CMS Unveils 12-Step Reconciliation Process For Retiree Drug Subsidy (RDS) The Centers for Medicare and Medicaid Services (CMS) has announced a 12-step final reconciliation process for plan sponsors receiving drug subsidies through the Medicare Part D Retiree Drug Subsidy Program. CMS has provided over 200 pages of detailed instructions on its website. Background Under the retiree drug subsidy program established by the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (RDS program), employers providing prescription drug coverage to qualified retirees may receive a 28% tax-free subsidy from the government for allowable prescription drug costs incurred by those retirees. Plan sponsors that seek reimbursement from Medicare under RDS and receive at least one interim payment must go through a mandatory reconciliation process, under which they match their enrollment and member eligibility with CMS records, validate their coverage of drug claims, and true-up their costs with Medicare s allowable costs and compare the results with interim payments received. The reconciliation process must be completed no later than 15 months following the last day of the plan year. For 2006 calendar year plans, that deadline is March 31, 2008. Failure to timely file a final reconciliation will result in a denial of all payments to the plan sponsor, and will trigger recovery by CMS of interim payments, possible interest penalties, and fines. CMS 12-Step Reconciliation Process The final reconciliation is the process a plan sponsor will follow to submit the total gross covered prescription drug costs and actual cost adjustments (e.g., discounts, chargebacks, rebates and other price concessions) to CMS for the final payment under RDS. The reconciliation process must be completed for each application submitted by the plan sponsor, and all 12 steps summarized below must be completed for each application. If the final reconciliation is not completed with respect to an application for which the plan sponsor has received interim payments, then all interim payments will need to be returned to CMS. If the plan sponsor has not submitted any interim payment requests, the reconciliation is the final payment request. Except for steps 11 and 12, all of the steps can be completed by the Account Manager, or by a designee with appropriate authority. Steps 11 and 12 can only be completed by the Authorized Representative. In what follows, we highlight the 12 steps. The table on page 5 summarizes each step and sets out who has the authority to complete that step.
Step 1: Initiate Reconciliation The first step serves as notice to CMS that the plan sponsor is ready to submit the final reconciliation. The reconciliation can only be started after the plan year is completed thus for calendar year 2006 plans, the reconciliation can be started now. However, once the reconciliation is started no additional interim payments can be requested. CMS recommends that the reconciliation not be started until the plan sponsor understands the entire process and has collected and reviewed all necessary elements, including any changes in the Account Manager, Authorized Representative or designees the accuracy of retiree eligibility data whether cost data has been completed whether rebates have been finalized whether interim payment activities have been completed. BUCK COMMENT. In addition to the Account Manager and Authorized Representative, there are a number of other parties that could be involved in completing the final reconciliation including Cost Reporters, eligibility vendors, and other designees of the plan sponsor. Before the reconciliation process is started, the roles and responsibilities of each party must be clearly defined by the plan sponsor. Step 2: Review Payment Setup The second step involves review of the current payment setup and identification of who is allowed to report final costs, retiree eligibility and prepare the reconciliation payment request. Step 3: Request List of Covered Retirees The plan sponsor must request a list of all covered retirees from CMS and review it. Payment requests can be made only for retirees included in this list, and for the benefit options and coverage periods in the list. Step 4: Finalize Covered Retirees Once the plan sponsor finalizes the list of covered retirees, the list is verified with CMS. BUCK COMMENT. Because CMS continuously updates eligibility and enrollment under RDS, and because all RDS claim submissions must be limited to eligible RDS covered members, the finalization of the covered retiree list is a critical step. Plan sponsors should already be requesting eligibility lists from CMS, reviewing them for accuracy and rectifying any eligibility discrepancies before starting the final reconciliation process. Step 5: Start Preparation of Reconciliation Payment Request This step involves notification to CMS that the plan sponsor is ready to start submitting its final cost reports. [ 2 ]
Step 6: Manage Submission of Final Cost Reports The plan sponsor can now manage and verify the submission of the final cost reports from all cost reporting sources (e.g., the pharmacy benefit manager or carrier). This step must be carefully coordinated if there are multiple cost reporters. Step 7: Review Final Costs The plan sponsor must review and confirm all final cost reports for each UBOI (unique benefit option ID) included in the application. BUCK COMMENT. Plan sponsors should accurately identify and exclude prescription drugs that are not covered by Medicare Part D in particular drugs covered under Medicare Part B. The plan sponsor calculations must also apply the threshold and cost limit to each member, and this data must be reported separately by UBOI. Step 8: Enter Revisions to Final Costs The plan sponsor can enter any final adjustments, if necessary. BUCK COMMENT. Adjustment factors, such as rebates, are complex and may be financially material to large plan sponsors. All plan sponsors must exclude actual rebates from the final reconciliation. CMS has stated that this step cannot be undertaken until fall of 2007. Step 9: Finalize Reconciliation Payment Request The Account Manager (or designee) agrees that the reconciliation payment request is ready for the Authorized Representative. Step 10: Review Electronic Funds Transfer (EFT) Information The original RDS application included EFT information. In this step, the plan sponsor can modify that information, if necessary. Step 11: Approve EFT Information If the EFT information is modified in Step 10, then the Authorized Representative must approve the revised information. Step 12: Review and Submit Reconciliation Payment Request The Authorized Representative reviews the payment request and can either submit or reject the application. If the request is rejected, Steps 9 through 12 must be completed again with any necessary revisions. BUCK COMMENT. While the Account Manager or designee can complete the first ten steps, only the Authorized Representative can complete steps 11 and 12 and submit the final reconciliation payment request. [ 3 ]
Timing Final reconciliation must be completed no later than 15 months after the end of the plan year. For 2006 calendar year plans, that deadline is March 31, 2008. However, if the final reconciliation would have been due before November 30, 2007, the reconciliation deadline for that application will be November 30, 2007. Thus, for example, the final reconciliation for a plan sponsor with a plan year starting July 1, 2005 would be November 30, 2007, rather than 15 months after the end of the plan year. Failure to complete the reconciliation by the deadline will be treated as a denial of all payments to the plan sponsor and will trigger recovery of interim payments, with possible interest penalties and fines. BUCK COMMENT. Plan sponsors with non-calendar year plans should determine as soon as possible whether they will need to complete the final reconciliation by November 30, 2007. After CMS has processed the reconciliation payment request, one of the following will occur If the payment request is greater than zero, a payment will be made to the plan sponsor. If the payment request is less than zero, CMS will demand repayment of excess payments. If the payment request is zero, the plan sponsor will receive email confirmation that the request has been finalized. Documentation CMS has also advised plan sponsors that they will be responsible for keeping records on a wide assortment of matters, including the work papers supporting the actuarial attestation, documentation of rebate arrangements, and other documentation required for the final reconciliation. Conclusion The reconciliation process requires the collection and verification of extensive retiree eligibility and claims data, and coordination between the plan sponsor and cost and eligibility data reporters. Buck has developed a service that can assist employers with the RDS reconciliation process, while also maximizing the RDS subsidy. This service is known as CARDS - Compliance, Audit validation, Reconciliation and Data Storage solution. Buck s consultants would be pleased to assist you in satisfying the RDS reconciliation process and in helping you understand and implement other aspects of the RDS program. [ 4 ]
The RDS Reconciliation Process The twelve steps are outlined in the following table along with who is allowed to complete each step. Authorized Representative Account Manager Designee with Payment Request Privilege Step 1 Initiate Reconciliation Yes Yes View Only Step 2 Review Payment Setup Yes Yes View Only Step 3 Request Covered Retiree List Yes Yes Yes* Step 4 Finalize Covered Retirees Yes Yes Yes* Step 5 Step 6 Start Preparation of Reconciliation Payment Request Manage Submission of Final Cost Reports Step 7 Review Final Costs Step 8 Enter Revisions to Final Costs Step 9 Finalize Reconciliation Payment Request Step 10 Review EFT Information Yes Yes Yes** Step 11 Approve EFT Information Yes View Only View Only*** Step 12 Review and Submit Reconciliation Payment Request Yes View Only View Only * Both payment request and retiree data privileges required to access download ** Designee with both payment request and EFT privileges may complete step *** View only for designee with both payment request and EFT privileges This FYI is intended to provide general information. It does not offer legal advice or purport to treat all the issues surrounding any one topic. [ 5 ]