Program Components:
This page contains answers to Common Questions about preparing cost data. Review this page to learn about how and when to report cost data, what data to report, and more. For additional information, refer to the Prepare Cost Data section of the RDS User Guide.
- Who should submit cost data?
- How often should cost data be reported?
- What cost data should be submitted?
- What are Gross Retiree Costs?
- What are Estimated Premiums?
- What is the Cost Threshold?
- What is the Cost Limit?
- What is the Threshold Reduction?
- What is the Limit Reduction?
- What are Cost Adjustments?
- How do I report Estimated Percentage of Premiums instead of Gross Retiree Costs?
- Are there any cost reporting examples available to assist with preparing cost reports?
- When am I required to coordinate individual retiree cost data?
- How do I extract certain Medicare Part B costs from RDS payment requests?
- What are Quick Access Reports (QAR)?
Who should submit cost data?
ANSWER: Plan Sponsors and Vendors must submit cost data to CMS' RDS Center before submitting an interim or Reconciliation payment request.
Before submitting cost data, Cost Preparers compile incurred costs of Medicare Part D drugs by Benefit Option and Plan Month for Qualifying Covered Retirees (QCRs) that are eligible for subsidy under the RDS Program. The function of the Cost Preparer happens outside of the RDS system and may or may not be the same individual(s) assigned the Report Costs privilege on the RDS Secure Website. Regardless, communicating with these individuals is important. It is recommended that the Account Manager coordinate communication among all individuals involved.
Once costs are prepared, Cost Reporters report cost data to CMS' RDS Center for QCRs by Manual Data Entry on the RDS Secure Website or by Connect:Direct. A Cost Reporter may be the Account Manager, Plan Sponsor Designee, Vendor, or Vendor Designee.
Answer ID: 2000-1
Date Posted: 4/15/2022
How often should cost data be reported?
ANSWER: The frequency with which cost data are reported to CMS' RDS Center is at the discretion of the Plan Sponsor. There is no limit to the number of times cost data can be submitted or resubmitted for a month. Reported cost data submitted to CMS' RDS Center are used to build payment requests; therefore, cost data must be submitted before a payment request can be created and submitted by the Plan Sponsor. Payments can only be requested for the month(s) in which cost data has been reported.
Answer ID: 2000-2
Date Posted: 10/17/2014
What cost data should be submitted?
ANSWER: Cost Preparers must consider several things when determining what cost data to submit:
- Cost reporting data elements vary depending on whether costs are being reported for interim or final payment, as well as whether Gross Retiree Costs or Estimated Premiums are being reported.
- When determining what Gross Retiree Cost Data to submit, keep in mind that cost data may only be submitted for the Qualifying Covered Retirees (QCRs), Benefit Options, and subsidy periods listed on the Covered Retiree List (CRL).
- When determining eligible costs, there are three main criteria to determine if drug costs for a retiree are eligible for subsidy: drug costs must be covered under Medicare Part D, drug costs must be incurred within the Subsidy Period Effective and Termination Dates for the retiree, and drug costs must be paid.
Refer to What Cost Data to Submit for additional guidelines for preparing cost data.
Answer ID: 2000-3
Date Posted: 10/17/2014
What are Gross Retiree Costs?
ANSWER: Gross Retiree Costs are non-administrative costs incurred under the plan for Medicare Part D drugs (as defined in 42 C.F.R. §423.100), whether paid by the Plan Sponsor or retiree or a combination. Gross Retiree Costs must be reported for all months in the plan year. Premium costs are not considered Gross Retiree Costs for purposes of final cost reports and cannot be reported in place of or in addition to Gross Retiree Costs.
Answer ID: 2000-4
Date Posted: 10/17/2014
What are Estimated Premiums?
ANSWER: Estimated Premiums cannot be submitted in final costs during Reconciliation. Actual gross costs must be reported at the time of Reconciliation. Estimated percentage of premiums is the portion of premium costs (excluding administrative costs, risk charges, etc.) paid by the Plan Sponsor and by the Qualifying Covered Retiree that, based on a determination by the insurer using reasonable actuarial principles, is allocated to Gross Retiree Costs between the Cost Threshold and the Cost Limit.
Answer ID: 2000-5
Date Posted: 10/17/2014
What is the Cost Threshold?
ANSWER: The Cost Threshold is a Federally-defined amount of out-of-pocket expenses paid by, or on behalf of, the beneficiary. The amount up to the Cost Threshold is not eligible for subsidy. It is adjusted in the same manner as the annual Medicare Part D deductible and the annual Medicare Part D out of pocket threshold and is adjusted annually as defined in 42 C.F.R. §423.104(d)(1)(ii) and (d)(5)(iii)(B), respectively. The Cost Threshold is calculated based on Plan Year End Date. For more information on Cost Threshold amounts, refer to Cost Threshold and Cost Limit by Plan Year.
Answer ID: 2000-6
Date Posted: 10/17/2014
What is the Cost Limit?
ANSWER: The Cost Limit is a Federally-defined amount of out-of-pocket expenses paid by, or on behalf of, the beneficiary. The amount exceeding the Cost Limit is not eligible for subsidy. It is adjusted in the same manner as the annual Medicare Part D deductible and the annual Medicare Part D out of pocket limit and is adjusted annually as defined in 42 C.F.R. §423.104(d)(1)(ii) and (d)(5)(iii)(B), respectively. The Cost Limit is calculated based on Plan Year End Date. For more information on Cost Limit amounts, refer to Cost Threshold and Cost Limit by Plan Year.
Answer ID: 2000-7
Date Posted: 10/17/2014
What is the Threshold Reduction?
ANSWER: Gross Retiree Costs below the Federally-defined Cost Threshold are not eligible for the subsidy. This amount is referred to as the Threshold Reduction. Gross Retiree Costs will be reduced by the Threshold Reduction when calculating subsidy. The Threshold Reduction amount must be calculated per Qualifying Covered Retiree and aggregated by Benefit Option and plan month.
Note: The Threshold Reduction is required for at least the first month in the plan year where gross costs were reported. For subsequent months, the Threshold Reduction is not required; however, it must be provided as applicable. In order for subsidy to be paid, at least one Qualifying Covered Retiree must surpass the Cost Threshold for the plan year.
Answer ID: 2000-8
Date Updated: 4/15/2022
What is the Limit Reduction?
ANSWER: The amount of Gross Retiree Costs in excess of the Federally-defined Cost Limit is not eligible for the subsidy. This ineligible excess amount is referred to as the Limit Reduction. Gross Retiree Costs will be reduced by the Limit Reduction when calculating subsidy. The Limit Reduction amount must be calculated per Qualifying Covered Retiree and aggregated by Benefit Option and plan month.
Answer ID: 2000-9
Date Updated: 4/15/2022
What are Cost Adjustments?
ANSWER: 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. The Cost Adjustment needs to be reported to CMS' RDS Center, as those amounts must be accounted for, to determine the Allowable Retiree Cost. For interim cost reporting, the Estimated Cost Adjustment is reported. At Reconciliation, the Actual Cost Adjustment must be reported. For more information on reporting Estimated versus Actual Cost Adjustments, refer to Reporting Cost Adjustments. Estimated Cost Adjustments are only used in interim cost reporting.
Answer ID: 2000-10
Date Posted: 10/17/2014
How do I report Estimated Percentage of Premiums instead of Gross Retiree Costs?
ANSWER: Self-funded plans must report Gross Retiree Costs. However, plans that are fully insured have the option to report Gross Retiree Costs or Estimated Percentage of Premiums. The estimated premium option is recommended for those fully-insured plans that do not have access to retirees' gross drug costs. For more information, refer to Reporting Estimated Percentage of Premiums Instead of Gross Retiree Costs: Option for Fully-Insured Plans.
Answer ID: 2000-11
Date Posted: 10/17/2014
Are there any cost reporting examples available to assist with preparing cost reports?
ANSWER: Yes. The RDS User Guide offers a number of cost reporting examples to assist with preparing cost reports. Refer to Cost Reporting Examples for more information.
Answer ID: 2000-12
Date Posted: 10/17/2014
When am I required to coordinate individual retiree cost data?
ANSWER: Plan Sponsors are required to coordinate individual retiree cost data within an application for the purpose of appropriately applying each individual retiree's Cost Threshold and Cost Limit. CMS' RDS Center understands that a situation may arise where individual retirees are associated with more than one Unique Benefit Option Identifier (UBOI) within one of a Plan Sponsor's applications and/or have costs reported by more than one Cost Reporter within the same RDS application. The RDS Program requires Plan Sponsors to coordinate an individual retiree's drug cost data within an application if the retiree is claimed under multiple UBOIs and/or is being claimed by multiple Cost Reporters for the same application.
For more information as well as examples of how to handle coordination of individual retiree cost data, refer to Coordination of Individual Retiree Cost Data.
Answer ID: 2000-13
Date Posted: 10/17/2014
How do I extract certain Medicare Part B costs from RDS payment requests?
ANSWER: To be eligible for subsidy, Qualifying Covered Retiree drug costs must be covered under Medicare Part D. To help distinguish between Part D and Part B costs, refer to How to Extract Certain Medicare Part B Costs from RDS Payment Requests.
Answer ID: 2000-14
Date Posted: 10/17/2014
What are Quick Access Reports (QAR)?
ANSWER: CMS' RDS Center offers a series of Quick Access Reports (QAR) to assist and accelerate the cost reporting activities of Vendors and Plan Sponsors by delivering consolidated cost reporting information. QAR can be used to view a summary of cost reports and errors. Refer to the Quick Access Reports (QAR) Guide for comprehensive information about these reports.
Answer ID: 2000-15
Date Posted: 10/17/2014