100-16 Medicare Managed Care Manual: Chapter 1 - General Provisions

Medicare Managed Care Manual
Chapter 1 - General Provisions
Table of Contents
(Rev. 125, 02-10-17)
Transmittals for Chapter 1
10 – Legislative History
20 – Types of Medicare Advantage (MA) Plans
20.1 – Overview of MA Plans
20.2 – Coordinated Care Plans (CCPs)
20.2.1 – Health Maintenance Organizations (HMOs)
20.2.2 – Preferred Provider Organizations (PPOs)
20.2.3 – Special Needs Plans (SNPs)
20.3 – Medical Savings Account (MSA) Plans
20.4 – Private Fee-for-Service (PFFS) Plans
30 – Other MA Plans
30.1 – Religious Fraternal Society (RFB) Plans
30.2 – Part B only Plans
40 – Medicare Cost Plans and Health Care Prepayment Plans (HCPP)
40.1 – Medicare Cost Plans
40.2 – HCPP Plans

10 – Legislative History
( Rev. 124, Issued: 11-10-16; Effective: 11-10-16; Implementation: 11-10-16 )
The Balanced Budget Act of 1997 (BB A) (Public Law 105-33) establi shed a new Pa rt C
of the Medica r e p rogram, known then a s the Medica re+Choice (M +C ) program, effective
J anua r y 1999. 	As pa rt o f the M+C p rogram, the BB A autho rized C MS to cont ract with
public or private o r ganizations to offe r a variety o f health plan options fo r bene ficiarie s,
including both t raditional managed ca re plan s (such as those o ffe r ed by Health
Maintenance Organizations (HMOs) unde r §1876 of the Social Secu rity A ct ) and ne w
option s that wer e not previously authorized. 	Fou r types o f M+C plan s we r e autho rized
under the ne w Pa rt C o f Medica r e:
• 	Coo rdinated car e plans (CCPs), including:
o 	HMOs (with or without P oint -o f-Se rvice (POS) options;
o 	Provide r Spon so red Or ganizations (PSOs); and
o 	Pre fe rr ed Provider Or ganizations (PPOs).
• 	Medica re Medical S avings Account (MSA ) plans;
• 	Private Fee-fo r-S e rvice (PFFS) plans; and
• 	Religious Fraternal Brotherhood Societies (RFB).
The Pa rt C program o f M edicare was r enam ed the Medica re Advantage (MA) Progr am
pursuant to Title II of the Medica r e Pres c ription Drug, Improvement, and Mode rnization
Act o f 2003 (MMA) (Public Law 108 - 173 ), which was enacted on December 8, 2003.
The MMA updated and i mp roved the choice o f plans f o r bene ficia rie s under MA, and
changed the way benefit s ar e establi shed and payment s a re m ade. Under the MMA,
beneficia rie s may choos e fro m additional plan options, including r egional PP O (RPP O)
plans and special need s plans (SNP s ). Title I of the MMA fu rther e stabli shed the
Medica re p re s c ription dr ug benefit (Pa rt D) p rogr am, and a mended the MA p rogra m to
allow, and in some cases require, MA plans to offe r p res c ription drug cover age. 	Mo re
inform ation about prescription drug requi re ment s can b e found in the Medicare
P r esc ription Drug Benefit Manual at http://www.cms.gov/Medicare/Prescription-Drug-
Coverage/PrescriptionDrugCovContra/PartDManuals.html page.
On July 15, 2008, the Medica re Imp rove ment s fo r Patient s and P roviders Act (MIPPA )
(Public Law 110 -275 ) wa s enacted, revi sing and a mending statuto r y p rovi sions governing
t he MA and Part D p rogr ams. A mong the se we re p rovi sions that e stabli shed new rules
for PFFS plans, SNP s, and Section 1876 cost plan s .
In 2010, the Patient P rotection and Affo rdable Ca r e Act (Public Law 111 - 148) and the
H ealth Ca re and Education Reconciliation Act (Public Law 111-1 52 ) were enacted and

ar e collectively refe rred to as the Affo rdable Ca re Act (ACA). The ACA includes
significant refo rms to both the p rivate health insu r ance indu st r y and the Medicar e and
Medicaid p rogra ms. P rovi sions in the ACA concerning t h e MA and Part D p rogr a ms
la r gely focus on benefici ar y p rotections, MA payment s, and si mplification of MA and
Part D p rogr a m p rocesse s.
CMS implemented the MA and Part D p rovi sions specified in the ACA th r ough
regulations at 42 CFR 422 and 423.
20 - Types of Medicare Advantage (MA) Plans
( Rev. 124, Issued: 11-10-16; Effective: 11-10-16; Implementation: 11-10-16 )
20.1 - Overview of MA Plans
( Rev. 124, Issued: 11-10-16; Effective: 11-10-16; Implementation: 11-10-16 )
Terms in this chapter follow the definitions at §422.2.
There are three basic types of MA plans: CCPs (Section 20.2); MSA plans (Section
20.3); and PFFS plans (Section 20.4).
Two other types of MA plans characterized by special enrollment are the RFB societies
which are affiliated with a church and may only enroll RFB members (Section 30.1) and
Part B-only plans which restrict enrollment to beneficiaries who only have Part B of
original Medicare (Section 30.2).
20.2 - Coordinated Care Plans (CCPs)
( Rev. 124, Issued: 11-10-16; Effective: 11-10-16; Implementation: 11-10-16 )
As defined at 42 CFR 422.4(a)(1), a CCP is a plan that includes a network of providers
that are under contract or arrangement with the MA organization to deliver the benefit
package approved by CMS. A CCP must at least (i) furnish all Part A and Part B services
(except for hospice) (42 CFR 422.101(a)); (ii) conduct quality improvement activities (42
CFR 422.152(a)–(b)); (iii) provide sufficient access, as defined by CMS, to services
including continuity of care (42 CFR 422.112(a)–(b)); and (iv) disclose required
information about benefits and costs to enrollees (42 CFR 422.111(b)(2)).
CCPs may use mechanisms to control enrollee utilization of services. Mechanisms may
include requiring referrals from a gatekeeper (usually the enrollee’s primary care provider
(PCP)) or prior authorization for an enrollee to receive certain covered services (42 CFR
422.4(a)(1)(ii)).
20.2.1- Health Maintenance Organizations (HMOs)
( Rev. 124, Issued: 11-10-16; Effective: 11-10-16; Implementation: 11-10-16 )
HMO - An HMO is generally the most restrictive of the CCP types. HMOs may control
enrollees’ utilization of services by requiring enrollees to go `through a gatekeeper,

usually the enrollees’ PCP, to obtain referrals for services the PCP does not furnish and to
obtain all services from network providers (42 CFR 417.448(a)).
HMO-POS - Some HMOs offer coverage of certain specified plan-covered services
outside of the plan network. Offering that out-of-network access to some covered
services requires that the HMO offer a point-of-service (POS) supplemental benefit and
may also require the HMO to obtain state licensure to offer an HMO-POS. The HMO-
POS must specify in writing which services it offers out-of-network, maximum enrollee
out-of-pocket cost sharing, and any annual limits on the benefits offered under the POS
benefit.
20.2.2 - Preferred Provider Organizations (PPOs)
( Rev. 124, Issued: 11-10-16; Effective: 11-10-16; Implementation: 11-10-16 )
A PPO is a CCP plan that provides for reimbursement for all covered benefits regardless
of whether the benefits are provided within the plan’s network of providers (42 CFR
422.4(a)(1)(v)(B); Section 1852(e)(3)(iv) of the Social Security Act). PPOs may be local
or regional (42 CFR 422.4(a)(iii)(C)).
Local PPOs - A local PPO has a service area that is specified by the organization
offering the plan and approved by CMS. Its service area typically will consist of one or
multiple counties. However, as noted in Chapter 4 of the Medicare Managed Care
Manual, Section 140, CMS may allow service areas to contain partial counties if the plan
can demonstrate that this is necessary, non-discriminatory and in the best interests of the
plan enrollees (See also 42 CFR 422.2 (definition of service area)).
Regional PPOs (RPPOs) - The MMA introduced the RPPO option in an effort to
expand access to MA managed care to include Medicare beneficiaries living in rural
areas. RPPOs may be offered only in one or several, but not in parts, of the 26 MA
regions established by CMS for RPPOs. See
http://www.cms.hhs.gov/PrescriptionDrugCovGenIn/Downloads/MAPDRegions.pdf
for the location of the MA regions; each MA region consists of one or more states. RPPOs
must offer a uniform benefit package across the service area, must establish a
‘catastrophic’ maximum enrollee out-of-pocket cost sharing limit, and must establish a
provider network approved by CMS. In those portions of its service area where it is
possible, RPPOs should meet network adequacy criteria for original Medicare services by
having written contracts with a full network of providers. In more rural areas, RPPOs may
request an exception to CMS’s requirement that the RPPO have written contracts in order
to meet network adequacy criteria (42 CFR 422.112(a)(1)(ii)).
RPPO plans offered by MA organizations must be licensed or otherwise authorized under
State law as a risk-bearing entity eligible to offer health insurance or health benefits
coverage in each state in which it offers one or more MA plans.
See Chapter 4 of the Medicare Managed Care Manual for information on deductibles as
well as catastrophic limits on cost sharing for RPPOs. Annually, CMS issues information

about deductibles and cost sharing for the following contract year in the Call Letter.
Current and past Call Letters may be accessed at:
https://www.cms.gov/Medicare/Health-
Plans/MedicareAdvtgSpecRateStats/Announcements-and-Documents.html
20.2.3 - Special Needs Plans (SNPs)
( Rev. 124, Issued: 11-10-16; Effective: 11-10-16; Implementation: 11-10-16 )
A SNP may be offered as any of the CCP types and must satisfy CMS' SNP
requirements. SNPs must exclusively enroll special needs individuals as appropriate to
the SNP type (42 CFR 422.4(a)(1)(iv)).
The MMA designated three specific segments of the Medicare population as special
needs individuals: (1) institutionalized individuals; (2) those entitled to Medical
Assistance under a State Plan under Title XIX (Medicaid) (i.e., dual eligibles); or (3)
those who have “a severe or disabling chronic condition” who would “benefit from
enrollment in a specialized MA plan (Section 1859 of the Act and 42 CFR 422.2).
Corresponding to these segments of the Medicare population there are three types of
SNPS: I-SNPs for institutionalized individuals, D-SNPs for dual eligible individuals and
C-SNPs for chronic-condition individuals.
See chapter 16b for more details on these requirements.
20.3 - Medical Savings Account (MSA) Plans
( Rev. 124, Issued: 11-10-16; Effective: 11-10-16; Implementation: 11-10-16 )
The BBA authorized MSA plans on a demonstration basis when it created the M+C
program. The MMA of 2003 made Medicare MSAs a permanent type of MA plan
option and extended the beneficiary protection from balance billing by non-contracting
providers to include MSA enrollees (42 U.S.C. § 1395w-28(b)(3)(A); 42 CFR 422.4(a)).
An MSA has two parts: 1) A high deductible MA plan and 2) a Medical Savings account
(42 CFR 422.4(a)(2)).
1. 	In a high deductible MA plan:
a. 	Enrollees pay no premiums to the MSA plan except as required to cover
supplemental benefits (42 CFR 422.262(b)(2));
b. 	Enrollees pay out of pocket for all services until they reach the deductible amount
(42 CFR 422.103(a); 42 U.S.C. § 1395w-28(b)(3)(A)(i)); and
c. 	The MSA plan pays for all Medicare covered services, after the high-plan
deductible is met (42 CFR 422.103(c); 42 U.S.C. § 1395w-28(b)(3)(A)(iii)).
2. 	Medical Savings Account: The organization offering the MSA plan deposits money

into a special savings account at the beginning of each calendar year. Only the plan
can make deposits into the MSA account; plan enrollees cannot deposit their own
money. The amount of deposit can change each year and may also earn interest. Any
money left in the account at the end of the year will remain in the account and will be
added to the new deposit the following year if the enrollee choses to continue
enrollment.
Enrollees are responsible for handling the money in their account, including
deciding whether to pay for health care services using medical savings account
funds or other funds.
An MSA plan:
• 	Must, after the enrollee has met the plan deductible, cover in full all original
Medicare Part A and B services subject to the requirements at 42 CFR 422.101 and
section 1852(a)(1). (See also section 1859(b)(3) of the Act and 42 CFR 422.103(a));
• 	May offer supplemental benefits but may not apply the patient portion of the cost of
those services to the patient’s deductible (Section 1859(a)(3)(B)(ii)); and
• 	May not offer a Part D benefit. However, plan enrollees may choose to
simultaneously enroll in a Prescription Drug Plan (PDP) (42 CFR 422.4(c)(1)–(2)).
MSA plans must meet all other requirements of MA plans.
For further information on MSA plans including special tax requirements
see: https://www.medicare.gov/Pubs/pdf/11206.pdf
20.4 - Private Fee-for-Service (PFFS) Plans
( Rev. 124, Issued: 11-10-16; Effective: 11-10-16; Implementation: 11-10-16 )
All PFFS plans must cover all Part A and Part B original Medicare services whether or
not the PFFS plan has a full network of contracted providers. If the PFFS plan is not in a
network area, and does not have a full network of contracted providers, it must pay for
covered services furnished to enrollees by providers with whom they do not have written
contracts by paying at least the original Medicare rate (Section 1852(d)(4) of the Act and
42 CFR 422.114(a)(2)).
PFFS plans may differ in their network requirements. For a given contract year, a
network area is any area that the Secretary determines to have “at least 2 network-based
plans” (Section 1852(d)(5)(B) of the Act). CMS annually announces which counties are
network areas in the Advance Notice. Effective 2011, a PFFS plan operating in a
network area must meet Medicare Advantage network adequacy criteria consistent with
the CMS network management module by having a full network. This means the PFFS
plan must have written contracts with a sufficient number and range of providers to
provide coverage for all Part A and Part B original Medicare services. Similarly, a PFFS

employer/union plan that has waivers under section 1857(i) of the Act must operate as a
full network plan (irrespective of its service area) (42 CFR 422.114(a)(3) and (4)).
PFFS plans operating in non-network areas may choose to meet network adequacy
criteria for original Medicare services by having full networks, or they may choose to
meet network adequacy criteria by stating in their terms and conditions of payment that
they will pay providers with whom the plan does not have a written contract at least the
original Medicare rate.
PFFS plans may offer qualified Part D. If the PFFS plan chooses not to cover Part D, the
PFFS plan enrollees may simultaneously enroll in a PDP (42 CFR 422.4(c)(1), (3)).
PFFS plans are further discussed in chapter 16a.
30 - Other MA Plans
( Rev. 124, Issued: 11-10-16; Effective: 11-10-16; Implementation: 11-10-16 )
30.1 – Religious Fraternal Society (RFB) Plans
( Rev.124, Issued: 11-10-16; Effective: 11-10-16; Implementation: 11-10-16 )
RFB plans are MA plans that are offered by an RFB society; the RFB society must limit
enrollment exclusively to members of the RFB society (42 CFR 422.57) and may be
approved to offer any MA plan type (e.g., HMO, PPO, PFFS).
An RFB society is an organization that is described in §501(c)(8) of the Internal
Revenue Code of 1986, is exempt from taxation under §501(a) of that code and 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 churches. See section
1859(e)(3)(A) of the Act; 42 CFR 422.2.
30.2 – Part B only Plans
( Rev. 124, Issued: 11-10-16; Effective: 11-10-16; Implementation: 11-10-16 )
An MA Part B only plan is a plan offered to individuals eligible for Part B who do not
have Part A coverage. Part B only plans are required to cover the Medicare benefits that
are coved under Part B and any supplemental benefits the plan may offer. Regulations at
42 CFR 422.50 prohibit creating new Part B only plans except for EGWPs that are granted
a waiver. Non-EGWP Part B only plans created before the MMA may continue operating
as long as they have membership and provided they do not enroll new Part B only
members. For a complete discussion of Part B only plans offered by Employer Group
Waiver Plans (EGWPs), see chapter 9 of this manual.
For information on Part B only beneficiaries enrolling in Medicare cost plans under
section 1876 of the Social Security Act, see Section 40.
40 - Medicare Cost Plans and Health Care Prepayment Plans (HCPP)

( Rev. 124, Issued: 11-10-16; Effective: 11-10-16; Implementation: 11-10-16 )
Medicare cost plans and HCPP plans are not MA plans because they are authorized under
a different section of the Social Security Act than MA plans.
40.1 - Medicare Cost Plans
(Rev. 125, Issued: 02-10-17, Effective: 02-10-17, Implementation: 02-10-17)
Medicare cost plans are operated by a legal entity licensed as an HMO in accordance
with a cost reimbursement contract under Section 1876 of the Social Security Act and
Title 42, Part 417 of the Code of Federal Regulations. Medicare payment to the HMO is
based on the reasonable costs of providing services to their enrollees.
Medicare cost plans may enroll both Part A/B as well as Part B only beneficiaries (Section
1876(d) of the Social Security Act). Medicare cost plan enrollees are not restricted to the
HMO network for receipt of covered Medicare services (i.e., covered Part A and Part B
services may be received through non-HMO plan sources and are reimbursed separately
by original Medicare).
Cost plans may offer either Part D or non-qualified prescription drug coverage but may
not offer both (42 CFR 417.440(b)). 	Plan enrollees not electing Part D coverage from
the plan, either because the plan does not offer it or because they did not elect it, may
enroll in a PDP.
Under Section 1876 (h)(5) of the Social Security Act, no new cost plan contracts are
accepted by CMS. CMS will, however, accept and review applications to modify cost
plan contracts in order to expand service areas (42 CFR 417.402(b)).
Section 1876(h)(5)(C) of the Social Security Act requires that beginning CY 2016,
CMS non- renew cost plans in service areas or portions of service areas in which at least
two competing MA local or two MA regional coordinated care plans that meet specified
enrollment thresholds are available. The Medicare Access and CHIP Reauthorization
Act of 2015 delays non-renewal of plans affected by the cost plan competition
requirements through CY 2018. This means cost plans that would otherwise be non-
renewed in all or a portion of a plan’s service area as a result of the cost plan
competition requirements, will be able to continue to offer the plans through contract
year 2018.
For further information on Medicare Cost plans see Chapter 17 of this manual.
40.2 – HCPP Plans
( Rev. 124, Issued: 11-10-16; Effective: 11-10-16; Implementation: 11-10-16 )
An HCPP operates like a Medicare cost plan but exclusively enrolls Part B only
beneficiaries and only provides Part B benefits (42 CFR 417.800(a)(1)(B), (d)(1))).

Transmittals Issued for this Chapter
Rev # 	Issue Date Subject 	Impl Date CR#
R125MCM 02/10/2017 Update of Chapter 1 	02/10/2017 N/A
R124MCM 11/10/2016 Update of Chapter 1 of the Managed Care
Manual
11/10/2016 N/A
R95MCM 	01/07/2011 Chapter 1, “General Provisions” 	01/07/2011 N/A
R81MCM 	04/25/2007 Updates to Chapter 1, “General Provisions” 	04/25/2007 N/A
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