Medicare Program; Medicare Prescription Drug Benefit; Interpretation

This final rule modifies or clarifies our interpretations in several areas of the final rule titled "Medicare Prescription Drug Benefit" published in the Federal Register on January 28, 2005. First, it clarifies our interpretation of "entity", to respond to inquiries we received subsequent to the publication of the Prescription Drug Benefit (Part D) final rule on January 28, 2005. We were asked whether a joint enterprise could be considered an "entity" under section 1860D-12(a)(1) of the Social Security Act (the Act), for purposes of offering a prescription drug plan (PDP). Our interpretation is discussed in the Supplementary Information section of this final rule. Second, also subsequent to the publication of the Prescription Drug Benefit (Part D) final rule on January 28, 2005, we received inquiries from parties about our discussion of the actuarial equivalence standard and the manner in which an employee health plan sponsor could apply the aggregate net value test in the regulatory text of the final rule. Our interpretation is discussed in the "Provisions" section of this final rule. In addition, subsequent to publishing the August 3, 2004 proposed rule (69 FR 46684), we received comments on how the late enrollment penalty would be coordinated with the late enrollment penalty for Part B, and whether the one percent penalty would be sufficient to control for adverse selection. We clarify in the Provisions section of this final rule that the example given in the proposed rule, published on August 3, 2004, did not accord with the proposed or final regulatory language because it did not account for the fact that the base beneficiary premium increases on an annual basis. To remedy this error and in response to comments received on the proposed rule, we provide an interpretation that as the base beneficiary premium increases, the late enrollment penalty must also increase, and is in keeping with how the Part B penalty is calculated. Finally, we are providing clarifying