§ 1395w-115. Subsidies for part D eligible individuals for qualified prescription drug coverage
(a)
Subsidy payment
In order to reduce premium levels applicable to qualified prescription drug coverage for part D eligible individuals consistent with an overall subsidy level of 74.5 percent for basic prescription drug coverage, to reduce adverse selection among prescription drug plans and MA–PD plans, and to promote the participation of PDP sponsors under this part and MA organizations under part C of this subchapter, the Secretary shall provide for payment to a PDP sponsor that offers a prescription drug plan and an MA organization that offers an MA–PD plan of the following subsidies in accordance with this section:
(1)
Direct subsidy
A direct subsidy for each part D eligible individual enrolled in a prescription drug plan or MA–PD plan for a month equal to—
(2)
Subsidy through reinsurance
The reinsurance payment amount (as defined in subsection (b) of this section).
This section constitutes budget authority in advance of appropriations Acts and represents the obligation of the Secretary to provide for the payment of amounts provided under this section.
(b)
Reinsurance payment amount
(1)
In general
The reinsurance payment amount under this subsection for a part D eligible individual enrolled in a prescription drug plan or MA–PD plan for a coverage year is an amount equal to 80 percent of the allowable reinsurance costs (as specified in paragraph (2)) attributable to that portion of gross covered prescription drug costs as specified in paragraph (3) incurred in the coverage year after such individual has incurred costs that exceed the annual out-of-pocket threshold specified in section
1395w–102
(b)(4)(B) of this title.
(2)
Allowable reinsurance costs
For purposes of this section, the term “allowable reinsurance costs” means, with respect to gross covered prescription drug costs under a prescription drug plan offered by a PDP sponsor or an MA–PD plan offered by an MA organization, the part of such costs that are actually paid (net of discounts, chargebacks, and average percentage rebates) by the sponsor or organization or by (or on behalf of) an enrollee under the plan, but in no case more than the part of such costs that would have been paid under the plan if the prescription drug coverage under the plan were basic prescription drug coverage, or, in the case of a plan providing supplemental prescription drug coverage, if such coverage were standard prescription drug coverage.
(3)
Gross covered prescription drug costs
For purposes of this section, the term “gross covered prescription drug costs” means, with respect to a part D eligible individual enrolled in a prescription drug plan or MA–PD plan during a coverage year, the costs incurred under the plan, not including administrative costs, but including costs directly related to the dispensing of covered part D drugs during the year and costs relating to the deductible. Such costs shall be determined whether they are paid by the individual or under the plan, regardless of whether the coverage under the plan exceeds basic prescription drug coverage.
(c)
Adjustments relating to bids
(1)
Health status risk adjustment
(A)
Establishment of risk adjustors
The Secretary shall establish an appropriate methodology for adjusting the standardized bid amount under subsection (a)(1)(A) of this section to take into account variation in costs for basic prescription drug coverage among prescription drug plans and MA–PD plans based on the differences in actuarial risk of different enrollees being served. Any such risk adjustment shall be designed in a manner so as not to result in a change in the aggregate amounts payable to such plans under subsection (a)(1) of this section and through that portion of the monthly beneficiary prescription drug premiums described in subsection (a)(1)(B) of this section and MA monthly prescription drug beneficiary premiums.
(C)
Data collection
In order to carry out this paragraph, the Secretary shall require—
(D)
Publication
At the time of publication of risk adjustment factors under section
1395w–23
(b)(1)(B)(i)(II) of this title, the Secretary shall publish the risk adjusters established under this paragraph for the succeeding year.
(2)
Geographic adjustment
(A)
In general
Subject to subparagraph (B), for purposes of section
1395w–113
(a)(1)(B)(iii) of this title, the Secretary shall establish an appropriate methodology for adjusting the national average monthly bid amount (computed under section
1395w–113
(a)(4) of this title) to take into account differences in prices for covered part D drugs among PDP regions.
(d)
Payment methods
(1)
In general
Payments under this section shall be based on such a method as the Secretary determines. The Secretary may establish a payment method by which interim payments of amounts under this section are made during a year based on the Secretary’s best estimate of amounts that will be payable after obtaining all of the information.
(2)
Requirement for provision of information
(e)
Portion of total payments to a sponsor or organization subject to risk (application of risk corridors)
(1)
Computation of adjusted allowable risk corridor costs
(A)
In general
For purposes of this subsection, the term “adjusted allowable risk corridor costs” means, for a plan for a coverage year (as defined in subsection (b)(4) of this section)—
(i)
the allowable risk corridor costs (as defined in subparagraph (B)) for the plan for the year, reduced by
(ii)
the sum of
(I)
the total reinsurance payments made under subsection (b) of this section to the sponsor of the plan for the year, and
(II)
the total subsidy payments made under section
1395w–114 of this title to the sponsor of the plan for the year.
(B)
Allowable risk corridor costs
For purposes of this subsection, the term “allowable risk corridor costs” means, with respect to a prescription drug plan offered by a PDP sponsor or an MA–PD plan offered by an MA organization, the part of costs (not including administrative costs, but including costs directly related to the dispensing of covered part D drugs during the year) incurred by the sponsor or organization under the plan that are actually paid (net of discounts, chargebacks, and average percentage rebates) by the sponsor or organization under the plan, but in no case more than the part of such costs that would have been paid under the plan if the prescription drug coverage under the plan were basic prescription drug coverage, or, in the case of a plan providing supplemental prescription drug coverage, if such coverage were basic prescription drug coverage taking into account the adjustment under section
1395w–111
(c)(2) of this title. In computing allowable costs under this paragraph, the Secretary shall compute such costs based upon imposition under paragraphs (1)(D) and (2)(E) of section
1395w–114
(a) of this title of the maximum amount of copayments permitted under such paragraphs.
(2)
Adjustment of payment
(A)
No adjustment if adjusted allowable risk corridor costs within risk corridor
If the adjusted allowable risk corridor costs (as defined in paragraph (1)) for the plan for the year are at least equal to the first threshold lower limit of the risk corridor (specified in paragraph (3)(A)(i)), but not greater than the first threshold upper limit of the risk corridor (specified in paragraph (3)(A)(iii)) for the plan for the year, then no payment adjustment shall be made under this subsection.
(B)
Increase in payment if adjusted allowable risk corridor costs above upper limit of risk corridor
(i)
Costs between first and second threshold upper limits
If the adjusted allowable risk corridor costs for the plan for the year are greater than the first threshold upper limit, but not greater than the second threshold upper limit, of the risk corridor for the plan for the year, the Secretary shall increase the total of the payments made to the sponsor or organization offering the plan for the year under this section by an amount equal to 50 percent (or, for 2006 and 2007, 75 percent or 90 percent if the conditions described in clause (iii) are met for the year) of the difference between such adjusted allowable risk corridor costs and the first threshold upper limit of the risk corridor.
(ii)
Costs above second threshold upper limits
If the adjusted allowable risk corridor costs for the plan for the year are greater than the second threshold upper limit of the risk corridor for the plan for the year, the Secretary shall increase the total of the payments made to the sponsor or organization offering the plan for the year under this section by an amount equal to the sum of—
(iii)
Conditions for application of higher percentage for 2006 and 2007
The conditions described in this clause are met for 2006 or 2007 if the Secretary determines with respect to such year that—
(C)
Reduction in payment if adjusted allowable risk corridor costs below lower limit of risk corridor
(i)
Costs between first and second threshold lower limits
If the adjusted allowable risk corridor costs for the plan for the year are less than the first threshold lower limit, but not less than the second threshold lower limit, of the risk corridor for the plan for the year, the Secretary shall reduce the total of the payments made to the sponsor or organization offering the plan for the year under this section by an amount (or otherwise recover from the sponsor or organization an amount) equal to 50 percent (or, for 2006 and 2007, 75 percent) of the difference between the first threshold lower limit of the risk corridor and such adjusted allowable risk corridor costs.
(ii)
Costs below second threshold lower limit
If the adjusted allowable risk corridor costs for the plan for the year are less the second threshold lower limit of the risk corridor for the plan for the year, the Secretary shall reduce the total of the payments made to the sponsor or organization offering the plan for the year under this section by an amount (or otherwise recover from the sponsor or organization an amount) equal to the sum of—
(3)
Establishment of risk corridors
(A)
In general
For each plan year the Secretary shall establish a risk corridor for each prescription drug plan and each MA–PD plan. The risk corridor for a plan for a year shall be equal to a range as follows:
(ii)
Second threshold lower limit
The second threshold lower limit of such corridor shall be equal to—
(B)
Target amount described
The target amount described in this paragraph is, with respect to a prescription drug plan or an MA–PD plan in a year, the total amount of payments paid to the PDP sponsor or MA–PD organization for the plan for the year, taking into account amounts paid by the Secretary and enrollees, based upon the standardized bid amount (as defined in section
1395w–113
(a)(5) of this title and as risk adjusted under subsection (c)(1) of this section), reduced by the total amount of administrative expenses for the year assumed in such standardized bid.
(C)
First and second threshold risk percentage defined
(i)
First threshold risk percentage
Subject to clause (iii), for purposes of this section, the first threshold risk percentage is—
(ii)
Second threshold risk percentage
Subject to clause (iii), for purposes of this section, the second threshold risk percentage is—
(iii)
Reduction of risk percentage to ensure 2 plans in an area
Pursuant to section
1395w–111
(b)(2)(E)(ii) of this title, a PDP sponsor may submit a bid that requests a decrease in the applicable first or second threshold risk percentages or an increase in the percents applied under paragraph (2).
(f)
Disclosure of information
(1)
In general
Each contract under this part and under part C of this subchapter shall provide that—
(A)
the PDP sponsor offering a prescription drug plan or an MA organization offering an MA–PD plan shall provide the Secretary with such information as the Secretary determines is necessary to carry out this section; and
(B)
the Secretary shall have the right in accordance with section
1395w–27
(d)(2)(B) of this title (as applied under section
1395w–112
(b)(3)(C) of this title) to inspect and audit any books and records of a PDP sponsor or MA organization that pertain to the information regarding costs provided to the Secretary under subparagraph (A).
(g)
Payment for fallback prescription drug plans
In lieu of the amounts otherwise payable under this section to a PDP sponsor offering a fallback prescription drug plan (as defined in section
1395w–111
(g)(4) of this title [2]), the amount payable shall be the amounts determined under the contract for such plan pursuant to section
1395w–111
(g)(5) of this title.
[1] So in original. The word “and” probably should not appear.
[2] See References in Text note below.