508_Compliant_CMS-10142_Attachment_B_Supporting_Statement

Attachment B
Bid Pricing Tool (BPT) for Medicare Advantage (MA) Plans and
Prescription Drug Plans (PDP)
Supporting Statement for Paperwork Reduction Act Submission
OMB # 0938 – 0944
CMS-10142
Supporting Regulations Contained in 42 Code of Federal Regulation (CFR):
422.250, 422.252, 422.254, 422.256, 422.258, 422.262, 422.264, 422.266, 422.270,
422.300, 422.304, 422.306, 422.308, 422.310, 422.312, 422.314, 422.316, 422.318, 422.320, 422.322, 422.324 ,
423.251, 423.258, 423.265, 423.272, 423.279, 423.286, 423.293,
423.301, 423.308, 423.315, 423.322, 423.329, 423.336, 423.343, 423.346, 423.350

A. Background
Under the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA),
and implementing regulations at 42 CFR, Medicare Advantage organizations (MAO) and
Prescription Drug Plans (PDP) are required to submit an actuarial pricing “bid” for each plan
offered to Medicare beneficiaries for approval by the Centers for Medicare & Medicaid Services
(CMS).
Title I of the MMA established a program to offer prescription drug benefits to Medicare
enrollees through Prescription Drug Plans. MMA Title II revised several aspects of the
Medicare+Choice program (renamed Medicare Advantage), including the payment methodology
and the introduction of “Regional” MA plans. CMS payments to PDPs and MA plans will be on
a market-based competitive approach.
MAOs and PDPs use the Bid Pricing Tool (BPT) software to develop their actuarial pricing bid.
The information provided in the BPT is the basis for the plan’s enrollee premiums and CMS
payments for each contract year. The tool collects data such as medical expense development
(from claims data and/or manual rating), administrative expenses, profit levels, and projected
plan enrollment information. By statute, completed BPTs are due to CMS by the first Monday of
June each year.
CMS reviews and analyzes the information provided on the Bid Pricing Tool. Ultimately, CMS
decides whether to approve the plan pricing (i.e., payment and premium) proposed by each
organization.
CMS is requesting to continue its use of the BPT for the collection of information for CY2013
through CY2015.

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B. Justification
1. Need and Legal Basis
The MMA was signed into law by President Bush on December 8, 2003. Two key provisions of
the MMA were the new prescription drug benefit (Medicare Part D) and enhanced health plan
choices of the Medicare Advantage program (which replaced the Medicare+Choice program).
MMA established a new competitive bidding process. Not later than the first Monday of June of
each year, organizations must submit to CMS an actuarial bid for each plan that the organization
intends to offer to Medicare beneficiaries in the upcoming year. CMS has the authority to review
the bid and conduct negotiations with the submitting organization.
The Act specifies numerous requirements that each bid must contain. The Bid Pricing Tool was
designed to facilitate the collection of this information, as well as the actuarial calculation of
certain bid requirements (such as payment rates and beneficiary premiums). The submission,
review, and approval process for both MA and PD programs has been synchronized.
More specific information can be found in the 42 CFR references listed above. Copies of these
references are available at:
Medicare Advantage: http://edocket.access.gpo.gov/2005/pdf/05-1322.pdf
Prescription Drug: http://edocket.access.gpo.gov/2005/pdf/05-1321.pdf
2. Information Users
CMS requires that MAOs and PDPs complete the BPT as part of the annual bidding process.
During this process, organizations prepare their proposed actuarial bid pricing for the upcoming
contract year and submit them to CMS for review and approval.
The purpose of the BPT is to collect the actuarial pricing information for each plan. The BPT
calculates the plan’s bid, enrollee premiums, and payment rates.
CMS publishes beneficiary premium information using a variety of formats (www.medicare.gov,
the Medicare & You handbook, Summary of Benefits marketing information) for the purpose of
beneficiary education and enrollment.
All other information collected through the BPT follows the rules described in Section 10:
Confidentiality.
3. Improved Information Technology
In Attachment D, the BPT software screen prints display the program requirements for the
collection of MA and PDP actuarial pricing information.
The BPT is programmed in an off-the-shelf software package called Excel. This software has
been used by CMS for numerous other pricing activities and builds on the knowledge of the

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organizations’ users regarding this common business software. Excel’s design is a user-friendly
format, and used commonly in business applications. These factors limit the time required by
organization users to gain experience and familiarity with the BPT software.
The hardcopy screen prints in Attachment D present an overview of the tool, and may not fully
capture the streamlining effect of the BPT software on the bid submission and review process.
The actuarial pricing bid involves many complex calculations to develop the plan’s bid, enrollee
premiums, and payment rates. The use of Excel greatly reduces the burden on the organizations
to calculate each item by using standard formulas. Also, in the case where an organization offers
more than one plan (and therefore, submits more than one bid), the Excel format allows for plans
to easily “copy” information into multiple bid forms and to use other automation techniques.
The submission process for the BPTs is entirely automated (electronically) through CMS’s
Health Plan Management System (HPMS). No paper/hardcopy submissions are required.
In addition, CMS has maximized the usability of the BPT by using standardized formats,
intelligently pre-filled data fields, and instructions. These features enable the user to complete
the BPT fields in a timely manner. In cases where the standardized format or pre-filled items do
not describe an organization’s specific pricing adequately, the BPT has included free-flow text
fields where plans can describe their individual pricing in a custom fashion. Also, plans have the
flexibility to provide supporting documentation to CMS in order to further describe any aspects
of the bid that they would like to expand on, beyond the bid pricing tool elements.
CMS continues to improve the BPT with suggestions from its users (CMS employees, bid
reviewers, and industry). The BPT allows for the consolidation of data reporting, to use the
information to perform numerous activities (beneficiary premium, plan payment) without placing
additional burden on the organization.
4. Duplication of Similar Information
There is no similar information collected through any other CMS effort.
5. Small Businesses
Small businesses are not significantly affected by this collection. As stated earlier, the Excel
format of the BPT is a common business application among businesses both large and small. As
stated in #13 below, no capital costs are required for this effort. The electronic submission of
bids eases burden among all plans.
6. Less Frequent Collection
CMS must collect this information annually, as required by the Social Security Act. This
collection is part of the annual bidding process, where organizations are required to submit their
proposed actuarial pricing bid (premiums and payment rates) for the upcoming contract year.
Legislation indicates that the collection must occur annually in early June. Plans may need to
resubmit bids after the initial June submission based on annually calculated national averages and
to inform CMS of any rebate re-allocations.

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If this collection were not conducted, or were conducted less frequently than described above,
there would be adverse consequences to the Medicare Advantage and Prescription Drug
programs, including but not limited to, the following:
•

CMS would not be able to effectively review and approve plan marketing materials.

•

CMS would not be able to effectively review and approve the plan’s bid submission, as
required by statute.

•

CMS would not be able to accurately or effectively educate Medicare beneficiaries
regarding plan premiums.

7. Special Circumstances
Organizations may be required to submit data more often than quarterly under certain special
circumstances. As stated above, each organization must submit a BPT on an annual basis as part
of the contract renewal process. Under certain circumstances, new legislation may require that
an organization make another submission in mid-year.
Organizations may be required to submit data in a written response to an information collection
request/ requirement in fewer than 30 days after receipt under certain special circumstances.
Each bid contains detailed pricing information that is unique to that organization and plan. If
some of the information contained in the bid is deemed by CMS to be outside the norm, CMS
has reserved the right to request additional supporting documentation, as part of the bid review
process.
8. Federal Register Notice/Outside Consultation
A 60-day Federal Register notice was published on September 30, 2011, Vol. 76, No. 190, pg
60845-60847. There were no public comments received from the publication of the 60-day
notice.
The BPT was first developed by CMS for Contract Year 2006 of the Medicare Advantage and
Prescription Drug program. During its initial development, CMS undertook numerous
opportunities to confer with representatives from the Medicare managed care industry, including
both MAOs/PDPs and Medicare managed care trade groups, to solicit comments and feedback
on the BPT.
An open door forum with industry professionals was held on December 17, 2004. During the
first half of the session, OACT explained the purpose and design of the BPT, while questions and
comments from industry professionals were addressed in the second half of the session. More
than 400 industry representatives from health plans, consulting firms, and state agencies attended
the session (either in person at CMS in Baltimore or via conference call dial-in).
CMS held training sessions on the BPT (as well as other aspects of the MA/PDP program). A
session for industry professionals was held in January 2005 in Baltimore. In addition, CMS then

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traveled to San Diego and New Orleans to present information on the program (including the
BPT) to industry professionals.
A bidders training was held in April 2005 in Washington DC. There was a full-day presentation
on the BPTs and included a Q&A session for questions from industry professionals that would
use the BPT.
After the CY2006 bids were received, reviewed and approved, CMS sought outside consultation
on the BPT via an online feedback/comment forum. These comments were incorporated into the
CY2007 BPT.
Beginning with the CY2007 bid submission/ review season, and continuing every year thereafter,
CMS solicits industry consultation via the following avenues:
•
•
•
•
•
•

beta testing of the BPTs in February, including solicitation of user feedback,
annual bidders training, in early April, conducted by CMS,
weekly CMS user group calls with BPT users, between mid-April and early-June,
a CMS resource mailbox available for correspondence regarding the BPT,
an online industry feedback/ comment forum following the bid review season, and
informal discussions between CMS and BPT users (phone, email, etc.) as part of our daily
business operations.

These consultations, and the resulting feedback, are then considered and incorporated into the
BPT each year.
To summarize, industry input assists CMS to create a tool that is entirely automated, data driven,
and responsive to the needs of BPT users.
9. Payments/Gifts To Respondents
There are no payments/gifts to respondents.
10. Confidentiality
Information collected through the BPT may contain proprietary information, trade secret,
commercial and/or financial information, therefore it is privileged, private to the extent permitted
by law, and protected from disclosure.
This information is protected to the extent permitted by the Freedom of Information Act (5
U.S.C.552). Beyond plan premium information (used as part of CMS beneficiary education),
information from the BPT is not published.
11. Sensitive Questions
There are no sensitive questions included in this collection effort.

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12. Burden Estimate
The estimated annual burden for the BPT is as follows:

Type of
Number of
Respondent Respondents
PDP
150
MAO:
380
MA-only,
MA-PD
Total
530

Average
Number of
Responses per
Respondent
9
9

9

Number of
Responses
1,350 PD
3,420:
1,395 MA-only,
2,025 MA-PD
4,770

Average Hours
per Response
12 PD

Response
Burden
16,200

30 MA
30 MA + 12 PD
30

41,850
85,050
143,100

An estimate of the cost to respondents in burden hours for the submission of information is
approximately $21,465,000 (143,100 hours x $150 per hour) for each contract year.
The estimates for “number of respondents” and “average number of responses per respondent”
are based on the previous years’ bid submissions.
The estimates for the “average hours per response” and “wages per hour” are based on a survey
conducted by CMS. As directed in the terms of clearance for the CY 2011 BPT, CMS conducted
a survey of a sample of respondents to compute the burden estimates.
In the CY 2011 PRA Terms of Clearance for the BPT, CMS was instructed to survey a subset of
plans regarding their burden estimates. CMS requested participation in the survey from nine
organizations representing a meaningful sampling of MA and PDP organizations. Seven
organizations completed the PRA burden survey. Two of the organizations declined
participation in the survey process.
Note that the number of respondents for the BPT does not exactly match the number of
respondents for the PBP, even though these two instruments are often viewed as one submission.
The difference in the number of respondents between the BPT and PBP is due to the fact that
some respondents only submit the PBP, and some other respondents only submit the BPT.
13. Capital Costs
No capital costs are needed for this collection effort.
14. Cost to the Federal Government
The initial burden to the Federal government for the collection of the BPT was borne through the
initial development cycle, as a one-time cost. The BPT is now in maintenance mode with regard
to development and enhancements. The maintenance cost and the cost for enhancements are
estimated in the table below. (The CMS employees’ hourly wage schedule can be obtained from
the OPM website).

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Maintenance and Enhancements

$300,000

Defining Requirements
2 GS-15: 2 x $74.51 x 40 hours
2 GS-14: 2 x $65.53 x 80 hours
6 GS-14: 6 x $65.53 x 20 hours
2 GS-13: 2 x $55.46 x 20 hours
Subtotal

$5,960.80
$10,484.80
$7,863.60
$2,218.40
$26,527.60

Total Cost to the Government

$326,527.60

15. Program Changes/Adjustments
Adjustment is due to updated estimates of the number of respondents.
16. Publication and Tabulation Dates
Plan premium information in the BPT is utilized, in conjunction with the PBP, for beneficiary
education and enrollment (the SB marketing material, the www.medicare.gov website, and the
Medicare & You handbook). The remainder of the BPT collection are not published
17. Expiration Date
CMS has no objections to displaying the expiration date.
18. Certification Statement
There are no exceptions to the certification statement.

C. Collections of Information Employing Statistical Methods
Not Applicable. No statistical methods will be used in this collection effort.

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