Vision of Future Fee-for-Service Medicare Environment

In December 2003, Congress passed the Medicare Prescription Drug, Improvement, and Modernization Act (MMA) of 2003.  Under section 911 of the MMA, Congress requires that CMS replace the current fiscal intermediary (FI) and carrier contracts with competitively procured contracts that conform to the Federal Acquisition Regulation (FAR). Under the new Medicare Administrative Contractor (MAC) contracting authority, CMS has 6 years-between 2005 and 2011-to complete the transition of Medicare Fee-for-Service (FFS) claims processing activities from the FIs and carriers to the MACs. The provisions contained under section 911 are collectively referred to as Medicare Contracting Reform.

The full FFS program functional environment vision includes functional contractors working with the MACs.  An overview of the functional contractors is found in the second download below.  

On July 22, 2010, the Centers for Medicare and Medicaid Services posted a notice on the federal government's procurement website regarding upcoming plans for CMS's continued implementation and strategy of MAC procurements.  Comments from interested parties were reviewed, resulting in revisions to the contract award limitation proposed policy.  The CMS's revised plans for implementing the A/B MAC environment were reflected in the most recent A/B MAC solicitation, posted to the federal government's procurement web site on October 5, 2010. 

The target audience for these notices (a “Request for Information” or “RFI”) was all contractors and other parties that have an interest in CMS's plans for awarding contracts for Medicare Parts A and B claims processing to A/B MACs.

CMS' plan includes three objectives for A/B MAC  upcoming MAC procurements:

  • Consolidation of the present 15 A/B MAC jurisdictions into ten (10) A/B MAC jurisdictions (in a phased process that will take several years to complete);
  • Implementation of a contract limit for the A/B MAC contracts, and;
  • Enhancement of the role of the contractor medical directors (CMDs).

Contract Award Limitation

CMS intends to apply a contract award limitation to the upcoming A/B MAC contracts.  This contract award limitation refers to the amount of A/B MAC contract responsibility that any single entity  or set of affiliated entities can win.

CMS is establishing this limit based on the overall percentage of Medicare fee-for-service claims volume that is serviced by a single contractor (or set of affiliates).  CMS will identify the A/B MAC prime contracts held by the given contractor (or set of affiliates). 

CMS believes that implementing a contract award limitation will yield the following benefits:

  • An award limitation allows CMS to manage program risk throughout the contract life-cycle (contract implementation phases, ongoing operations, and close-out periods).
  • An award limitation supports a vigorous level of competition for A/B MAC contracts.