42 C.F.R. Subpart G—Payments to Medicare Advantage Organizations
Title 42 - Public Health
Source: 70 FR 4729, Jan. 28, 2005, unless otherwise noted.
This subpart is based on sections 1853, 1854, and 1858 of the Act. It sets forth the rules for making payments to Medicare Advantage (MA) organizations offering local and regional MA plans, including calculation of MA capitation rates and benchmarks, conditions under which payment is based on plan bids, adjustments to capitation rates (including risk adjustment), and other payment rules. See §422.458 in subpart J for rules on risk sharing payments to MA regional organizations. (a) General rules. Except as provided in paragraph (b) of this section, CMS makes advance monthly payments of the amounts determined under paragraphs (a)(1) and (a)(2) of this section for coverage of original fee-for-service benefits for an individual in an MA payment area for a month. (1) Payment of bid for plans with bids below benchmark. For MA plans that have average per capita monthly savings (as described at §422.264(b) for local plans and §422.264(d) for regional plans), CMS pays: (i) The unadjusted MA statutory non-drug monthly bid amount defined in §422.252, risk-adjusted as described at §422.308(c) and adjusted (if applicable) for variations in rates within the plan's service area (described at §422.258(a)(2)) and for the effects of risk adjustment on beneficiary premiums under §422.262; and (ii) The amount (if any) of the rebate described in paragraph (a)(3) of this section. (2) Payment of benchmark for plans with bids at or above benchmark. For MA plans that do not have average per capita monthly savings (as described at §422.264(b) for local plans and §422.264(d) for regional plans), CMS pays the unadjusted MA area-specific non-drug monthly benchmark amount specified at §422.258, risk-adjusted as described at §422.308(c) and adjusted (if applicable) for variations in rates within the plan's service area (described at §422.258(a)(2)) and for the effects of risk adjustment on beneficiary premiums under §422.262. (3) Payment of rebate for plans with bids below benchmarks. The rebate amount under paragraph (a)(1)(ii) of this section is the amount of the monthly rebate computed under §422.266(a) for that plan, less the amount (if any) applied to reduce the Part B premium, as provided under §422.266(b)(3)). (b) Separate payment for Federal drug subsidies. In the case of an enrollee in an MA-PD plan, defined at §422.252, the MA organization offering such a plan also receives- (1) Direct and reinsurance subsidy payments for qualified prescription drug coverage, described at section 1860D–15(a) and (b) of the Act (other than payments for fallback prescription drug plans described at section 1860D–11(g)(5) of the Act); and (2) Reimbursement for premium and cost sharing reductions for low-income individuals, described at section 1860D–14 of the Act. (c) Special rules—(1) Enrollees with end-stage renal disease. (i) For enrollees determined to have end-stage renal disease (ESRD), CMS establishes special rates that are actuarially equivalent to rates in effect before the enactment of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003. (ii) CMS publishes annual changes in these capitation rates no later than the first Monday in April each year, as provided in §422.312. (iii) CMS applies appropriate adjustments when establishing the rates, including risk adjustment factors. (iv) CMS reduces the payment rate for each renal dialysis treatment by the same amount that CMS is authorized to reduce the amount of each composite rate payment for each treatment as set forth in section 1881(b)(7) of the Act. These funds are to be used to help pay for the ESRD network program in the same manner as similar reductions are used in original Medicare. (2) MSA enrollees. In the case of an MSA plan, CMS pays the unadjusted MA area-specific non-drug monthly benchmark amount for the service area, determined in accordance with §422.314(c) and subject to risk adjustment as set forth at §422.308(c), less 1/12 of the annual lump sum amount (if any) CMS deposits to the enrollee's MA MSA. (3) RFB plan enrollees. For RFB plan enrollees, CMS adjusts the capitation payments otherwise determined under this subpart to ensure that the payment level is appropriate for the actuarial characteristics and experience of these enrollees. That adjustment can be made on an individual or organization basis. (d) Payment areas—(1) General rule. Except as provided in paragraph (e) of this section— (i) An MA payment area for an MA local plan is an MA local area defined at §422.252. (ii) An MA payment area for an MA regional plan is an MA region, defined at §422.455(b)(1). (2) Special rule for ESRD enrollees. For ESRD enrollees, the MA payment area is a State or other geographic area specified by CMS. (e) Geographic adjustment of payment areas for MA local plans—(1) Terminology. “Metropolitan Statistical Area” and “Metropolitan Division” mean any areas so designated by the Office of Management and Budget in the Executive Office of the President. (2) State request. A State's chief executive may request, no later than February 1 of any year, a geographic adjustment of the State's payment areas for MA local plans for the following calendar year. The chief executive may request any of the following adjustments to the payment area specified in paragraph (c)(1)(i) of this section: (i) A single statewide MA payment area. (ii) A metropolitan-based system in which all non-metropolitan areas within the State constitute a single payment area and any of the following constitutes a separate MA payment area: (A) All portions of each single Metropolitan Statistical Area within the State. (B) All portions of each Metropolitan Statistical Area within each Metropolitan Division within the State. (iii) A consolidation of noncontiguous counties. (3) CMS response. In response to the request, CMS makes the payment adjustment requested by the chief executive. This adjustment cannot be requested or made for payments to regional MA plans. (4) Budget neutrality adjustment for geographically adjusted payment areas. If CMS adjusts a State's payment areas in accordance with paragraph (d)(2) of this section, CMS at that time, and each year thereafter, adjusts the capitation rates so that the aggregate Medicare payments do not exceed the aggregate Medicare payments that would have been made to all the State's payments areas, absent the geographic adjustment. Subject to adjustments at §422.308(b) and §422.308(g), the annual capitation rate for each MA local area is determined under paragraph (a) of this section for 2005 and each succeeding year, except for years when CMS announces under §422.312(b) that the annual capitation rates will be determined under paragraph (b) of this section. (a) Minimum percentage increase rate. The annual capitation rate for each MA local area is equal to the minimum percentage increase rate, which is the greater of— (1) 102 percent of the annual capitation rate for the preceding year; or (2) The annual capitation rate for the area for the preceding year increased by the national per capita MA growth percentage (defined at §422.308(a)) for the year, but not taking into account any adjustment under §422.308(b) for a year before 2004. (b) Greater of the minimum percentage increase rate or local area fee-for-service costs. The annual capitation rate for each MA local area is the greater of— (1) The minimum percentage increase rate under paragraph (a) of this section; or (2) The amount determined, no less frequently than every 3 years, to be the adjusted average per capita cost for the MA local area, as determined under section 1876(a)(4) of the Act, based on 100 percent of fee-for-service costs for individuals who are not enrolled in an MA plan for the year, with the following adjustments: (i) Adjusted as appropriate for the purpose of risk adjustment; (ii) Adjusted to exclude costs attributable to payments under section 1886(h) of the Act for the costs of direct graduate medical education; and (iii) Adjusted to include CMS' estimate of the amount of additional per capita payments that would have been made in the MA local area if individuals entitled to benefits under this title had not received services from facilities of the Department of Defense or the Department of Veterans Affairs. CMS performs the following calculations and adjustments to determine rates and payments: (a) National per capita growth percentage. The national per capita growth percentage for a year, applied under §422.306, is CMS' estimate of the rate of growth in per capita expenditures under this title for an individual entitled to benefits under Part A and enrolled under Part B. CMS may make separate estimates for aged enrollees, disabled enrollees, and enrollees who have ESRD. (b) Adjustment for over or under projection of national per capita growth percentages. CMS will adjust the minimum percentage increase rate at §422.306(a)(2) and the adjusted average per capita cost rate at §422.306(b)(2) for the previous year to reflect any differences between the projected national per capita growth percentages for that year and previous years, and the current estimates of those percentages for those years. CMS will not make this adjustment for years before 2004. (c) Risk adjustment—(1) General rule. CMS will adjust the payment amounts under §422.304(a)(1), (a)(2), and (a)(3) for age, gender, disability status, institutional status, and other factors CMS determines to be appropriate, including health status, in order to ensure actuarial equivalence. CMS may add to, modify, or substitute for risk adjustment factors if those changes will improve the determination of actuarial equivalence. (2) Risk adjustment: Health status—(i) Data collection. To adjust for health status, CMS applies a risk factor based on data obtained in accordance with §422.310. (ii) Implementation. CMS applies a risk factor that incorporates inpatient hospital and ambulatory risk adjustment data. This factor is phased as follows: (A) 100 percent of payments for ESRD MA enrollees in 2005 and succeeding years. (B) 75 percent of payments for aged and disabled enrollees in 2006. (C) 100 percent of payments for aged and disabled enrollees in 2007 and succeeding years. (3) Uniform application. Except as provided for MA RFB plans under §422.304(c)(3), CMS applies this adjustment factor to all types of plans. (d) Adjustment for intra-area variations. CMS makes the following adjustments to payments. (1) Intra-regional variations. For payments for an MA regional plan for an MA region, CMS will adjust the payment amount specified at §422.304(a)(1) and (a)(2) to take into account variations in local payment rates among the different MA local areas included in the region. (2) Intra-service area variations. For payments to an MA local plan with a service area covering more than one MA local area (county), CMS will adjust the payment amount specified in §422.304(a)(1) and (a)(2) to take into account variations in local payment rates among the different MA local areas included in the plan's service area. (e) Adjustment relating to risk adjustment: the government premium adjustment. CMS will adjust payments to an MA plan as necessary to ensure that the sum of CMS' monthly payment made under §422.304(a) and the plan's monthly basic beneficiary premium equals the unadjusted MA statutory non-drug bid amount, adjusted for risk and for intra-area or intra-regional payment variation. (f) Adjustment of payments to reflect number of Medicare enrollees—(1) General rule. CMS adjusts payments retroactively to take into account any difference between the actual number of Medicare enrollees and the number on which it based an advance monthly payment. (2) Special rules for certain enrollees. (i) Subject to paragraph (f)(2)(ii) of this section, CMS may make adjustments, for a period (not to exceed 90 days) that begins when a beneficiary elects a group health plan (as defined in §411.1010) offered by an MA organization, and ends when the beneficiary is enrolled in an MA plan offered by the MA organization. (ii) CMS does not make an adjustment unless the beneficiary certifies that, at the time of enrollment under the MA plan, he or she received from the organization the disclosure statement specified in §422.111. (g) Adjustment for national coverage determination (NCD) services and legislative changes in benefits. If CMS determines that the cost of furnishing an NCD service or legislative change in benefits is significant, as defined in §422.109, CMS will adjust capitation rates, or make other payment adjustments, to account for the cost of the service or legislative change in benefits. Until the new capitation rates are in effect, the MA organization will be paid for the significant cost NCD service or legislative change in benefits on a fee-for-service basis as provided under §422.109(b). (h) Adjustments to payments to regional MA plans for purposes of risk corridor payments. For the purpose of calculation of risk corridors under §422.458, MA organizations offering regional MA plans in 2006 and/or 2007 must submit, after the end of a contract year and before a date CMS specifies, the following information: (1) Actual allowable costs (defined in §422.458(a)) for the previous contract year. (2) The portion of the costs attributable to administrative expenses incurred in providing these benefits. (3) The total costs for providing rebatable integrated benefits (as defined in §422.458(a)) and the portion of the costs that is attributable to administrative expenses in addition to the administrative expenses described in paragraph (h)(2) of this section. (a) Definition of risk adjustment data. Risk adjustment data are all data that are used in the application of a risk adjustment payment model. (b) Data collection: Basic rule. Each MA organization must submit to CMS (in accordance with CMS instructions) the data necessary to characterize the context and purposes of each service provided to a Medicare enrollee by a provider, supplier, physician, or other practitioner. CMS may also collect data necessary to characterize the functional limitations of enrollees of each MA organization. (c) Sources and extent of data. (1) To the extent required by CMS, risk adjustment data must account for the following: (i) Services covered under the original Medicare program. (ii) Medicare covered services for which Medicare is not the primary payer. (iii) Other additional or supplemental benefits that the MA organization may provide. (2) The data must account separately for each provider, supplier, physician, or other practitioner that would be permitted to bill separately under the original Medicare program, even if they participate jointly in the same service. (d) Other data requirements. (1) MA organizations must submit data that conform to the requirements for equivalent data for Medicare fee-for-service when appropriate, and to all relevant national standards. Alternatively, MA organizations may submit data according to an abbreviated format, as specified by CMS. (2) The data must be submitted electronically to the appropriate CMS contractor. (3) MA organizations must obtain the risk adjustment data required by CMS from the provider, supplier, physician, or other practitioner that furnished the services. (4) MA organizations may include in their contracts with providers, suppliers, physicians, and other practitioners, provisions that require submission of complete and accurate risk adjustment data as required by CMS. These provisions may include financial penalties for failure to submit complete data. (e) Validation of risk adjustment data. MA organizations and their providers and practitioners will be required to submit a sample of medical records for the validation of risk adjustment data, as required by CMS. There may be penalties for submission of false data. (f) Use of data. CMS uses the data obtained under this section to determine the risk adjustment factor used to adjust payments, as required under §422.304(a)(1), (a)(2), and (a)(3). CMS may also use the data for other purposes except for medical records data. (g) Deadlines for submission of risk adjustment data. Risk adjustment factors for each payment year are based on risk adjustment data submitted for services furnished during the 12-month period before the payment year that is specified by CMS. As determined by CMS, this 12-month period may include a 6-month data lag that may be changed or eliminated as appropriate. (1) The annual deadline for risk adjustment data submission is the first Friday in September for risk adjustment data reflecting services furnished during the 12-month period ending the prior June 30, and the first Friday in March for data reflecting services furnished during the 12-month period ending the prior December 31. (2) CMS allows a reconciliation process to account for late data submissions. CMS continues to accept risk adjustment data submitted after the March deadline until December 31 of the payment year. After the payment year is completed, CMS recalculates the risk factors for affected individuals to determine if adjustments to payments are necessary. Risk adjustment data that are received after the annual December 31 late data submission deadline will not be accepted for the purposes of reconciliation. (a) Capitation rates—(1) Initial announcement. Not later than the first Monday in April each year, CMS announces to MA organizations and other interested parties the following information for each MA payment area for the following calendar year: (i) The annual MA capitation rate. (ii) The risk and other factors to be used in adjusting those rates under §422.308 for payments for months in that year. (2) CMS includes in the announcement an explanation of assumptions used and a description of the risk and other factors. (3) Regional benchmark announcement. Before the beginning of each annual, coordinated election period under §422.62(a)(2), CMS will announce to MA organizations and other interested parties the MA region-specific non-drug monthly benchmark amount for the year involved for each MA region and each MA regional plan for which a bid was submitted under §422.256. (b) Advance notice of changes in methodology. (1) No later than 45 days before making the announcement under paragraph (a)(1) of this section, CMS notifies MA organizations of changes it proposes to make in the factors and the methodology it used in the previous determination of capitation rates. (2) The MA organizations have 15 days to comment on the proposed changes. (a) Establishment and designation of medical savings account (MSA). A beneficiary who elects coverage under an MA MSA plan— (1) Must establish an MA MSA with a trustee that meets the requirements of paragraph (b) of this section; and (2) If he or she has more than one MA MSA, designate the particular account to which payments under the MA MSA plan are to be made. (b) Requirements for MSA trustees. An entity that acts as a trustee for an MA MSA must— (1) Register with CMS; (2) Certify that it is a licensed bank, insurance company, or other entity qualified, under sections 408(a)(2) or 408(h) of the Internal Revenue Code of 1986, to act as a trustee of individual retirement accounts; (3) Agree to comply with the MA MSA provisions of section 138 of the Internal Revenue Code of 1986; and (4) Provide any other information that CMS may require. (c) Deposit in the MA MSA. (1) The payment is calculated as follows: (i) The monthly MA MSA premium is compared with 1/12 of the annual capitation rate applied under this section for the. (ii) If the monthly MA MSA premium is less than 1/12 of the annual capitation rate applied under this section for the area, the difference is the amount to be deposited in the MA MSA for each month for which the beneficiary is enrolled in the MSA plan. (2) CMS deposits the full amount to which a beneficiary is entitled under paragraph (c)(1)(ii) of this section for the calendar year, beginning with the month in which MA MSA coverage begins. (3) If the beneficiary's coverage under the MA MSA plan ends before the end of the calendar year, CMS recovers the amount that corresponds to the remaining months of that year. [70 FR 4729, Jan. 28, 2005, as amended at 70 FR 52027, Sept. 1, 2005] If an enrollee in an MA plan receives a service from a Federally qualified health center (FQHC) that has a written agreement with the MA organization offering the plan concerning the provision of this service (including the agreement required under section 1857(e)(3) of the Act and as codified in §422.527)— (a) CMS will pay the amount determined under section 1833(a)(3)(B) of the Act directly to the FQHC at a minimum on a quarterly basis, less the amount the FQHC would receive for the MA enrollee from the MA organization (which includes the cost sharing amount the FQHC may charge an enrollee, as established in the contract between the FQHC and the MA organization); and (b) CMS will not reduce the amount of the monthly payments under this section as a result of the application of paragraph (a) of this section. [70 FR 4729, Jan. 28, 2005, as amended at 70 FR 76198, Dec. 23, 2005] (a) Applicability. This section applies to inpatient services in a “subsection (d) hospital” as defined in section 1886(d)(1)(B) of the Act, a psychiatric hospital described in section 1886(d)(1)(B)(i) of the act, a rehabilitation hospital described in section 1886(d)(1)(B)(ii) of the Act, a distinct part rehabilitation unit described in the matter following clause (v) of section 1886(d)(1)(B) of the Act, or a long-term care hospital (described in section 1886(d)(1)(B)(iv)). (b) Coverage that begins during an inpatient stay. If coverage under an MA plan offered by an MA organization begins while the beneficiary is an inpatient in one of the facilities described in paragraph (a) of this section— (1) Payment for inpatient services until the date of the beneficiary's discharge is made by the previous MA organization or original Medicare, as appropriate; (2) The MA organization offering the newly-elected MA plan is not responsible for the inpatient services until the date after the beneficiary's discharge; and (3) The MA organization offering the newly-elected MA plan is paid the full amount otherwise payable under this subpart. (c) Coverage that ends during an inpatient stay. If coverage under an MA plan offered by an MA organization ends while the beneficiary is an inpatient in one of the facilities described in paragraph (a) of this section— (1) The MA organization is responsible for the inpatient services until the date of the beneficiary's discharge; (2) Payment for those services during the remainder of the stay is not made by original Medicare or by any succeeding MA organization offering a newly-elected MA plan; and (3) The MA organization that no longer provides coverage receives no payment for the beneficiary for the period after coverage ends. (a) Information. An MA organization that has a contract under subpart K of this part must inform each Medicare enrollee eligible to select hospice care under §418.24 of this chapter about the availability of hospice care (in a manner that objectively presents all available hospice providers, including a statement of any ownership interest in a hospice held by the MA organization or a related entity) if— (1) A Medicare hospice program is located within the plan's service area; or (2) It is common practice to refer patients to hospice programs outside that area. (b) Enrollment status. Unless the enrollee disenrolls from the MA plan, a beneficiary electing hospice continues his or her enrollment in the MA plan and is entitled to receive, through the MA plan, any benefits other than those that are the responsibility of the Medicare hospice. (c) Payment. (1) No payment is made to an MA organization on behalf of a Medicare enrollee who has elected hospice care under §418.24 of this chapter, except for the portion of the payment attributable to the beneficiary rebate for the MA plan, described in §422.266(b)(1) plus the amount of the monthly prescription drug payment described in §423.315 (if any). This no-payment rule is effective from the first day of the month following the month of election to receive hospice care, until the first day of the month following the month in which the election is terminated. (2) During the time the hospice election is in effect, CMS' monthly capitation payment to the MA organization is reduced to the sum of— (i) An amount equal to the beneficiary rebate for the MA plan, as described in §422.304(a)(3) or to zero for plans with no beneficiary rebate, described at §422.304(a)(2); and (ii) The amount of the monthly prescription drug payment described in §423.315 (if any). (3) In addition, CMS pays through the original Medicare program (subject to the usual rules of payment)— (i) The hospice program for hospice care furnished to the Medicare enrollee; and (ii) The MA organization, provider, or supplier for other Medicare-covered services to the enrollee. [70 FR 4729, Jan. 28, 2005, as amended at 70 FR 52027, Sept. 1, 2005] (a) Source of payments. (1) Payments under this subpart for original fee-for-service benefits to MA organizations or MA MSAs are made from the Federal Hospital Insurance Trust Fund or the Supplementary Medical Insurance Trust Fund. CMS determines the proportions to reflect the relative weight that benefits under Part A, and benefits under Part B represents of the actuarial value of the total benefits under title XVIII of the Act. (2) Payments to MA-PD organizations for statutory drug benefits provided under this title are made from the Medicare Prescription Drug Account in the Federal Supplementary Medical Insurance Trust Fund. (b) Payments to the MA organization. Subject to §412.105(g) and §413.86(d) of this chapter and §422.109, §422.316, and §422.320, CMS' payments under a contract with an MA organization (described in §422.304) with respect to an individual electing an MA plan offered by the organization are instead of the amounts which (in the absence of the contract) would otherwise be payable under original Medicare for items and services furnished to the individual. (c) Only the MA organization entitled to payment. Subject to §422.314, §422.316, §422.318, §422.320, and §422.520 and sections 1886(d)(11) and 1886(h)(3)(D) of the Act, only the MA organization is entitled to receive payment from CMS under title XVIII of the Act for items and services furnished to the individual. [70 FR 4729, Jan. 28, 2005, as amended at 70 FR 52027, Sept. 1, 2005] (a) MA organizations may receive direct graduate medical education payments for the time that residents spend in non-hospital provider settings such as freestanding clinics, nursing homes, and physicians' offices in connection with approved programs. (b) MA organizations may receive direct graduate medical education payments if all of the following conditions are met: (1) The resident spends his or her time assigned to patient care activities. (2) The MA organization incurs “all or substantially all” of the costs for the training program in the non-hospital setting as defined in §413.86(b) of this chapter. (3) There is a written agreement between the MA organization and the non-hospital site that indicates the MA organization will incur the costs of the resident's salary and fringe benefits and provide reasonable compensation to the non-hospital site for teaching activities. (c) An MA organization's allowable direct graduate medical education costs, subject to the redistribution and community support principles specified in §413.85(c) of this chapter, consist of— (1) Residents' salaries and fringe benefits (including travel and lodging where applicable); and (2) Reasonable compensation to the non-hospital site for teaching activities related to the training of medical residents. (d) The direct graduate medical education payment is equal to the product of— (1) The lower of— (i) The MA organization's allowable costs per resident as defined in paragraph (c) of this section; or (ii) The national average per resident amount; and (2) Medicare's share, which is equal to the ratio of the number of Medicare beneficiaries enrolled to the total number of individuals enrolled in the MA organization. (e) Direct graduate medical education payments made to MA organizations under this section are made from the Federal Supplementary Medical Insurance Trust Fund.
Title 42: Public Health
PART 422—MEDICARE ADVANTAGE PROGRAM
Subpart G—Payments to Medicare Advantage Organizations
§ 422.300 Basis and scope.
§ 422.304 Monthly payments.
§ 422.306 Annual MA capitation rates.
§ 422.308 Adjustments to capitation rates, benchmarks, bids, and payments.
§ 422.310 Risk adjustment data.
§ 422.312 Announcement of annual capitation rate, benchmarks, and methodology changes.
§ 422.314 Special rules for beneficiaries enrolled in MA MSA plans.
§ 422.316 Special rules for payments to Federally qualified health centers.
§ 422.318 Special rules for coverage that begins or ends during an inpatient hospital stay.
§ 422.320 Special rules for hospice care.
§ 422.322 Source of payment and effect of MA plan election on payment.
§ 422.324 Payments to MA organizations for graduate medical education costs.
