risk scores, reducing Medicare Advantage payment rates in 2010 to account for differences in disease coding patterns between MA organizations and the original Medicare program (Parts A and B). The adjustment will be applied as a uniform 3.41 percentage reduction to all Medicare Advantage plans’ Part C risk scores in 2010.

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CMS has re-issued the draft 2010 MA, MA-Prescription Drug (MA-PD), Cost-Based Plan, and Stand Alone Prescription Drug Plan (PDP) Call Letter for public commen. CMS originally released a draft Call Letter for public comment on January 8, 2009 and withdrew it on January 22, 2009 pending further review. Comments on the letter should be submitted to CMS by March 6, 2009; comments previously submitted on the earlier version should be resubmitted if still relevant. In addition, on February 20, 2009, CMS issued its “Advance Notice” of changes in methods that will be used to calculate capitation rates for payments to Medicare Advantage organizations for 2010. The Advance Notice also announces policy and technical changes to the payment methodology for MA plans and PDPs. The final capitation rates for each county are scheduled to be announced on April 6, 2009. The Advance Notice also describes changes in risk adjustment of MA and PDP payments. Comments on the Advance Notice also are due March 6, 2009. 

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The HHS OIG has released a report entitled "Effect of the Part D Coverage Gap on Medicare Beneficiaries Without Financial Assistance in 2006." The OIG found that 7% of Part D beneficiaries entered the coverage gap and did not receive financial assistance with prescription drug costs in 2006.  During the coverage gap, 69% of beneficiaries decreased the average number of drugs they purchased, which could have resulted from beneficiaries trying to reduce their financial burden during the coverage gap, or from appropriate reductions due to changes in beneficiaries' health status.  The greater the average number of drugs per month that beneficiaries purchased before entering the coverage gap, the more they reduced the average number of drugs per month that they purchased during the coverage gap. The OIG recommends that CMS support outreach and education activities targeted at beneficiaries who make more prescription drug purchases before entering the coverage gap.

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The has OIG issued a report entitled "Comparing Pharmacy Reimbursement: Medicare Part D to Medicaid." The OIG found that Part D and nationwide Medicaid pharmacy reimbursement amounts for most of the single-source drugs that the OIG reviewed were similar; however, Medicaid reimbursement amounts for the multiple-source drugs reviewed were typically higher than the Part D amounts. The OIG notes that it compared only the amount reimbursed to pharmacies by Part D and Medicaid; the OIG did not compare total program expenditures or examine the impact of rebates or post-point-of-sale price concessions. Moreover, in a review of five states, the OIG found that Medicaid and Part D ingredient cost reimbursement amounts were similar for single-source drugs, but the average Medicaid ingredient costs exceeded the average Part D ingredient costs for most multiple-source drugs under review. In addition, Medicaid dispensing fees were substantially higher than average Part D dispensing fees for both the single-source and multiple-source drugs under review.

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CMS has re-issued the draft 2010 Medicare Advantage (MA), Medicare Advantage-Prescription Drug (MA-PD), Cost-Based Plan, and Stand Alone Prescription Drug Plan (PDP) Call Letter for public comment. CMS originally released a draft Call Letter for public comment on January 8, 2009 and withdrew it on January 22, 2009 pending further review. Comments/concerns should be submitted to CMS by March 6, 2009; comments already submitted based on the January 8, 2009 version of the draft Call Letter, if they are still relevant to the revised document, should be resubmitted. 

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On January 16, 2009, CMS published an interim final rule with comment period to implement MIPPA provisions regarding protected classes of drugs under the Medicare Part D prescription drug benefit. For 2010, CMS is continuing to require Part D sponsors to include all or substantially all Part D drugs in the antidepressant, antipsychotic, anticonvulsant, immunosuppressant, antiretroviral, and antineoplastic classes for 2010. For contract years 2011 and beyond, any CMS modifications to the protected categories and classes will be made through rulemaking. CMS notes that to identify appropriate drug categories and classes for future revisions, it is beginning an extensive examination of widely-used drug treatment guidelines, analyzing Part D data, and planning validation review with input from an expert panel of physicians and pharmacists. The rule is effective January 16, 2009, and comments will be accepted until March 17, 2009. 

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CMS has rescinded its draft 2010 Medicare Advantage (MA), Medicare Advantage-Prescription Drug (MA-PD), Cost-Based Plan, and Stand Alone Prescription Drug Plan (PDP) Call Letter so it can be further reviewed by the new Obama Administration. CMS will post a new version of the draft as soon as possible. 

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The HHS Office of Inspector General (OIG) has issued a report on the top management and performance challenges facing the HHS. Key areas identified by the OIG include: Medicare Part D oversight (including drug pricing and rebates, fraud and abuse safeguards, and access to accurate information); Medicare integrity (including DME fraud and competitive bidding); Medicare Advantage; Medicaid and State Children’s Health Insurance program integrity (including prescription drug fraud and pharmacy reimbursement); quality of care (including pay-for-performance, “never events,” and transparency of ownership and performance); emergency preparedness and response; oversight of food, drugs, and medical devices (including food safety and security, drug and medical device safety, and transparency of provider financial interests); grants management; integrity of information systems and the implementation of health information technology; and ethics program oversight and enforcement.

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On January 12, 2009, CMS published a final rule that revises Medicare’s definition of Part D negotiated prices to require drug plan sponsors to use the amount paid to a pharmacy (rather than the sometimes lower "lock in price" paid to a pharmacy benefit manager) as the basis for determining cost sharing for beneficiaries and for reporting a plan’s drug costs to CMS. The rule also, among other things: requires new enrollees in special needs plans to be members of the population that the plan is designed to serve; permits CMS to impose on plans a civil money penalty of up to $25,000 for each enrollee adversely affected by a contract violation; codifies CMS policy regarding using the best available evidence to determine an enrollee’s eligibility for extra help through the Part D Low Income Subsidy program; prevents beneficiaries enrolled in Medicare Advantage and Part D plans who elect to have their premiums withheld from their Social Security payments from being double-billed for premiums; and requires Medicare Medical Savings Account plans to report cost and quality information to beneficiaries.  CMS also issued a related proposed rule providing CMS with the authority to "waive or modify" statutory requirements pertaining to the Retiree Drug Subsidy (RDS) program in order to facilitate the offering of a prescription drug plan covering employees or retirees has also been released. Comments on the proposed rule will be accepted until March 13, 2009.

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CMS has released draft 2010 Medicare Advantage (MA), Medicare Advantage-Prescription Drug (MA-PD), Cost-Based Plan, and Stand Alone Prescription Drug Plan (PDP) Call Letter. The 2010 Call Letter focuses on new regulatory requirements and other new policy clarifications and statutory requirements affecting MA and Part D programs in order help plans prepare their bids for the upcoming year. CMS will separately issue technical and procedural clarifications regarding bid and formulary submissions, benefits, HPMS data, CMS marketing models, and other operational issues of interest to sponsoring organizations. Comments on the draft will be accepted through January 30, 2009.

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The OIG has issued a report entitled “Comparing Special Needs Plan Beneficiaries to Other Medicare Advantage Prescription Drug Plan Beneficiaries.” The OIG found that Special Needs Plan (SNP) beneficiaries filled an average of 11% more prescriptions than other Medicare Advantage Prescription Drug Plan (MA-PD) beneficiaries, and the average annual prescription cost per SNP beneficiary was 49% higher compared to that of other MA-PD beneficiaries. On the other hand, SNP and other MA-PD beneficiaries were similarly exposed to potentially inappropriate drug pairs that could lead to adverse drug events. The OIG recommends that CMS take steps to help physicians and pharmacists prevent inappropriate drug pairs. Separately, the Government Accountability Office (GAO) has issued a report entitled "Medicare Part D: Opportunities Exist for Improving Information Sent to Enrollees and Scheduling the Annual Election Period" Sponsors, pharmacists, beneficiary advocates, and counselors GAO interviewed expressed concern that CMS’s model Annual Notice of Change (ANOC) for the 2008 annual election period (AEP) did not effectively communicate drug plan changes to enrollees. In addition, although CMS and plan sponsors made improvements to the enrollment process, CMS data showed that about 15% of beneficiaries who chose to switch plans in the 2008 AEP were not fully enrolled in their new plan by January 1. To improve the AEP, the GAO recommends that CMS review alternative formats to communicate plan changes. Additionally, Congress should consider authorizing the HHS Secretary to amend the AEP schedule to include a processing interval between the end of the AEP and the effective date of new coverage. CMS concurred with the GAO recommendations.

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On November 21, 2008, CMS published a notice correcting technical and typographical errors identified in the September 18, 2008 interim final rule with comment period that revises the regulations governing the Medicare Advantage program, the Part D prescription drug benefit program, and section 1876 cost plans to conform with provisions of the Medicare Improvements for Patients and Providers Act (MIPPA). The correcting amendment is effective November 21, 2008, and is applicable on September 18, 2008. 

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On November 14, 2008, the Centers for Medicare & Medicaid Services (CMS) published an interim final rule with comment period revising marketing requirements for Medicare Advantage (MA) plans and Medicare Part D prescription drug plans (PDPs). Specifically, the rule amends requirements just issued on September 18, 2008 to further limit the compensation that can be paid to agents or brokers with respect to MA and Part D plans in order to limit incentives to switch beneficiaries between plans to generate commissions, as authorized by the Medicare Improvements for Patients and Providers Act (MIPPA). Under the September 18 rule, plans were required to pay compensation on a six-year cycle, comprised of an initial enrollment year and five renewal years, with compensation in the initial year capped at 200% of the amount paid for renewal years. CMS received complaints, however, that plans were misinterpreting the rule’s intent by proposing structures under which compensation in the initial year in the cycle was less than the renewal years and renewal compensation varied from year to year. Among other things, the November 14 rule modifies the marketing requirements by:

• Specifying that all compensation paid to agents and brokers reflect fair-market value based on the commissions paid in the past, adjusted for inflation for similar products in the same geographic area.
• Requiring that renewal compensation equal 50% of the compensation paid for that beneficiary in the initial year of the six-year compensation cycle.
• Applying similar limits on payments to organizations such as Field Marketing Organizations.
• Requiring plans to submit to CMS their compensation structures for the previous three years plus the compensation structure they are implementing for 2009, and preventing rates from being changed without prior CMS approval.
• Requiring plans to initially pay renewal rate compensation in 2009; upon CMS approval, plans will retrospectively pay agents/brokers an additional amount to total the initial compensation rate filed with CMS.

The rule is effective November 10, 2008; CMS is accepting comments on the rule until December 15, 2008. 

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The OIG and the Government Accountability Office (GAO) have issued several reports regarding the Medicare Part D drug program. In a report entitled “Medicare Drug Plan Sponsors' Identification of Potential Fraud and Abuse,” the OIG recommends a number of steps to address fraud and abuse. For instance, the OIG calls on CMS to: review variances in potential fraud and abuse among plans; determine if Part D prescription drug plan (PDP) sponsors investigated and corrected potential abuses; and require PDP sponsors to report on their fraud and abuse programs. In a separate report, “Oversight of Prescription Drug Plan Sponsors' Compliance Plans,” the OIG found that CMS conducted only one focused audit and no routine audits of PDP sponsors’ compliance plans in 2007. Further, CMS did not verify sponsor’s responses to a compliance plan self-assessment. CMS agreed with an OIG recommendation that CMS conduct audits to verify that PDP sponsors' compliance plans meet regulatory and manual requirements. Additionally, an OIG report on "Centers for Medicare & Medicaid Services Audits of Medicare Part D Bids" found that one-quarter of all bid audits completed for plan years 2006 and 2007 identified at least one material finding, but CMS has not adjusted PDP sponsors’ bid amounts based on such findings. The OIG recommends that CMS hold plan sponsors more accountable for material findings identified in bid audits, and conduct the required number of financial audits in a timely manner. Finally, the GAO has reported on "Medicare Part D Prescription Drug Coverage: Federal Oversight of Reported Price Concessions Data." The GAO found that CMS has initiated about half of its planned detailed financial audits to examine Part D price concessions data for 2006, with the rest delayed due to financial constraints. The audits are expected to be completed by October 2009. CMS also pointed to variation in defining and reporting price concessions data, such as differences in how sponsors allocate manufacturer rebates between their Part D plans and other business, as likely creating oversight challenges.

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On November 6 and 7, 2008, the Medicare Payment Advisory Commission (MedPAC) is meeting to discuss a number of health care policy issues, including reporting of physicians’ financial relationships, medical imaging services, the Medicare Part D and Medicare Advantage programs, hospice payments, and physician resource use. 

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CMS has posted guidance for Medicare Part D prescription drug plan sponsors on compliance with its September 18, 2008 final rules updating Part D marketing regulations in conformance with the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA). 

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On November 5, 2008, CMS will host a Special Open Door Forum on “Medicare Part D Payments to Indian Health Service (IHS) & Tribal Facilities,” including an overview of Medicare Part D changes for 2009. 

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On October 10, 2008, the Centers for Medicare & Medicaid Services (CMS) published a notice soliciting comments on the Medicare Part D/Medicare Advantage Calendar Year (CY) 2010 Bid Pricing Tool and the CY 2010 Plan Benefit Package software and formulary submission. CMS also has posted the forms and related documents regarding the information collections. CMS will accept comments on the forms through December 9, 2008.

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On October 10, 2008, CMS announced that beneficiaries may now review specific Medicare Part D prescription drug plan and Medicare Advantage health plan information for 2009 online through the Medicare Prescription Drug Plan Finder and Medicare Options Compare. 

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On October 30, 2008, CMS is hosting a Prescription Drug Event (PDE) Symposium at CMS headquarters in Baltimore for researchers and other interested parties. The meeting will discuss the Medicare beneficiary Part D experience and what new PDE data show. The registration deadline is October 24, 2008.

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On September 18, 2008, the Centers for Medicare & Medicaid Services (CMS) published two final rules modifying Medicare Advantage (MA) and Part D Prescription Drug Plan (PDP) marketing and other requirements. 

• The first rule implements certain MA and PDP marketing provisions and a requirement related to the disclosure and dissemination of Part D information included in a May 16, 2008 proposed rule and subsequently enacted into statute by the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA). Specifically, the rule: prohibits plans from providing meals to prospective enrollees at promotional events; prohibits unsolicited contact with potential enrollees (e.g., door-to-door solicitation); prohibits plans from cross-selling non-health care related products during Medicare marketing activities; restricts marketing activities in provider offices (except in certain common areas); prohibits plans from conducting marking activities at educational events; requires that only state-licensed representatives conduct marketing activities; requires plans to disclose certain beneficiary information at the time of enrollment and 15 days before the annual coordinated election period; and defines certain terms related to marketing activities. The rule is effective September 18, 2008 and applies to the 2009 benefit year marketing campaign, beginning October 1, 2008.  
  

• The second rule, which addresses a variety of other MIPPA MA and Part D provisions, is subject to a public comment period until November 17, 2008. With regard to Part D and MA marketing, the rule, among other things: codifies the $15 limit on nominal gifts to prospective enrollees; codifies restrictions on co-branding; limits marketing appointments to the scope of healthcare-related products agreed upon by the beneficiary in advance; restricts agent/broker compensation arrangements to reduce financial incentives to move a beneficiary from one plan to another; and establishes requirements for agent/broker training and testing and the reporting of terminated agents/brokers. The rule also includes provisions regarding special needs plans (SNP), including: an extension of the authority for SNPs through 2010; state contracting requirements for new and expanding dual eligible SNP applicants; model of care requirements covering scope of provider networks, individual assessments, outcomes measures, and interdisciplinary care management; cost-sharing limitations; disclosure requirements; and quality measure reporting. The rule also includes new access and quality improvement requirements for private fee-for-service plans, codifies the waiver of the late enrollment penalty for low-income subsidy enrollees; implements requirements regarding the prompt payment of clean claims; clarifies claims submission timeframes for long term care pharmacies; modifies cost plan contracts, phases out indirect costs for medical education from MA capitation rates; revises the use of certain Part D data; updates the prescription drug pricing standard; and makes exemptions to the income and resource requirements for Part D low-income subsidy eligibility determination.  The provisions of the rule generally apply beginning October 1, 2008, with certain exceptions.  CMS published a notice correcting technical and typographical errors identified in this rule on November 21, 2008. 

Separately, on September 26, 2008, CMS published a notice correcting a number of technical and typographical errors in its December 5, 2007 final rule regarding Medicare Advantage (MA) and Part D drug plan contract determination and compliance issues.

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CMS has announced the 2009 Medicare PDP and MA plan options. Details about the specific plans in each region will be available mid-October 2008. Open enrollment for 2009 prescription drug coverage begins November 15, 2008 and ends December 31, 2008.

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The HHS Office of Inspector General (OIG) has releaseda report entitled "Marketing Materials for Medicare Prescription Drug Plans." Among other things, the OIG found that CMS's oversight of marketing materials for stand-alone Medicare prescription drug plans is limited, the agency’s model documents are not consistent with its guidelines, and 85% of marketing materials failed to meet at least one element of CMS's guidelines.

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The Government Accountability Office (GAO) has issued a report on Medicare Part D low-income subsidies (LIS) and low-income beneficiary access to state and manufacturer drug programs. In brief, the GAO found that in 2006 and 2007, assets and income were both important factors in LIS denials, but income was of greater importance. The GAO also reports that the availability and extent of state and drug manufacturer low-income Medicare beneficiary prescription assistance programs are uneven. State Pharmaceutical Assistance Programs are available in 23 states, but differ in the type and extent of assistance they offer with beneficiaries’ out-of-pocket prescription drug costs. Prescription drug manufacturers’ Patient Assistance Programs (PAP) also assist low-income individuals in obtaining prescription drugs, but not all PAPs are open to Part D beneficiaries, and the drugs provided are limited to those of the sponsoring manufacturers.

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The Government Accountability Office (GAO) has issued a report examining (1) the extent to which certain Medicare Part D drug plan sponsors have implemented programs to control fraud, waste, and abuse, and (2) the extent of CMS’s oversight of Part D plan sponsors’ programs to control fraud, waste, and abuse. The GAO concluded that five of the largest Part D plan sponsors’ had not completely implemented all of CMS’s required compliance plan elements and selected recommended measures for Part D fraud and abuse programs. Moreover, CMS oversight of Part D sponsors’ fraud and abuse programs has been limited. The GAO recommends that CMS conduct timely audits of Part D sponsors’ fraud and abuse programs, and CMS concurred.

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CMS has released the 2009 Part D national average monthly bid amount, the Medicare Part D base beneficiary premium, the Part D regional low-income premium subsidy amounts, and the Medicare Advantage regional benchmarks.  In addition, CMS has issued guidance to clarify its “best available evidence” (BAE) policy, which requires Part D drug plan sponsors to establish the appropriate cost-sharing for low-income beneficiaries when presented with evidence that the beneficiary's information is not accurate. 

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The OIG has issued a report entitled "Review of Medicare Part D Contracting for Contract Year 2006."  The report examines Medicare prescription drug plan (PDP) sponsors’ strategies for contracting with local, community pharmacies to provide Part D prescription drugs to Medicare beneficiaries. The pharmacies and their pharmacy services administrative organizations reported experiencing problems related to PDP sponsors’ network development methods, standard terms and conditions, extended-day supply terms, negotiations, and network requirements and contracting requirements. The OIG provided a number of recommendations related to contracting practices.

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On July 15, 2008, the House and Senate overrode the President's veto of H.R. 6331, the “Medicare Improvements for Patients and Providers Act of 2008” (MIPPA).  The law rescinds a 10.6% cut in physician payments and delays a controversial medical equipment competitive bidding program, both of which temporarily went into effect July 1, 2008, and makes numerous other Medicare and Medicaid policy changes.  Highlights of the law include the following:

• Physician Payments: MIPPA cancels a 10.6% Medicare physician fee schedule cut that was triggered on July 1, 2008 and provides a 1.1% increase for 2009 (rather than the forecasted 5.4% cut).  The law also expands the Physician Quality Reporting Initiative, promotes electronic prescribing, and requires non-hospital advanced imaging providers to be accredited by 2012.

 

• DMEPOS Competitive Bidding.  MIPPA delays and reforms the Centers for Medicare & Medicaid Services’ (CMS) competitive bidding program for certain categories of durable medical equipment, prosthetics, orthotics and supplies (DMEPOS).  H.R. 6331 terminates contracts awarded under round one, rebids those areas in 2009, and delays round two bidding until 2011.  The delay is financed by cutting fee schedule payments for round one items by 9.5% nationwide beginning January 1, 2009.  MIPPA also includes a series of procedural improvements to the bidding process. A detailed Reed Smith analysis of the MIPPA DMEPOS bidding provisions is available on our website.
• Therapy Caps Exception Process.  MIPPA extends through December 31, 2009 the outpatient therapy service cap exceptions process.
• Clinical Laboratory Services.  The act repeals the clinical lab competitive bidding demonstration project and reduces the clinical lab fee schedule update by 0.5% in each of the next 5 years.
• Medicare Advantage (MA) Provisions.  MIPPA makes a series of MA payment and policy changes, including a $1.8 billion cut in the regional MA stabilization fund in 2012 and a phase-out of the adjustment for indirect medical education. 
• Medicare Part D Drug Plans.  MIPPA sets timeframes for plan payments to pharmacies and long-term care pharmacy submission of claims; mandates coverage of certain classes of drugs; clarifies the use of Part D drug data; limits certain sales and marketing activities; and makes other Part D reforms. 
• End-Stage Renal Disease (ESRD) Provisions.  The law updates the ESRD composite rate by 1.0% for 2009 and 2010, and mandates a fully-bundled ESRD payment system and quality incentive program by January 1, 2011.
• Medicaid Drug Reimbursement.  MIPPA delays the adoption of Medicaid payment based on average manufacturer price (AMP) for multiple source drugs and prevents publication of AMP data until October 1, 2009.

Reed Smith is preparing a client memo analyzing the new law, which will be available on our web site.  

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Congressional committees have held numerous hearings on health policy issues recently, including the following: 

• The House Oversight and Government Reform Committee held a hearing July 24, 2008, entitled, "The Medicare Drug Benefit:  Are Private Insurers Getting Good Discounts for the Taxpayer?" At the hearing, the Committee released a staff report that charges that prices paid for drugs used by the dual eligible beneficiaries under Medicare Part D are significantly higher than Medicaid prices for the same drugs. According to the report, the higher prices for the top 100 drugs resulted in a windfall of $1.7 billion for drug manufacturers in 2006 and $2 billion in 2007.   Separately, on July 24, the Joint Economic Committee held a hearing entitled "Small Market Drugs, Big Price Tags: Are Drug Companies Exploiting People With Rare Diseases?" 

• On July 24, the House Ways and Means Health Subcommittee held a hearing on options to encourage the adoption and use of a fully interoperable health information technology system. On July 15, the panel considered health care reform lessons learned at the state level. 
  
• The House Energy and Commerce Subcommittee on Health held a hearing July 22 on “State Fiscal Relief: Protecting Health Coverage in an Economic Downturn.”  The Subcommittee on Oversight and Investigations held a hearing July 24 on "Long-Term Care Insurance: Are Consumers Protected for the Long Term?"  Likewise, the House Small Business Committee held a hearing July 23 on "The Impact of Predators in Long-Term Care on Small Business Operators." 
  
• The House Budget Committee held a hearing July 16 entitled "Getting Better Value in Health Care."  Likewise, on July 17, the Senate Finance Committee held a hearing entitled "The Right Care at the Right Time: Leveraging Innovation to Improve Health Care Quality for All Americans."  
  
• The Senate Special Aging Committee held a hearing July 23 to examine person-centered health care at nursing homes.
  
• On July 22, the House Homeland Security Committee held a hearing on "Emerging Biological Threats and Public Health Preparedness: Getting Beyond Getting Ready." . The Committee also met to focus on the “Training of First Responders in Rural Communities." In addition, the House Agriculture Committee held a hearing July 23 on health care in rural areas.

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The GAO has released two reports involving prescription drugs. The first report, "Prescription Drugs: FDA's Oversight of the Promotion of Drugs for Off-Label Uses," found a number of shortcomings in the FDA's review process, including FDA's failure to prioritize its reviews in a systematic manner or consistently track the receipt and review of submitted materials. The second report, "Medicare Part D: Complaint Rates Are Declining, but Operational and Oversight Challenges Remain,” includes a number of recommendations to improve oversight of the Medicare Part D grievances process and provide added assurance that beneficiaries’ grievances are being resolved.

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On July 15, 2008, the House and Senate overrode the President's veto of H.R. 6331, the  "Medicare Improvements for Patients and Providers Act of 2008” (MIPPA).  The law rescinds a 10.6% cut in physician payments and delays a controversial medical equipment competitive bidding program, both of which went into effect July 1, 2008, and makes numerous other Medicare and Medicaid policy changes. The vote was 70-26 in the Senate and 383-41 in the House, following the President's veto earlier in the day. 

The following are highlights of the legislation:

• Physician Fee Schedule: MIPPA maintains physician payment rates for 2008 (rather than implement the 10.6% cut that was triggered on July 1, 2008), and provides a 1.1% increase for 2009 (rather than the forecasted 5.4% cut). The law also extends for two years the Physician Quality Reporting Initiative (PQRI), increases incentive payments for reporting by 2%, and makes other reforms to the program. The act promotes electronic prescribing (e-prescribing) by providing incentive payments for practitioners who use a qualified e-prescribing systems in 2009 through 2013, and reducing payments by 2% for providers practitioners who fail to e-prescribe beginning in 2011 (with limited exceptions). MIPPA also requires non-hospital advanced imaging providers to be accredited by 2012 and establishes a voluntary demonstration program to test the use of appropriateness criteria for advanced diagnostic imaging services.
• DMEPOS Competitive Bidding.  MIPPA delays and reforms the Centers for Medicare & Medicaid Services' (CMS) competitive bidding program for certain categories of durable medical equipment, prosthetics, orthotics and supplies (DMEPOS). The first round of the program went into effect in 10 geographic areas on July 1, 2008. H.R. 6331 terminates contracts awarded under round one and rebids those areas in 2009, with bidding for round two delayed until 2011. The delay is financed by cutting fee schedule payments for all items covered by round one bidding program by 9.5% nationwide beginning January 1, 2009, followed by a 2% increase in 2014 (with certain exceptions). MIPPA also includes a series of procedural improvements to the bidding process, and addresses quality by, among other things, requiring subcontractor accreditation, excluding complex rehabilitation wheelchairs and negative pressure wound therapy from bidding, and exempting of certain rural and low-population areas from bidding. Separately, MIPPA repeals current oxygen equipment transfer of ownership requirements.
• Therapy Caps Exception Process.  MIPPA extends through December 31, 2009 the exceptions process relative to the annual per-beneficiary limitations on outpatient therapy services.
• Clinical Laboratory Services. The act repeals the competitive bidding demonstration project for clinical laboratory services and instead reduces the fee schedule update for clinical lab services by 0.5% in each of the next 5 years.
• Medicare Advantage (MA) Provisions. MIPPA makes a series of payment and policy changes affecting Medicare Advantage plans, including a $1.8 billion cut in the MA stabilization fund for regional preferred provider organizations in 2012 and a phase-out of the adjustment for indirect medical education. 
• Medicare Part D Drug Plans. MIPPA establishes timeframes for plan payments to pharmacies and long-term care pharmacy submission of claims; codifies current coverage of certain “protected classes” of drugs; clarifies the use of Part D drug data for research and other purposes; limits certain sales and marketing activities; and makes other Part D reforms. 
• End-Stage Renal Disease Provisions. The law provides a 1.0% update to the composite rate for renal dialysis services for 2009 and 2010, requires the Secretary to establish a fully bundled ESRD payment system by January 1, 2011, and establishes a quality incentive payment program for ESRD providers, effective January 1, 2011.
• Medicaid Drug Reimbursement. MIPPA delays the adoption of Medicaid payment based on average manufacturer price (AMP) for multiple source drugs and prevent publication of AMP data until October 1, 2009.

Additional details regarding the legislation are available on the House Ways and Means Committee web site.

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On June 6, 2008, Senate Finance Committee Chairman Max Baucus introduced the “Medicare Improvements for Patients and Providers Act of 2008” (S. 3101).   Most notably, the legislation would block a scheduled cut in Medicare physician payments, extend certain expiring health care provisions, and make numerous other Medicare and Medicaid payment and coverage changes. 

The following are highlights of the bill:

• Physician Payments: In the absence of Congressional action, Medicare physician fee schedule payments will be subject to a more than 10 percent across-the-board cut effective July 1, 2008. The Baucus bill would delay the cut through December 31, 2009 and provide a 1.1% update for 2009. In addition, the bill would extend the physician quality reporting initiative (PQRI) through December 31, 2010, with an increase in the PQRI bonus to 2.0% for 2009 and 2010. The bill also would provide financial incentives for physicians to use e-prescribing, establish accreditation requirements for providers of the technical component of certain diagnostic imaging services, extend the current treatment of certain physician pathology services, and extend an increase in the geographic adjustment to payment for physician work in rural areas.
• Renal Dialysis Provisions:  The bill would increase the composite rate for end stage renal disease (ESRD) services by 1 percentage point for both 2009 and 2010, and require the Secretary to established a fully bundled payment system for ESRD services. In addition, dialysis providers would be subject to new quality standards.
• Other Part B Provisions:  Among other things, the bill would extend the outpatient therapy cap exceptions process; extend current payment rules covering brachytherapy and radiopharmaceuticals; extend the Medicare hold harmless provision under the hospital outpatient prospective payment system for certain small rural hospitals; repeal the clinical laboratory competitive bidding demonstration project (offset by a 0.5 percent reduction in lab payment updates for each of the next 5 years); improve payments for clinical lab tests performed by critical access hospitals; and modify payments for oxygen and power wheelchairs.
• Hospital Provisions: The legislation would extend the Medicare Rural Hospital Flexibility Program, rebase sole community hospital payments, and make other rural hospital improvements.
• Medicare Advantage Reforms: The proposal includes a series of changes to Medicare Advantage payment and other policies, including a phase-out of indirect medical education payments and a $1.8 billion cut in the Medicare Advantage Stabilization Fund.
• Medicare Part D Drug Plan Provisions: Among other things, the bill would set deadlines for drug plan payment to pharmacies; establish claims submission time-frames for long-term care pharmacies; require weekly updates on pricing standards used for pharmacy reimbursement; allow coverage of barbiturates and benzodiazepines; codify coverage of certain “protected classes” of drugs; clarify the use of compendia for the drug benefit; and clarify the use of Part B data for research and other purposes.
• Clinical Trials, Clinical Effectiveness: The bill would authorize alternative methods of payment for Medicare services provided to beneficiaries who participate in certain randomized control trials conducted by a Department of Health and Human Services (HHS) agency. It also would authorize Institute of Medicine studies on best practices in setting clinical decision-making protocols and on methodological standards for conducting systematic reviews of clinical effectiveness research.
• Medicaid Drug Payments:  The bill would delay the establishment of Medicaid payment limits using Average Manufacturer Price for multiple source drugs through September 30, 2009.
• Beneficiary Improvements: The bill would expand coverage of preventive services, reduce copayments for outpatient mental health services, expand access to certain low-income programs, and limit certain Medicare Advantage and Part D drug plan sales and marketing practices, among other things.

Additional details regarding the Baucus bill are available here. The full Senate is expected to consider the legislation later this month. If approved by the Senate, attention would then shift to reaching an agreement with the House, which passed a much different Medicare bill last summer (H.R. 3162). Prospects for enactment are uncertain, given the Administration’s strong opposition to reductions in Medicare Advantage funding. Note that Senator Chuck Grassley, Ranking Republican on the Finance Committee, also has outlined an alternative Medicare proposal that does not include managed care cuts, which could serve as the basis of a compromise agreement.

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The HHS Office of Inspector General (OIG) has issued two reports regarding Part D drugs for dual-eligible nursing home residents: “Availability of Medicare Part D Drugs to Dual-Eligible Nursing Home Residents,” and “Role of Nursing Homes and Long Term Care Pharmacies in Assisting Dual-Eligible Residents With Selecting Part D Plans.”

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On May 28, 2008, CMS published a final rule allowing Part D claims data to be shared with other agencies, states, researchers, and beneficiaries for use in program monitoring, research, public health, care coordination, quality improvement, population of personal health records, and other purposes. CMS notes that it has adopted a number of improvements to the rule to provide additional protections for commercially-sensitive plan data.  For instance, the program will not share Part D plan-specific bid data, rebates, risk-sharing, reinsurance, or payment information collected outside of a Part D claim, and cost data elements will be aggregated.  Additional CMS information regarding the rule is posted here.  On June 11, 2008, CMS is hosting a "Special Open Door Forum" phone conference to discuss the rule. The call will take place from 3:30pm–5:00pm eastern time. To participate, dial 1-800-837-1935 and reference Conference ID: 50230963.

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CMS is moving from annual reviews of the Part D prescription drug program model formulary to a three-year review cycle, given the "success and stabilization of recent versions of the Model Guidelines." 

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On May 16, 2008, the Centers for Medicare & Medicaid Services (CMS) published a proposed rule that would revise Medicare Advantage (MA) program and Part D prescription drug program rules. Among many other things, the rule would codify recent marketing guidance documents and impose new requirements, including bans on door-to-door marketing and cold-calling, restrictions on broker/agent commissions, and limits on sales activities at educational events. The proposal also would streamline eligibility determinations under the low-income subsidy (LIS) program and provide new protections for beneficiaries enrolled in special needs plans, including clarified delivery-of-care standards. Moreover, CMS proposes new safeguards to protect beneficiaries from excessive cost-sharing, including refined definitions related to the drug costs Part D sponsors may use as the basis for calculating beneficiary cost sharing, reporting drug costs to CMS for reinsurance reconciliation and risk sharing, and submitting bids to CMS.  CMS also proposes a new definition for administrative costs to further clarify costs excluded from Part D drug costs. CMS will accept comments on the proposal until July 15.

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The OIG has issued a report on Medicare Part D payments to community pharmacies. Among other things, the OIG found that Medicare Part D payments (excluding dispensing fees) exceeded the pharmacies’ drug acquisition costs by about 18.1 percent when drug wholesalers rebates to pharmacies were included. Excluding rebates, Part D payments exceeded drug acquisition costs by an estimated 17.3 percent, with a much larger difference for generic drugs than for brand-name drugs.   A separate OIG report addresses the ability of physician-owned specialty hospitals to manage medical emergencies. The OIG found that about half of all physician-owned specialty hospitals have emergency departments, with the majority having one emergency bed. Not all physician-owned specialty hospitals had nurses on duty and physicians on call during the review period, and 66 percent use 9-1-1 as part of their emergency response procedures. In addition, the OIG has issued a report entitled "National Institutes of Health: Conflicts of Interest in Extramural Research," which includes a series of recommendations to increase oversight of grantee institutions to ensure their compliance with federal financial conflicts-of-interest regulations.

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