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December 2013 Retiree Drug Subsidy (RDS) Community Information Group (CIG) Webinar Spotlights Part 3: Working with Cost Reporters at Reconciliation

The Retiree Drug Subsidy (RDS) Community Information Group (CIG) hosted a webinar on Wednesday, December 18, 2013. Over 170 individuals attended the webinar allowing them to stream audio and view presentation slides.

The webinar was presented by Lisa Hesseltine, a subject matter expert for the Education, Training, and Outreach division of CMS' RDS Center. The webinar covered the following topics:

Review these topics for a summary of the information presented, as well as links to recommended resources.

Webinar Topics:

Preparing Final Costs

When to Prepare Final Costs

Participants were reminded that cost figures can only be finalized after the Covered Retiree List (CRL) is finalized in Reconciliation Step 4: Finalize Covered Retirees. Up until Step 4 is complete, an event may occur that may change the CRL, such as a notification from the Medicare Beneficiary Database (MBD) or submission of a new retiree file. Should these events occur, the RDS Secure Website (SWS) will force you to request and download a new CRL. Once Step 4 is complete, new retiree files will be rejected and notifications will be held.

Communicate the final CRL to Cost Preparers and Cost Reporters once Step 4 is complete. Remind Cost Preparers that they must only include costs for the Qualifying Covered Retirees (QCRs), Benefit Options, and Subsidy Periods listed on the final CRL.

What Costs to Report as Gross Retiree Costs

Gross Retiree Costs are eligible costs aggregated by plan month based on the incurred date. To be eligible, the drug cost(s) must be:

  • Covered under Medicare Part D and not reimbursable under Medicare Part B.
  • Incurred on or within the Subsidy Period Effective Date and Termination Date for each QCR listed on the CRL.
  • Paid by the plan, the QCR through out-of-pocket co-pay or deductible, or a combination of the two.

Recommended resources related to this topic:

Cost Threshold and Cost Limit

Participants were reminded that only costs between the Federally defined Cost Threshold and Cost Limit are eligible for subsidy. The Cost Threshold and the Cost Limit are determined based on plan year end date. For example, if the plan year starts in 2012 and ends in 2013, the 2013 Threshold and Limit will apply. When reporting final costs, the Threshold Reduction (amount below the Cost Threshold) and the Limit Reduction (amount above the Cost Limit) must be applied per QCR and aggregated by plan month and Benefit Option. If the QCR is covered under more than one Benefit Option, the Thresholds and Limits must be coordinated between Benefit Options.

Recommended resources related to this topic:

Actual Cost Adjustments

Actual cost adjustments are any discounts, chargebacks, rebates, and/or other price concessions given by the manufacturer or pharmacy to the Plan Sponsor that are attributable to Gross Retiree Costs between the Cost Threshold and Cost Limit. Actual cost adjustments are not eligible for subsidy and must be allocated by Benefit Option and plan month at Reconciliation.

Reconciliation results in an overpayment for some Plan Sponsors because they underestimated their Estimated Cost Adjustment during Interim Payments. Ms. Hesseltine suggested that Plan Sponsors that used a methodology to estimate rebates for Interim Payments revisit that methodology each year and make adjustments to it as necessary to help avoid being in an overpayment situation at Reconciliation.

Recommended resources related to this topic:

How Final Payment Is Calculated

To calculate Final Payment, RDS subtracts the Threshold Reduction (TR) and the Limit Reduction (LR) from the Gross Retiree Cost (GRC) to calculate the Gross Eligible amount. The Actual Cost Adjustment (ACA) is then subtracted from the Gross Eligible amount to determine the Allowable Retiree Cost (ARC). In summary: GRC - TR - LR - ACA = ARC.

The ARC is then multiplied by 28% to determine the current subsidy amount. The Reconciliation Payment Request is the Net subsidy amount: Current – Old Costs (Interim Payment) = Net (Reconciliation).

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Updating Payment Setup and Tips to Avoid Common Mistakes

Determining Whether Payment Setup Needs to Be Updated

The Reconciliation process includes reviewing and possibly updating Payment Setup. To determine whether you need to update Payment Setup, consider the following questions:

  1. How are final costs being reported? Consider your source, the organization responsible for submitting the Cost Report (Plan Sponsor or Vendor). Also consider your method, the way in which the Cost Report is submitted to CMS' RDS Center (Mainframe or Data Entry).
  2. Who is reporting final costs?  Consider your Cost Reporter (Vendor, Designee, and Account Manager).

If there are any changes to the Plan Sponsor's methods, sources, or Cost Reporters that were used for interim cost reporting, the Plan Sponsor needs to update Payment Setup by going to Reconciliation Checklist Step 2: Review Payment Setup.

Recommended resources related to this topic:

Things to Remember When Changing Payment Setup

Participants were provided a number of guidelines to remember when changing Payment Setup:

  • A source that previously reported costs cannot be deleted.
  • New Vendors and Cost Reporters can be added—remember to assign Benefit Options to the new source.
  • Making Designee changes can make Payment Setup incomplete—be sure to complete Step 2 if you make changes to Designees or other items in Payment Setup.

Changing Sources and Methods

If changing the cost reporting source and method from Vendor Mainframe to Plan Sponsor Data Entry, and the Vendor reported costs included in Interim Payments, there is no need for the Vendor to report zero costs or any Final Costs. If a Vendor reports Final Costs, the Plan Sponsor should reject the costs in Reconciliation Step 7. The interim costs will appear as old costs in Reconciliation Step 7. Remember to add the new Plan Sponsor Cost Reporter (Plan Sponsor Designee or Account Manager) and attach Benefit Option(s) to the new Cost Reporter so they can report Final Costs for the plan year.

If changing the source and method from Plan Sponsor Data Entry to Vendor Mainframe or Data Entry, the Plan Sponsor should not change, save, or submit any Final Costs. If any Final Costs were submitted, they can be rejected in Reconciliation Step 7. In Payment Setup, the Plan Sponsor should add the Vendor to the Application, assign Designees to report or view costs, and attach the Vendor to Benefit Option(s). Remember to notify the Vendor that they can now send or enter Cost Reports and then monitor the reports.

Recommended resources related to this topic:

Avoiding Common Mistakes

Participants were provided an overview of common mistakes made during Payment Setup and tips to help avoid those mistakes.

Common mistakes during Vendor setup are:

  • Not adding the Vendor to the Application
  • Not attaching the Vendor to the proper Benefit Option

Tip: Go back to Reconciliation Step 2: Review Payment Setup to update Payment Setup. Complete Payment Setup Step 5: Assign Benefit Options to Cost Reporters.

 Common mistakes made during Designee setup are:

  • Data Entry Method: Setting up a Designee employed by a Vendor as a Plan Sponsor Designee
  • Mainframe Method: Not setting up a Designee or setting up a Plan Sponsor Designee

Tip: Be sure to attach the Designee to the Vendor. This is optional if using the Data Entry method, but required for Mainframe method.

Ms. Hesseltine reminded participants that it is critical to ensure that Step 6 of Payment Setup is complete. If Payment Setup is incomplete, then Reconciliation Step 2 will also be incomplete.  When Reconciliation Step 2 is incomplete costs cannot be reported, Vendor reports will be rejected, and Data Entry will be prohibited. Payment Setup is complete when all steps in the Payment Setup Menu are in a "Complete" status.

Recommended resources on this topic:

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Reporting Final Costs

When and Where to Report Final Costs

Participants were provided an overview of when Final Costs may be reported. The following must be true to report Final Costs:

  • The Application Status is "Reconciliation Cost Reporting Opened"
  • Reconciliation Step 6: Manage Submission of Final Cost Reports is opened with an "Incomplete" status
  • Reconciliation Step 2: Review Payment Setup is "Complete"

Participants were also advised where in the RDS Secure Website they can view and report final costs and also view old costs.

Types of Cost Report Edits in Step 6

Ms. Hesseltine provided an overview of the types of Cost Report edits in Step 6. She explained that the system edits are run on the reported and calculated cost figures. If costs are reported on the RDS Secure Website (SWS), Cost Report edits will be run when cost data is saved for a plan month and the Final Cost Report is submitted. If costs are reported using Mainframe, edits will be run when the Final Cost Report is submitted.

The Cost Report edits for the Data Entry method are Basic Data Integrity Edits, Data Consistency Edits, and Cost Verification Edits. For Mainframe method, Cost Report edits are File Format Edits, Expanded Data Integrity Edits, Data Consistency Edits, and Cost Verification Edits.

Participants were then shown examples of Cost Verification warning and error messages in Step 6 and provided direction on how to resolve them.

Per Plan Month – Error Message Example

April 2012: The Retiree Costs reported for this Benefit Option exceed the maximum allowed costs for Qualifying Covered Retirees with coverage effective dates that fall within the reported month. 

What It Means: The Retiree Costs calculated for April 2012 exceeded the maximum amount.  Retiree Costs were calculated based on the Benefit Option costs last reported by the Plan Sponsor or Vendor for April 2012. The maximum for April 2012 was determined based on the maximum allowed costs per retiree and the number of QCRs for the Benefit Option with coverage effective dates that fall within April 2012.

What You Should Do: Revisit Step 3: Request List of Covered Retirees and Step 4: Finalize Covered Retirees.  If you believe the CRL is not accurate, contact CMS' RDS Center for a Reconciliation Step 3 and 4 reset.

Recommended resources related to this topic:

When Final Cost Reporting Can Close

Final Cost Reporting can be closed when the Plan Sponsor has:

  • Submitted at least one Final Cost Report
  • Submitted a Final Cost Report for each Benefit Option included in an Interim Payment Request
  • No Cost Report is in "Data Entry: Saved" status

Final Cost reporting can be reopened any time after Step 6 is complete and before Step 12 is complete.

Recommended resources related to this topic:

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Reviewing Final Costs

Participants were shown an example of a Cost Report with errors, as well as the types of warning and error messages that may be encountered in Reconciliation Step 7 such as the error message, "Maximum Threshold Reduction exceeded for Application." Possible error reasons could be:

  • Duplicated cost reporting
  • Not properly coordinating individual retiree costs
  • Not re-calculating costs after changes in Qualifying Covered Retirees

To resolve these errors, a Plan Sponsor can reject individual Cost Reports until the error is resolved, and/or re-open cost reporting and re-report Final Costs.

Recommended resources related to this topic:

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Plan Sponsor's Responsibility for Reporting Costs

Participants were reminded that the Plan Sponsor has a responsibility for accurate cost reporting regardless of the source.  Based on CIG input, Ms. Hesseltine provide the following examples:

  1. Verify Payment Setup in Step 2. Consider the following questions:
    • Who will report costs for each Benefit Option?
    • Did you change Vendors?
    • Is coordination of individual retiree costs needed across Benefit Options?
    • Are new Designees needed?
    • How are Designees employed by Vendor setup?
    • Does any Benefit Option have multiple sources vs. multiple Cost Reporters for the same source?
  2. Monitoring Cost Reports in Step 6. Consider the following questions:
    • Are costs reported for all expected Benefit Options?
    • Are costs reported for Benefit Options with interim costs?
    • Are any Cost Reports in "Mainframe: Errors Detected" status?
    • Are any Cost Reports in "Data Entry: Saved" status?
    • Are there multiple sources for the same Benefit Option?
  3. Review and verify Cost Reports in Reconciliation Step 7. Spot-check costs by considering items such as:
    • Average costs per retiree compared to the last Interim Payment or last year. Are there significant increases and decreases?
    • Missing cost adjustments
    • Duplicate costs
    • Threshold Reduction, which is usually higher at the beginning of the year. Is there some Threshold Reduction for every QCR with Gross Retiree Costs?
    • Limit Reduction, specifically, if there is a Limit Reduction for every QCR with claims exceeding the Cost Limit. The Limit Reduction is higher near the end of the year as QCRs meet the Cost Limit (see more fluctuation with a small number of retirees).
    • Significant change in retirees without changes in costs from the last Interim Payment or last year's Application
    • Retirees in multiple Benefit Options to ensure Thresholds and Limits were coordinated
    • Calculation for Estimated vs. Actual Cost Adjustments to ensure the calculation method was adjusted as needed

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Working with Your Cost Reporting Vendor

Participants were provided some tips on how to help their cost reporting Vendor:

  • Understand Vendor Cost Reporter access. Remember that the Vendor can only access the Final Costs action. Additionally, Vendor Designees do not have access to the Reconciliation Checklist. Finally, they can only manage retirees if they have been assigned the View/Send/Receive Retiree Data privilege.
  • Communicate the Covered Retiree List (CRL). It is critical that the last requested CRL be communicated to the Vendor. In addition, costs must be computed based on the last created CRL that was agreed upon in Step 4. Finally, the Vendor can only report final costs for the QCRs, subsidy periods, and Benefit Options agreed upon in Step 4.
  • Avoid common Payment Setup mistakes. Use the previously mentioned tips to avoid mistakes while configuring Vendors, assigning Designees, and completing Payment Setup.
  • Communicate when cost reporting is Open. Remember that Step 5 must be complete and cost reporting must be open for a Vendor to report costs.
  • Communicate when cost reporting is Closed. Remember that after Step 6 is complete all cost reports will be rejected.

Quick Access Reports (QAR)

Participants were then provided an overview of the Quick Access Reports (QARs) available on the RDS Secure Website (SWS). There are two types of reports: 1) the Cost Reporting Summary Report, which displays cost reporting information for approved Applications, and 2) the Cost Reporting Exception Detail Report, which only shows reports rejected by the Mainframe. The data shown in the reports is based on existing privileges and rules.

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Upcoming Webinars

Plan Sponsors and Vendors are encouraged to monitor the RDS Program Website for announcements about upcoming webinars.

If you have questions or need additional information, contact CMS' RDS Center.

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