§ 423.329 Determination of payments.

(a) Subsidy payments—(1) Direct subsidy. CMS makes a direct subsidy payment for each Part D eligible beneficiary enrolled in a Part D plan for a month equal to the amount of the plan's approved standardized bid, adjusted for health status (as determined under § 423.329(b)(1)), and reduced by the base beneficiary premium for the plan (as determined under § 423.286(c) and adjusted in § 423.286(d)(1)). The direct subsidy payment may be increased by the excess amount of a negative premium as described in § 423.286(d)(1), if applicable.

(2) Subsidy through reinsurance. CMS makes reinsurance subsidy payments as provided under paragraph (c) of this section.

(3) Low-income cost-sharing subsidy. CMS makes low-income cost-sharing subsidy payments as provided under paragraph (d) of this section.

(b) Health status risk adjustment—(1) Establishment of risk factors. CMS establishes an appropriate methodology for adjusting the standardized bid amount to take into account variation in costs for basic prescription drug coverage among Part D plans based on the differences in actuarial risk of different enrollees being served. Any risk adjustment is designed in a manner so as to be budget neutral in the aggregate to the risk of the Part D eligible individuals who enroll in Part D plans.