Health Hippo: M+C: Subpart A

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

 CFR Chapter IV is amended as set forth below.


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

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


Sec. 400.200 General definitions.

ALJ stands for administrative law judge.

NCD stands for national coverage determination.

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

PRO stands for peer review organization.

RRB stands for Railroad Retirement Board.

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

Sec. 400.202 Definitions specific to Medicare.

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


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

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

Sec. 403.205 Medicare supplemental policy.

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


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

2. Part 410 is amended as set forth below.

a. Section 410.57 is revised to read as follows:

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

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

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


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

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


Sec. 411.15 Particular services excluded from coverage.

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

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

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

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


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

2. Section 417.402 is revised to read as follows:

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

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

Sec. 417.413 Qualifying condition: Operating experience and

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

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

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

Sec. 417.426 Open enrollment requirements.

(a) Basic requirements.

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

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

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

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

Sec. 417.472 Basic contract requirements.

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

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

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

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

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

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

(e) Determination of rate for calendar year 1998. For calendar
year 1998, HMOs or CMPs with risk contracts will be paid in
accordance with principles contained in subpart F of part 422 of
this chapter.
10. In subpart Q, Secs. 417.600 through 417.638 are removed.

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

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

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

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

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


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

2. Subparts A through G are added as follows:

Subpart A–General Provisions

422.1 Basis and scope.

422.2 Definitions.

422.4 Types of M+C plans.

422.6 Application requirements.

422.8 Evaluation and determination procedures.

422.10 Cost-sharing in enrollment-related costs.

Subpart B–Eligibility, Election, and Enrollment

422.50 Eligibility to elect an M+C plan.

422.54 Continuation of enrollment

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

422.57 Limited enrollment under M+C RFB plans.

422.60 Election process

422.62 Election of coverage under an M+C plan.

422.64 Information about the M+C program.

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

422.68 Effective dates of coverage and change of coverage.

422.74 Disenrollment by the M+C organization.

422.80 Approval of marketing materials and application

Subpart C–Benefits and Beneficiary Protections

422.100 General requirements.

422.101 Requirements relating to basic benefits.

422.102 Supplemental benefits.

422.103 Benefits under an M+C MSA plan.

422.104 Special rules for supplemental benefits for M+C MSA

422.105 Special rules for point of service option.

422.106 Special arrangements with employer groups.

422.108 Medicare secondary payer (MSP) procedures.

422.109 Effect of national coverage determinations (NCDs).

422.110 Discrimination against beneficiaries prohibited.

422.111 Disclosure requirements.

422.112 Access to services.

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

422.118 Confidentiality and accuracy of enrollee records.

422.128 Information on advance directives.

422.132 Protection against liability and loss of benefits.

Subpart D–Quality Assurance

422.152 Quality assessment and performance improvement

422.154 External review.

422.156 Compliance deemed on the basis of accreditation.

422.157 Accreditation organizations.

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

Subpart E–Relationships With Providers

422.200 Basis and scope.

422.202 Participation procedures.

422.204 Provider credentialing and provider rights.

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

422.208 Physician incentive plans: requirements and

422.210 Disclosure of physician incentive plans

422.212 Limitations on provider indemnification.

422.214 Special rules for services furnished by noncontract

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

422.220 Exclusion of services furnished under a private

Subpart F–Payments to Medicare+Choice Organizations

422.249 Terminology

422.250 General provisions.

422.252 Annual capitation rates.

422.254 Calculation and adjustment factors.

422.256 Adjustments to capitation rates and aggregate

422.257 Encounter data.

422.258 Announcement of annual capitation rates and
methodology changes.

422.262 Special rules for beneficiaries enrolled in M+C MSA

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

422.266 Special rules for hospice care.

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

Subpart G–Premiums and Cost-Sharing

422.300 Basis and scope.

422.302 Terminology.

422.304 Rules governing premiums and cost-sharing.

422.306 Submission of proposed premiums and related

422.308 Limits on premiums and cost-sharing amounts.

422.309 Incorrect collections of premiums and cost-sharing.

422.310 Adjusted community rate (ACR) approval process.

422.312 Requirement for additional

Subpart A–General Provisions

Sec. 422.1 Basis and scope.

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

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

Sec. 422.2 Definitions.

As used in this part–

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

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

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

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

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

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

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

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

  • Cost-sharing includes deductibles, coinsurance, and

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Sec. 422.4 Types of M+C plans.

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

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

Sec. 422.6 Application requirements.

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

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

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

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

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

Sec. 422.8 Evaluation and determination procedures.

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

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

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

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

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

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

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

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

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

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

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

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

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

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