Government News
of the Week:
Medicare Compliance, Medicare Advantage and Part D, and Other Federal and State Developments

1. CMS soon will publish a long-awaited notice of proposed rulemaking that, contrary to early reports, will cover more issues than Medicare Advantage (MA) and Part D marketing alone, Abby L. Block, director of CMS's Center for Beneficiary Choices, said April 17. Block told a managed care industry operations conference that day that while CMS's MA marketing guidelines afford beneficiary protections, the agency "learned, unfortunately, that a higher level of due diligence is required" - and is putting the finishing touches on MA regulations better described as "catch-all."

Later that same day, Block told AIS in an exclusive interview: "Everybody thinks we're proposing just marketing guidelines. We're working on a multifaceted regulation that focuses on many issues, not just marketing…but marketing is a key feature."

Block, when asked by AIS whether the impending rule will contain significant new requirements for MA plans, replied: "It depends on how you define 'significant.' In some instances, it will codify things already in place. It's a complex, multifaceted regulation." She said it was premature to comment further on the matter.

Block reiterated that the proposed MA rule "should be out very soon." An agency source said April 17 that it remained under review by the Office of Management and Budget (OMB) and in the clearance process. "It is stuck over in OMB, and discussions are still going on," he said.

Block and other CMS officials spoke at America's Health Insurance Plans' 2008 Medicare Operations, Bidding, and Implementation conference in Baltimore. Jerry Mulcahy, director of the CMS Medicare Advantage Group's Division of Policy, Analysis, and Planning, said he could not discuss the proposed regulations since they "are still being developed and could change."

CMS expects to have the new regulations finalized in time for the 2009 contract year, Block added.

CMS marketing guidelines also are being updated for contract year 2009, said Camille Brown, MA marketing lead in CMS's Medicare Advantage Group. She said the goal of the update is to "streamline" the guidelines. However, Mulcahy added that the guidelines are "not expected to be out before plans can begin submitting marketing documents" to CMS for approval. In that case, he explained, the agency "will not make [the updated guidelines] retroactive."

Plans must submit marketing materials for 2009 MA products to CMS for review over a two-week period starting June 16. Marketing begins Oct. 1.

Mulcahy said CMS had considered standardized broker training, but described it as a "huge undertaking" that already has been done, noting that AHIP has an online system "that fills this need." He clarified that plans can accept other plans' training certifications. "As long as a plan in comfortable [with another plan's training system], we are OK with the organization accepting the training of the other organization or third-party entity," he said. Mulcahy added that there is nothing to prevent state agencies from developing broker training.

Reprinted from the April 24, 2008, issue of MEDICARE ADVANTAGE NEWS.

2. A long-awaited final guidance on employer comparable contributions to health savings accounts (HSAs) was released April 17 by the Treasury Dept. and IRS. The guidance clarifies the obligations to other employees when some are offered an HSA as part of their benefits.

While employers aren't required to contribute to HSAs, employers that choose to do so must make comparable contributions to all other eligible employees. Employers failing to comply with this comparability rule face a substantial penalty.

However, the comparability rule doesn't apply if contributions are made through a Section 125 "cafeteria plan," by which employees select from a "menu" of benefits.

The final guidance clarifies that if an employer allows its qualified employees to contribute pretax salary dollars to an HSA through a cafeteria plan, then any HSA contributions are exempt from the comparability rules.

Employee benefits experts say that the guidance will make it easier for employers to make contributions to their employees' HSAs.

The guidance also addresses an issue related to acceleration of HSA contributions. An employer may accelerate part or all of its contributions for the entire year to the HSAs of employees who have incurred qualified medical expenses exceeding the employer's contribution at the time. If an employer accelerates contributions for even one employee, the contributions must be made available on an "equal and uniform basis to all eligible employees throughout the calendar year," according to the guidance.

A proposed guidance on the comparability rule was published by the Treasury Dept. Aug. 26, 2005, but industry observers say it failed to clarify several important issues. The final guidance applies to employer contributions made for calendar years beginning on or after Jan. 1, 2009. To view the guidance, visit www.treas.gov/press/releases/reports/
hsa_comparable_contributions_4830.pdf.

Reprinted from the April 25, 2008, issue of INSIDE CONSUMER-DIRECTED CARE,

3. Touro Infirmary, a New Orleans hospital, will pay $1.75 million to settle allegations that it paid a psychiatrist in order to induce her to refer patients, the Department of Justice said April 17. The feds alleged that Touro paid $144,000 per year to Maria Palazzo, M.D., for a series of consultant and medical directorship contracts. Those agreements were "shams intended to disguise kickbacks to Dr. Palazzo," the feds say. The government filed criminal charges against Palazzo in 2005, alleging that she billed Medicare for services to patients in a psychiatric partial hospitalization program that she did not render, among other allegation. She was convicted by a jury of 39 counts of health care fraud, according to a statement by the U.S. Attorney's Office for the Eastern District of Louisiana. She faces 390 years in prison and $9.75 million in fines. A hospital spokesperson could not be reached for comment. An attorney for Palazzo also could not be reached.

Reprinted from the April 28, 2008, issue of REPORT ON MEDICARE COMPLIANCE,

4. The National Uniform Billing Committee (NUBC) is asking HHS for another six-month extension to the National Provider Identifier (NPI) deadline, according to an April 16 letter to HHS Sec. Michael Leavitt. NPIs, part of the HIPAA administrative simplification, replace all "legacy" identifiers now in use, such as UPINs used by physicians, provider numbers used by hospitals, Medicaid provider IDs and private health plan IDs. CMS said last year that covered entities could take another year to start using NPIs exclusively without facing penalties as long as they could show they were taking steps to comply with the NPI regulation. But the May 23 deadline is quickly approaching, and the NPI system "has shown significant issues with some payers' ability (including Medicare) to map NPI legacy numbers," says NUBC, which is made up of providers and payers. Visit www.nubc.org, and click on "What's New."

Reprinted from the April 28, 2008, issue of REPORT ON MEDICARE COMPLIANCE,

5. CMS on April 15 published an amendment to the May 25, 2007, Medicare Part D rule, implementing technical corrections and clarifications (73 Fed. Reg. 20485). The amendment essentially corrects typographical errors, makes nonsubstantive clarifications, and formally incorporates existing CMS guidance into the Part D rule.

The rule, effective June 9, addresses (1) convenient access to long-term care (LTC) pharmacies for beneficiaries in LTC facilities; (2) timely delivery of home-infusion drugs, including all necessary professional services and ancillary supplies for infusible drug administration, by home-infusion pharmacies; (3) provider dissemination of Part D plan marketing materials; (4) exclusions of certain medications from the definition of Part D drugs; (5) Part D coverage of vaccine administration; and (6) retiree drug subsidy application and attestation submission dates.

Under the rule, Part D plan sponsors must ensure convenient access to network LTC pharmacies for beneficiaries residing in LTC facilities. These facilities include skilled nursing facilities, institutions for mental diseases, LTC hospitals, and other hospitals that receive payments under Medicaid for Medicare-Medicaid dual-eligible institutionalized beneficiaries.

Sponsors also must ensure timely delivery of home-infusion drugs, services, and supplies beginning Jan. 1, 2009. This is done by ensuring that contracted pharmacy networks provide adequate access to home-infusion pharmacies capable of delivering home-infused drugs in a clinically appropriate manner and providing infusible drugs for short- and long-term chronic care. Timely is considered within 24 hours of a beneficiary's discharge from acute care settings.

The amendments clarify that providers who distribute printed information comparing different Part D plans must accept and display materials from only the sponsors that they contract with. This clarification aligns the Part D rule with CMS's marketing guidelines, which state that providers may "distribute printed information provided by a plan sponsor to their patients comparing the benefits of different plans (all or a subset) with which they contract."

CMS confirms in the rule that erectile dysfunction medications are not Part D drugs unless prescribed for a condition for which the FDA has approved the medication's use. And agents used for anorexia, weight gain or loss, cosmetic procedures, and hair growth are also not considered Part D drugs. These changes reflect CMS guidance in Chapter 6 of the Prescription Drug Benefit Manual.

The rule incorporates the coverage of vaccine administration under Part D, effective Jan. 1, and clarifies that medical supplies directly associated with the delivery of insulin into the human body are covered Part D drugs, along with the actual insulin. These medical supplies include needles, syringes, alcohol swabs, and inhalation chambers.

In the proposed Part D rule, the deadline for the annual submission of the application for the retiree drug subsidy was 90 days before the start of the retiree drug plan's plan year. However, CMS has said since then that it "believes that an end-of-month deadline would be administratively simpler for both plan sponsors and CMS to track." Thus, the amendment changes the 90-day requirement to a "date specified by CMS."

Go to www.AISPartD.com to access CMS's rule. Under "Part D Sponsors," click on "General Information" and "Policy and Technical Rule."

Reprinted from the May 2008 issue of MEDICARE PART D COMPLIANCE NEWS,

6. Health plans in Connecticut may have a second chance to bid for the state's Medicaid managed care contract, according to Stifel Nicolaus Capital Markets analyst Tom Carroll. In a recent research note, he wrote that "efforts are afoot to partition out the two main components of the reform: HUSKY (Medicaid) and Charter Oak (expansion program [to expand coverage to the uninsured])." The state's first request for proposals (RFP) had consolidated the programs into one bid, he said. The potential change may make it easier for Medicaid-specific health plans to enter the market, but likely will delay implementation to 2009, he contended. If the RFP is split into two separate bids, he said, companies including AMERIGROUP Corp., Centene, Molina Healthcare, Inc. and Coventry Health Care, Inc. may take another look at entering the market. He added that a mature program may generate annual premium revenue exceeding $700 million for Medicaid managed care and $400 million for Charter Oak.

Reprinted from the April 24, 2008, issue of MEDICARE ADVANTAGE NEWS.

7. Legislation passed by Georgia lawmakers would create new incentives to encourage consumers to choose high-deductible health plans (HDHPs). If signed by Gov. Sonny Perdue (R), the legislation would provide tax breaks for insurance companies and employers that offer HDHPs. Employers that offer HDHPs would receive a $250 tax credit for each employee who enrolls in the plan, and insurance companies would be exempt from the 2.25% state sales tax on HDHP premiums and the 2.5% sales tax that cities and counties can collect on these premiums. Individuals would be allowed to deduct their monthly HDHP premiums from state taxes. The proposal would also make it legal for insurers to offer financial incentives for complying with wellness and disease management programs.

Reprinted from the April 25, 2008, issue of INSIDE CONSUMER-DIRECTED CARE,

8. Sens. Jim DeMint (R-S.C.) and Jon Kyl (R-Ariz.) introduced a bill that would allow consumers who buy health insurance to deduct their health insurance premiums from their income taxes and allow those with HSAs to make tax-free withdrawals from their accounts to pay premiums. Introduced on April 9, the Health Care Equity Act (S. 2835) was referred to the Committee on Finance.

Reprinted from the April 25, 2008, issue of INSIDE CONSUMER-DIRECTED CARE,

9. The U.S. District Court of Massachusetts partially granted the Secretary of HHS's motion to dismiss a lawsuit brought by a group of plaintiffs for failure of the Secretary and the Commissioner of the Social Security Administration to stop withholding premium payments for Part D, and to repay the amounts improperly withheld. The lawsuit, Machado v. Leavitt, No. 07-30111-MAP (D.Mass. 2008), filed in June 2007, alleged that the feds failed to stop withholding premium payments when requested to do so by beneficiaries, in violation of the Medicare statute, the anti-assignment provision of the Social Security Act, and the Due Process Clause. The court dismissed the plantiffs' three statutory claims but allowed the case to proceed under the due-process claim. The court also denied the plantiffs' motion for class-action certification of similarly situated Medicare Part D beneficiaries whose premium payments have been properly withheld.

Reprinted from the May 2008 issue of MEDICARE PART D COMPLIANCE NEWS,

10. Michael Labrada was sentenced to 97 months in prison, and Miguel Castillo received 57 months for their participation in a health care fraud and money laundering scheme that defrauded Medicare of about $1.6 million, the U.S. Attorney's Office for the Southern District of Florida said this month. The two men allegedly served as straw owners of medical equipment companies, the feds say. They both have plea agreements with the feds, court records indicate. Four other co-conspirators have pleaded guilty.

Additional government news appears in
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