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CMS Issues Final Guidance on Rewards and Incentives….Here’s What MA Plans Can and Can’t Do

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On December 4, 2014, CMS issued additional guidance regarding rewards and incentive programs (“RI Programs”).  Historically, MA plans have been able to offer limited rewards and incentives to members in order to entice them to receive preventive services that had zero-cost sharing in accordance with guidelines set forth in Chapter 3 of the Medicare Managed Care Manual.  In May of 2014, CMS promulgated final regulations that provide MA plans much more flexibility in implementing rewards and incentives programs for members. Under the regulations, MA plans are allowed to create programs that provide members rewards for participating in activities focused on promoting improved health, preventing injuries and illness, and promoting efficient use of health care resources, defined in the guidance as “Preventive Services.”

Several noteworthy provisions about permissible RI Programs and the Medicare Advantage Organizations (MAO) that implement them:


Description of Provisions



  • Must not discriminate against enrollees based on race, gender, chronic disease, institutionalization, frailty, health status or other impairments.
  • Must be designed so that all enrollees are able to earn rewards.
  • Should be included in the bid as a non-benefit expense and should not be entered in the Plan Benefit Package.
  • Must otherwise comply with all relevant fraud and abuse laws, including, when applicable, the anti-kickback statute and civil money penalty prohibiting inducements to enrollees.
Applicable Entities 
  • RI Programs apply only to Part C (Medicare Advantage) at 42 CFR §422 and may not be offered in connection with any Part D benefits governed by 42 CFR § 423
  • Offered to All Enrollees.  Must be offered to all eligible members without discrimination.
  • Potential Enrollees. May not be used to target potential enrollees.
  • Caretakers. A caretaker may not participate in place of the enrollee in the services or activities in order to earn rewards or incentives on behalf of the enrollee.
  • General. An MAO may create one or more RI Programs that provide rewards and incentives to enrollees in connection with the participation in activities that focus on promoting improved health, preventing injuries and illness, and promoting efficient use of health care resources. The overall goal of RI Programs is to encourage enrollees to be actively engaged in their health care and ultimately to improve and sustain their overall health and well-being.
  • Significant flexibility in designing RI Programs. Free to determine the specific services, activities, or behaviors that are subject to rewards or incentives within their program design. May include, for example, the utilization of a particular service(s) or preventive screening benefit(s), adherence to prescribed treatment regimens, attending education/self-care management classes, meeting nutritional goals, and making and keeping appointments with the doctor.
  • May Not Target Health Outcomes. Rewards and incentives based on health outcomes may not be offered. However, enrollees may be rewarded for continued healthy behaviors over time. For example, MAOs may not provide rewards and incentives for the amount of weight lost or a lowered blood pressure, as those are health outcomes over which an enrollee may have little control. Instead, the MAO may provide rewards and incentives for reporting their weight or blood pressure at regular intervals.
  • May Target Sustained Behavior Changes. May reward sustained behavior changes by enrollees to support and promote the ultimate goal of RI Programs, which is lasting, positive changes in health-related behaviors. For example, an RI Program might include incentives for those enrollees that report that they remain smoke-free at several intervals after completion of a smoking cessation program.
  • May Target Specific Conditions. The non-discrimination and equal access requirements do not preclude offering RI programs that target enrollees with a specific disease or chronic condition as long as the RI Program does not discriminate against any enrollee who would otherwise qualify for participation in that program.
  • Reasonable Alternatives.  Any RI Program must accommodate otherwise qualified enrollees who receive services in an institutional setting or who need a modified approach to enable effective participation and attainment of designated reward.  For example,
    • while internet-based RI Programs are allowed, an alternate method of earning and/or claiming rewards must be offered to those enrollees who do not have Internet access.
    • an RI Program in which participants earn a reward for participating in an exercise class. An alternate method of fulfilling an exercise activity must be offered to those who are unable to attend the class,  due to institutionalization, lack of transportation, or are wheelchair bound.
  • May Not Target Federal Surveys. Completion of a federally mandated survey, though arguably a health-related activity, may not be included in an RI Program because of the potential for biased responses due to the influence of rewards or incentives.
  • May Target Activities within a Service. MAOs are expected to reasonably define the scope of the “entire service or activity” within their program design and assign a value of the reward or incentive accordingly. For example, an MAO may decide to offer rewards and incentives for participation in a smoking cessation program. The MAO may decide to give smaller rewards for each class or counseling session attended or may offer a single, larger reward for completing a pre-determined number of classes or counseling sessions.
Incentive Values
  • No Limit on Total Dollars or Frequency. CMS has not set a limit on the total dollar limit or the frequency of rewards. Instead, MAOs are to establish reasonable and appropriate values for rewards and incentives in accordance with CMS requirements. If necessary, in the future, CMS may set these limits.
  • Incentive Values.  May have a value that may be expected to affect enrollee behavior, but not exceed the value of the health related service or activity itself.
Rewards Rewards may be offered in the form of:

  • Gift cards not redeemable for cash
  • Discount coupons that are not redeemable for cash
  • Points that can be accumulated to obtain a member’s reward

Rewards may not be offered in the form of:

  • Cash or Cash Equivalents. Cash or other monetary rebates including reduced cost-sharing or premiums, as well as gift card redeemable for cash, are prohibited.
  • Charitable contributions. Charitable contributions made on behalf of the enrollee do not satisfy the CMS criteria as a permissible reward or incentive because the enrollee who earned the reward does not benefit from such a contribution by the MAO.
  • Lotteries and Chance Programs. Rewards and incentives based on probability, including lotteries or drawings to receive a reward of a significant value, are not permissible because all enrollees who complete the activities required of them must receive a tangible reward. The chance of winning the reward in such a program (depending on the pool of eligible enrollees) does not qualify as a tangible reward or incentive. Furthermore, RI Programs structured in this manner are potentially vulnerable to fraud and abuse.
  • Incentive Items.  Reward and incentive “items” may not be offered to potential enrollees under any circumstances.
  • May include information about RI Programs in marketing materials as long as those communications are provided to all current and prospective enrollees without discrimination.
  • Marketing of RI Programs must be done in conjunction with marketing of plan-covered benefits.
  • Not required to submit information to CMS regarding their RI Program(s). However, MAOs are expected to document and track information \ and be prepared to provide that information to CMS upon request. Appropriate documentation includes, but is not limited to: date(s) of enrollee-specific participation in RI Program services and activities, rewards and incentive attained, how program participation is measured, and available alternative methods of participation

For the full description of the regulations see

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