[Federal Register Volume 90, Number 227 (Friday, November 28, 2025)]
[Proposed Rules]
[Pages 54894-55030]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2025-21456]
[[Page 54893]]
Vol. 90
Friday,
No. 227
November 28, 2025
Part II
Department of Health and Human Services
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Centers for Medicare & Medicaid Services
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42 CFR Parts 422 and 423
Medicare Program; Contract Year 2027 Policy and Technical Changes to
the Medicare Advantage Program, Medicare Prescription Drug Benefit
Program, and Medicare Cost Plan Program; Proposed Rule
Federal Register / Vol. 90 , No. 227 / Friday, November 28, 2025 /
Proposed Rules
[[Page 54894]]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Centers for Medicare & Medicaid Services
42 CFR Parts 422 and 423
[CMS-4212-P]
RIN 0938-AV63
Medicare Program; Contract Year 2027 Policy and Technical Changes
to the Medicare Advantage Program, Medicare Prescription Drug Benefit
Program, and Medicare Cost Plan Program
AGENCY: Centers for Medicare & Medicaid Services (CMS), Department of
Health and Human Services (HHS).
ACTION: Proposed rule.
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SUMMARY: This proposed rule would revise the Medicare Advantage (Part
C), Medicare Prescription Drug Benefit (Part D), and Medicare cost plan
regulations to implement changes related to Star Ratings, marketing and
communications, drug coverage, enrollment processes, special needs
plans, and other programmatic areas.
DATES: To be assured consideration, comments must be received at one of
the addresses provided below, no later than 5 p.m. Eastern Time on
January 26, 2026.
ADDRESSES: In commenting, please refer to file code CMS-4212-P. Because
of staff and resource limitations, we cannot accept comments by
facsimile (FAX) transmission.
Comments, including mass comment submissions, must be submitted in
one of the following three ways (please choose only one of the ways
listed):
1. Electronically. You may submit electronic comments on this
regulation to http://www.regulations.gov. Follow the ``Submit a
comment'' instructions.
2. By regular mail. You may mail written comments to the following
address ONLY:
Centers for Medicare & Medicaid Services, Department of Health and
Human Services, Attention: CMS-4212-P, P.O. Box 8013, Baltimore, MD
21244-8013.
Please allow sufficient time for mailed comments to be received
before the close of the comment period.
3. By express or overnight mail. You may send written comments to
the following address ONLY:
Centers for Medicare & Medicaid Services, Department of Health and
Human Services, Attention: CMS-4212-P, Mail Stop C4-26-05, 7500
Security Boulevard, Baltimore, MD 21244-1850.
For information on viewing public comments, see the beginning of
the SUPPLEMENTARY INFORMATION section.
FOR FURTHER INFORMATION CONTACT:
Kristy Nishimoto, (206) 615-2367--General Questions and Beneficiary
Enrollment Issues.
Naseem Tarmohamed, (410) 786-0814--Part C and Cost Plan Issues.
Lucia Patrone, (410) 786-8621--Part D Issues.
Alissa Stoneking, (410) 786-1120--Parts C and D Payment Issues.
Sara Klotz, (410) 786-1984--D-SNP Issues.
Beckie Peyton, (410) 786-1572--Manufacturer Discount Program
Issues.
[email protected]--Parts C and D Star Ratings
Issues.
[email protected]--RFI on Future Directions in Medicare
Advantage.
[email protected]--Part D Program Integrity Issues.
SUPPLEMENTARY INFORMATION:
Inspection of Public Comments: All comments received before the
close of the comment period are available for viewing by the public,
including any personally identifiable or confidential business
information that is included in a comment. We post all comments
received before the close of the comment period on the following
website as soon as possible after they have been received: http://www.regulations.gov. Follow the search instructions on that website to
view public comments. CMS will not post on Regulations.gov public
comments that make threats to individuals or institutions or suggest
that the commenter will take actions to harm an individual. CMS
continues to encourage individuals not to submit duplicative comments.
We will post acceptable comments from multiple unique commenters even
if the content is identical or nearly identical to other comments.
Plain Language Summary: In accordance with 5 U.S.C. 553(b)(4), a
plain language summary of this proposed rule may be found at https://www.regulations.gov/.
Deregulation Request for Information (RFI): On January 31, 2025,
President Trump issued Executive Order (E.O.) 14192 ``Unleashing
Prosperity Through Deregulation,'' which states the Administration
policy to significantly reduce the private expenditures required to
comply with Federal regulations to secure America's economic prosperity
and national security and the highest possible quality of life for each
citizen. We would like public input on approaches and opportunities to
streamline regulations and reduce administrative burdens on providers,
suppliers, beneficiaries, and other interested parties participating in
the Medicare program. We have made available an RFI at https://www.cms.gov/medicare-regulatory-relief-rfi. Please submit all comments
in response to this request for information through the provided
weblink. Please note, this is an RFI only. In accordance with the
implementing regulations of the Paperwork Reduction Act (PRA),
specifically 5 CFR 1320.3(h)(4), this general solicitation is exempt
from the PRA. Facts or opinions submitted in response to general
solicitations of comments from the public, published in the Federal
Register or other publications, regardless of the form or format
thereof, provided that no person is required to supply specific
information pertaining to the commenter, other than that necessary for
self-identification, as a condition of the agency's full consideration,
are not generally considered information collections and therefore not
subject to the PRA.
I. Executive Summary
A. Purpose
The primary purpose of this proposed rule is to amend the
regulations for the Medicare Advantage (Part C) program, Medicare
Prescription Drug Benefit (Part D) program, and Medicare cost plan
program. This proposed rule includes a number of changes that would
improve these programs for contract year 2027 as well as codify
existing sub-regulatory guidance.
We note that, as with previous rules, the new marketing and
communications policies in this rule are proposed to be applicable for
all contract year 2027 marketing and communications, beginning October
1, 2026.
B. Summary of the Key Provisions
1. Medicare Part D Redesign
This proposal would implement the changes made to the Part D
benefit design and the payment obligations of enrollees, Part D plan
sponsors, manufacturers, and CMS by section 11201 of the Inflation
Reduction Act of 2022 (IRA) (Pub. L. 117-169).
We are proposing to codify the statutory changes to the phases of
the Part D benefit made by the IRA related to the deductible, initial
coverage limit, the coverage gap, the annual out-of-pocket threshold,
and alternative prescription drug coverage options. In alignment with
these changes to the Part
[[Page 54895]]
D benefit, we are also proposing to codify technical and conforming
changes to our specialty tier regulations. This proposal would codify
additional structural and operational statutory changes to the Part D
benefit design, including making changes to the types of payments that
count as True Out-Of-Pocket costs (TrOOP), establishing a policy for
how an enrollee's costs for drugs not subject to the Part D defined
standard deductible count towards becoming eligible for manufacturer
discounts under the Medicare Part D Manufacturer Discount Program
(Manufacturer Discount Program), making updates to the methodology for
reinsurance payments from us to Part D sponsors, and implementing the
Selected Drug Subsidy, among others.
2. Coverage Gap Discount Program
We propose to codify the sunsetting of the Coverage Gap Discount
Program and termination of all Coverage Gap Discount Program agreements
as of January 1, 2025, in alignment with subsection (h) of section
1860D-14A of the Social Security Act (the Act), as added by section
11201 of the IRA. Specifically, we propose to revise Sec. 423.2300 by
adding paragraph (b) to establish applicability dates for the Coverage
Gap Discount Program, revise Sec. 423.2345 by adding paragraph (f) to
terminate all Coverage Gap Discount Program agreements, as well as make
conforming changes for clarity.
3. Manufacturer Discount Program
We propose regulatory changes to codify the Manufacturer Discount
Program, established in section 1860D-14C of the Act, as added by
section 11201 of the IRA. Under the Manufacturer Discount Program,
which replaces the Coverage Gap Discount Program and began on January
1, 2025, manufacturers that enter into a Manufacturer Discount Program
agreement are required to provide discounts on applicable drugs in both
the initial and catastrophic coverage phases of the Part D benefit.
Specifically, we propose to add new subpart AA to part 423 to codify
the Manufacturer Discount Program requirements and make several
conforming changes throughout part 423 to reflect the new program.
4. Updates to Star Ratings
We have continued to identify enhancements to the Star Ratings
program over time to increase the health and wellbeing of enrollees. In
this proposed rule, we are proposing changes to simplify and refocus
the areas included in the Star Ratings, including changes to the
measure set. We also propose to not move forward with the
implementation of the Health Equity Index (also called Excellent Health
Outcomes for All) reward at Sec. Sec. 422.166(f)(3) and 423.186(f)(3)
and to continue to include the historical reward factor in the Star
Ratings methodology at Sec. Sec. 422.166(f)(1) and 423.186(f)(1). We
also solicit comments on ways to further simplify and modify the Star
Ratings program to further drive improved quality of care and reduce
regulatory burden.
5. Request for Information on Dually Eligible Individual Enrollment
Growth in C-SNPs and I-SNPs
Chronic condition special needs plans (C-SNPs) and the number of
dually eligible individuals enrolled in these plans have grown
significantly between 2021 and 2025. Dually eligible enrollment in
institutional special needs plans (I-SNPs) has remained more stable.
While C-SNPs and I-SNPs can offer benefits specific to chronic disease
and institutional level of care, respectively, they do not integrate
Medicare and Medicaid benefits and may not be the best approach for
meeting the needs of dually eligible individuals. The growth in C-SNP
enrollment could be an intentional approach by MA organizations to
circumvent Federal and State requirements for dual eligible special
needs plans (D-SNPs), such as States determining which D-SNPs will be
offered in a State through their State Medicaid agency contract
authority and general coordination and integration requirements. This
proposed rule includes a request for information (RFI) to share
information with interested parties on these trends and solicit
feedback on them as well as on potential policy solutions for future
consideration.
6. Request for Information on Future Directions in Medicare Advantage
(Risk Adjustment and Quality Bonus Payments)
This RFI will serve as a formal mechanism to solicit comprehensive
public input from interested parties, including MA organizations,
beneficiary advocates, healthcare providers, as well as technology and
industry experts, regarding the future direction of the MA program. The
goal of this RFI is to solicit comment on modernizing and improving the
MA program that could be implemented through either programmatic
changes or through a CMS Innovation Center (CMMI) model. This public
comment process will enable us to gather critical feedback on risk
adjustment enhancements and quality bonus payment changes. Through this
RFI, we are working to ensure any resulting changes would effectively
address interested parties' concerns while achieving objectives of data
transparency for beneficiaries to facilitate optimal plan selection,
improved quality, enhanced competition, taxpayer savings, and
minimizing fraud, waste, and abuse in the MA program.
C. Summary of Costs and Benefits
BILLING CODE 4120-01-P
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[GRAPHIC] [TIFF OMITTED] TP28NO25.000
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BILLING CODE 4120-01-C
D. Supplemental Requests for Information
We are requesting comments on several specific areas beyond the
various comment opportunities already presented throughout the proposed
rule as part of our commitment to reducing regulatory burden while
strengthening program integrity. First, we are considering ways to
modernize our approach to marketing oversight and agent/broker
regulation in the Medicare program while ensuring beneficiaries
continue to receive accurate information about plan choices. This
includes, but is not limited to, all of the following:
Modifying the current definition of third-party marketing
organization (TPMO) under Sec. Sec. 422.2260 and 423.2260 to delineate
the roles of and requirements applicable to the different kinds of
TPMOs.
Modifying the 5 percent translation requirement found in
Sec. Sec. 422.2267 and 423.2267.
Removing the requirement for our approval of plan use of
the Medicare Card image found in Sec. Sec. 422.2262(a)(1)(xix) and
423.2262(a)(1)(xviii).
Eliminating the Outbound Enrollment Verification found in
Sec. Sec. 422.2272(b) and 423.2272(b).
Modifying testimonial requirements found under Sec. Sec.
422.2262(b) and 423.2262(b).
Eliminating mailing statement requirements found under
Sec. Sec. 422.2267(e)(36) and 422.2267(e)(37).
We are also looking specifically at regulatory changes that will
assist the agency in taking appropriate action against TPMOs, including
agents and brokers who fail to adhere to our requirements. Our goal is
to address non-compliance, holding MA plans and Part D sponsors
accountable for those TPMOs who provide inaccurate, misleading, and
confusing information, or act in a manner contrary to our requirements.
We have considered options such as further segmentation of the
definition for TPMOs found under Sec. Sec. 422.2260 and 423.2260 to
account for size, scope, and role of various interested parties;
however, we recognize the need for industry input before implementing
any change. We, therefore, solicit comments on how to hold ``bad
actors'' accountable, while not burdening those TPMOs and plans that
adhere to our requirements. We also solicit comments on how to properly
align incentives in the agent or broker space, how to identify and
address when agents and brokers perform their jobs in good faith but
does not adhere to requirements that apply to the MA plan. For example,
we welcome comment on whether updates to the training and testing
requirements are needed or new ways CMS or MA organizations and Part D
sponsors can improve how beneficiaries interact with agents or brokers.
We are also soliciting comments on how best to monitor and assess the
actions of MA organizations, Part D sponsors, and their downstream
entities such as TPMOs, using data driven strategies. We are interested
in finding ways to better utilize data--whether it is CMS, plan, first
tier, downstream or related entity (FDR), or TPMO data--to review and
monitor the MA and Part D market, and to assist us in addressing MA
organization and PDP sponsor compliance with our requirements.
Likewise, the agency is also seeking interested parties feedback
regarding how technology can be leveraged, including on the use of
artificial intelligence, to enhance the decision support tools used by
beneficiaries and their caregivers.
In addition to issues regarding marketing oversight and agent/
broker regulation and consistent with the Administration's deregulation
priorities, we are seeking comment on current reporting processes and
data collections to identify specific areas where requirements can be
simplified, consolidated, or eliminated while maintaining program
integrity and beneficiary protections in the following areas:
Network adequacy.
Medical loss ratio (MLR) reporting.
Benefit, including supplemental benefit, usage and
utilization data reporting.
Requirements related to the SNP model of care (MOC).
We are interested in ideas for streamlining data collection
processes for the areas listed previously, including automated data
sharing to reduce manual reporting and ideas related to alignment with
existing reporting mechanisms. We are also interested in feedback
regarding which data elements are the most burdensome to collect and
report, as we seek to balance the level of detail required to maintain
proper program oversight while promoting efficiency.
Regarding network adequacy, we seek comments on how to simplify the
provider and facility network review process overall, including the
submission process, the exception request process, and the timing and
frequency of the reviews. An example of a way that we could simplify
the exception request process is to create a separate pattern of care
exception under Sec. 422.116(f)(1), that could be used where the
pattern of care in the area is unique and the organization believes
their contracted network is consistent with or better than the Original
Medicare pattern of care. An organization could use this exception in
lieu of demonstrating the current requirements under Sec.
422.116(f)(1)(i), that is: (A) Certain providers or facilities are not
available for the MA plan to meet the network adequacy criteria as
shown in the Provider Supply file for the year for a given county and
specialty type ; and (B) the MA plan has contracted with other
providers and facilities that may be located beyond the limits in the
time and distance criteria, but are currently available and accessible
to most enrollees, consistent with the local pattern of care.
We welcome comments on these topics.
E. Conclusion
Finally, we are clarifying and emphasizing our intent that if any
provision of this rule, once finalized, is held to be invalid or
unenforceable by its terms, or as applied to any person or
circumstance, or stayed pending further agency action, it shall be
severable from this rule and not affect the remainder thereof or the
application of the provision to other persons not similarly situated or
to other, dissimilar circumstances. Through this rule, we propose
provisions that are intended to and will operate independently of each
other, even if each serves the same general purpose or policy goal.
Where a provision is necessarily dependent on another, the context
generally makes that clear (such as by a cross-reference to apply the
same standards or requirements).
II. Implementation of Certain Provisions of the Inflation Reduction Act
of 2022 and the Substance Use-Disorder Prevention That Promotes Opioid
Recovery and Treatment for Patients and Communities Act of 2018
A. Medicare Part D Redesign
1. Background
Section 11201 of the Inflation Reduction Act of 2022 (IRA) made
significant changes to the Part D benefit design that affect the
structure of the Part D benefit and the payment obligations of
enrollees, Part D plan sponsors, manufacturers, and CMS. Several of the
changes made by section 11201 of the IRA have taken effect already and
other changes will go into effect in 2026, as described later.
Section 11201(f) of the IRA directed the Secretary to implement
section
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11201 of the IRA for 2024, 2025, and 2026 by program instruction or
other forms of program guidance. On February 1, 2023, we released
guidance outlining changes to the Part D benefit that were specific to
Calendar Year (CY) 2024 in the CY 2024 Advance Notice and Rate
Announcement.\1\ In that guidance, we eliminated cost sharing for
covered Part D drugs in the catastrophic phase of coverage, consistent
with section 1860D-2(b)(4)(A)(i) of the Social Security Act (the Act),
as amended by section 11201 of the IRA.\2\
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\1\ https://www.cms.gov/files/document/2024-advance-notice-pdf.pdf.
\2\ https://www.cms.gov/files/document/2024-advance-notice-pdf.pdf.
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On April 1, 2024, we released the Final CY 2025 Part D Redesign
Program Instructions.\3\ In these program instructions, we implemented
changes to the structure of the Part D benefit for CY 2025 made by
section 11201 of the IRA. Section 11201 of the IRA added section 1860D-
2(b)(4)(B)(i)(VII) of the Act to reduce the annual out-of-pocket (OOP)
threshold to $2,000 for CY 2025 (to be annually increased by the annual
percentage increase, as described in section 1860D-2(b)(6) of the Act).
The IRA also amended section 1860D-2(b) of the Act to eliminate the
coverage gap phase and added subsection (h) to section 1860D-14A of the
Act to sunset the Coverage Gap Discount Program. The IRA added section
1860D-14C of the Act to establish the Manufacturer Discount Program.
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\3\ https://www.cms.gov/files/document/final-cy-2025-part-d-redesign-program-instructions.pdf.
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On April 7, 2025, we issued the Final CY 2026 Part D Redesign
Program Instructions which described changes to the Part D benefit for
CY 2026.\4\ In these program instructions, we implemented further
changes made by the IRA to the Part D benefit that go into effect in CY
2026, including certain changes to the Part D benefit that relate to
the Medicare Drug Price Negotiation Program that also was established
by the IRA. Beginning January 1, 2026, the maximum fair prices (MFPs)
negotiated under the Medicare Drug Price Negotiation Program go into
effect.\5\ This program, as established in Part E of title XI of the
Act, permits the Secretary to negotiate MFPs for certain high
expenditure, single source drugs and biological products with
participating manufacturers. When these prices go into effect, the IRA
makes further changes to payment obligations in Part D related to
selected drugs (as defined in section 1192(c) of the Act) during a
price applicability period (as defined in section 1191(b)(2) of the
Act).
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\4\ https://www.cms.gov/files/document/final-cy-2026-part-d-redesign-program-instruction.pdf.
\5\ For more information on the Medicare Drug Price Negotiation
Program, please see: https://www.cms.gov/priorities/medicare-prescription-drug-affordability/overview/medicare-drug-price-negotiation-program.
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As described in the Final CY 2026 Part D Redesign Program
Instructions, the defined standard Part D benefit for CY 2026 will
consist of the following phases and liabilities, with the CY 2026
changes reflected in bolded and italicized font:
Annual deductible. The enrollee pays 100 percent of their
gross covered prescription drug costs (GCPDC) until the deductible is
met.
Initial coverage. The enrollee pays 25 percent coinsurance
for covered Part D drugs. The Part D plan sponsor typically pays 65
percent of the costs of applicable drugs and selected drugs \6\ and 75
percent of the costs of all other covered Part D drugs. The
manufacturer, through the Manufacturer Discount Program, typically
covers 10 percent of the costs of applicable drugs. In the initial
coverage phase, CMS will pay a 10 percent subsidy for selected drugs
during a price applicability period. This phase ends when the enrollee
has reached the annual OOP threshold of $2,100 for CY 2026.
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\6\ An applicable drug under the Manufacturer Discount Program
is a Part D drug approved under a new drug application (NDA) under
section 505(c) of the Federal Food, Drug, and Cosmetic Act (FDCA)
or, in the case of a biological product, licensed under section 351
of the Public Health Service Act (PHSA), but does not include a
selected drug (as defined in section 1192(c) of the Act) dispensed
during a price applicability period (as defined in section
1191(b)(2) of the Act) with respect to that drug. Selected drug has
the meaning given such term in section 1192(c) of the Act and any
applicable regulations and guidance.
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Catastrophic. The enrollee pays no cost sharing for Part D
drugs. Part D plan sponsors typically pay 60 percent of the costs of
all covered Part D drugs. The manufacturer pays a discount, typically
equal to 20 percent, for applicable drugs. Medicare pays a reinsurance
subsidy equal to 20 percent of the costs of applicable drugs, and
equivalent to 40 percent of the costs of all other covered Part D drugs
that are not applicable drugs. In the catastrophic phase, Medicare will
provide 40 percent reinsurance for selected drugs during a price
applicability period.
As part of the overall restructuring of the Part D benefit, the IRA
also made changes to the treatment of Advisory Committee on
Immunization Practices (ACIP)-recommended adult vaccines and covered
insulin products under Part D. Section 11401 of the IRA added section
1860D-2(b)(8) of the Act to require that, effective for plan years
beginning on or after January 1, 2023, the Medicare Part D deductible
shall not apply to, and there is no coinsurance or cost sharing for, an
adult vaccine recommended by ACIP that is a covered Part D drug.
Further, section 11406 of the IRA added section 1860D-2(b)(9) of the
Act to require that, effective for plan years beginning on or after
January 1, 2023, the Medicare Part D deductible shall not apply to
covered insulin products, and the Part D cost-sharing amount for a one-
month supply of each covered insulin product must not exceed the
applicable cost-sharing amount for all enrollees. For CYs 2023, 2024,
and 2025, this amount was $35.
Sections 11401(e) and 11406(d) of the IRA directed the Secretary to
implement the vaccine and insulin cost sharing changes for CYs 2023,
2024, and 2025 by program instruction or other forms of program
guidance. In accordance with the law, we issued several memoranda via
the Health Plan Management System (HPMS) that implemented sections
11401 and 11406 of the Act for CYs 2023, 2024, and 2025.\7\ These
provisions of the IRA were then codified in the ``Contract Year 2026
Policy and Technical Changes to the Medicare Advantage Program,
Medicare Prescription Drug Benefit Program, Medicare Cost Plan Program,
and Programs of All-Inclusive Care for the Elderly)'' final rule, which
appeared in the Federal Register on April 15, 2025 (90 FR 15792) (CY
2026 final rule).\8\
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\7\ See the following HPMS memoranda: Contract Year 2023 Program
Guidance Related to Inflation Reduction Act Changes to Part D
Coverage of Vaccines and Insulin (and Revision); Final Contract Year
(CY) 2024 Part D Bidding Instructions; and Final CY 2025 Part D
Redesign Program Instructions.
\8\ https://www.federalregister.gov/documents/2025/04/15/2025-06008/medicare-and-medicaid-programs-contract-year-2026-policy-and-technical-changes-to-the-medicare.
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In the CY 2026 final rule, consistent with section 1860D-2(b)(9)(B)
of the Act, we finalized the requirement that, for CY 2026 and each
subsequent year, the applicable cost-sharing amount for a covered
insulin product is the lesser of: (1) $35, (2) an amount equal to 25
percent of the MFP established for the covered insulin product in
accordance with Part E of title XI of the Act; or (3) an amount equal
to 25 percent of the negotiated price, as defined in Sec. 423.100, of
the covered insulin product under the Part D Prescription Drug Plan
(PDP) or Medicare Advantage Prescription Drug (MA-PD) plan.
2. Redesigned Part D Benefit (Sec. Sec. 423.100 and 423.104)
In this rule, we are proposing to codify at Sec. Sec. 423.100 and
423.104
[[Page 54899]]
changes to the Part D benefit made by the IRA related to the
deductible, initial coverage limit, the coverage gap, the annual out-
of-pocket (OOP) threshold, and alternative prescription drug coverage
options.
a. Deductible (Sec. 423.104(d)(1))
The IRA Part D benefit redesign does not change how the annual
deductible for standard prescription drug coverage is calculated.
However, as discussed previously, sections 11401 and 11406 of the IRA
provide that, effective for plan years beginning on or after January 1,
2023, the Medicare Part D deductible shall not apply to ACIP-
recommended adult vaccines or covered insulin products under Part D. We
codified these changes in the CY 2026 final rule.\9\ Specifically, the
vaccine changes codified at Sec. 423.120(g)(1) and the insulin changes
codified at Sec. 423.120(h)(1) state, respectively, that the Part D
deductible does not apply with respect to ACIP-recommended adult
vaccines and covered insulin products.
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\9\ https://www.federalregister.gov/documents/2025/04/15/2025-06008/medicare-and-medicaid-programs-contract-year-2026-policy-and-technical-changes-to-the-medicare.
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In alignment with these changes, we are proposing to revise the
regulatory text at Sec. 423.104(d)(1) by adding language to state
there, too, that the deductible does not apply to ACIP-recommended
adult vaccines or covered insulin products, as defined in Sec.
423.100.
b. Initial Coverage Limit (Sec. Sec. 423.104(d)(2) and 423.104(d)(3))
Section 11201 of the IRA amended section 1860D-2(b)(3)(A) of the
Act to specify that the initial coverage limit only applies for years
preceding CY 2025. Prior to this statutory change, once an enrollee met
their deductible, they would enter the initial coverage phase, which
would extend until the enrollee's gross covered prescription drug
costs, as defined in Sec. 423.100, reached the initial coverage limit.
At that point the enrollee would enter the coverage gap phase. The
enrollee would remain in the coverage gap phase until the enrollee's
incurred costs, as defined in Sec. 423.100, met the OOP threshold, at
which point the enrollee would enter the catastrophic phase.
By eliminating the initial coverage limit beginning in CY 2025, the
IRA eliminated the coverage gap phase, resulting in a three-phase
benefit for Part D prescription drug coverage which includes the
deductible phase, the initial coverage phase, and the catastrophic
phase. As such, as of CY 2025, there is no longer an initial coverage
limit and the initial coverage phase extends to the annual OOP
threshold, at which point the catastrophic phase begins. Once an
enrollee enters the catastrophic phase, they pay no cost sharing for
Part D drugs.
As a result of these changes, we are proposing to revise Sec.
423.104(d)(2) and (d)(3) to reflect the elimination of the initial
coverage limit beginning in CY 2025. Specifically, we are proposing to
revise the section heading at Sec. 423.104(d)(2) by removing ``the
initial coverage limit'' and replacing it with ``prescription drug
plans'' to accurately reflect the new benefit structure in which there
is no initial coverage limit beginning in CY 2025 and to ensure
consistency with the statutory changes made by the IRA. This proposed
heading language change is intended to accurately encompass the
regulations included in the paragraphs that are subordinate to Sec.
423.104(d)(2), which include regulations related to tiered copayments
and the specialty tier.
We are also proposing to revise Sec. 423.104(d)(2)(i), which
currently specifies that coinsurance for actual costs for covered Part
D drugs above the annual deductible applies up to the initial coverage
limit. To align our regulations with current statute and the redesigned
Part D benefit structure where beneficiaries move directly from the
initial coverage phase to the catastrophic phase once they reach the
OOP threshold, we propose to revise this language to specify that for
each year preceding 2025, this coinsurance applies up to the initial
coverage limit and, for 2025 and each subsequent year, this coinsurance
applies up to the annual OOP threshold specified in Sec.
423.104(d)(5)(iii).
We also propose to revise Sec. 423.104(d)(3), which specifies how
the initial coverage limit is determined. We first propose to correct
Sec. 423.104(d)(3) by removing the references to paragraphs (d)(4) and
(d)(5) of this section because these paragraphs refer to regulations
related to cost sharing in the coverage gap and the out-of-pocket
threshold, which do not affect how the initial coverage limit is
determined. We propose to revise Sec. 423.104(d)(3)(ii) to specify
that the methodology for increasing the initial coverage limit was in
effect from 2007 to 2024. We are also proposing to add a new paragraph
at Sec. 423.104(d)(3)(iii) to state that, for 2025 and each subsequent
year, there is no initial coverage limit.
Finally, we are proposing two conforming changes at Sec.
423.128(e), which refers to the explanation of benefits that a Part D
sponsor must furnish directly to enrollees. First, we propose to revise
Sec. 423.128(e)(3)(ii) which states that Part D sponsors are required
to include information on the cumulative, year-to-date total amount of
benefits provided in relation to the initial coverage limit for the
current year in the explanation of benefits provided to enrollees. In
alignment with section 1860D-4(a)(4)(B)(i) of the Act, as amended by
section 11201 of the IRA, we are proposing to revise Sec.
423.128(e)(3)(ii) by adding language to specify that the requirement to
include information about the initial coverage limit was only in effect
for years preceding 2025. Second, we propose to revise Sec.
423.128(e)(7) which states that the explanation of benefits must be
provided no later than the end of the month following any month when
prescription drug benefits are provided under this part, including the
covered Part D spending between the initial coverage limit described in
Sec. 423.104(d)(3) and the out-of-pocket threshold described in Sec.
423.104(d)(5)(iii). In alignment with the elimination of the initial
coverage limit and coverage gap phase beginning in CY 2025, we are
proposing to add language to specify that the covered Part D spending
between the initial coverage limit and the out-of-pocket threshold
requirement is only applicable for years preceding 2025.
Rather than striking the regulations that apply through CY 2024, we
are proposing to maintain these regulations, with the described
revisions, for historical purposes and for any reconciliation
activities related to benefit years prior to 2025.
c. Coverage Gap (Sec. Sec. 423.100 and 423.104(d)(4))
Section 11201 of the IRA eliminated the coverage gap phase of the
Part D benefit by amending section 1860D-2(b) of the Act to eliminate
the initial coverage limit beginning in CY 2025.
To align with these changes to the Part D benefit, we propose to
revise Sec. 423.104(d)(4) by adding language to reflect that the
coverage gap phase was eliminated. The proposed revision would state
that the methodology for determining cost sharing in the coverage gap
that is described in this section applies only for years preceding
2025. This proposed change aligns with our proposed revision to the
definition of ``coverage gap'' in Sec. 423.100 to specify that the
coverage gap means the period in prescription drug coverage that occurs
between the initial coverage limit and the OOP threshold during the
years 2006 through 2024.
[[Page 54900]]
We are also proposing to revise Sec. 423.104(d)(4)(iii), which
describes the generic gap coinsurance percentage, by adding an end date
to paragraph (C) of this section to state that the 25 percent generic
gap coinsurance percentage only applied for years 2020 through 2024.
This aligns with the IRA's elimination of the coverage gap phase in CY
2025.We also propose to revise Sec. 423.104(d)(4)(iv), which describes
the applicable gap coinsurance percentage, by revising paragraph (E) to
specify that the applicable gap coinsurance percentage for 2019 was 75
(not 80 percent) and to add an end date indicating that the 75 percent
applies for years 2019 through 2024, and removing paragraph (F), which
incorrectly stated that the applicable gap coinsurance percentage for
2020 and subsequent years was 75 percent. These changes align with
changes made by the Bipartisan Budget Act (BBA) of 2018 and the IRA.
Section 53116 of the BBA amended section 1860D-2(b)(2)(D)(ii) of the
Act to specify that the applicable gap percentage for 2019 is 75
percent, not 80 percent, thus accelerating by 1 year a reduction in
enrollee cost sharing in the coverage gap phase. We note that this
revision to paragraph (E) is, in part, a technical correction to align
our regulations with the statutory change made by the BBA, which was
implemented in 2019. This revision does not change how the applicable
gap percentage was calculated in the past, as these amounts were
properly determined consistent with the statutory requirement. We
additionally propose to add a new paragraph at Sec. 423.104(d)(4)(v)
to specify that, for 2025 and each subsequent year, there is no
coverage gap.
Finally, we are proposing conforming changes to Sec. Sec.
422.2267(e)(5)(ii)(B)(1) and 423.2267(e)(5)(ii)(A)(2) which state that
information on prescription drug expenses, including information on the
deductible, the initial coverage phase, coverage gap, and catastrophic
coverage, is required to be included in the Summary of Benefits
provided to prospective enrollees. Due to the elimination of the
coverage gap in CY 2025, we are proposing to revise Sec. Sec.
422.2267(e)(5)(ii)(B)(1) and 423.2267(e)(5)(ii)(A)(2) by adding
language to specify that the requirement to include information about
the coverage gap was only in effect for years preceding 2025.
Even though the coverage gap phase was eliminated in CY 2025, we
are proposing to maintain these regulations, with the described
revisions, for historical purposes and for any reconciliation
activities related to benefit years prior to 2025.
d. Annual Out-of-Pocket Threshold (Sec. 423.104(d)(5))
Section 11201 of the IRA amended section 1860D-2(b)(4)(B)(i) of the
Act to limit the annual OOP threshold for CY 2025 and each subsequent
year. As amended, section 1860D-2(b)(4)(B)(i)(VII) of the Act specifies
that the annual OOP threshold is $2,000 for CY 2025. For subsequent
years, section 1860D-2(b)(4)(B)(i)(VIII) of the Act specifies that the
annual OOP threshold will be increased by the annual percentage
increase described in section 1860D-2(b)(6). Accordingly, as specified
in the CY 2026 Rate Announcement, the annual OOP threshold for CY 2026
was determined to be $2,100.\10\ This amount was calculated, consistent
with section 1860D-2(b)(4)(B) of the Act, by multiplying the CY 2025
OOP threshold amount of $2,000 by the 2026 annual percentage increase
and rounding to the nearest multiple of $50. Once an enrollee's
incurred costs, as defined at Sec. 423.100, exceed the annual OOP
threshold, an enrollee will enter the catastrophic phase where there is
no cost sharing for Part D drugs.
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\10\ https://www.cms.gov/files/document/2026-announcement.pdf.
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As a result of these changes, we are proposing to revise Sec.
423.104(d)(5) to state the specific years for which certain aspects of
this section apply and describe the new methodology for determining the
annual OOP threshold, consistent with section 1860D-2(b)(4)(B)(i) of
the Act.
We are proposing to revise Sec. 423.104(d)(5)(i) to specify that,
once an enrollee's incurred costs, as defined at Sec. 423.100, exceed
the annual OOP threshold described in paragraph (d)(5)(iii) of this
section, they would have $0 cost sharing for 2024 and each subsequent
year and, for each year preceding 2024, the cost-sharing structure
currently outlined at paragraphs (d)(5)(i)(A) and (d)(5)(i)(B) of this
section would apply. We also propose to revise Sec.
423.104(d)(5)(i)(A)(2) to specify that the methodology described in
this section for determining an enrollee's copayment amount applies
through 2023. These proposed changes reflect the elimination of
enrollee cost sharing for Part D drugs in the catastrophic phase
beginning in CY 2024, consistent with section 1860D-2(b)(4)(A)(i) of
the Act, as amended by section 11201 of the IRA.
We propose to revise Sec. 423.104(d)(5)(iii)(F) to add an end date
to state that this paragraph describes how the annual OOP threshold was
determined for years 2021 through 2024. We also propose to add new
Sec. 423.104(d)(5)(iii)(G) to establish that for 2025, the annual OOP
threshold was set at $2,000, consistent with section 1860D-
2(b)(4)(B)(i)(VII) of the Act. Additionally, we are proposing to add
new Sec. 423.104(d)(5)(iii)(H) to specify the methodology for
determining the annual OOP threshold for 2026 and each subsequent year.
Consistent with section 1860D-2(b)(4)(B)(i)(VIII) of the Act, we
propose that the annual OOP threshold for 2026 and each subsequent year
would be the amount specified in this paragraph for the previous year,
increased by the annual percentage increase specified in paragraph
(d)(5)(iv) of this section, and rounded to the nearest $50.
e. Alternative Prescription Drug Coverage (Sec. 423.104(e)(5)) and
Enhanced Alternative Coverage (Sec. 423.104(f)(1))
Part D sponsors must provide their enrollees with qualified
prescription drug coverage which, as defined at Sec. 423.100, means
coverage that consists of either: (1) standard prescription drug
coverage or (2) alternative prescription drug coverage. Standard
prescription drug coverage, as defined at Sec. 423.100, means coverage
of Part D drugs that meets the requirements of Sec. 423.104(d) and
includes two distinct types of coverage: (1) defined standard coverage
and (2) actuarially equivalent (AE) standard coverage.
Prior to the implementation of the IRA, defined standard coverage
consisted of coverage of covered Part D drugs subject to an annual
deductible, 25 percent coinsurance for costs above the annual
deductible but at or below an initial coverage limit, coinsurance that
was equal to the costs of non-applicable and applicable drugs during
the coverage gap multiplied by the gap coinsurance percentages, and
catastrophic coverage with nominal cost sharing for the remainder of
the coverage year once an enrollee's incurred costs, as defined in
Sec. 423.100, exceeded the annual OOP threshold. After the
implementation of the IRA, defined standard coverage, as discussed in
more detail in the introduction of this section of the proposed rule,
now consists of an annual deductible, an initial coverage phase where
the enrollee pays 25 percent coinsurance for covered Part D drugs until
they reach the annual OOP threshold ($2,100 for CY 2026), and the
catastrophic phase where the enrollee pays no cost sharing for Part D
drugs. AE standard coverage, as defined at Sec. 423.100, provides for
cost sharing as described in
[[Page 54901]]
Sec. 423.104(d)(2)(i)(B) or cost sharing as described in Sec.
423.104(d)(5)(ii), or both. In other words, under an AE plan, Part D
sponsors modify certain benefit parameters, such as cost-sharing
structures, while maintaining the same actuarial value. The changes the
IRA made to the defined standard benefit are discussed in detail in the
preceding sections of this proposed rule.
The IRA also, through section 11201 which amended section 1860D-
2(c) of the Act, made changes to the requirements for alternative
prescription drug coverage. Alternative prescription drug coverage, as
defined in Sec. 423.100, means coverage of Part D drugs, other than
standard prescription drug coverage, that meets the requirements of
Sec. 423.104(e). Alternative prescription drug coverage includes two
types of coverage: (1) basic alternative coverage and (2) enhanced
alternative coverage. Both basic alternative and enhanced alternative
coverage must provide access to negotiated prices, coverage of Part D
drugs, and meet the requirements described in Sec. 423.104(e).
Basic alternative coverage is alternative coverage that is
actuarially equivalent to defined standard coverage, as determined
through the processes and methods established under Sec.
423.265(d)(2). Prior to the implementation of the IRA, Part D sponsors
offering basic alternative coverage could, within the parameters for
alternative prescription drug coverage as described in Sec.
423.104(e), combine certain features to maintain an actuarial value of
coverage equal to defined standard prescription drug coverage, such as:
(1) reducing the deductible, (2) making changes in cost sharing in an
actuarially equivalent manner to the 25 percent cost sharing above the
deductible and below the initial coverage limit under defined standard
coverage and in an actuarially equivalent manner to the gap coverage
coinsurance during the coverage gap, or (3) modifying the initial
coverage limit. With the changes made to the Part D benefit by the IRA,
including the elimination of the initial coverage limit and the
coverage gap, certain features that could be offered by basic
alternative plans are no longer available. Thus, we are proposing to
revise our regulations at Sec. 423.104(e) to align with these changes,
as discussed in more detail later.
Enhanced alternative coverage is alternative coverage that includes
both required basic prescription drug coverage and supplemental
benefits, as described at Sec. 423.104(f)(1)(ii). Prior to the
implementation of the Part D benefit redesign provisions in the IRA,
supplemental benefits included: the coverage of drugs that are
specifically excluded from the definition of a Part D drug in Sec.
423.100 under paragraph (2)(ii) and/or any one or more of the following
changes that increase the actuarial value of benefits above the
actuarial value of defined standard prescription drug coverage:
Reduction (or elimination) of the defined standard
deductible.
Reduction of cost sharing in the initial coverage phase.
Increase of the initial coverage limit threshold.
Additional cost-sharing reduction in the coverage gap
phase.
Reduction (or elimination) of cost sharing in the
catastrophic phase.
As noted in the Final CY 2025 Part D Redesign Program Instructions,
section 1860D-2(a)(2)(A)(i) of the Act does not include a reduction in
the annual OOP threshold in its list of permissible supplemental
benefits, and we have never interpreted such provision to allow for a
reduction in the annual OOP threshold. Because the IRA established a
defined annual OOP threshold of $2,000 for CY 2025, and an amount equal
to the previous year's OOP threshold increased by the annual percentage
increase for 2026 and subsequent years, and did not modify the list of
permissible supplemental benefits in section 1860D-2(a)(2)(A)(i) of the
Act to include a reduction in the annual OOP threshold, Part D sponsors
may not lower the annual OOP threshold below the specified amount.
Additionally, the IRA eliminated cost sharing in the catastrophic phase
beginning in CY 2024 and eliminated the coverage gap phase and replaced
the Coverage Gap Discount Program with the Manufacturer Discount
Program beginning in CY 2025. Thus, only the following supplemental
benefits remain as possible enhancement features: coverage of drugs
that are specifically excluded from the definition of a Part D drug,
and/or:
Reduction (or elimination) of the defined standard
deductible.
Reduction of cost sharing in the initial coverage phase.
Given these changes to alternative prescription drug coverage, we
propose to revise Sec. 423.104(e)(5) to align our requirements for
alternative prescription drug coverage with the changes made by the
IRA. We are also proposing to revise Sec. 423.104(f)(1) to align our
requirements for enhanced alternative drug coverage with the changes
made by the IRA.
We first propose to revise Sec. 423.104(e)(5) to establish a
distinction between the requirements for alternative prescription drug
coverage that are applicable for years preceding 2025 and requirements
for 2025 and each subsequent year. Specifically, we are proposing to
add language that, for years preceding 2025, alternative prescription
drug coverage is required to provide coverage that is designed to
provide payment for costs incurred for covered Part D drugs that is
equal to the initial coverage limit. We also propose to add language
stating that, for 2025 and each subsequent year, this coverage must be
equal to the annual OOP threshold, consistent with section 1860D-
2(c)(1)(C) of the Act. Similarly, we propose to revise Sec.
423.104(e)(5)(i) to specify that when calculating the required payment
amount for costs incurred for covered Part D drugs, the amount the
initial coverage limit exceeds the deductible should be used for years
preceding 2025, and the amount the annual OOP threshold exceeds the
deductible should be used for 2025 and each subsequent year. We propose
maintaining Sec. 423.104(e)(5)(ii) without change; therefore, the
amount calculated in Sec. 423.104(e)(5)(i) would be multiplied by 100
percent minus the coinsurance percentage specified in paragraph
(d)(2)(i) of this section to determine the required payment amount.
Finally, we propose to revise Sec. 423.104(f)(1) to specify that
an increase in the initial coverage limit could be considered a
supplemental benefit only for years preceding 2025. This change
reflects the elimination of the initial coverage limit beginning in CY
2025. All other requirements for enhanced alternative coverage that are
described in Sec. 423.104(f) remain applicable under the redesigned
Part D benefit. Therefore, we are not proposing any additional changes
to this section.
3. Specialty Tier (Sec. 423.104)
Section 1860D-2(b)(2) of the Act established the parameters of the
Part D program's defined standard benefit and allows for alternative
benefit designs that are actuarially equivalent to the defined standard
benefit, including the use of tiered formularies. Although not
required, Part D sponsors are permitted to include a specialty tier in
their plan design. A specialty tier, as defined in Sec.
423.104(d)(2)(iv), is a formulary cost-sharing tier dedicated to high-
cost Part D drugs with ingredient costs for a 30-day equivalent supply
(as described in paragraph (d)(2)(iv)(A)(2) of this section) that are
greater than the specialty-tier cost threshold specified in paragraph
(d)(2)(iv)(A) of this section. Consistent with Sec.
423.104(d)(2)(iv)(D), Part D sponsors may maintain up to two specialty
tiers.
[[Page 54902]]
Use of one or two specialty tiers provides the opportunity for Part
D sponsors to manage high-cost drugs apart from tiers that have less
expensive drugs. Our policies for the specialty tier aim to strike the
appropriate balance between plan flexibility and Part D enrollee access
to drugs, consistent with our statutory authority.
In the final rule titled ``Medicare and Medicaid Programs; Contract
Year 2022 Policy and Technical Changes to the Medicare Advantage
Program, Medicare Prescription Drug Benefit Program, Medicaid Program,
Medicare Cost Plan Program, and Programs of All-Inclusive Care for the
Elderly'' (CY 2022 final rule) which appeared in the Federal Register
on January 19, 2021 (86 FR 5864),\11\ We codified several important
aspects of the specialty-tier policy that had previously been
maintained through subregulatory guidance, including our methodology
for setting and increasing the specialty-tier cost threshold and
determining the maximum allowable cost sharing for specialty-tier
drugs.
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\11\ https://www.federalregister.gov/documents/2021/01/19/2021-00538/medicare-and-medicaid-programs-contract-year-2022-policy-and-technical-changes-to-the-medicare.
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In the CY 2022 final rule, we codified our methodology for setting
the specialty-tier cost threshold at Sec. 423.104(d)(2)(iv)(A), as
well as our methodology for increasing this cost threshold at Sec.
423.104(d)(2)(iv)(B). These rules describe our processes for setting a
minimum dollar-per-month threshold amount to determine which drugs are
eligible, based on relative high cost, for inclusion on the specialty
tier as well as adjusting this threshold to maintain approximately one
percent of Part D drugs as specialty-tier eligible. In the CY 2022
final rule, we also codified, at Sec. 423.104(d)(2)(iv)(D)(1) through
(3), the maximum allowable cost sharing for drugs on the specialty tier
between 25 and 33 percent coinsurance. By codifying this rule, we aimed
to prevent discriminatory formulary structures and protect Part D
enrollees with certain disease states that are treated only by
specialty-tier eligible drugs. This ``25/33 percent'' maximum allowable
cost sharing means that we approve cost sharing for the specialty tier
of no more than 25 percent coinsurance after the standard deductible
and before the initial coverage limit (ICL), or up to 33 percent
coinsurance for plans with decreased or no deductible under alternative
prescription drug coverage designs and before the ICL.
The implementation of the IRA has made it necessary for us to make
changes to our current specialty-tier regulations related to adjusting
the specialty-tier cost threshold and determining the maximum allowable
cost sharing to align with the redesigned Part D benefit. In this rule,
we propose to codify technical and conforming changes to our specialty-
tier regulations at Sec. 423.104.
a. Technical Correction to the Specialty-Tier Cost Threshold
Determination (Sec. 423.104(d)(2)(iv)(A)(4))
We are proposing a technical correction in Sec.
423.104(d)(2)(iv)(A)(4), which describes how the specialty-tier cost
threshold is determined for the plan year. The current regulation text
incorrectly refers to paragraph (d)(2)(iii) for the cost threshold
determination, but it should refer to the top one percent methodology
for determining the specialty-tier cost threshold at paragraph
(d)(2)(iv)(A)(3). We therefore propose to correct this inadvertent
technical error in this proposed rule.
b. Limit on Specialty-Tier Cost Threshold Adjustment (Sec.
423.104(d)(2)(iv)(B))
We annually calculate a minimum dollar-per-month threshold amount
to determine which drugs are eligible, based on relative high cost, for
inclusion on the specialty tier. This cost threshold is adjusted to
maintain approximately 1 percent of Part D drugs as specialty-tier
eligible. In the CY 2022 final rule, we codified at Sec.
423.104(d)(2)(iv)(B) our methodology to increase the specialty-tier
cost threshold as follows:
(1) CMS increases the specialty-tier cost threshold for a plan year
only if the amount determined in paragraph (d)(2)(iv)(A)(3) of this
section for a plan year is at least 10 percent above the specialty tier
cost threshold for the prior plan year.
(2) If an increase is made in accordance with this paragraph
(d)(2)(iv)(B), CMS rounds the amount determined in paragraph
(d)(2)(iv)(A)(3) of this section to the nearest $10, and the resulting
dollar amount is the specialty-tier cost threshold for the plan year.
Our current regulation only contemplates increasing the specialty-
tier cost threshold and does not consider decreasing the threshold when
market conditions might warrant such a change. Given the many changes
made to the Part D benefit by the IRA, we believe that it may be
necessary in future years to decrease the specialty-tier cost threshold
due to reductions in Part D drug costs. In general, shifting market
dynamics, such as increased utilization of lower cost generic drugs,
could potentially lead to reductions in Part D drug costs. The Medicare
Drug Price Negotiation Program, as established in Part E of title XI of
the Act, which permits the Secretary to negotiate MFPs for certain high
expenditure, single source drugs and biological products with
participating manufacturers, could also lead to a future need for a
downward adjustment. The MFPs for the first 10 selected drugs are
scheduled to go into effect on January 1, 2026, with new MFPs taking
effect and new drugs being selected for negotiation each subsequent
year. Therefore, it is possible that as a result of general market
dynamics and more high expenditure drugs being selected for negotiation
and their negotiated MFPs taking effect, the methodology for
determining the specialty-tier cost threshold, as described in Sec.
423.104(d)(2)(iv)(A), may yield an amount that is at least 10 percent
below the previous plan year's specialty-tier cost threshold.
Thus, we propose to revise Sec. 423.104(d)(2)(iv)(B)(1) and (2) by
adding language to allow us to reduce the cost threshold under certain
circumstances. Specifically, in paragraph (B)(1) of this section, we
are proposing to replace ``increase'' with ``modifies'' and add ``or
below'' following ``10 percent above.'' In paragraph (B)(2), we are
proposing to replace ``increase'' with ``modification.''
c. Specialty Tier Maximum Allowable Cost Sharing (Sec.
423.104(d)(2)(iv)(D))
Each year, we set the maximum allowable cost sharing for the
specialty tier based on the plan's deductible, in accordance with Sec.
423.104(d)(2)(iv)(D). The intent of this policy is to ensure a plan's
value is reflective of the defined standard benefit. The regulation
limits a plan with the full defined standard deductible to a 25 percent
coinsurance on its specialty tier but allows a plan that fully
eliminates the deductible up to a 33 percent coinsurance on its
specialty tier. Based on the pre-IRA benefit design, we determined that
the 33 percent maximum coinsurance was mathematically equivalent to the
effective coinsurance for a beneficiary who would have paid the defined
standard deductible for any given year plus the 25 percent coinsurance
in the initial coverage phase until their drug costs reached the
initial coverage limit. In other words, prior to CY 2025, beneficiary
OOP costs divided by total drug costs equaled a 33 percent effective
[[Page 54903]]
coinsurance for the beneficiary regardless of the plan deductible,
represented by the following equation:
[GRAPHIC] [TIFF OMITTED] TP28NO25.001
To operationalize the concept of maximum allowable cost sharing for
the specialty tier based on the plan's deductible, CMS, in the CY 2022
final rule, codified the following calculation at Sec.
423.104(d)(2)(iv)(D)(3) to determine the deductible range that
corresponded to each specialty-tier coinsurance percentage point from
25 percent through 33 percent. Thus, under the pre-IRA Part D benefit
design, we used this equation for the calculation:
[GRAPHIC] [TIFF OMITTED] TP28NO25.002
Consistent with the first equation, the numerator here represents
beneficiary OOP costs while the denominator represents total drug
costs, resulting in an effective coinsurance of 33 percent, to align
with the defined standard benefit. This equation was then solved for
the deductible, and each specialty-tier coinsurance percentage point
was inserted, to calculate the maximum allowable deductible value
corresponding to that coinsurance percentage.
However, in CY 2025, the ICL was eliminated and, as a result, the
methodology codified at Sec. 423.104(d)(2)(iv)(D)(3) was no longer
valid. Therefore, in the Final CY 2025 Part D Redesign Program
Instructions,\12\ we established a new methodology to determine the
specialty-tier coinsurance/deductible ranges to represent the effective
coinsurance for a beneficiary under the redesigned Part D benefit. In
the Final CY 2026 Part D Redesign Program Instructions,\13\ we
continued to use the methodology outlined in the Final CY 2025 Part D
Redesign Program Instructions.
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\12\ https://www.cms.gov/files/document/final-cy-2025-part-d-redesign-program-instructions.pdf.
\13\ https://www.cms.gov/files/document/final-cy-2026-part-d-redesign-program-instruction.pdf.
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In accordance with the Final CY 2025 Part D Redesign Program
Instructions, we are now proposing to codify this methodology for
determining the specialty-tier coinsurance/deductible ranges to
represent the effective coinsurance for a beneficiary under the Part D
benefit. To ensure that a plan's value is reflective of the defined
standard benefit, we are proposing to codify a methodology similar to
the methodology used to calculate the cost-sharing requirements in
Sec. 423.104(d)(2)(iv)(D). For Part D plans with the full deductible
provided under the defined standard benefit, the coinsurance is 25
percent, consistent with the defined standard benefit. Using the CY
2025 defined standard benefit parameters of a $590 deductible, a $2,000
annual OOP threshold, and a 25 percent coinsurance after the deductible
is met and before the annual OOP threshold is reached, the total drug
costs can be calculated at $6,230. This results in an effective
coinsurance of 32.1 percent. To ensure that coinsurance for the
specialty tier remains in alignment with cost sharing under the defined
standard benefit, we are retaining the 33 percent maximum coinsurance
currently effective at Sec. 423.104(d)(2)(iv)(D)(2).
We are proposing to use, as in previous years, an effective
coinsurance equation to calculate the deductible that corresponds to
each specialty-tier coinsurance percentage point from 25 percent
through 33 percent. Consistent with our decision to retain the 33
percent maximum coinsurance, we are also proposing to use 33 percent to
calculate the deductible that corresponds to each specialty-tier
coinsurance percentage point. This equation would continue to represent
beneficiary OOP costs in the numerator divided by total drug costs in
the denominator. The following equation illustrates how we would
calculate the effective coinsurance for the Part D benefit for purposes
of calculating specialty-tier cost-sharing percentages:
[GRAPHIC] [TIFF OMITTED] TP28NO25.003
As with the previous methodology, the equation is solved for the
deductible, and each maximum allowable specialty tier coinsurance value
is inserted, to determine the maximum allowable deductible value
corresponding to that coinsurance. For example, the results for CY 2026
are shown in Table 1.
[[Page 54904]]
[GRAPHIC] [TIFF OMITTED] TP28NO25.004
Consistent with the approach taken for both CY 2025 and CY 2026 as
detailed in the Final CY 2025 Part D Redesign Program Instructions, we
are proposing to codify this methodology for determining specialty-tier
coinsurance/deductible ranges. Thus, we propose to revise Sec.
423.104(d)(2)(iv)(D)(3)(i) to describe how the maximum coinsurance
percentage was determined for years preceding 2025. We also propose to
add new Sec. 423.104 (d)(2)(iv)(D)(3)(ii) to describe the methodology
for calculating the maximum coinsurance percentage for 2025 and each
subsequent year.
4. Changes in True Out-of-Pocket (TrOOP) Costs (Sec. Sec. 423.100 and
423.464)
A beneficiary's progression through the Part D benefit phases is
determined by the total amount of costs incurred by the beneficiary for
covered Part D drugs in the plan year. This amount is also referred to
as the beneficiary's accumulated TrOOP spending. Incurred costs are
defined at section 1860D-2(b)(4)(C) of the Act and the statutory
definition has been revised several times since the beginning of the
Part D program. Between 2005 and 2010, TrOOP expenditures represented
costs actually paid by the beneficiary, another person on behalf of the
beneficiary, or a qualified State Pharmaceutical Assistance Program
(SPAP). The Act also expressly excluded certain costs from the
definition of TrOOP, including costs ``reimbursed through insurance or
otherwise, a group health plan, or other third-party payment
arrangement.''
In January 2005, we published the final rule titled, ``Medicare
Program; Medicare Prescription Drug Benefit'' (70 FR 4194), in which we
initially codified the rules applicable to incurred costs at Sec.
423.100 (hereinafter referred to as the January 2005 Medicare Final
Rule). In that rule, we established that the terms ``insurance or
otherwise'' are separate terms with separate definitions. The term
``insurance'' refers to a health plan that provides or pays the cost of
covered Part D drugs, including, but not limited to health insurance
coverage, an MA plan, and a PACE organization. The term ``or
otherwise'' refers to government-funded health programs, and
accordingly, we defined the term ``government-funded health programs''
to mean any program established, maintained, or funded--in whole or in
part--by the Federal government, the governments of States or political
subdivisions of States, or any agency or instrumentality of these
governments which uses public funds in whole or in part to provide to,
or pay on behalf of, an individual the cost of Part D drugs at Sec.
423.100.
Enacted into law on March 23, 2010, section 3314 of the Patient
Protection and Affordable Care Act (PPACA) (Pub. L. 111-148) added
section 1860D-2(b)(4)(C)(iii) of the Act to specify that costs borne or
paid for by the Indian Health Service (IHS), an Indian tribe or tribal
organization, or an urban Indian organization, and costs borne or paid
for by an AIDS Drug Assistance Program (ADAP) count as incurred costs
and accumulate towards TrOOP. In the final rule titled, ``Medicare
Program; Changes to the Medicare Advantage and the Medicare
Prescription Drug Benefit Programs for Contract Year 2012 and Other
Changes,'' which appeared in the April 15, 2011 Federal Register (76 FR
21432), we revised the definition of incurred cost at Sec. 423.100 to
reflect the amendments to section 1860D-2(b)(4)(C)(iii) of the Act made
by the PPACA. Specifically, we revised the regulation to include
payments by the IHS, an Indian tribe or tribal organization, or an
urban Indian organization (referred to as I/T/U pharmacy in Sec.
423.100) or under an ADAP in the definition of incurred costs at Sec.
423.100. We also amended Sec. 423.464(f)(2) to state that expenditures
made by IHS, an Indian tribe or tribal organization, or an urban Indian
organization or under an ADAP are not required to be excluded when
determining whether a Part D enrollee has satisfied the out-of-pocket
threshold.
Section 11201 of the IRA further amended section 1860D-2(b)(4)(C)
of the Act to update the definition of incurred costs. Section 1860D-
2(b)(4)(C)(iii)(II) of the Act, as added by the IRA, amended the
definition of incurred costs to include, for CY 2025 and subsequent
years, costs incurred that are reimbursed through insurance, a group
health plan, or certain other third party payment arrangements, but not
including the coverage provided by a prescription drug plan or an MA-PD
plan that is basic prescription drug coverage or any payments by a
manufacturer under the Manufacturer Discount Program. In addition, the
IRA provided that, for beneficiaries who have opted into the Medicare
Prescription Payment Plan described in section 1860D-2(b)(2)(E) of the
Act, election into such program will not impact how a beneficiary moves
through the Part D benefit or what counts towards TrOOP. Under section
1860D-2(b)(4)(F) of the Act, a Medicare Prescription Payment Plan
participant's TrOOP-eligible costs that are paid by their Part D plan
under the Medicare Prescription Payment Plan shall be treated as
incurred costs.
Section 11201(f) of the IRA directed the Secretary to implement
section 11201 of the IRA for 2024, 2025, and 2026 by program
instruction or other forms of program guidance. In the Final CY 2025
Part D Redesign Program Instructions, we released guidance to implement
the IRA's additions to section 1860D-2(b)(4)(C) of the Act.
Specifically, we stated that
[[Page 54905]]
supplemental Part D coverage provided by enhanced alternative Part D
plans and other health insurance (OHI) will be counted as incurred
costs and included in the calculation of TrOOP for CY 2025. This
includes supplemental coverage provided by Employer Group Waiver Plans
(EGWPs), plan reductions in cost sharing for enrolled beneficiaries,
such as reductions by Medicare-Medicaid Plans and D-Special Needs Plans
(SNPs), and Center for Medicare and Medicaid Innovation (CMMI) model
benefits that reimburse costs for covered Part D drugs (unless stated
otherwise in an applicable CMMI model's respective Request for
Applications or model guidance). In response to comments received, we
explained that including supplemental coverage provided by enhanced
alternative Part D plans in addition to OHI is required by the plain
language of the statute. Specifically, by excluding ``coverage provided
by a prescription drug plan or an MA-PD plan that is basic prescription
drug coverage'' from the definition of costs ``reimbursed through
insurance,'' the text of section 1860D-2(b)(4)(C)(iii)(II) indicates
that drug coverage provided by Part D plans other than basic
prescription drug coverage is included in the definition of costs
``reimbursed through insurance.'' This would include enhanced
alternative supplemental benefits. If the provision only included EGWP
supplemental coverage in the definition of costs ``reimbursed through
insurance,'' then the statute would have explicitly included EGWP
supplemental coverage in the definition of ``costs reimbursed through
insurance'' and expanded the exclusion clause to apply to both basic
prescription drug coverage and enhanced alternative supplemental
coverage.
We further stated in the Final CY 2025 Part D Redesign Program
Instructions that under section 1860D-2(b)(4)(C)(iii)(II) of the Act,
only amounts reimbursed by supplemental coverage will be newly included
in the calculation of TrOOP. For enhanced alternative plans, plan
liability is mapped to the defined standard benefit to distinguish
between basic and supplemental benefits provided under the Part D
sponsor. Because of this, if beneficiary cost sharing is greater than
what it would have been under the defined standard benefit, a negative
value is recorded on a Prescription Drug Event (PDE) record for the
field representing the value of the supplemental coverage. Such
negative values will be disregarded (that is, be treated as zero) when
calculating TrOOP, because they do not represent reimbursement to the
beneficiary. In response to comments received, we explained that, while
excluding such negative values from TrOOP can overstate the net value
of total supplemental benefits provided to beneficiaries over the
course of the year, including negative values in TrOOP would
inappropriately disregard any beneficiary cost sharing in excess of the
defined standard cost sharing amount when calculating TrOOP. This would
particularly disadvantage certain beneficiaries who have patterns of
utilization that disproportionately include this situation. For
example, if a beneficiary in an enhanced alternative plan has higher
cost sharing than the defined standard benefit for a maintenance
medication, including the negative values in TrOOP could significantly
disadvantage that beneficiary as these negative values would
continually offset part of the payments the beneficiary actually paid
OOP. This would create some circumstances where certain beneficiaries
have a net negative value for their supplemental benefits when they
reach the $2,100 OOP threshold, which means they would have to pay more
than $2,100 OOP to reach the catastrophic phase for CY 2026.
Additionally, we noted that section 1860D-2(b)(4)(C)(iii)(II) of
the Act states that reimbursements through ``certain other third party
payment arrangements'' are to be included in the calculation of TrOOP.
We did not identify any third party payment arrangements in addition to
those described in the preceding paragraphs that could be included in
the calculation of TrOOP. For instance, primary payer amounts paid on
Medicare as secondary payer (MSP) claims are a category of third party
payments that we considered for TrOOP eligibility. We determined that
these payments should remain excluded from TrOOP due to the
requirements at section 1862(b) of the Act, which was not amended by
the IRA. As such, for 2025, we did not count as incurred costs any
other third party payments not considered TrOOP-eligible prior to 2025.
In the Final CY 2025 Part D Redesign Program Instructions, we also
solicited comment on whether interested parties are aware of other
third party payments that could be included under section 1860D-
2(b)(4)(C)(iii)(II) of the Act. No commenters identified additional
third party payments that they believed should be included in TrOOP. We
also did not receive any comments on the Final CY 2026 Part D Redesign
Program Instructions recommending that we include any other third party
payments towards TrOOP.
Further, we stated that, as required by section 1860D-
2(b)(4)(C)(iii)(II) of the Act, any manufacturer payments made under
the Manufacturer Discount Program, which was newly created under the
IRA, do not count as incurred costs and are not included in the
calculation of TrOOP in 2025.
Finally, we stated that for beneficiaries who have opted into the
Medicare Prescription Payment Plan described in section 1860D-
2(b)(2)(E) of the Act, as added by section 11202 of the IRA, election
into such program will not impact how a beneficiary moves through the
Part D benefit or what counts towards TrOOP. Under section 1860D-
2(b)(4)(F) of the Act, as codified at Sec. 423.137(c)(4), a Medicare
Prescription Payment Plan participant's TrOOP-eligible costs that are
paid by their Part D plan under the Medicare Prescription Payment Plan
shall be treated as incurred costs.
In the Final CY 2026 Part D Redesign Program Instructions, we
stated that certain policies described in the Final CY 2025 Part D
Redesign Program Instructions, including the policy with respect to
incurred costs, also applied in CY 2026.
In this proposed rule, we propose to codify at Sec. 423.100 the
policies we established in the Final CY 2025 Part D Redesign Program
Instructions for CY 2025 and applied via the Final CY 2026 Part D
Redesign Program Instructions for CY 2026 with respect to the
definition of incurred costs for 2025 and subsequent years, without
modification. These policies are currently in effect for CY 2026.
Specifically, we propose to add a new subparagraph (3) to the
definition of incurred costs at Sec. 423.100 defining incurred costs
for 2025 and subsequent years to include costs that are reimbursed
through insurance, a group health plan, or certain other third party
payment arrangements, but not including the coverage provided by a PDP
or an MA-PD plan that is basic prescription drug coverage or any
payments by a manufacturer under the Manufacturer Discount Program
under section 1860D-14C of the Act. We also propose to amend Sec.
423.464(f)(2)(i)(C) to remove the exclusion of expenditures for covered
Part D drugs made by insurance or otherwise, a group health plan, or
other third party payment arrangements, including expenditures by plans
offering other prescription drug coverage and replace it with an
exclusion limited to expenditures for covered Part D drugs made by
[[Page 54906]]
government-funded health programs or the coverage provided by a PDP or
an MA-PD plan that is basic prescription drug coverage or any payments
by a manufacturer under the Manufacturer Discount Program.
5. Policy for Drugs Not Subject to Defined Standard Deductible (Sec.
423.104)
Under sections 1860D-2(b) and (c) of the Act, as amended by section
11201 of the IRA, the coverage gap phase was eliminated in CY 2025.
Beginning in CY 2025, a beneficiary leaves the initial coverage phase
and enters the catastrophic phase once they incur enough TrOOP-eligible
costs to meet the annual OOP threshold. Accordingly, under section
1860D-14A(h) of the Act, as added by section 11201 of the IRA, the
Coverage Gap Discount Program sunset effective January 1, 2025. Section
11201 of the IRA added section 1860D-14C of the Act, which created the
Manufacturer Discount Program beginning January 1, 2025. Under section
1860D-14C(b)(1)(A) of the Act, manufacturers that enter into a
Manufacturer Discount Program agreement will provide discounts on
applicable drugs, typically amounting to 10 percent of the negotiated
price for enrollees in the initial coverage phase and 20 percent of the
negotiated price for enrollees in the catastrophic phase, in CY 2025
and subsequent years.
Manufacturer discounts are available under the Manufacturer
Discount Program once a beneficiary becomes an ``applicable
beneficiary.'' Section 1860D-14C(g)(1) of the Act defines an applicable
beneficiary as an individual who, on the date of dispensing a covered
Part D drug, is enrolled in a PDP or MA-PD plan, is not enrolled in a
qualified retiree prescription drug plan, and has incurred TrOOP-
eligible costs that exceed the defined standard deductible specified in
section 1860D-2(b)(1) of the Act. TrOOP-eligible costs for drugs not
subject to the defined standard deductible, specifically covered
insulin products, as well as TrOOP-eligible costs for drugs not subject
to a non-defined standard plan deductible or drugs subject to a reduced
deductible under non-defined standard plans, all count towards a
beneficiary's satisfaction of the defined standard deductible.
In the Final CY 2025 Part D Redesign Program Instructions, we
established a policy for drugs not subject to the defined standard
deductible to address situations where a beneficiary has not satisfied
their plan deductible but has incurred sufficient TrOOP-eligible costs
to satisfy the defined standard deductible. The policy also addresses
situations where a beneficiary incurs sufficient costs to satisfy the
plan deductible but has not incurred TrOOP-eligible costs cumulatively
across all drugs at or above the defined standard deductible amount.
The component of the definition of an applicable beneficiary at section
1860D-14C(g)(1)(C) of the Act creates the possibility for a beneficiary
to encounter these situations; therefore, this policy was necessary to
ensure that such situations are treated similarly by all Part D plan
sponsors.
We established that in CY 2025, if a beneficiary has not satisfied
their plan deductible but has incurred sufficient TrOOP-eligible costs
to satisfy the defined standard deductible, they will be both an
applicable beneficiary under the Manufacturer Discount Program, as we
propose to define at Sec. 423.100, and be deemed to have satisfied
their plan deductible.
Furthermore, we established that, if a plan offers a non-defined
standard plan deductible--whether that be a lower deductible than the
defined standard deductible or a deductible that applies for a subset
of covered Part D drugs--and a beneficiary incurs sufficient costs to
satisfy the plan deductible but has not incurred TrOOP-eligible costs
cumulatively across all drugs at or above the defined standard
deductible amount, discounts under the Manufacturer Discount Program
are not available. As such, the plan is responsible for covering the
portion of costs that would be covered by the manufacturer discount if
the beneficiary were an applicable beneficiary until the beneficiary's
TrOOP exceeds the defined standard deductible and they become an
applicable beneficiary. The same guidance applies when a beneficiary
under any Part D plan is dispensed a covered insulin product or ACIP-
recommended vaccine before they have incurred TrOOP-eligible costs at
or above the defined standard deductible amount.
For example, an enhanced alternative plan has a tiered formulary,
does not charge a deductible for tier 1 drugs, and charges 20 percent
coinsurance for drugs in that tier. A beneficiary's first fill of the
year is for a $200 tier 1 drug, meaning they pay $40 out of pocket. The
beneficiary has not incurred sufficient TrOOP-eligible costs to satisfy
the defined standard deductible of $615 (and has $415 in remaining
TrOOP-eligible costs before they satisfy the deductible) and does not
meet the definition of an applicable beneficiary under the Manufacturer
Discount Program. Therefore, the plan must cover the 10 percent of
costs that would be covered by the manufacturer discount if the
beneficiary were an applicable beneficiary.
In the Final CY 2026 Part D Redesign Program Instructions, we
stated that certain policies described in the Final CY 2025 Part D
Redesign Program Instructions, including the policy with respect to
drugs not subject to the defined standard deductible, also applied in
CY 2026. We also established that the policy for drugs not subject to
the defined standard deductible also applies to selected drugs for CY
2026. Specifically, we stated that if a plan offers a non-defined
standard plan deductible--whether that be a lower deductible than the
defined standard deductible or a deductible that applies for a subset
of covered Part D drugs--and a beneficiary incurs sufficient costs to
satisfy the plan deductible but has not incurred TrOOP-eligible costs
cumulatively across all drugs at or above the defined standard
deductible amount, the selected drug subsidy is not available for
selected drugs during a price applicability period. As such, for a
selected drug during a price applicability period, the plan is
responsible for covering the portion of costs that would be covered by
the selected drug subsidy if the beneficiary were an applicable
beneficiary until the beneficiary's TrOOP exceeds the defined standard
deductible and they become an applicable beneficiary.
In this proposed rule, we propose to codify the policy for drugs
not subject to the defined standard deductible that are in effect for
2025 and 2026 without modification. Specifically, we propose to codify
the policy for drugs not subject to defined standard deductible at a
new Sec. 423.104(j).
6. Annual Indexing of Part D Benefit Parameters Using the Annual
Percentage Increase in Drug Expenditures (API) and Consumer Price Index
(CPI) (Sec. Sec. 423.104, 423.782)
The Medicare Prescription Drug, Improvement, and Modernization Act
of 2003 (Pub. L. 108-173) (MMA) added sections 1860D-2(b) and 1860D-
14(a) of the Act directing the Secretary to index certain Part D
benefit parameters each year, which include, but are not limited to,
the deductible limit and low-income cost-sharing amounts. The required
annual adjustments ensure that the actuarial value of the drug benefit
remains consistent with changes in Part D drug expenditures and general
inflation. The MMA established two indices for adjusting Part D benefit
parameters: (1) the annual percentage increase in average per capita
aggregate expenditures for covered Part D drugs in
[[Page 54907]]
the U.S. for Part D eligible individuals under section 1860D-2(b)(6) of
the Act (referred to as the API); and (2) the annual percentage
increase in the Consumer Price Index based on all items per a U.S. city
average under section 1860D-14(a)(4)(A) of the Act (referred to as the
CPI).
In the January 2005 Medicare Final Rule (70 FR 4194), establishing
the regulatory framework for the Medicare Part D prescription drug
benefit program created by the MMA. This rule codified the statutory
requirements for annual adjustments of the deductible under section
1860D-2(b)(6) of the Act and low-income cost-sharing amounts under
section 1860D-14(a) of the Act, using the API and the CPI. The rule
also established the regulatory basis for annual adjustments to
additional Part D parameters, including the annual out-of-pocket
threshold and retiree drug subsidy (RDS) cost thresholds, to maintain
the actuarial integrity of the benefit structure as drug costs and
economic conditions change over time.
In accordance with the statute and corresponding regulation, the
following Part D standard benefit, low-income subsidy, and RDS program
parameters are updated using the API:
Standard Benefit Deductible--section 1860D-2(b)(1)(A)(ii)
of the Act; Sec. 423.104(d)(1)(ii).
Initial Coverage Limit--section 1860D-2(b)(3)(A)(ii) of
the Act; Sec. 423.104(d)(3)(ii).
OOP Threshold--section 1860D-2(b)(4)(B)(i)(VIII) of the
Act.
Maximum copayments below the out-of-pocket threshold for
certain low-income full subsidy eligible enrollees (income less than
150 percent, but greater than 100 percent of Federal Poverty Level
(FPL), not including institutionalized individuals)--section 1860D-
14(a)(1)(D)(iii) of the Act; Sec. 423.782(a)(2)(i).
RDS Cost threshold--section 1860D-22(a)(3)(B)(i)(I) of the
Act; Sec. 423.886(b)(3).
RDS Cost limit--section 1860D-22(a)(3)(B)(i)(II) of the
Act; Sec. 423.886(b)(3).
The CPI is used to update the following Part D low-income subsidy
and cost-sharing program benefit parameter:
Maximum copayments below the out-of-pocket threshold for
certain low-income full subsidy eligible enrollees (income less than
100 percent of the FPL)--section 1860D-14(a)(1)(D)(ii) of the Act;
Sec. 423.782(a)(2)(iii)(A).
While sections 1860D-2(b)(6) and 1860D-14(a)(4)(A) describe the
parameter adjustments as an ``increase'' when referring to API and CPI,
we have historically applied them multidirectionally, including
decreasing the parameter values in the event of a decrease in annual
Part D expenditures or deflation, to ensure that the actuarial value of
the drug benefit remains consistent each year.
The current regulations do not describe the specific methods used
to calculate the annual percentage increases. Instead, the specific
methods for calculating the annual percentage increases in drug
expenditures and CPI that are applied to the Part D benefit parameters
have been proposed for each CY in the Advance Notice of Methodological
Changes for Medicare Advantage (MA) Capitation Rates and Part C and
Part D Payment Policies (Advance Notice) and finalized in the
Announcement of Medicare Advantage (MA) Capitation Rates and Part C and
Part D Payment Policies (Rate Announcement). In this proposed rule, we
propose to codify these methodologies in regulation. We also propose
making certain technical changes to current regulations related to
indexing certain benefit parameters for low-income individuals.
Although we are proposing to codify the calculation methodology for the
API and CPI in this rule, we will continue to publish the annual
percentage increases in drug expenditures and CPI and updated Part D
benefit parameters for each CY through the Advance Notice and Rate
Announcement. The projections and calculations used in the
methodologies described at proposed Sec. Sec. 423.104 and 423.782 are
made using generally accepted actuarial principles and practices. In
applying generally accepted actuarial principles and practices,
actuarial judgment and discretion may be used, including taking into
account information such as changes in legislation (such as changes in
Medicare benefits), Medicare payment policy, trends over several years
of data, and external variables (such as public health emergencies);
selecting among different approaches (such as weighting for utilization
and using average or median values); and in selecting data or data
samples.
Calculation of the Annual Percentage Increase in Drug Expenditures
Section 1860D-2(b)(6) of the Act defines the API for each year as
the annual percentage increase in average per capita aggregate
expenditures for Part D drugs in the United States for Part D eligible
individuals, for the 12-month period ending in July of the previous
year using such methods as the Secretary shall specify. We calculate
the aggregate expenditures for Part D drugs using the GCPDC instead of
an alternative cost measure such as actual net drug costs, because
gross drug costs reflect the prices available to beneficiaries and are
the basis for calculating beneficiary cost sharing and for beneficiary
progression through the Part D drug benefit. The GCPDC is reported to
CMS on PDE records; consequently, PDE records are the data source used
for this calculation. For contract years 2006 and 2007, the API
calculations were based on National Health Expenditure (NHE)
prescription drug per capita estimates due to insufficient Part D
program data availability; however, we transitioned to using PDE
records for CY 2008 and future years.
The API calculation, where API represents the annual percentage
increase for Part D expenditures for a given year, is comprised of two
factors we refer to as: (1) an annual percentage trend (APT), and (2) a
multiplicative update (MU) factor for prior-year revisions.
Mathematically, the formula is expressed as follows:
API = (APT) * (MU)
For a given payment year, the APT is the ratio of total per capita
Part D drug expenditures in the 12-month period (August through July)
prior to the given payment year (numerator) to the total per capita
Part D drug expenditures two years prior to the given payment year
(denominator).
For example, the APT for CY 2027 is equal to:
[GRAPHIC] [TIFF OMITTED] TP28NO25.005
[[Page 54908]]
The MU factor is used to incorporate updated data for prior years
into the calculation. We update data for prior years for two reasons:
First, at the time the CMS Office of the Actuary calculates the API,
actual, reasonably complete PDE data is typically only available for
dates of service during the first 5 months of the measurement period
(August-December). For the remainder of the measurement period
(typically 7 months (January-July)), the costs must be estimated using
historical data and actuarial experience. For example, for payment year
2027, the average per capita cost for August 2024-July 2025 (2 years
prior) is calculated from submitted PDE data, while the average for
August 2025-July 2026 (the year prior) is based on actual data from
August 2025-December 2025 and projections for January-July 2026.
Second, PDE data may be resubmitted to make corrections or retroactive
claim adjustments \14\ for activities such as coordination of benefits
or changes in eligibility status for Part D or the Low-Income Subsidy
program. Historically, we have used a retrospective period, typically 5
years, to update calculations to account for the impact of
resubmissions that occur as part of Part D operations such as the
annual Part D payment reconciliation under Sec. 423.343 or a reopening
of a reconciliation under Sec. 423.346. We have found few to no
resubmissions occur beyond a typical retrospective 5-year window.
---------------------------------------------------------------------------
\14\ Medicare Prescription Drug Benefit Manual, Pub. 100-18,
Chapter 14: Coordination of Benefits.
---------------------------------------------------------------------------
The MU factor for a given year is the ratio of the product of the
APTs for all prior recorded years (since the first calculation in
2007), with the most recent 5 years revised and updated with the
currently available data (numerator) to the product of APTs in prior
recorded years as published in the previous year's Rate Announcement
(denominator). As discussed in the preceding paragraphs, the MU factor
has a 5-year retrospective window; however, we have historically
included data since 2007 for informational purposes, as this historical
data is the same in the numerator and the denominator and has no
effect. To convert ratios to percentages, it is necessary to add 1.0 to
each factor prior to entering them into the formula.
For example, the MU factor for CY 2027 is equal to:
[GRAPHIC] [TIFF OMITTED] TP28NO25.006
In this example, APT is the annual percentage trend, denoted with a
subscript for the year of the data. The numerator is updated from CY
2020 through CY 2025, using the most recent data available when it is
calculated in 2026, and the denominator uses data published in the CY
2026 Rate Announcement (published in April 2025).
Historically, the statutory parameters updated by the API have
included the defined standard benefit deductible, initial coverage
limit, annual OOP threshold, and the parameters for the LIS and RDS
benefits. The IRA eliminated the coverage gap phase and beneficiary
cost sharing above the annual OOP threshold; it also set the annual OOP
threshold at $2,000 for CY 2025. Given these changes, for CY 2025, only
the defined standard deductible and LIS benefit parameters were updated
using the API. For CY 2025 and subsequent years, no updates to the
parameters for the initial coverage limit, maximum or minimum
beneficiary cost sharing in the coverage gap or above the annual OOP
threshold were necessary as the coverage gap phase and beneficiary cost
sharing above the annual OOP threshold were eliminated. In CY 2026, the
defined standard deductible, the annual OOP threshold, and the maximum
copayment below the annual OOP threshold for low-income, full-subsidy-
eligible beneficiaries with incomes between 100 and 150 percent of the
FPL were updated using the API.
We propose to revise Sec. 423.104(d)(5)(iv) by adding three
paragraphs describing (1) the overall calculation of the annual
percentage increase, or the API, in per capita Part D drug
expenditures, (2) the calculation of the annual percentage trend, or
the APT, and (3) the calculation of the multiplicative update factor,
or the MU. We will continue to publish updates to the Part D benefit
parameters calculated through these methodologies through the Advance
Notice and Rate Announcement process described in section 1853(b) of
the Act.
Calculation of the Annual Percentage Increase in CPI
Section 1860D-14(a)(4)(A) of the Act specifies that the annual
percentage increase in CPI, a measure of the average change over time
in the prices paid by urban consumers for a market basket of consumer
goods and services,\15\ is the annual percentage increase in the CPI
(all items; U.S. city average) as of September of such previous year.
As noted previously, the annual percentage increase in the CPI applies
to the copayments for the lowest income dually eligible individuals
(with incomes not exceeding 100 percent of the FPL) under section
1860D-14(a)(1)(D)(ii) of the Act, and is reflected at Sec.
423.782(a)(2)(iii). The CPI is based on economic assumptions of the
Consumer Price Index for All Urban Consumers (CPI-U), which is
published by the Bureau of Labor Statistics. The method for calculating
the annual percentage increase in the CPI comprises two factors we
refer to as: (1) an annual percentage trend; and (2) a multiplicative
update factor for prior-year revisions.
---------------------------------------------------------------------------
\15\ Consumer Price Index, https://www.bls.gov/cpi/ (last
visited Jun 17, 2025).
---------------------------------------------------------------------------
While the other Part D benefit parameters are indexed using the API
to track drug expenditure trends and maintain actuarial equivalence
within the drug benefit structure, this parameter uses the CPI because
it represents a fixed dollar copayment amount that needs to maintain
its purchasing power relative to general inflation rather than
specifically tracking drug cost inflation trends.
Mathematically, the formula is expressed as follows:
Annual Percentage Increase in CPI = (APT) * (MU), where APT is the
annual percentage trend, and MU is the multiplicative update factor for
prior year revisions.
The APT consists of a year-over-year comparison of the CPI in the
United States for all items, ending in the month of September. For a
given payment year, it is the ratio of the CPI in the year ending the
previous September (numerator) to the CPI for the year ending the
September two years prior (denominator). To ensure that plan sponsors
and CMS have sufficient time to incorporate cost-sharing requirements
into the development of the benefit, any marketing materials, and
necessary systems, we include an estimate of the September CPI based on
projections from the President's Budget in its
[[Page 54909]]
methodology to calculate the annual increase in the CPI for the 12-
month period ending in September prior to the applicable payment year.
For example, the annual percentage trend in the September CPI for
CY 2027 is calculated as follows:
[GRAPHIC] [TIFF OMITTED] TP28NO25.007
The MU factor revises APTs in the September CPI to reflect updates
(provided by the BLS) from the previously estimated September CPI to
the actual reported September CPI. The MU factor for a given year is
the ratio of the product of the APTs for all prior recorded years
(since the first calculation in 2007), with the most recent year
updated with the currently available data (numerator) to the product of
APTs in prior recorded years as published in the previous year's Rate
Announcement (denominator). As mentioned in the preceding paragraphs,
data since 2007 is included for informational purposes. To convert the
ratios to percentages, it is necessary to add 1.0 to each factor prior
to entering them into the formula.
For example, the MU factor for CY 2027 is equal to--
[GRAPHIC] [TIFF OMITTED] TP28NO25.008
In this example, the numerator is updated from CY 2025 through CY
2026, using recent economic assumptions, and the denominator uses data
published in the CY 2026 Rate Announcement (published in April 2025).
To implement the CPI calculation described previously in our
regulations, we are proposing to revise Sec. 423.782(a)(2)(iii)(A) to
include a reference to a new paragraph (d), which we propose to add at
the end of Sec. 423.782. The new section at Sec. 423.782(d) would
comprise the general language of the statute, as well as add three
subparagraphs describing: (1) the overall calculation of the annual
percentage increase in CPI and specify the period ending in ``September
of such previous year,'' (2) the calculation of the annual percentage
trend, and (3) the calculation of the multiplicative update factor. We
will continue to publish updates to the Part D benefit parameters
calculated through these methodologies through the Advance Notice and
Rate Announcement process described in section 1853(b) of the Act.
Technical Changes
We are proposing two technical changes to Sec. 423.782(b). First,
we propose to add a cross-reference to Sec. 423.104(d)(5)(iv) to the
provision at Sec. 423.782(b)(1) to make clear that the annual
percentage increase in average per capita aggregate expenditures that
we use to calculate the deductible for certain low-income subsidy
eligible individuals is calculated as provided in Sec.
423.104(d)(5)(iv). Second, we propose to streamline the regulation text
at Sec. 423.782(b)(3) so that it directly cross references the updated
maximum copayment amounts that apply for years subsequent to 2006.
Section 1860D-2(b)(4)(A)(i)(I) is implemented in regulation at Sec.
423.104(d)(5)(i)(A)(2). We propose to replace the description in Sec.
423.782(b)(3) of the annual process for updating maximum copayments
with a cross reference to Sec. 423.104(d)(i)(A)(2).
7. Changes to GCPDC and Allowable Reinsurance Cost Definitions To
Include Costs Paid by the MDP (Sec. 423.308)
Section 1860D-15(b)(3) of the Act defines ``gross covered
prescription drug costs'' as, ``with respect to a part D eligible
individual enrolled in a prescription drug plan or MA-PD plan during a
coverage year, the costs incurred under the plan, not including
administrative costs, but including costs directly related to the
dispensing of covered part D drugs during the year and costs relating
to the deductible. Such costs shall be determined whether they are paid
by the individual or under the plan . . . regardless of whether the
coverage under the plan exceeds basic prescription drug coverage.''
Section 1860D-15(b)(2) of the Act defines allowable reinsurance costs
as ``. . . such costs that are actually paid (net of discounts,
chargebacks, and average percentage rebates) by the sponsor or
organization or by (or on behalf of) an enrollee under the plan . . .''
GCPDC and allowable reinsurance costs are defined and used at section
1860D-15(b) of the Act for the purpose of describing the methodology
for calculating the reinsurance payment amount.
In the January 2005 Medicare Final Rule (70 FR 4194), we codified
the definition of ``gross covered prescription drug costs'' at Sec.
423.308. This regulatory definition referred to ``gross covered
prescription drug costs'' as ``actually paid costs.'' In the final rule
that appeared in the Federal Register on April 12, 2023(70 FR 22120),
we revisited the regulatory definition of GCPDC by amending the
definition at Sec. 423.308 to remove the phrase ``actually paid.'' We
made this change because the term ``actually paid'' has a specific
meaning in Medicare Part D and is separately defined at Sec. 423.308
to mean costs actually incurred by the plan that are net of direct and
indirect remuneration (DIR), including discounts, rebates, or other
price concessions typically received and applied after the point of
sale (POS). However, unlike the statutory definitions of ``allowable
reinsurance costs'' and ``allowable risk corridor costs'' at sections
1860D-15(b)(2) and 1860D-15(e)(1)(B) of the Act, respectively, the
statutory definition of ``gross covered prescription drug costs'' at
section 1860D-15(b)(3) of the Act does not use the phrase ``actually
paid'' or otherwise specify that such costs must be net of all DIR. As
we explained in the December 2022 proposed rule (87 FR 79611), because
the definition of ``gross covered prescription drug costs'' was
codified in regulation for the sole purpose of describing the
methodology for calculating the reinsurance payment amount, in using
the phrase ``actually paid'' in the regulatory definition of ``gross
covered prescription drug costs,'' We were incorporating a requirement
from the statutory definition of ``allowable reinsurance costs'' to
emphasize that DIR would be netted out
[[Page 54910]]
in the calculation of costs eligible for Part D reinsurance. As we
explained in the proposed rule, the proposed revisions to the
definition would not change the fact that Part D reinsurance is
ultimately based on net drug costs or change the final reinsurance
payment amount a Part D sponsor receives. Rather, allowable reinsurance
costs would continue to be defined at Sec. 423.308 as the subset of
gross covered prescription drug costs actually paid.
Manufacturer discounts, among other costs, paid under the Coverage
Gap Discount Program (as described in section 1860D-14A of the Act)
were always included in the calculation of GCPDC. This policy was
consistent with the statutory and regulatory definition of GCPDC, which
generally requires the inclusion of all costs incurred under the plan,
including those paid on behalf of the Part D beneficiary. The IRA
sunset the Coverage Gap Discount Program as of January 1, 2025. As
such, these costs are no longer included in the calculation of GCPDC.
Section 11201(b)(3) of the IRA amended section 1860D-15(b)(3) of the
Act in two places to also require the inclusion of manufacturer
discounts paid under the Manufacturer Discount Program in the
calculation of GCPDC (first, by specifying that the definition of GCPDC
is subject to paragraph (2)(B) of section 1860D-15(b) of the Act and
second, by adding language specifying that, in the case of an
applicable drug, as defined at Sec. 423.100, GCPDC shall be determined
whether the costs are paid by the individual, under the plan, or by a
manufacturer). Moreover, section 11201(b)(2) of the IRA also amended
section 1860D-15(b)(2) of the Act to require the inclusion of
manufacturer discounts paid under the Manufacturer Discount Program
under section 1860D-14C of the Act in the calculation of allowable
reinsurance costs in 2025.
In the Final CY 2025 Part D Redesign Program Instructions, under
the requirement in section 11201(f) of the IRA that we use program
instruction or other forms of program guidance to implement section
11201 of the IRA for 2025 and to mirror the statutory language in
sections 1860D-15(b)(2) and (3) of the Act, as amended by the IRA, we
stated that the regulatory definition of ``gross covered prescription
drug costs'' at Sec. 423.308 would be considered to have been revised
for CY 2025 to include ``all amounts paid by manufacturers under the
Manufacturer Discount Program (as defined in section 1860D-14C of the
Act).'' Additionally, we stated that the regulatory definition of
``allowable reinsurance costs'' at Sec. 423.308 would be considered to
have been revised for CY 2025 to include ``the portion of the
negotiated price (as defined in section 1860D-14C(g)(6) of the Act) of
an applicable drug (as defined in section 1860D-14C(g)(2) of the Act)
paid by manufacturers under the Manufacturer Discount Program (as
defined in section 1860D-14C of the Act).''
In the Final CY 2026 Part D Redesign Program Instructions, we
stated that certain policies described in the Final CY 2025 Part D
Redesign Program Instructions, including the policy with respect to the
definitions of GCPDC and allowable reinsurance costs, also applied in
CY 2026.
We propose to codify the policy that we established in the Final CY
2025 Part D Redesign Program Instructions for CY 2025 and applied via
the Final CY 2026 Part D Redesign Program Instructions for CY 2026 with
the limited modifications mentioned later in this section.
Specifically, we propose that the regulatory definition of ``gross
covered prescription drug costs'' at Sec. 423.308 be revised to
include ``all amounts paid by manufacturers under the Manufacturer
Discount Program (as defined at Sec. 423.100).'' We also propose to
add the phrase ``for years prior to 2025'' before the phrase ``amounts
between the initial coverage limit and the out-of-pocket threshold''
and the phrase ``because the enrollee is between the initial coverage
limit and the out-of-pocket threshold'' to reflect that the coverage
gap phase does not exist for 2025 and subsequent years. Additionally,
we propose to revise the regulatory definition of ``allowable
reinsurance costs'' at Sec. 423.308 to include ``the portion of the
negotiated price (as defined in section 1860D-14C(g)(6) of the Act) of
an applicable drug (as defined at Sec. 423.100) paid by manufacturers
under the Manufacturer Discount Program (as defined at Sec.
423.100).''
8. Reinsurance Methodology (Sec. 423.329)
Section 1860D-15(b) of the Act, originally enacted into law by the
MMA, sets forth rules for the calculation and payment of federal
reinsurance subsidies for Part D plans. For years preceding CY 2025,
the reinsurance amount for a Part D eligible individual was an amount
equal to 80 percent of the allowable reinsurance costs attributable to
that portion of gross covered prescription drug costs incurred after
that individual reached the catastrophic phase of the benefit. In the
January 2005 Medicare Final Rule, we codified this calculation at Sec.
423.329(c)(1).
Under section 1860D-15(b)(2) of the Act, we make reinsurance
payments to Part D plan sponsors based on the GCPDC that were actually
paid during the coverage year. ``Actually paid,'' defined at Sec.
423.308, means that the costs must be actually incurred by the Part D
sponsor and must be net of any DIR. Each year, sponsors report their
DIR to us as part of the annual DIR reporting process, and we use this
information, along with cost data reported on PDE records, to allocate
a portion of the DIR towards reducing allowable reinsurance costs.
Historically, we allocated DIR to reduce allowable reinsurance costs
and calculate final reinsurance subsidy payments in accordance with the
methodology provided in the CY 2006 Advance Notice.
The IRA significantly modifies the reinsurance subsidy under the
Part D benefit in CY 2025. Specifically, under section 1860D-15(b) of
the Act, as amended by section 11201(b) of the IRA, in 2025, the
reinsurance payment amount for a Part D beneficiary will decrease from
80 percent of the allowable reinsurance costs incurred after the
beneficiary exceeds the annual OOP threshold to 20 percent for
applicable drugs or 40 percent for drugs that are not applicable drugs.
Covered Part D drugs that are not applicable drugs and which are
eligible for reinsurance payments amounts equal to 40 percent of the
allowable reinsurance costs incurred include selected drugs (as defined
in section 1192(c) of the Act and as we propose to define at Sec.
423.100) during a price applicability period (as defined in section
1191(b)(2) of the Act and as we propose to define at Sec. 423.100), as
well as non-applicable drugs (as defined in section 130 of the Medicare
Part D Manufacturer Discount Program Final Guidance and section II.C.
of this proposed rule).
Therefore, a different calculation applies to applicable drugs
versus non-applicable and selected drugs for the reinsurance payment
amount, and the methodologies for calculating the reinsurance subsidy
and allocating direct and indirect remuneration (DIR) towards
reinsurance, must also be reconsidered.
In the Final CY 2025 Part D Redesign Program Instructions, we
established a methodology to calculate the reinsurance subsidy
separately for applicable and non-applicable drugs and allocate the
share of DIR for applicable and non-applicable drugs based on their
respective gross drug costs that fall in the catastrophic phase. The
methodology otherwise aligns with
[[Page 54911]]
our historical approach for apportioning DIR.
Specifically, we stated that after the end of the coverage year, we
would reconcile reinsurance subsidies for applicable drugs as follows:
Identify incurred reinsurance costs for applicable drugs
above the annual OOP threshold at the individual beneficiary level
(from PDE records).
Sum incurred reinsurance costs for applicable drugs at the
plan level.
Allocate DIR for applicable drugs to incurred reinsurance
costs for applicable drugs by applying the ratio of total DIR to total
allowed costs. (The allocated DIR for reinsurance is referred to as
``reinsurance DIR.'')
Subtract reinsurance DIR for applicable drugs from
incurred reinsurance costs for applicable drugs, then multiply the
difference by 20 percent (the reinsurance payment amount percentage for
applicable drugs).
Similarly, after the end of the coverage year, we stated that we
would reconcile reinsurance subsidies for non-applicable drugs as
follows:
Identify incurred reinsurance costs for non-applicable
drugs above the annual OOP threshold at the individual beneficiary
level (from PDE records).
Sum incurred reinsurance costs for non-applicable drugs at
the plan level.
Allocate DIR for non-applicable drugs to incurred
reinsurance costs for non-applicable drugs by applying the ratio of
total DIR to total allowed costs.
Subtract reinsurance DIR for non-applicable drugs from
incurred reinsurance costs for non-applicable drugs, then multiply the
difference by 40 percent (the reinsurance payment amount percentage for
non-applicable drugs).
The sum of the adjusted reinsurance amounts for applicable and non-
applicable drugs will then be reconciled with prospective reinsurance
payment amounts made to plans during the coverage year.
In the Final CY 2026 Part D Redesign Program Instructions, we
updated the methodology applied in CY 2025 to account for selected
drugs, as the selected drug subsidy program begins in 2026.
Specifically, we stated that, for CY 2026, we would calculate the
reinsurance subsidy separately for applicable drugs. Because the
percentage of allowable reinsurance costs to calculate the reinsurance
payment amount for a Part D beneficiary is the same for non-applicable
and selected drugs, the reinsurance subsidy for non-applicable and
selected drugs would be calculated together. Additionally, we stated
that, for CY 2026, we would allocate the share of DIR for applicable
drugs and non-applicable and selected drugs based on their respective
share of gross drug costs that fall in the catastrophic phase.
After the end of CY 2026, we stated that we would reconcile
reinsurance subsidies for non-applicable and selected drugs as follows:
Identify incurred reinsurance costs for non-applicable and
selected drugs above the annual OOP threshold at the individual
beneficiary level (from PDE records).
Sum incurred reinsurance costs for non-applicable and
selected drugs at the plan level.
Allocate DIR for non-applicable and selected drugs to
incurred reinsurance costs for non-applicable and selected drugs by
applying the ratio of total DIR to total allowed costs. (The allocated
DIR for reinsurance is referred to as ``reinsurance DIR.'')
Subtract reinsurance DIR for non-applicable and selected
drugs from incurred reinsurance costs for non-applicable and selected
drugs, then multiply the difference by 40 percent (the reinsurance
payment amount percentage for non-applicable and selected drugs).
The sum of the adjusted reinsurance amounts for applicable drugs
and non-applicable and selected drugs for CY 2026 will then be
reconciled with prospective reinsurance payment amounts made to plans
during the coverage year. To determine the appropriate category
(applicable, non-applicable, or selected) for drugs, we stated we would
use the 11-digit NDC submitted on each PDE record and assign it with an
applicable, non-applicable, or selected designation based on the
marketing category listed for that NDC in the U.S. Food and Drug
Administration (FDA)'s NSDE file used for PDE processing and the list
of NDCs referenced in the Medicare Drug Price Negotiation Program
guidance.
For CY 2026, the calculation formulas for applicable drugs are:
Reinsurance DIR for applicable drugs = (total DIR/total allowed costs)
x incurred reinsurance costs for applicable drugs.
Adjusted reinsurance for applicable drugs = (incurred reinsurance costs
for applicable drugs-reinsurance DIR for applicable drugs) x 0.20.
For CY 2026, the calculation formulas for non-applicable and
selected drugs are:
Reinsurance DIR for non-applicable and selected drugs = (total DIR/
total allowed costs) x incurred reinsurance costs for non-applicable
and selected drugs.
Adjusted reinsurance for non-applicable and selected drugs = (incurred
reinsurance costs for non-applicable and selected drugs-reinsurance DIR
for non-applicable and selected drugs) x 0.40.
In this proposed rule, we propose to codify at Sec. 423.329 the
policies we established in the Final CY 2025 Part D Redesign Program
Instructions for CY 2025 and the Final CY 2026 Part D Redesign Program
Instructions for CY 2026 with respect to the reinsurance methodology
without modification. Specifically, we propose to redesignate paragraph
(c)(1) as paragraph (c)(1)(i) and revise the introductory language to
state ``general rule for years preceding 2025'' and add a new paragraph
(c)(1)(ii) to codify the rules described previously for 2026 and future
years.
9. Selected Drug Subsidy (Sec. Sec. 423.265, 423.315, 423.329,
423.343)
Section 11201 of the IRA added section 1860D-14D to the Act,
creating a new selected drug subsidy program, which began in CY 2026.
Under the selected drug subsidy program, the Secretary must,
periodically and on a timely basis, provide Part D plan sponsors with a
subsidy for selected drugs, as defined under section 1192(c) of the
Act, equal to 10 percent of the drug's negotiated price. The selected
drug subsidy applies to a covered Part D drug that would otherwise meet
the definition of an applicable drug but for being a selected drug
under the Medicare Drug Price Negotiation Program during a price
applicability period. The subsidy is paid on behalf of an applicable
beneficiary who is enrolled in a PDP or an MA-PD plan, has not incurred
costs that are equal to or exceed the annual OOP threshold, and is
dispensed a selected drug.
Under the selected drug subsidy program, once an enrollee incurs
costs exceeding the annual deductible specified in section 1860D-
2(b)(1) of the Act (that is, the deductible under the defined standard
benefit) the selected drug subsidy is available in the initial coverage
phase of the benefit. The selected drug subsidy lowers Part D plan
sponsor liability on the negotiated price of the drug.
Because of the intertwined structure and wording of the
Manufacturer Discount Program and selected drug subsidy program
provisions at sections 1860D-14C and 1860D-14D of the Act, we interpret
the statute as establishing the selected drug subsidy as a substitute
for the Manufacturer Discount Program discount for a covered Part D
drug that would otherwise meet the definition of an applicable drug but
for being a
[[Page 54912]]
selected drug under the Medicare Drug Price Negotiation Program during
a price applicability period. As such, we propose to treat claims that
are subject to the selected drug subsidy as coterminous with claims
that would qualify for applicable discounts under the Manufacturer
Discount Program, but for the drug's status as a selected drug during a
price applicability period. In other words, the selected drug subsidy
will apply if the selected drug that otherwise would be an ``applicable
drug'' would have received an applicable discount under the
Manufacturer Discount Program for the particular claim at issue under
the rules of the Manufacturer Discount Program. Conversely, the
selected drug subsidy will not apply if the applicable discount under
the Manufacturer Discount Program otherwise would not have applied to
that particular claim. For example, as discussed in section II.C. of
this proposed rule, certain claims involving an applicable drug, such
as Medicare Secondary Payer claims, are not subject to discounts under
the Manufacturer Discount Program; in these situations, the selected
drug subsidy would also not apply.
Because certain actual expenses can only be fully known after all
costs have been incurred for a payment year, we make final payment for
these costs after a coverage year after obtaining all the information
necessary to determine the amount of payment. We currently make monthly
prospective payments of certain estimated costs submitted with bids,
including reinsurance costs and low-income cost-sharing subsidy (LICS)
costs, to mitigate cash-flow concerns that plans could experience if
such payments were made wholly on a retrospective basis.
In the Final CY 2026 Part D Redesign Program Instructions, we
stated that similar concerns suggested that we should also make monthly
prospective payments for the selected drug subsidy program. We
accordingly established a process where Part D plan sponsors are
required to submit estimates of selected drug subsidy amounts with
their annual bids and we pay Part D plan sponsors prospective selected
drug subsidy amounts equal to these estimated amounts. We use the
actual selected drug subsidy amounts that Part D plan sponsors report
on PDE data to determine actual costs incurred for selected drug
subsidy payments.
After the deadline for PDE submissions for a year, we will
calculate the difference between the prospective payments made by us to
the Part D plan sponsor and the actual payments made by the Part D plan
sponsor to determine a selected drug subsidy reconciliation amount. We
will make a lump-sum adjustment to monthly payments based on the
calculated reconciliation amount in the same manner as is done for
other Part D reconciliation payments. Specifically, we will recover
payments made for a coverage year if prospective selected drug subsidy
payments exceed the selected drug subsidy costs actually incurred by
the plan or if the Part D plan sponsor does not provide the data
requested by us to verify the plan's actual selected drug subsidy
amount; similarly, we will make a lump sum payment if the actually
incurred subsidy amount exceeds the prospective selected drug subsidy
payments.
In this proposed rule, we propose to codify the policies we
established in the Final CY 2026 Part D Redesign Program Instructions
with respect to the selected drug subsidy for 2026 and subsequent years
without modification. Specifically, we propose to codify at new Sec.
423.265(d)(2)(vi) a requirement that assumptions regarding selected
drug subsidy amounts payable be included in Part D bids submitted to
us. We also propose to codify at new Sec. 423.315(h) that we would
provide prospective selected drug subsidy payments on a monthly basis.
We also propose to codify at new Sec. 423.329(e) the determination of
selected drug subsidy payments. Finally, we propose to codify at Sec.
423.343(e) that we would make final payment for selected drug subsidy
payments after a coverage year after obtaining all information
necessary to determine the amount of payment.
10. Technical Correction--Retroactive Adjustments and Reconciliations
(Sec. Sec. 423.336 and 423.343)
In the course of this rulemaking, we noticed the need for a
technical correction at Sec. 423.343(d)(2). The final sentence of this
paragraph states that in the event Part D sponsors do not provide
adequate data to us for the calculation of risk corridor payments, we
assume that the Part D plan's adjusted allowable risk corridor costs
are 50 percent of the target amount. This sentence is incorrectly
placed in Sec. 423.343, which describes payments of low-income cost-
sharing subsidies, and should instead be placed in Sec. 423.336, which
describes risk sharing arrangements. Thus, we propose to revise Sec.
423.343 to remove this sentence and revise Sec. 423.336(c) to add this
sentence in its proper context.
11. Base Beneficiary Premium (Sec. 423.286)
Section 1860D-13(a)(2) of the Act, as established by the MMA,
describes the statutory formula for calculating plan-specific basic
Part D premiums under the Part D program. The national base beneficiary
premium (BBP) is the starting point for calculating a plan-specific
basic Part D premium. Prior to the enactment of the IRA, the BBP was
calculated as the product of the beneficiary premium percentage and the
national average monthly bid amount. The beneficiary premium percentage
(``applicable percentage'') is a fraction, with a numerator of 25.5
percent and a denominator equal to 100 percent minus a percentage equal
to (i) the total reinsurance payments that we estimate will be paid for
the coverage year, divided by (ii) that amount plus the total payments
that we estimate will be paid to Part D plans based on the standardized
bid amount during the year, taking into account amounts paid by both
CMS and plan enrollees. In the January 2005 Medicare Final Rule, we
codified the statutory formula for calculating the BBP at Sec.
423.286.
Section 11201 of the IRA amended section 1860D-13(a)(2) of the Act
such that the statutory formula described in the preceding paragraph
would apply subject to a newly added section 1860D-13(a)(8)(A) of the
Act, which states that, for a prescription drug plan for a month in
2024 through 2029, the BBP shall be equal to the lesser of the BBP for
the preceding year increased by 6 percent or the amount computed under
the formula described at section 1860D-13(a)(2) of the Act. In the
Advance Notice of Methodological Changes for CY 2024 for Medicare
Advantage (MA) Capitation Rates and Part C and Part D Payment Policies
(2024 Advance Notice) \16\ and the July 31, 2023 HPMS memorandum
titled, ``Annual Release of Part D National Average Bid Amount and
Other Part C & D Bid Information'',\17\ we stated that it would
calculate the BBP as the lesser of the prior year's BBP increased by 6
percent, or the BBP as it would have been calculated if the IRA's
premium stabilization provision had not been enacted, to determine the
CY 2024 BBP. In the July 29, 2024, HPMS memorandum titled, ``Annual
Release of Part D National Average Bid Amount and Other Part C & D Bid
Information,'' we applied the revised formula described in this
paragraph to determine the CY 2025 BBP.
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\16\ https://www.cms.gov/files/document/2024-announcement-pdf.pdf.
\17\ https://www.cms.gov/files/document/july-29-2024-parts-c-d-announcement.pdf.
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In this proposed rule, we propose to codify the statutory
amendments to section 1860D-13(a) of the Act.
[[Page 54913]]
Specifically, we propose to redesignate Sec. 423.286(b) as Sec.
423.286(b)(1) and codify the BBP formula for 2024 through 2029 at new
Sec. 423.286(b)(2).
12. Low-Income Cost-Sharing Subsidy (Sec. 423.782)
The Part D low-income subsidy (LIS) helps individuals with Medicare
who meet certain statutory income and resource criteria pay for
prescription drugs and lowers the costs of prescription drug coverage.
Prior to the enactment of the IRA, individuals who qualified for the
full LIS received assistance to pay their full premiums and deductibles
(in certain Part D plans) and have reduced cost sharing. Individuals
who qualified for the partial LIS paid reduced premiums (on a sliding
scale based on their income) and also had reduced deductibles and cost
sharing. Section 11404 of the IRA amended section 1860D-14 of the Act
to expand eligibility for the full LIS to individuals who are
determined to have incomes below 150 percent of the FPL and who meet
either the resource standard in paragraph (3)(D) or paragraph (3)(E) of
section 1860D-14(a) of the Act, with respect to plan years beginning on
or after January 1, 2024. Thus, beginning in CY 2024, individuals who
previously would have qualified for the partial subsidy now receive the
full LIS.
In the final rule titled, ``Medicare Program; Contract Year 2024
Policy and Technical Changes to the Medicare Advantage Program,
Medicare Prescription Drug Benefit Program, Medicare Cost Plan Program,
and Programs of All-Inclusive Care for the Elderly,'' which appeared in
the April 12, 2023 Federal Register (88 FR 22120), and therewithin, we
codified the applicable rules under Sec. Sec. 423.773 and 423.780 to
expand eligibility for the LIS under Part D. In this rule, we propose
to also amend the eligibility criteria for LIS cost sharing reductions
at Sec. 423.782 to align with the IRA's amendments to section 1860D-
14(a)(1) of the Act and the changes to Sec. Sec. 423.773 and 423.780.
Specifically, we propose to update the FPL limit specified in Sec.
423.782(a)(2)(i)(B) to 150 percent for plan years beginning on or after
January 1, 2024.
In addition, we propose to amend paragraph (a)(2) of Sec. 423.782
to state that for years preceding 2025, LIS cost sharing reductions
applied to covered Part D drugs obtained after the initial coverage
limit and below the OOP limit.
13. Retiree Drug Subsidy Parameters (Sec. Sec. 423.882 and 423.884)
Section 1860D-22 of the Act provides for subsidy payments to
sponsors of qualified retiree prescription drug plans, provided that
the employment-based retiree health coverage is at least actuarially
equivalent to the standard prescription drug coverage under Medicare
Part D. In the January 2005 Medicare Final Rule, we established
regulations at 42 CFR part 423 Subpart R to, in part, determine which
group health plans may qualify as qualified retiree prescription drug
plans and, therefore, be eligible to receive retiree drug subsidy
payments for a qualifying covered retiree.
Per section 1860D-22(a)(2)(A) of the Act, qualified retiree
prescription drug plans are required to annually attest that the
actuarial value of prescription drug coverage under the plan (as
described in section 1860D-11(c) of the Act) is at least equal to the
actuarial value of standard prescription drug coverage, not taking into
account the value of any discount provided under the Manufacturer
Discount Program as established in section 1860D-14C of the Act, and
disclose that coverage under the plan is creditable in accordance with
section 1860D-13(b)(6)(B) of the Act.
In the Final CY 2025 Part D Redesign Program Instructions, we
addressed the implications of the amendments to the parameters of the
standard prescription drug coverage made by the IRA for the retiree
drug subsidy parameters described at Subpart R and summarized the IRA
policies in effect for 2025 that are considered in determining the
actuarial value of the defined standard benefit. While the IRA amends
the parameters of the standard prescription drug coverage and makes
other changes to the Part D benefit, we stated that there are no
changes to the requirements for qualified retiree prescription drug
plans.
In the Final CY 2026 Part D Redesign Program Instructions, we
stated that certain policies described in the Final CY 2025 Part D
Redesign Program Instructions, including the guidance related to the
retiree drug subsidy parameters, also applied in CY 2026.
The majority of the IRA policies in effect for CY 2027 and
subsequent years do not require updates to Subpart R; however, there
are certain conforming edits required to reflect the proposed revisions
to the definitions of ``gross covered prescription drug costs'' and
``allowable reinsurance costs'' as well as revisions needed to reflect
the sunsetting of the Coverage Gap Discount Program and the
establishment of the Manufacturer Discount Program. Specifically, we
propose to revise the definitions of ``gross covered retiree plan-
related prescription drug costs'' and ``allowable retiree costs'' at
Sec. 423.882 to reflect the proposed revisions to the definitions of
``gross covered prescription drug costs'' and ``allowable reinsurance
costs'' at Sec. 423.308. We also propose to replace all references in
Sec. 423.884(d) to ``not taking into account the value of any discount
or coverage provided during the coverage gap'' with the statement ``for
years prior to 2025, not taking into account the value of any discount
or coverage provided during the coverage gap and for 2025 and
subsequent years, not taking into account the value of any discount
provided under the Manufacturer Discount Program.''
14. Medical Loss Ratio (Sec. 423.2420)
Section 1103 of Title I, Subpart B of the Health Care and Education
Reconciliation Act (Pub. L. 111-152) amended section 1857(e) of the Act
to add a medical loss ratio (MLR) requirement to Medicare Part C (MA
program). An MLR is expressed as a percentage, generally representing
the percentage of revenue used for patient care rather than for such
other items as administrative expenses or profit. Because section
1860D-12(b)(3)(D) of the Act incorporates by reference the requirements
of section 1857(e) of the Act, these MLR requirements also apply to the
Medicare Part D program. In the final rule titled ``Medicare Program;
Medical Loss Ratio Requirements for the Medicare Advantage and the
Medicare Prescription Drug Benefit Programs,'' which appeared in the
May 23, 2013 Federal Register (78 FR 31284) (hereinafter referred to as
the May 2013 Medicare MLR final rule), in which we codified the MLR
requirements for MA organizations and Part D prescription drug plan
sponsors (``Part D sponsors'') (including organizations offering cost
plans that offer the Part D benefit) in the regulations at 42 CFR part
422, subpart X, and part 423, subpart X.
Generally, the MLR for each Part D contract reflects the ratio of
costs (numerator) to revenues (denominator) for all enrollees under the
contract. The MLR for a Part D contract reflects the percentage of
revenue received under the contract spent on incurred claims for all
enrollees for Part D prescription drugs and on quality initiatives that
meet the requirements at Sec. 423.2430. The percentage of revenue that
is used for other items such as administration, marketing, and profit
is excluded from the numerator of the MLR for MA and
[[Page 54914]]
Part D (see Sec. Sec. 423.2401; 423.2420(b)(4); 423.2430(b)).
The MLR regulations at Sec. 423.2420(c) specify that the following
Part D plan payments from the federal government are included in the
MLR denominator: the direct subsidy, prospective Federal reinsurance
subsidy, reconciliation adjustments to the Federal reinsurance subsidy,
low-income premium subsidy (LIPS) amount, and risk corridor payments.
In the May 2013 Medicare MLR final rule, we explained that we viewed
LICS and Coverage Gap Discount Program payments as pass-through
payments for which plans do not retain any liability, and that these
amounts should therefore be excluded from the MLR calculation (78 FR
31290); accordingly, LICS and Coverage Gap Discount Program payments
are excluded from both the MLR numerator and denominator.
The IRA introduced new categories of Part D plan payments from the
Federal government. These include the Manufacturer Discount Program
payment, the Inflation Reduction Act Subsidy Amount (IRASA), and the
selected drug subsidy payment. The payment process for the Manufacturer
Discount Program payments includes a cost-based reconciliation intended
to make Part D sponsors whole for the manufacturer discount amounts
they advance on behalf of the manufacturer. The IRASA is a Part D
payment specific to CY 2023 that we provided to Part D plan sponsors.
This temporary retrospective subsidy was paid to Part D plans for the
reduction in cost sharing and elimination of the deductible for ACIP-
recommended adult vaccines and covered insulin products during the 2023
plan year (that is, to cover the difference between the beneficiary
cost sharing for the covered insulin, or ACIP-recommended adult
vaccine, under the plan's 2023 benefit design, and the applicable
statutory maximum cost sharing ($35 for a one month-supply of covered
insulin products and $0 for vaccines)). Finally, under the selected
drug subsidy program, the government provides a subsidy to Part D plan
sponsors for selected drugs dispensed to enrollees in the initial
coverage phase.
In the Final CY 2025 Part D Redesign Program Instructions, we
stated that for CY 2025 and prior years, the new Part D plan payments
for the Manufacturer Discount Program and IRASA are excluded from the
denominator of the MLR calculation, and associated expenditures are
excluded from the numerator of the MLR calculation. In the Final CY
2026 Part D Redesign Program Instructions, we stated that the new Part
D plan payments for the selected drug subsidy are excluded from the
denominator of the MLR calculation, and associated expenditures are
excluded from the numerator of the MLR calculation. In the Final CY
2026 Part D Redesign Program instructions, we applied certain policies
described in the Final CY 2025 Part D Redesign Program Instructions,
including the treatment of the Manufacturer Discount Program payments,
in CY 2026.
In this proposed rule, we propose to codify for CY 2027 and
subsequent years the policies established in the Final CY 2025 Part D
Redesign Program Instructions and Final CY 2026 Part D Redesign Program
Instructions with respect to the treatment of the Manufacturer Discount
Program payments, IRASA, and selected drug subsidy program payments for
MLR purposes. These policies are currently in effect. Specifically, we
propose to codify the exclusion of the Manufacturer Discount Program
payments, IRASA, and selected drug subsidy program payments at Sec.
423.2420(b)(4)(iii), (iv), and (v) respectively.
15. Severability
The Medicare Part D redesign provisions proposed herein are
separate and severable from one another. If any of these provisions,
once finalized, is held to be invalid or unenforceable by its terms, or
as applied to any person or circumstance, or stayed pending further
agency action, it is our intention that such provision shall be
severable from this rule and not affect the remainder thereof, or the
application of such provision to other persons not similarly situated
or to other, dissimilar circumstances.
B. Medicare Coverage Gap Discount Program
The Patient Protection and Affordable Care Act (Pub. L. 111-148)
amended Title XVIII of the Act by adding sections 1860D-14A and 1860D-
43, establishing the Medicare Coverage Gap Discount Program. The
Coverage Gap Discount Program, which began on January 1, 2011, was
initially implemented through program instruction, and program
requirements were codified in the ``Medicare Program; Changes to the
Medicare Advantage and the Medicare Prescription Drug Benefit Programs
for Contract Year 2013 and Other Changes'' final rule (77 FR 22072)
under subpart W of 42 CFR part 423.
The Coverage Gap Discount Program made manufacturer discounts
available at the point of sale (POS) to Part D enrollees who are not
eligible for the low-income subsidy (LIS) under section 1860D-14 of the
Act when receiving applicable drugs (as defined at Sec. 423.100) while
in the coverage gap phase of the Part D benefit. Under Coverage Gap
Discount Program rules, pharmaceutical manufacturers were required to
enter into a Coverage Gap Discount Program agreement with CMS in order
for their applicable drugs to be covered under Part D. In general, the
discount was 70 percent of the negotiated price (as defined at Sec.
423.2305) of the applicable drug.
The Inflation Reduction Act of 2022 (Pub. L. 117-169) (IRA) made
significant changes to the Part D benefit design, which are discussed
in more detail in section II.A. of this proposed rule. These changes
included eliminating the coverage gap phase of the Part D benefit after
2024 and adding section 1860D-14C to the Act, which established the
Manufacturer Discount Program, under which manufacturers pay discounts
for applicable drugs when dispensed to Part D enrollees during the
initial and catastrophic coverage phases. Our proposal to codify the
Manufacturer Discount Program is discussed in section II.C. of this
proposed rule.
Consistent with the elimination of the coverage gap phase of the
Part D benefit, section 11201 of the IRA added section (h) to section
1860D-14A of the Act, which sunset the Coverage Gap Discount Program
and terminated all Coverage Gap Discount Program agreements, effective
January 1, 2025. Section 1860D-14A(h)(2) of the Act further specifies
that the provisions of section 1860D-14A of the Act, including all
responsibilities and duties under such agreements continue to apply
with respect to applicable drugs dispensed prior to January 1, 2025.
Accordingly, we propose to amend Sec. 423.2300 by adding a new
paragraph to specify that the requirements of Subpart W apply before
January 1, 2025 and, with respect to applicable drugs dispensed prior
to that date, continue to apply on and after January 1, 2025. To make
this change, we propose to redesignate the existing text of Sec.
423.2300 as paragraph (a) and redesignate existing paragraphs (a)
through (h) as Sec. 423.2300(a)(1) through (8), respectively. We
propose to add the new text at Sec. 423.2300(b). We also propose to
revise Sec. 423.2315(c)(2) to reflect the sunset of the Coverage Gap
Discount Program by limiting this provision specifying the effective
date of a Coverage Gap Discount Program agreement to 2012 and
subsequent years prior to 2025. Finally, in accordance with section
1860D-14A(h)(1) of the Act, we propose to amend Sec. 423.2345 by
adding a new paragraph (f) to specify
[[Page 54915]]
that, subject to Sec. 423.2300(b), as redesignated, all Coverage Gap
Discount Program agreements under this subpart are terminated as of
January 1, 2025.
As discussed in more detail in section II.C. of this proposed rule,
``discounted price'' is defined at section 1860D-14A(g)(4) of the Act
for purposes of the Coverage Gap Discount Program and at section 1860D-
14C(g)(4) of the Act for purposes of the Manufacturer Discount Program.
Because the percentage of the negotiated price that the manufacturer
agrees to pay is different under the two programs, the statutory term
``discounted price'' as well as its corresponding regulatory term
``applicable discount'' have different meanings between the two
programs. To address the programmatic difference, we propose to revise
the regulation text at Sec. 423.2305 to clarify that the definitions
in this section apply only for purposes of the Coverage Gap Discount
Program. Further, we propose to revise the definition of ``applicable
discount'' at Sec. 423.2305 to specify that it refers to 50 percent of
the negotiated price with respect to a plan year before 2019 and 70
percent of the negotiated price with respect to plan year 2019 through
plan year 2024. This clarification further distinguishes the definition
of ``applicable discount'' at Sec. 423.2305 under the Coverage Gap
Discount Program from the definition of ``applicable discount''
(proposed at Sec. 423.2712 as part of this proposed rule) under the
Manufacturer Discount Program.
Lastly, for clarity and readability, we propose technical changes
throughout Subpart W to replace the shorthand term ``Discount Program''
with ``Coverage Gap Discount Program,'' to better distinguish it from
the Manufacturer Discount Program.
C. Medicare Part D Manufacturer Discount Program
1. Background
The Medicare Part D Manufacturer Discount Program (Manufacturer
Discount Program) was enacted into law in section 11201 of the
Inflation Reduction Act of 2022, Public Law 117-169 (IRA) and codified
in sections 1860D-14C and 1860D-43 of the Act. Section 11201(f) of the
IRA directed the Secretary to implement the Manufacturer Discount
Program by program instruction or other forms of program guidance for
2025 and 2026. In accordance with the law, on November 17, 2023, CMS
released the Medicare Part D Manufacturer Discount Program Final
Guidance. On December 20, 2024, we released the Revised Medicare Part D
Manufacturer Discount Program Final Guidance (Manufacturer Discount
Program Final Guidance).\18\
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\18\ Available at: https://www.cms.gov/files/document/revised-manufacturer-discount-programfinal-guidance122024.pdf.
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The IRA made significant changes to the Part D benefit, which are
discussed in detail in section II.A. of this proposed rule. The IRA
eliminated the coverage gap phase of the Part D benefit after 2024 and
added subsection (h) to section 1860D-14A of the Act, which sunset the
Coverage Gap Discount Program and terminated all Coverage Gap Discount
Program agreements effective January 1, 2025. Our proposal to update
the Part D regulations to reflect the statutory sunsetting of the
Coverage Gap Discount Program and termination of Coverage Gap Discount
Program agreements is discussed in section II.B. of this proposed rule.
In this proposed rule, we would codify the Manufacturer Discount
Program Final Guidance, with the refinements and changes discussed
herein, to be effective beginning CY 2027. Under the Manufacturer
Discount Program, for applicable drugs and selected drugs to be
coverable under Part D, manufacturers of such drugs are required to
enter into a Manufacturer Discount Program agreement with CMS and agree
to provide discounts on their applicable drugs when dispensed to Part D
enrollees who are in the initial and catastrophic coverage phases of
the Part D benefit. Similar to the Coverage Gap Discount Program which
the Manufacturer Discount Program replaces, the discounts under the
Manufacturer Discount Program are advanced at the point of sale by the
Part D plan sponsor, and manufacturers are invoiced quarterly based on
the amounts submitted by plan sponsors on Prescription Drug Event (PDE)
records. CMS provides prospective payments to plan sponsors to ensure
they are able to advance the discounts and adjusts the payments through
an annual reconciliation.
Unlike the Coverage Gap Discount Program, discounts under the
Manufacturer Discount Program generally reduce the amount the Part D
sponsor pays for the drug versus reducing the out-of-pocket amount for
the enrollee, and discounts are paid for all Part D enrollees who have
exceeded the annual Part D deductible specified in section 1860D-
2(b)(1) of the Act. While the discounts are a lower percentage of the
negotiated price of the applicable drug than under the Coverage Gap
Discount Program (10 percent in the initial coverage phase and 20
percent in the catastrophic coverage phase), they continue through the
end of the plan year once the enrollee exceeds the deductible. The
discount percentages manufacturers are required to pay are phased in
over the first several years of the program for manufacturers that meet
statutory criteria for specified manufacturers and specified small
manufacturers.
Many of the other policies currently in effect pursuant to the
Manufacturer Discount Program Final Guidance, which we propose to
codify in this rule, mirror longstanding policies under the Coverage
Gap Discount Program, including use of a third party administrator
(TPA) to facilitate program operations such as invoicing and payment,
use of the Health Plan Management System (HPMS) to execute agreements
and house data, and the manufacturer dispute resolution process. All of
these policies are discussed in more detail later in this section.
2. Basis and Scope (Sec. 423.2700)
We propose to codify the requirements for the Manufacturer Discount
Program under sections 1860D-14C and 1860D-43 of the Act as new subpart
AA of part 423. Proposed Sec. 423.2700(a) and (b) set forth the basis
and scope, respectively.
We propose a conforming change at Sec. 423.1 to incorporate
section 1860D-14C of the Act into the scope of part 423.
3. Definitions (Sec. Sec. 423.100, 423.1002, 423.2305, and 423.2704)
In this proposed rule, we propose to codify the definition of
frequently used terms consistent with section 1860D-14C of the Act or
established in the Manufacturer Discount Program Final Guidance, as
well as new definitions based on the policies in this proposed rule.
Several of these terms are also used for purposes of the Coverage
Gap Discount Program. In some cases, the same term has a different
meaning for the Manufacturer Discount Program than for the Coverage Gap
Discount Program because of differences in the programs reflected in
sections 1860D-14C and 1860D-14A of the Act, respectively. Where
possible under the statutory requirements, we propose to use the same
terms, defined in the same way, for both programs. Because some of the
terms are applicable to both subpart W and proposed subpart AA, we
propose to revise certain definitions in existing Sec. Sec. 423.100,
423.1002, and 423.2305, move certain definitions from Sec. 423.2305 to
Sec. 423.100 with revisions
[[Page 54916]]
as necessary to comply with relevant statutory requirements, and add
new definitions for purposes of the Manufacturer Discount Program at
proposed Sec. 423.2704.
At Sec. 423.100, we propose to revise a number of existing
definitions as discussed below.
``Applicable beneficiary'';
We propose to revise the definition of ``applicable beneficiary''
to reflect the statutory definition of such term under the Coverage Gap
Discount Program and the Manufacturer Discount Program. Specifically,
we propose adding that for the purposes of the Coverage Gap Discount
Program, applicable beneficiary means an individual who on the date of
dispensing a covered Part D drug is not entitled to an income-related
subsidy under section 1860D-14(a) of the Act; has reached or exceeded
the initial coverage limit under section 1860D-2(b)(3) of the Act
during the year; has not incurred costs for covered Part D drugs in the
year equal to the annual out-of-pocket threshold specified in section
1860D-2(b)(4)(B) of the Act; and has a claim that is within the
coverage gap or straddles or spans the coverage gap. We also propose
adding to the definition that for the purposes of the Manufacturer
Discount Program, applicable beneficiary means an individual who on the
date of dispensing a covered Part D drug has incurred costs, as
determined in accordance with section 1860D-2(b)(4)(C) of the Act, for
covered Part D drugs in the year that exceed the annual deductible
specified in section 1860D-2(b)(1) of the Act.
``Applicable drug'';
We propose to modify the existing definition of ``applicable drug''
to specify that compounded drug products (as described in Sec.
423.120(d)) containing an applicable drug are excluded. This proposed
change would codify both longstanding CMS policy under the Coverage Gap
Discount Program that excluded compounds as well as the policy
established in section 40.1 of the Manufacturer Discount Program Final
Guidance. As stated in the guidance, while plans may cover compounds
that include at least one Part D ingredient, and that ingredient would
be an applicable drug if dispensed on its own, we believe that the
applicable drug determination must be made with respect to the compound
as a whole. Because the compound as a whole is not approved under a New
Drug Application (NDA) or Biologic Licensing Application (BLA), a
compound does not meet the definition of an applicable drug.
Further, for the purposes of the Manufacturer Discount Program, we
propose to clarify that applicable drug also includes a Part D drug
that is provided to a particular applicable beneficiary as a transition
fill under Sec. 423.120(b)(3) or as an emergency supply as may be
required for an applicable beneficiary who is a long-term care
resident. This clarification would codify our longstanding approach
under the Coverage Gap Discount Program where, in practice, such fills
have been treated as meeting the definition of ``applicable drug.''
Finally, in accordance with the statutory definition of
``applicable drug'' at section 1860D-14C(g)(2) of the Act and the
Manufacturer Discount Program Final Guidance, we further propose to
specify in the definition of ``applicable drug'' that, for the purposes
of the Manufacturer Discount Program, an applicable drug is not a
selected drug during a price applicability period with respect to such
drug.
We propose to add definitions for the following terms at Sec.
423.100:
``Applicable discount'';
At Sec. 423.100, we propose to add a definition of ``applicable
discount'' that identifies the separate programmatic definitions of
such term for the Coverage Gap Discount Program and the Manufacturer
Discount Program. Specifically, we propose to define ``applicable
discount'' as, for purposes of the Coverage Gap Discount Program,
having the meaning set forth at Sec. 423.2305, and for purposes of the
Manufacturer Discount Program, the meaning set forth at Sec. 423.2712.
``Applicable number of calendar days'';
We propose to remove the definition of ``applicable number of
calendar days'' from Sec. 423.2305 and add it at Sec. 423.100. This
definition would apply to both the Coverage Gap Discount Program and
the Manufacturer Discount Program.
``Date of dispensing'';
We propose to remove the existing definition of ``date of
dispensing'' from Sec. 423.2305 and add it, with revisions, at Sec.
423.100. Specifically, we propose to add at the end of the definition,
``For long-term care and home infusion pharmacies, the date of
dispensing can be interpreted as the date the pharmacy submits the
discounted claim for reimbursement.'' This proposed revision is
consistent with the definition of ``date of dispensing'' used in the
Manufacturer Discount Program Final Guidance and with criteria
established under Sec. 423.2325(g) for the Coverage Gap Discount
Program.
``Labeler code'';
We propose to remove the existing definition of ``labeler code''
from Sec. 423.2305 and add it, with revisions, at Sec. 423.100.
Specifically, we propose to remove the phrase ``Food and Drug
Administration'' for conciseness and accuracy.
``Manufacturer'';
We propose to remove the existing definition of ``manufacturer''
from Sec. 423.2305 and add it at Sec. 423.100 with a revision
removing the phrase ``Discount Program'' and adding in its place the
phrase ``Coverage Gap Discount Program and the Manufacturer Discount
Program'' for accuracy.
``Manufacturer Discount Program'';
We propose to define ``Manufacturer Discount Program'' as the
Medicare Part D Manufacturer Discount Program established under section
1860D-14C of the Act.
``Manufacturer Discount Program agreement'';
We propose to define ``Manufacturer Discount Program agreement'' as
the agreement described at section 1860D-14C(b) of the Act.
``Medicare Coverage Gap Discount Program'';
We propose to remove the definition of ``Medicare Coverage Gap
Discount Program'' from Sec. 423.2305 and add it at Sec. 423.100,
with revisions to remove the phrase ``Program (or Discount Program)''
and add in its place the phrase ``Program (or Coverage Gap Discount
Program)''.
``Medicare Coverage Gap Discount Program agreement'';
We propose to remove the definition of ``Medicare Coverage Gap
Discount Program agreement'' from Sec. 423.2305 and add it at Sec.
423.100 with revisions to remove the phrase ``Program agreement (or
Discount Program agreement)'' and add in its place the phrase ``Program
agreement (or Coverage Gap Discount Program agreement)''.
``National Drug Code (NDC)''; and
We propose to remove the definition of ``National Drug Code'' from
Sec. 423.2305 and add it at Sec. 423.100 with revisions to remove the
phrase ``the product'' and add in its place the phrase ``the product's
manufacturer, product''. This proposed revision aligns with the
definition of NDC used in the Manufacturer Discount Program Final
Guidance.
``Non-applicable drug'';
We propose to define ``non-applicable drug'' to mean any Part D
drug that is not an applicable drug and not a selected drug during a
price applicability period with respect to such drug.
``Price applicability period'';
We propose to define ``price applicability period'' as having the
[[Page 54917]]
meaning given such term in section 1191(b)(2) of the Act and any
applicable regulations and guidance.
``Selected drug''; and
We propose to define ``selected drug'' as having the meaning given
such term in section 1192(c) of the Act and any applicable regulations
and guidance. Such definition aligns with the definition used in the
Manufacturer Discount Program Final Guidance.
``Third Party Administrator (TPA)''.
We propose to add at Sec. 423.100 the definition of ``Third Party
Administrator'' that we propose to remove from Sec. 423.2305, with
revisions. Specifically, we propose to remove the phrase ``section
1860D-14A of the Act'' and add in its place the phrase ``sections
1860D-14A and 1860D-14C of the Act''.
At Sec. 423.1002, we propose to revise the existing definition of
``affected party'' to account for the definition of ``manufacturer''
under the Coverage Gap Discount Program and the definition of
``agreement holder'' under the Manufacturer Discount Program.
Specifically, we propose that affected party means any Part D sponsor
or, for purposes of the Coverage Gap Discount Program, any manufacturer
(as defined in Sec. 423.100), or, for purposes of the Manufacturer
Discount Program, any manufacturer that is an agreement holder (as
defined in Sec. 423.2704), impacted by an initial determination or, if
applicable, by a subsequent determination or decision issued under this
part, and ``party'' means the affected party or CMS, as appropriate.
We propose to remove the following definitions from Sec. 423.2305
because, as noted previously, we propose to add definitions for such
terms at Sec. 423.100, for purposes of incorporating the Manufacturer
Discount Program:
``Applicable number of calendar days'';
``Date of dispensing'';
``Labeler code'';
``Manufacturer'';
``Medicare Coverage Gap Discount Program'';
``Medicare Coverage Gap Discount Program Agreement'';
``National Drug Code (NDC)''; and
``Third Party Administrator (TPA)''.
At Sec. 423.2704, we propose to define the following terms for
purposes of proposed subpart AA and the Manufacturer Discount Program:
``Agreement holder'';
We propose to define ``agreement holder'' as a manufacturer that
has executed and has in effect its own Manufacturer Discount Program
agreement in accordance with Sec. 423.2708(b)(1).
``Applicable discount'';
We propose to define ``applicable discount'' as having the meaning
set forth at Sec. 423.2712.
``Applicable LIS percent'';
We propose to define ``applicable LIS percent'' as having the
meaning set forth at Sec. 423.2712(d)(1).
``Applicable small manufacturer percent'';
We propose to define ``applicable small manufacturer percent'' as
having the meaning set forth at Sec. 423.2712(d)(2).
``Covered Part D drug'';
We propose to define ``covered Part D drug'' as having the meaning
set forth at Sec. 423.100.
``Dispute submission deadline'';
We propose to define ``dispute submission deadline'' as the date
that is 60 calendar days from the date of the invoice containing the
information that is the subject of the agreement holder's dispute.
``Negotiated price'';
We propose to define ``negotiated price'' as having the meaning set
forth at Sec. 423.100, and with respect to an applicable drug under
the Manufacturer Discount Program, such negotiated price includes any
dispensing fee and, if applicable, any vaccine administration fee and
sales tax.
``Network pharmacy'';
We propose to define ``network pharmacy'' as having the meaning set
forth at Sec. 423.100.
``Part D drug'';
We propose to define ``Part D drug'' as having the meaning set
forth at Sec. 423.100.
``Primary manufacturer'';
We propose to define ``primary manufacturer'' as having the meaning
given such term pursuant to applicable regulations and guidance for the
Medicare Drug Price Negotiation Program.
``Specified drug'';
We propose to define ``specified drug'' as meaning, with respect to
a specified manufacturer, for 2021, an applicable drug that is
produced, prepared, propagated, compounded, converted, or processed by
the specified manufacturer.
``Specified small manufacturer drug''; and
We propose to define ``specified small manufacturer drug'' as
meaning, with respect to a specified small manufacturer, for 2021, an
applicable drug that is produced, prepared, propagated, compounded,
converted, or processed by the specified small manufacturer.
``Total expenditures''.
We propose to define ``total expenditures'' as meaning, with
respect to Part D, the total gross covered prescription drug costs, as
defined in Sec. 423.308; and as meaning, with respect to Part B, the
total Medicare allowed amount (that is, total allowed charges),
inclusive of beneficiary cost sharing, for Part B drugs and
biologicals, except that expenditures for a drug or biological that are
bundled or packaged into the payment for another service are excluded.
4. Conditions for Coverage of Drugs Under Part D (Sec. 423.2708)
Section 1860D-43(a) of the Act, as amended by the IRA, specifies
that, beginning January 1, 2025, in order for Part D coverage to be
available for the covered Part D drugs of a manufacturer, the
manufacturer must participate in the Manufacturer Discount Program and
have entered into and have in effect a Manufacturer Discount Program
agreement with CMS, as described in section 1860D-14C(b) of the Act.
Operationally, coverage of a drug under a Manufacturer Discount Program
agreement is determined by coverage of its labeler code (as defined at
Sec. 423.100) under such agreement. As discussed in section 40 of the
Manufacturer Discount Program Final Guidance, CMS maintains a list of
all labeler codes that are covered by a Manufacturer Discount Program
agreement, which is updated monthly and posted on the CMS website to
assist Part D sponsors in accurately adjudicating claims at the point
of sale. As described in more detail in section II.C.12. of this
preamble, manufacturers are required to provide CMS with a complete
list of the labeler codes covered under their agreements.
Any Part D drug that is a selected drug during a price
applicability period with respect to such drug, is excluded from the
definition of applicable drug under section 1860D-14C(g)(2)(B) of the
Act and, therefore, not subject to applicable discounts under the
Manufacturer Discount Program when dispensed during a price
applicability period. However, a selected drug would otherwise meet the
definition of an applicable drug, but for it being in a price
applicability period following its selection into the Medicare Drug
Price Negotiation Program. Therefore, applying section 1860D-43(a) of
the Act's coverage exclusion in the absence of a Manufacturer Discount
Program agreement to both applicable drugs and selected drugs provides
incentive for manufacturers of brand name drugs and biological products
to participate in the Manufacturer Discount Program, while not
undermining beneficiary access to generics. Moreover, this
interpretation is consistent with the IRA's addition of
[[Page 54918]]
section 1860D-43(c)(2) of the Act, which prohibits the Secretary from
authorizing coverage for a covered Part D drug of a manufacturer
without a Manufacturer Discount Program agreement for any period
described in section 5000D(c)(1) of the Internal Revenue Code under the
exception for drugs determined to be essential to the health of Part D
enrollees. This provision further demonstrates that the statute does
not allow for a selected drug to be eligible for Part D coverage in the
absence of a Manufacturer Discount Program agreement. As stated in
section 40 of the Manufacturer Discount Program Final Guidance and
consistent with the policy on applicable drugs, beginning January 1,
2025, Part D coverage for selected drugs during a price applicability
period is available only for selected drugs for which the labeler code
is covered by a Manufacturer Discount Program agreement with CMS, as
described in section 1860D-14C(b) of the Act.
Accordingly, at Sec. 423.2708(a), we propose to codify that, in
order for coverage to be available under Part D for a Part D drug of a
manufacturer that is an applicable drug or a selected drug during a
price applicability period:
The FDA-assigned labeler code of such drug must be covered
under a Manufacturer Discount Program agreement that is in effect;
The manufacturer must participate in the Manufacturer
Discount Program; and
The manufacturer must have entered into and have in effect
a Manufacturer Discount Program agreement.
We expect each manufacturer choosing to participate in the
Manufacturer Discount Program to enter into its own Manufacturer
Discount Program agreement with CMS. However, we acknowledge a
longstanding practice where CMS has permitted manufacturers to cover by
their Manufacturer Discount Program agreement (and previously by their
Coverage Gap Discount Program agreement) labeler code(s) assigned by
the FDA to another manufacturer. CMS does not currently and is not
proposing to prohibit this practice, provided all other requirements as
discussed in this proposed rule are met. As such, we clarify that a
manufacturer is considered to participate in the Manufacturer Discount
Program and to have entered into and have in effect a Manufacturer
Discount Program agreement under proposed Sec. 423.2708(a)--and thus,
under section 1860D-43(a) of the Act--if such manufacturer executes and
has in effect its own Manufacturer Discount Program agreement or
participates by means of an arrangement whereby its labeler code(s) is
covered by another manufacturer's Manufacturer Discount Program
agreement that is in effect. We propose to codify this requirement at
Sec. 423.2708(b).
We further clarify that, while a manufacturer that participates in
the Manufacturer Discount Program in accordance with proposed Sec.
423.2708(b)(2) is a participating manufacturer, as described in more
detail in section II.C.12. of this preamble, only the entity that
executes an agreement pursuant to proposed Sec. 423.2708(b)(1) is an
agreement holder (as defined at Sec. 423.2704). Consistent with our
longstanding practice, only the agreement holder is a party to the
Manufacturer Discount Program agreement with CMS, and the agreement
holder is the entity subject to the rights and obligations of the
Manufacturer Discount Program agreement, including the obligation to
pay all invoiced amounts under such agreement.
In accordance with section 1860D-43(c)(1)(A) of the Act, we propose
to codify at Sec. 423.2708(c) that an applicable drug of a
manufacturer that does not participate in the Manufacturer Discount
Program or has not entered into and does not have in effect a
Manufacturer Discount Program agreement under section 1860D-14C(b) of
the Act is not excluded from Part D coverage if CMS has made a
determination that the availability of the applicable drug is essential
to the health of Part D enrollees. In addition, we propose to codify
that, as specified in section 1860D-43(c)(2) of the Act, this exception
to the exclusion from Part D coverage does not apply to any applicable
drug or selected drug of a manufacturer for any period described in
section 5000D(c)(1) of the Internal Revenue Code of 1986 with respect
to such manufacturer.
Consistent with our prior interpretation of section 1860D-43(a) of
the Act under the Coverage Gap Discount Program, for purposes of the
Manufacturer Discount Program, the exclusion from Part D coverage
applies only to applicable drugs and selected drugs not covered by a
Manufacturer Discount Program agreement that is fully executed and in
effect. Coverage under Medicare Part D is available to non-applicable
drugs of a manufacturer regardless of whether the manufacturer
participates in the Manufacturer Discount Program or has a Manufacturer
Discount Program agreement in effect.
With regard to the Coverage Gap Discount Program, we previously
explained our interpretation that the conditions for coverage described
in section 1860D-43(a) of the Act must be read together with section
1860D-14A of the Act's provision for Part D coverage of non-applicable
drugs under certain circumstances in the absence of a Coverage Gap
Discount Program agreement (77 FR 22082). The IRA adopted parallel
language for the Manufacturer Discount Program, including section
1860D-14C(f) of the Act, which states that ``[n]othing in this section
shall prevent an applicable beneficiary from purchasing a covered part
D drug that is not an applicable drug (including a generic drug or a
drug that is not on the formulary of the prescription drug plan or MA-
PD plan that the applicable beneficiary is enrolled in).'' For the same
reasons described in the Manufacturer Discount Program Final Guidance
and our prior rulemaking, we propose to adopt the same interpretation
here with regard to the parallel provisions of section 1860D-14C of the
Act. Accordingly, at Sec. 423.2708(d), we propose that non-applicable
drugs, as we propose to define the term in Sec. 423.100, will continue
to be coverable under Part D whether or not the manufacturer
participates in the Manufacturer Discount Program or has a Manufacturer
Discount Program agreement in effect.
5. Applicable Discounts (Sec. 423.2712)
Under the Manufacturer Discount Program, once an enrollee incurs
costs exceeding the annual deductible specified in section 1860D-
2(b)(1) of the Act, that is, the deductible under the defined standard
benefit, manufacturer discounts are available in both the initial and
catastrophic coverage phases of the benefit. The applicable discount
lowers Part D sponsor liability on the negotiated price of the drug.
a. Defined
As described in section 50 of the Manufacturer Discount Program
Final Guidance, for the purposes of the Manufacturer Discount Program,
``applicable discount'' means, subject to the phase-ins and the
straddle claims policy described in this section, with respect to an
applicable drug of a manufacturer dispensed during a year to an
applicable beneficiary (as we propose to define in Sec. 423.100) who
has--
Not incurred costs, as determined in accordance with
section 1860D-2(b)(4)(C) of the Act, for covered Part D drugs in the
year that are equal to or exceed the annual out-of-pocket threshold
specified in section 1860D-2(b)(4)(B)(i) of the Act for the year, 10
percent of the negotiated price of such drug; and
[[Page 54919]]
Incurred costs, as determined in accordance with section
1860D-2(b)(4)(C) of the Act, for covered Part D drugs in the year that
are equal to or exceed the annual out-of-pocket threshold specified in
section 1860D-2(b)(4)(B)(i) of the Act for the year, 20 percent of the
negotiated price of such drug.
We propose to codify this policy at Sec. 423.2712(a). Consistent
with the statutory requirements and the Manufacturer Discount Program
Final Guidance, the applicable discount is not available until the
enrollee has incurred costs exceeding the annual deductible specified
in section 1860D-2(b)(1) of the Act, regardless of whether the enrollee
has to pay a deductible (for example, through eligibility for an
income-related subsidy or enrollment in an enhanced benefit plan with a
reduced or no deductible, or for a drug that is not subject to the
deductible, such as a covered insulin product or an Advisory Committee
on Immunization Practices (ACIP)-recommended adult vaccine). Because
the applicable discount and enrollee cost sharing are both calculated
based on the negotiated price of the drug, as described in section
II.A. of this proposed rule, the applicable discount will not affect
the application of the standard 25 percent coinsurance under section
1860D-2(b)(2)(A) of the Act or the application of the copayment amount
under section 1860D-2(b)(4)(A) of the Act unless, after the discount is
applied to the negotiated price of the drug, the enrollee cost sharing
specified under the plan would exceed such negotiated price minus the
applicable discount. In such a situation, the enrollee cost sharing
will be the negotiated price minus the applicable discount. We propose
to codify this at Sec. 423.2712(g).
In accordance with section 1860D-14C(c)(1)(C) of the Act, we
propose to codify at Sec. 423.2712(b) our policy that the value of the
discount is calculated before the application of supplemental benefits,
and at Sec. 423.2712(c) that the applicable discount must be
calculated before any coverage or financial assistance under another
health or prescription drug benefit plan or program that provides
prescription drug coverage or financial assistance.
b. Application of Discount Phase-In for Specified Manufacturers and
Specified Small Manufacturers
The IRA provides for lower applicable discounts for certain
manufacturers' applicable drugs marketed as of August 16, 2022, during
a multi-year phase-in period which concludes by 2031. Under section
1860D-14C(g)(4) of the Act, there are two such phase-ins: one for
certain applicable drugs of specified manufacturers dispensed to
applicable beneficiaries who are eligible for LIS under section 1860D-
14(a) of the Act and one for certain applicable drugs of specified
small manufacturers dispensed to all applicable beneficiaries.
The applicable discount paid by specified manufacturers for
specified drugs dispensed to applicable beneficiaries who are eligible
for LIS, referred to in the statute as the ``specified LIS percent,''
is defined in section 1860D-14C(g)(4)(B) of the Act. The discount paid
by specified small manufacturers for specified drugs dispensed to all
applicable beneficiaries, referred to in the statute as the ``specified
small manufacturer percent,'' is defined in section 1860D-14C(g)(4)(C)
of the Act. These provisions, which also set forth the criteria by
which specified manufacturers and specified small manufacturers are
defined, require such manufacturers to pay, when applicable, the
phased-in discount.
(1) Applicable LIS Percent
Under section 1860D-14C(g)(4)(B) of the Act, for an applicable drug
of a specified manufacturer (as described at proposed Sec.
423.2716(a)) that is marketed as of August 16, 2022, and dispensed for
an applicable beneficiary who is a subsidy eligible individual (as
defined in section 1860D-14(a)(3) of the Act), the applicable discount
is as follows:
For such individual who has not incurred costs equal to or
exceeding the annual out-of-pocket threshold for the year--
++ For 2025, 1 percent;
++ For 2026, 2 percent;
++ For 2027, 5 percent;
++ For 2028, 8 percent; and
++ For 2029 and each subsequent year, 10 percent.
For such individual who has incurred costs equal to or
exceeding the annual out-of-pocket threshold for the year--
++ For 2025, 1 percent;
++ For 2026, 2 percent;
++ For 2027, 5 percent;
++ For 2028, 8 percent;
++ For 2029, 10 percent;
++ For 2030, 15 percent; and
++ For 2031 and each subsequent year, 20 percent.
We propose to codify the policy for the applicable LIS percent at
Sec. 423.2712(d)(1).
(2) Applicable Small Manufacturer Percent
Under section 1860D-14C(g)(4)(C) of the Act, for an applicable drug
of a specified small manufacturer (as described at proposed Sec.
423.2716(b)), that is marketed as of August 16, 2022, and dispensed for
an applicable beneficiary, the applicable discount is as follows:
For such individual who has not incurred costs equal to or
exceeding the annual out-of-pocket threshold for the year--
++ For 2025, 1 percent;
++ For 2026, 2 percent;
++ For 2027, 5 percent;
++ For 2028, 8 percent; and
++ For 2029 and each subsequent year, 10 percent; and
For such individual who has incurred costs equal to or
exceeding the annual out-of-pocket threshold for the year--
++ For 2025, 1 percent;
++ For 2026, 2 percent;
++ For 2027, 5 percent;
++ For 2028, 8 percent;
++ For 2029, 10 percent;
++ For 2030, 15 percent; and
++ For 2031 and each subsequent year, 20 percent.
We propose to codify the policy for the applicable small
manufacturer percent at Sec. 423.2712(d)(2).
(3) Marketed as of the Date of Enactment
Sections 1860D-14C(g)(4)(B)(i) and 1860D-14C(g)(4)(C)(i) of the Act
limit the application of the discount phase-ins for specified
manufacturers and specified small manufacturers, respectively, to drugs
of such manufacturers that are ``marketed as of the date of enactment''
(that is, August 16, 2022). CMS interprets the reference to a drug that
is marketed as of August 16, 2022 to refer to a drug that was marketed
by the manufacturer on one specific, backward-looking date, that is,
the date of enactment of the IRA. Accordingly, for purposes of
identifying applicable drugs of specified manufacturers and specified
small manufacturers subject to phase-ins, CMS will determine whether an
applicable drug had Part D expenditures on or before August 16, 2022,
and did not have a marketing end date on the FDA NDC SPL Data Elements
File before August 17, 2022.
We propose to codify this requirement at Sec. 423.2712(d)(3).
c. Straddle Claims
In the case of a claim for an applicable drug for an applicable
beneficiary that ``straddles'' multiple phases of the benefit, section
1860D-14C(g)(4)(E) of the Act requires that for claims that do not fall
entirely--
Above the annual deductible specified in section 1860D-
2(b)(1) of the
[[Page 54920]]
Act, the manufacturer provides the applicable discount on only the
portion of the negotiated price that falls above the deductible; and
Below or entirely above the annual out-of-pocket threshold
specified in section 1860D-2(b)(4)(B)(i) of the Act, the manufacturer
provides the applicable discount on each portion of the negotiated
price in accordance with this section based on the benefit phase into
which each portion of the negotiated price falls.
We propose to codify the policy for straddle claims at Sec.
423.2712(e).
d. Claims Not Subject to Discount
Under the Coverage Gap Discount Program, certain coordination of
benefits and other non-standard Part D claims for applicable drugs were
not subject to manufacturer discounts. In response to the Manufacturer
Discount Program Draft Guidance, released on May 12, 2023, we received
public comments seeking clarification about how to calculate
manufacturer discounts under the Manufacturer Discount Program in
certain situations involving coordination of Part D with other benefits
and non-standard format claims. In the Manufacturer Discount Program
Final Guidance, CMS responded to those comments by clarifying that
discounts are not paid on Medicare Secondary Payer (MSP) claims or
Medicaid subrogation claims involving an applicable drug.
As described in section 60.1.4 of the Manufacturer Discount Program
Final Guidance, discounts are not applied to MSP claims under the
Manufacturer Discount Program because CMS is unable to ascertain from
the PDE how much liability, if any, the Part D sponsor has on such
claims. Discounts are not applied to Medicaid subrogation claims under
the Manufacturer Discount Program because drug costs reported on such
claims are accounted for during the payment reconciliation process as
contributing entirely to Covered D Plan Paid Amounts (CPP). We propose
to codify those policies at Sec. 423.2712(f)(1) and (2), respectively.
The Manufacturer Discount Program Final Guidance also referred to
Indian Health Service (IHS) ``subrogation'' claims as not being subject
to discounts under the Manufacturer Discount Program. We clarify that,
while the guidance specifically referred to IHS claims, our intent was
to adopt the longstanding policy applied under the Coverage Gap
Discount Program where coordination of benefits claims involving payer-
to-payer reconciliation are not subject to manufacturer discounts.
Using an example from Appendix E, Chapter 14, of the Medicare
Prescription Drug Benefit Manual, if a tribal member newly enrolled in
Part D is initially unable to access their Part D benefits through
their Part D plan, the tribe may step in to pay for the individual's
Part D drugs. In this scenario, the tribe is entitled to seek
compensation from the Part D plan once enrollment is confirmed.
Consistent with CMS coordination of benefits requirements at Sec.
423.464, the Part D plan is required to reimburse the tribe when the
tribe has paid primary. In accordance with these requirements, we
propose at Sec. 423.2712(f)(3) to specify that non-standard format
coordination of benefits claims involving an applicable drug are not
subject to discounts under the Manufacturer Discount Program. We
further clarify that claims submitted by a pharmacy operated by IHS,
tribes or tribal organizations, or Urban Indian organizations to a Part
D plan as the primary payer for an applicable drug dispensed to an
applicable beneficiary are subject to discounts under the Manufacturer
Discount Program, consistent with our policy under the Coverage Gap
Discount Program.
Lastly, at Sec. 423.2712(f)(4) we propose to codify our
longstanding policy that manual claims involving an applicable drug
with a service provider identification qualifier of ``Other'' are not
subject to discounts under the Manufacturer Discount Program. Because
PDE records for such claims do not have a service provider identifier,
there is no way to furnish the manufacturer with an invoice containing
all of the required data elements necessary for manufacturer review to
confirm or dispute the validity of the dispensing entity. Section
II.C.13.a. of this preamble contains a more detailed discussion of the
required data elements for manufacturer invoices.
As discussed in section II.C.3. of this preamble, compounded drug
products are excluded from the definition of applicable drug that we
propose to revise at Sec. 423.100; as such, claims for Part D
compounds are not subject to discounts under the Manufacturer Discount
Program.
6. Phase-In of Applicable Discounts (Sec. Sec. 423.2716 Through
423.2728)
As discussed in sections 50.1.1 and 50.1.2 of the Manufacturer
Discount Program Final Guidance, the IRA establishes lower percentages
for discounts on applicable drugs that are subject to phase-ins for
specified manufacturers and specified small manufacturers. Since the
discount reduces the plan liability for applicable drugs, Part D
sponsors are responsible for covering the remaining amount of the
negotiated price, less enrollee cost sharing, for applicable drugs
subject to a phased-in discount percentage as discussed in this
section. For example, the applicable discount for applicable drugs in
the initial coverage phase is 10 percent. In 2025, the applicable LIS
percent for a specified drug dispensed to an LIS enrollee during the
initial coverage phase is 1 percent. In a defined standard plan, the
plan liability in the initial coverage phase is 75 percent of the
negotiated price before the discount. With a 10 percent applicable
discount, the plan liability would be reduced to 65 percent of the
negotiated price. With a 1 percent applicable LIS percent in 2025, the
plan liability would be reduced to 74 percent of the negotiated price.
Section 1860D-14C(b)(1)(A) of the Act specifies that a Manufacturer
Discount Program agreement shall require the agreement holder to
provide discounted prices for applicable drugs covered by its agreement
when dispensed to applicable beneficiaries. The IRA does not provide a
mechanism by which CMS could permit specified manufacturers or
specified small manufacturers to ``opt out'' of the phase-in discounts.
At Sec. 423.2716, we propose to codify, without modification, the
criteria for phase-in eligibility for specified manufacturers and
specified small manufacturers established in the Manufacturer Discount
Program Final Guidance.
a. Specified Manufacturer
Pursuant to section 1860D-14C(g)(4)(B)(ii) of the Act, a specified
manufacturer is a manufacturer of an applicable drug that, in 2021
had--
A Coverage Gap Discount Program agreement in effect; \19\
---------------------------------------------------------------------------
\19\ A manufacturer that participated in the Coverage Gap
Discount Program in 2021 by means of an arrangement whereby its
labeler code(s) were listed on another manufacturer's Coverage Gap
Discount Program agreement would be considered to have had an
agreement in effect during 2021. See November 17, 2023 HPMS
memorandum entitled, ``Medicare Part D Manufacturer Discount
Program: Methodology for Identifying Specified Manufacturers and
Specified Small Manufacturers'' for more information.
---------------------------------------------------------------------------
Total expenditures for all of its specified drugs (as
proposed at Sec. 423.2704) covered by a Coverage Gap Discount Program
agreement for 2021 and covered under Part D in 2021 represented less
than 1.0 percent of total expenditures for all Part D drugs in 2021;
and
Total expenditures for all of its specified drugs that are
single source
[[Page 54921]]
drugs and biological products for which payment may be made under Part
B in 2021 represented less than 1.0 percent of the total expenditures
under Part B for all drugs or biological products in 2021.
Pursuant to the aggregation rule set forth in section 1860D-
14C(g)(4)(B)(ii)(II)(bb) of the Act, all entities, including
corporations, partnerships, proprietorships, and other entities treated
as a single employer under subsection (a) or (b) of section 52 of the
Internal Revenue Code of 1986 are treated as one manufacturer for
purposes of this section. Our proposed definition of specified
manufacturer is subject to the limitation with respect to manufacturer
acquisitions proposed at Sec. 423.2724 and discussed in section
II.C.6.d. of this preamble.
The eligibility criteria for specified manufacturers are proposed
at Sec. 423.2716(a) and the aggregation rule is proposed at Sec.
423.2716(c).
b. Specified Small Manufacturer
Pursuant to section 1860D-14C(g)(4)(C)(ii) of the Act, a specified
small manufacturer is a manufacturer of an applicable drug that, in
2021--
Is a specified manufacturer as described at proposed Sec.
423.2716(a); and
The total expenditures under Part D for any one of its
specified small manufacturer drugs (as defined in Sec. 423.2704)
covered under a Coverage Gap Discount Program agreement for 2021 and
covered under Part D in 2021 are equal to or greater than 80 percent of
the total expenditures for all its specified small manufacturer drugs
covered under Part D in 2021.
Pursuant to the aggregation rule set forth in section 1860D-
14C(g)(4)(C)(ii)(II)(bb) of the Act, all entities, including
corporations, partnerships, proprietorships, and other entities treated
as a single employer under subsection (a) or (b) of section 52 of the
Internal Revenue Code of 1986 are treated as one manufacturer for
purposes of this section. Our proposed definition of specified small
manufacturer is subject to the limitation with respect to manufacturer
acquisitions proposed at Sec. 423.2724 and discussed in section
II.C.6.d. of this preamble.
The eligibility criteria for specified small manufacturers are
proposed at Sec. 423.2716(b) and the aggregation rule is proposed at
Sec. 423.2716(c).
c. Determination of Phase-In Eligibility
As discussed in section 50.1 of the Manufacturer Discount Program
Final Guidance, CMS identifies which manufacturers qualify for phase-
ins by analyzing Medicare Part B claims data, Part D PDE data, and
ownership information submitted by manufacturers. All manufacturers
that sign a Manufacturer Discount Program agreement that takes effect
prior to the end of the phase-in periods will be considered and do not
need to submit a separate application. Our policy describing the
methodology used to identify manufacturers eligible for phase-ins was
provided in the November 17, 2023 HPMS memorandum titled ``Medicare
Part D Manufacturer Discount Program: Methodology for Identifying
Specified Manufacturers and Specified Small Manufacturers''
(Manufacturer Discount Program Methodology).
The phase-in determination is a one-time assessment that CMS
performs with respect to each manufacturer when it executes a
Manufacturer Discount Agreement or when a manufacturer's labeler
code(s) is first added to another manufacturer's Manufacturer Discount
Program agreement. As such, the phase-in statuses have already been
determined for likely the vast majority of manufacturers that will
participate in the Manufacturer Discount Program during the phase-in
periods (that is, through 2030). Codifying the methodology described in
the Manufacturer Discount Program Methodology for identifying specified
manufacturers and specified small manufacturers ensures consistency
across the program by applying the same methodology to future cases of
new phase-in determinations to be made under the regulations proposed
in this rule (for example, when a new manufacturer enters into a
Manufacturer Discount Program agreement with respect to 2027 or
thereafter) as the methodology that was applied to the manufacturers
currently participating in the Manufacturer Discount Program. We are
proposing to codify such methodology at Sec. 423.2720.
Specifically, we propose to codify at Sec. 423.2720 that for each
manufacturer with one or more FDA-assigned labeler codes covered by a
Manufacturer Discount Program agreement, CMS will determine whether the
manufacturer is a specified manufacturer or a specified small
manufacturer when the manufacturer executes a Manufacturer Discount
Program agreement, or, in the case of a manufacturer whose FDA-assigned
labeler code(s) is covered by another manufacturer's Manufacturer
Discount Program agreement, when such labeler code(s) is first added to
such agreement. In addition, we propose to codify that in applying the
aggregation rule at Sec. 423.2716(c), CMS will attribute expenditures
for a drug to a manufacturer based on the NDC(s) for the drug, as
reported on PDE records. Specifically, CMS will match the labeler code
extracted from the first 5 digits of each NDC to the manufacturer to
whom the labeler code is assigned by the FDA.
As discussed in detail later in this section, we propose at
paragraph (a) of Sec. 423.2720 the methodology for identifying
``specified manufacturers'', at paragraph (b) of Sec. 423.2720 the
methodology for identifying ``specified small manufacturers'', and at
paragraph (c) the approach CMS will use to issue the phase-in
determination notices once a phase-in determination is made.
For identification of a specified manufacturer, we propose to
codify at Sec. 423.2720(a)(1) that a manufacturer is considered to
have had a Coverage Gap Discount Program agreement in 2021, as
specified at Sec. 423.2716(a)(1), if the manufacturer (i) had a
Coverage Gap Discount Program agreement in effect during 2021, or (ii)
participated in the Coverage Gap Discount Program in 2021 by means of
an arrangement whereby its labeler code(s) was covered by another
manufacturer's Coverage Gap Discount Program agreement in effect during
2021.
As described in the Manufacturer Discount Program Methodology, CMS
will calculate the three values needed for determining which
manufacturers that had a Coverage Gap Discount Program agreement in
2021 are specified manufacturers and specified small manufacturers. The
three values are:
The manufacturer's percent share of Part D total
expenditures,
The manufacturer's percent share of Part B total
expenditures, and
Each drug's percent share of the specified manufacturer's
Part D total expenditures.
The first value that needs to be determined is each manufacturer's
share of Part D total expenditures, which will be used to determine if
the manufacturer's total expenditures for all of its applicable drugs
covered under a Coverage Gap Discount Program agreement(s) for 2021,
and covered under Part D in 2021, represented less than 1.0 percent of
total expenditures for all Part D drugs in 2021. CMS will identify
manufacturers that meet this threshold for the specified manufacturer
phase-in by first summing the 2021 Part D total expenditures for Part D
drugs, then summing the 2021 Part D total expenditures for applicable
drugs for each manufacturer, and finally, identifying each manufacturer
for which 2021 Part D total expenditures for applicable drugs are less
than 1.0
[[Page 54922]]
percent of all 2021 Part D total expenditures.
The first step is to calculate the Part D total expenditures for
2021. We will calculate the Part D total expenditures for 2021 reported
on all final action,\20\ non-delete Prescription Drug Event (PDE)
records submitted as of June 30, 2022, which represents the annual PDE
data submission deadline for Part D payment reconciliation, for all
Part D drugs dispensed in benefit year 2021. This value represents the
Part D total expenditures and will be used as the denominator when
calculating the percent share of Part D total expenditures attributable
to each manufacturer's applicable drugs in step 3 below.
---------------------------------------------------------------------------
\20\ CMS uses the term ``final action'' to describe the most
recently accepted original, adjustment, or delete PDE record
representing a single dispensing event. See the 2011 Regional
Prescription Drug Event Data Technical Assistance Participant Guide,
page 3-29, available at https://www.csscoperations.com/internet/
csscw3.nsf/DIDC/
FJUKANFCP1~Prescription%20Drug%20Program%20(Part%20D)~Training.
---------------------------------------------------------------------------
The second step is to calculate each manufacturer's Part D total
expenditures for applicable drugs for 2021. For purposes of calculating
each manufacturer's Part D total expenditures for applicable drugs, CMS
will identify the National Drug Codes (NDCs) attributable to the
manufacturer that have a Marketing Category Code of `NDA', `BLA', or
`NDA AUTHORIZED GENERIC' on the NDC SPL Data Elements (NSDE) File
maintained by the Food and Drug Administration (FDA). CMS will
attribute an NDC as reported on the PDE record to the manufacturer
using the labeler code extracted from the first 5 digits of each NDC.
CMS will calculate the Part D total expenditures for each relevant NDC
attributable to the manufacturer as reported on all final action, non-
delete PDE records submitted as of June 30, 2022 for applicable drugs
dispensed in benefit year 2021. CMS will then sum the Part D total
expenditures for all relevant NDCs attributable to the manufacturer--
that is, the Part D total expenditures for all applicable drugs of all
manufacturers treated as a single employer under subsection (a) or (b)
of section 52 of the Internal Revenue Code of 1986, as identified by
the ownership information submitted and attested to by the manufacturer
(as described in the aggregation rule proposed at Sec. 423.2716(c)).
The third step is to calculate each manufacturer's percent share of
Part D total expenditures for 2021. CMS will divide the Part D total
expenditures for applicable drugs of the manufacturer, determined in
step 2 above, by the Part D total expenditures for all Part D drugs,
determined in step 1 above, and then multiply by 100 to get the
manufacturer's percent share. If a manufacturer's Part D total
expenditures for its applicable drugs are less than 1.0 percent of the
2021 Part D total expenditures, CMS will consider the manufacturer to
have satisfied the Part D total expenditure criterion for specified
manufacturer phase-in eligibility.
We propose to codify this part of the methodology at Sec.
423.2720(a)(2).
The next value that needs to be determined is each manufacturer's
share of Part B total expenditures, which will be used to determine if
the manufacturer's total expenditures for all of its specified drugs
that are single source drugs or biological products represented less
than 1.0 percent of the total expenditures for all drugs or biologicals
under Part B in 2021, excluding expenditures for a drug or biological
that are bundled or packaged into payment for another service. This
calculation involves three steps: identifying 2021 Part B total
expenditures for drugs and biological products, identifying the 2021
Part B total expenditures for single-source drugs and biological
products for each manufacturer that had a Coverage Gap Discount Program
agreement(s) in 2021, and identifying eligible manufacturers for which
Part B total expenditures for single source drugs or biological
products represent less than 1.0 percent of total expenditures for drug
and biological products under Part B for 2021.
The first step is to calculate Part B total expenditures for all
drugs and biological products for 2021. CMS will identify all
Healthcare Common Procedure Coding System (HCPCS) codes for drugs and
biological products. Then, CMS will calculate Part B Carrier, durable
medical equipment (DME), and Outpatient Medicare Part B total
expenditures for drug and biological products for Fee-for-Service claim
line items with a drug- or biological product-related HCPCS code,
submitted as of December 31, 2022, which represents the Medicare Fee-
For-Service submission deadline for CY 2021.
The second step is to calculate each manufacturer's Part B total
expenditures for applicable drugs that are single-source drugs and
biological products for 2021. CMS will first map the HCPCS codes
identified in step 1 above to NDCs using the NDC-HCPCS Crosswalk file
provided as part of the CMS ASP Pricing File and the Pricing, Data
Analysis and Coding (PDAC) HCPCS to NDC crosswalk file. Since the ASP
NDC-HCPCS Crosswalk file is not a comprehensive list of all drugs/NDCs
available in the United States, a Medi-Span Generic Product Identifier
(GPI-14) expansion is used to help identify all NDCs associated with
the HCPCS codes. We define a single source drug or biological following
the definition in section 1847A(c)(6)(D) of the Act and we are
identifying NDCs for single source drugs using Medi-Span and the FDA
NSDE marketing category data, or biological products using the FDA
Purple Book. A HCPCS code is considered to be indicative of a single
source drug or biological product if each NDC associated with the HCPCS
code is for a single source drug or biological product. The
corresponding NDCs are used to determine the labeler codes for each
applicable HCPCS code. CMS will match the labeler code extracted from
the first 5 digits of each NDC to the manufacturer. Since a HCPCS code
can be mapped to multiple NDCs and labeler codes, it can also be
associated with multiple manufacturers. While Part B single source
drugs or biological products can be mapped to a particular HCPCS code,
mapping applicable Part B expenditures to a particular manufacturer
when a particular HCPCS code may reflect drugs of multiple
manufacturers can be challenging. For this reason, CMS will only count
the payments associated with a HCPCS code toward a manufacturer's 2021
Part B total expenditures if the HCPCS code is only mapped to drugs of
that same manufacturer, consistent with the aggregation rule proposed
at Sec. 423.2716(c).
The third step is to calculate each manufacturer's percent share of
Part B total expenditures for 2021. CMS will divide the Part B total
expenditures for the applicable drugs that are single source drugs and
biological products of the manufacturer, determined in step 2 above, by
the Part B total expenditures for all drugs and biological products,
determined in step 1 above, and then multiply by 100 to get the
manufacturer's percent share. If a manufacturer's Part B total
expenditures are less than 1.0 percent of the 2021 Part B total
expenditures, CMS will consider the manufacturer to have satisfied the
Part B total expenditure criterion for the specified manufacturer
phase-in eligibility.
We propose to codify this part of the methodology at Sec.
423.2720(a)(3).
The last value that needs to be determined for each specified
manufacturer is the total expenditures under Part D for any one of the
manufacturer's specified drugs covered
[[Page 54923]]
under a Coverage Gap Discount Program agreement(s) for 2021, and
covered under Part D in 2021, which will be used to determine if the
manufacturer's total expenditures for one specified drug are equal to
or greater than 80 percent of the total expenditures for all of its
specified drugs covered under Part D in 2021 such that the manufacturer
is eligible for the specified small manufacturer phase-in.
The first step is to aggregate all NDCs for applicable drugs
reported on PDEs for each specified manufacturer that have the same
active moiety for drug products, or same active ingredient for
biological products, and with the same holder of the NDA or BLA. To
determine one drug's share of a manufacturer's Part D total
expenditures, which we will use to identify specified small
manufacturers, we first note that for drug products, one specified
small manufacturer drug will include all dosage forms and strengths of
a drug with the same active moiety and the same holder of the NDA,\21\
inclusive of products that are marketed pursuant to different NDAs. For
biological products, one specified small manufacturer drug will include
all dosage forms and strengths of the biological product with the same
active ingredient and the same holder of the BLA,\22\ inclusive of
products that are marketed pursuant to different BLAs. CMS will
identify the holder of the NDA/BLA for a drug or biological product as
reported in Drugs@FDA or FDA Purple Book. If a drug is a fixed
combination drug \23\ with two or more active moieties/active
ingredients, the distinct combination of active moieties/active
ingredients will be considered as one active moiety/active ingredient
for the purpose of identifying a specified small manufacturer drug.
Therefore, all formulations of this distinct combination with the same
NDA/BLA holder will be aggregated across all dosage forms and strengths
of the fixed combination drug. A product containing only one (but not
both) of the active moieties/active ingredients with the same NDA/BLA
holder will not be aggregated with the formulations of the fixed
combination drug and will be considered a separate specified small
manufacturer drug. CMS will attribute Part D expenditures for a drug,
including authorized generic drugs and repackaged and relabeled drugs,
to a specified manufacturer based on the NDC(s) for the drug, as
reported on PDE records. Specifically, CMS will match the labeler code
extracted from the first 5 digits of each NDC to the manufacturer. (See
the aggregation rule proposed at Sec. 423.2716(c)).
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\21\ As described in section 505(c) of the FD&C Act.
\22\ As described in section 351(a) of the PHS Act.
\23\ As described in 21 CFR 300.50.
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The second step is to calculate the Part D total expenditures for
each aggregated drug for 2021. CMS will calculate the Part D total
expenditures for each aggregated drug attributable to the manufacturer
as identified in step 1 by summing the Part D total expenditures for
all NDCs under each aggregated drug as reported on all final action,
non-delete PDE records submitted as of June 30, 2022, for drugs
dispensed in benefit year 2021.
The third step is to calculate each drug's percent share of the
specified manufacturer's Part D total expenditures for applicable drugs
for 2021. CMS will divide the Part D total expenditures for each
aggregated drug, determined in step 2, by the Part D total expenditures
for all applicable drugs of the specified manufacturer, and then
multiply by 100 to get the percent share. Specified manufacturers that
have 2021 Part D total expenditures for a single specified drug that
are equal to or greater than 80 percent of the specified manufacturer's
Part D total expenditures for all specified drugs are considered to
have met the eligibility criteria for specified small manufacturers and
are eligible for the specified small manufacturer phase-in.
We propose to codify this part of the methodology at Sec.
423.2720(b).
Finally, at paragraph (c)(1) of Sec. 423.2720, we propose to
specify that CMS will issue a phase-in determination notice to each
manufacturer that has executed and has in effect a Manufacturer
Discount Program agreement when such determination is made, delivered
by electronic mail, to the primary point of contact as identified by
the manufacturer. At paragraph (c)(2) of Sec. 423.2720, we propose to
specify that in the case of a manufacturer that participates in the
Manufacturer Discount Program by means of an arrangement whereby its
labeler code(s) is covered by another manufacturer's Manufacturer
Discount Program agreement, CMS will issue a phase-in eligibility
determination notice to the agreement holder.
For purposes of identifying manufacturers eligible for phase-ins,
the aggregation rule at section 1860D-14C(g)(4)(B)(ii)(II)(bb) of the
Act for specified manufacturers and section 1860D-
14C(g)(4)(C)(ii)(II)(bb) of the Act for specified small manufacturers
requires that CMS treat as a single manufacturer all entities that are
treated as a single employer under subsection (a) or (b) of section 52
of the Internal Revenue Code of 1986. As noted previously, we propose
to codify the aggregation rule at Sec. 423.2716(c). The statute, at
section 1860D-14C(g)(4)(B)(ii)(II)(bb) of the Act for specified
manufacturers and section 1860D-14C(g)(4)(C)(ii)(II)(bb) of the Act for
specified small manufacturers, also requires that manufacturers provide
and attest to necessary information as specified by CMS. Because CMS
does not have information about which entities are treated as a single
employer under the Internal Revenue Code of 1986, manufacturers that
wish to participate in the Manufacturer Discount Program must submit
and attest to information about the company and its products in order
for CMS to make a determination about phase-in eligibility.
d. Effect of Manufacturer Acquisition on Phase-In Eligibility
Section 1860D-14C(g)(4)(B)(ii)(III) of the Act requires that when a
specified manufacturer is acquired after 2021 by another manufacturer
that is not a specified manufacturer, the acquired manufacturer is no
longer a specified manufacturer effective at the beginning of the plan
year immediately following the acquisition. For acquisitions before
2025, the change is effective January 1, 2025. Section 1860D-
14C(g)(4)(C)(ii)(III) of the Act establishes a similar requirement for
specified small manufacturers: when acquired after 2021 by a
manufacturer that is not a specified small manufacturer, such
manufacturer is no longer a specified small manufacturer effective at
the beginning of the plan year immediately following the acquisition
(or January 1, 2025, for acquisitions before 2025).
While the statute is explicit that an acquired specified
manufacturer or specified small manufacturer loses that specific phase-
in status upon acquisition by another manufacturer that is not a
specified manufacturer or a specified small manufacturer, respectively,
it does not expressly address whether such acquired manufacturers
assume the phase-in eligibility of the acquiring manufacturer or lose
all phase-in eligibility (for example, a specified manufacturer is
acquired by a specified small manufacturer or a specified small
manufacturer is acquired by a specified manufacturer). Similarly, the
statute does not expressly address what happens if a specified
manufacturer or a specified small manufacturer acquires a manufacturer
that CMS determined was not eligible for either phase-in. Consistent
with our approach to
[[Page 54924]]
acquisitions under the Manufacturer Discount Program thus far, we
propose at Sec. 423.2724 to review phase-in status bidirectionally
such that acquired manufacturers may gain or lose phase-in eligibility
as the result of an acquisition. In other words, regardless of the
phase-in status of the acquiring manufacturer or the acquired
manufacturer at the time of the acquisition, when a manufacturer
acquires another manufacturer (that is, the acquired manufacturer
becomes part of such acquiring manufacturer under the aggregation rule
at Sec. 423.2716(c)), the acquired manufacturer will assume the phase-
in status of the acquiring manufacturer, as of the effective date
following the acquisition discussed later in this section. CMS believes
this bidirectional policy best aligns with the statutory structure and
purpose of the phase-ins. First, we believe this policy is most
consistent with the directive in sections 1860D-
14C(g)(4)(B)(ii)(II)(bb) and 1860D-14C(g)(4)(C)(ii)(II)(bb) of the Act
to treat all entities, including corporations, partnerships,
proprietorships, and other entities, treated as a single employer under
subsection (a) or (b) of section 52 of the Internal Revenue Code of
1986 as one manufacturer for the purposes of the phase-ins. Without
applying the effect of acquisitions bidirectionally, manufacturers that
are members of the same controlled group could have different phase-in
eligibility statuses as a result of an acquisition. Additionally, while
a specified small manufacturer that is acquired by a specified
manufacturer will lose its specified small manufacturer status
consistent with section 1860D-14C(g)(4)(C)(ii)(III) of the Act, such
manufacturer becomes a specified manufacturer under this policy, rather
than losing eligibility for phase-in altogether.
We propose that all changes to a manufacturer's phase-in status as
a result of an acquisition will become effective on January 1 of the
year following the acquisition or, in the case of an acquisition before
2025, effective January 1, 2025. This aligns the effective date of
changes to a manufacturer's phase-in status across all acquisitions
with the requirements in sections 1860D-14C(g)(4)(B)(ii)(III) and
1860D-14C(g)(4)(C)(ii)(III) of the Act discussed previously and is
consistent with our approach to date for acquisitions that have already
occurred. Operationally, adopting a January 1 effective date minimizes
burden on Part D sponsors who would otherwise need to regularly make
additional claims processing changes to accommodate phase-in status
changes throughout the year given the frequency of corporate ownership
changes in the pharmaceutical industry. It also minimizes any need for
Part D sponsors to make retrospective PDE adjustments if, for example,
CMS does not become aware of the acquisition until after it occurs.
In sum, in alignment with the statutory requirements and the
procedures already in place under the Manufacturer Discount Program, we
propose at Sec. 423.2724 to codify a regulatory policy for
manufacturer acquisitions where, regardless of the manufacturer's
phase-in eligibility status prior to the acquisition, once acquired,
the acquired manufacturer is recognized as having the phase-in
eligibility status of the acquiring manufacturer. Consistent with the
statutory requirements related to the loss of phase-in eligibility, and
to minimize any potential impact on Part D sponsors or manufacturers as
a result of changes to manufacturer phase-in status in the middle of a
plan year, we also propose at Sec. 423.2724 that any change in phase-
in eligibility status as a result of an acquisition, regardless of
whether the acquired manufacturer gains or loses phase-in eligibility,
would be effective on January 1 of the year following the acquisition.
e. Recalculation
We propose to codify the recalculation policy discussed in section
50.2.2 of the Manufacturer Discount Program Final Guidance, with
certain modifications, at Sec. 423.2728.
As discussed in the guidance, while the requirements to qualify as
a specified manufacturer or specified small manufacturer are set forth
in statute, we recognize that, while unlikely, a manufacturer may wish
to raise concerns with the outcome of the application of those
statutory requirements. As such, CMS established a mechanism for
manufacturers that wish to request a recalculation of their phase-in
eligibility determination. Such requests can only be filed by the
manufacturer that received the determination. We propose to codify this
requirement at Sec. 423.2728(a).
Under the recalculation policy, a manufacturer that seeks a
recalculation of their phase-in eligibility determination must file the
request with CMS no later than 30 calendar days from the date the
eligibility determination is electronically sent to the manufacturer.
The request must clearly describe the issue(s) forming the basis of the
request for recalculation, and include any relevant supporting
information. We propose to codify these requirements at Sec.
423.2728(b).
After consideration of the issues raised in a recalculation
request, CMS will decide whether to perform the recalculation, and will
issue a written decision to the manufacturer that will include CMS's
decision about whether to perform the requested recalculation and, if
such recalculation is performed, the resulting eligibility
determination. The decision is final and binding, subject to the
requirements of the Manufacturer Discount Program under section 1860D-
14C of the Act and the Manufacturer Discount Program agreement. We
propose to codify this policy at Sec. 423.2728(c).
Finally, at Sec. 423.2728(d), we propose to limit the
recalculation process to requests that meet the requirements proposed
in Sec. 423.2728(a) and (b). The recalculation request process cannot
be used to request or be granted an exception to the requirements set
forth in statute that determine eligibility for the specified
manufacturer or specified small manufacturer phase-in.
7. Use of a Third Party Administrator (Sec. 423.2732)
Unlike under the statute establishing the Coverage Gap Discount
Program, section 1860D-14C of the Act does not require CMS to engage a
third party administrator (TPA) under the Manufacturer Discount
Program. However, section 1860D-14C(d)(2) of the Act prohibits CMS from
receiving or distributing any funds of a manufacturer under the
Manufacturer Discount Program. Because of this limitation, under our
authority at section 1860D-14C(d)(1) of the Act, CMS has engaged a TPA
to assist in the administration of the Manufacturer Discount Program,
which includes, but is not limited to Manufacturer Discount Program
invoicing, the receipt and distribution of funds of a manufacturer, and
dispute resolution. We propose to codify the agency's engagement of a
TPA at Sec. 423.2732(a).
As proposed at Sec. 423.2752(a)(6), the Manufacturer Discount
Program agreement requires agreement holders to enter into and have in
effect, under terms and conditions specified by CMS, an agreement with
the TPA. It further requires agreement holders to comply with the TPA's
instructions, processes, and requirements. We believe these
requirements are important because of the quantity of Part D sponsor
and manufacturer data elements, and the sensitivity of such data
elements, that is processed each quarter by the TPA. Accordingly, we
are proposing to codify at Sec. 423.2732(b)(1) that agreement
[[Page 54925]]
holders must enter into and have in effect an agreement with the TPA
and that such TPA agreement will only terminate upon the termination of
the agreement holder's Manufacturer Discount Program agreement.
We are also proposing at Sec. 423.2732(b)(2) that agreement
holders must establish and maintain electronic connectivity with the
TPA for the purpose of timely transmission of data and funds. Because
Part D sponsors, under Sec. 423.505(b)(25), must agree to maintain
administrative and management capabilities sufficient for financial,
communication, and other activities related to the delivery of Part D
services, we have not proposed a separate requirement in subpart AA
regarding Part D sponsors' establishment and maintenance of an account
on the TPA's electronic portal; we believe Sec. 423.505(b)(25) already
establishes this obligation.
8. Requirement for Point-of-Sale Discounts (Sec. Sec. 423.505 and
423.2736)
a. Point-of-Sale Discounts
Under section 60.1 of the Manufacturer Discount Program Final
Guidance, Part D sponsors must provide applicable discounts on
applicable drugs at the point of sale on behalf of the manufacturer.
This policy aligns with the process used under the Coverage Gap
Discount Program since 2011, to which interested parties are
accustomed, coupled with prospective payments to sponsors and the
payment reconciliation process at proposed Sec. 423.2744(a) and (c),
respectively, minimizes burden on plan sponsors, manufacturers,
pharmacies, and Part D enrollees. We propose to codify this policy at
Sec. 423.2736(a).
In order to provide point-of-sale discounts, plan sponsors must
determine whether an enrollee is an applicable beneficiary (as defined
at Sec. 423.100), including where the enrollee falls in the phases of
the Part D benefit based on their gross drug spend and incurred costs
at the time an applicable drug is dispensed; whether a drug is an
applicable drug (as defined at Sec. 423.100); and the amount of the
discount (in accordance with proposed Sec. 423.2712).
Part D regulations at part 423 subpart K set forth the requirements
for Part D contracts between Part D sponsors and CMS. We propose a
conforming change to revise the text of Sec. 423.505(b)(24) to specify
that Part D sponsors must provide applicable discounts on applicable
drugs when dispensed to applicable beneficiaries in accordance with the
requirements in subpart W of part 423 for the Coverage Gap Discount
Program and the requirements in subpart AA of part 423 for the
Manufacturer Discount Program.
b. Direct Member Reimbursement
As established under section 60.1.1 of the Manufacturer Discount
Program Final Guidance, Part D sponsors must provide applicable
discounts on claims for applicable drugs submitted by applicable
beneficiaries as direct member reimbursements (DMRs), including out-of-
network and in-network paper claims, if such claims are payable under
the Part D plan. While the sponsor must account for the discount in
adjudicating the DMR request and the associated PDE submitted to CMS,
the point-of-sale requirement does not apply. We propose codifying this
policy at Sec. 423.2736(b). For purposes of discounting DMR claims for
prescriptions filled at out-of-network pharmacies, the negotiated price
means the plan allowance as set forth in Sec. 423.124. CMS guidance
related to DMR processing can be found in Chapter 14, section 50.4.3,
of the Medicare Prescription Drug Benefit Manual.\24\
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\24\ Available at https://www.cms.gov/Medicare/Prescription-Drug-Coverage/PrescriptionDrugCovContra/Downloads/Chapter-14-Coordination-of-Benefits-v09-14-2018.pdf.
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c. Pharmacy Prompt Payment
Pursuant to section 1860D-14C(c)(1)(B) of the Act, and consistent
with section 60.3 of the Manufacturer Discount Program Final Guidance
and CMS pharmacy prompt payment requirements at Sec. 423.520, we
propose at Sec. 423.2736(c) that Part D sponsors must reimburse a
network pharmacy (as defined in Sec. 423.100) the amount of the
applicable discount no later than the applicable number of calendar
days (as defined in Sec. 423.100) after the date of dispensing (as
defined in Sec. 423.100) of an applicable drug. As described in the
definition of date of dispensing, for long-term care and home infusion
pharmacies, the date of dispensing can be interpreted as the date the
pharmacy submits the discounted claim for reimbursement.
d. Prescription Drug Event Requirements
We propose codifying at Sec. 423.2736(d) PDE requirements
established in section 60.2 of the Manufacturer Discount Program Final
Guidance, specifically, that Part D sponsors must report the applicable
discounts made available to their enrollees under the Manufacturer
Discount Program on the PDE records associated with such discounts.
This information will be used for the cost-based reconciliation of
prospective Manufacturer Discount Program payments made to each sponsor
(as proposed at Sec. 423.2744(c)) and to invoice agreement holders for
reimbursement of the amount advanced on their behalf by the Part D
sponsor at the point of sale (as proposed at Sec. 423.2756(a)).
e. Retroactive Adjustments
Under section 60.1.5 of the Manufacturer Discount Program Final
Guidance, Part D sponsors must make retroactive adjustments to
applicable discounts as necessary to reflect applicable changes,
including changes to the claim, beneficiary eligibility, or benefit
phase determined after the date of dispensing. We propose codifying
this policy at Sec. 423.2736(e).
9. Negative Invoice Payment Process for Part D Sponsors (Sec.
423.2740)
In certain instances in the quarterly Manufacturer Discount Program
invoicing process (proposed at Sec. 423.2756(a)) a Part D sponsor may
receive a negative invoice amount. This can occur when a PDE, which had
been previously invoiced, is either deleted or adjusted by the plan
such that the reported discount amount is less than originally
invoiced. A negative invoice amount can be thought of as the amount an
agreement holder has overpaid a Part D sponsor in a prior quarter that
is now due back to the agreement holder because of a PDE adjustment or
deletion. Negative invoice amounts occurred under the Coverage Gap
Discount Program, and CMS developed our proposed Manufacturer Discount
Program negative invoice policy based on program instruction for the
Coverage Gap Discount Program, including the July 12, 2013 HPMS
memorandum titled ``Instructions for Resolving Coverage Gap Discount
Program (CGDP) Negative Invoice Amounts.'' Accordingly, we propose that
Part D sponsors must pay such negative invoices in the manner specified
by CMS within 38 calendar days of receipt of the invoice, the same
timeframe specified in the July 12, 2013 memorandum. A sponsor's
failure to pay such a negative invoice within the 38-day deadline may
result in CMS taking compliance action in accordance with Sec.
423.505(n). We propose codifying this negative invoice policy at Sec.
423.2740.
10. Prospective Payments to Part D Sponsors (Sec. 423.2744)
a. General Rule
We propose at Sec. 423.2744(a) to provide monthly prospective
[[Page 54926]]
Manufacturer Discount Program payments to Part D sponsors for sponsors
to advance applicable discounts at the point of sale under proposed
Sec. 423.2736(a) and reimburse network pharmacies within the timeframe
required under proposed Sec. 423.2736(c).
Consistent with section 60.4 of the Manufacturer Discount Program
Final Guidance, CMS calculates Manufacturer Discount Program
prospective payments based on the projections in each plan's bid and
current enrollment. Under this process, CMS estimates the per member
per month cost of the manufacturer discounts for each plan based on a
percentage of the cost assumptions submitted with plan bids under Sec.
423.265 and negotiated and approved under Sec. 423.272, adjusted as
necessary to account for applicable drug costs for applicable
beneficiaries. CMS then multiplies the plan's manufacturer discount
estimate by the number of beneficiaries enrolled in the plan and
distributes the prospective Manufacturer Discount Program payments to
plans on the first of each month. The Manufacturer Discount Program
payments are reflected as a separate line item on each plan's Monthly
Membership Detail Reports and included in the Part D payments displayed
on the Monthly Membership Summary Reports.
When manufacturers pay their quarterly Manufacturer Discount
Program invoices, sponsors will appear to have a temporary duplicate
payment from two sources, the manufacturer and CMS, for the same
expense. After receiving payment from the manufacturer, the Part D
sponsor no longer needs the cash flow advance from the prospective
Manufacturer Discount Program payment. Therefore, CMS will offset the
monthly prospective Manufacturer Discount Program payment, with the
offset amount being equal to the total manufacturer discount amount
received by the Part D sponsor from the manufacturer in the previous
quarter.
b. Exception
As described in section 60.4 of the Manufacturer Discount Program
Final Guidance, employer group waiver plans (EGWPs) do not submit Part
D bids; therefore, CMS does not have the information necessary to
estimate the cost of applicable discounts for these plans and will not
provide prospective Manufacturer Discount Program payments to EGWPs. We
propose to codify this exception to the Manufacturer Discount Program
prospective payments at Sec. 423.2744(b). However, because
manufacturers are required to provide discounts for applicable drugs
when dispensed to applicable beneficiaries who are enrolled in an EGWP,
EGWPs are required to advance such discounts at the point of sale. The
discounts will be invoiced to the manufacturer for reimbursement to the
EGWP through the invoicing process at proposed Sec. 423.2756(a).
c. Reconciliation
Because prospective discount payments are estimates, Part D
sponsors may incur actual Manufacturer Discount Program costs that are
greater or less than the prospective payments. To ensure that Part D
sponsors are made whole for the manufacturer discount amounts they
advanced on behalf of the manufacturer, we propose at Sec. 423.2744(c)
to codify cost-based reconciliation in accordance with subpart G of
Part 423 and as implemented under section 60.5 of the Manufacturer
Discount Program Final Guidance. Manufacturer Discount Program
reconciliation occurs after Part D payment reconciliation. In general,
CMS calculates the discount reconciliation amount by subtracting the
prospective discount payments from manufacturer discount amounts as
reported by Part D sponsors on PDE data and invoiced to manufacturers.
If the difference is positive, CMS pays the difference to Part D
sponsors. If the prospective discount payments exceed the invoiced
manufacturer discount amounts, CMS recovers the difference from Part D
sponsors. Manufacturer discount amounts reported on invoiced PDE data
submitted by the PDE submission deadline for Part D payment
reconciliation are included in the Manufacturer Discount Program
reconciliation. Any manufacturer discount amounts reported on PDE
records submitted after the PDE submission deadline for Part D payment
reconciliation for a plan year are not subject to the Manufacturer
Discount Program reconciliation process for that plan year.
d. Manufacturer Bankruptcy
In the event that an agreement holder declares bankruptcy, as
described in title 11 of the United States Code, and as a result of the
bankruptcy, does not pay all invoiced amounts due under the
requirements of proposed Sec. 423.2756(a), we propose at Sec.
423.2744(d) to adjust the Manufacturer Discount Program reconciliation
amount for each affected Part D sponsor to account for the total unpaid
quarterly invoiced amount owed to each Part D sponsor for the contract
year being reconciled, as per proposed Sec. 423.2744(c). We propose to
reserve the government's right to file a proof-of-claim and take any
other action under bankruptcy law, as appropriate, to attempt to
recover such unpaid amounts and any civil money penalties imposed by
CMS under these regulations.
11. Requirement To Use the Health Plan Management System (Sec.
423.2748)
The Health Plan Management System (HPMS) is CMS's primary system of
record for the collection, review, and storage of information that must
be submitted by Part D manufacturers for CMS review. As announced in
the April 17, 2023 HPMS memorandum, ``April 2023 Drug Manufacturer
Module Enhancements,'' \25\ CMS modified the Drug Manufacturer Contract
Management module in the HPMS in support of the IRA, including changes
to support the Manufacturer Discount Program. CMS relies on ownership
and other identifying information that agreement holders provide and
attest to in the HPMS and in accordance with proposed Sec.
423.2752(a)(7) for determining manufacturers' discount phase-in
eligibility status and for other program operations.
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\25\ Available at https://www.cms.gov/https/editcmsgov/research-statistics-data-and-systems/computer-data-and-systems/hpms/hpms-memos/hpms-memos-wk-3-april-17-21.
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We propose to codify the HPMS instructions included in the
Manufacturer Discount Program Final Guidance, for program continuity
and to minimize burden. Specifically, under proposed Sec. 423.2748,
agreement holders are required to use the HPMS to--
Provide and maintain required information, as specified by
CMS;
Attest to the completeness and accuracy of the data
necessary for CMS to determine whether the manufacturer qualifies as a
specified manufacturer or specified small manufacturer, as described at
Sec. 423.2716;
Execute a Manufacturer Discount Program agreement and a
TPA agreement; and
As otherwise specified by CMS to administer the program.
More information about the use of the HPMS for the Manufacturer
Discount Program is provided in the Part D Manufacturer Discount
Program Information Collection Request (ICR) (CMS-10846, OMB control
no. 0938-1451), which was approved by the Office of Management and
Budget through September 30, 2025. The Part D Manufacturer Discount
Program ICR, including the supporting statement, information collection
instruments, a
[[Page 54927]]
summary of changes, and responses to comments received during the
comment periods can be viewed at https://www.reginfo.gov/public/do/PRAViewICR?ref_nbr=202307-0938-003 (select ``all'' to see full
details). The ICR renewal package was published on June 20, 2025, for a
60-day public comment period, and was published again on October 2,
2025, for a 30-day public comment period.\26\ CMS received no comments
during either comment period, and the ICR renewal package has submitted
to OMB for approval.
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\26\ Available at https://www.cms.gov/regulations-and-guidance/legislation/paperworkreductionactof1995/pra-listing/cms-10846.
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To comply with the requirements under proposed Sec. 423.2748,
agreement holders must obtain and maintain access in the HPMS. The May
4, 2023 HPMS memorandum entitled ``Instructions for Requesting Drug
Manufacturer Access in the Health Plan Management System (HPMS)'' \27\
describes the steps involved in obtaining and maintaining access. These
steps include requesting a CMS user identification and HPMS access,
establishing HPMS access and electronic signature access, and annually
recertifying identification and password requirements.
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\27\ Available at https://www.cms.gov/https/editcmsgov/research-statistics-data-and-systems/computer-data-and-systems/hpms/hpms-memos/hpms-memos-wk-1-may-1-5.
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Because Part D sponsors are already required to maintain
administrative and management capabilities sufficient for financial,
communication, and other activities related to the delivery of Part D
services, under existing Sec. 423.505(b)(25), we have not proposed
separate requirements in subpart AA regarding Part D sponsors' use of
HPMS.
12. Manufacturer Discount Program Agreement (Sec. 423.2752)
Section 1860D-14C(a) of the Act requires CMS to enter into
Manufacturer Discount Program agreements with manufacturers in order
for manufacturers to participate in the Manufacturer Discount Program.
We propose to codify section 80.1 of the Manufacturer Discount Program
Final Guidance at proposed Sec. 423.2752.
CMS released the Manufacturer Discount Program agreement template
on November 17, 2023. The burden associated with executing the
agreement and related requirements is currently approved under OMB
control number 0938-1451 (CMS-10846) and referenced in the COI section
of this proposed rule.
a. Requirements of Agreement
As discussed in more detail in section II.C.4. of this preamble, a
manufacturer is considered to participate in the Manufacturer Discount
Program and to have entered into and have in effect a Manufacturer
Discount Program agreement, as required under section 1860D-43(a) of
the Act, if such manufacturer executes and has in effect its own
Manufacturer Discount Program agreement or participates by means of an
arrangement whereby its labeler code(s) is covered by another
manufacturer's Manufacturer Discount Program agreement that is in
effect. We propose to codify this requirement at Sec. 423.2708(b). We
further clarify that only a manufacturer that is an agreement holder
(as defined in Sec. 423.2708) is a party to such agreement with CMS,
and the entity subject to the rights and obligations of such agreement.
In accordance with this framework, the requirements we propose at Sec.
423.2752 related to the Manufacturer Discount Program agreement apply
only to manufacturers that are agreement holders. Pursuant to section
1860D-14C(b) of the Act, we propose that the Manufacturer Discount
Program agreement require, at a minimum, each agreement holder to:
Reimburse, within the required 38-day timeframe, all
applicable discounts provided by Part D sponsors on behalf of the
manufacturer for applicable drugs dispensed on or after January 1, 2025
that have an NDC with a labeler code that is covered by the
manufacturer's Manufacturer Discount Program agreement and invoiced to
the manufacturer. As proposed at Sec. 423.2756(b)(2), when an invoice
deadline falls on a Saturday, Sunday, or legal holiday, the payment
timeframe is extended to the first day thereafter which is not a
Saturday, Sunday, or legal holiday.
Provide CMS with all labeler codes covered by its
Manufacturer Discount Program agreement.
Ensure that the labeler codes provided to CMS include, at
a minimum, all labeler codes assigned by the FDA to the manufacturer
that contain NDCs for any of the manufacturer's applicable drugs or
selected drugs, and promptly update CMS with any labeler codes newly
assigned to the manufacturer by the FDA that contain NDCs for any of
the manufacturer's applicable drugs or selected drugs in accordance
with the timing requirements discussed later in this section and
proposed at Sec. 423.2756(c)(3) for newly assigned labeler codes.
Comply with the requirements established by CMS for
purposes of administering the Manufacturer Discount Program and
monitoring compliance with such program, including providing the
manufacturer's Employer Identification Number (EIN) and other
identifying information to CMS upon request.
Comply with the requirements related to the provision and
maintenance of data, including collecting, maintaining, and reporting
appropriate data related to the labeler codes covered by its agreement
and any other data CMS determines necessary to carry out the
Manufacturer Discount Program and demonstrate compliance with its
requirements.
Enter into and have in effect, under the terms and
conditions specified by CMS, an agreement with the TPA and comply with
such agreement and all TPA instructions, processes, and requirements.
Provide and attest to information, as specified by CMS,
necessary for CMS to determine eligibility for, and implement, the
specified manufacturer and specified small manufacturer phase-in
discounts.
Agree that, no less than 30 days after the date CMS
determines that a primary manufacturer of a selected drug has, in
accordance with proposed Sec. 423.2752(c)(1)(ii), provided notice to
CMS of its decision not to enter into or continue its participation in
the Medicare Drug Price Negotiation Program and to discontinue its
applicable agreements under the Medicaid Drug Rebate Program and the
Manufacturer Discount Program, none of the drugs of such primary
manufacturer will be covered by the manufacturer's Manufacturer
Discount Program agreement.
Comply with all other requirements of the Manufacturer
Discount Program.
We propose to codify these requirements at Sec. 423.2752(a).
b. Term and Renewal
Consistent with section 1860D-14C(b)(4)(A) of the Act, Manufacturer
Discount Program agreements are valid for an initial term of not less
than 12 months, and automatically renew for a period of 1 year on each
subsequent January 1, except as described later in this section, unless
terminated as described in section II.C.12.c. of this preamble. Under
section 1860D-14C(b)(1)(C)(i) of the Act, a manufacturer must have
entered into the agreement no later than March 1, 2024 to participate
in the Manufacturer Discount Program in 2025. The initial
[[Page 54928]]
12-month term began on January 1, 2025 and ends on December 31, 2025.
Consistent with the policies CMS established in the Manufacturer
Discount Program Final Guidance, for subsequent years, we propose that
a Manufacturer Discount Program agreement would become effective on the
first day of a calendar quarter. We further propose that a manufacturer
must enter into the agreement no later than the last day of the first
month of a calendar quarter for the term to begin on the first day of
the next calendar quarter. If a manufacturer enters into the agreement
after the last day of the first month of a particular calendar quarter,
the initial term would begin on the first day of the second calendar
quarter after the calendar quarter in which the manufacturer entered
into the agreement.
Under our proposal, an initial term that begins on January 1 would
end on December 31 of the same calendar year. An initial term that
begins on April 1, July 1, or October 1 would end on December 31 of the
following calendar year. The following examples illustrate these
proposed requirements:
Manufacturer enters into agreement on October 31, 2027;
agreement is effective on January 1, 2028 and the initial term ends on
December 31, 2028.
Manufacturer enters into agreement on November 1, 2027;
agreement is effective on April 1, 2028 and the initial term ends on
December 31, 2029.
We propose to codify the requirements related to the Manufacturer
Discount Program agreement term and renewal at Sec. 423.2752(b).
c. Termination of Agreement
(1) Termination by CMS
Under section 1860D-14C(b)(4)(B)(i) of the Act, CMS may terminate a
Manufacturer Discount Program agreement for a knowing and willful
violation of the requirements of the agreement or other good cause
shown in relation to a manufacturer's participation in the Manufacturer
Discount Program. The statute also specifies that a termination by CMS
will not be effective earlier than 30 calendar days after the date of
notice to the manufacturer of such termination. We propose to codify
the policies for termination by CMS at Sec. 423.2752(c)(1).
Consistent with applicable guidance for the Medicare Drug Price
Negotiation Program,\28\ a manufacturer that is a primary manufacturer,
as we propose to define at Sec. 423.2704, may submit a request for
termination of a Manufacturer Discount Program agreement in connection
with a notice of its decision that it is unwilling to participate in,
or continue its participation in, the Medicare Drug Price Negotiation
Program.
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\28\ See, for example, sections 40.1 and 40.6, as applicable, of
the June 30, 2023 Medicare Drug Price Negotiation Program Revised
Guidance, Implementation of Sections 1191-1198 of the Social
Security Act for Initial Price Applicability Year 2026, available at
https://www.cms.gov/files/document/revised-medicare-drug-price-negotiation-program-guidance-june-2023.pdf; the October 2, 2024
Medicare Drug Price Negotiation Program: Final Guidance,
Implementation of Sections 1191-1198 of the Social Security Act for
Initial Price Applicability Year 2027 and Manufacturer Effectuation
of the Maximum Fair Price in 2026 and 2027, available at https://www.cms.gov/files/document/medicare-drug-price-negotiation-final-guidance-ipay-2027-and-manufacturer-effectuation-mfp-2026-2027.pdf;
and the September 30, 2025 Medicare Drug Price Negotiation Program:
Final Guidance, Implementation of Sections 1191-1198 of the Social
Security Act for Initial Price Applicability Year 2028 and
Manufacturer Effectuation of the Maximum Fair Price in 2026, 2027,
and 2028, available at https://www.cms.gov/files/document/ipay-2028-final-guidance.pdf.
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Specifically, a manufacturer that is the primary manufacturer of a
selected drug may provide a notice to CMS stating the primary
manufacturer's unwillingness to participate in, or its request to
terminate an agreement under, the Medicare Drug Price Negotiation
Program (herein referred to as a ``Request to Terminate''). In
accordance with applicable regulations and guidance for the Medicare
Drug Price Negotiation Program, such Request to Terminate must
incorporate both: (1) a request for termination of the primary
manufacturer's applicable agreements under the Medicaid Drug Rebate
Program and the Manufacturer Discount Program, consistent with the
requirements as set forth in 26 U.S.C. 5000D(c)(1)(A)(i); and (2) an
attestation that provides in part that through the end of the price
applicability period (as defined in section 1191(b)(2) of the Act) for
the selected drug that the primary manufacturer (i) shall not seek to
enter into any subsequent agreement with the Manufacturer Discount
Program under section 1860D-14C of the Act; and (ii) shall not seek
coverage for any of its drugs under the Manufacturer Discount Program
under section 1860D-14C of the Act, consistent with the requirements
set forth in 26 U.S.C. 5000D(c)(1)(B). If CMS determines the primary
manufacturer's Request to Terminate complies with applicable
requirements, the primary manufacturer's request will constitute good
cause under section 1860D-14C(b)(4)(B)(i) of the Act to terminate the
primary manufacturer's applicable agreements under the Manufacturer
Discount Program in accordance with the proposed Sec.
423.2752(c)(1)(ii) and the proposed Sec. 423.2752(c)(1)(v)(A)(1), as
applicable.\29\ CMS also will terminate coverage for all of the drugs
of the primary manufacturer under the Manufacturer Discount Program in
accordance with proposed Sec. 423.2752(c)(1)(v)(A)(2), as discussed in
more detail later in this section.
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\29\ 26 U.S.C. 5000D(c)(2), as enacted by section 11003 of the
IRA, defines ``applicable agreement.'' In the context of the
Manufacturer Discount Program, the primary manufacturer's applicable
agreements include any Manufacturer Discount Program agreement for
which the primary manufacturer is the agreement holder, as well as
any arrangement in which FDA-assigned labeler code(s) of the primary
manufacturer is/are covered under the Manufacturer Discount Program
agreement of another manufacturer. If the primary manufacturer's
Request to Terminate complies with applicable requirements, CMS will
effectuate removal of only the previously described FDA-assigned
labeler code(s) from the Manufacturer Discount Program agreement of
another manufacturer.
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Consistent with the requirement in section 1860D-14C(b)(4)(B)(i) of
the Act and the termination policies established in section 80.1.3.1 of
the Manufacturer Discount Program Final Guidance, CMS will provide,
upon written request, a manufacturer a hearing concerning a termination
by CMS. This hearing will take place prior to the effective date of the
termination with sufficient time for the termination to be repealed
prior to the effective date if CMS determines repeal would be
appropriate. If a manufacturer or CMS receives an unfavorable decision
from the hearing officer, the manufacturer or CMS may request review by
the CMS Administrator within 30 calendar days of receipt of the
notification of such determination. The decision of the CMS
Administrator is final and binding. A timely request for a hearing
before a hearing officer or review by the CMS Administrator will stay
termination until the parties have exhausted their appeal rights under
the Manufacturer Discount Program, which means either the timeframes to
pursue a hearing before a hearing officer or review by the CMS
Administrator have passed or a final decision by the Administrator has
been issued and there is no remaining opportunity to request further
administrative review. We propose to codify these policies regarding
hearings at Sec. 423.2752(c)(1)(iv)(A) and (B).
In the case of a primary manufacturer of a selected drug under the
Medicare Drug Price Negotiation Program that is unwilling to enter into
a Medicare Drug Price Negotiation Program agreement or continue its
participation in the Medicare Drug Price Negotiation Program and
submits a Request to Terminate that complies with all
[[Page 54929]]
applicable requirements, CMS shall, upon written request from such
primary manufacturer, provide a hearing concerning the termination of
the primary manufacturer's applicable agreements under the Manufacturer
Discount Program, in accordance with section 1860D-14C(b)(4)(B)(i) of
the Act. Such a hearing will be held prior to the effective date of
termination with sufficient time for such effective date to be
repealed. Such a hearing will be held solely on the papers. CMS'
determination that there is good cause for termination depends solely
on the primary manufacturer's request for termination to effectuate its
decision not to participate in or to terminate its participation in the
Medicare Drug Price Negotiation Program. Therefore, the only question
to be decided in the hearing is whether the primary manufacturer has
asked to rescind its Request to Terminate prior to the effective date
of the termination. CMS will automatically grant such request from the
primary manufacturer to rescind its Request to Terminate. We propose to
codify these policies at Sec. 423.2752(c)(1)(iv)(C).
If CMS determines that a primary manufacturer's Request to
Terminate complies with all applicable requirements, we will effectuate
the removal of the FDA-assigned labeler code(s) of the primary
manufacturer from all Manufacturer Discount Program agreements for
which the primary manufacturer is not the agreement holder no earlier
than 30 days from the date we send the notice of termination to the
manufacturer in accordance with proposed Sec. 423.2752(c)(1)(iii).
We propose to codify this requirement at Sec.
423.2752(c)(1)(v)(A)(1).
Similarly, CMS will effectuate the termination of coverage under
any Manufacturer Discount Program agreement specific to NDCs of all
applicable drugs and selected drugs for which the primary manufacturer
is the holder of the new drug application or biologics license
application. Such termination of coverage will apply to all applicable
drug and selected drug NDCs of the primary manufacturer for which the
labeler code is assigned to a manufacturer other than the primary
manufacturer and for which the primary manufacturer is the new drug
application or biologics license application holder for such drug. We
propose to codify this requirement at Sec. 423.2752(c)(1)(v)(A)(2).
At Sec. 423.2752(c)(1)(v)(B), we propose to clarify that,
consistent with the requirement at Sec. 423.2752(c)(3) discussed
below, the removal of labeler code(s) in accordance with Sec.
423.2752(c)(1)(v)(A)(1) and the termination of coverage specific to
NDCs in accordance with Sec. 423.2752(c)(1)(v)(A)(2) do not affect the
agreement holder's responsibility to reimburse Part D sponsors for
applicable discounts for applicable drugs with such labeler code(s) or
such NDCs that were incurred under the agreement before the effective
date of removal or termination.
(2) Termination by the Manufacturer
In accordance with section 1860D-14C(b)(4)(B)(ii) of the Act, an
agreement holder may terminate its Manufacturer Discount Program
agreement for any reason. Under the policies established in section
80.1.3.2 of the Manufacturer Discount Program Final Guidance, if the
manufacturer provides notice of termination under section 1860D-
14C(b)(4)(B)(ii) of the Act before January 31 of a calendar year, such
termination will be effective as of January 1 of the succeeding
calendar year. If the manufacturer provides such notice of termination
on or after January 31 of a calendar year, the termination will be
effective as of January 1 of the second succeeding calendar year. The
following examples illustrate these requirements:
If a manufacturer notifies CMS on January 20, 2027 that it
wishes to terminate, the termination will be effective as of January 1,
2028.
If the manufacturer notifies CMS on February 1, 2027 that
it wishes to terminate, the termination will be effective as of January
1, 2029.
We propose to codify these existing policies without modification
at Sec. 423.2752(c)(2).
(3) Post-Termination Obligations
Consistent with section 1860D-14C(b)(4)(B)(iii) of the Act, the
termination of a Manufacturer Discount Program agreement under either
sections 1860D-14C(b)(4)(B)(i) or 1860D-14C(b)(4)(B)(ii) of the Act
will not affect the manufacturer's responsibility to reimburse Part D
sponsors for applicable discounts for applicable drugs having NDCs with
labeler code(s) covered by the manufacturer's agreement that were
incurred under the agreement before the effective date of termination.
We propose to codify this requirement at Sec. 423.2752(c)(3).
(4) Reinstatement
As described in section 80.1.4 of the Manufacturer Discount Program
Final Guidance, reinstatement in the Manufacturer Discount Program
subsequent to termination by CMS will be available to a manufacturer
only upon payment of all outstanding applicable discounts and penalties
incurred under any previous Manufacturer Discount Program agreement or
Coverage Gap Discount Program agreement. The timing of any such
reinstatement will be consistent with the requirements for entering
into an agreement under proposed Sec. 423.2752(b).
We propose to codify this policy at Sec. 423.2752(c)(4).
(5) Automatic Assignment Upon Change of Ownership
At Sec. 423.2752(d) we propose to codify the requirements of
section 80.5.1 of the Manufacturer Discount Program Final Guidance and
section (VIII)(b) of the Manufacturer Discount Program agreement, that
in the event of a change in ownership of a manufacturer that is an
agreement holder, the Manufacturer Discount Program agreement is
automatically assigned to the new owner, and all terms and conditions
of the agreement remain in effect as to the new owner unless terminated
in accordance with requirements at Sec. 423.2752(c). Further, we
propose that the new agreement holder would agree to be bound by and to
perform all the duties and responsibilities under the Manufacturer
Discount Program, and assume all obligations and liabilities of, and
all claims incurred against, the prior agreement holder under the
Manufacturer Discount Program agreement whether arising before or after
the effective date of the change of ownership.
13. Manufacturer Requirements (Sec. 423.2756)
We propose that manufacturers that are agreement holders, as
defined at Sec. 423.2704, must comply with all requirements at
proposed Sec. 423.2756.
a. Manufacturer Invoicing
CMS established its manufacturer invoicing policy in section 80.2
of the Manufacturer Discount Program Final Guidance. We propose to
codify this policy at Sec. 423.2756(a). Specifically, we propose that
CMS will calculate, based on information reported by Part D sponsors,
the amounts owed for applicable discounts for applicable drugs having
NDCs with a labeler code covered by the agreement holder's Manufacturer
Discount Program agreement. We also propose that CMS will invoice
agreement holders quarterly through the TPA's portal, consistent with
the published invoicing
[[Page 54930]]
calendar.\30\ Such invoices will be itemized at the NDC level. In
addition, we propose that CMS will invoice manufacturer discount
amounts from accepted PDE data for 37 months following the end of the
benefit year.
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\30\ Available at https://tpadministrator.com/internet/
tpaw3_files.nsf/F/TPACGDP_MDP_Calendar_2024-2028_12062024.pdf/$FILE/
CGDP_MDP_Calendar_2024-2028_12062024.pdf.
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CMS considered feedback from interested parties received prior to
issuing the Manufacturer Discount Program Draft Guidance regarding data
elements to include in manufacturer invoices. Based on this feedback,
and in an effort to provide transparency and minimize manufacturer
disputes, CMS includes the following detail on Manufacturer Discount
Program invoices:
Date of service;
Service provider identifier qualifier;
Service provider identifier;
Prescription/service reference number;
Product/service identifier;
Quantity dispensed;
Days supply;
Fill number;
Reported discount;
Low-income cost sharing amount;
Total gross covered drug cost accumulator;
True out-of-pocket accumulator;
Gross drug cost below out-of-pocket threshold; and
Gross drug cost above out-of-pocket threshold.
b. Requirement for Timely Payment
We propose at Sec. 423.2756(b)(1) that agreement holders must pay
each Part D sponsor the invoiced amounts through the TPA portal no
later than 38 calendar days from receipt of the relevant invoice, in
the manner specified by CMS, with limited exceptions in proposed
paragraphs (b)(2) and (b)(3). At Sec. 423.2756(b)(2), we propose that
if an invoice deadline falls on a Saturday, Sunday, or legal holiday,
the payment timeframe is extended to the first day thereafter which is
not a Saturday, Sunday, or legal holiday.
At Sec. 423.2756(b)(3), we propose that agreement holders are not
permitted to withhold payment for any disputed invoiced amount,
including while a dispute is pending, except when the basis for the
dispute is that the agreement holder has been invoiced amounts for
applicable drugs that have NDCs that do not correspond to labeler codes
covered by the agreement holder's Manufacturer Discount Program
agreement. Under the proposed regulation, if payment is withheld in
such an instance, the agreement holder must notify the TPA within 38
calendar days of the manufacturer's receipt of the applicable invoice
that payment is being withheld for this reason.
This payment withholding rule is consistent with processes
established in section 80.2.3 of the Manufacturer Discount Program
Final Guidance, and we believe it continues to strike a reasonable
balance between the needs of manufacturers and Part D sponsors. CMS
performs extensive quality assurance with respect to PDE data submitted
by sponsors and, based on our experience under the Coverage Gap
Discount Program, we believe that prohibiting the withholding of
disputed invoices minimizes the risk to Part D sponsors for these
discount-related incurred liabilities without significantly increasing
the financial risk to a manufacturer. The PDE data used to calculate
quarterly invoices are derived from claims for each prescription
submitted to Part D sponsors for payment. Part D sponsors validate each
claim as part of their process to reimburse pharmacies for the cost of
the drug. In addition, CMS applies multiple edits to validate the PDE
data submitted by Part D sponsors. Those edits include identification
and adjustment of outlier and other erroneous entries for variables,
such as discount amount, beneficiary eligibility for the discount, and
NDCs.
c. Reporting Requirements
At paragraph (c)(1) of Sec. 423.2756, we propose that, in general,
agreement holders must collect, have available, and maintain
appropriate data related to the labeler codes covered by their
Manufacturer Discount Program agreement. This includes FDA drug
approvals, FDA NDC Directory listings, NDC last-lot expiration dates,
utilization and pricing information relied on by the manufacturer to
dispute quarterly invoices, and any other data CMS determines necessary
to carry out the Manufacturer Discount Program and demonstrate
compliance with its requirements. We also propose that manufacturers
maintain such data as described previously for a period of not less
than 10 years from the date of payment of the corresponding invoice.
This 10-year timeline is consistent with the Part D record retention
requirement for Part D sponsors at Sec. 423.505(d).
At Sec. 423.2756(c)(2), we propose requirements related to
providing information to CMS about manufacturer ownership.
Specifically, at paragraph (c)(2)(i), we propose to require agreement
holders to provide and attest to ownership and other data, in the form
and manner specified by CMS, as necessary for CMS to determine
eligibility for discount phase-ins for specified manufacturers and
specified small manufacturers in accordance with statutory
requirements, as we propose to codify at Sec. 423.2716. Likewise, at
paragraph (c)(2)(iii), we propose that if the agreement holder covers
the FDA-assigned labeler code(s) of another manufacturer by its
Manufacturer Discount Program agreement, the agreement holder would
also be required to provide ownership information about such other
manufacturer.
Similarly, it is imperative that CMS be notified promptly of any
ownership changes of a manufacturer participating in the Manufacturer
Discount Program so that CMS can evaluate such changes as they relate
to the application of discount phase-ins, including the acquisition
policy under proposed Sec. 423.2724. At Sec. 423.2756(c)(2)(ii), we
propose to codify our longstanding policy that agreement holders notify
CMS of a change in their ownership no later than 30 calendar days after
the agreement holder executes a legal obligation for such an
arrangement and no later than 45 calendar days prior to the change in
ownership taking effect. At Sec. 423.2756(c)(2)(iii), we propose a
corresponding requirement that, if an agreement holder covers the
labeler code(s) of another manufacturer by its Manufacturer Discount
Program agreement, the agreement holder must notify CMS of a change in
ownership of such other manufacturer.
If CMS is not notified of an ownership change, the original
agreement holder will be invoiced and payment will have to be
reconciled between the manufacturers involved in the transaction. CMS
will not consider untimely notice of a change of ownership to be
grounds for an agreement holder to dispute the invoiced amount.
At Sec. 423.2756(c)(3), we propose requirements related to labeler
codes. Consistent with the Manufacturer Discount Program Final
Guidance, section 80.5.2, we propose at Sec. 423.2756(c)(3)(i) that
each agreement holder must cover by its agreement all labeler codes
assigned by the FDA to the agreement holder that contain NDCs for the
agreement holder's applicable drugs and selected drugs. We also propose
at Sec. 423.2756(c)(3)(ii) that, consistent with Sec. 423.2708(b)(2),
an agreement holder may cover by its Manufacturer Discount Program
agreement applicable drugs or selected drugs with labeler code(s)
assigned by the FDA to another manufacturer, provided the other
[[Page 54931]]
manufacturer has not executed and does not have in effect its own
Manufacturer Discount Program agreement in accordance with Sec.
423.2708(b)(1).
We propose that agreement holders must provide to CMS and maintain
all required labeler code information as instructed by CMS.
Specifically, we propose at Sec. 423.2756(c)(3)(iii) to require
agreement holders to provide to CMS the following labeler code
information:
All labeler codes assigned by the FDA to the agreement
holder that contain NDCs for the agreement holder's applicable drugs
and selected drugs; and
All labeler codes assigned by the FDA to another
manufacturer that the agreement holder covers by its agreement and for
which the agreement holder agrees to pay discounts.
We also propose at Sec. 423.2756(c)(3)(iv) that agreement holders
must provide labeler codes newly assigned by the FDA to the agreement
holder to CMS no later than 3 business days after receiving written
notification of the newly assigned labeler code(s) from the FDA and in
advance of providing any NDCs associated with such labeler codes to
electronic database vendors.
As proposed at Sec. 423.2756(c)(3)(v), agreement holders are
responsible for maintaining the list of labeler codes covered by their
agreement to ensure that it remains current on an ongoing basis. An
agreement holder's failure to update labeler codes covered by its
agreement does not change the agreement holder's responsibility to pay
the amounts invoiced for applicable drugs. Specific instructions on how
agreement holders are to submit information to CMS are available in the
HPMS Drug Manufacturer Management User Manual.
As part of maintaining the list of labeler codes covered by their
Manufacturer Discount Program agreement, agreement holders should
submit a request in HPMS to terminate labeler codes where all of the
NDCs are past the last lot expiration date. In order to submit the
request, the agreement holder must attest in HPMS that the marketing
end date on the FDA NDC SPL Data Elements file, defined by the FDA as
the date of expiration of the last lot released to the marketplace, has
passed for all applicable drugs and selected drugs associated with the
labeler code. Termination of labeler codes where all of the NDCs are
past the last lot expiration date differs from the process proposed at
Sec. 423.2752(c)(1)(v), which applies to the CMS termination of
labeler codes and NDCs of a primary manufacturer and is described in
section II.C.12.c. of this preamble.
At Sec. 423.2756(c)(4), we propose requirements related to
maintenance of FDA records and related records. CMS relies on data
available through the FDA to identify applicable drugs in the
Manufacturer Discount Program. Accordingly, we propose at Sec.
423.2756(c)(4)(i)(A) that agreement holders must ensure that all
labeler codes assigned by the FDA to the agreement holder that contain
NDCs for any of its applicable drugs or selected drugs are properly
listed on the FDA NDC Directory. We propose at Sec.
423.2756(c)(4)(i)(B) that agreement holders must electronically list
all NDCs of their applicable drugs or selected drugs with the FDA in
advance of commercial distribution of the product(s) so that CMS and
plans can accurately identify applicable drugs once they are provided
to pharmacies for distribution. Further, CMS proposes at Sec.
423.2756(c)(4)(i)(C) that agreement holders must maintain up-to-date
electronic FDA registrations and listings of all NDCs, including the
timely removal of discontinued NDCs from the FDA NDC Directory. As we
discussed in section 80.5.3 of the Manufacturer Discount Program Final
Guidance, accurate NDC listings enable CMS and Part D sponsors to
accurately identify applicable drugs. For this reason, updates to the
FDA NDC Directory must precede NDC additions made to commercial
electronic databases used for pharmacy claims processing.
In addition, we propose at Sec. 423.2756(c)(4)(i)(D) that
agreement holders must maintain up-to-date listings with the electronic
database vendors to whom they provide their NDCs for pharmacy claims
processing. Only manufacturers know the last-lot expiration dates for
their NDCs and, therefore, the manufacturers are responsible for
ensuring that these electronic database vendors are prospectively
notified when NDCs no longer represent products that are still
available on the market. A manufacturer's failure to provide
appropriate advance notice to electronic database vendors may result in
the agreement holder being responsible for discounts after the last-lot
expiration date unless the manufacturer can document that it provided
such appropriate advance notice to the database vendors, or the
manufacturer has provided advance notice to the FDA of the marketing
end date.
At Sec. 423.2756(c)(4)(ii), we propose that if an agreement
holder's Manufacturer Discount Program agreement covers labeler code(s)
that are assigned by the FDA to another manufacturer that participates
in the Manufacturer Discount Program in accordance with Sec.
423.2708(b)(2), the agreement holder must ensure that the requirements
of this section are met with respect to such labeler codes.
At Sec. 423.2756(d), we propose to codify existing CMS policy that
permits agreement holders to transfer labeler code(s) between
Manufacturer Discount Program agreements so long as the transfer is
consistent with requirements of the proposed subpart AA and the
Manufacturer Discount Program agreement and is approved by CMS. Among
other requirements, such a transfer must be consistent with proposed
Sec. 423.2756(c)(3)(i), which requires all labeler codes assigned by
the FDA to the agreement holder that contain NDCs for the agreement
holder's applicable drugs and selected drugs to be covered by the
agreement holder's Manufacturer Discount Program agreement.
Specifically, consistent with section 80.5.2.2 of the Manufacturer
Discount Program Final Guidance, agreement holders are permitted to
transfer existing labeler code(s) from one Manufacturer Discount
Program agreement to another Manufacturer Discount Program agreement
provided that both agreement holders take part in the transfer process.
As instructed by CMS in the HPMS Drug Manufacturer Management User
Manual, the agreement holder that covers under its Manufacturer
Discount Program agreement the labeler code(s) of another manufacturer
must request that the labeler code(s) be transferred to the other
agreement holder, and the agreement holder that intends to assume
coverage by its agreement must request that the labeler code(s) be
added to its Manufacturer Discount Program agreement. If both agreement
holders are in agreement and all other Manufacturer Discount Program
requirements are met, CMS will approve the labeler code transfer
between agreements by approving both agreement holders' requests.
Transfers of labeler codes from one Manufacturer Discount Program
agreement to another are not considered complete until CMS has approved
both requests. The agreement holder seeking to transfer the labeler
code from its agreement remains liable for payment of all discounts
related to such labeler code until the transfer is complete. An
agreement holder is not permitted to transfer its own FDA-assigned
labeler code(s) to the Discount Program agreement of another
manufacturer.
Once the transfer is complete, the receiving agreement holder
assumes responsibility for all Manufacturer
[[Page 54932]]
Discount Program requirements with respect to the transferred labeler
code(s). Manufacturer Discount Program invoices to the receiving
agreement holder will include the discount amounts by labeler code for
the entire quarter. If an agreement holder assumes liability for a
labeler code effective the second or third month of a quarter, that
agreement holder will be invoiced and is responsible for all discount
amounts of that labeler code for the entire quarter, including any
claims from dates of service in prior quarters that are included on
that quarter's invoice. For example:
If a labeler code transfer request is approved by CMS in
February and becomes effective on March 1st, the first quarter (Q1)
invoice will be delivered to the receiving agreement holder that
assumed responsibility for the labeler code.
If a labeler code transfer request is approved by CMS in
March and becomes effective April 1st, the Q1 invoice will be delivered
to the prior (that is, transferring) agreement holder.
In the event that business needs do not coincide with the timing of
the transfer, agreement holders are expected to reconcile any payments
among themselves without CMS involvement.
The transfer of a labeler code between Manufacturer Discount
Program agreements includes all NDCs associated with the transferred
labeler code; CMS will not transfer individual NDCs.
14. Audits (Sec. 423.2760)
We propose, at Sec. 423.2760, to codify the Manufacturer Discount
Program audit processes established in section 90 of the Manufacturer
Discount Program Final Guidance. Such processes conform with section
1860D-14C(c)(2) of the Act, which requires CMS to monitor a
manufacturer's compliance with the terms of a Manufacturer Discount
Program agreement, and with section 1860D-14C(b)(2) of the Act, which
requires manufacturers to collect and have available appropriate data,
as determined by CMS, to ensure they can demonstrate to CMS compliance
with the requirements of the Manufacturer Discount Program. Though the
Act does not specifically allow audits by agreement holders, CMS
proposes codifying that under CMS's authority to provide for
implementation of the Manufacturer Discount Program under section
1860D-14C(d)(1) of the Act, CMS will permit agreement holders to
conduct periodic audits of the TPA data and information used to
calculate the quarterly invoices described in Sec. 423.2756(a). CMS
believes that continuing to permit audits in the manner established
under the Medicare Part D Manufacturer Discount Program Final Guidance
promotes transparency as well as consistency in Part D program
operations.
Specifically, we propose at Sec. 423.2760(a)(1) that an agreement
holder may conduct audits, directly or through third parties and no
more often than annually, of TPA data and information used to determine
discounts for applicable drugs covered under the agreement holder's
Manufacturer Discount Program agreement. As proposed at Sec.
423.2760(a)(2), the agreement holder must provide 60 calendar days'
notice to the TPA of the reasonable basis for the audit and a
description of the information required for the audit.
When developing audit processes for the Manufacturer Discount
Program Final Guidance, CMS considered feedback from interested
parties. In response to this feedback and in alignment with section
90.1.2 of the Manufacturer Discount Program Final Guidance, CMS
provides the following data to agreement holders that are auditing TPA
data, in addition to the data elements included on invoices:
Contract number;
Plan benefit package identifier;
Ingredient cost paid;
Dispensing fee paid;
Total amount attributed to sales tax;
Non-covered plan paid amount; and
Vaccine administration fee or additional dispensing fee.
CMS proposes limits on audits of TPA data and information at Sec.
423.2760(a)(3). To appropriately balance transparency and efficiency,
and in alignment with generally accepted auditing standards, we propose
at Sec. 423.2760(a)(3)(i) that the data provided to the manufacturer
conducting the audit be limited to a statistically significant random
sample of data held by the TPA that were used to determine applicable
discounts for applicable drugs having NDCs with labeler codes covered
by the agreement holder's Manufacturer Discount Program agreement. Such
data is sufficient for a manufacturer to reach statistically valid
conclusions that could be used to support a dispute under proposed
Sec. 423.2764(a). We further propose at Sec. 423.2760(a)(3)(ii) that
manufacturers are not permitted to audit CMS records or the records of
Part D sponsors beyond the data provided to the TPA, which includes
claim-level information.
CMS is obligated to protect the privacy of beneficiary medical
information. Accordingly, CMS proposes at Sec. 423.2760(a)(3)(iii)
that audits must occur on site at a location specified by the TPA, and
with the exception of work papers, such data cannot be removed from the
audit site. Additionally, CMS proposes at Sec. 423.2760(a)(3)(iv) that
the auditor may release only an opinion of the audit results and is
prohibited from releasing any other information obtained from the
audit, including work papers, to its client, employer, or any other
party. CMS believes these limitations on the distribution of data
support beneficiary privacy, while addressing manufacturer need for
access to data that are relevant to the calculation of the discounts.
Regarding CMS audits of manufacturer data, we propose at Sec.
423.2760(b)(1) that an agreement holder is subject to periodic audit by
CMS no more often than annually, directly or through third parties. We
propose at Sec. 423.2760(b)(2) that CMS must provide agreement holders
with 60 calendar days' notice of the reasonable basis for the audit and
a description of the information required for the audit. We further
propose at Sec. 423.2760(b)(3) that CMS has the right to audit
appropriate data, including data related to labeler codes covered by
the agreement holder's Manufacturer Discount Program agreement and
related NDC last-lot expiration dates, utilization, and pricing
information relied on by the agreement holder to dispute quarterly
invoices, and any other data CMS determines necessary to evaluate
compliance with the requirements of the Manufacturer Discount Program.
15. Dispute Resolution (Sec. 423.2764)
Section 1860D-14C(c)(1)(D) of the Act requires CMS to provide a
reasonable dispute resolution mechanism to resolve disagreements
between manufacturers, Part D sponsors, and the Secretary. For
continuity and familiarity, CMS proposes codifying the dispute
resolution processes established in section 100 of the Manufacturer
Discount Program Final Guidance.
Specifically, at Sec. 423.2764, we propose a 3-level dispute
resolution framework through which agreement holders can dispute
applicable discounts that they were invoiced via the invoicing process
proposed at Sec. 423.2756(a). Such invoices may contain applicable
discounts that an agreement holder believes are incorrect and which the
agreement holder wishes to contest.
We propose at Sec. 423.2764(a) that an agreement holder may
dispute applicable discounts invoiced to such agreement holder under
Sec. 423.2756(a) by filing an initial dispute. This is the
[[Page 54933]]
first level of the dispute resolution framework. Under proposed Sec.
423.2764(a)(1), the initial dispute must be filed in the manner
specified by CMS no later than the dispute submission deadline, which
CMS proposes to define at Sec. 423.2704 as the date that is 60
calendar days from the date of the invoice containing the information
that is the subject of the dispute. The disputing manufacturer must
explain why it believes the invoiced discount amount is in error and
must provide supporting evidence that is material, specific, and
related to the dispute. We propose at Sec. 423.2764(a)(2) that CMS
will issue a written determination on an initial dispute no later than
60 calendar days from the dispute submission deadline.
We propose at Sec. 423.2764(b) that an agreement holder that
receives an unfavorable determination from CMS on its initial dispute,
or that has not received a determination within 60 calendar days of the
dispute submission deadline, may request review by the independent
review entity (IRE) contracted by CMS. Such independent review is
considered the second level of the dispute resolution framework.
We propose at Sec. 423.2764(b)(1) that an agreement holder must
file a request for review by the IRE in the manner specified by CMS no
later than the earlier of 30 calendar days from the date of the
unfavorable determination on the initial dispute, or 90 calendar days
from the dispute submission deadline if no determination was made
within 60 calendar days of the dispute submission deadline.
We propose at Sec. 423.2764(b)(2) that the IRE may seek additional
information from any agreement holder that requests an independent
review, for the purpose of considering the appeal. An agreement
holder's failure to comply with an information request from the IRE
within the timeframe specified could result in the IRE issuing a
denial. In addition to the information provided by the agreement
holder, the IRE will base its decision on information received by CMS,
the TPA, the Part D sponsor, and other databases compiled by CMS or
other sources.
We propose at Sec. 423.2764(b)(3) that the IRE will issue a
written notice of decision to the agreement holder and to CMS no later
than 90 calendar days from receipt of the request. Under proposed Sec.
423.2764(b)(4), the notice must include a clear statement indicating
whether the decision is favorable or unfavorable to the agreement
holder; an explanation of the rationale for the IRE's decision; and
instructions on how to request a review by the CMS Administrator. Under
proposed Sec. 423.2764(b)(5), a decision by the IRE is binding on all
parties unless the agreement holder or CMS files a valid request for
review by the CMS Administrator.
At Sec. 423.2764(c)(1), we propose as the third level of the
dispute resolution process that an agreement holder or CMS may request
review by the CMS Administrator following receipt of an unfavorable
determination from the IRE. Under proposed Sec. 423.2764(c)(2), such
request must be filed in the manner specified by CMS, no later than 30
calendar days from the date of the IRE decision. After completing the
review and making a decision, under proposed Sec. 423.2764(c)(3), the
CMS Administrator will issue written notice of their decision to both
parties. Such decision by the CMS Administrator is final and binding
under proposed Sec. 423.2764(c)(4). CMS proposes at Sec. 423.2764(d)
that it will adjust future invoices, or implement an alternative
reimbursement process if determined necessary, if a dispute is resolved
in favor of the agreement holder. As discussed earlier in this preamble
at II.C.13.b., CMS proposes at Sec. 423.2756(b)(3) that agreement
holders cannot withhold payment for any disputed invoiced amount,
including while a dispute is pending, except as specified at Sec.
423.2756(b)(3).
Under proposed Sec. 423.2764(e) agreement holders cannot use this
dispute resolution process to dispute a decision by CMS to terminate an
agreement holder's participation in the Manufacturer Discount Program
under Sec. 423.2752(c)(1) or a decision by CMS about a manufacturer's
eligibility for discount phase-ins described at Sec. 423.2720. As
described earlier in this section of the preamble, the dispute
resolution process must be used specifically for the purpose of
resolving disputes regarding applicable discounts invoiced to agreement
holders under Sec. 423.2756(a).
Under section 100.2 of the Manufacturer Discount Program Final
Guidance, CMS does not permit Part D sponsors to dispute invoiced
amounts under the Manufacturer Discount Program. Section 423.505(f)
requires sponsors to submit information to CMS that is necessary for
CMS to administer and evaluate the Part D program, which includes
information relevant to disputes under the Manufacturer Discount
Program. CMS relies on the information received in PDE data submitted
by sponsors when applicable discounts are advanced at the point of sale
for calculating quarterly invoices for agreement holders. Because
sponsors provide the data CMS uses to calculate invoices for agreement
holders, sponsors do not have the right to directly dispute invoiced
amounts under the processes described in this section. Part D sponsors
should note that a determination about a dispute at any level of the
dispute resolution process described in this section also cannot be
appealed directly by a sponsor. However, as part of the adjudication
process for manufacturer disputes, sponsors will have an opportunity to
confirm the accuracy of a disputed discount, when applicable.
Regarding beneficiary disputes, the IRA does not require a dispute
resolution mechanism for Part D enrollees with respect to the
Manufacturer Discount Program and, as a practical matter, an individual
would likely not be aware if a discount is provided on their claim,
because in most cases, the Manufacturer Discount Program will not
affect enrollee cost sharing, and consistent with section 1860D-
14C(g)(4) of the Act, applicable discounts are not counted toward an
enrollee's incurred costs. Nevertheless, any Part D enrollee who has a
dispute about their plan's decision not to provide or pay for a Part D
drug, including a dispute about whether a drug is excluded from Part D
or about the amount of cost sharing, has the right to request a
coverage determination from the plan and the right to appeal any
coverage determination not fully favorable to the enrollee under the
procedures specified in subpart M of part 423.
16. Civil Money Penalties (Sec. Sec. 423.1000, 423.1002 and 423.2768)
Section 1860D-14C(e) of the Act requires that a manufacturer that
fails to provide, in accordance with the terms of its Manufacturer
Discount Program agreement and the requirements of the Manufacturer
Discount Program, applicable discounts for applicable drugs covered by
the manufacturer's Manufacturer Discount Program agreement and
dispensed to applicable beneficiaries is subject to a civil money
penalty (CMP) for each such failure. CMS proposes codifying this
general rule at Sec. 423.2768(a), in alignment with processes
established in section 120 of the Manufacturer Discount Program Final
Guidance.
Under proposed Sec. 423.2756(b)(1), agreement holders must pay
invoiced amounts to relevant Part D sponsors within 38 calendar days of
receipt of a TPA invoice. CMS considers an agreement holder to have
failed to provide applicable discounts if payment is not made within 38
calendar days,
[[Page 54934]]
with limited exceptions as proposed at Sec. 423.2756(b)(2) and (b)(3).
It is imperative that agreement holders make timely payments under the
Manufacturer Discount Program, and an agreement holder's failure to
establish sufficient controls to ensure compliance with this
requirement will not relieve the agreement holder of penalties imposed
under section 1860D-14C(e)(1) of the Act.
We propose at Sec. 423.2768(b) that CMS will issue a notice of
non-compliance to an agreement holder that fails to make a timely
payment as required under Sec. 423.2756(b). We propose allowing the
agreement holder 5 business days to respond to the notice of non-
compliance with additional context, evidence refuting the violation, or
other factors that CMS may consider when determining whether to impose
a CMP.
Consistent with section 1860D-14C(e)(1) of the Act, we propose at
Sec. 423.2768(c) that a CMP will be equal to the sum of the amount the
agreement holder would have paid with respect to the applicable
discount, plus 25 percent of such amount. In situations where an
agreement holder pays an invoice in part, but not in full, within the
required timeframe, any CMP imposed by CMS would be based only on the
outstanding invoiced amount that was not paid within the required
timeframe. Additionally, while the amount of a CMP may be reduced by
any invoiced amount the agreement holder pays after the 38-day
timeframe, such late payments will not relieve the agreement holder of
its obligation to pay the additional 25 percent penalty, which will be
assessed on all invoiced amounts not paid within the required
timeframe, as proposed at Sec. 423.2756(b).
We propose at Sec. 423.2768(d) that, if after issuing a notice of
non-compliance CMS makes a determination to impose a CMP on an
agreement holder, CMS will send to such agreement holder a written
notice of the determination to impose a CMP. Under our proposal, CMS
would include the following 6 elements in the notice: a description of
the basis for the determination, the basis for the penalty, the amount
of the penalty, the date the penalty is due, the agreement holder's
right to a hearing according to the administrative appeal process and
procedures established in 42 CFR part 423, subpart T, and information
about where to file the request for a hearing.
To ensure a consistent approach to CMPs, we propose at Sec.
423.2768(e) applying existing appeal procedures for CMPs in 42 CFR part
423, subpart T to agreement holders appealing a CMP imposed under the
Manufacturer Discount Program. CMS has utilized this appeal process for
many years for CMP determinations affecting MA organizations and Part D
sponsors, including with respect to the Manufacturer Discount Program
under the Manufacturer Discount Program Final Guidance. CMS therefore
proposes to amend regulations in 42 CFR part 423, subpart T by
replacing paragraph Sec. 423.1000(a)(3), with new paragraphs (a)(3)(i)
and (a)(3)(ii). Our proposed revisions would specify that CMS must
impose a CMP on a manufacturer that fails to provide applicable
discounts for applicable drugs of the manufacturer pursuant to both the
terms of such manufacturer's Coverage Gap Discount Program agreement
and such manufacturer's Manufacturer Discount Program agreement.
We also propose to amend the definition of ``affected party'' at
Sec. 423.1002 to conform to other regulatory changes proposed in this
rule. Currently ``affected party'' is defined, in part, to include a
``any manufacturer (as defined in Sec. 423.2305)''. As discussed in
section II.C.3. of this preamble, however, we are proposing to revise
and move the definition of ``manufacturer'' from Sec. 423.2305 to
Sec. 423.100. As such, we propose to revise the definition of
``affected party'' to refer to ``for purposes of the Coverage Gap
Discount Program, any manufacturer (as defined in Sec. 423.100)''. For
purposes of the Manufacturer Discount Agreement, the appeal procedures
in 42 CFR part 423, subpart T could apply only to a manufacturer that
is an ``agreement holder'' since an ``agreement holder,'' as defined at
proposed Sec. 423.2704, is a manufacturer that has executed and has in
effect its own Manufacturer Discount Program agreement in accordance
with Sec. 423.2708(b)(1). As such, we further propose to revise the
definition of ``affected party'' at Sec. 423.1002 to specify ``for
purposes of the Manufacturer Discount Program, any manufacturer that is
an agreement holder (as defined in Sec. 423.2704)''.
Section 1128A(c)(2) of the Act specifically requires that CMS not
collect a CMP until the affected party has received written notice and
been given an opportunity for a hearing. Accordingly, we propose to
codify at Sec. 423.2768(f)(1) that CMS may not collect a CMP until the
affected party (as defined at Sec. 423.1002) has received notice and
the opportunity for a hearing under section 1128A(c)(2) of the Act.
We propose to codify timing requirements for collecting CMPs that
are assessed under the Manufacturer Discount Program in alignment with
section 120.3 of the Manufacturer Discount Program Final Guidance and
with existing CMP appeal procedures codified in 42 CFR part 423,
subpart T. Specifically, we propose at Sec. 423.2768(f)(2) that an
agreement holder that has received from CMS a notice of determination
to impose a CMP must pay such CMP in full within 60 calendar days of
the date of the CMS notice of determination, except as provided in
Sec. 423.2768(f)(3). At Sec. 423.2768(f)(3), we propose that if the
agreement holder requests a hearing to appeal in accordance with 42 CFR
part 423, subpart T, the CMP is due, as applicable, once the
administrative process specified in subpart T has concluded. We further
propose at Sec. 423.2768(f)(4) that CMS will initiate the collection
of a CMP owed by an agreement holder either following the expiration of
60 days from the date of the CMS notice of determination to impose a
CMP, or, if later, the conclusion of the administrative process
specified in 42 CFR part 423, subpart T, as applicable.
Section 1860D-14C(e)(2) of the Act makes the provisions of section
1128A of the Act (except for subsections (a) and (b) of section 1128A
of the Act) applicable to CMPs imposed under the Manufacturer Discount
Program. We propose to codify this requirement at Sec. 423.2768(g).
At Sec. 423.2768(h), we propose that, in the event an agreement
holder declares bankruptcy, as described in title 11 of the United
States Code, and, as a result of such bankruptcy, fails to pay the
total sum of the CMPs imposed, the government reserves the right to
file a proof-of-claim and take any other action under bankruptcy law,
as appropriate, to attempt to recover such unpaid amounts and any CMPs
imposed by CMS under these proposed regulations.
17. Severability
The Manufacturer Discount Program provisions proposed herein are
separate and severable from one another. If any of these provisions,
once finalized, is held to be invalid or unenforceable by its terms, or
as applied to any person or circumstance, or stayed pending further
agency action, it is our intention that such provision shall be
severable from this rule and not affect the remainder thereof, or the
application of such provision to other persons not similarly situated
or to other, dissimilar circumstances.
D. Definition of Creditable Coverage
Section 1860D-13(b) of the Act contains provisions related to late
enrollment penalties (LEPs), which are
[[Page 54935]]
increases in monthly beneficiary premiums for individuals without
creditable coverage for a continuous period of Part D eligibility of 63
days or longer prior to Part D enrollment. Per section 1860D-13(b)(5)
of the Act, coverage meets the creditable coverage requirement ``only
if the coverage is determined (in a manner specified by the Secretary)
to provide coverage of the cost of prescription drugs the actuarial
value of which (as defined by the Secretary) to the individual equals
or exceeds the actuarial value of standard prescription drug
coverage.''
The allowable methodologies used to determine creditable coverage
have been updated a few times since the start of the Part D program,
including most recently for CY 2025 and CY 2026 in the Final CY 2025
Part D Redesign Program Instructions and Final CY 2026 Part D Redesign
Program Instructions.\31\ Under changes to Part D made by the IRA, the
definition of creditable prescription drug coverage at Sec. 423.56(a)
was modified in these Program Instructions. Prior to the Final CY 2025
Part D Redesign Program Instructions, Sec. 423.56(a) specified that
prescription drug coverage would be considered creditable ``only if the
actuarial value of the coverage equals or exceeds the actuarial value
of defined standard prescription drug coverage under Part D in effect
at the start of such plan year, not taking into account the value of
any discount or coverage provided during the coverage gap, and
demonstrated through the use of generally accepted actuarial principles
and in accordance with CMS guidelines.'' We now describe historical
changes to the creditable coverage definition and allowable
methodologies in greater detail.
---------------------------------------------------------------------------
\31\ Draft CY 2025 Part D Redesign Program Instructions
available at https://www.cms.gov/files/document/draft-cy-2025-part-d-redesign-program-instruction.pdf.
Final CY 2025 Part D Redesign Program Instructions available at
https://www.cms.gov/files/document/final-cy-2025-part-d-redesign-program-instructions.pdf.
Draft CY 2026 Part D Redesign Program Instructions available at
https://www.cms.gov/files/document/draft-cy-2026-part-d-redesign-program-instructions.pdf.
Final CY 2026 Part D Redesign Program Instructions available at
https://www.cms.gov/files/document/final-cy-2026-part-d-redesign-program-instruction.pdf.
---------------------------------------------------------------------------
Since the start of the Part D program in 2006, CMS, consistent with
section 1860D-13 of the Act, has permitted an entity offering a group
health plan that is not applying for the retiree drug subsidy (RDS)
under section 1860D-22(a) of the Act \32\ to use either actuarial
equivalence testing or the creditable coverage ``simplified
determination methodology'' to determine whether its prescription drug
coverage is creditable. Some group health plans would undertake
considerable workloads in conducting in-house actuarial testing, while
others would use the simplified approach presented in the ``Updated
Creditable Coverage Guidance,'' which we released on September 18,
2009. Under the simplified approach, coverage would be considered
creditable if it:
---------------------------------------------------------------------------
\32\ The attestation of actuarial equivalence requirements for
qualified retiree prescription drug plans (also known as plans
receiving the Retiree Drug Subsidy) are set forth in section 1860D-
22 of the Act and codified in Sec. 423.884.
---------------------------------------------------------------------------
Provides coverage for brand and generic prescriptions;
Provides reasonable access to retail providers;
The plan is designed to pay on average at least 60 percent
of participants' prescription drug expenses; and
Satisfies at least one of the following:
++ The prescription drug coverage has no annual benefit maximum or
a maximum annual benefit payable by the plan of at least $25,000, or
++ The prescription drug coverage has an actuarial expectation that
the amount payable by the plan will be at least $2,000 annually per
Medicare eligible individual.
++ For entities that have integrated health coverage, the
integrated health plan has no more than a $250 deductible per year, has
no annual benefit maximum, or a maximum annual benefit payable by the
plan of at least $25,000, and has no less than a $1,000,000 lifetime
combined benefit maximum.
The IRA eliminated the coverage gap phase and sunset the Coverage
Gap Discount Program (CGDP) effective December 31, 2024. The Medicare
Part D Manufacturer Discount Program (Manufacturer Discount Program)
replaced the CGDP beginning January 1, 2025. The IRA revised section
1860D-22(a)(2)(A) of the Act to specify that any discount provided
pursuant to the Manufacturer Discount Program established by the IRA
under section 1860D-14C of the Act is not taken into account when
determining the actuarial value of qualified retiree coverage.
Additionally, section 1860D-14C(g)(1)(B) of the Act excludes enrollees
in a qualified retiree prescription drug plan from the definition of
applicable beneficiary for the purposes of the Manufacturer Discount
Program. The changes made by the IRA required us to revise the existing
regulatory definition of creditable prescription drug coverage in Sec.
423.56(a). Under the requirement in section 11201(f) of the IRA that we
use program instruction or other forms of program guidance to implement
section 11201 of the IRA for 2025 and 2026, we issued a revised
regulatory definition of creditable prescription drug coverage in Sec.
423.56(a) in the Final CY 2025 Part D Redesign Program Instructions and
Final CY 2026 Part D Redesign Program Instructions. In 2025 and 2026,
the definition of creditable coverage reads as follows (bolded and
italicized text indicates the language we added in light of the IRA):
Creditable prescription drug coverage means any of the following
types of coverage listed in paragraph (b) of this section only if the
actuarial value of the coverage equals or exceeds the actuarial value
of defined standard prescription drug coverage under Part D in effect
at the start of such plan year, not taking into account the value of
any discount provided under section 1860D-14C of the Social Security
Act, and demonstrated through the use of generally accepted actuarial
principles and in accordance with CMS guidelines.
In the Draft CY 2025 Part D Redesign Program Instructions, we
proposed that because of the IRA changes to the Part D benefit, the
simplified determination methodology would no longer be a valid
methodology to determine whether such an entity's prescription drug
coverage is creditable as of 2025. For instance, the increased plan
liability in the catastrophic phase of the defined standard benefit
requires sponsors to pay more than the 60 percent specified in the
current simplified determination methodology and, therefore, continuing
to use 60 percent would not satisfy requirements for actuarial
equivalence for creditable coverage. We received several comments on
the Draft CY 2025 Part D Redesign Program Instructions that raised
concerns about the potential risk that a large number of Part D
eligible individuals would no longer have creditable coverage through
their group health plan if the existing simplified determination
methodology were no longer available for 2025. Commenters were also
concerned that group health plan sponsors would not have sufficient
time to consider the impact of the Part D benefit changes made by the
IRA to make decisions about their benefit offerings in time for 2025
coverage.
In response to those comments, in the Final CY 2025 Part D Redesign
Program Instructions we recognized the IRA's sweeping changes to the
Part D benefit in CY 2025, which, if coupled with the retirement of the
creditable simplified
[[Page 54936]]
determination methodology, could pose various challenges for group
health plan sponsors and could have an adverse effect on certain Part D
eligible individuals who could lose creditable coverage and be at risk
for the Part D LEP. After consideration of the comments received and
available options to mitigate potential disruptive effects of the Part
D redesign on the group health plan market and the Part D eligible
individuals served by such group health plans, we decided to continue
to permit use of the creditable coverage simplified determination
methodology, without modification to the existing parameters, for CY
2025 for group health plan sponsors not applying for the RDS. By
permitting continued use of the creditable coverage simplified
determination methodology for 2025, we stated we would have additional
time to better assess the various impacts of the Part D redesign and
evaluate modifications to this methodology to ensure Part D eligible
individuals with creditable coverage continue to have prescription drug
coverage that is at least as good as defined standard Part D coverage.
We committed to re-evaluating the continued use of the existing
simplified determination methodology, or establish a revised one, for
2026.
For 2026, the Final CY 2026 Part D Redesign Program Instructions
adopted a revised simplified determination methodology for non-RDS
group health plans to determine whether their prescription drug
coverage is creditable. Under the revised simplified determination
methodology, coverage is deemed to provide prescription drug coverage
with an actuarial value that equals or exceeds the actuarial value of
defined standard Part D coverage if it meets all of the following
standards:
Provides reasonable coverage for brand name and generic
prescription drugs and biological products;
Provides reasonable access to retail pharmacies; and
Is designed to pay on average at least 72 percent of
participants' prescription drug expenses.
The revised simplified determination methodology retained some
parameters of the prior methodology, such as a requirement for
reasonable coverage of brand and generic prescription drugs and
reasonable retail pharmacy access. We added coverage of biological
products due to changes in the prescription drug landscape since the
prior methodology was developed and made other updates for accuracy. We
removed the requirements related to annual and lifetime benefit
maximums because changes to the health insurance landscape under the
Affordable Care Act have essentially eliminated such limitations among
group health plans. We also removed requirements related to an annual
deductible, because outside of the Medicare program it is unusual for
health and drug coverage to be separate benefits, and integrated health
and drug plans could have a significantly higher deductible than
standard Part D coverage but still offer comparable drug coverage.
Although plans with higher annual deductibles (including high
deductible health plans) might have appeared less likely to meet the
requirement to pay at least 72 percent of prescription drug expenses,
such risk may be mitigated through other aspects of the benefit such as
not applying a deductible to preventive (that is, maintenance)
medications, a reasonable and supportable allocation of the deductible
attributable to prescription drug expenses, or offering lower cost
sharing than standard Part D coverage once the deductible is met.
Under the revised simplified methodology for 2026, the group health
plan coverage must be designed to pay at least 72 percent of
participants' prescription drug expenses, versus 60 percent under the
prior methodology. We made this revision because of program changes in
Part D--in particular, the benefit changes mandated by the IRA, which
significantly enhanced the Part D defined standard benefit. These
changes--which included a $35 cost sharing cap on a month's supply of
each covered insulin product, access to recommended adult vaccines
without cost sharing, the implementation of an annual out-of-pocket
threshold ($2,100 for CY 2026), and the elimination of the coverage gap
phase of the benefit--increased the proportion of drug costs paid by
the Part D plan sponsor. In light of the more robust Part D benefit
under the IRA, we determined that the 60 percent value was no longer an
accurate representation of the value of the Part D benefit and that
group health plan coverage for 2026 should be designed to pay on
average at least 72 percent of participants' prescription drug expenses
in order to provide coverage to the individual that equals or exceeds
the actuarial value of standard Part D coverage, as required by section
1860D-13(b)(5) of the Act. We estimated the actuarial value of the
defined standard benefit in 2026 using 2023 Part D claims experience
under the projected 2026 benefit structure. The 2026 benefit parameters
were deflated to a 2023 dollar basis. We estimated that the actuarial
value increased to 72 percent, primarily as a result of the changes
made by the IRA to the Part D defined standard benefit.
The Draft CY 2026 Part D Redesign Program Instructions stated that
non-RDS group health plans could make the determination of creditable
coverage either by (1) determining whether the actuarial value of the
coverage equals or exceeds the actuarial value of defined standard Part
D coverage, demonstrated through generally accepted actuarial
principles, or (2) using the revised simplified determination
methodology described previously. In response to comments received
requesting a phased in approach to this change, in the Final CY 2026
Part D Redesign Program Instructions, we decided to allow for a
transition year whereby non-RDS group health plans that opted to make
the determination of creditable coverage through the simplified
determination methodology were permitted for 2026 to use either the
2009 simplified determination methodology (that is, among other
requirements, at least 60 percent of prescription drug expenses) or the
revised simplified determination methodology (that is, among other
requirements, at least 72 percent of prescription drug expenses) to
determine whether their prescription drug coverage is creditable. We
determined that this transitional policy for CY 2026 was appropriate to
minimize potential risks to the employer group market and to Part D
eligible individuals who may no longer have access to creditable
coverage through an employer plan. In the Final CY 2026 Part D Redesign
Program Instructions, we also stated our intention to propose to no
longer permit use of the 2009 simplified determination methodology for
CY 2027.
As the IRA's directive to implement the Part D redesign by program
instruction or other forms of program guidance expires in 2027, we
propose codifying in Sec. 423.56(a) the revised definition of
creditable coverage in the Final CY 2026 Part D Redesign Program
Instructions to account for the Manufacturer Discount Program. We also
propose to amend Sec. 423.56(a) to sunset use of the 2009 simplified
determination methodology and codify the revised simplified
determination methodology, starting with 2027. In Sec. 423.56(a), we
propose to require that non-RDS group health plans may either use
actuarial equivalence testing under Sec. 423.56(a)(1) or the revised
simplified determination methodology under Sec. 423.56(a)(2) and in
place for CY 2026, with one modification from 72 to 73 percent of
prescription drug costs the
[[Page 54937]]
non-RDS group health plan must cover compared with coverage under a
Part D defined standard plan.
To determine the percent of prescription drug costs that must be
covered to be creditable, our modeling is based on the prescription
drug event (PDE) data for a recent year. We modify the claims line by
line to adjust for benefit differences while maintaining actual
utilization patterns. For the purposes of determining what the
simplified determination value should be for a given future year, we
readjudicate all claims as they would have been paid under the defined
standard benefit design for the year we are projecting. This process
also requires estimating the benefit parameters for the year of
interest and deflating the values to align with the historical PDE
experience year we are using in our projection. After the PDE records
are adjusted to the benefit design of the future year, we aggregate the
results to determine the average percentage of gross drug cost that
would be covered by a defined standard plan. We use this value rounded
to the nearest whole percentage point as the minimum percent of
participants' prescription drug expenses that the non-RDS health plan
benefit needs to be designed to pay in order to qualify as creditable
coverage.
As discussed and consistent with the methodology described
previously in this section, we estimated the actuarial value of the
defined standard benefit for 2026 using 2023 Part D claims experience
under the projected 2026 benefit levels deflated to a 2023 dollar basis
to arrive at the requirement that a non-RDS health plan's benefit must
be designed to pay on average 72 percent of participants' prescription
drug expenses to meet the conditions of the revised simplified
determination methodology. For 2027, this model estimates an actuarial
value of 73 percent for the defined standard benefit. In subsequent
years, this value is projected to increase, ultimately reaching 75
percent in 2030 and stabilize thereafter. Accordingly, we propose a
minimum of 73 percent instead of 72 percent for 2027. We further
propose that we will update this figure for future years in a time and
manner as we determine, consistent with the actuarial equivalence
requirements in section 1860D-13(b)(5) of the Act and the methodology
described earlier in this section, via subregulatory guidance, such as
a memo issued by the Health Plan Management System (HPMS). We would
release this guidance in advance of the yearly bid submission deadline
for plan sponsors to take into account as they prepare their bids.
As described previously, the proposed changes to Sec. 423.56
retire the simplified approach presented in the ``Updated Creditable
Coverage Guidance'' that we released on September 18, 2009, and
generally proposes to codify the options available to plans in the
Final CY 2026 Part D Redesign Program Instructions: choosing between
conducting actuarial equivalence testing themselves or the revised
simplified determination methodology. Non-RDS plans using either
approach in the proposed Sec. 423.56(a) can attest to the creditable
coverage of their plan offerings, thereby ensuring individuals in
creditable non-RDS plans will not owe an LEP upon enrollment in a Part
D plan. The proposed Sec. 423.56 requirements have mostly been
previously implemented and our proposal in this rulemaking is similar
to the ways plans assessed creditable coverage in 2026. We do not
believe that the proposed changes to the regulatory text would have a
significant impact on plan sponsors or individuals. There is no change
to paperwork burden to plans or individuals.
E. Outlier Prescriber Criteria
1. Background
Section 6065 of the Substance Use Disorder Prevention that Promotes
Opioid Recovery and Treatment for Patients and Communities (SUPPORT)
Act (Pub. L. 115-271) added subparagraph (D) to section 1860D-4(c)(4)
of the Act, which requires the Secretary to identify Part D outlier
prescribers of opioids, using the valid prescriber National Provider
Identifier (NPI) included on claims for covered part D drugs, and
notify those prescribers that they have been identified as outliers.
The notifications provided to prescribers identified as outliers
include information on how the prescriber compares to other prescribers
within the same specialty and geographic area, as well as resources on
proper prescribing methods.
The Secretary is required to establish thresholds for identifying
whether a prescriber is an outlier based on prescribers in the same
specialty and geographic area, with certain exclusions. We currently
define outlier prescribers as those in the top 25th percentile when
compared to their peers (that is, prescribers in the same National Plan
& Provider Enumeration System (NPPES) taxonomy and State) for both (1)
co-prescribing opioids and benzodiazepines, and (2) the average daily
morphine milligram equivalent (MME) prescribed to those patients.
Exclusions to this methodology include (1) beneficiaries who have
cancer or sickle cell disease diagnosis, are enrolled in hospice, or
reside in a long-term care facility; and (2) providers subject to a
current CMS or HHS Office of Inspector General (``HHS-OIG'')
investigation. Over time, should the opioid crisis continue to evolve
and CDC practice guidelines change, we will make further adjustments to
the methodology, as appropriate, to ensure beneficiary safety, as well
as alignment with clinical standards and regulatory requirements that
govern the Medicare Part D program. Our current outlier prescriber
methodology is available on the CMS website (https://www.cms.gov/files/document/methodology-comparison.pdf), and any future updates to the
methodology will be made at this website location.
Section 6065 of the SUPPORT Act also established additional
requirements for outlier prescribers that are identified by us as
``persistent'' at section 1860D-4(c)(4)(D)(v) of the Act, although it
does not provide criteria or thresholds to determine persistently
identified outlier prescribers of opioids. First, we may require a
persistent outlier to enroll in the Medicare program but only after
other appropriate remedies have been provided, such as receiving
technical assistance on best practices related to prescribing opioid
and non-opioid pain management therapies through entities funded
through section 6052 of the SUPPORT Act. Second, we are required to
communicate information on such prescribers to Part D plan sponsors no
less frequently than annually. Considering the significant implications
of being identified as an outlier prescriber of opioids, including a
persistent outlier, we believe it prudent to clearly outline the key
criteria for such a designation in regulation.
2. Proposed Provisions
First, to reflect the requirements surrounding the Secretary's
identification of an outlier prescriber of opioids under section 1860D-
4(c)(4)(D)(ii) of the Act, we propose to define an outlier prescriber
of opioids as a statistical outlier when compared to their peers based
on NPPES taxonomy and state. Second, given the potential impact(s) of
being identified as a persistent outlier prescriber of opioids (for
example, the potential for becoming a lead for a Part D plan sponsor
investigation), we are proposing and seeking public comment on what
criteria should apply for designation as a persistent outlier
prescriber of opioids. We propose to establish a threshold to identify
persistent outlier prescribers of
[[Page 54938]]
opioids as those outlier prescribers who receive three consecutive
outlier prescriber notifications from CMS based on the same
methodology. If there is an update to the methodology, only prescribers
that have been identified three times by the same methodology would be
considered ``persistent.'' We seek comments on this threshold.
Specifically, we propose to add a paragraph (f) under Sec.
423.504:
(f) Outlier Prescribers of Opioids.
++ CMS will identify and send notifications to outlier prescribers
of opioids, which includes information about how the prescriber
compares to other specified prescribers and resources on proper
prescribing methods.
++ At least annually, CMS will communicate information about
persistent outlier prescribers of opioids to all Part D plan sponsors.
We also propose to add the following definitions under Sec. 423.4:
Outlier prescriber of opioids means a prescriber who is a
statistical outlier compared to their peers in a specialty and
geographic area.
Specialty means the National Plan and Provider Enumeration System
(NPPES) taxonomy of a prescriber.
Geographic area means the State in which a prescriber is
practicing.
Persistent outlier prescriber of opioids means an outlier
prescriber identified by CMS in three consecutive outlier prescriber
notifications.
F. Reopening and Payment Appeals
The Inflation Reduction Act of 2022 (Pub. L. 117-169) made several
amendments to Part D of Title XVIII of the Social Security Act (the
Act), including adding section 1860D-14C of the Act, which describes
the Manufacturer Discount Program; section 1860D-14D of the Act, which
describes the Selected Drug Subsidy Program; and section 1860D-15(h) of
the Act, which describes the temporary retrospective subsidy for the
reduction in cost-sharing and deductible for adult vaccines recommended
by the advisory committee on immunization practices (ACIP) and insulin.
The temporary retrospective subsidy for ACIP-recommended adult vaccines
and insulin was limited to contract year 2023 and is hereinafter
referred to as the Inflation Reduction Act Subsidy Amount (IRASA).
In subregulatory guidance, we described the reconciliation and
payment determination processes for the Manufacturer Discount Program,
selected drug subsidy, and IRASA.\33\ For the Manufacturer Discount
Program and the selected drug subsidy, we make monthly prospective
payments for estimated costs submitted with bids, then make final
payments based on the a plan's actual costs after a coverage year after
obtaining all of the information necessary to determine the amount of
payment through cost-based reconciliations.
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\33\ See the HPMS memorandum, Revised Medicare Part D
Manufacturer Discount Program Final Guidance, December 20, 2024
(available at https://www.cms.gov/files/document/revised-manufacturer-discount-programfinal-guidance122024.pdf); Final CY
2026 Part D Redesign Program Instructions (available at https://www.cms.gov/files/document/final-cy-2026-part-d-redesign-program-instruction.pdf); and HPMS memorandum, PDE Reporting Instructions
for Implementing the Cost Sharing Maximums Established by the
Inflation Reduction Act for Covered Insulin Products and ACIP-
Recommended Vaccines for Contract Year 2023, September 26, 2022
(available https://www.cms.gov/files/document/2023-pde-reporting-instructions.pdf).
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IRASA is the difference between the beneficiary cost-sharing for a
covered insulin product or an ACIP-recommended adult vaccine under the
plan's 2023 benefit design and the applicable statutory maximum cost-
sharing ($35 for each covered insulin product and $0 for ACIP-
recommended adult vaccines). The difference was reimbursed by Medicare
during the 2023 Part D payment reconciliation. We propose to amend
Sec. 423.308 to add the definition of Inflation Reduction Act Subsidy
Amount (IRASA).
We propose that the Manufacturer Discount Program reconciliation,
selected drug subsidy reconciliation, and IRASA reconciliation payment
determinations would be payment determinations that may be reopened by
CMS under Sec. 423.346 and would also be appealable by the Part D
sponsors under Sec. 423.350. Therefore, we propose to update the
existing regulation concerning the reopening of final payment
determinations and the existing payment appeals regulation by adding
the Manufacturer Discount Program reconciliation, selected drug subsidy
reconciliation, and IRASA reconciliation payment determinations. We
also propose to amend the time for filing a payment appeal under the
existing payment appeals provision.
1. Definition of Inflation Reduction Act Subsidy Amount (IRASA)
Section 1860D-2(b)(9) of the Act imposes a $35 monthly limit on
cost sharing for a month's supply of each covered insulin product
throughout all phases of the Part D benefit for CYs 2023, 2024, and
2025. For CY 2026 and each subsequent year, this limit is the lesser
of: (1) $35, (2) an amount equal to 25 percent of the maximum fair
price established for the covered insulin product in accordance with
Part E of title XI of the Act; or (3) an amount equal to 25 percent of
the negotiated price, as defined in Sec. 423.100, of the covered
insulin product under the Part D Prescription Drug Plan (PDP) or
Medicare Advantage Prescription Drug (MA-PD) plan. Section 1860D-
2(b)(8) of the Act requires the elimination of beneficiary cost sharing
for ACIP-recommended adult vaccines that are administered in accordance
with the ACIP recommendation (hereafter referred to as ``ACIP-
recommended adult vaccines'') under a Part D plan throughout the entire
Part D benefit beginning January 1, 2023. Section 1860D-15(h) of the
Act requires that a temporary retrospective subsidy be paid to Part D
plans for the reduction in cost sharing and the elimination of the
deductible for ACIP-recommended adult vaccines and covered insulin
products during the 2023 plan year--the Inflation Reduction Act Subsidy
Amount (IRASA).
We propose to amend Sec. 423.308 to add the definition of
Inflation Reduction Act Subsidy Amount (IRASA). Under our proposed
rule, Inflation Reduction Act Subsidy Amount (IRASA) would mean a
temporary retrospective subsidy paid to Part D plan sponsors for
contract year 2023 for the statutory reduction in cost-sharing and
deductible for covered insulin products or for advisory committee on
immunization practices (ACIP)-recommended adult vaccines administered
in accordance with the ACIP recommendation and is equal to the
difference between the following: (1) The beneficiary cost-sharing for
a covered insulin product or an ACIP-recommended adult vaccine under
the plan's approved bid submitted under Sec. 423.265 for contract year
2023, and (2) the applicable statutory maximum cost-sharing for the
covered insulin product or for the ACIP-recommended adult vaccine for
contract year 2023.
2. Reopenings
Under the authority under section 1860D-15(f)(1)(B) of the Act, the
Secretary has the right to inspect and audit any books and records of a
Part D sponsor or MA organization that pertain to the information
regarding costs provided to the Secretary. We stated in our final rule,
``Medicare Program; Medicare Prescription Drug Benefit,'' which
appeared in the January 28, 2005 Federal Register (70 FR 4194, 4316),
that this right to inspect and audit would not be meaningful, if upon
finding mistakes under such audits, the Secretary was not able to
reopen final payment determinations. Therefore, we
[[Page 54939]]
established the reopening provision at Sec. 423.346, which allows CMS,
at its discretion, to reopen and revise initial or reconsidered
specified payment determinations. Paragraph (a) of Sec. 423.346 lists
the payment determinations that we may reopen and revise. These payment
determinations include the final amount of direct subsidy described in
Sec. 423.329(a)(1), final reinsurance payments described in Sec.
423.329(c), the final amount of the low-income subsidy described in
Sec. 423.329(d), and final risk corridor payments as described in
Sec. 423.336. In our final rule, ``Medicare Program; Contract Year
2016 Policy and Technical Changes to the Medicare Advantage and the
Medicare Prescription Drug Benefit Programs,'' which appeared in the
February 12, 2015 Federal Register (80 FR 7912, 7936), we added the
Coverage Gap Discount Program reconciliation payment to the list of
payment determinations that we may reopen and revise.
We propose to amend Sec. 423.346(a) to add the Manufacturer
Discount Program reconciliation payment determination, the selected
drug subsidy reconciliation payment determination, and the IRASA
reconciliation payment determination to the list of payment
determinations that we may reopen and revise. Under our proposal, these
payment determinations would be subject to reopening consistent with
the current reopening guidelines described at Sec. 423.346, which are
explained in detail in our final rule, ``Medicare Program; Changes to
the Medicare Advantage and the Medicare Prescription Drug Benefit
Program for Contract Year 2024--Remaining Provisions and Contract Year
2025 Policy and Technical Changes to the Medicare Advantage Program,
Medicare Prescription Drug Benefit Program, Medicare Cost Plan Program,
and Programs of All-Inclusive Care for the Elderly (PACE),'' which
appeared in the April 23, 2024 Federal Register (89 FR 30448, 30460)
(hereinafter referred to as the Contract Year 2025 Final Rule).
Under our proposal, the selected drug subsidy reconciliation
payment determination and the IRASA reconciliation payment
determination would be included in scheduled global reopenings and
could be included in targeted reopenings, which are defined at Sec.
423.308 (definition of Reopening). However, similar to the Coverage Gap
Discount Program reconciliation payment determination, we anticipate
that we would rarely reopen the Manufacturer Discount Program
reconciliation payment determination. This is because Manufacturer
Discount Program invoicing continues after the Manufacturer Discount
Program reconciliation, and sponsors receive payments from the
pharmaceutical manufacturers for a total of 17 quarters.\34\ Under our
proposal and similar to current guidance in the CY 2025 Final Rule, we
would also be able to reopen and revise the Manufacturer Discount
Program reconciliation, selected drug subsidy reconciliation, and the
IRASA reconciliation payment determinations, as necessary, to correct
certain issues such as a CMS-identified problem with an internal CMS
file that we used in a payment reconciliation.
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\34\ See the Medicare Part D Coverage Gap Discount Program
(CGDP) and Manufacturer Discount Program (MDP) Calendar, available
at https://tpadministrator.com/internet/tpaw3_files.nsf/F/
TPACGDP_MDP_Calendar_2024-2028_12062024.pdf/$FILE/
CGDP_MDP_Calendar_2024-2028_12062024.pdf.
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3. Payment Appeals
Section 1860D-15(d)(1) of the Act gives the Secretary broad
authority to develop payment methodologies for payments described in
section 1860D-15 of the Act, and we use this broad authority to
establish a payment appeals process. Accordingly, in our final rule,
``Medicare Program; Medicare Prescription Drug Benefit,'' which
appeared in the January 28, 2005 Federal Register (70 FR 4194, 4316),
we added Sec. 423.350 to establish a payment appeals process for the
reconciled health status risk adjustment of the direct subsidy as
provided in Sec. 423.343(b); the reconciled reinsurance payments under
Sec. 423.343(c); the reconciled final payments made for low-income
cost sharing subsidies provided in Sec. 423.343(d); and the final
risk-sharing payments made under Sec. 423.336. In our final rule,
``Medicare Program; Contract Year 2016 Policy and Technical Changes to
the Medicare Advantage and the Medicare Prescription Drug Benefit
Programs,'' which appeared in the February 12, 2015 Federal Register
(80 FR 7912, 7938), we added the reconciled Coverage Gap Discount
Program payment to the list of payment determinations that could be
appealed under Sec. 423.350.
We propose to amend Sec. 423.350(a)(1) to add the following
payment determinations that would be subject to appeal under Sec.
423.350--the reconciled IRASA payment for contract year 2023,
reconciled Manufacturer Discount Program payment, and reconciled
selected drug subsidy payment. We note that the IRASA reconciliation
payment for contract year 2023 has already been made to Part D
sponsors. In subregulatory guidance, we explained that the Part D
sponsors could appeal the IRASA reconciliation payment
determination.\35\ We propose to include the IRASA reconciliation
payment determination in the appeals provision for consistency with the
proposed updates to Sec. 423.346, under which we would be able to
reopen the IRASA reconciliation payment determination. Indeed, we
anticipate that we would reopen the IRASA reconciliation during the
global reopening of the contract year 2023 Part D payment
reconciliation. Under our proposal, the reopened IRASA reconciliation
payment determination would be appealable under Sec. 423.350.
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\35\ HPMS memorandum, Completion of the 2023 Final Part D
Payment Reconciliation and the 2023 Inflation Reduction Act Subsidy
Amount (IRASA) Reconciliation, September 27, 2024 (available at
https://www.cms.gov/about-cms/information-systems/hpms/hpms-memos-archive-weekly/hpms-memos-wk-4-september-23-27).
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The Part D payment appeals process only applies to perceived errors
in the application of our payment methodology. The payment information
submitted by the Part D sponsor cannot be appealed through this
process. Part D sponsors are expected to submit payment information
correctly and within the established timeframes. We codified at Sec.
423.350(a)(2) that payment information submitted to us under Sec.
423.322 and reconciled under the various payment provisions is final
and may not be appealed nor may the appeals process be used to submit
new information after the submission of information necessary to
determine retroactive adjustments and reconciliations. We propose to
amend the regulation at Sec. 423.350(a)(2) to add language specifying
that information that is submitted and reconciled or used in the
payment calculations for the Manufacturer Discount Program
reconciliation, the selected drug subsidy reconciliation, and the IRASA
reconciliation are final and would not be appealable nor would the
appeals process be used to submit new information after the submission
of information necessary to determine these retroactive adjustments and
reconciliations.
We also propose to amend Sec. 423.350(a)(2) to add a reference to
Sec. 423.336, which describes the risk corridor payment, to correct an
inadvertent omission. The information that is submitted and used in the
payment calculations under Sec. 423.336 is final and would not be
appealable nor would the appeals process be used to submit new
information after the
[[Page 54940]]
submission of information necessary to determine that payment
determination.
4. Payment Appeals--Time for Filing
Under existing Sec. 423.350(b)(1), the payment appeal
(specifically, the request for reconsideration of the payment
determination) must be filed within 15 days from the date of the final
payment. We propose two amendments to Sec. 423.350(b)(1) to reflect
actual practice. First, we propose to amend 15 days to 15 calendar
days. Second, we propose that the appeal deadline would be based on the
release of the reconciliation reports to the Part D sponsors, as
opposed to the date of the final payment. The reconciliation reports
that CMS releases to the Part D sponsors are detailed reports that
specify the inputs and results of the payment reconciliation at the
plan-level. These detailed reports allow plans to understand how their
Part D payment reconciliation was calculated by us. Part D sponsors
currently appeal their payment determinations based on information in
the reconciliation reports. Therefore, we propose to update that the
time for filing an appeal would be within 15 calendar days from the
date we issue the payment reconciliation report for the payment
determination that is being appealed by the Part D sponsor.
The proposals described in this section of the final rule are
consistent with our current guidance and requirements. The proposed
changes are updates that do not place additional requirements on Part D
sponsors, nor do the proposed changes place any additional burden on
the Part D sponsors or their pharmacy benefit managers (PBMs).
Part D sponsors' compliance with this reopening process is
evidenced by each Part D sponsor's signed attestation certifying the
cost data (under Sec. 423.505(k)(3) and (5)) that we use in each of
the reopenings. In addition, the burden associated with the submission
of cost data is already approved under the OMB control numbers 0938-
0982 (CMS-10174) and 0938-0964 (CMS-10141).
We believe that the payment appeals process at Sec. 423.350 is an
administrative action or investigation with respect to a specific
party, which is exempt from the COI process. Therefore, as our changes
do not result in additional burden, we have not included a discussion
of this provision in the COI section of this rule.
We are not scoring this provision in the Regulatory Impact Analysis
section because industry is already complying with this process.
III. Enhancements to the Medicare Advantage and Medicare Prescription
Drug Benefit Programs
A. Revise List of Non-Allowable Special Supplemental Benefits for the
Chronically Ill (SSBCI) (Sec. 422.102)
The ``Medicare and Medicaid Programs; Contract Year 2026 Policy and
Technical Changes to the Medicare Advantage Program, Medicare
Prescription Drug Benefit Program, Medicare Cost Plan Program, and
Programs of All-Inclusive Care for the Elderly Final Rule'' appeared in
the April 15, 2025, Federal Register (90 FR 15792), hereafter referred
to as the April 2025 final rule. In this rule, CMS codified new
regulation language at 42 CFR 422.102(f)(1)(iii)(G) that cannabis
products are not allowable Special Supplemental Benefits for the
Chronically Ill (SSBCI), as they are illegal substances under federal
law.
Section 10113 of the Agriculture Improvement Act of 2018, also
known as the 2018 Farm Bill (Pub. L. 115-334,\36\) added a definition
of ``hemp'' to the Agricultural Marketing Act of 1946. Under this
definition, ``[t]he term `hemp' means the plant Cannabis sativa L. and
any part of that plant, including the seeds thereof and all
derivatives, extracts, cannabinoids, isomers, acids, salts, and salts
of isomers, whether growing or not, with a delta-9 tetrahydrocannabinol
(THC) concentration of not more than 0.3 percent on a dry weight
basis.'' In addition, section 12619 of the 2018 Farm Bill amended the
Controlled Substances Act (CSA) to exclude hemp from the CSA's
definition of marijuana.\37\ The Continuing Appropriations,
Agriculture, Legislative Branch, Military Construction and Veterans
Affairs, and Extensions Act, 2026, amends the definition of hemp to
exclude any cannabinoids that are not naturally found or produced in
the cannabis plant, cannabinoids that are synthesized outside of the
plant, and final form products for human use that contain more than 0.4
milligrams per container combined total of naturally occurring
tetrahydrocannabinols and other naturally produced cannabinoids
determined by the Secretary of Health and Human Services to have the
same effect. This amended definition of hemp takes effect on November
12th, 2026. Consequently, hemp and hemp-derived cannabis products that
meet the current 2018 definition are not federally controlled
substances through November 11th, 2026, and those that meet the amended
definition beginning on November 12th, 2026, will remain not federally
controlled substances as of that date. If such products comply with all
other applicable federal laws, including any future changes to the
definition of hemp and applicable provisions of the Federal Food, Drug,
and Cosmetic Act (FFDCA), then they are not illegal under federal law.
To reflect this distinction, CMS proposes amending Sec.
422.102(f)(1)(iii)(G) to state more precisely that cannabis products
that are illegal under applicable State or Federal law, including the
FFDCA, are not allowable as SSBCI.
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\36\ Agriculture Improvement Act of 2018, H.R.2, 115th Congress
(2018). https://www.congress.gov/bill/115th-congress/house-bill/2.
\37\ https://www.congress.gov/crs-product/
R44742#:~:text=The%202018%20farm%20bill%20further,regulations%2C%20an
d%20applicable%20state%20regulations.
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Currently, only one product that meets the definition of hemp under
the 2018 Farm Bill has been approved as a drug in the United States:
the prescription drug Epidiolex. CMS notes that Epidiolex has been
approved by the FDA to treat seizures and is covered under Medicare
Part D, so it would not be permitted to be offered as a Part C
supplemental benefit. In addition, in December 2018, FDA completed its
evaluation of three generally recognized as safe (GRAS) notices for the
following hemp seed-derived food ingredients: hulled hemp seed, hemp
seed protein powder, and hemp seed oil.\38\ FDA had no questions at
that time about the notifier's conclusion that the ingredients were
GRAS for their intended use in food. An ingredient that meets the GRAS
standard can be used in food without being required to undergo
premarket review and approval by FDA for that intended use.\39\
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\38\ https://www.fda.gov/food/hfp-constituent-updates/fda-responds-three-gras-notices-hemp-seed-derived-ingredients-use-human-food.
\39\ https://www.fda.gov/food/food-ingredients-packaging/generally-recognized-safe-gras.
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Therefore, this proposal would allow MA organizations to offer
hulled hemp seed, hemp seed protein powder, and hemp seed oil,
consistent with FDA's review of the GRAS notices,--as SSBCI to
qualifying enrollees, to the extent otherwise appropriate as SSBCI and
under federal and applicable state law. Additionally, at this time, any
cannabis product with a delta-9 THC content above the 0.3 percent
threshold is still considered marijuana, remains a Schedule I
controlled substance, and therefore is illegal under federal law and
would be subject to CMS's prohibition. Any product that does not comply
with the amended definition of hemp after the November 12th, 2026,
effective date will be a Schedule I controlled
[[Page 54941]]
substance as of that date, and therefore will be illegal under federal
law \40\ and subject to CMS's prohibition.
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\40\ Under the Controlled Substances Act, Schedule I controlled
substances may only be used for research purposes by practitioners
who are registered with DEA to conduct such research. 21 U.S.C.
822(b), 823(g)(2).
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Section 1852(a)(3)(D)(ii)(I) of the Act requires that an item or
service offered as an SSBCI must have a reasonable expectation of
improving or maintaining the health or overall function of the
chronically ill enrollee. There may be situations in which foods
containing one or more of these three specific ingredients meet the
``reasonable expectation of improving or maintaining the health or
overall function'' standard for SSBCI. For example, there is evidence
that hemp seed protein powder may offer nutritional benefits.\41\ CMS
reminds MA organizations about the importance of ensuring that the
items and services provided to enrollees, including any foods
containing these specific hemp-derived ingredients, meet the
requirements for being offered as an SSBCI. CMS notes that if this
proposal is finalized and MA organizations choose to offer any of these
three hemp-derived ingredients, they would be subject to all applicable
SSBCI requirements under Sec. 422.102(f), including the bibliography
requirements for SSBCI items and services set forth at 42 CFR
422.102(f)(3) to demonstrate through relevant acceptable evidence that
the item has a reasonable expectation of improving or maintaining the
health or overall function of a chronically ill enrollee.
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\41\ https://www.sciencedirect.com/science/article/pii/S221345302200235X.
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The proposed amended language also clarifies that MA organizations
remain prohibited from covering any cannabis product, including any
hemp-derived cannabis product, that is illegal under state law within
their service area regardless of the product's federal legal status.
While this proposal would modify existing policy, it is not
expected to have an impact on current operating expenses for MA
organizations as the proposal would not impose any new burden or
collection of information requirements.
CMS seeks comments on all aspects of this proposal and may consider
revisions to the final policy based on the comments received.
IV. Strengthening Current Medicare Advantage and Medicare Prescription
Drug Benefit Program Policies (Operational Changes)
A. Special Enrollment Period for Provider Terminations (Sec.
422.62(b)(23))
In the Medicare Program; Contract Year 2021 Policy and Technical
Changes to the Medicare Advantage Program, Medicare Prescription Drug
Benefit Program, and Medicare Cost Plan Program Final Rule (85 FR
33796) we codified at Sec. 422.62(b)(23) the special election period
(SEP) for Significant Change in Provider Network. Currently, when CMS
determines a change in a plan's provider network to be significant,
affected enrollees are eligible for this SEP and may use it to request
enrollment in another MA plan or to disenroll to original Medicare from
the MA plan that has changed its network. As described in Sec.
422.62(b)(23)(ii), enrollees are ``affected'' by a significant network
change and eligible for this SEP when they are assigned to, are
currently receiving care from, or have received care within the past
three months from a provider or facility being terminated from the MA
(or MA-PD) plan's provider network.
Changes to provider networks occur routinely throughout the year;
individual clinicians may relocate their practice, retire or expire
over the course of the year. For the discussion that follows, we wish
to distinguish these routine, smaller scale, changes in provider
networks from the more substantial changes, such as a large medical
group or hospital system leaving the network. CMS requires that MA
organizations notify enrollees of changes in a provider network
resulting from the termination--with or without cause--of a contract
with a provider organization pursuant to Sec. Sec. 422.111(e) and
422.2267(e)(12). This notification requirement is separate from, and
therefore not impacted by, the question of whether CMS would consider
the network change to be significant for purposes of the SEP described
in Sec. 422.62(b)(23). Further, it is longstanding CMS policy that MA
plan enrollees who believe they may be adversely impacted by a provider
termination may contact 1-800-MEDICARE to request an SEP due to
exceptional circumstances, such as situations where access to services
is compromised and adverse health consequences may result, including
interruptions in treatment. CMS reviews the supporting details and
documentation for these requests and determines eligibility for an
exceptional circumstances SEP on a case-by-case basis.
Historically, the types of provider network changes that have been
more likely to convey eligibility for the SEP for Significant Change in
Provider Network are those that go beyond individual or limited
provider terminations that occur during the routine course of plan
operations or have the potential to substantially impact a large number
of the MA organization's enrollees, such as terminated relationships
with multispecialty group practices or hospital systems. MA
organizations notify CMS of any no-cause provider termination that the
MA organization deems to be a significant provider termination at least
90 days prior to the effective date. After receiving such notification,
CMS implements an internal review process that evaluates the totality
of the circumstances around each termination to determine whether the
change in provider network is significant. The timeframe for CMS
determinations of a significant network change varies depending on the
circumstances of each case. If CMS determines that a provider
termination represents a significant change in the plan's provider
network, the CMS Account Manager for the MA organization notifies the
organization of the CMS determination and of the requirement to issue
written notification to affected enrollees of their eligibility for an
SEP, the start and end dates of the SEP, how to make use of the SEP and
also Medigap guaranteed issue (GI) rights in accordance with Sec.
422.62(b)(23)(iii) and Section 1882(s)(3)(D) of the Act. CMS provides
model language regarding the SEP and Medigap GI rights for the MA
organization to use in its notice to affected enrollees.\42\ Currently,
the requirement for written notification to enrollees regarding their
eligibility for the SEP for Significant Change in Provider Network
(Sec. 422.62(b)(23)(iii)) is separate and distinct from the
requirement that MA organizations provide enrollees advance notice of
routine provider terminations (Sec. Sec. 422.111(e) and
422.2267(e)(12)).
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\42\ Medicare Advantage Enrollment and Disenrollment Guidance
Appendices and Exhibits.
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Although CMS evaluates cases of possible significant network change
carefully and strives to reach a determination as expeditiously as
possible, we continue to look for ways to reduce the time it takes to
inform beneficiaries of their rights and their enrollment options.
Specifically, we are looking to streamline the currently
[[Page 54942]]
separate notification requirements for provider terminations and the
SEP for Significant Change in Provider Network. Accordingly, we are
proposing several enhancements to the current process by which an MA
enrollee is provided the option to change plans when one or more of
their plan providers are leaving the plan's network.
Specifically, at Sec. 422.62(b)(23) we propose to change the
eligibility criteria for the current SEP for Significant Change in
Provider Network to reflect that a determination of significant
provider network change by CMS or an MA organization is not necessary
for an enrollee who is affected by the provider network change to be
eligible for the SEP. As noted, it is longstanding CMS policy that MA
plan enrollees who believe they may be adversely impacted by any
provider termination, significant or otherwise, may contact 1-800-
MEDICARE to request an SEP due to exceptional circumstances. We propose
to retain the definition of an ``affected enrollee'' as an enrollee who
is assigned to, currently receiving care from, or has received care
within the past 3 months from a provider or facility being terminated.
As is the case for the current SEP for Significant Change in Provider
Network, the revised SEP, which we propose to name the SEP for Provider
Terminations, would begin the month the individual is notified of
eligibility for the SEP and would continue for an additional 2 calendar
months after the month in which the enrollee is notified of the SEP.
While we are not proposing any changes to the provider termination
notification timeliness requirements at Sec. 422.111(e), we believe
that it is in the best interests of both the MA organization and the
enrollee for this SEP information to be included in the provider
termination notice for affected enrollees, rather than require the MA
organization to issue a separate notice, as is most often the case
currently when CMS determines a network change to be significant.
Accordingly, at Sec. 422.2267(e)(12)(ii)(D), we are proposing that the
following information, currently provided to enrollees affected by a
network change determined by CMS to be significant, be included in the
provider termination notice.
Information about the Annual Coordinated Election Period
(AEP) and the MA Open Enrollment Period (MA-OEP);
Notification that the affected enrollee is eligible for a
special election period (SEP), as specified in Sec. 422.62(b)(23),
including the start and end dates of the SEP;
Medigap guaranteed issue (GI) rights; and
A note stating that individuals who have coverage through
an employer or union should contact their benefits administrator before
leaving their current MA plan to find out how making such a change may
affect their employer or union health benefits.
Requirements related to the model MA Provider Termination Notice
content are codified at Sec. 422.2267(e)(12); we propose to revise
Sec. 422.2267(e)(12)(ii)(D) to require that the information described
above be included in the notice.
Consistent with the current SEP for Significant Change in Provider
Network, the proposed SEP for Provider Terminations could be used by an
affected enrollee only once per provider network change. MA
organizations would be able to determine eligibility for the proposed
SEP for Provider Terminations based on beneficiary attestations of
election period eligibility, such that beneficiaries would not be
limited to requesting enrollment via 1-800-MEDICARE. An individual
would be able to attest directly to the plan that they were affected by
a provider termination.
In the final rule in which we codified the SEP for Significant
Change in Provider Network (85 FR 33796) we also codified the SEP to
enroll in a PDP for MA enrollees using the SEP provided in CMS's
regulations at 42 CFR 422.62(b)(23) to disenroll from an MA plan. We
are not proposing any changes to the eligibility criteria for Sec.
423.38(c)(30), meaning that this coordinating Part D SEP, codified at
Sec. 423.38(c)(30), will continue to allow MA enrollees to request
enrollment in a PDP if and when they use the SEP at Sec. 422.62(b)(23)
to disenroll from an MA plan.
CMS data suggests that use of the current SEP for Significant
Change in Provider Network by eligible beneficiaries is low. In 2024,
of the MA enrollees who were notified that they were eligible for the
SEP and could switch to another MA plan or disenroll from MA to
original Medicare, approximately 3.6 percent made an election of any
type. Thus, our experience shows that when enrollees are affected by a
provider termination and notified that they are eligible for a SEP to
change plans or switch to Original Medicare, presumably to follow their
provider, very few actually use the SEP. This leads us to conclude that
other factors, such as formulary, benefits, plan premium, cost sharing,
familiarity, and other plan attributes may play a role in the affected
enrollee's decision and may result in the enrollee choosing not to
leave their current plan.
We anticipate a one-time burden on MA organizations to update their
existing written provider termination notice in compliance with the new
required notice content that we are proposing at Sec.
422.2267(e)(12)(ii). We conclude that the proposed changes to the
regulatory text will not have any impact on the Medicare Trust Funds.
All information impacts related to the procedural steps plans must take
to determine eligibility for an election period have already been
accounted for under OMB control number 0938-0753 (CMS-R-267).
B. Coordination of Election Mechanisms for MA and Part D (Sec. Sec.
422.62, 422.66, 423.32, 423.36, and 423.38)
Section 1851(c) of the Act provides the Secretary with the
authority to establish a process by which MA enrollment elections
(hereinafter referred to as ``elections'') are made and changed,
including the form and manner in which they are changed. Section
1851(e)(4)(D) of the Act provides the Secretary with the authority to
establish Special Election Periods for exceptional conditions, during
which individuals may make elections. Section 1860D-1(b)(1)(B) of the
Act directs the Secretary to use rules related to enrollment,
disenrollment, termination, and change of enrollment for Part D
sponsors that are similar to those established for MA plans under
specified subsections of section 1851 of the Act. Section 1860D-
1(b)(1)(B)(ii) of the Act specifies that the Secretary shall use
section 1851(c) of the Act, other than paragraph (3)(A) and paragraph
(4) of such section, for Part D rules relating to exercise of choice.
Consistent with these sections of the Act, in 1998, we published a
final rule (63 FR 34968) to codify the Part C election process required
under section 1851(c) of the Act at Sec. 422.66. In 2005, we published
a final rule (70 FR 4194) to codify the Part D election process
required under section 1860D-1(b)(1)(B) of the Act at Sec. Sec. 423.32
and 423.36. The Parts C and D subpart B regulations set forth our
requirements with respect to the election process under Sec. Sec.
422.60 (election process), 422.66 (coordination of enrollment and
disenrollment through MA organizations), 423.32 (enrollment process),
and 423.36 (disenrollment process).
MA election requests, with few exceptions, are submitted by the
individual requesting enrollment in or disenrollment from a particular
MA plan. In certain circumstances, namely passive enrollment (a process
where
[[Page 54943]]
CMS initiates enrollment into another plan in cases of immediate plan
terminations, harm to beneficiaries, or for the promotion of integrated
care with state Medicaid agency approval) and default enrollment (a
process available only for integrated D-SNP enrollments), CMS directly
enrolls individuals and transmits an enrollment transaction to the
plan, which bypasses the usual process discussed later in this section.
Current Part C regulations at Sec. 422.60(e) specify that MA
organizations must have effective systems for receiving, controlling,
and processing election requests. After satisfying those requirements
and accepting an individual's election request, the MA organization
transmits the information necessary for CMS to add the individual to
its records as an enrollee of the MA organization. Current Part C
regulations at Sec. Sec. 422.66(a) and (b) specify that elections may
be made by filing appropriate election forms with the MA organization
or through other mechanisms as determined by CMS. The same process is
mirrored in current Part D regulations at Sec. Sec. 423.32(a) through
(d) and 423.36(a) and (b), whereby the Part D sponsor receives an
election request from an individual and then submits necessary
information to CMS.
Outside of circumstances where CMS directly enrolls an individual
into a plan (passive, default enrollment, etc.) most election requests
are filed with the MA organization or Part D sponsor, though the
election form or mechanism may differ. Election mechanisms are how an
individual communicates their election request to the MA organization
or Part D sponsor, whether on paper, over the phone, electronically,
etc. Even if an individual uses a CMS-operated election mechanism (1-
800-MEDICARE or the Online Enrollment Center), the election request is
still filed with the plan for processing.
Historically, CMS has regulated the required content of election
mechanisms under the ``form and manner'' authority specified at section
1851(c)(1) of the Act and codified at Sec. Sec. 422.60(c), 422.66(a),
423.32(a), and 423.36(a). Consistent with section 1851(e)(4) of the
Act, CMS has required CMS approval for certain election periods. For
example, consistent with the provisions in section 1851(e)(4)(C)
providing that a SEP may be available where an ``individual
demonstrates (in accordance with guidelines established by the
Secretary) that . . . the organization offering the plan substantially
violated a material provision of the organization's contract under this
part in relation to the individual . . . ,'' CMS's current regulations
governing the special enrollment period (SEP) for contract violation
(Sec. Sec. 422.62(b)(3) and 423.38(c)(8)) provides that the SEP is
available where an individual demonstrates to CMS that specified
criteria have been met. This SEP is only available once CMS determines
that a contract violation has occurred. An individual alleging a
contract violation must call 1-800-MEDICARE to explain their
circumstances and demonstrate to CMS that there was a violation. Once
eligibility is demonstrated, the individual can elect a new plan or
disenroll from their current plan and the election request is
subsequently transmitted to the plan to process. The requirement that
the individual demonstrate eligibility to CMS has been in place since
the SEP was first codified in a 1998 final rule (63 FR 34968, 34980)
and the process to demonstrate eligibility to CMS is also described in
section 30.6.28 of the Medicare Advantage and Part D Enrollment and
Disenrollment Guidance, see also MA-PD Plan Communications User Guide,
pg. 3-38.
There are other SEPs that are currently only available with prior
CMS approval, provided by CMS sending a notice or election request to
the MA organization or Part D sponsor. These SEPs are: SEP for
individuals who disenroll in connection with CMS sanction (Sec. Sec.
422.62(b)(5) and 423.38(c)(12)); SEP for individuals who were not
adequately informed of a loss of creditable prescription drug coverage
(Sec. Sec. 422.62(b)(20) and 423.38(c)(2)); and SEP for other
exceptional circumstances (Sec. Sec. 422.62(b)(27) and 423.38(c)(36)).
As described in CMS's Medicare Advantage and Part D Enrollment and
Disenrollment Guidance, Section 30.6, in order for CMS to review that
appropriate circumstances apply to allow for an SEP based on a CMS
sanction, an individual not receiving adequate information about loss
of creditable prescription drug coverage, or other exceptional
circumstances, plans must have prior approval from CMS to submit
enrollment transactions based on these SEPs.
We are proposing to codify our current policy that for elections
that are made based on certain special election periods, the
beneficiary at issue must either have CMS approval for the use of that
SEP through the use of a CMS-operated election mechanism (for example,
1-800-MEDICARE or the Online Enrollment Center (OEC)) or other means,
such as enrollee receipt of a notice. We propose this change to codify
longstanding guidance and practice requiring CMS approval for certain
SEPs. This policy allows for control over election periods and
mechanisms to ensure appropriate use and allows us to delineate a clear
process for each election. To accomplish this, we would propose to
establish at Sec. Sec. 422.66(g), 423.32(k), and 423.36(g) the
requirement that elections may require CMS approval based on the use of
specified SEPs. CMS approval would be provided for plan elections
either through the use of a CMS-operated election mechanism or through
the individual's receipt of a notice which explains eligibility for the
SEP and election instructions. As CMS approval would be an eligibility
criterion of the SEP, MA organizations and Part D plan sponsors may not
transmit elections to CMS using the specified SEPs without prior CMS
approval.
Under this proposal, we would codify these limitations for the
following SEPs:
SEP for individuals who disenroll in connection with CMS
sanction (Sec. Sec. 422.62(b)(5) and 423.38(c)(12));
SEP for individuals who were not adequately informed of a
loss of creditable prescription drug coverage (Sec. Sec. 422.62(b)(20)
and 423.38(c)(2));
SEP for contract violation (Sec. Sec. 422.62(b)(3) and
423.38(c)(8));
SEP for other exceptional circumstances (Sec. Sec.
422.62(b)(27) and 423.38(c)(36)).
These limitations would be codified at Sec. Sec. 422.62(b)(3),
(b)(5), (b)(20), (b)(27), and 423.38(c)(2), (c)(8), (c)(12), and
(c)(36). Language would be added to each SEP we propose to limit to
require CMS approval. The language would indicate that CMS approval is
required and reference how CMS approval would be indicated, either
through providing a notice or the acceptance of an election through a
CMS-operated mechanism. These limitations and applicable SEPs are also
described at Sec. Sec. 422.66(g)(2), 423.32(k)(2), and 423.36(g)(2).
We are proposing to codify these limitations in order to better
oversee the use of SEPs which may not be appropriate for plans to use
without prior CMS eligibility determination and approval. It would, for
example, be inappropriate for an organization to evaluate the claim
that another organization violated their contract with an individual,
or that the individual was impacted by conduct that was sanctioned by
CMS. In those cases, other organizations are not neutral arbiters of
eligibility as they have a financial interest in deeming the conduct of
other organizations as a contract violation or they lack the complete
information about the
[[Page 54944]]
circumstances of the sanctioned conduct. The SEP for individuals who
were not adequately informed of a loss of creditable prescription drug
coverage is similarly justified as requiring CMS approval prior to the
election request being filed with the plan for processing. The
eligibility determination for this SEP also requires evaluation of the
conduct of another organization or entity and whether they provided
adequate notice of the loss of creditable coverage. We believe these
SEP limitations would prevent organizations, who do not have
appropriate context, from incorrectly determining eligibility. This is
especially true for the SEP for other exceptional circumstances, which
covers situations not otherwise captured in the SEPs in regulation.
This SEP is determined on a case-by-case basis for circumstances that
warrant an enrollment opportunity given the exceptional conditions
experienced by the individual. In these types of cases, only CMS can
appropriately consider the circumstances of an individual's
eligibility.
In order to best facilitate CMS approval prior to the election
request being filed with the plan, these SEPs should only be available
through a CMS-operated mechanism, to allow the approval for the SEP to
be sent to the plan along with the election request for processing. The
requirement for certain SEPs to be approved by CMS first, before the
election is filed with the plan, does not preclude the involvement of
an agent or broker assisting the enrollee. The enrollee can meet with
an agent/broker for assistance in selecting the best plan for the
enrollee. The enrollee can then use the CMS mechanism, for example,
call 1-800-MEDICARE on their own or with the assistance of the agent/
broker. 1-800-MEDICARE and the OEC are capable of capturing the
involvement of the agent/broker and transmitting that information to
the newly selected plan when CMS sends the approved election request.
As the pre-existing limitations have been long-standing, previously
implemented and are currently being followed by plan sponsors, we
conclude that the proposed changes to the regulatory text will not
adversely impact plan sponsors, individuals, or agents/brokers, nor
would the proposed changes have any impact on the Medicare Trust Funds
or result in a paperwork burden. All information impacts related to the
procedural steps plans must take to receive and process election
requests have already been accounted for under OMB control numbers
0938-0753 (CMS-R-267) for Part C and 0938-0964 (CMS-10141) for Part D.
CMS welcomes comments on this proposal as well as comments on how
these SEPs can be further improved for beneficiaries.
C. Use and Release of Risk Adjustment Data
Section 1853(a) of the Act requires CMS to risk adjust payments
made to Medicare Advantage (MA) organizations. In order to carry out
risk adjustment, section 1853(a)(3)(B) of the Act requires MA
organizations to submit data regarding inpatient hospital services and
data regarding other services and other information the Secretary deems
necessary. Risk adjustment data are the data submitted to CMS by MA
organizations to carry out risk adjustment, including the development
and application of a risk adjustment payment model. Regulations at 42
CFR 422.310 establish requirements regarding the collection and
submission of risk adjustment data, as well as the allowable uses of
risk adjustment data and conditions under which the data can be
released.
The MA program now comprises 51 percent of the Medicare population,
and there has been a coinciding increase in the number and variety of
requests that CMS receives for risk adjustment data. This increase is
due to both the utility of the more detailed risk adjustment data that
CMS started collecting in 2012 (that is, encounter data) and growing
enrollment in MA. With the increased variety of requests for risk
adjustment data and CMS's better understanding of the data requests
received, CMS has come to recognize that the limits on the use and
release of risk adjustment data imposed by Sec. 422.310(f) may be
unnecessary, burdensome, and overly restrictive for CMS, and for
private and public stakeholders requesting the data. The existing
restrictions may limit innovative uses of the data by CMS and non-CMS
entities that may improve program integrity, increase efficiency, or
reduce waste. The proposal described later in this section would lead
to more efficient use of public and private sector resources by
removing the existing restrictions on the use and release of risk
adjustment data while maintaining the protections in place for
beneficiary identifying information through CMS data sharing procedures
and for plan-submitted dollar amounts reported for an associated
encounter. CMS believes that easing the use and release requirements
for risk adjustment data would support the goals of Executive Order
14243 ``Stopping Waste, Fraud, and Abuse by Eliminating Information
Silos'' (March 20, 2025) by reducing barriers to sharing government
data across agencies, improve CMS's ability to effectively and
efficiently administer and oversee MA and other Federal health care
programs, as well as encourage research into improving health care
delivery.
1. Background
Section 1853(a) of the Act requires the Secretary to make monthly
payments to MA organizations for each beneficiary enrolled in an MA
plan. Section 1853(a)(1)(C) of the Act requires the Secretary to adjust
the monthly payments based on risk factors of a plan's enrolled
beneficiaries, such as demographic factors and other factors that the
Secretary determines are appropriate, including health status. To
support risk adjustment, section 1853(a)(3)(B) of the Act requires MA
organizations to submit data regarding the services provided to
enrollees and other information the Secretary deems necessary.
The requirements for the submission of risk adjustment data by MA
organizations are set forth at Sec. 422.310. In accordance with these
regulations, MA organizations must submit the data necessary to
characterize the context and purposes of each item and service provided
to their enrollees by a provider, supplier, physician, or other
practitioner in accordance with CMS instruction. Paragraphs (a) through
(d) of Sec. 422.310 define risk adjustment data, the basic rules of
risk adjustment data collection, the sources and extent of risk
adjustment data, and other risk adjustment data requirements. There are
two forms of risk adjustment data: (1) data equivalent to Medicare fee-
for-service (FFS) data, when appropriate, and to all relevant national
standards, referred to as encounter data, and (2) data submitted by MA
organizations prior to 2022 in an abbreviated format, referred to as
Risk Adjustment Processing System (RAPS) data.43 44 Both
encounter data and RAPS data submissions include beneficiary diagnoses.
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\43\ Refer to the CSSC Operations website for information about
the submission of encounter data and RAPS data.
\44\ RAPS remains available to MA organizations for the
submission of data corrections for years prior to 2022.
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Though section 1853(a)(3)(B) of the Act does not limit the
Secretary's use or disclosure of risk adjustment data, Federal laws,
such as the Privacy Act of 1974 (as amended), impose restrictions on
the disclosure of data collected by Federal agencies, and section
1106(a) of the Act [42 U.S.C. 1306(a)] generally
[[Page 54945]]
prohibits the disclosure of any information obtained by HHS except as
the Secretary may prescribe by regulations and except as otherwise
provided by Federal law. Over time, CMS has regulated the scope of
permissible uses and releases of the MA risk adjustment data, including
RAPS and encounter data, in order to achieve a balance between
protection of beneficiary identifying information and the interests of
MA organizations with the need to effectively administer Federal
programs and to encourage research into better ways to provide health
care. In the final rule establishing the MA program, published in
January 2005 (70 FR 4661), CMS adopted regulations at Sec. 422.310(f)
such that CMS may use risk adjustment data to determine the risk
adjustment factor used to adjust payments, and for unspecified other
purposes, with an exception made to limit CMS's use of medical record
data collected under Sec. 422.310(e) to validation studies.
In April 2008, CMS proposed to amend Sec. 422.310 to provide that
CMS will collect data from MA organizations regarding each item and
service provided to an MA plan enrollee,\45\ which would allow CMS to
include utilization data and other factors in developing CMS-
Hierarchical Condition Categories (CMS-HCC) risk adjustment models that
reflect patterns of diagnoses and expenditures in the MA program. In
response to the April 2008 proposal and CMS's efforts to collect
encounter data, some stakeholders raised concerns that the use of risk
adjustment data for ``other purposes,'' as finalized in the January
2005 final rule, was too broad. Some stakeholders also believed that
the data collected for risk adjustment, including encounter data, could
not be used for purposes other than risk adjustment. CMS disagreed with
this assertion. As stated in the August 2008 final rule, ``Section
1853(a)(3)(B) of the Act obligates MA organizations to submit inpatient
and outpatient encounter data for purposes of use in implementing a
risk adjustment methodology. Unlike the case of information collected
under section 1860D-15 of the Act, however, which the statute restricts
to being used solely for purposes of implementing that section (see
section 1860D-15(d)(2)(B) and (f)(2) of the Act), section 1853(a)(3)(B)
of the Act does not impose any such restrictions on other legitimate
uses of the encounter data collected'' (73 FR 48653). While CMS is not
subject to specific statutory restrictions on our own use of risk
adjustment data, the agency responded to industry concerns by
establishing in regulation limits on the agency's use of risk
adjustment data. Specifically, in the August 2008 final rule, CMS
revised Sec. 422.310(f) to establish the following five specific uses
of risk adjustment data: (i) calculating the risk adjustment factors
used to adjust payments, (ii) updating risk adjustment models, (iii)
calculating Medicare Disproportionate Share Hospital (DSH) percentages,
(iv) conducting quality review and improvement activities, and (v) for
Medicare coverage purposes (73 FR 48651, 48653-48654).
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\45\ Refer to Federal Register, 73 FR 23528, section H: https://www.federalregister.gov/documents/2008/04/30/08-1135/medicare-program-proposed-changes-to-the-hospital-inpatient-prospective-payment-systems-and-fiscal.
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CMS made further revisions to Sec. 422.310(f) in the August 2014
final rule to strengthen program management and increase transparency
in the MA program by adding four more uses of risk adjustment data at
Sec. 422.310(f)(1)(vi) through Sec. 422.310(f)(1)(ix) and by adding
two subparagraphs Sec. 422.310(f)(2) and Sec. 422.310(f)(3) to
address the terms under which risk adjustment data could be released to
non-CMS entities (79 FR 50324-50334). Specifically, the four uses added
to Sec. 422.310(f)(1) in the August 2014 final rule are: (vi) to
conduct evaluations and other analysis to support the Medicare program
(including demonstrations) and to support public health initiatives and
other health care-related research; (vii) for activities to support the
administration of the Medicare program; (viii) for activities conducted
to support program integrity; and (ix) for purposes authorized by other
applicable laws.
The subparagraph CMS added in the August 2014 final rule at Sec.
422.310(f)(2) provided that the agency may release the minimum data it
determines is necessary for one of the purposes listed in Sec.
422.310(f)(1) to other HHS agencies, other Federal executive branch
agencies, States, and external entities where that disclosure would be
in accordance with: (i) applicable Federal laws; (ii) CMS data sharing
procedures; (iii) subject to the protection of beneficiary identifier
elements and beneficiary confidentiality, (iv) subject to the
aggregation of dollar amounts reported for the associated encounter to
protect commercially sensitive data; and (v) risk adjustment data other
than that described in paragraphs (f)(2)(iii) and (f)(2)(iv) of Sec.
422.310 will be released without the redaction or aggregation described
in paragraphs (f)(2)(iii) and (f)(2)(iv), respectively. CMS clarified
that an external entity could be an individual, a group, or an
organization, and that CMS would not release payment data (that is,
dollar amounts) submitted by MA organizations at the level of the
encounter as that data might reveal proprietary negotiated payment
rates between MA plans and providers (79 FR 50328).
The subparagraph CMS added at (f)(3) in the August 2014 final rule
stipulates additional conditions related to the timing of release of
risk adjustment data in response to comments from some stakeholders
that there should be a delay in releasing the data. CMS added
subparagraph (f)(3) in response to comments to clarify that CMS did not
plan to regularly release risk adjustment data for a data collection
year prior to the completion of the reconciliation period. Risk
adjustment reconciliation refers to the period provided to MA
organizations to identify and correct errors in data they have
submitted for a data collection year to ensure that the risk adjustment
data is complete and accurate based on the MA organization's best
knowledge, information, and belief. Risk adjustment data are not
considered reconciled for a given payment year until after the final
risk adjustment data submission deadline, established at Sec.
422.310(g)(2)(ii), which can be no earlier than January 31 of the year
following the payment year (for example, January 31, 2025, for payment
year 2024). Specifically, Sec. 422.310(f)(3)(i) specifies that risk
adjustment data submitted for a given payment year are not available
for release by CMS unless the risk adjustment reconciliation has been
completed for that payment year except under limited circumstances,
such as when CMS determines that releasing risk adjustment data before
reconciliation is necessary for emergency preparedness (Sec.
422.310(f)(3)(ii)) or due to extraordinary circumstances (Sec.
422.310(f)(3)(iii)) (79 FR 50331).
Since the August 2014 final rule was published, CMS has identified
additional circumstances that warranted releasing risk adjustment data
prior to reconciliation outside of emergency preparedness and
extraordinary circumstances. In the final rule issued in November 2023,
CMS provided an additional circumstance (Sec. 422.310(f)(3)(iv)) to
allow for releasing aggregate risk adjustment data prior to risk
adjustment reconciliation (88 FR 79397-79400). This provision was added
to provide MA utilization data measures on the Care Compare website,
along with FFS utilization data, to support the administration of the
Medicare program and to more
[[Page 54946]]
completely fulfill the public reporting required by section 104 of the
Medicare Access and CHIP Reauthorization Act (MACRA) and section 10331
of the Patient Protection and Affordable Care Act of 2010 (Pub. L. 111-
148) (Affordable Care Act) and provide beneficiaries with useful and
appropriate information when selecting a Medicare provider.
The following year, in April 2024, CMS issued a final rule in which
CMS revised two of the allowable uses (Sec. 422.310(f)(1)(vi) and
(vii)) to support the administration of the Medicaid program as well as
the Medicare program. CMS further allowed for the release of risk
adjustment data to State Medicaid agencies before reconciliation for
the specific purpose of coordinating care for dually eligible
individuals if CMS determined it was necessary and appropriate to
support the administration of the Medicare and Medicaid programs (Sec.
422.310(f)(3)(v)) (89 FR 30536-30541). This expansion of CMS's use of
risk adjustment data to support the administration of the Medicaid
program is consistent with the goals of better integrating benefits and
improving care coordination for dually eligible individuals as
established at section 2602 of the Affordable Care Act.
2. Overview of Proposed Regulatory Changes
CMS is proposing to increase access to risk adjustment data while
reducing regulatory burden and the resources expended by public and
private organizations when requesting risk adjustment data by removing
the uses enumerated in Sec. 422.310(f)(1). This change would enable
CMS to align more closely with standards applicable to FFS claims and
other MA and Part D data and allow the data to be used for more
purposes than are permitted under the existing regulations. CMS
receives requests to use risk adjustment data for a broad range of
purposes including research, health care operations, and oversight of
public benefit programs, and from a broad range of entities including
academic institutions, government entities, and oversight bodies. CMS
believes the limitations imposed by Sec. 422.310(f)(1) may be
excessive and does not think that MA risk adjustment data should have a
different or more restrictive standard for use and release than the
standard applied to Medicare FFS claims. Similarly, the list of
external parties to whom the data can be released at Sec.
422.310(f)(2) (``other HHS agencies, other Federal executive branch
agencies, States, and external entities'') may unnecessarily limit
access to risk adjustment data to some external entities for legitimate
uses that are in the public's interest. CMS believes the proposed
removal of Sec. 422.310(f)(2), which would eliminate the restriction
on which types of entities can access the data, would be in keeping
with our approach to make the risk adjustment data more broadly
available. CMS also believes that the provisions on the timing of
release of risk adjustment data at Sec. 422.310(f)(3) may be overly
restrictive, and there should be more flexibility to release data
before reconciliation.
We emphasize, however, that CMS release of the data would remain
contingent on Federal law and CMS data sharing procedures, per the
proposal at Sec. 422.310(f). CMS data sharing procedures include an
evaluation of requests to ensure that data requests comply with
applicable Federal laws, regulations, and CMS data policies.
Additionally, as part of the request process, unless the requester is a
beneficiary requesting his or her own data, a data sharing agreement is
established between CMS and the requesters prior to disclosing the
data. Data sharing agreements include, but are not limited to,
information exchange agreements (IEA),\46\ memoranda of understanding
(MOU), and data use agreements (DUAs),\47\ all of which are agreements
that document the terms and conditions under which CMS data may be used
to ensure that data requesters adhere to CMS privacy and security
requirements and data release policies. Included in the terms and
conditions are safeguards to protect beneficiary identifying
information and confidentiality. Also, consistent with what we stated
in the August 2014 final rule, CMS data sharing agreements have
enforcement mechanisms, and data requesters are required to acknowledge
these mechanisms. For example, penalties under section 1106(a) of the
Act [42 U.S.C. 1306(a)], including possible fines or imprisonment, and
criminal penalties under the Privacy Act [5 U.S.C. 552a(i)(3)] may
apply, as well as criminal penalties imposed under 18 U.S.C. 641 (79 FR
50333). Requesters of CMS data are responsible for abiding by the law,
policies, and restrictions of the data sharing agreements.
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\46\ Centers for Medicare & Medicaid Services. (n.d). CMS
Information Exchange Agreement (IEA). U.S. Department of Health and
Human Services. https://security.cms.gov/learn/cms-information-exchange-agreement-iea.
\47\ Centers for Medicare & Medicaid Services. (n.d.). CMS data:
Data disclosures and data use agreements (DUAs). U.S. Department of
Health and Human Services. https://www.cms.gov/data-research/cms-data/data-disclosures-and-data-use-agreements-duas. An example of a
research DUA can be found on the ResDAC website at https://resdac.org/request-form/rif-data-use-agreement.
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Over time, Sec. 422.310(f) has become increasingly complex and
cumbersome to implement as CMS receives more requests and identifies
additional reasonable uses that CMS did not anticipate. As described
previously, CMS has revised the regulation over the years by adding
specific uses or exceptions for release of risk adjustment data as they
are identified, which is burdensome, slows progress, and limits
opportunities to effectively and efficiently administer, oversee, and
improve Federal programs, and to conduct health care research that can
improve health care delivery. The proposal outlined later in this
section would address these concerns by easing restrictions on the use
and release of risk adjustment data while maintaining the current
protections for plan-submitted payment amounts for an associated
encounter that are currently in place. Protections for beneficiary
identifying information currently specified in regulation would be
maintained through CMS data sharing procedures and other applicable
Federal laws as described previously.
CMS expects that transparency in the MA program would be improved
by removing: (1) the specific uses at Sec. 422.310(f)(1), aside from
protections of the plan-submitted payment amounts that currently exist;
(2) the restrictive conditions regarding which external government
entities the data can be released to at Sec. 422.310(f)(2); and (3)
the timing of when the data can be released at Sec. 422.310(f)(3). We
believe these revisions would also allow for more streamlined access to
information on the Medicare program as MA grows, thereby strengthening
program management, continuing to advance program integrity, supporting
public health initiatives, and reducing burden through the
implementation of practices and processes for the use and release of MA
risk adjustment data that align more closely with standards applicable
to other Medicare data, such as FFS claims. The proposed revisions to
Sec. 422.310(f) are consistent with Executive Order 14192 ``Unleashing
Prosperity through Deregulation'' (January 31, 2025) by reducing the
burden for CMS and external entities associated with the increasingly
complex regulation surrounding the use and release of risk adjustment
data and would support the goals of Executive Order 14243 ``Stopping
Waste, Fraud, and Abuse by Eliminating Information Silos'' (March 20,
2025) by reducing barriers to sharing government data across agencies.
[[Page 54947]]
3. Proposed Broadening of the Use and Release of Risk Adjustment Data
CMS proposes to ease restrictions on the use of risk adjustment
data at Sec. 422.310(f)(1) and repeal the limitations surrounding the
release of risk adjustment data at Sec. 422.310(f)(2) and (f)(3),
other than the protections currently in place for plan-submitted
payment amounts, to allow for the use and release of risk adjustment
data that is more aligned with the use and release of FFS claims and
other MA data. The limited uses of risk adjustment data were
established when CMS resumed activities to collect encounter data to
alleviate concerns from some stakeholders that risk adjustment data
would be used in ways that they thought were inappropriate. As stated
previously, CMS does not believe the statute restricts our use of risk
adjustment data, and over time CMS has identified unanticipated uses
and releases of the data that are in the public's interest beyond the
nine listed at Sec. 422.310(f)(1). Historically, this has necessitated
CMS resources to conduct rulemaking to add to or amend the list,
resulting in regulatory burden and increasingly complex requirements.
For example, as previously discussed, CMS could not use risk adjustment
data to conduct evaluations and other analyses to support the Medicaid
program, nor could CMS use the data to support the administration of
the Medicaid program, like care coordination, before amending Sec.
422.310(f)(1)(vi) and (vii) in the final rule CMS issued in April 2024
(89 FR 30536 through 30541).
Given the growth of MA, risk adjustment data is increasingly
important to understanding the Medicare program and health care
delivery more broadly. CMS anticipates that the number and variety of
requests for risk adjustment data will continue to increase, as will
the resources required to enforce the more restrictive requirements and
to develop revised regulations when unanticipated yet warranted uses
are identified. We believe that removing the specified uses and easing
restrictions for data release at Sec. 422.310(f) would provide CMS
flexibility to release MA risk adjustment data in a way that more
closely aligns with the release of FFS claims and other MA data, which
is crucial to burden reduction and the ability of CMS and external
entities to be innovative in the pursuit of improved health care
delivery and program integrity, greater transparency, and reduced
fraud, waste, and abuse.
Specifically, CMS proposes to revise Sec. 422.310(f) as follows:
``Regarding the data described in paragraphs (a) through (d) of this
section, CMS may use and release the minimum data it determines is
necessary in accordance with CMS data sharing procedures and applicable
Federal laws, subject to the aggregation of dollar amounts reported for
the associated encounter to protect commercially sensitive data, unless
authorized by other applicable laws.'' The proposal provides for the
stipulation that this proposal does not limit CMS disclosure of data as
authorized under separate statutory authority.\48\ We propose to repeal
the nine specified uses currently listed in Sec. 422.310(f)(1) that,
under the proposal, would be encompassed under the revised (f) text. We
also propose to repeal the release restrictions specified at Sec.
422.310(f)(2) and Sec. 422.310(f)(3), other than the existing
restrictions on the release of the minimum necessary data and on the
release of dollar amounts at the encounter level, which were moved to
Sec. 422.310(f). We note, however, that under this proposal,
protections to the beneficiary identifying information would be
encompassed under the data sharing procedures in the revised (f) text.
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\48\ For example, 31 U.S.C. 716, 2 U.S.C. 166(d)(1) and 601(d),
section 1805 of the Act (42 U.S.C. 1395b-6), section 1128J of the
Act (42 U.S.C. 1320a-7k), and section 6(a) of the Inspector General
Act of 1978 (5 U.S.C. 406).
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Though CMS is proposing to repeal the regulatory language at Sec.
422.310(f)(2) that stipulates protections for beneficiary
confidentiality, the protections of beneficiary identifying information
currently specified at Sec. 422.310(f)(2) would remain in place in
accordance with applicable Federal laws, such as the Privacy Act,
section 1106(a) of the Act, and CMS information disclosure regulations
at 42 CFR part 401, subpart B, that continue to govern this data
sharing. CMS would be able to release an individual's risk adjustment
data when authorized by that individual and, for other kinds of
requests for release of risk adjustment data, CMS would release such
information in accordance with CMS data sharing procedures, consistent
with current practice. We intend to continue to protect beneficiary
data through, for example, encryption, or removal of the confidential
fields when risk adjustment data is released. CMS has an established
process to evaluate requests for data and enters into data sharing
agreements with data requesters for disclosures of risk adjustment data
to ensure that data requesters adhere to CMS privacy and security
requirements and data release policies. We believe this process
contains the necessary checks and safeguards to ensure that the risks
of disclosure of beneficiary identifying information are minimal.
CMS is also maintaining the protections that currently exist
regarding the release of plan-submitted dollar amounts associated with
the items or services submitted to CMS pursuant to Sec. 422.310(b)
that characterize the context and purposes of each item and service
provided to a Medicare enrollee by a provider, supplier, physician, or
other practitioner. In the August 2014 final rule (79 FR 49854), we
stated our belief that release of payment data at the level of the
encounter record might reveal proprietary negotiated payment rates
between MA plans and providers and, therefore, we restricted the
release of payment data by only allowing for its release if aggregated.
CMS is maintaining the guardrails for payment data (dollar amounts) at
the level of the encounter as they were originally finalized in the
August 2014 final rule. Per the proposed change to Sec. 422.310(f),
CMS may only release aggregated dollar amounts reported for an
associated encounter, retaining the regulatory text that currently
exists at Sec. 422.310(f)(2)(iv)--risk adjustment data is ``subject to
the aggregation of dollar amounts reported for the associated encounter
to protect commercially sensitive data.'' As stated previously, this
proposal would not limit CMS disclosure of risk adjustment data as
authorized under separate statutory authority.
Currently, Sec. 422.310(f)(3) imposes the restriction that risk
adjustment data will not become available for release before
reconciliation for the applicable payment year has been completed,
unless CMS determines that it is necessary for one of four specific
exceptions.\49\ Consistent with our proposed changes to remove the list
of permissible uses and conditions for release of risk adjustment data,
CMS is also proposing to remove the detailed list of exceptions for
release of risk adjustment data prior to reconciliation in paragraph
(f)(3). The proposed change would continue to allow for the release of
risk adjustment data prior to reconciliation for the four previously
identified exceptions and provide flexibility when CMS receives novel
requests for data that have not been reconciled.
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\49\ Sec. 422.310(f)(3)(ii) through (f)(3)(v).
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As discussed previously, because MA plans have a window of time in
which they should submit data corrections for a given payment year
(typically January
[[Page 54948]]
31 of the year following the payment year), risk adjustment data are
not considered reconciled for payment purposes before that date has
passed. For this reason, there is currently a prohibition against
releasing the data prior to the final submission deadline except in
specific, limited circumstances. However, over time CMS identified more
purposes for which using the data prior to reconciliation may be
appropriate and that the original reasons and concerns that led to
delaying the release of risk adjustment data in the August 2014 final
rule may not always apply or may no longer apply. Some of the purposes
identified are reflected in the recent changes to Sec. 422.310(f)(3)
where additional exceptions for early release were added, one of which
is care coordination, but others may include program integrity
initiatives that necessitate timelier data or to support beneficiaries
in managing their health by allowing them to access and share their
current data. For example, currently, through the CMS Blue Button 2.0
Application Programming Interface (API), an individual may choose to
share their own Medicare A, B, and D claims data with Medicare-approved
applications or websites that a third party (not Medicare) creates,
thereby allowing an individual to use health technology and their own
data to improve their health outcomes and decision making. In removing
restrictions related to releasing pre-reconciled risk adjustment data,
this tool could also be made available to MA enrollees.
While this proposal would allow for release of risk adjustment data
prior to reconciliation broadly, CMS understands that it is not always
necessary and appropriate for risk adjustment data to be released prior
to reconciliation. For example, relying on diagnosis information for
research or program operations may not be appropriate before the final
risk adjustment data submission deadline since plans have at least 13
months after the end of the service year to submit additional diagnoses
for payment. CMS would review requests for the release of risk
adjustment data prior to reconciliation to assess whether pre-
reconciled data is necessary and appropriate for the requester's
purpose. CMS's proposal to remove restrictions on the use and release
of pre-reconciled risk adjustment data would provide greater
flexibility in the release of risk adjustment data, supporting the
goals of Executive Order 14243 ``Stopping Waste, Fraud, and Abuse by
Eliminating Information Silos'' (March 20, 2025). Additionally, by no
longer restricting release to prescribed purposes, CMS is supporting
the goals of Executive Order 14192 ``Unleashing Prosperity through
Deregulation'' (January 31, 2025) by reducing the burden for CMS and
external entities associated with the increasingly complex regulation
that necessitates rulemaking when an unanticipated use of the data is
identified.
CMS is seeking public comments on all aspects of the proposed
revisions to the use and release of risk adjustment data at Sec.
422.310(f) and allowing for greater flexibility in the release of data
prior to the final risk adjustment data submission deadline.
D. Strengthened Documentation Standards for Part D Plan Sponsors
1. Background of Part D Coverage Determinations and Point-of-Sale (POS)
Claim Adjudications
CMS regulations at Sec. 423.566 specify that each Part D plan
sponsor must have a procedure for making timely coverage determinations
regarding the prescription drug benefits an enrollee is entitled to
receive under the plan and the amount, including cost sharing, if any,
that the enrollee is required to pay for a drug. In addition to a
standard procedure for making such determinations, it must also have an
expedited procedure for situations in which applying the standard
procedure may seriously jeopardize the enrollee's life, health, or
ability to regain maximum function, in accordance with Sec. 423.570.
When a Part D plan sponsor requires a drug to be reviewed for coverage
under Part D, there is coordination between the Part D plan sponsor and
another entity, such as the prescriber, pharmacy, enrollee, or enrollee
representative, to ensure that the drug meets the criteria for coverage
prior to accepting the claim for payment under the Part D benefit.
Coverage determinations can be requested by the Part D enrollee,
the enrollee's representative, or the prescriber on behalf of the
enrollee. Current regulations at Sec. 423.566(b) outline the actions
that are considered Part D coverage determinations, such as a decision
not to provide or pay for a Part D drug, including a decision not to
pay because the drug is not on the plan's formulary, the drug is
determined not to be medically necessary, the drug is furnished by an
out-of-network pharmacy, or the Part D plan sponsor determines that the
drug is otherwise excludable under section 1862(a) of the Act if
applied to Medicare Part D.
A POS claim adjudication occurs when a claim is submitted by a
pharmacy for payment after the presentation of a valid prescription,
regardless of whether the Part D plan sponsor treats the POS
transaction as a coverage determination. In general, Part D plan
sponsors do not treat POS claim adjudications as coverage
determinations.\50\ However, Part D plan sponsors may implement
utilization management edits in various situations to determine a
drug's coverage at the POS. In such cases, the Part D sponsor may or
may not choose to treat the POS claim adjudication as a coverage
determination, leading to variance among plan sponsors. One reason a
Part D plan sponsor might require a coverage determination or POS claim
adjudication edit is to verify a drug's coverage under the Part D
benefit. For example, Part D plan sponsors can use prior authorization
for drugs with the highest likelihood of non-Part D covered uses, such
as when coverage is available under Part A or Part B (versus D) for the
drug as prescribed and dispensed or administered, or when the drug is
not used for a medically accepted indication (MAI).\51\
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\50\ Parts C & D Enrollee Grievances, Organization/Coverage
Determinations, and Appeals Guidance, Section 40.2 (found at https://www.cms.gov/Medicare/Appeals-and-Grievances/MMCAG/Downloads/Parts-C-and-D-Enrollee-Grievances-Organization-Coverage-Determinations-and-Appeals-Guidance.pdf).
\51\ Medicare Prescription Drug Benefit Manual, Chapter 6 Part D
Drugs and Formulary Requirements, Section 30.2.2.3 (found at https://www.cms.gov/Medicare/Prescription-Drug-Coverage/PrescriptionDrugCovContra/Downloads/Part-D-Benefits-Manual-Chapter-6.pdf).
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Depending on the drug, Part D plan sponsors vary the scope of
review when determining coverage or conducting a POS claim adjudication
that determines coverage, and therefore, CMS must be able to review the
plan sponsors' original documentation to ensure that a Part D plan
sponsor asked relevant questions and received appropriate responses for
the drug being reviewed. For example, in the instance of reviewing a
drug for an MAI, the Part D plan sponsor needs to verify the diagnosis
that led to the drug being prescribed to ensure that it is being
prescribed and dispensed for an MAI and is eligible for coverage under
Part D.
2. Audits of Part D Program Integrity Prescription Drug Event Records
Under section 1860D-12(b)(3)(C) of the Act and 42 CFR 423.505(d)-
(e), Part D plan sponsors are required to maintain certain categories
of documentation for specified periods of
[[Page 54949]]
time. Specifically, Sec. 423.505(d) requires that the contract between
a Part D plan sponsor and CMS include an agreement by the Part D plan
sponsor to maintain books, records, documents, and other evidence of
accounting procedures and practices for 10 years that are sufficient to
meet certain requirements, including enabling CMS to evaluate the
quality, appropriateness, and timeliness of services performed under
the contract and to audit the services performed or determinations of
amounts payable under the contract. In addition, Sec. 423.505(e)
requires that Part D plan sponsors agree to allow HHS, the Comptroller
General or their designee to evaluate through audit, inspection, or
other means (1) the quality, appropriateness, and timeliness of those
services furnished to Medicare enrollees; (2) compliance with CMS
requirements for maintaining the privacy and security of protected
health information and other personally identifiable information of
Medicare enrollees; (3) facilities of the Part D sponsor; and (4)
enrollment/disenrollment records for the current contract period and 10
prior periods. Furthermore, Sec. Sec. 423.568(a)(3), 423.570(c)(2),
and 423.584(c)(1) outline requirements for Part D plan sponsors to
establish and maintain a method of documenting and to retain
documentation for oral requests for coverage determinations under
standard timeframes, expedited timeframes, and redeterminations
respectively.
Although the statute and current regulatory requirements address
documentation maintenance and availability, these requirements do not
detail the documentation needed to be maintained to support the
appropriateness of a Part D coverage determination or POS claim
adjudication that is used to determine coverage under the Part D
benefit. The availability of complete and accurate documentation in its
original format (for example, fax, call notes, electronic PA), is a key
component of ensuring that taxpayer dollars are spent appropriately in
the Part D program. Through CMS's Part D program integrity prescription
drug event (PDE) record review audits, we have observed a large degree
of variation among the documentation that Part D plan sponsors maintain
when conducting coverage determinations, including prior
authorizations, and POS claim adjudication edits, used to determine a
drug's coverage under Part D, and subsequently provide to CMS upon
audit. While some Part D plan sponsors have robust documentation
standards that outline the information the Part D plan sponsor obtained
that led to coverage under the Part D benefit, others provide or
maintain little to no documentation. In some instances, plan sponsors
maintain a summary of the original coverage request or refer to a past
coverage determination to extend an authorization. In these instances,
CMS is unable, upon audit, to review the original documentation to
ensure that the information obtained was accurate. For CMS to provide
proper oversight of the Part D program and the approvals made for drugs
covered under the Part D benefit, it is imperative that Part D plan
sponsors provide and maintain original documentation that describes how
and why the Part D plan sponsor approved a drug for coverage. Without
sufficient documentation, CMS cannot fully review, during an audit or
educational analyses, or other program integrity efforts, Part D plan
sponsor coverage determinations and POS claim adjudications for
accuracy. The standardization and availability of sufficient
documentation to support a drug's coverage under the Part D benefit
will allow CMS to conduct more effective audits and help ensure CMS can
verify that a drug was accurately paid under Part D.
3. Proposed Provisions
We are proposing standardized, detailed documentation requirements
for coverage determinations and POS claim adjudications, used for
purposes of determining coverage under the Part D benefit. We are
proposing documentation requirements that include but are not limited
to certain written, verbal, and electronic communications, such as the
date and time the request was received; the name and title of the
individual who submitted or verified the request; and the information
used to make the coverage determination. These requirements would not
apply to POS claim adjudications for purposes that are unrelated to the
determination of coverage under the Part D benefit or the correct
Medicare benefit for coverage, such as those POS claim adjudications
for safety, dose limitations, and quantity limits. Any additional
documentation recorded or maintained will be subject to existing
protected health information (PHI) and personally identifiable
information (PII) rules and regulations.
Specifically, we propose the following revisions to the
documentation requirements:
First, to revise Sec. 423.505(d)(1) to add new paragraph
(vi) to enable CMS to review original format documentation or
information from all written, electronic, and verbal communications
between the pharmacist, prescriber, enrollee, or other relevant
stakeholders, in addition to what is included on the pharmacy claim,
that is relied upon by the Part D plan sponsor to make a coverage
determination or otherwise permit a point-of-sale claim adjudication
that determines a drug's coverage under the Part D benefit. In
instances when a coverage determination is extended, the original
coverage determination must be maintained as documentation. The
documentation covered by these standards must be made available to CMS
during Part D program integrity prescription drug event (PDE) record
review audits. Failure to produce this documentation will result in an
improper Part D audit determination and will be subject to PDE record
deletion in accordance with Sec. 423.325(a)(2).
Second, to revise Sec. 423.505 to add the following new
paragraphs:
++ Paragraph (d)(2)(xiii) to include all documentation or
information from all written, electronic, and verbal communications
between the pharmacist, prescriber, enrollee, or other relevant
stakeholders, in addition to what is included on the pharmacy claim,
that is relied upon when a Part D plan sponsor makes a coverage
determination or otherwise permit a point-of-sale claim adjudication
that determines coverage of a drug under the Part D benefit, consistent
with paragraph (d)(1)(vi). This includes:
++ Paragraph (d)(2)(xiii)(A) to include the date and time the
request for a coverage determination or point-of-sale claim
adjudication was received and the identity of the individual who
submitted the request.
++ Paragraph (d)(2)(xiii)(B) to include the name and title (as
applicable) of the individual the Part D plan sponsor contacted to
verify the request (for example, pharmacist, prescriber, enrollee, or
enrollee representative).
++ Paragraph (d)(2)(xiii)(C) to include information obtained,
including the questions asked and the responses received, and the final
decision rendered.
++ Paragraph (d)(2)(xiii)(D) to include the diagnosis code for a
coverage determination or point-of-sale claim adjudication used to
support a medically accepted indication.
++ Paragraph (d)(2)(xiii)(E) to include any additional information
that the Part D plan sponsor utilized to determine the final outcome of
the coverage determination or point-of-sale claim adjudication request.
Third, to revise Sec. 423.505(e)(2) to add a phrase to
reference the
[[Page 54950]]
requirement to make available the records containing information used
to make the coverage determination or POS claim adjudication.
E. Updating Third-Party Marketing Organizations (TPMO) Disclaimer
Requirements (Sec. Sec. 422.2267 and 423.2267)
As a part of the Medicare Program; Contract Year 2023 Policy and
Technical Changes to the Medicare Advantage and Medicare Prescription
Drug Benefit Programs; Policy and Regulatory Revisions in Response to
the COVID-19 Public Health Emergency; Additional Policy and Regulatory
Revisions in Response to the COVID-19 Public Health Emergency Final
Rule which appeared in the Federal Register on May 9, 2022 (hereafter
referred to as the May 2022 final rule) (87 FR 27704), as a part of a
broader effort to address concerns with TPMOs, CMS finalized
regulations at Sec. Sec. 422.2267(e)(41) and 423.2267(e)(41) to
improve regulatory oversight of Third-Party Marketing Organizations
(TPMOs). One provision required Medicare Advantage (MA) organizations
and Part D sponsors to ensure that the TPMOs, with whom MA
organizations and Part D sponsors directly or indirectly do business,
verbally convey a standardized disclaimer during sales calls with
beneficiaries. CMS implemented these regulations after listening to
TPMO-based sales calls and hearing first-hand beneficiary confusion
about the information the TPMO was conveying and to help ensure that
TPMOs were not marketing information in a misleading way that might
lead beneficiaries to join a plan contrary to their intention, or a
plan that did not best meet their health care needs. The disclaimer, as
finalized, consisted of the following statement: ``We do not offer
every plan available in your area. Any information we provide is
limited to those plans we do offer in your area. Please contact
Medicare.gov or 1-800-MEDICARE to get information on all of your
options.''
After these regulations were implemented, CMS continued to monitor
TPMOs' interactions with beneficiaries during these sales calls. In
CMS's review of hundreds of sales, marketing, and enrollment audio
calls, CMS found that only one plan option from one MA organization was
discussed in over 80 percent of the calls reviewed. These reviews also
showed that TPMOs rarely, if ever, informed the beneficiary that there
were multiple plans available in their service area. Although the TPMO
may have researched other plans, the TPMO rarely communicated
information about those plan options to the beneficiary; thus, the
beneficiary may not have known about other available options. These
monitoring efforts heightened CMS's concern that beneficiaries were not
receiving comprehensive information about all their plan choices, thus
limiting their ability to make an informed decision about the plan best
able to meet their health care needs.
To address those concerns, CMS issued the Medicare Program;
Contract Year 2024 Policy and Technical Changes to the Medicare
Advantage Program, Medicare Prescription Drug Benefit Program, Medicare
Cost Plan Program; and Programs of All-Inclusive Care for the Elderly
Final Rule, hereinafter referred to as the April 2023 final rule (88 FR
22120). In this final rule, CMS amended Sec. Sec. 422.2267(e)(41) and
423.2267(e)(41) revising the existing disclaimer, which was applicable
to TPMOs that represented more than one, but not all, MA organizations
or Part D sponsors in a given service area, to notify the beneficiary
about the number of organizations and the number of plans the
organizations offered. Additionally, CMS revised Sec. Sec.
422.2267(e)(41) and 423.2267(e)(41) to include a new required
disclaimer for TPMOs that contracted with every MA organization or Part
D sponsor in a service area. Finally, CMS added State Health Insurance
Assistance Programs (SHIPs) as a source of information for
beneficiaries to both versions of the disclaimer and required TPMOs
convey the applicable disclaimer within the first minute of a sales
call, among other requirements for the TMPO to communicate the
disclaimer through other electronic means or materials (as described
under Sec. Sec. 422.2267(e)(41) and 423.2267(e)(41)).
In the April 2023 final rule, CMS addressed comments received in
response to the proposed rule (88 FR 22120). Some industry stakeholders
raised concerns about the new disclaimer requirements. For example,
some asserted that requiring TPMOs to list all the plans with which
they contract would confuse or distract beneficiaries; or for those
TPMOs that represent many plans, the disclaimer would be too long to
read within the first minute. Similarly, some stakeholders pointed out
that budget constraints and limited training would hinder a SHIP's
ability to effectively assist beneficiaries with plan choices. While
CMS understood those concerns, given CMS's observations about common
TPMO interactions with beneficiaries during the sales and enrollment
calls previously described, the agency determined that these regulatory
changes were warranted.
CMS regularly reviews MA and Part D program requirements and how
they affect Medicare beneficiaries and industry stakeholders. Based on
CMS's review and industry feedback, CMS determined that additional
changes to the TPMO disclaimer may be appropriate. CMS is proposing to
modify the TPMO disclaimer requirement in Sec. Sec. 422.2267(e)(41)
and 423.2267(e)(41) to: (1) replace the existing requirement to read
the disclaimer within the first minute of the call, so that TPMOs are
instead required to read the disclaimer ``prior to the discussion of
any benefits'' during the call, and to: (2) remove SHIPs as a source of
information from the disclaimer. CMS has determined that requiring
TPMOs to convey the disclaimer during the first minute of a sales call
is not always the appropriate time to notify the beneficiary of the
number of plan choices available. CMS believes that many calls
typically begin with the TPMO obtaining basic demographic information
from the beneficiary, which allows the TPMO to immediately determine if
the call should proceed to the benefit discussion phase. In other
instances, the TPMO may determine that the beneficiary does not have a
valid election period, which would end the call, making the disclaimer
unnecessary. Notifying the beneficiary of the number of plans that a
TPMO represents in the first minute does not always promote clear
communication with the beneficiary or mitigate beneficiary confusion.
By permitting TPMOs to read the disclaimer at an appropriate point
during the call, provided it is read prior to the discussion of any
benefits, the disclaimer will fit in better with the flow of the
conversation. CMS does not consider the mere mention of a benefit, for
example pointing out that nearly all MA organizations offer routine
dental care, constitutes a discussion of benefits. Rather, CMS believes
that discussing the specificity of a benefit with the intent to draw a
beneficiary's attention to an MA or Part D plan(s), or to influence a
beneficiary's decision-making process when making an MA or Part D plan
selection, or to influence a beneficiary's decision to stay enrolled in
a plan, could represent a discussion of benefits, as defined by the
marketing definition under Sec. Sec. 422.2260 and 423.2260. This could
include, for example, talking with a beneficiary about the benefits
listed in a plan's Evidence of Coverage document, or how beneficiary
out of pocket cost sharing
[[Page 54951]]
might work given a plan's benefit structure and the beneficiary's
previous health care experience or needs. If there is no discussion of
benefits, CMS would not expect TPMOs to provide the disclaimer to
beneficiaries. CMS seeks comment on how the Agency should identify when
a ``discussion of benefits'' occurs.
CMS is proposing changes only to the TPMO disclaimer provision at
Sec. Sec. 422.2267(e)(41)(ii) and 423.2267(e)(41)(ii). Thus, this
proposal would not alter the existing requirements provided within
Sec. Sec. 422.2267(e)(41)(i), (iii), (iv), and (v); and
423.2267(e)(41)(i), (iii), (iv), and (v). That is, any TPMO, as defined
under Sec. Sec. 422.2260 and 423.2260, that sells plans on behalf of
more than one MA organization or Part D sponsor, must electronically
convey the TPMO disclaimer when communicating with a beneficiary
through email, online chat, or other electronic means of communication,
prominently display the disclaimer on TPMO websites, and include the
disclaimer in any marketing materials, including print materials and
television advertisements, developed, used or distributed by the TPMO.
CMS is also proposing to remove SHIPs as a source of information
from the disclaimer. CMS recognizes that, while SHIPs can be a source
of unbiased information about plan choices, informing beneficiaries on
every sales call about the SHIP may cause additional issues. SHIP
volunteers may not always have the expertise to help beneficiaries
navigate increasingly complex MA and Part D programs. CMS believes that
beneficiaries enrolled in the MA and Part D programs may be more
effectively served by information and entities for which CMS has direct
oversight. Moreover, a recent article in the Journal of the American
Medical Association Network \52\ details a study conducted to determine
if SHIP counselors provided accurate and complete information to
Medicare beneficiaries about their coverage options. In this study,
mystery shoppers posed as individuals newly eligible for Medicare.
While over 94 percent of the responses differentiating Original
Medicare from MA were accurate, fewer than half of counselors mentioned
Dual-Eligible Special Needs Plans (D-SNPs) as an option for mystery
shoppers posing as dually eligible beneficiaries. The results suggested
that SHIPs may not always be able to address the needs of Medicare
beneficiaries seeking unbiased information on coverage options
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\52\ https://jamanetwork.com/journals/jamanetworkopen/fullarticle/2832052#google_vignette.
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CMS also recognizes that each SHIP works differently and provides
different training to its counselors, which can vary further at the
local level. This can result in Medicare beneficiaries receiving
different information based on the SHIP and SHIP counselor that is
ultimately reached. CMS believes that, for the TPMO disclaimer, 1-800-
MEDICARE is a better option to assist beneficiaries with health care
choices. 1-800-MEDICARE has representatives available 24/7 to assist
beneficiaries, provides standardized training to its customer service
representatives, is centrally monitored and controlled by CMS, which
facilitates efficient and consistent information sharing, and is a one-
stop shop for all beneficiaries, regardless of the state in which they
live.
For reasons previously discussed, CMS is proposing to revise
Sec. Sec. 422.2267(e)(41) and 423.2267(e)(41) to remove references to
the SHIPs, while maintaining guidance for beneficiaries to contact
Medicare.gov or 1-800-MEDICARE for plan advice. Additionally, CMS is
proposing to revise Sec. Sec. 422.2267(e)(41)(ii) and
423.2267(e)(41)(ii) to require TPMOs to provide the TPMO disclaimer
during sales calls before engaging in discussions about benefits rather
than requiring TPMOs to verbally convey the disclaimer during the first
minute of a sales call.
CMS solicits comment on this proposal.
F. Removing Rules on Time and Manner of Beneficiary Outreach
(Sec. Sec. 422.2264, 423.2264, 422.2274, and 423.2274)
Section 1851(h) and (j) of the Act provides a structural framework
for how MA organizations may market and communicate with beneficiaries
and directs CMS to adopt standards related to prohibitions and
limitations on marketing and communications activities. Section 1860D-
1(b)(1)(B)(vi) of the Act directs that the Secretary use rules similar
to and coordinated with the MA rules at section 1851(h) of the Act
relating to approval of marketing material and application forms for
Part D sponsors. Section 1860D-4(l) of the Act applies certain
prohibitions under section 1851(h) of the Act to Part D sponsors in the
same manner as such provisions apply to MA organizations (and agents,
brokers, and other third parties representing MA organizations).
CMS has adopted regulations related to marketing and communications
by MA organizations and Part D sponsors in 42 CFR part 422, subpart V,
and 42 CFR part 423, subpart V; these regulations include the specific
standards and prohibitions in the statute as well as standards and
prohibitions promulgated under the statutory authority granted to the
agency. Additionally, under 42 CFR 417.428, most marketing and
communications requirements in subpart V of part 422 also apply to
section 1876 cost plans. CMS has long provided further interpretation
and sub-regulatory guidance for these regulations in the form of a
manual titled, ``Medicare Communications and Marketing Guidelines''
(MCMG), previously known as ``Medicare Marketing Guidelines.'' Because
this proposed rule is applicable to MA organizations, Part D sponsors,
and cost plans, CMS refers to each of these regulated entities as a
``plan.''
In the Medicare and Medicaid Programs; Contract Year 2022 Policy
and Technical Changes to the Medicare Advantage Program, Medicare
Prescription Drug Benefit Program, Medicaid Program, Medicare Cost Plan
Program, and Programs of All-Inclusive Care for the Elderly Final Rule
(hereinafter referred to as the January 2021 final rule), CMS codified
guidance contained in the MCMG by integrating it with existing
regulations. In the Medicare Program; Contract Year 2024 Policy and
Technical Changes to the Medicare Advantage Program, Medicare
Prescription Drug Benefit Program, Medicare Cost Plan Program, and
Programs of All-Inclusive Care for the Elderly Final Rule (hereinafter
referred to as the April 2023 final rule), CMS then finalized several
changes to 42 CFR parts 422 and 423, subpart V, to strengthen
beneficiary protections and improve MA and Part D marketing.
In this current proposed rule, CMS is proposing several changes to
requirements regarding the time and manner of plans' outreach to
beneficiaries. The primary proposals include three changes to
Sec. Sec. 422.2264(c) and 423.2264(c) to remove rules on the time and
manner of beneficiary outreach. In addition, at Sec. Sec.
422.2264(c)(3), 423.2264(c)(3), 422.2274(b)(3), 423.2274(b)(3),
422.2274(c)(9)(ii), and 423.2274(c)(9)(ii), CMS is proposing a few
other regulatory changes to add specificity and clarify policy. In
total, these proposals and clarifications are designed to improve the
enrollment decision-making process by creating a more convenient,
beneficiary-friendly outreach experience and to reduce the burden on
beneficiaries, plans, and agents/brokers. Furthermore, these proposals
align with the January 31, 2025, Executive Order 14192, ``Unleashing
Prosperity Through
[[Page 54952]]
Deregulation'' (hereinafter referred to as E.O. 14192).\53\ E.O. 14192
describes the Administration's policy goals to promote prudent
financial management and alleviate unnecessary regulatory burdens.
Section 2 of E.O. 14192 states that it is the policy of the executive
branch to be prudent and financially responsible in the expenditure of
funds, from both public and private sources, and to alleviate
unnecessary regulatory burdens placed on the American people. The
changes CMS proposes here are deregulatory and therefore support the
Administration's policy goals.
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\53\ https://www.whitehouse.gov/presidential-actions/2025/01/unleashing-prosperity-through-deregulation/.
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1. Marketing Events Following Educational Events in Same Location
In the January 2021 final rule, CMS codified guidance existing in
the MCMG regarding events with beneficiaries. The finalized regulation
text at Sec. Sec. 422.2264(c)(2)(i) and 423.2264(c)(2)(i) required
that if a marketing event directly followed an educational event, the
beneficiary must be made aware of the change from an educational to a
marketing event and be given the opportunity to leave prior to the
marketing event beginning. In the April 2023 final rule, CMS modified
Sec. Sec. 422.2264(c)(2)(i) and 423.2264(c)(2)(i) to prohibit
marketing events from taking place within 12 hours of an educational
event in the same location (that is, the entire building or adjacent
buildings). This prohibition was intended to protect beneficiaries from
feeling pressured to stay for a marketing event after having attended
an educational event. However, it also created additional barriers for
plans or agents/brokers as well as beneficiaries who wished to discuss
potential enrollment options with respect to specific plan products
following an educational event.
As described in the April 2023 final rule, approximately half of
the commenters opposed this provision. Some commenters stated that
agents/brokers were not hurting seniors by holding a marketing event
after an educational event, that this provision would result in
beneficiaries being upset with agents/brokers for something that is out
of their control, that it would not add any additional protection from
marketing abuses, that it would degrade the consumer experience, and
that the proposal was both heavy-handed and unworkable. Furthermore,
some commenters were concerned that the number of educational events
would decrease, resulting in beneficiaries being less informed
regarding plan options overall and increasing the likelihood of a
beneficiary enrolling in a plan that did not meet their health care
needs. Other commenters said that the 12-hour delay was burdensome,
specifically for dually eligible, low-income, disabled, and other
underserved beneficiaries, who might experience transportation barriers
or lack access to transportation. Such barriers factor in when
beneficiaries are forced to travel to separate locations to attend an
educational event and a separate marketing event 12 or more hours
later, thus making access to information and resources in just one
interaction a critical component. For greater detail on the different
types of burden potential identified by commenters, see the April 2023
final rule.
Following the April 2023 final rule, CMS has continued to receive
stakeholder feedback reiterating concerns about the burden placed on
both plans or agents/brokers and beneficiaries regarding the 12-hour
delay requirement. While CMS considered similar hypothetical concerns
prior to finalizing the April 2023 rule, the agency is now
reconsidering these requirements based on valuable input, such as the
real-world experience cited in stakeholder feedback. After reevaluating
these impacts, CMS is concerned that the requirements at Sec. Sec.
422.2264(c)(2)(i) and 423.2264(c)(2)(i) do impose an unnecessary burden
on beneficiaries and plans and agents/brokers. Furthermore, CMS
believes, based on stakeholder input, that the 12-hour delay
requirement between an educational event and a marketing event may also
create an unnecessary barrier to accessing important MA and Part D
information for beneficiaries, especially those who live far from the
events or those who lack access to transportation. Moreover, based on a
lack of evidence of a quantifiable protection to the beneficiary from
the existing regulatory requirement, CMS believes that the beneficiary
protections that CMS previously identified in the April 2023 final rule
have not materialized. For example, in the April 2023 final rule, CMS
explained that its concern about inappropriate pressure on
beneficiaries (especially dually eligible individuals and other
vulnerable groups) that may occur when marketing events occur directly
after educational events outweighed some of the access and
transportation concerns. However, CMS is now reconsidering these
previous positions taken in 2023 because for vulnerable beneficiaries,
especially those in SNPs, it is common to have caregivers or other
friends or family members provide assistance in gathering information
on plan options (and often ultimately make decisions on behalf of the
beneficiary), thus, there is often a built-in layer of added protection
from any potential undue pressure. CMS notes that there are also
various beneficiary protections in place, including the possibility of
providing special enrollment periods (SEPs) when appropriate, or, if
warranted, processing a retrospective enrollment to place the
beneficiary back into their prior coverage, if a beneficiary makes an
adverse enrollment decision based on misrepresentation or otherwise
non-compliant sales tactics. CMS thus proposes that plans and agents/
brokers should be able hold an educational event and a marketing event
back-to-back and in the same location.
For these reasons, CMS is proposing to eliminate the 12-hour delay
requirement, so that a marketing event may take place directly
following and in the same location as an educational event. This
proposal aligns with section 1851(j)(1)(D)(ii) of the Act, which
prohibits sales and marketing activities at educational events but does
not require a specific timeframe between an educational event and a
marketing event. This proposal, permitting marketing events to follow
educational events, provided there is an appropriate break, is
consistent with the statutory requirement. CMS is proposing to amend
paragraph (c)(2)(i) in both Sec. Sec. 422.2264 and 423.2264 to state
that if a marketing event directly follows an educational event, plans
and agents/brokers would be required to notify the beneficiary that the
educational event is ending and a marketing event will begin shortly.
Examples of appropriate beneficiary notification might be in the form
of a verbal announcement at the educational event or a clear and
distinct notation on a written schedule of the day's event. In addition
to the beneficiary notification, CMS is proposing that plans and
agents/brokers would also be required to give the beneficiary a
sufficient opportunity to leave the educational event prior to the
start of the marketing event. An example of ``a sufficient opportunity
to leave'' appropriately given by the plan or agent/broker would be a
brief restroom or snack break between the educational event and the
marketing event. This deregulatory change is expected to significantly
reduce burden and cost for plans and agents/brokers in terms of event
planning. It would also likely ease burden on beneficiaries when they
attend an educational event and
[[Page 54953]]
subsequently want to obtain more plan-specific information at a
marketing event. By allowing both types of events to occur at the same
location once beneficiaries are made aware of both events and given a
sufficient opportunity to leave, beneficiaries would not need to return
on a different day or to a different venue to attend a marketing event.
As such, this proposal would provide greater convenience for
beneficiaries and enhance the beneficiary experience in shopping for a
plan.
2. Timing of Personal Marketing Appointment After Scope of Appointment
(SOA) Form Completion
Sections 1851(j)(2)(A) and 1860D-4(l)(2) of the Act direct that the
Secretary shall establish limitations with respect to the scope of any
marketing appointment and that such limitation shall require advance
agreement with a prospective enrollee on the scope of the marketing
appointment and that documentation of such agreement must be done by
the plan. In situations where the marketing appointment is in person,
the statute further provides that such documentation shall be in
writing. The advance agreement documentation is commonly referred to as
the Scope of Appointment (SOA) form. The SOA requirement helps to
ensure beneficiaries understand what types of plans will be discussed
prior to meeting with a plan or an agent/broker.
Over the course of the past several years, CMS SOA policy has
evolved as reflected in CMS's regulatory requirements. This is in part
due to changes in the MA market over time, which has led to an evolving
understanding of what measures may be appropriate to regulate for
improper marketing activities and to ensure that beneficiaries are able
to make informed decisions about their enrollment choices. CMS first
codified the SOA statutory requirement at Sec. Sec. 422.2268(g) and
423.2268(g) in the Medicare Program; Revisions to the Medicare
Advantage and Prescription Drug Benefit Programs Interim Final Rule
with Comment Period (hereinafter referred to as the September 2008 IFC)
(73 FR 54226), prohibiting plans from marketing during a marketing
appointment beyond the scope agreed upon by the beneficiary, and
documented by the plan, prior to the appointment occurring. Aligning
with the statute, CMS explained that the beneficiary must have the
opportunity to agree to the range of choices that will be discussed,
and that agreement would have to be documented. Then in the Medicare
Program; Medicare Advantage and Prescription Drug Benefit Programs
Final Rule (hereinafter referred to as the September 2011 final rule)
(76 FR 54634), CMS modified Sec. Sec. 422.2268(g) and 423.2268(g) by
designating a specific timeframe standard for the SOA advance
agreement--48 hours in advance of the marketing appointment, when
practicable. This CMS interpretation was also memorialized in the MCMG
at the time. In the January 2021 final rule, CMS made some structural
changes to 42 CFR part 422, subpart V, and 42 CFR part 423, subpart V,
removed Sec. Sec. 422.2268 and 423.2268, and shifted the SOA rule to
Sec. Sec. 422.2264(c)(3)(i) and 423.2264(c)(3)(i). Also, in this
January 2021 final rule (86 FR 5890), CMS removed the 48-hour SOA
standard again, stating that prior to the personal marketing
appointment beginning, the plan (or agent/broker, as applicable) must
agree upon and record the SOA with the beneficiary(ies).
In the April 2023 final rule, CMS reverted to the 48-hour SOA
standard, prohibiting personal marketing appointments from taking place
until after 48 hours have passed since the time the SOA was completed
by the beneficiary. However, this change did not include the previously
codified ``when practicable'' because CMS, at the time, believed this
phrase nullified the purpose of the 48-hour timeframe given the various
reasons why waiting 48 hours may not be practicable.\54\ Therefore, in
the April 2023 final rule (88 FR 22336), CMS added the phrase ``At
least 48 hours'' to Sec. Sec. 422.2264(c)(3)(i) and 423.2264(c)(3)(i)
to require such a timeframe prior to the personal marketing appointment
for the SOA to be agreed upon and recorded with the beneficiary. CMS
also finalized two exceptions to the 48-hour SOA rule--one for SOAs
that are completed during the last four days of a valid election period
for the beneficiary and the other for unscheduled in-person meetings
(walk-ins) initiated by the beneficiary (see Sec. Sec.
422.2264(c)(3)(i)(A)-(B) and 423.2264(c)(3)(i)(A)-(B)). These are the
current policies for the 48-hour SOA rule.
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\54\ For more details, please refer to the Medicare Program;
Contract Year 2024 Policy and Technical Changes to the Medicare
Advantage Program, Medicare Prescription Drug Benefit Program,
Medicare Cost Plan Program, Medicare Parts A, B, C, and D
Overpayment Provisions of the Affordable Care Act and Programs of
All-Inclusive Care for the Elderly; Health Information Technology
Standards and Implementation Specifications Proposed Rule
(hereinafter referred to as the December 2022 proposed rule).
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Similar to the reasoning for proposing to eliminating the 12-hour
delay requirement at Sec. Sec. 422.2264(c)(2)(i) and
423.2264(c)(2)(i), CMS believes that the strict 48-hour SOA requirement
may create an unnecessary barrier to accessing important MA and Part D
information for impacted beneficiaries, and also barriers for plans and
agents/brokers distributing this information, without offering a
quantifiable protection to the beneficiary. For example, after both the
September 2011 final rule and the April 2023 final rule, CMS received
numerous inquiries from plans and agents/brokers questioning the
logistics of the 48-hour SOA rule and objecting to the rule's tendency
to create obstacles to promoting beneficiaries' smooth, informed, and
timely decision-making when faced with various enrollment options. The
48-hour delay may have a negative impact on a beneficiary's freedom to
engage with a plan or an agent/broker on a schedule that works best for
them. On the other hand, the 48-hour delay may require a beneficiary to
dedicate more time than they wished to spend should they wish to engage
with multiple plans or agents/brokers and need to wait 48 hours before
engaging with them and deciding in which plan they wish to enroll.
Consequently, CMS is proposing to eliminate the 48-hour waiting
period required between the SOA completion and a personal marketing
appointment, as well as eliminate the two corresponding exceptions to
the 48-hour SOA rule. Under this proposal, plans and agents/brokers
would no longer be required to wait 48 hours between obtaining an SOA
and speaking with a beneficiary about plan products. Beneficiaries
would be able to learn about plan products in real time, rather than
having to come back for a personal marketing appointment 48 hours
later. This rule, if finalized, would still require an advance
agreement, as statutorily required, but without a specified timeframe.
Beneficiaries would be able to fill out an SOA just prior to discussing
plan products or may fill out an SOA for a future personal marketing
appointment. For this proposed change, paragraph (c)(3)(i) in both
Sec. Sec. 422.2264 and 423.2264 would revert to its original language
as finalized in the January 2021 final rule by removing the phrase ``At
least 48 hours'' and the phrase ``, except for:'' and by removing the
two exceptions listed at paragraphs (c)(3)(i)(A) and (B). CMS is also
proposing a minor technical correction in Sec. 422.2264(c)(3)(i) to
add the missing word ``appointment'' after ``marketing.''
CMS believes that eliminating the 48-hour SOA rule would benefit
all parties,
[[Page 54954]]
especially beneficiaries, by allowing for a discussion of plan products
on the beneficiary's schedule. Similar to the 12-hour delay requirement
between an educational event and a marketing event, the 48-hour SOA
rule potentially inhibits a beneficiary from receiving information.
While the current requirement has an exception for in-person meetings
(walk-ins) initiated by the beneficiary, it does not account for other
interactions that may take place between the beneficiary and a plan or
an agent/broker. For example, beneficiaries who live far away or those
with transportation issues who sign an SOA with a plan or an agent/
broker when attending a marketing event would be required to come back
no less than 48 hours later to meet with that plan or agent/broker
again.
CMS acknowledges that in the April 2023 final rule, CMS stated that
the burden caused by the 48-hour SOA rule was outweighed by the
potential benefit of providing beneficiaries, especially vulnerable
beneficiaries, time to speak with caregivers and others who they may
rely upon for help or advice or just provide the beneficiary additional
time to consider their options. However, CMS believes that a different
approach may be appropriate now for a similar reason as mentioned for
the proposal to eliminate the 12-hour delay requirement. There is often
a built-in layer of added protection from any potential undue pressure,
as evidenced by the tendency for vulnerable beneficiaries to have other
people help them with plan options and making decisions (for example,
caregivers or authorized representatives), together with previously
mentioned existing beneficiary protections if a beneficiary makes an
adverse enrollment decision based on misrepresentation or otherwise
non-compliant sales tactics. CMS is now reexamining the relative
protection offered by these other factors and based on additional
information that CMS has received about the relative benefit or burden
of the 48-hour SOA rule. As described earlier in the proposal, since
the September 2011 final rule, and more recently, the April 2023 final
rule, CMS has received numerous clarifying questions regarding the 48-
hour timeframe, as well as stakeholder commentaries providing anecdotal
and hypothetical concerns and reasons why the 48-hour SOA rule may be
harmful to beneficiaries. Criticism regarding the potentially adverse
effects on beneficiaries led CMS to further review the unintended
consequences of the ``cooling off'' period. This leads CMS to conclude
that it may be appropriate for plans and agents/brokers to meet with
the beneficiary or the beneficiary's representative sooner than 48
hours after the collection of the SOA form. In other cases, the plan or
agent/broker may need to travel long distances, possibly hundreds of
miles, to have a follow-up appointment based on the current 48-hour SOA
rule, therefore, the proposal here would also reduce the burden on
plans and agents/brokers in addition to beneficiaries and their
representatives.
Furthermore, by returning to the same regulatory language as in the
January 2021 final rule (and similar language as in the September 2008
IFC)--which aligned with section 1851(j)(2)(A) of the Act--CMS is
closely aligning with statute. CMS believes this proposal to eliminate
the 48-hour SOA rule is consistent with the statutory requirement at
section 1851(j)(2)(A) of the Act that requires an advance agreement
with a prospective enrollee, given the statute does not define the
timeframe between the agreement and the marketing appointment with the
plan or agent/broker.
In conjunction with proposing to eliminate the 48-hour SOA rule,
CMS is also proposing a few additional associated regulation changes
and clarifying various SOA policies that would further bolster the
precision of the remaining requirements should the agency finalize the
elimination of the 48-hour SOA rule. CMS has received questions from
plans and agents/brokers regarding SOA policies, and these proposed
regulation changes and policy clarifications are necessary and
responsive to those questions. CMS is requesting that plans and agents/
brokers review the following information carefully and provide feedback
through the comment process. If this portion of the rule is finalized
as proposed, the SOA policy clarifications contained herein will
supersede any existing SOA guidance.
First, CMS is proposing to more clearly define what qualifies as a
personal marketing appointment. The introductory language at Sec. Sec.
422.2264(c)(3) and 423.2264(c)(3) currently states that personal
marketing appointments are those appointments that are tailored to an
individual or small group and that personal marketing appointments are
not defined by the location. CMS proposes to clarify this regulatory
definition by adding language to paragraph (c)(3) in both Sec. Sec.
422.2264 and 423.2264 stating that personal marketing appointments are
for purposes of discussing marketing topics, so that the proposed
language reads as follows: ``Personal marketing appointments are those
appointments that are tailored to an individual or small group (for
example, a married couple) for purposes of discussing marketing
topics.''
In addition to this proposed change to the regulatory text, CMS is
also clarifying here that a small group, for purposes of an SOA, is a
limited number of people, generally related or living in the same
household. While the regulation provides an example of a married
couple, another example would be a parent and child who are both
Medicare-eligible. Meetings with unrelated beneficiaries in a home or a
public space, such as a book club at a house or a small group at a
library, would require separate SOAs for each individual. In addition,
Sec. Sec. 422.2264(c)(3) and 423.2264(c)(3) state that personal
marketing appointments are not defined by the location, meaning that
such an appointment could take place in-person, telephonically, or
virtually.
For more context on what a personal marketing appointment is, CMS
reminds plans and agents/brokers of the types of activities that may
take place at such an appointment. Per Sec. Sec. 422.2264(c)(3)(ii)
and 423.2264(c)(3)(ii), plans and agents/brokers holding a personal
marketing appointment may do any of the following: (1) provide
marketing materials; (2) distribute and accept plan applications; (3)
conduct marketing presentations; and (4) review the individual needs of
the beneficiary including, but not limited to, health care needs and
history, commonly used medications, and financial concerns.
Following the introductory definition of a personal marketing
appointment, Sec. Sec. 422.2264(c)(3)(i) and 423.2264(c)(3)(i)
describe the current 48-hour SOA rule. CMS is proposing to remove the
word ``scheduled'' before ``personal marketing appointment'' at
Sec. Sec. 422.2264(c)(3)(i) and 423.2264(c)(3)(i), so that the
proposed text would state that ``prior to the personal marketing
appointment,'' the MA/Part D plan (or agent or broker, as applicable)
must agree upon and record the Scope of Appointment with the
beneficiary(ies). Likewise, CMS is proposing to amend Sec. Sec.
422.2274(b)(3) and 423.2274(b)(3) to more closely align with Sec. Sec.
422.2264(c)(3)(i) and 423.2264(c)(3)(i) by replacing ``prior to meeting
with potential enrollees'' with ``prior to a personal marketing
appointment.'' CMS believes these regulatory text changes are necessary
to avoid ambiguity and prevent misinterpretation.
If finalized as proposed, CMS's removal of the word ``scheduled''
would mean that an SOA would be required for
[[Page 54955]]
all appointments that meet the definition of personal marketing
appointments. For example, an SOA would be required for plan/agent/
broker-initiated outbound contact and for beneficiary-initiated inbound
contact (including walk-ins, unscheduled calls and web-based chats, and
web-based forms), as long as the contact is tailored to an individual
or small group (as explained earlier in the proposal) for purposes of
discussing marketing topics. To be clear, this means that an SOA would
be required regardless of whether the personal marketing appointment
was initiated by the plan, an agent/broker, or the beneficiary.
Other relevant requirements regarding the SOA are related to the
method of delivery and where SOAs may and may not be accepted or
collected. In order to align with the statutory requirements at section
1851(j)(2)(A) of the Act, CMS is proposing to add that the SOA must be
in writing for in-person personal marketing appointments by adding new
regulatory text to Sec. Sec. 422.2264(c)(3)(i) and 423.2264(c)(3)(i).
This proposed change mirrors the statutory requirement which provides
that if the marketing appointment is in person, then the SOA must be in
writing. The proposed new regulatory text at Sec. Sec.
422.2264(c)(3)(i) and 423.2264(c)(3)(i) would read, ``The Scope of
Appointment must be in writing for in-person personal marketing
appointments.'' Additionally, Sec. Sec. 422.2274(c)(9)(ii) and
423.2274(c)(9)(ii) require agents/brokers to establish and maintain a
system for confirming that agents/brokers appropriately complete SOA
records for all marketing appointments (including telephonic and walk-
in). Here, CMS is proposing to add the word ``personal'' to Sec. Sec.
422.2274(c)(9)(ii) and 423.2274(c)(9)(ii), so that it reads ``personal
marketing appointments'' to ensure consistency with the other
regulation sections previously mentioned. CMS is also clarifying that
there are many ways that an agent/broker can complete an SOA record.
For example, an audio or audio-visual recording or an electronic record
would suffice as an SOA record for a personal marketing appointment
that does not occur in person. Instances in which SOAs may be accepted
or collected include: (1) plan activities in the health care setting
(Sec. Sec. 422.2266(e)(1) and 423.2266(e)(1)); (2) marketing events
(Sec. Sec. 422.2264(c)(2)(ii)(C) and 423.2264(c)(2)(ii)(C)); and (3)
educational events--if the proposed changes to Sec. Sec.
422.2264(c)(1)(ii)(D) and 423.2264(c)(1)(ii)(D) are finalized as
proposed. Instances in which SOAs may not be accepted or collected
include: (1) plan-initiated provider activities (Sec. Sec.
422.2266(d)(1)(i) and 423.2266(d)(1)(i)); and (2) activities performed
by social workers of an I-SNP (employees, agents, or contracted
providers) (Sec. 422.2266(f)(3)).
Regarding the content of the SOA, CMS is clarifying here that,
because Sec. Sec. 422.2264(c)(3)(iii) and 423.2264(c)(3)(iii) require
that plans and agents/brokers holding personal marketing appointments
may not market any health care related product during an appointment
beyond the scope agreed upon by the beneficiary and documented in an
SOA, the SOA must therefore include, at a minimum, the type of
product(s) to be discussed. This aligns with section 1851(j)(2)(A) of
the Act's reference to ``the scope of the marketing appointment.''
Examples of types of products to be discussed include, but are not
limited to, MA plans, MA-PD plans, and standalone PDPs. As a best
practice, in addition to the type of product(s) to be discussed, CMS
encourages plans to also include other pertinent information in the
SOA, such as the date of the appointment and beneficiary contact
information. In addition, on the SOA form, CMS permits plans to have
check boxes or requests from the beneficiary regarding the type of
product(s) to be discussed, for example, an internet site with an
online form that requests a plan or an agent/broker to contact the
beneficiary. Provided this type of SOA form addresses the type of
product(s) to be discussed, the plan or agent/broker may contact the
beneficiary after the form has been filled out. CMS also clarifies that
Business Reply Cards (BRCs), voicemails, online forms, or other
requests for information that include the type of product(s) to be
discussed are, in effect, SOAs. CMS currently does not provide a model
document for SOAs.
Lastly, CMS would like to remind plans and agents/brokers of and
clarify the requirements regarding the validity time period for an SOA.
Pursuant to Sec. Sec. 422.2264(c)(3)(iii)(A) and (B) and
423.2264(c)(3)(iii)(A) and (B), SOAs, BRCs, and other requests for
additional information are valid for 12 months following the
beneficiary's signature date or the date of the beneficiary's initial
request for information. During this 12-month period, plans or agents/
brokers may contact beneficiaries regarding the agreed upon scope of
products documented in the SOA. This does not grant permission to
discuss products not previously agreed upon in the original SOA; any
new product discussion outside the scope previously agreed upon would
require a new SOA. This includes the same product for a different year
(for example, if there is an SOA to discuss contract year 2026 plans,
then a new SOA would be required to discuss contract year 2027 plans).
Finally, the signed SOA can be used for multiple telephonic or in-
person contacts or appointments. With that said, a plan or agent/broker
should respect a beneficiary's request to no longer be contacted, even
if that additional contact would take place within the 12-month window.
3. Scope of Appointment (SOA) Forms at Educational Events
In the January 2021 final rule, at Sec. Sec. 422.2264(c)(1)(ii)(E)
and 423.2264(c)(1)(ii)(E), CMS codified rules permitting plans and
agents/brokers holding or participating in educational events with
beneficiaries to obtain beneficiary contact information, including SOA
forms, at educational events. In the April 2023 final rule, at
Sec. Sec. 422.2264(c)(1)(ii)(D) and 423.2264(c)(1)(ii)(D), CMS
finalized rules that revised these regulations by prohibiting plans and
agents/brokers from making available and receiving SOA forms from
beneficiaries at educational events (other forms of beneficiary contact
information, including BRCs, were still permitted). This is the current
policy regarding SOA forms at educational events.
CMS is proposing to rescind these requirements as finalized in the
April 2023 final rule and revert to the language established in the
January 2021 final rule, to permit plans and agents/brokers to obtain
SOA forms at educational events. Although section 1851(j)(1)(D)(ii) of
the Act prohibits sales and marketing activities from occurring at
educational events, the statute does not prohibit the collection of SOA
forms at educational events. The collection of an SOA form is not a
sales or marketing activity but is the making of an agreement regarding
what type of product(s) will be discussed in advance of a personal
marketing appointment between the beneficiary and the plan or agent/
broker. By permitting plans and agents/brokers to obtain SOA forms at
educational events, the burden on beneficiaries, plans, and agents/
brokers would be reduced, and parties would be allowed to conveniently
schedule personal marketing appointments to discuss plan options in the
future, instead of having to wait until after the educational event
ends to schedule an appointment. If plans and agents/brokers are
allowed to collect SOAs at educational events, then it decreases the
likelihood that beneficiaries might face
[[Page 54956]]
undue burden and the potential challenge of reconnecting with a plan or
agent/broker or traveling back to a venue to locate a plan or agent/
broker at the conclusion of an educational event.
CMS acknowledges that this proposal reflects a change in the
agency's position as described in the April 2023 final rule where CMS
most recently adopted the ban on collecting SOA forms at educational
events. For example, as part of its previous reasoning, CMS stated that
it was concerned that beneficiaries may feel uncomfortable refusing to
fill out an SOA form, or that they may feel obligated to provide this
information in exchange for attending an educational event. Upon
reconsideration, CMS now recognizes that these concerns regarding
beneficiary pressure appear to be outweighed by the importance of
maximizing beneficiary access to information on available plan options,
which could be accomplished by allowing the collection of SOA forms at
educational events. In addition, as previously mentioned, there are
also beneficiary protections in place should a beneficiary make an
adverse enrollment decision based on misrepresentation or otherwise
non-compliant sales tactics.
Thus, CMS proposes to modify Sec. Sec. 422.2264(c)(1)(ii)(D) and
423.2264(c)(1)(ii)(D) to permit plans and agents/brokers holding or
participating in educational events with beneficiaries to make
available and receive SOA forms at those same educational events.
Specifically, at paragraph (c)(1)(ii)(D) in both Sec. Sec. 422.2264
and 423.2264, CMS proposes to replace the phrase ``Cards, but not
including Scope'' with the phrase ``Cards and Scope'' so that it reads
``including Business Reply Cards and Scope of Appointment forms.'' CMS
notes that the remaining distinctions and inherent beneficiary
protections between educational events as required under Sec. Sec.
422.2264(c)(1) and 423.2264(c)(1) and marketing or sales events as
required under Sec. Sec. 422.2264(c)(2) and 423.2264(c)(2) remain.
In summary, CMS is proposing to modify Sec. Sec. 422.2264(c) and
423.2264(c) to improve rules regarding beneficiary outreach and
Sec. Sec. 422.2274(b)(3), 423.2274(b)(3), 422.2274(c)(9)(ii), and
423.2274(c)(9)(ii) to add specificity and clarify policy in conjunction
with the primary proposals at Sec. Sec. 422.2264(c) and 423.2264(c).
These primary proposals include: (1) allowing a marketing event to
directly follow an educational event in the same location; (2) allowing
a personal marketing appointment to occur at any point following
completion of an SOA form; and (3) allowing the SOA form to be
collected from beneficiaries at educational events. CMS's proposed
regulatory changes would remove current rules on the time and manner of
beneficiary outreach, reduce burden on beneficiaries, plans, and
agents/brokers, foster a convenient, beneficiary-friendly experience in
the enrollment decision-making process, and ensure consistency and
clarity in the regulatory text.
These proposals are not expected to have any economic impact on the
Medicare Trust Fund, nor are they expected to have any negative impacts
based on capital investments associated with the requirements that CMS
is proposing to remove. CMS solicits comments on these proposed
amendments to Sec. Sec. 422.2264(c), 423.2264(c), 422.2274(b)(3),
423.2274(b)(3), 422.2274(c)(9)(ii), and 423.2274(c)(9)(ii), including
on the accuracy of assumptions regarding information collection
requirements. CMS thanks commenters in advance for their feedback.
G. Relaxing the Restrictions on Language in Advertising (Sec. Sec.
422.2262(a)(1)(i), 422.2262(a)(1)(ii), 423.2262(a)(1)(i), and
423.2262(a)(1)(ii))
In the Medicare and Medicaid Program; Contract Year 2022 Policy and
Technical Changes to the Medicare Advantage Program, Medicare
Prescription Drug Benefit Program, Medicaid Program, Medicare Cost Plan
Program, and Programs of All-Inclusive Care for the Elderly final rule
(86 FR 5864), hereinafter referred to as the January 2021 final rule,
CMS codified 42 CFR 422.2262(a)(1)(ii) and 423.2262(a)(1)(ii), which
prohibited MA organizations and Part D sponsors from making
unsubstantiated statements, except when used in logos or taglines.
Prior to the January 2021 final rule, this requirement was in the
Medicare Communications and Marketing Guidelines (MCMG). In the
Medicare Program; Contract Year 2024 Policy and Technical Changes to
the Medicare Advantage Program, Medicare Prescription Drug Benefit
Program, Medicare Cost Plan Program, and Programs of All-Inclusive Care
for the Elderly (88 FR 22120), hereinafter referred to as the April
2023 final rule, CMS updated Sec. Sec. 422.2262(a)(1)(ii) and
423.2262(a)(1)(ii) to prohibit MA organizations and Part D sponsors
from using superlatives, unless sources of documentation or data
supportive of the superlative is also referenced in the marketing or
communications material where the superlative is being used. CMS
finalized this current requirement asserting that, without the updated
requirement, a beneficiary may have no knowledge of how the superlative
is determined, which may mislead the beneficiary into believing a
statement that is not accurate. At the time, CMS noted that providing
current, reliable, and valid data as the basis for superlatives is
critical for beneficiaries to review the data themselves (88 FR 22238).
When CMS first codified Sec. Sec. 422.2262(a)(1)(ii) and
423.2262(a)(1)(ii) in the January 2021 final rule, CMS explained that
the policies being codified were not new to MA organizations and Part D
sponsors as they were already included in the MCMG, on which the
industry heavily relied at that time (86 FR 5981). After years of
implementation and oversight, including one revision to the
requirement, CMS now believes the current restrictions regarding use of
superlatives at Sec. Sec. 422.2262(a)(1)(ii) and 423.2262(a)(1)(ii)
are unnecessary as, per Sec. Sec. 422.2262 and 423.2262, MA
organizations and Part D sponsors are already broadly prohibited from
providing beneficiaries marketing and communications materials that are
misleading, confusing, or materially inaccurate. Although CMS is
proposing to remove the prohibition on the use of superlatives, MA
organizations and Part D sponsors would still be required to ensure
that all statements, including superlatives, included in marketing and
communications materials do not mislead, confuse, or provide materially
inaccurate information to current or potential beneficiaries. CMS will
continue to review materials as described at Sec. Sec. 422.2261 and
423.2261, and may request data, reports, or other documentation that
supports the MA organization or Part D sponsor's statements in these
materials either as a part of the formal review process or based on
beneficiary complaints after the materials are actively being used. If
finalized, CMS would continue to encourage MA organizations and Part D
sponsors to make available to beneficiaries and the public the data,
reports, or other documentation that supports the superlative to
promote informed enrollment decisions.
Sections 422.2262(a)(1)(ii) and 423.2262(a)(1)(ii) were intended to
strengthen protections for beneficiaries to ensure they had access to
all necessary information needed to make an informed enrollment
decision. However, because Sec. Sec. 422.2262 and 423.2262 already
broadly prohibit misleading, confusing, and inaccurate marketing and
communications materials, CMS believes that removing
[[Page 54957]]
Sec. Sec. 422.2262(a)(1)(ii) and 423.2262(a)(1)(ii) will not affect
the existing beneficiary protections, which will still be in effect,
but will reduce the administrative burden for all parties. Although
removing Sec. Sec. 422.2262(a)(1)(ii) and 423.2262(a)(1)(ii) does not
remove the prohibition on providing misleading, confusing, or
materially inaccurate information to beneficiaries, it does remove the
requirement for MA organizations and Part D sponsors to reference
supporting documentation or data directly in the material. CMS notes,
however, that if this proposed change to CMS's regulations is
finalized, MA organizations and Part D sponsors can still choose to
make data available to beneficiaries as they determine appropriate,
which may reduce the administrative burden.
CMS will continue to review applicable materials to ensure they do
not provide misleading, confusing, or materially inaccurate information
to beneficiaries. To aid CMS in determining if a material is
misleading, confusing, or materially inaccurate; in some instances, it
may expedite the review process if the MA organization or Part D
sponsor provides supporting documentation when submitting marketing
materials that include the use of superlatives. Moreover, when the
Agency is investigating a material based on a complaint that it was
misleading, confusing, or materially inaccurate, CMS may request the
plan provide documentation that supports the superlative, per the
Agency's oversight authority at Sec. Sec. 422.504(f)(2) and
423.505(f)(2).
For example, quantifiable superlatives such as ``highest rated
providers in Chester County,'' ``largest provider network in Florida,''
or ``highest rated plan in Virginia'' would be acceptable if this
proposed rule is finalized. Further, MA organizations and Part D
sponsors must be able to factually support such superlatives through
data, surveys, studies, or other type of information, and when
requested, provide that information to CMS. In addition, when including
superlatives based on older data, to ensure that they are not
misleading or confusing, MA organizations and Part D sponsors should
indicate the year or in some way show the statement is based on data
older than the current or prior contract year. For example, the use of
a superlative such as ``The most popular Medicare Prescription Drug
plan in Montgomery County in 2023'' would be acceptable if this
proposed rule is finalized. Conversely, CMS would generally find the
same statement to be misleading if the date was missing.
CMS recognizes that not all superlatives can be quantified or
reasonably measured. For example, the use of superlatives such as ``our
plan cares about you the most'' and ``we have the most dedicated
providers in our network.'' Both examples would be permissible if this
proposed rule is finalized, and CMS would not expect MA organizations
or Part sponsors to provide supporting documentation as a part of
submission, nor would the agency request such information as a part of
a complaint investigation.
Consistent with Executive Order 14267,\55\ Reducing Anti-
Competitive Regulatory Barriers, issued on April 9, 2025, CMS believes
that removing the prohibition on the use of superlatives and
underscoring the continued requirement of not misleading, confusing, or
providing inaccurate information to beneficiaries will likely promote
competition as this revision provides more opportunities for MA
organizations and Part D sponsors to innovate while simultaneously
protecting beneficiaries' access to accurate materials to help with
their enrollment decisions.
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For the reasons discussed, CMS proposes to delete current
paragraphs at Sec. Sec. 422.2262(a)(1)(ii) and (a)(1)(ii)(A), and
423.2262(a)(1)(ii) and (a)(1)(ii)(A) in their entirety to remove the
prohibition of using superlatives in marketing and communications
materials without providing supporting documentation. With this
revision, CMS will renumber current paragraphs Sec. Sec.
422.2262(a)(1)(iii)-(xix) and 423.2262(a)(1)(iii)-(xviii).
Consistent with Executive Order 14192,\56\ Unleashing Prosperity
Through Deregulation, issued on January 31, 2025, CMS also proposes
deleting the current paragraphs at Sec. Sec. 422.2262(a)(1)(i) and
423.2262(a)(1)(i), which reiterate the prohibition on MA organizations
and Part D sponsors providing misleading and inaccurate information to
beneficiaries. This is a technical change that would remove the
duplication of Sec. Sec. 422.2262 and 423.2262, which already require
MA organizations and Part D sponsors to not provide misleading,
confusing, or materially inaccurate information to current and
potential beneficiaries.
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CMS welcomes comments on the proposed changes to Sec. Sec.
422.2262(a)(1)(i) and (ii) and 423.2262(a)(1)(i) and (ii), and thanks
commenters in advance for their feedback.
H. Third-Party Marketing Organization (TPMO) Oversight: Revising the
Record Retention Requirements for Marketing and Sales Call Recordings
(Sec. Sec. 422.2274(g)(2) and 423.2274(g)(2))
CMS is proposing to revise the marketing and sales recording
requirements at 42 CFR 422.2274(g)(2) and 423.2274(g)(2). Consistent
with the 10 year record retention requirements and access to records
requirements described in Sec. Sec. 422.504(d) and (e)(1)(iv) and
Sec. Sec. 423.505(d) and (E)(1)(iv), MA Organizations and Part D
sponsors are expected to retain the sales and marketing call recordings
described in Sec. Sec. 422.2274(g)(2) and 423.2274(g)(2) for 10 years.
CMS is proposing to update Sec. Sec. 422.2274(g)(2)(ii) and
423.2274(g)(2)(ii) to reduce the amount of time that MA Organizations
and Part D sponsors are required to retain recordings of marketing and
sales calls to 6 years, while maintaining the requirement that
enrollment records be retained for 10 years, as required under
Sec. Sec. 422.504(e)(1)(iv) and 423.505(e). This proposal modifies
only the record retention requirements for the marketing and sales
portions of calls at 42 CFR part 422, subpart V and Part 423, Subpart
V. CMS has long required enrollment records to be maintained for 10
years and this proposal does not remove applicable enrollment
documentation and retention requirements set forth in other
regulations, specifically the requirement to file and retain enrollment
forms as required in Sec. Sec. 422.60(c)(2), 422.504(e)(1)(iv) and
423.505(e)(1)(iv). To meet enrollment documentation requirements for
enrollments that occur over the phone, plans would still be required to
record the enrollment portion of the call, as the recording in this
instance serves as the enrollment form and provides proof that the
beneficiary attested to their intent to enroll in accordance with Sec.
422.60(c)(2) and the Medicare Managed Care Manual, Chapter 2, Medicare
Advantage Enrollment and Disenrollment, Section 40.1.3. The enrollment
portion of the call begins when the beneficiary is advised that they
are completing an enrollment request, after which they provide the
information as required by the enrollment form and attest to their
intention to enroll.
As a part of the Medicare Program; Contract Year 2023 Policy and
Technical Changes to the Medicare Advantage and Medicare Prescription
Drug Benefit Programs; Policy and Regulatory Revisions in Response to
the
[[Page 54958]]
COVID-19 Public Health Emergency; Additional Policy and Regulatory
Revisions in Response to the COVID-19 Public Health Emergency Final
Rule (hereafter referred to as the May 2022 final rule) (87 FR 27704),
CMS finalized regulations at Sec. Sec. 422.2274(g)(2) and
423.2274(g)(2) regarding plan oversight of Third-Party Marketing
Organizations (TPMOs). Under these regulations, MA organizations and
Part D sponsors must have certain requirements in their contracts,
written arrangements, and agreements with TPMOs, or between the TPMO
and MA organization or Part D sponsor's first tier, downstream, and
related entities (FDR). In Sec. Sec. 422.2274(g)(2)(ii) and
423.2274(g)(2)(ii), CMS finalized the requirement that an MA
organization or a Part D sponsor's contract, written arrangement and/or
agreement with the aforementioned entities must ensure that all calls
with beneficiaries are recorded in their entirety. In addition, in
order to ensure compliance with the 10-year record retention and access
to records requirements described in Sec. Sec. 422.504(d) and
(e)(1)(iv) and Sec. 423.505(d) and (e)(1)(iv), MA organizations and
Part D sponsors are expected to retain the sales and marketing call
recordings described in Sec. Sec. 422.2274(g)(2) and 423.2274(g)(2)
for 10 years.
Following the finalization and implementation of the May 2022 final
rule, CMS received questions regarding retention requirements for
recorded calls, as MA organizations and Part D sponsors were unsure if
calls regarding marketing, sales, and enrollment were subject to the
10-year record retention requirements at Sec. Sec. 422.504(d) and
423.505(d). CMS also received questions about the scope of ``all
calls'' for recording purposes, including if the recording requirement
extended to calls that merely set an appointment with a potential
enrollee, calls to enrollees to confirm welcome packets were received,
and other non-marketing or non-sales calls to prospective enrollees.
CMS notes that the May 2022 final rule did not provide exceptions or
otherwise establish a more defined boundary for the type of call that
was subject to recording and retention. To rectify any potential
unintended consequences stemming from the standard that CMS codified in
the May 2022 final rule, CMS issued the Medicare Program; Contract Year
2024 Policy and Technical Changes to the Medicare Advantage Program,
Medicare Prescription Drug Benefit Program; Medicare Cost Plan Program,
and Programs of All-Inclusive Care for the Elderly Policy Final Rule
(hereafter referred to as the April 2023 final rule) (88 FR 22120), to
address the requirement that all calls be recorded and retained. In the
April 2023 final rule, CMS modified Sec. Sec. 422.2274(g)(2)(ii) and
423.2274(g)(2)(ii) to require only the recording of marketing, sales,
and enrollment calls, including the audio portion of calls via web-
based technology. The implementation of this revised and less
burdensome call recording requirement was to ensure the necessary calls
were recorded and available for oversight and monitoring while still
reducing some level of burden on plans.
CMS has continued to oversee and monitor agent and broker behavior
by reviewing call recordings to determine compliance. In addition to
CMS, other governmental entities (e.g., Department of Justice) have
relied on call recordings for investigations. CMS has requested call
recordings based on complaints from CMS's Complaint Tracking Module
(CTM). The requested recordings were chosen based on the severity of
the allegations in the complaint in the CTM and used to determine if
the merit of the claims against the agent or broker. The outcome of
CMS's review of the marketing and sales portion of the call recordings
has been mixed. In some instances, the recordings did not support the
beneficiary's complaint as detailed in the CTM. In other instances, the
complaints were substantiated by the recording. These reviews have
shown examples where agents and brokers fail to provide sufficient
information for a beneficiary to make an informed decision or the
information provided by the agent or broker is inaccurate. For reviewed
complaints that are substantiated, CMS has notified the MA organization
or Part D sponsor of the agency's findings and requested the
organization review the results and take appropriate action against the
agent, broker, or TPMO. MA organizations and Part D sponsors have
responded to CMS's findings with actions such as retraining or
discontinuing contracts with certain entities.
MA organizations and Part D sponsors are responsible for ensuring
all downstream entities meet CMS's requirements. There are over 68
million Medicare beneficiaries, of which 51.1 percent are enrolled in
MA and other health plans.\57\ Of the approximately 34 million
beneficiaries enrolled in an MA plan or other health plan, 31 percent
use agents to assist with plan choices,\58\ resulting in 10,540,000
beneficiaries discussing plan options with agents annually. Each year,
only three out of every ten beneficiaries compare plans during
Medicare's Annual Election Period,\59\ resulting in approximately 3.1
million beneficiaries using agents or brokers to review their plan
choices. Based on these data, CMS conservatively estimates that MA
organizations, Part D Sponsors, and their TPMOs must record hundreds of
thousands of calls each year to comply with these regulatory
requirements, resulting in millions of calls being subject to the 10-
year retention requirement.
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\57\ https://data.cms.gov/summary-statistics-on-beneficiary-enrollment/medicare-and-medicaid-reports/medicare-monthly-enrollment.
\58\ https://www.medpac.gov/wp-content/uploads/2024/08/Medicare-agents-MedPAC-03.25sec.pdf.
\59\ https://www.kff.org/medicare/issue-brief/nearly-7-in-10-medicare-beneficiaries-did-not-compare-plans-during-medicares-open-enrollment-period/.
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CMS recognizes the cost and burden of these requirements. CMS has
received comments from industry groups noting the costs associated with
recording and retaining the marketing and sales portion of calls. Audio
call files are large, taking a substantial amount of data storage,
especially when the record retention requirement is to store these
calls for 10 years. In addition, to the cost of maintaining these
calls, CMS is highly unlikely to review calls past the 6-year mark. To
best address marketing complaints, the review of calls typically needs
to be much closer to the timeframe of the actual complaint. Reviewing
complaints that are 10 years old may result in the discovery of issues
that are irrelevant and that will not result in identifying current
issues that affect beneficiaries. Because of these reasons, CMS is
proposing to reduce the timeframe for the retention of the marketing
and sales portion of calls from a 10-year requirement to a 6-year
requirement. If finalized, this revised retention requirement would
also apply to currently retained call recordings, meaning that any
marketing and sales portion of calls older than 6 years that are
currently being retained would no longer need to be retained.
CMS believes a 6-year record retention requirement for the
marketing and sales portion of calls is sufficient for the purpose of
enabling CMS review of agent and broker behavior and balances the need
for appropriate oversight while also providing consideration of the
burden imposed by record retention. It is helpful to CMS to review the
marketing and sales portion of audio recordings when the Agency
receives complaints from of beneficiaries related to being misled into
choosing a plan and
[[Page 54959]]
then enrolling in that plan. The marketing and sales portion of these
recordings is most useful when it is recent and permits CMS to provide
timely feedback to MA organizations and Part D sponsors, so they may,
in turn, quickly address any compliance issues that are identified by
CMS review.
While proposing a revised 6-year record retention requirement for
the marketing and sales portion of calls, CMS is also considering
several other alternatives described below and CMS might finalize a
policy that includes, but is not limited, to the specific alternatives
discussed below. CMS is considering alternatives based on the cost and
burden of recording and storing calls when CMS only reviews a few
hundred calls each year.
One alternative to the proposed 6-year retention requirement is to
reduce the 10-year retention requirement for the marketing and sales
portion of calls to a 3-year retention requirement. This alternative
would also further decrease existing burden and costs on MA
organizations and Part D sponsors but would provide both CMS and other
oversight organizations with a shorter lookback period. A shorter
lookback period could make it more challenging to identify longer-term
trends, including potential trends associated with TPMOs. However, a 3-
year retention requirement would result in a more significant decrease
in burden as compared to the proposed 6-year retention requirement.
CMS is also considering alternatives such as whether audio
recordings of the marketing and sales portion of calls are necessary
for record retention purposes or whether the ability to review agent
and broker behavior could be achieved via other, less expensive means.
Specifically, CMS is considering whether permitting written retention
of the marketing and sales portion of calls (i.e., a transcript) in
lieu of retaining audio recordings of such calls, or a hybrid approach
that requires audio recordings for 3 years followed by written
retention for remainder of the retention period would be sufficient to
achieve the purpose articulated by CMS within this proposal. An
important factor to this alternative is the ability of current
technology to automate the transcription with sufficient accuracy. CMS
believes these transcripts might still provide CMS with enough ability
to review interactions between beneficiaries and agents and brokers to
identify non-compliance similar to the review of audio recordings. On
the other hand, transcripts would not capture the tone by which the
agent or broker interacted with the beneficiary. Either way, the data
storage costs of retaining transcripts may be less than the data
storage costs of audio recordings, further reducing burden if new costs
from automated transcription did not outweigh those savings.
Finally, based on the mixed findings from the review of call
recordings, CMS is also considering, as an alternative, whether
maintaining a recording, either audio or otherwise, of the marketing
and sales portion of calls is necessary at all. The results of the
review of these portions of calls, as identified earlier in this
proposal, have provided examples that agents and brokers do not always
provide accurate and truthful information. Conversely, in other
instances, the call recordings offer a way to refute beneficiary
complaints, such as those filed through 1-800-MEDICARE. However, by
eliminating these requirements, CMS and other oversight organizations
would not have the ability to directly review agent and broker behavior
to ensure beneficiaries select a plan that best meets their needs. CMS
acknowledges there are differences between MA, Part D, Marketplace,
Medicaid, and commercial insurance, however, CMS notes the elimination
of recording the MA and Part D marketing and sales portion of calls
would result in more parity with the requirements of these programs.
To reiterate, CMS is specifically seeking comment on: (1) the
appropriate duration of the recording retention requirement, i.e., 3
years, 6 years, or other timeframes, for the marketing and sales
portion of calls; (2) alternative means of recording the marketing and
sales portion of calls, such as transcription, in lieu of requiring an
audio recording, including input on other technologies to aid in
capturing the interaction between a TPMO and a Medicare beneficiary;
(3) whether the agency should completely remove the requirement to
record the marketing and sales portion of calls, including what
alternative means of oversight the agency could implement to ensure an
appropriate level of oversight; and (4) the impact of proposed and
alternative requirements on beneficiaries. CMS also welcomes other
options for reducing the burden and costs associated with these
requirements. In providing alternatives, CMS is also seeking the
savings attributed to each of the alternatives. We are also seeking
rationale, including the accuracy of transcriptions, for each
alternative.
CMS solicits comments on all aspects of this proposal and may
consider alternatives and other revisions based on the comments
received, including, but not limited, to the specific alternatives
discussed above, which, based on comments, may be finalized rather than
the proposal.
I. Rescinding the Requirement for the Notice of Availability
(Sec. Sec. 422.2267(e)(31) and 423.2267(e)(33))
The Notice of Availability of language assistance services and
auxiliary aids and services (NoA) material, formerly known as the
Multi-language insert (MLI), required at 42 CFR 422.2267(e)(31) and
423.2267(e)(33), has been modified in conjunction with changes to the
Health and Human Services Office for Civil Rights (OCR) language
assistance notification requirements (currently at 45 CFR 92.11),
implementing section 1557 of the Affordable Care Act (ACA), 42 U.S.C.
18116. Currently, CMS's NoA requirements are closely aligned with and
broadly duplicate OCR's NoA requirements. On March 1, 2025, Executive
Order (E.O.) 14224 was issued: ``Designating English as the Official
Language of The United States'' (hereinafter referred to as E.O.
14224).\60\ E.O. 14224 designates English as the official language of
the United States and includes the revocation of E.O. 13166 of August
11, 2000 (Improving Access to Services for Persons with Limited English
Proficiency). On January 31, 2025, E.O. 14192 was issued: ``Unleashing
Prosperity Through Deregulation'' (hereinafter referred to as E.O.
14192).\61\ E.O. 14192 describes the Administration's policy goals to
promote prudent financial management and alleviate unnecessary
regulatory burdens. Section 2 of E.O. 14192 states that ``it is the
policy of the executive branch to be prudent and financially
responsible in the expenditure of funds, from both public and private
sources, and to alleviate unnecessary regulatory burdens placed on the
American people.'' Lastly, a recent memorandum from the Office of the
Attorney General, released on July 14, 2025,\62\ which provides
guidance for compliance with E.O. 14224, introduces additional
uncertainty regarding the future of language assistance requirements.
To ensure consistency and reduce the risk of misalignment, CMS believes
it is prudent to defer to OCR as to how this guidance will impact
language assistance and auxiliary aid and service
[[Page 54960]]
requirements throughout the programs under HHS's purview.
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\60\ https://www.whitehouse.gov/presidential-actions/2025/03/designating-english-as-the-official-language-of-the-united-states/.
\61\ https://www.whitehouse.gov/presidential-actions/2025/01/unleashing-prosperity-through-deregulation/.
\62\ https://www.justice.gov/opa/pr/justice-department-releases-guidance-implementing-president-trumps-executive-order.
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CMS's requirements under Sec. Sec. 422.2267(e)(31) and
423.2267(e)(33) currently duplicate OCR requirements at 45 CFR 92.11.
To ensure clarity, minimize administrative burden, and limit confusion
for MA organizations and Part D sponsors regarding language assistance
and auxiliary aids and services notification requirements, CMS is
proposing to eliminate the NoA requirement under Sec. Sec.
422.2267(e)(31) and 423.2267(e)(33) and to defer to OCR's oversight and
management of any requirements related to language assistance and
auxiliary aids and services notifications. This would mitigate the
potential for future misalignment and the need for additional
modifications to CMS's requirements as policy evolves.
CMS historically has looked to OCR's language requirements when
promulgating regulations for the MA and Part D programs. On May 18,
2016, OCR published the Nondiscrimination in Health Programs and
Activities final rule (81 FR 31376), hereinafter referred to as the
``2016 section 1557 final rule,'' implementing the requirement that all
covered entities--any health program or activity that receives Federal
financial assistance--include taglines with all ``significant
communications.'' On June 19, 2020, the Department of Health and Human
Services (Department) published a new section 1557 final rule,
``Nondiscrimination in Health and Health Education Programs or
Activities, Delegation of Authority,'' hereinafter referred to as the
2020 section 1557 final rule (85 FR 37160), rescinding the 2016 section
1557 final rule's tagline requirements (84 FR 27860).
To address the gap after the rescission of OCR's tagline
requirements in the 2020 section 1557 final rule, CMS finalized an MLI
requirement in the ``Medicare Program; Contract Year 2023 Policy and
Technical Changes to the Medicare Advantage and Medicare Prescription
Drug Benefit Programs; Policy and Regulatory Revisions in Response to
the COVID-19 Public Health Emergency; Additional Policy and Regulatory
Revisions in Response to the COVID-19 Public Health Emergency'' final
rule (87 FR 27704), hereinafter referred to as the ``May 2022 final
rule.'' CMS, at Sec. Sec. 422.2267(e)(31) and 423.2267(e)(33),
required the MLI to have a CMS-provided standardized tagline in the
following languages: Spanish, Chinese, Tagalog, French, Vietnamese,
German, Korean, Russian, Arabic, Italian, Portuguese, French Creole,
Polish, Hindi, and Japanese. Additionally, the MLI required that MA
organizations and Part D sponsors include additional languages in the
plan's service area that met the 5 percent service area threshold, as
required under Sec. Sec. 422.2267(a)(2) and 423.2267(a)(2). Sections
422.2267(a)(2) and 423.2267(a)(2) require that, for all required
materials and content under Sec. Sec. 422.2267 and 423.2267, MA
organizations and Part D sponsors must, ``for markets with a
significant non-English speaking population, be in the language of
these individuals.'' Specifically, MA organizations and Part D sponsors
``must translate required materials into any non-English language that
is the primary language of at least 5 percent of the individuals in a
plan benefit package (PBP) service area.''
On August 4, 2022, OCR proposed a new rule, Nondiscrimination in
Health Programs and Activities (hereinafter referred to as the ``2022
proposed rule'') for section 1557 of the ACA (87 FR 47824), to require
covered entities to notify the public of the availability of language
assistance services and auxiliary aids and services for their health
programs and activities at no cost using a NoA and requiring that the
NoA be provided in English and at least in the 15 most common languages
spoken by individuals with limited English proficiency in the relevant
State or States, and in alternate formats for individuals with
disabilities who request auxiliary aids and services to ensure
effective communications.'' \63\
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\63\ The proposed rule was finalized, with minor modifications
on May 6, 2024, (89 FR 37522), creating the requirements for the
notice of the availability of language assistance services and
auxiliary aids and services at 45 CFR 92.11.
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To ensure consistency, following OCR's 2022 proposed rule, CMS
finalized the current NoA in the ``Medicare Program; Changes to the
Medicare Advantage and the Medicare Prescription Drug Benefit Program
for Contract Year 2024-Remaining Provisions and Contract Year 2025
Policy and Technical Changes to the Medicare Advantage Program,
Medicare Prescription Drug Benefit Program, Medicare Cost Plan Program,
and Programs of All-Inclusive Care for the Elderly (PACE)'' final rule
(89 FR 30448), hereinafter known as the ``April 2024 final rule.'' In
this rule, CMS renamed the required document from the MLI to the Notice
of availability of language assistance services and auxiliary aids and
services at Sec. Sec. 422.2267(e)(31) and 423.2267(e)(33) to align
with OCR's language. Additionally, the notice was recategorized from a
standardized communications material to a model communications
material, requiring plans to include in the notice that, at a minimum,
the MA organization or Part D sponsor provide language assistance
services and appropriate auxiliary aids and services free of charge (89
FR 30534). The updated NoA also updated the language criteria to align
with OCR's proposed language at the time. To align with OCR, CMS
finalized the requirement for plans to provide the NoA ``in English and
at least the 15 languages most commonly spoken by individuals with
limited English proficiency of the relevant State or States associated
with the plan's service area and must be provided in alternate formats
for individuals with disabilities who require auxiliary aids and
services to ensure effective communication.'' CMS maintained the
requirement that the NoA also include any non-English language that is
the primary language of at least 5 percent of the individuals in a plan
benefit package (PBP) service area, provided it was beyond the 15
languages most commonly spoken by individuals with limited English
proficiency of the relevant State or States associated with the plan's
service area. This update resulted in the potential for MA plans and
Part D sponsors to develop a NoA with more than 15 languages, exceeding
OCR's requirements.
While currently, OCR's and CMS's requirements are mostly aligned,
CMS notes minor differences in the language of the current regulations.
The OCR NoA requirement applies to the ``State or States in which a
covered entity operates'' which is broader than CMS's requirement.
CMS's NoA requirement applies to the ``State or States associated with
the plan's service area'' which CMS defined as the plan benefit package
level. Additionally, CMS requires the NoA to be included on all CMS
required materials at Sec. Sec. 422.2267(e) and 423.2267(e), whereas
OCR's language regarding where the NoA should be placed (45 CFR
92.11(c)(5)) is less specific, though its guidance still aligns with
many of CMS's required materials.
As discussed in the April 2024 final rule, the ACA (42 U.S.C.
18116(c)) provides that, except where otherwise provided in Title I of
the ACA, an individual shall not, on the grounds prohibited under Title
VI of the Civil Rights Act of 1964, 42 U.S.C. 2000d et seq. (race,
color, or national origin), Title IX of the Education Amendments of
1972, 20 U.S.C. 1681 et seq. (sex), the Age Discrimination Act of 1975,
42 U.S.C. 6101 et seq. (age), or section 504 of the Rehabilitation Act
of 1973, 29 U.S.C. 794 (disability), be excluded from participation in,
be denied the benefits
[[Page 54961]]
of, or be subjected to discrimination under, any health program or
activity, any part of which is receiving Federal financial assistance
(including credits, subsidies, or contracts of insurance); any program
or activity administered by the Department; or any program or activity
administered by any entity established under Title I of the Act.
In the April 2024 final rule, CMS cited discussions from the May
2022 final rule, that ``solely relying on the requirements delineated
in the 2020 section 1557 final rule for covered entities to convey the
availability of interpreter services is insufficient for the MA, cost
plan, and Part D programs and is not in the best interest of Medicare
beneficiaries who are evaluating whether to receive their Medicare
benefits through these plans and who are enrolled in these plans'' (89
FR 30529). At the time, CMS took the position that ``informing Medicare
beneficiaries that interpreter services are available is essential to
realizing the value of our regulatory requirements for interpreter
services'' (89 FR 30529). CMS further explained that through additional
insights ``regarding the void created by the lack of any notification
requirement associated with the availability of interpreter services
for Medicare beneficiaries the materials required under Sec. Sec.
422.2267(e) and 423.2267(e) were vital to the beneficiary's decision-
making process'' (87 FR 27821). CMS also cited complaint tracking
module (CTM) cases in the Health Plan Management System (HPMS) related
to ``language'' and found a pattern of beneficiary confusion stemming
from not fully understanding materials based on a language barrier.
In the April 2024 final rule, CMS also explained that updating the
NoA requirements in Parts C and D would help align with the Medicaid
requirement under Sec. 438.10(d)(2), in which ``States must require
Medicaid managed care organizations (MCOs), prepaid inpatient health
plans (PIHPs), prepaid ambulatory health plans (PAHPs), and primary
care case management programs to include taglines in written materials
that are critical to obtaining services for potential enrollees in the
prevalent non-English languages in the State explaining the
availability of oral interpretation to understand the information
provided, information on how to request auxiliary aids and services,
and the toll-free telephone number of the entity providing choice
counseling services in the State'' (89 FR 30529). Therefore, CMS
finalized NoA requirements that also aligned with Medicaid materials
requirements, such as updating the NoA to require the 15 most common
languages in the State rather than the 15 most common languages
nationally (89 FR 30529).
While CMS's and OCR's current requirements are now mostly aligned,
CMS is concerned that the duplicative nature of these requirements may
potentially result in additional regulatory updates, and corresponding
burdens as policy evolves. Because CMS and OCR regulatory schedules
vary, the potential differences in requirements can be confusing and
burdensome to MA organizations and Part D sponsors who are subject to
CMS requirements and the broader OCR requirements as covered entities.
Additionally, uncertainty regarding broad changes to language
assistance and notification requirements, or how OCR may modify their
requirements as policy evolves may result in additional confusion,
administrative burden and potential for misalignment of the NoA
requirement under Sec. Sec. 422.2267(e)(31) and 423.2267(e)(33).
Eliminating the NoA requirement under Sec. Sec. 422.2267(e)(31) and
423.2267(e)(33) will ensure consistency and clarity for covered
entities as these requirements will be addressed centrally by OCR. CMS
notes that dual eligible special needs plans would still be subject to
any notice requirements that may be included in the State Medicaid
agency contract or State statute for Medicaid as applicable. Overall,
CMS's position is that eliminating the duplicative nature of OCR's and
CMS's regulatory requirements supports the principles set forth in E.O.
14192 by promoting prudent financial management and alleviating
unnecessary regulatory burdens.
In summary, this proposal will reduce administrative burden on CMS,
MA organizations and Part D sponsors by eliminating duplicative
requirements. CMS is not scoring this provision in the COI section as
CMS believes there will be no burden impacts for this provision. In
addition, this provision is not expected to have any economic impact on
the Medicare Trust Fund. CMS solicits comments on the agency's proposed
amendments.
J. Appeals Process for Part D Program Integrity Prescription Drug Event
Record Review Audits
1. Background
Section 423.505(e) authorizes CMS to evaluate, through audit,
inspection, or other means, the appropriateness of services furnished
to Medicare enrollees under a Part D contract. Consistent with this
authority, CMS conducts Part D prescription drug event (PDE) record
review audits under the Center for Program Integrity (CPI) that
identify improper PDE records paid under the Medicare Part D benefit,
herein referred to as Part D program integrity PDE record review
audits, including instances in which the drug, item, or service does
not meet the definition of a covered Part D drug under section 1860D-
2(e) of the Act. As part of these audits, CMS identifies PDE records
that it believes are potentially improper, and plan sponsors submit
supporting documentation to rebut this finding and demonstrate that the
drug, item, or service was appropriate for coverage under the Medicare
Part D program. If CMS determines, based on a review of this
documentation, that Medicare Part D rules and regulations were not met
and therefore the PDE is improper, CMS notifies the Part D plan sponsor
to submit PDE deletion or adjustment records for the associated
record(s) in accordance with Sec. 423.325(a)(2) and subregulatory
guidance. The deleted PDE records result in savings to the Medicare
Trust Fund when the PDE record for a given plan year is included in
that plan year's global reopening, described at Sec. 423.308 and Sec.
423.346(a)(2).
Currently, Part D plan sponsors have one opportunity to submit
documentation demonstrating that a PDE record was appropriate for
coverage under the Part D program, which occurs during the audit
itself. Because there is currently no process for Part D plan sponsors
to further appeal determinations that a PDE record was improper, we
propose to establish a three level appeals process for Part D program
integrity PDE record review audits. Specifically, we propose to amend
42 CFR part 423 subpart Z, which currently outlines the Recovery Audit
Contractor (RAC) Part D appeals process, to include any Part D program
integrity PDE record review audits. We also propose several conforming
revisions to achieve alignment and streamlining of the Part D program
integrity PDE record review audit appeals processes. Under this revised
appeals process, Part D plan sponsors would receive an audit close out
letter including: (1) an explanation of the drug, item, or service
under audit; (2) a high-level overview of improper and proper PDE
record counts; (3) an attached PDE level record file denoting improper
and proper PDE records; (4) requirements for the submission of deletion
records or adjustment records for the PDEs determined to be improper;
and (5) instructions on how the Part D
[[Page 54962]]
plan sponsor may appeal the findings. There would be no minimum
threshold for an appeal at any level.
2. Appeals Process
In this rule, we are proposing to codify at 42 CFR part 423 subpart
Z changes to the existing RAC appeals process to include any CMS Part D
program integrity PDE record review audits. To reflect the proposed
expansion of the appeals process, we propose to revise the regulatory
text title of subpart Z from ``Recovery Audit Contractor Part D Appeals
Process'' to ``Appeals Process for Part D Program Integrity
Prescription Drug Event Record Review Audits''. This change will
establish an appeals process for Part D plan sponsors to appeal
findings for Part D program integrity audits conducted by CMS that
review PDE records for appropriateness.
Currently, 42 CFR part 423 subpart Z sections 423.2600 to 423.2615
describe what may or may not be subject to appeal and the processes for
each of the three levels of appeal, which include: (1) request for
reconsideration, (2) hearing official review, and (3) review by the
Administrator. To align with the changes being proposed concurrently
under subpart Z, these regulations would likewise remove the mention of
the RACs specifically, as the appeals process will include any Part D
program integrity audits that review PDE records for appropriateness.
Furthermore, the proposed modifications would establish review
timeframes for the different review entities at each level of appeal.
The RAC Part D payment audits recovered improper payments from Part D
plan sponsors through the monthly capitation payment, and therefore,
could recover funds at any time without constraints. As such, the
current regulatory text for the RAC audit appeals did not have a need
to require that the independent reviewer make their decision within a
certain timeframe. However, current Part D program integrity PDE record
review audits require the plan sponsors to submit deletion records to
CMS for all PDE records deemed improper during audit, in accordance
with Sec. 423.325(a)(2) and prior to the global reopening for any
given plan year, to ensure the integrity of the Medicare Trust Fund.
For these reasons, we believe it is necessary to provide timeframes for
decisions to be made at each appeal level. We believe that three levels
of appeal, with review timeframes, would allow sufficient opportunity
for Part D plan sponsors to appeal a determination and ensure that
timely and accurate determinations are made consistent with the rules
and regulations of the Part D program.
a. Payment Appeals (Sec. 423.2600)
The current payment appeals language at Sec. 423.2600 describes
for the Part D plan sponsor what is or is not considered appealable
during a RAC payment audit. To align with the broadened scope of
subpart Z, as proposed, we are proposing to also amend the language
describing what is or is not considered appealable to reflect the
scenarios that apply to Part D program integrity PDE record review
audits. As such, we propose to modify the existing regulatory language
at Sec. 423.2600 to state Medicare Part D plan sponsors may appeal
program integrity PDE prescription drug even record review audit
determinations. We propose to add a new paragraph (a) to Sec.
423.2600, which would identify the issues that may be appealed through
the audit appeals process. Specifically, under (a) Issues eligible for
appeal, we propose to add paragraph (a)(1) to state CMS's application
of Part D policy(ies). Part D policy(ies) refer to any Part D sponsor
requirement from CMS outlined in the Code of Federal Regulations CFR,
CMS manuals, or other communications from CMS. Proposed paragraph
(a)(2) would specify that Part D sponsors may appeal factual or data
errors. Examples of appealable issues at (a)(1) or (a)(2) would
include: (1) a determination that a drug, item or service was excluded
from coverage under the Medicare Part D program; or (2) a determination
that a Medicare Part D payment was a duplicate payment. Errors of this
nature would be appealable given there would be documentation for the
reviewers to review to ensure that the payment was proper under the
Medicare Part D benefit. The independent reviewer would review the
documentation to determine and ensure that the payment was proper and
in accordance with Medicare Part D policies. Furthermore, the
independent reviewer may also determine, based on documentation
submitted, whether the error resulted from actions made by CMS.
We propose to further amend Sec. 423.2600 by adding a new
paragraph (b), which would identify issues ineligible for appeal.
Proposed paragraph (b)(1) would specify that Part D plan sponsors may
not appeal the failure to submit documentation in the timeframes
specified by CMS during the audit. Failure to submit documentation
would not be appealable, given the plan sponsor has the opportunity to
provide the documentation to CMS for review within a specified audit
timeframe. Historically, during Part D program integrity PDE record
review audits, the audit timeframes are extended due to the
documentation lacking specific information needed to evaluate the PDE
records appropriateness. This greatly affects the overall length of the
audit and causes undue burden on both the plan sponsor and CMS.
Therefore, CMS is proposing to require that plan sponsors provide
documentation in accordance with the provisions in this proposed rule
that propose updates at Sec. 423.505, and accordingly, failure to
provide this information would result in an improper determination that
is not appealable. Providing documentation in accordance with the
provisions proposed at Sec. 423.505 will greatly reduce the burden and
overall audit timeline for both CMS and Part D plan sponsors, as CMS
will not have to request additional information from the plan sponsors.
Proposed paragraph (b)(2) would state that Medicare Part D plan
sponsors may not appeal the program integrity PDE record review audit
methodology. That is, while CMS's application of Part D policy(ies) and
factual or data errors may be appealed, the Part D plan sponsor may not
appeal the underlying audit methodology, such as the manner in which
data was extracted.
b. Reconsiderations (Sec. 423.2605)
In existing paragraph (a), we propose to replace the term ``demand
letter'' with the term ``close out letter'' for consistency with
current terminology in CMS's Part D program integrity PDE record review
audits. In existing paragraph (e), we propose to add a timeframe for
when the independent reviewer's decision needs to be decided and
communicated to the Part D plan sponsor and CMS. Specifically, we
propose to amend the language from ``[t]he independent reviewer informs
CMS and the Part D plan sponsor of its decision in writing'' to ``the
independent reviewer decides the reconsideration within 60 calendar
days after the timeframe for filing a rebuttal has expired, and sends a
written decision to the Part D plan sponsor and CMS, explaining the
basis for the decision.'' Adding a timeframe for the independent
reviewer's decision gives CMS the opportunity to ensure that any upheld
improper PDE records can be submitted as a deletion record by the plan
sponsor within the global reopening timeframe.
c. Hearing Official Review (Sec. 423.2610)
In the existing regulatory text at Sec. 423.2610, CMS outlines the
process for a hearing official review. We propose to
[[Page 54963]]
revise paragraph (d)(2)(i), to replace ``Part D RAC'' with ``CMS'' for
consistency with the changes, discussed previously, regarding the
audits to which these appeals processes apply. We propose to revise
paragraph (d)(3) to remove the phrase ``nor CMS may submit'' and
replace it with ``nor CMS is permitted to submit'' to establish
stronger verbiage that the submission of new evidence is not permitted
by either the plan sponsor or by CMS and will not be considered by the
hearing official. In addition, we propose to revise paragraph (e), to
replace ``60 days'' with ``60 calendar days after the timeframe for
filing a rebuttal has expired,'' to be explicit that 60 days refers to
calendar days rather than business days. Furthermore, we propose to
revise paragraph (f), to replace the existing language that states
``Sec. 423.2610'' with ``Sec. 423.2615'', to fix a citation error in
the existing regulatory text. The existing text in paragraph (f) refers
to the hearing official's decision being binding unless overturned in
the third level of appeal by the CMS Administrator. The Administrator
level of appeal is found at Sec. 423.2615 not at Sec. 423.2610, and
therefore, the citation needs to be corrected.
d. Review by the Administrator (Sec. 423.2615)
In the existing regulatory text at Sec. 423.2615, CMS outlines the
process for the review by the Administrator. We propose to revise
paragraph (b)(2) to remove the phrase ``nor CMS may submit'' and
replace it with ``nor CMS is permitted to submit'' to establish
stronger verbiage that the submission of new evidence is not permitted
by either the plan sponsor or by CMS and will not be considered by the
Administrator. In existing paragraph (d), we propose to replace ``45
days'' with ``30 calendar days.'' Furthermore, in existing paragraph
(e), we propose to add a 45-calendar day timeframe for the
Administrator to furnish a final decision. Specifically, the regulatory
text will be amended to read, ``If the CMS Administrator agrees to
review the hearing official's decision, he or she determines, after
reviewing the hearing record and any arguments submitted by the Part D
plan sponsor or CMS in accordance with this section, whether the
determination should be upheld, reversed, or modified. The CMS
Administrator furnishes a written decision, which is final and binding,
to the Part D plan sponsor and CMS within 45 calendar days after the
timeframe for filing a rebuttal has expired.'' Both reducing the
timeframe for the Administrator to decide if they will review the case
and adding a timeframe for furnishing a final decision would help
ensure that any upheld improper PDE records can be submitted as a
deletion record by the plan sponsor within the global reopening
timeframe. The timeframes proposed are critical to ensure the appeals
process is completed by the PDE submission deadline for the global
reopening. Completion within the global reopening timeframe enables CMS
to properly oversee the Medicare Part D program by ensuring CMS has
accurate, complete, and truthful claims data, in accordance with Sec.
423.505(k)(3), and to protect the integrity of the Medicare Trust Fund.
K. Prescription Drug Event Submission Timeliness Requirements (Sec.
423.325)
1. Background
CMS codified its requirements for the timely submission of
prescription drug event (PDE) records at 42 CFR 423.325 in the final
rule titled ``Medicare and Medicaid Programs; Contract Year 2026 Policy
and Technical Changes to the Medicare Advantage Program, Medicare
Prescription Drug Benefit Program, Medicare Cost Plan Program, and
Programs of All-Inclusive Care for the Elderly,'' which appeared in the
April 15, 2025, Federal Register (hereinafter referred to as the April
2025 final rule). In that rule, we described the General PDE Submission
Timeliness Requirements at Sec. 423.325(a) and the Selected Drugs PDE
Submission Timeliness Requirement at Sec. 423.325(b).
Under the General PDE Submission Timeliness Requirements, a Part D
sponsor must submit an initial PDE record within 30 calendar days from
the date the Part D sponsor receives the claim, submit adjustment or
deletion PDE records within 90 calendar days of the discovery or
notification of an issue requiring a change to the previously submitted
PDE records, and resolve rejected PDE records within 90 calendar days
of the rejection. The General PDE Submission Timeliness Requirements
apply unless the Selected Drugs PDE Submission Timeliness Requirement
is applicable.
In this rule, we propose to modify the General PDE Submission
Timeliness Requirements by modifying existing Sec. 423.325(a)(3)
related to the submission of PDE records to resolve a rejected PDE
record. Under the current rule, Part D sponsors must submit a revised
PDE record to resolve a PDE record that CMS rejected through the PDE
editing process within 90 calendar days of the receipt of rejected
record status from CMS. We recognize that submission of a revised PDE
record is not always appropriate. As the regulation is currently
written, a Part D sponsor may not be able to comply with the current
rule under various scenarios. Therefore, we propose to set forth new
requirements related to the resolution of rejected PDE records.
a. Rejected PDE Records
Part D sponsors submit PDE records to CMS through the Drug Data
Processing System (DDPS). The DDPS performs checks on the data to
validate and help ensure its accuracy, including checks for missing and
invalid information, beneficiary eligibility, and calculation checks on
costs and payment fields.\64\ These checks can result in the PDE data
being accepted or rejected by the DDPS. Consistent with our long-
standing guidance \65\ and pursuant to Sec. 423.325(a)(3), Part D
sponsors must resolve those rejections within 90 calendar days, that
is, resubmit corrected PDE records to CMS within 90 calendar days of
receiving the rejection.
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\64\ See generally, DDPS Edit Spreadsheet, at https://
www.csscoperations.com/internet/csscw3.nsf/DIDC/
FGSMOX8LWK~Prescription%20Drug%20Program%20(Part%20D)~References.
\65\ HPMS memorandum, Revision to Previous Guidance Titled
``Timely Submission of Prescription Drug Event (PDE) Records and
Resolution of Rejected PDEs'', October 6, 2011, available at https://www.cms.gov/httpseditcmsgovresearch-statistics-data-andsystemscomputer-data-and-systemshpmshpmsmemos-archive/hpms-memo-qtr1-4.
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CMS recognizes there are a range of situations where it might be
inappropriate to submit a revised PDE record after receiving a
rejection. For example, if a rejected record is no longer associated
with a valid claim, it would not be appropriate for the Part D sponsor
to submit a corrected PDE record. A valid claim would not exist, for
example, if a pharmacy reversed the claim and returned the drug to
stock because the beneficiary never obtained the prescription.
Likewise, if the PDE record that was rejected should never have
been submitted to CMS in the first instance because the record was
contrary to CMS's requirements, it would not be appropriate to resubmit
a PDE record that continues to be contrary to CMS's requirements. For
example, if a PDE record was rejected because the prescriber listed on
the applicable claim is on the HHS-OIG's List of Excluded Individuals/
Entities (LEIE) without an applicable waiver, CMS does not expect that
the Part D sponsor would resubmit the PDE record if the claim continues
to list an excluded prescriber without an applicable waiver.
Given the scenarios described in this Background, it may not be
appropriate
[[Page 54964]]
to resolve a PDE rejection with submission of a revised PDE record. The
submission of a PDE record implies that there was and continues to be a
valid claim. Resubmission of a previously rejected PDE record
associated with an invalid claim could be harmful to the Part D
program. Such data could inadvertently cause problems with the analysis
of the rejected data, with no visibility into why such rejected data
was never corrected.
In addition, it is not possible for the Part D sponsor to
``delete'' the rejected PDE record to avoid non-compliance with the
requirement when these scenarios arise. This is due to operational
constraints. CMS's DDPS does not allow Part D sponsors to submit PDE
deletion records associated with rejected PDE records.
2. Requirements
As explained in the Background, CMS does not always have insight
into why a Part D sponsor might not submit a revised PDE record to
resolve certain rejected PDE records. Ensuring greater transparency
regarding the status of rejected PDE records would enhance CMS's
oversight of Part D sponsors' compliance with PDE submission timeliness
requirements. We propose to modify the existing regulation at Sec.
423.325(a)(3) to account for the scenarios described in the Background,
increase transparency, and construct the requirement to account for
circumstances where resubmission of PDE records is not appropriate.
We propose that Part D sponsors must submit a PDE record within 90
calendar days from receipt of the rejection and within every 90
calendar days thereafter until a revised PDE record is accepted unless
the claim associated with the rejected PDE record is reversed or
deleted, or the PDE record is otherwise found to have been submitted in
error. We believe that submissions at least once every 90 calendar days
will allow CMS to know that the rejected PDE record continues to
reflect an active claim that the sponsor believes is valid and for
which the sponsor is working to resolve the bases for the PDE
rejection. The sponsor is not required to submit revised PDE records at
least once every 90 calendar days, if the claim associated with the
rejected PDE record is reversed or deleted, or the PDE record is
otherwise found to have been submitted in error. This additional
information will provide CMS with greater insight into the PDE revision
process and ensure that a rejected PDE record must be corrected by the
plan sponsor unless it is not appropriate to do so.
CMS believes that it is beneficial for program integrity for the
agency to have increased visibility into the processing and progression
of revisions of rejected PDE records. This includes ensuring that
rejected PDE records that are not resubmitted within 90 days, in
accordance with Sec. 423.325(a)(3), are limited to claims that are no
longer active and where resubmission is inappropriate (because for
example, the pharmacy has since reversed the claim).
We note that since 2011, the vast majority of the PDE records that
are rejected are resolved by sponsors within the 90-day timeframe, and
in more recent years, nearly all the PDE rejections are resolved within
the 90-day timeframe. Therefore, CMS expects no additional costs or
savings from the proposed change and is not scoring these requirements
in the Regulatory Impact Analysis section. There are no new reporting
requirements.\66\ We do not anticipate additional paperwork burden.
Therefore, no increase is included in the Collection of Information
section.
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\66\ See OMB 0938-0982, CMS-10174, expiration April 30, 2027
(available at https://www.reginfo.gov/public/do/PRAViewDocument?ref_nbr=202403-0938-002).
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We welcome feedback on these proposed changes.
V. Medicare Advantage/Part C and Part D Prescription Drug Plan Quality
Rating System (Star Ratings) (Sec. Sec. 422.164, 422.166, 423.186, and
423.184)
A. Introduction
CMS develops and publicly posts a 5-star rating system for Part
C,\67\ more commonly referred to as Medicare Advantage (MA), and Part D
plans as part of its responsibility to disseminate comparative
information, including information about quality, to beneficiaries
under sections 1851(d) and 1860D-1(c) of the Act. The Part C and Part D
Star Ratings system is used to determine quality bonus payment (QBP)
ratings for MA plans under section 1853(o) of the Act and the amount of
MA beneficiary rebates under section 1854(b) of the Act. We use
multiple data sources based on the collection of different types of
quality data under section 1852(e) of the Act to measure the quality
and performance of contracts, such as CMS administrative data, surveys
of enrollees, and information provided directly from health and drug
plans. CMS regulations, including Sec. Sec. 417.472(j) and (k),
422.152(b), 423.153(c), and 423.156, require plans to report on quality
improvement and quality assurance and to provide data that help
beneficiaries compare plans. The methodology for the Star Ratings
system for the MA/Part C and Part D programs is codified at Sec. Sec.
422.160 through 422.166 and 423.180 through 423.186, respectively, and
we have specified the measures used in setting Star Ratings through
rulemaking. In addition, the cost plan regulation at Sec. 417.472(k)
requires cost contracts to be subject to the Parts 422 and 423 MA and
Part D Prescription Drug Program Quality Rating System. As a result,
the regulatory changes proposed here will apply to the quality ratings
for MA plans and cost plans.
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\67\ We generally use ``Part C'' to refer to the quality
measures and ratings system that apply to MA plans and cost plans.
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We have continued to identify enhancements to the Star Ratings
program to ensure it is aligned with the CMS Quality Strategy as that
Strategy \68\ evolves over time to increase the health and wellbeing of
enrollees. In this proposed rule, we are proposing changes to simplify
and refocus the areas included in the Star Ratings, including changes
to the measure set. We also propose to not move forward with the
implementation of the Health Equity Index reward and to continue to
include the historical reward factor in the Star Ratings methodology.
We propose to add additional information about the data available to MA
organizations and Part D sponsors during the plan preview periods
before each Star Ratings release. We also solicit comments on ways to
further simplify and modify the Star Ratings program to further drive
improved quality of care, and whether there are ways to streamline the
timeline from measure development to implementation. We solicit
additional feedback related to Star Ratings in the Request for
Information on Future Directions in Medicare Advantage in section XXXX
of this proposed rule.
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\68\ https://www.cms.gov/medicare/quality/meaningful-measures-initiative/cms-quality-strategy.
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B. Adding, Updating, and Removing Measures (Sec. Sec. 422.164 and
423.184)
The regulations at Sec. Sec. 422.164 and 423.184 specify the
criteria and procedures for adding, updating, and removing measures for
the Part C and Part D Star Ratings program. As has been historically
operationalized and as described at 83 FR 16533, measure removals are
proposed and finalized through rulemaking unless they meet the
requirements at Sec. Sec. 422.164(e)(1) and 423.184(e)(1), which allow
for measure removals through the process described
[[Page 54965]]
for changes in and adoption of payment and risk adjustment policies in
section 1853(b) of the Act. This subregulatory process for measure
removal was codified at Sec. Sec. 422.164(e)(1) and 423.184(e)(1) to
allow CMS to remove measures quickly, and without separate rulemaking,
in certain circumstances where it is appropriate and necessary to do
so. We are proposing language at Sec. Sec. 422.164(e)(3) and
423.184(e)(3) to clarify our existing policy that removal of measures
for any other reasons not stated in paragraph (e)(1) will be proposed
and finalized through rulemaking. We are also proposing language at
Sec. Sec. 422.164(e)(2) and 423.184(e)(2) to clarify that removals for
the reasons stated in paragraph (e)(1) will either be announced through
the process described for changes in and adoption of payment and risk
adjustment policies in section 1853(b) of the Act or proposed and
finalized through rulemaking. This language would reflect that where
one of the bases for measure removal identified in paragraph (e)(1)
applies, we would pursue removal using the process that allows for the
most expedient notice to MA organizations and Part D sponsors at that
time. For example, if a measure steward announces a measure retirement,
we would use the process described for changes in and adoption of
payment and risk adjustment policies in section 1853(b) of the Act or
rulemaking depending on the timing of the announcement so that we can
provide this information as quickly as possible to MA organizations and
Part D sponsors.
In the ``Medicare Program; Contract Year 2019 Policy and Technical
Changes to the Medicare Advantage, Medicare Cost Plan, Medicare Fee-
for-Service, the Medicare Prescription Drug Benefit Programs, and the
PACE Program'' final rule which appeared in the Federal Register on
April 16, 2018 (83 FR 16532) (``April 2018 final rule''), we stated we
are committed to continuing to improve the Part C and Part D Star
Ratings system and anticipated that over time measures would be added,
updated, and removed. We also specified at Sec. Sec. 422.164(d) and
423.184(d) rules for measure updates based on whether they are
substantive or non-substantive. The regulations, at paragraph (d)(1),
list examples of non-substantive updates. (See also 83 FR 16534 through
16537.) Due to the regular updates and revisions made to measures, CMS
does not codify a list in regulation text of the measures (and their
specifications) adopted for the Part C and Part D Star Ratings program.
CMS lists the measures used for the Star Ratings each year in the
Medicare Part C & D Star Ratings Technical Notes or similar guidance
issued with publication of the Star Ratings.
1. Removing Measures
As the Part C and Part D Star Rating program continues to evolve
and align with the measures included in the Universal Foundation,\69\ a
strategy to align measures across the agency's quality and value-based
care goals, we propose to simplify and refocus the measure set on
clinical care, outcomes, and patient experience of care measures where
performance is not topped out and where there is more variation in
performance across contracts. Reducing the number of measures would
increase the focus on the remaining measures, including those
consistent with the Make America Healthy Again (MAHA) initiative, such
as Reducing the Risk of Falling and Monitoring Physical Activity.
Additionally, reducing the number of measures is consistent with
recommendations from MedPAC \70\ and other interested parties that CMS
consider having fewer measures in the Part C and Part D Star Ratings
program. This is also consistent with the Universal Foundation which
attempts, among other things, to focus attention on measures that are
meaningful for the health of broad segments of the population and to
reduce provider burden by streamlining and aligning measures--in other
words, to focus the measure set on clinical care, outcomes, and patient
experience of care measures. We initially solicited feedback on
simplifying and refocusing the measure set in the Advance Notice of
Methodological Changes for Calendar Year (CY) 2026 for Medicare
Advantage (MA) Capitation Rates and Part C and Part D Payment Policies
(``2026 Rate Announcement''),\71\ as well as from the Star Ratings
Technical Expert Panel (TEP) in October 2024.\72\
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\69\ https://www.cms.gov/medicare/quality/cms-national-quality-strategy/aligning-quality-measures-across-cms-universal-foundation.
\70\ Replacing the Medicare Advantage quality bonus program--
MedPAC.
\71\ https://www.cms.gov/files/document/2026-advance-notice.pdf.
\72\ https://www.rand.org/pubs/conf_proceedings/CFA3973-1.html.
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Although the TEP recommended keeping the measure set as large as
possible to avoid the ratings being influenced by a single measure, the
TEP did support rethinking the measures included. Overall, the TEP
supported measures from the current Healthcare Effectiveness Data and
Information Set (HEDIS), Consumer Assessment of Healthcare Providers
and Systems (CAHPS), Health Outcomes Survey (HOS), and some of the
operational measures. Suggestions included the following: adding more
evidence-based, clinical outcomes measures or redesigning current
measures to assess patient outcomes (such as medication adherence);
considering relevance, reliability, and the small denominator for some
measures; considering ``gameability,'' attribution issues, provider
burden, and the sensitivity of measures to small changes; and
considering measures focused on trust enrollees have in the plan and
network issues.
After taking into consideration feedback from the TEP and from
interested parties that commented on the Advance Notice of
Methodological Changes for Calendar Year (CY) 2026 for Medicare
Advantage (MA) Capitation Rates and Part C and Part D Payment
Policies,\73\ we are proposing to remove seven Star Ratings measures
focused on operational and administrative performance, three additional
measures focused on process of care, and two additional measures
focused on patient experience of care. There is a balance between
streamlining the measure set and continuing to include enough measures
to assess performance across the range of health care quality and to
avoid contracts ``teaching to the test'' or focusing performance
improvement efforts on a limited number of measured areas. We aim to
achieve this balance by proposing initially to remove measures focused
on operational and administrative performance, along with some
additional process and patient experience of care measures with high
performance and less variability across contracts, while retaining many
measures focused on clinical care, outcomes, and patient experience and
continuing to see where we can add additional outcomes measures in the
future.
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\73\ See pages 107-110 at https://www.cms.gov/files/document/2026-announcement.pdf for a summary of comments.
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There are various measures currently in the Part C and Part D Star
Ratings measure set that focus on operational performance or on
completion of required administrative processes. While these measures
have been invaluable to CMS's efforts to monitor and improve plan
performance and compliance in critical operational areas, many of these
measures may be better suited as measures to monitor plan performance
and compliance rather than as quality measures in the Part C and Part D
Star Ratings program,
[[Page 54966]]
especially since ratings for many of these measures are sensitive to
small changes in performance because they have smaller denominators,
such that small changes in the numerator can have a large impact on the
measure Star Rating. Additionally, we have seen improvement on these
measures since the inception of the Part C and Part D Star Ratings
program, and MA organization and Part D sponsor performance rates are
consistently fairly high.
We also propose to remove three additional process measures
(Diabetes Care--Eye Exam, Statin Therapy for Patients with
Cardiovascular Disease, and Members Choosing to Leave the Plan) and two
patient experience of care measures (Customer Service and Rating of
Health Care Quality) to further streamline the Star Ratings measure
set. We want to focus more on clinical care, outcomes, and patient
experience of care measures where performance is not topped out and
where there is more variability in performance across contracts. This
is where there is more room for improvement and measures where we see
MA organization and Part D sponsors need more incentives to perform
well. Additionally, when there is little variation in performance
across contracts for a measure, this does not provide meaningful
information to beneficiaries or their caregivers when choosing a plan.
One purpose of providing quality and performance information is to
highlight differences in performance across contracts that can impact
the care and services provided by the plan. Reducing the number of
operational and administrative measures and removing some additional
process and patient experience of care measures would also increase the
relative weight of the outcome measures in the summary and overall
ratings.
We propose to remove the twelve measures in Table 1 beginning with
the Star Ratings year shown in the table for each measure. Following
the table, we provide additional details on our rationale for proposing
to remove each measure. We expect that removing these measures would
result in an overall decrease in ratings since performance on many of
these measures is very high; however, we also expect that the proposed
removal of the Health Equity Index (HEI; also called Excellent Health
Outcomes for All) reward along with keeping the historical reward
factor, discussed in more detail in section V.D. of this proposed rule,
would generally increase ratings. We provide the estimated combined
impact of these proposed changes in section XI.C.7. of this proposed
rule.
CMS is also considering removing additional measures in the future
as we continue to simplify and refocus the program. Removal of any
additional measures would need to be proposed and finalized through
rulemaking.
[GRAPHIC] [TIFF OMITTED] TP28NO25.009
a. Plan Makes Timely Decisions About Appeals (Part C) and Reviewing
Appeals Decisions (Part C)
We propose removing the Plan Makes Timely Decisions about Appeals
(Part C) and Reviewing Appeals Decisions (Part C) measures because
average performance on these measures has increased from 90 to 96
percent and 88 to 95 percent from the 2015 to 2025 Star Ratings,
respectively. There is also not a lot of variation across the vast
majority of contracts on these measures and the measures can have small
denominators for some contracts, both of which can lead to shifts in
ratings as a result of small changes in the numerator. Since the
appeals process is critical to monitor as it impacts access to care,
CMS would continue to monitor plan performance and issue compliance
actions based on appeals data as needed and would continue to monitor
access issues through the CAHPS survey measures.
b. Special Needs Plan (SNP) Care Management (Part C)
We propose removing the SNP Care Management (Part C) measure as
part of our effort to increase the focus on patient experience and
outcome measures. This administrative-focused process measure indicates
how often a contract completed the required health risk assessment. The
goal of this assessment is to then use the results to help enrollees
get the care they need. CMS is ultimately interested in whether
enrollees receive needed care as indicated by this assessment and not
only whether the assessment is completed. We are proposing to remove
this measure since the current measure does not provide any information
about whether enrollees received care as indicated by their
assessments. We would move this measure to the display page.
c. Call Center--Foreign Language Interpreter and TTY Availability (Part
C and Part D)
We propose removing the Call Center--Foreign Language Interpreter
and TTY Availability (Part C and Part D) measures. Average performance
on these measures in the 2025 Star Ratings was very high at 94 percent
on the Part C measure, and 94 percent for MA-PD contracts and 97
percent for PDP contracts on the Part D measure. Additionally, there is
not a lot of variation across the vast majority of contracts on these
measures, and the measures have relatively small denominators, both of
which can lead to shifts in ratings as a result of small changes in the
numerator. If these measures were removed, CMS would continue to
monitor plan performance
[[Page 54967]]
and compliance, and the Star Ratings would continue to capture similar
issues related to customer service through the CAHPS survey measures.
d. Complaints About the Health/Drug Plan (Part C and Part D)
We propose removing the Complaints about the Health/Drug Plan (Part
C and Part D) measure. Average performance on this measure was high at
0.23 percent for MA-PD contracts and 0.04 percent for PDP contracts in
the 2025 Star Ratings (lower scores are better). The volume of
complaints has significantly decreased since this measure was first
introduced, and there is also not a lot of variation in this measure
across contracts. CMS would continue to monitor plan performance and
issue compliance actions as needed, and the Star Ratings would continue
to capture similar issues related to access to care and patient
experience through the CAHPS survey measures.
e. Medicare Plan Finder (MPF) Price Accuracy (Part D)
We propose removing the MPF Price Accuracy (Part D) measure.
Average scores on this measure were very high at 98 for MA-PD contracts
and 97 for PDP contracts in the 2025 Star Ratings. Additionally, there
is not a lot of variability across most contracts on this measure. If
this measure were removed, CMS would continue to monitor plan
performance related to drug prices posted on MPF.
f. Diabetes Care--Eye Exam (Part C)
We propose removing the Diabetes Care--Eye Exam (Part C) measure as
part of our effort to streamline the Star Ratings measure set and
increase the focus on patient experience and outcome measures. There
are several other measures currently in the Star Ratings that focus on
diabetes care, thus, covering a similar topic area as this measure.
Given the importance of diabetes care, we would move this measure to
the display page.
g. Statin Therapy for Patients With Cardiovascular Disease (Part C)
We propose removing the Statin Therapy for Patients with
Cardiovascular Disease (Part C) measure as part of our effort to
streamline the Star Ratings measure set and increase the focus on
patient experience and outcome measures. There is not a lot of
variation in performance across contracts on this measure, and there
are other measures, such as Medication Adherence for Cholesterol
(Statins), currently in the Star Ratings that cover a similar topic
area as this measure. As noted in the Announcement of Calendar Year
(CY) 2026 Medicare Advantage (MA) Capitation Rates and Part C and Part
D Payment Policies, the National Committee for Quality Assurance (NCQA)
reevaluated the Statin Therapy for Patients with Cardiovascular Disease
(Part C) measure for the 2026 measurement year. The changes finalized
by NCQA expand the eligible population and are considered a substantive
change to the measure. CMS will include the updated Statin Therapy for
Patients with Cardiovascular Disease on the 2028 display page and
monitor changes in performance for this measure since statin therapy is
important in lowering cholesterol and reducing the risk of
cardiovascular disease.
h. Members Choosing To Leave the Plan (Part C and Part D)
We propose removing the Members Choosing to Leave the Plan (Part C
and Part D) measure as part of our effort to streamline the Star
Ratings measure set and increase the focus on patient experience and
outcome measures. We are proposing to remove the measure based on
previous feedback from Part C and D sponsors that they would prefer
this measure be at the parent organization level versus the contract
level or that they would like additional exclusions for the measure
such as exclusions for terminations of provider networks. Additionally,
without knowing the reasons for disenrollment, it is hard for enrollees
to interpret what this measure score means and make meaningful
comparisons between contracts. The current measure at the contract
level would move to the display page.
i. Customer Service and Rating of Health Care Quality (Part C)
We propose removing the Customer Service and Rating of Health Care
Quality (Part C) measures as part of our effort to streamline the Star
Ratings measure set. Compared to other patient experience of care
measures, there is less variation in performance across contracts on
these measures. We would continue to collect these data for quality
improvement purposes and report the measures on the display page.
We welcome feedback on all the potential measure removals discussed
in this proposed rule, including feedback on the timing of measure
removals.
2. Adding Measure
a. Depression Screening and Follow-Up (Part C)
We are committed to continuing to improve the Part C and Part D
Star Ratings system by focusing on improving clinical and other health
outcomes. Consistent with Sec. Sec. 422.164(c)(1) and 423.184(c)(1),
we continue to review measures that are nationally endorsed and in
alignment with the private sector. (83 FR 16533). For example, we
regularly review measures developed by NCQA and the Pharmacy Quality
Alliance (PQA). As we continue to align with the Universal Foundation,
we also propose to add the Part C Depression Screening and Follow-Up
(DSF) measure to the 2029 Star Ratings (measurement year 2027). CMS
will begin reporting the DSF measure on the display page for the 2026
Star Ratings. As provided at Sec. Sec. 422.164(c)(3) and (4) and
423.184(c)(3) and (4), as new performance measures are developed and
adopted they are initially posted on the display page for at least 2
years.
We solicited feedback regarding whether to add the DSF measure to
the 2026 Star Ratings display page (using data from the 2024
measurement year) in the Advance Notice of Methodological Changes for
Calendar Year (CY) 2024 for Medicare Advantage (MA) Capitation Rates
and Part C and Part D Payment Policies and noted that it would need to
go through rulemaking to be added to the Star Ratings.\74\ DSF measures
the percentage of eligible MA plan members who were screened for
clinical depression using a standardized instrument and, if screened
positive, received follow-up care within 30 days. This aligns with the
U.S. Preventive Services Task Force recommendations regarding screening
and follow-up for depression,\75\ supports CMS's efforts to implement
the Universal Foundation set of measures across quality programs, and
focuses on improving the well-being of beneficiaries as well as MAHA
priorities by encouraging MA health plans to screen for depression and
follow-up with appropriate care. Although this is a process measure,
health outcomes can be improved by identifying individuals with
depression and providing treatment. There are currently no measures
specific to behavioral health care in the Part C and D Star Ratings, so
adding this measure would fill an important gap.
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\74\ See page 162 at https://www.cms.gov/files/document/2024-announcement-pdf.pdf for a summary of comments.
\75\ https://www.uspreventiveservicestaskforce.org/uspstf/recommendation/screening-depression-suicide-risk-adults.
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Depression is a common mental disorder that occurs in people of all
ages, and estimates of major depression were 13.1 percent in people age
12 and older and 8.7 percent in people age 60 and older during the
period from
[[Page 54968]]
August 2021 through August 2023.\76\ Depression can exacerbate other
chronic medical conditions, and it increases the risk of morbidity and
mortality. There is evidence that screening tools used in primary care
settings can accurately identify depressed individuals and treatment
can improve depression outcomes.\77\
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\76\ https://www.cdc.gov/nchs/data/databriefs/db527.pdf.
\77\ https://pmc.ncbi.nlm.nih.gov/articles/PMC7661597/ and
https://www.amjmed.com/article/S0002-9343(22)00524-1/fulltext.
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We submitted the DSF measure through the 2024 Pre-rulemaking Review
Process for review by the Measures Application Partnership, which is a
multi-stakeholder partnership that provides recommendations to HHS on
the selection of quality and efficiency measures for CMS programs, and
the Measures Application Partnership provided support for this
measure.\78\ Consensus was not reached on this measure. The committee
recommended that the Merit-based Incentive Payment System (MIPS)
program consider replacing their similar measure with this one to
improve alignment across quality programs \79\ and to report the
screening and follow-up rates separately. The HEDIS measure differs
slightly from the MIPS measure since the specification is at the health
plan level and also focuses on examining follow-up actions when
positive screenings occur. CMS will display separate rates for
screening and follow-up on the display page and take an average of the
rates for the Star Ratings measure.
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\78\ https://p4qm.org/sites/default/files/2025-02/PRMR-2024-2025-MUC-Recommendations-Report-Final.pdf.
\79\ The MIPS measure differs from the NCQA one in that the MIPS
version requires a qualifying encounter, whereas the NCQA-stewarded
version looks for a screen at any time in the measurement period;
the follow-up component of the MIPS version entails documentation of
a follow-up plan, whereas the NCQA-stewarded version is more
intensive requiring follow-up care; the follow-up timeframe in the
MIPS version is on or up to 2 days after the date of the qualifying
encounter, whereas the NCQA-stewarded measure uses a timeframe of on
or up to 30 days after the date of the positive screen; and the MIPS
version only excludes individuals with a diagnosis of bipolar
disorder, whereas the NCQA version excludes individuals with bipolar
disorder or a current diagnosis of depression.
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3. Summary of Measure Changes for the Part C and Part D Star Ratings
Table 2 summarizes the additional measure addressed in this
proposed rule, beginning with the 2029 Star Ratings. The measure
description listed in this table is a high-level description. The
annual Star Ratings measure specifications supporting document, the
Medicare Part C & D Star Ratings Technical Notes, provides detailed
specifications for each measure. Detailed specifications include, where
appropriate, more specific identification of a measure's: (1)
numerator, (2) denominator, (3) calculation, (4) timeframe, (5) case-
mix adjustment, and (6) exclusions. The Technical Notes document is
updated annually. The annual Star Ratings are produced in the fall of
the prior year. For example, Star Ratings for the year 2029 are
produced in the fall of 2028. If a measurement period is listed as
``the calendar year 2 years prior to the Star Ratings year'' and the
Star Ratings year is 2029, the measurement period is referencing the
January 1, 2027 to December 31, 2027 period. As noted earlier in
section V.B. of this proposed rule, CMS does not codify the specific
measures for the Part C and Part D Quality Rating System in regulation;
doing so would be unnecessarily lengthy and cumbersome due to the
relative regularity with which measure specifications are updated.
[GRAPHIC] [TIFF OMITTED] TP28NO25.010
C. Streamlining the Methodology, Further Incentivizing Quality
Improvement, and Suggestions for New Measures
Finally, we are also soliciting feedback on ways to streamline and
modify the Star Ratings methodology to further incentivize quality
improvement and suggestions for new outcomes measures to promote
prevention and wellness of health and drug plan enrollees to make the
Star Ratings program more aligned with MAHA efforts related to healthy
aging, such as nutrition and patient well-being. We are also soliciting
feedback on additional measures that could be removed in future years.
D. Health Equity Index Reward (Sec. Sec. 422.166(f)(3) and
423.186(f)(3))
In the ``Medicare Program; Contract Year 2024 Policy and Technical
Changes to the Medicare Advantage Program, Medicare Prescription Drug
Benefit Program, Medicare Cost Plan Program, and Programs of All-
Inclusive Care for the Elderly'' final rule, which appeared in the
Federal Register on April 12, 2023 (88 FR 22120) (``April 2023 final
rule''), we finalized the addition of the Health Equity Index (HEI)
reward (also called the Excellent Health Outcomes for All (EHO4all)
reward) \80\ along with the removal of the historical reward factor at
the same time. The HEI reward was intended to further incentivize Part
C and Part D contracts to focus on improving care for enrollees that
are dually eligible, receive a low-income subsidy, or are disabled
because these groups are at risk for poor health outcomes and Star
Ratings data show gaps in the quality of care for these enrollees. This
reward was finalized at 42 CFR 422.166(f)(3) and 423.186(f)(3) to be
implemented
[[Page 54969]]
beginning with the 2027 Star Ratings using data from the 2024 and 2025
measurement years. The historical reward factor, which incentivizes
consistent high performance across Star Ratings measures, was finalized
at Sec. Sec. 422.166(f)(1) and 423.186(f)(1) to be removed from the
Star Ratings methodology with the implementation of the HEI reward in
the 2027 Star Ratings using data from the 2025 measurement year. The
historical reward factor was included in the Star Ratings beginning
with the 2009 Star Ratings with the purpose of adding incentives for
contracts to achieve high and stable relative performance across all
measures.
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\80\ In the 2026 Rate Announcement, we began to rebrand the
Health Equity Index reward with a new name, the EHO4all reward.
https://www.cms.gov/medicare/payment/medicare-advantage-rates-statistics/announcements-and-documents/2026.
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Since the April 2023 final rule, we have reviewed the HEI reward
consistent with the Executive Order 14192, ``Unleashing Prosperity
Through Deregulation'' and propose to remove the HEI reward from the
Star Ratings methodology. We propose not to implement the HEI reward
with the 2027 Star Ratings and instead continue the historical reward
factor. Rather than incentivizing improvement among certain populations
like those included in the HEI, CMS would instead incentivize
improvement efforts on clinical care, outcomes, and patient experience,
in line with the proposal in section V.B. of this proposed rule to
refocus the Star Ratings measure set. We recognize that some health
plans may have already expended resources on performance improvement
focused on the populations included in the HEI reward; however, any
improvements in performance among these populations will still
contribute to higher performance on the Star Ratings by increasing
measure-level scores even without the implementation of the HEI reward.
Higher measure-level scores benefit health plans by improving overall
performance on the Star Ratings.
This shift is part of a broader effort to refocus the Star Ratings
on clinical care, outcomes, and patient experience. In section V.B. of
this proposed rule, we provide more detail about the efforts to refocus
the measurement set. Improvements in clinical care can lead to better
patient outcomes and, ultimately, higher Star Ratings.
This shift also aligns with our focus on exploring ways to simplify
and modify the Star Ratings methodology to further drive quality
improvement. Rather than implement the change to the methodology to add
the HEI reward and remove the historical reward factor, we instead
propose to keep the methodology consistent for now as we explore ways
to simplify the methodology in the future. See section V.C. where we
solicit comments on ways to simplify and modify the Star Ratings
methodology to further drive quality improvement. Any such
simplifications or modifications would be proposed in future
rulemaking.
Typically, CMS has proposed and finalized changes to the Star
Ratings methodology in advance of the measurement year (which aligns
with the rules for measure updates). However, this proposal would avoid
the need for updates to the Star Ratings methodology, including a
significant amount of programming, as well as updates to the Star
Ratings technical documentation and data display in the Health Plan
Management System (HPMS), to reflect the temporary addition of the HEI
reward and removal of the historical reward factor. Therefore, we do
not propose to implement the HEI reward and to continue to implement
the historical reward factor beginning with the 2027 Star Ratings. To
remove the HEI reward and revert to the historical reward factor in the
Star Ratings methodology, we propose to remove the paragraphs at
Sec. Sec. 422.166(f)(3) and 423.186(f)(3), and to modify Sec. Sec.
422.166(f)(1) and 423.186(f)(1) to remove ``Through the 2026 Star
Ratings.''
E. Plan Preview of Star Ratings (Sec. Sec. 422.166(h)(2) and
423.186(h)(2))
We are proposing to add additional information about the data
available to MA organizations and Part D sponsors during the plan
preview periods before each Star Ratings release described at
Sec. Sec. 422.166(h)(2) and 423.186(h)(2). During the first plan
preview, CMS expects Part C and D sponsors to closely review the
methodology and their posted numeric data for each measure in HPMS
prior to display on MPF. The second plan preview provides an
opportunity for Part C and D sponsors to review any updates from the
first plan preview and preliminary Star Ratings for each measure,
domain, summary rating, and overall rating. When the Star Ratings
methodology was first codified in the April 2018 final rule, we
anticipated that the plan preview periods would continue to evolve and
it was not necessary to codify the specific display content. As the
plan previews have continued to evolve, CMS has added de-identified
contract-level sample data for one of each type of measure needed for
MA organizations and Part D sponsors to replicate the calculation of
the measure-level cut points (that is, one CAHPS measure, one measure
for Part C and one for Part D that use clustering, and any measures
requiring a different type of calculation such as Complaints about the
Plan). These data allow MA organizations and Part D sponsors to
validate CMS's cut point calculations. The same cut point programming
is used for all other measures as the sample measures, so de-identified
contract-level data for only the sample measures are displayed in HPMS
during the second plan preview. We are proposing to codify our current
practice of providing sample data for one of each type of measure
during the second plan preview described at Sec. Sec. 422.166(h)(2)
and 423.186(h)(2).
F. Impact of Proposed Changes
Simulations of the impact of removing the HEI reward, keeping the
historical reward factor, and removing the 12 measures as proposed in
section V.B. of this proposed rule, using data from the 2025 Star
Ratings (2022 and 2023 measurement years) but updating the measure set
and measure weights for changes consistent with the 2026 Star Ratings
(for example, reducing the weight of patient experience/complaints and
access measures from 4 to 2) show most contracts (62 percent) would
have no change in the overall rating. The overall rating would increase
by a half star for 13 percent of contracts, would decrease by a half
star for 25 percent of contracts, and would decrease by one star for
one contract. Five percent of contracts would gain QBPs, and four
percent of contracts would lose QBPs.
As described in this proposed rule, we are proposing adding and
removing certain Star Ratings measures. The proposed new measure
entails moving an existing measure from the display page to Star
Ratings, which would have no impact on plan burden. The measures
proposed for removal are either calculated from administrative data
\81\ or would still be submitted by plan sponsors and, as such, there
would be no decrease in plan burden. The proposed provisions would not
change any respondent requirements or burden pertaining to any of CMS's
Star Ratings related PRA packages, including: OMB control number 0938-
0732 for CAHPS (CMS-R-246), OMB control number 0938-1028 for HEDIS
(CMS-10219), and OMB control number 0938-1054 for Part C Reporting
Requirements (CMS-10261). Since the provisions would not impose any new
or revised information collection requirements or burden, we
[[Page 54970]]
are not making changes under any of the aforementioned control numbers.
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\81\ The following measures proposed for removal are calculated
from administrative data: Plan Makes Timely Decisions about Appeals,
Reviewing Appeals Decisions, Complaints about the Health/Drug Plan,
Medicare Plan Finder Price Accuracy, Members Choosing to Leave the
Plan.
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We welcome feedback on these proposed changes.
VI. Improvements for Special Needs Plans
A. Model of Care (MOC) Off-Cycle Submission Window (42 CFR 422.101)
Congress first authorized special needs plans (SNP) through the
enactment of the Medicare Prescription Drug, Improvement, and
Modernization Act of 2003 (Pub. L. 108-173). The law authorized CMS to
contract with Medicare Advantage (MA) coordinated care plans that are
specifically designed to provide targeted care to individuals with
special needs. Section 1859(f)(5)(A) of the Act, as added by section
164 of the Medicare Improvements for Patients and Providers Act (Pub.
L. 110-275), imposes specific care management requirements for all SNPs
effective January 1, 2010. As a result, all SNPs are required to
implement care management requirements which have two explicit
components: a National Committee for Quality Assurance (NCQA) approved,
evidence-based model of care (MOC) and a series of care management
services.\82\
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\82\ For more discussion of the history of SNPs, please see
Chapter 16B of the Medicare Managed Care Manual (MMCM).
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All SNPs must submit their MOCs to CMS for NCQA evaluation and
approval and an MA organization sponsoring multiple SNPs must develop a
separate MOC to meet the needs of the targeted population for each SNP
type it offers as required at Sec. Sec. 422.4(a)(1)(iv),
422.101(f)(3)(i), and 422.152(g). The NCQA MOC evaluation and approval
process scores each of the clinical and non-clinical elements of the
MOC. The Institutional Special Needs Plan (I-SNPs) and Dual-Eligible
Special Needs Plan (D-SNPs) MOCs that receive a passing score from NCQA
are then approved for one-, two-, or three-year periods as set forth at
Sec. 422.101(f)(3)(iii). A Chronic Condition Special Needs Plan (C-
SNP) MOC that receives a passing score is approved for one year as
required by section 1859(f)(5)(B)(iv) of the Act. As the MOC approval
periods end, SNPs submit new MOCs to CMS for NCQA evaluation and
approval during an annual renewal MOC submission window. This ensures
that all operating SNPs have a current, NCQA approved, MOC in place.
CMS has acknowledged in the past that to more effectively address
the specific needs of its enrollees, a SNP may need to modify its
processes and strategies for providing care during its approved MOC
timeframe. A SNP that seeks to revise a MOC before the end of the MOC
approval period may do so between June 1st and November 30th of each
calendar year via the ``off-cycle MOC submission process'' outlined at
Sec. 422.101(f)(3)(iv). A D-SNP or I-SNP that decides to make
revisions to their existing approved MOC may submit a summary of their
off-cycle MOC changes, along with the red-lined MOC, in the Health Plan
Management System (HPMS) Model of Care module for NCQA review and
approval. The off-cycle submission requirements apply to substantial
changes in policies or procedures as described at Sec.
422.101(f)(3)(iv)(B)(1) and other revisions identified at Sec.
422.101(f)(3)(iv)(B)(2) to (5). These types of MOC changes are at the
discretion of the applicable MA organization offering the SNP and it is
the responsibility of the MA organization to notify CMS of revisions
and electronically submit their summary of changes to their MOC in HPMS
for review and approval.
Since the beginning of the MOC approval process, CMS has developed,
issued, and updated guidance on the MOC to support plan performance and
assist in improved health outcomes. CMS had previously required initial
and renewal MOCs to be submitted mid-February of the preceding plan
contract year, aligning with the MA application deadline. However, as
announced in an HPMS email titled ``Contract Year 2027 Model of Care
Submission Timeline Updates'' on September 3, 2025, CMS has moved the
initial and renewal MOC submission deadline to the Friday before the
first Monday of June, starting with the contract year (CY) 2027 MOC
submission period. The new MOC submission deadline and subsequent NCQA
evaluation overlap with the current off-cycle MOC submission window. To
accommodate the CY 2027 MOC submission deadline change and ensuing
operational considerations both for NCQA and CMS's HPMS, a new timeline
for the off-cycle submission process is needed. As such, CMS is
proposing that for CY 2027 and subsequent years, D-SNPs and I-SNPs
seeking to revise their NCQA-approved MOC during the MOC approval
period must submit updates and corrections between January 1st and
March 31st and October 1st and December 31st of each calendar year.
This would functionally provide SNPs with two separate windows of
opportunity to submit off-cycle MOC changes each year. Of note, SNPs
currently have a six-month window to update or correct their MOCs; this
new proposed timeline would split that period to accommodate the
operational needs of CMS and NCQA as staff review initial and annual
MOC submissions. CMS seeks comment on these proposed technical changes
to the timeline and opportunities for improving the off-cycle MOC
process for potential future rulemaking.
CMS believes there would be no change in the estimated burden from
this changed timeline for SNPs submitting off-cycle MOC changes.
Additionally, there would be no expected collection of information that
would be new for this rule, only maintenance of past expectations
around the off-cycle MOC process.
B. Passive Enrollment by CMS (Sec. 422.60)
Individuals who are dually eligible for both Medicare and Medicaid
typically face significant challenges in navigating the two programs,
which include separate or overlapping benefits and administrative
processes. Fragmentation between the two programs can result in a lack
of coordination for care delivery, potentially resulting in
unnecessary, duplicative, or missed services. One method for overcoming
this challenge is through integrated care, which provides dually
eligible individuals with the full array of Medicaid and Medicare
benefits for which they are eligible through a single delivery system,
thereby improving quality of care, beneficiary satisfaction, care
coordination, and reducing administrative burden.
Integrated care options are increasingly available for dually
eligible individuals, which include a variety of integrated D-SNPs.
Integrated D-SNPs can provide greater integration of Medicare and
Medicaid services and experiences than enrollees would otherwise
receive in other MA plans or Original Medicare, particularly when an
individual is enrolled in both a D-SNP and Medicaid managed care
organization (MCO) offered by the same organization. When referring to
integrated D-SNPs, we are referring to: applicable integrated plans
(AIPs), which include fully integrated dual eligible special needs
plans (FIDE SNPs), many highly integrated dual eligible special needs
plans (HIDE SNPs), and a small subset of coordination-only D-SNPs.
These D-SNP types meet higher standards of integration, quality, and
performance benchmarks, and for AIPs, exclusively aligned enrollment
(when enrollment in a parent organization's D-SNP is limited to
individuals with aligned enrollment), which we believe is a critical
part of improving experiences and outcomes
[[Page 54971]]
for dually eligible individuals. These D-SNP types more meaningfully
integrate Medicare and Medicaid services and administrative processes
(such as unified appeals and grievances) than coordination-only D-SNPs
that are not also AIPs.
While enrollment in integrated care options continues to grow,
there are instances in which enrollees may face disruptions in coverage
in integrated care plans. These disruptions can result from numerous
factors, including market forces that impact the availability of
integrated D-SNPs and State re-procurements of affiliated Medicaid
MCOs. Such disruptions can result in enrollees being enrolled with two
separate health plan organizations for their Medicaid and Medicare
benefits, thereby losing the benefits of integration achieved when the
same health plan organization offers both benefit packages. In an
effort to protect the continuity of integrated care for dually eligible
individuals, in the April 2018 final rule (83 FR 16502), we finalized a
limited expansion of our regulatory authority to initiate passive
enrollment for certain dually eligible individuals in instances where
integrated care coverage would otherwise be disrupted.
Section 1851(c)(1) of the Act authorizes us to develop mechanisms
for enrollees to elect MA enrollment, and in the April 2018 final rule
(83 FR 16502), we amended the regulation at Sec. 422.60(g) by adding
Sec. 422.60(g)(1)(iii) and (g)(2) to allow passive enrollment for
full-benefit dually eligible enrollees from a non-renewing integrated
D-SNP into another comparable plan. A beneficiary who is offered a
passive enrollment is deemed to have elected enrollment in the
designated plan if he or she does not elect to receive Medicare
coverage in another way.
In the April 2018 final rule, we finalized language authorizing CMS
to passively enroll certain dually eligible individuals currently
enrolled in an integrated D-SNP into another integrated D-SNP, after
consulting with the State Medicaid agency that contracts with the D-
SNP, when CMS determines that the passive enrollment will promote
continuity of care and integrated care under Sec. 422.60(g)(1)(iii).
We also finalized, under Sec. 422.60(g)(2), requirements an MA plan
would have to meet to qualify to receive passive enrollments under
paragraph (g)(1)(iii). However, in multiple situations where we have
attempted to implement these requirements, we have encountered
difficulty with receiving integrated D-SNPs meeting the requirement in
Sec. 422.60(g)(2)(ii) that they have provider networks and facility
networks that are substantially similar to those of the relinquishing
integrated D-SNP. In our attempts to utilize passive enrollment, we
found that while prospective receiving integrated D-SNPs had Medicare
provider and facility networks that meet the MA network adequacy
criteria at Sec. 422.116, these networks weren't substantially similar
to the provider and facility networks in the relinquishing integrated
D-SNPs.
We acknowledge that the substantially similar provider and facility
networks requirement that is used to assess receiving integrated D-SNPs
is undefined in regulation. On August 1, 2018, we published a Health
Plan Management System (HPMS) memo that provided further technical
guidance on how we would assess for substantially similar networks.\83\
In this memo, we noted that, using National Provider Identifier (NPI)
numbers, we would compare the MA network of the relinquishing
integrated D-SNP to that of a receiving integrated D-SNP to assess
overlap in provider and facility specialty types across an array of
provider specialty types with the highest utilization by dually
eligible individuals, which were outlined in the same HPMS memo.
However, even with the additional operational guidance, a network
comparison between the relinquishing and receiving plans did not result
in networks that we could consider substantially similar. As such, we
have not been able to implement passive enrollment as outlined in Sec.
422.60(g).
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\83\ CMS, HPMS memorandum titled ``Guidance on the Process for
Implementing Passive Enrollment Flexibilities to Protect Continuity
of Integrated Care for Dual Eligible Beneficiaries'', August 2018.
Retrieved from: https://www.cms.gov/research-statistics-data-and-systems/computer-data-and-systems/hpms/hpms-memos-archive-weekly-items/syshpms-memo-2018-week1-aug-1-3.
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We continue to find value in the concept of allowing passive
enrollment for full-benefit dually eligible enrollees from a non-
renewing or terminating integrated D-SNP to another comparable
integrated D-SNP, and we continue to hear from States interested in
using this provision. In order to operationalize this function, we are
proposing to amend Sec. 422.60(g)(2)(ii) to remove the requirement
that the receiving integrated D-SNPs have substantially similar
networks to the relinquishing integrated D-SNPs and, instead, require
receiving integrated D-SNPs to provide continuity of care for all
incoming enrollees for a minimum of 120 days. Specifically, we are
proposing to replace the current language in Sec. 422.60(g)(2)(ii)
with the requirement that a receiving integrated D-SNP provide
continuity of care for all incoming enrollees that complies with Sec.
422.112(b)(8)(i)(B), except that the minimum transition period would be
120 days. We note that this proposed requirement would not affect a
receiving integrated D-SNP's requirement to meet network adequacy
standards per Sec. 422.116, potential compliance actions that may
result from a failure to meet those requirements. We are also proposing
to amend Sec. 422.60(g)(2)(vi) to specify that an integrated D-SNP
receiving passive enrollment must have the care coordinator staffing
capacity to receive dually eligible enrollees through passive
enrollment. We expect this coordinator staffing capacity to be
sufficient to conduct required enrollee onboarding activities such as
health risk assessments and care plans and meet ongoing D-SNP care
coordination requirements, including those outlined at Sec.
422.107(c). Lastly, in an effort to use consistent and accurate
language throughout our processes and documentation, we are proposing
to amend Sec. 422.60(g)(2)(i) to instead describe the MA plans that
can receive passive enrollment as plans that operate as an applicable
integrated plan (AIP) as described at Sec. 422.561.
We are proposing to amend Sec. 422.60(g)(2)(ii) to require that
the plan receiving passive enrollment provide continuity of care to all
incoming enrollees for 120 days because we believe that this length of
time for continuity of care would address the issue that we attempted
to address at 83 FR 16504 in the April 2018 final rule, namely that the
provider network comparability analysis would minimize the number of
enrollees whose provider relationships are disrupted as a result of
passive enrollment and encourage retention following enrollees'
transition to a new integrated D-SNP, while creating an approach that
can be more feasibly implemented than the current substantially similar
network requirement.
We are specifically tying the proposed amendment in Sec.
422.60(g)(2)(ii) to Sec. 422.112(b)(8)(i)(B) because in keeping with
the spirit of the passive enrollment regulation, as discussed in the
April 2018 final rule, the goal of passive enrollment is continuity of
care. In the final rule titled ``Medicare Program; Contract Year 2024
Policy and Technical Changes to the Medicare Advantage Program,
Medicare Prescription Drug Benefit Program, Medicare Cost Plan Program,
and Programs of All-Inclusive Care for the Elderly,'' which appeared in
the Federal Register on April 12, 2023, we finalized
[[Page 54972]]
the provision at Sec. 422.112(b)(8)(i)(B) requiring that, with respect
to basic benefits, coordinated care plans are required to provide a
minimum 90-day transition period when an enrollee currently undergoing
treatment switches to a new MA plan, during which time the new MA plan
may not disrupt or require reauthorization for the active course of
treatment (88 FR 22205). We explain this requirement in the
corresponding notice of proposed rulemaking, titled ``Medicare Program;
Contract Year 2024 Policy and Technical Changes to the Medicare
Advantage Program, Medicare Prescription Drug Benefit Program, Medicare
Cost Plan Program, Medicare Parts A, B, C, and D Overpayment Provisions
of the Affordable Care Act and Programs of All-Inclusive Care for the
Elderly; Health Information Technology Standards and Implementation
Specifications,'' which appeared in the Federal Register on December
27, 2022, by stating the following: ``The MA organization must not
disrupt or require reauthorization for an active course of treatment
for new plan enrollees for a period of at least 90 day. This means that
for a minimum of 90 days, when an enrollee switches to a new MA
coordinated care plan, any active course of treatment must not be
subject to any prior authorization requirements. During the initial 90
days of an enrollee's enrollment with an MA coordinated care plan, the
MA coordinated care plan cannot subject any active course of treatment
(as defined at the proposed Sec. 422.112(b)(8)(ii)(B)) to additional
prior authorization requirements, even if the service is furnished by
an out-of-network provider. We expect any active course of treatment to
be documented in the enrollee's medical records so that the enrollee,
provider, and MA plan can track an active course of treatment and avoid
disputes over the scope of this proposed new requirement. We also
intend that an active course of treatment can include scheduled
procedures regardless of whether there are specific visits or
activities leading up to the procedure. To further illustrate, if an
enrollee has a procedure or surgery planned for January 31st at the
time of enrollment in a new MA coordinated care plan effective January
1, the new MA coordinated care plan must cover this procedure without
subjecting the procedure to prior authorization. The planned surgery is
a part of an active course of treatment and thus cannot be subjected to
prior authorization by the MA coordinated care plan in which the
beneficiary has newly enrolled.'' (87 FR 79504)
We believe that the requirements captured in Sec.
422.112(b)(8)(i)(B) are consistent with the intention behind passive
enrollment at Sec. 422.60(g), and as such, we are proposing to apply
the requirements at Sec. 422.112(b)(8) to Sec. 422.60(g)(2)(ii),
except that continuity of care would be applicable for 120 days as
opposed to 90 days, as is currently required at Sec. 422.112(b)(8).
This proposal is an attempt to balance the current 90 day requirement
applicable to all coordinated care plans with the intention behind the
current regulation at Sec. 422.60(g) to minimize the number of
enrollees whose provider relationships are disrupted as a result of
passive enrollment.
Additionally, we would like to note that in our proposed revision
of Sec. 422.60(g)(2)(ii), we are also proposing to remove the language
that requires the receiving plan to have substantially similar
Medicare- and Medicaid-covered benefits as the relinquishing integrated
D-SNP. In the final rule titled ``Medicare and Medicaid Programs;
Policy and Technical Changes to the Medicare Advantage, Medicare
Prescription Drug Benefit, Programs of All-Inclusive Care for the
Elderly (PACE), Medicaid Fee-For-Service, and Medicaid Managed Care
Programs for Years 2020 and 2021,'' which appeared in the Federal
Register on April 16, 2019 (hereafter referred to as the April 2019
final rule; 84 FR 15710), we finalized a series of provisions codifying
specific integration requirements for D-SNPs pursuant to the
requirements in the Bipartisan Budget Act of 2018. Since integration
levels are defined both in statute and in regulation at Sec. Sec.
422.2 and 422.107(d), and Medicare Part A, B, and D benefits and
Medicaid benefits do not tend to differ across D-SNPs with the same
integration level within a State, we do not believe that a specific
assessment for substantially similar coverage of Medicare and Medicaid
covered benefits is required. In such a situation where passive
enrollment is implemented, we believe that an assessment of level of
integration between the relinquishing and receiving integrated D-SNPs
would suffice.
Our continued goal with passive enrollment is to ensure that the
integrated D-SNPs receiving passive enrollments provide high-quality
care, coverage and administration of benefits. Passive enrollments
benefit a plan by providing an enrollee and associated payments without
the plan having to successfully market to the enrollee. Thus, we
continue to believe that it is important that these enrollments are
limited to plans that have demonstrated commitment to quality and are
able to provide longer continuity of care to minimize service
disruption for receiving dually eligible enrollees, who have complex
and unique care needs. We are not proposing any other changes to Sec.
422.60(g) or the process; receiving plans would still be held to all
other standards set forth at Sec. 422.60(g)(2). Similarly, we are not
proposing changes to the current regulation at Sec. 422.60(g)(4)
regarding beneficiary notification requirements. Further, passively
enrolled enrollees would still have the opportunity to opt out of the
receiving plan, and Sec. 422.60(g)(5), which describes an enrollee's
access to the special election period at Sec. 423.38(c)(10), would
still be in effect.
We welcome comments on the changes we propose at Sec.
422.60(g)(2)(i) and (ii). Similarly, we solicit comment on our proposed
revision to Sec. 422.60(g)(2)(vi) which would require that an
integrated D-SNP receiving passive enrollment have the care coordinator
staffing capacity to receive dually eligible enrollees through passive
enrollment. Our proposal does not define a minimum staffing capacity
threshold in order to give integrated D-SNPs flexibility in
implementing this proposed change. We invite comment on the feasibility
of this proposed requirement, and request suggestions for potential
refinement.
C. Continuity in Enrollment for Full-Benefit Dually Eligible
Individuals in a D-SNP and Medicaid Fee-for-Service (Sec. Sec. 422.107
and 422.514)
The Contract Year 2025 Medicare Advantage and Part D final rule,
which appeared in the Federal Register on April 23, 2024 (hereafter
referred to as the April 2024 final rule; 89 FR 30448), included
several provisions to simplify options for dually eligible individuals
and promote greater alignment of D-SNPs and Medicaid MCOs. We explained
at 89 FR 30675 that, despite progress, there remain a significant
number of enrollees who receive Medicare services through one managed
care entity and Medicaid services through a different entity
(misaligned enrollment), rather than from one organization delivering
both Medicare and Medicaid services (aligned enrollment). As expressed
in the April 2019 final rule (84 FR 15699 through 15730), we continue
to believe that aligned enrollment, and especially exclusively aligned
enrollment, is a critical part of improving the experiences and
outcomes of dually eligible individuals.
[[Page 54973]]
In the April 2024 final rule, we finalized a package of provisions
at Sec. Sec. 422.503(b)(8), 422.504(a)(20), and 422.514(h) that
require that, beginning in contract year 2027, where an MA organization
offers a D-SNP and the MA organization, its parent organization, or any
entity that shares a parent organization with the MA organization also
contracts with a State as a Medicaid MCO that enrolls full-benefit dual
eligible individuals in the same service areas (even if there is only
partial overlap of the service areas), the MA organization: (a) may
only offer, or have a parent organization or share a parent
organization with another MA organization that offers, one D-SNP for
full-benefit dual eligible individuals, except as otherwise provided in
Sec. 422.514(h)(3); and (b) must limit new enrollment in the D-SNP to
individuals enrolled in, or in the process of enrolling in, the
Medicaid MCO. Per Sec. 422.514(h)(2), beginning in contract year 2030,
such D-SNPs must only enroll (or continue to enroll) individuals
enrolled in (or in the process of enrolling in) the affiliated Medicaid
MCO, except that such D-SNPs may continue to implement deemed continued
eligibility requirements as described in Sec. 422.52(d). To minimize
enrollment disruption associated with achieving compliance, in the
April 2024 final rule, we finalized a provision at Sec.
422.530(c)(4)(iii) that would provide a new crosswalk exception to
allow one or more MA organizations that share a parent organization and
offer D-SNPs subject to the new limits to crosswalk enrollees (within
the same parent organization and among consistent plan types) when the
MA organization chooses to non-renew or consolidate its current D-SNPs
to comply with the new rules at Sec. Sec. 422.504(a)(20) and
422.51(h).
In addition, in the April 2024 final rule, we codified at Sec.
422.514(h)(3) two exceptions to the requirements at Sec. 422.514(h)(1)
and (2) for exceptions related to instances where (a) the State
Medicaid agency contract (SMAC) with the MA organization differentiates
enrollment into D-SNPs by age group or to align enrollment in the D-SNP
with the eligibility or benefit design used in the State's Medicaid
managed care program and (b) the MA organization, its parent
organization, or an entity that shares a parent organization with the
MA organization offers both HMO D-SNPs and PPO D-SNPs. To promote
integrated care through aligned Medicare and Medicaid products, at
Sec. 422.514(h)(3)(ii) we finalized that the MA organization, its
parent organization, or another MA organization that shares a parent
organization with the MA organization may only accept new enrollment in
one D-SNP for full-benefit dually eligible individuals in the same
service area as an affiliated Medicaid MCO, and such new enrollment is
limited to the full-benefit dually eligible individuals who are
enrolled (or are enrolling) in the Medicaid MCO.
As articulated in the April 2024 final rule (89 FR 30680), overall
these changes would have several benefits. These include boosting the
percentage of D-SNP enrollees in aligned enrollment, and--over time--
exclusively aligned enrollment, increasing access to the comprehensive
coordination of care, unified appeal processes across Medicare and
Medicaid, continuation of Medicare services during an appeal, and
integrated materials that come with enrollment in one or more of the
various types of integrated D-SNPs; prompting MA organizations to
consolidate PBPs down to a single PBP for full-benefit dually eligible
individuals that is aligned with their Medicaid MCO that fully or
partially overlaps with the D-SNP service area; removing some
incentives for agents and brokers to target dually eligible
individuals; lessening assistance needed from advocates and SHIP
counselors to correct enrollment issues; and simplifying provider
billing and lower the risk of inappropriate billing. For a more
detailed discussion of the provisions finalized at Sec. 422.514(h), we
direct readers to the proposed rule titled ``Medicare Program; Contract
Year 2025 Policy and Technical Changes to the Medicare Advantage
Program, Medicare Prescription Drug Benefit Program, Medicare Cost Plan
Program, and Programs of All-Inclusive Care for the Elderly; Health
Information Technology Standards and Implementation Specifications,''
which appeared in the Federal Register November 15 2023, (hereafter
referred to as the November 2023 proposed rule; 88 FR 78566 through
78575) and the April 2024 final rule (89 FR 30675 through 30681).
In response to our proposals in the November 2023 proposed rule, a
number of commenters suggested that the enrollment limitations could
create barriers to care for dually eligible individuals in States where
they are not required to be in or are explicitly carved out from
Medicaid managed care. (89 FR 30689 through 30690) For example, in New
York, only dually eligible individuals with significant long-term care
needs are required to enroll in Medicaid managed care, with the
majority of dually eligible individuals remaining in Medicaid fee-for-
service (FFS). These commenters noted that D-SNPs that also contract
with States as Medicaid MCOs can currently enroll individuals into
their D-SNP that are enrolled in Medicaid FFS but, under the
requirements finalized in the April 2024 final rule, those D-SNPs would
not be able to enroll these individuals beginning in 2027 and would be
required to disenroll them as of 2030. Commenters indicated that these
individuals are better served in D-SNPs where they receive coordination
of their Medicare and Medicaid FFS services. The commenters offered
several suggestions for how CMS could address these concerns: (a)
limiting the proposal to States that require mandatory enrollment for
dually eligible individuals, including those who do not receive long-
term care services, (b) implementing a limited exception process for
States that would allow MA organizations with an affiliated Medicaid
MCO to offer at least one D-SNP PBP that is not exclusively aligned and
that can enroll dually eligible individuals who maintain Medicaid FFS
coverage and (c) phasing in the proposal over time.
In the April 2024 final rule, we did not adopt any of these
suggestions. At 89 FR 30690, we outlined potential drawbacks to
limiting the Sec. 422.514(h) provisions to only States that require
mandatory Medicaid managed care enrollment for dually eligible
individuals. These drawbacks included narrowing the number of States in
which these policies would apply, thus reducing the extent to which we
would achieve the benefits. It would also raise potential complexity in
States where certain subpopulations of dually eligible individuals are
mandatorily enrolled, but others are not. We further stated that
allowing each MA organization with an affiliated Medicaid MCO to offer
at least one D-SNP that is not exclusively aligned with its affiliated
Medicaid MCO for the purpose of enrolling dually eligible individuals
who are enrolled in Medicaid FFS would similarly reduce the extent to
which we would achieve the benefits described in the proposed rule,
create additional operational complexity for States and CMS to
administer and monitor, and would likely be more complicated to explain
from a beneficiary communications and messaging perspective compared to
the proposal that we finalized in the April 2024 final rule. Finally,
we stated our belief that the phase-in of the policy would provide
ample time for transition; the finalized requirement limits new
enrollment to individuals
[[Page 54974]]
enrolled in both a D-SNP and affiliated Medicaid MCO offered under the
same parent organization starting in 2027 and then disenrolling those
enrollees who do not have aligned enrollment in the D-SNP's affiliated
Medicaid MCO in 2030. MA organizations would have two bid cycles and
contract years (2025 and 2026) during which D-SNPs with affiliated
Medicaid MCOs may prepare for the first phase of enrollment
limitations.
Since we codified the package of provisions in the April 2024 final
rule, we have received feedback from stakeholders on some challenges in
implementing these provisions in States without mandatory Medicaid
managed care for the dual eligible population. For example, given that
New York does not require mandatory Medicaid managed care for its
Integrated Benefits for Dually Eligible Enrollees (IB-Duals) program,
participating HIDE SNPs may enroll full-benefit dually eligible
individuals who are enrolled in Medicaid FFS or an unaffiliated
Medicaid MCO. These HIDE SNPs do not have aligned enrollment. Without
any change, in 2030, these HIDE SNPs would need to disenroll any
enrollees who do not have aligned enrollment in the HIDE SNP's
affiliated Medicaid MCO. In other words, beginning in 2027, these HIDE
SNPs could no longer enroll any new dually eligible individuals who are
enrolled in Medicaid FFS or an unaligned Medicaid MCO, and, in CY 2030,
these HIDE SNPs would need to disenroll Medicaid FFS enrollees and any
individuals enrolled in an unaligned Medicaid MCO.
In States that do not require mandatory Medicaid managed care for
all of their full-benefit dually eligible individuals, we are also
concerned about the Sec. 422.514(h) requirements potentially
disadvantaging MA organizations offering coordination-only D-SNPs and
HIDE SNPs that both enroll full-benefit dually eligible individuals in
the same service areas. Pennsylvania is one of these States with its
Community HealthChoices program for Medicaid managed care plan for
long-term services and supports. In this preamble, we will use the D-
SNP landscape in Pennsylvania as an illustration of this potentially
disadvantaging situation. The requirements at Sec. 422.514(h) do not
apply to MA organizations in the State that only offer coordination-
only D-SNPs since these MA organizations, their parent organizations,
or any entity that shares a parent organization with the MA
organization do not also contract with Pennsylvania as a Medicaid MCO
that enrolls full-benefit dually eligible individuals. However, the
Sec. 422.514(h) requirements do apply to the State's HIDE SNPs. In CY
2025, several MA organizations offer HIDE SNPs and coordination-only D-
SNPs in Pennsylvania that both enroll full-benefit dually eligible
individuals. We note that in Pennsylvania, these HIDE SNPs do not have
aligned enrollment. Per Sec. 422.2, a HIDE SNP requires the provision
of coverage of Medicaid benefits under a capitated contract between the
State Medicaid agency and the MA organization; MA organization's parent
organization, another entity that is owned and controlled by its parent
organization; or a local nonprofit public benefit corporation. As we
noted previously in this preamble, in the April 2024 final rule, we
finalized a policy that, beginning in 2027, where an MA organization
offers a D-SNP and the MA organization, its parent organization, or any
entity that shares a parent organization with the MA organization also
contracts with a State as a Medicaid MCO that enrolls full-benefit dual
eligible individuals in the same service areas (even if there is only
partial overlap of the service areas), the MA organization: (a) may
only offer, or have a parent organization or share a parent
organization with another MA organization that offers, one D-SNP for
full-benefit dual eligible individuals, except as otherwise provided in
Sec. 422.514(h)(3); and (b) must limit new enrollment in the D-SNP to
individuals enrolled in, or in the process of enrolling in, the
Medicaid MCO.
In a State like Pennsylvania that does not mandate Medicaid managed
care, those MA organizations offering a HIDE SNP with unaligned
enrollment will no longer be permitted to enroll unaligned full-benefit
dually eligible individuals into the HIDE SNP or allow full-benefit
dually eligible individuals to enroll in the coordination-only D-SNP,
unlike those MA organizations that only offer coordination-only D-SNPs
in the State and do not contract with Pennsylvania as a Medicaid MCO.
In 2030, MA organizations with unaligned HIDE SNPs would need to
disenroll any unaligned full-benefit dually eligible individuals from
their HIDE SNP. In a State like Pennsylvania that does not mandate
Medicaid managed care, we believe that our regulation as-is at Sec.
422.514(h) could create an incentive for MA organizations to terminate
their HIDE SNP and transition dually eligible enrollees to the
coordination-only D-SNP, which could continue to enroll full-benefit
dually eligible individuals regardless of whether an enrollee receives
their Medicaid coverage through Medicaid FFS or an unaligned Medicaid
managed care plan, allowing such a plan to maintain maximum enrollment.
For these reasons, we believe that the application of Sec. 422.514(h)
to the MA organizations with unaligned HIDE SNPs and coordination-only
D-SNPs puts them at a disadvantage in comparison to those MA
organizations with only coordination-only D-SNPs, since full-benefit
dually eligible individuals are able to, and do, remain in Medicaid FFS
in States without mandatory Medicaid managed care. This is an
unintended consequence of Sec. 422.514(h), inconsistent with our goals
to promote integrated care. While our goal is to have full-benefit
dually eligible individuals enrolled in integrated D-SNPs, we do not
want to inadvertently prevent integrated D-SNPs from continuing to
enroll full-benefit dually eligible individuals who are enrolled in
Medicaid FFS. We believe MA organizations offering integrated D-SNPs in
other States with voluntary Medicaid managed care for the dually
eligible population, such as Michigan and the District of Columbia, may
face similar challenges.
We are proposing to amend Sec. Sec. 422.107(d)(1) and 422.514(h)
to allow D-SNPs that serve full-benefit dually eligible individuals in
a HIDE SNP or coordination-only D-SNP to continue enrollment of full-
benefit dually eligible individuals in a D-SNP in the same service area
where those individuals are enrolled in Medicaid FFS. These proposed
changes would address the challenges of MA organizations complying with
the requirements at Sec. 422.514(h) in States where there is no
mandatory Medicaid managed care program and avoid the need for MA
organizations in those States to cease enrolling full-benefit dually
eligible individuals who are in Medicaid FFS starting in 2027 and
disenroll those members in 2030 as currently required under Sec.
422.514(h).
We propose to amend SMAC requirements at Sec. 422.107(d)(1)
through adding a new paragraph (i). For any SMACs that allow
coordination-only D-SNPs (as established under Sec. 422.107(d)(1)) to
enroll full-benefit dually eligible individuals, the newly proposed
paragraph (i) would require the SMAC to stipulate that such full-
benefit dually eligible beneficiaries cannot be enrolled in a Medicaid
MCO that is owned and controlled by an entity other than the MA
organization, its parent organization, or an entity that shares a
parent organization with the MA organization. In other words, the
proposed amendment to Sec. 422.107(d)(1)
[[Page 54975]]
would permit coordination-only D-SNPs that enroll full-benefit dually
eligible individuals who are enrolled in Medicaid FFS.
At Sec. 422.514(h)(3), we propose to add new paragraphs (iii) and
(iv). For any SMACs that permit full-benefit dually eligible
individuals to enroll in (a) a coordination-only D-SNP per proposed
amendment at Sec. 422.107(d)(1)(i) or (b) a HIDE SNP with a majority
of individuals enrolled in Medicaid FFS, the new paragraph proposed at
Sec. 422.514(h)(3)(iii) would allow the MA organization, its parent
organization, or an entity that shares a parent organization with the
MA organization to offer one or more additional D-SNPs for full-benefit
dually eligible individuals in the same service area. Limiting the
proposed exception at Sec. 422.514(h)(3) to HIDE SNPs with a majority
of enrollees in Medicaid FFS would prevent application of this
exception to HIDE SNPs with a minority of Medicaid FFS enrollees and a
majority of Medicaid managed care enrollees whose Medicaid MCO is
unaligned with the HIDE SNP. HIDE SNPs with a majority of enrollees in
unaligned Medicaid MCOs would have less incentive to achieve aligned
membership and detract from the intended goals of Sec. 422.514(h). We
propose adding a new paragraph (iv) at Sec. 422.514(h)(3) that would
require MA organizations with D-SNPs subject to Sec.
422.514(h)(3)(iii) to comply with care coordination responsibilities at
Sec. 422.562(a)(5). Per Sec. 422.562(a)(5)(i), D-SNPs must offer to
assist an enrollee in that D-SNP with obtaining Medicaid-covered
services and resolving grievances, including requesting authorization
of Medicaid services, as applicable, and navigating Medicaid appeals
and grievances in connection with the enrollee's own Medicaid coverage,
regardless of whether such coverage is in Medicaid FFS or a Medicaid
managed care plan, such as a Medicaid MCO, prepaid inpatient health
plan (PIHP), or prepaid ambulatory health plan (PAHP) as defined in
Sec. 438.2. If the enrollee accepts the offer of assistance, the plan
must provide the assistance. Examples of such assistance are outlined
at Sec. 422.562(a)(5)(i)(A). We are considering amending Sec.
422.562(a)(5)(i)(A) to require MA organizations with D-SNPs subject to
proposed Sec. 422.514(h)(3)(iii) to report to CMS on the proactive
outreach they provide to Medicaid FFS enrollees, the type of assistance
they offered to these enrollees, and whether these enrollees received
the relevant Medicaid services. We are not proposing to require MA
organizations with D-SNPs subject to proposed Sec. 422.514(h)(3)(iii)
to report their efforts to meet Sec. 422.562(a)(5)(i) to CMS since
such reporting would add burden for MA organizations and we may be able
to leverage existing oversight mechanisms, such as models of care
(MOCs), CMS program audits, monthly calls between MA organizations and
CMS account managers, and existing State Medicaid FFS reporting to CMS
instead of adding new plan reporting requirements. We solicit comments
on whether we should amend Sec. 422.562(a)(5)(i)(A) to require MA
organizations with D-SNPs to report on their activities for assisting
Medicaid FFS enrollees in obtaining Medicaid covered services instead
of or in addition to the existing oversight mechanisms outlined.
Collectively, we believe these proposals at Sec. Sec.
422.107(d)(1)(i) and 422.514(h)(3) would benefit MA organizations
operating multiple D-SNPs that enroll full-benefit dually eligible
individuals in States without mandatory Medicaid managed care. In
States like New York, our proposed changes would remove the
disadvantage MA organizations that offer HIDE SNPs will encounter
starting (a) in 2027, when they would need to stop enrolling full-
benefit dually eligible individuals into HIDE SNPs that enroll Medicaid
FFS enrollees and (b) in 2030, when they would need to disenroll full-
benefit dually eligible individuals from HIDE SNPs that enroll Medicaid
FFS enrollees. Similarly, in States like Pennsylvania, our proposed
changes would address the disadvantage MA organizations that offer HIDE
SNPs and coordination-only D-SNPs will encounter starting (a) in 2027,
when they would need to stop enrolling full-benefit dually eligible
individuals into coordination-only D-SNPs and (b) in 2030, when they
would need to disenroll full-benefit dually eligible individuals from
coordination-only D-SNPs that enroll Medicaid fee-for-service
enrollees. We do not believe these changes would detract from the goal
of the provisions we codified in the April 2024 final rule, which was
to increase the percentage of D-SNP enrollees in aligned enrollment,
and--over time--exclusively aligned enrollment. When Medicaid FFS is
available and HIDE SNPs can enroll individuals who are in Medicaid FFS,
exclusively aligned enrollment cannot be achieved.
In the April 2024 final rule, we received comments concerning the
applicability of the enrollment limitation policies at Sec. 422.514(h)
on unique Medicaid managed care programs. Among others, commenters
raised specific questions about the applicability of this rule to D-
SNPs in Puerto Rico (89 FR 30697). We responded to these comments and
noted that MA organizations that offer multiple D-SNPs participating in
the Platino program in Puerto Rico would be required to only offer one
D-SNP starting in 2027 for full-benefit dually eligible individuals in
a service area where an MA organization, its parent organizations, or
an entity that shares a parent organization with the MA organization
also offers an affiliated Medicaid MCO unless those D-SNPs meet the
exception finalized at Sec. 422.514(h)(3).
Currently, Puerto Rico is the only U.S. Territory that offers D-
SNPs. We note that the U.S. Territories, including Puerto Rico, are
unique, as the Medicaid program in the U.S. Territories differs from
Medicaid programs operating in the States and the District of Columbia
in several notable ways. The Medicare Savings Programs, as defined at
section 1144(c)(7) of the Act and 42 CFR 435.4, are Medicaid
eligibility groups through which Medicaid assists low-income Medicare
beneficiaries with their Part A and/or Part B premiums, and for many
enrollees, cost-sharing. The MSPs are mandatory Medicaid eligibility
groups for the 50 States and the District of Columbia, but optional for
the U.S. Territories per section 1905(p)(4)(A) of the Act. Currently,
no U.S. Territory has adopted the MSPs. Additionally, per section
1860D-14(a)(3)(F) of the Act and 42 CFR 423.907(a)(1), low-income Part
D eligible individuals who reside in the U.S. Territories are
ineligible for the Part D low-income subsidy, which provides cost-
sharing and premium assistance to low-income Part D-eligible in the 50
States and the District of Columbia in accordance with section 1860D-14
of the Act and 42 CFR part 423 subpart P. While traditional funding
sources for Medicare premiums are unavailable in the U.S. Territories,
D-SNPs have the discretion to apply their MA rebate toward the Part B
premium amount. (For CY 2026, we note that D-SNPs in Puerto Rico
differentiate their PBPs by level of Part B premium reduction amount
and supplemental benefits.) Additionally, premiums for Part D are
covered by the Enhanced Allotment Plan (section 1935(e) of the Act), a
specific source of funding for prescription drugs for the U.S.
Territories.
Upon further consideration and given the unique landscape in the
U.S. Territories, including Puerto Rico, we are proposing an exception
at
[[Page 54976]]
Sec. 422.514(h)(3)(v). The proposed exception would exempt MA
organizations operating in U.S. Territories that have not adopted MSP
from the requirements at Sec. 422.514(h)(1)(i) that otherwise would
require--beginning in contract year 2027--the MA organization to only
offer, or have a parent organization or share a parent organization
with another MA organization that offers, one D-SNP for full-benefit
dual eligible individuals.
We acknowledge that this proposal is a change from what we
previously stated in response to comments in the April 2024 final rule.
We also acknowledge that upon further consideration and review, we may,
in future rulemaking, reconsider this proposed exception at Sec.
422.514(h)(3)(v). These proposed changes target MA organizations in
States with voluntary Medicaid managed care enrollment and seek to
level the playing field in the marketplace for impacted D-SNPs. The
proposed change at Sec. 422.514(h)(3)(v) is intended to acknowledge
the uniqueness of D-SNP landscapes in the U.S. Territories.
We solicit comments on all aspects of our proposal, including
whether the advantages of the proposed changes would excessively
detract from the original goal of the provisions codified in the April
2024 final rule. For example, we are interested in stakeholders'
perspectives on the value of non-AIP HIDE SNPs with a majority of
Medicaid FFS enrollees and whether we should establish an exception for
them at proposed Sec. 422.514(h)(3)(iii) at all or limit that
exception to a shorter period of time, such as 2027 through 2029. While
we identified a few States that we expect would benefit from our
proposals, we invite commenters to identify other States that could
benefit or be negatively impacted. As outlined earlier in this section,
we also solicit comments on whether we should amend Sec.
422.562(a)(5)(i)(A) to require MA organizations with D-SNPs subject to
proposed Sec. 422.514(h)(3)(iii) to report on their activities to
assist Medicaid FFS enrollees with obtaining Medicaid covered services
enrollees instead of or in addition to the existing oversight
mechanisms. Further, we solicit comment on the likely effectiveness of
our proposed regulation in balancing the roles of D-SNPs in the U.S.
Territories to fill the gaps of MSP and Part D LIS while also providing
robust Medicare benefits to dually eligible individuals. We are also
interested in perspectives on how limiting D-SNPs in the U.S.
Territories would affect enrollees and the consumer choice in U.S.
Territories.
D. Contract Modifications for D-SNPs Following State Medicaid Agency
Contract Termination (Sec. 422.510)
MA organizations are required to have contracts with CMS to operate
each year. Section 1857(h)(2) of the Act provides authority for the
Secretary to immediately terminate a contract with an MA organization
in instances where the Secretary determines that a delay in termination
resulting from compliance with the procedures in section 1857(h)(1) of
the Act would pose an imminent and serious risk to the health of
enrolled Medicare beneficiaries. In the final rule titled ``Medicare
Program; Establishment of the Medicare+Choice Program,'' which appeared
in the Federal Register on June 26, 1998 (hereafter referred to as the
June 1998 final rule; 63 FR 35018), we finalized regulations at Sec.
422.510 which outline processes for terminations of contracts by CMS,
while providing conditions in which contracts may be found terminable.
Such conditions include failure to carry out the contract, carrying out
the contract in a manner that is inconsistent with the efficient and
effective administration of MA regulations, and no longer being able to
meet the applicable conditions put forth in MA regulations. In the
decades since this rule was first finalized, we have continued to
refine the conditions in which CMS may terminate an MA contract at
Sec. 422.510 and elsewhere in Part 422.
D-SNPs are MA plans that coordinate the delivery of Medicare and
Medicaid services for individuals who are eligible for such services
and enrolled in the plan. In addition to the standard contract an MA
organization must have with CMS to operate, per section 1859(f)(3)(D)
of the Act, MA organizations offering D-SNPs must also have a contract
with the State Medicaid agency to provide benefits, or arrange for
benefits to be provided, for individuals entitled to Medicaid. Because
D-SNPs are required to have contracts with the State Medicaid agency
(SMACs), States have significant control over the availability of D-
SNPs in their markets given the State's discretion in contracting with
D-SNPs in combination with the State's control over its Medicaid
program. We discussed this relationship between States and MA
organizations in the final rule titled ``Medicare Program; Contract
Year 2023 Policy and Technical Changes to the Medicare Advantage and
Medicare Prescription Drug Benefit Programs; Policy and Regulatory
Revisions in Response to the COVID-19 Public Health Emergency;
Additional Policy and Regulatory Revisions in Response to the COVID-19
Public Health Emergency,'' which appeared in the Federal Register on
May 9, 2022, specifically at 87 FR 27763.
Because of the relationship between the State and the D-SNP, the
provision and continuation of SMACs are sensitive to State policy
changes and operational choices. To illustrate this, we look to
Medicaid MCO procurement timelines and decisions. Some States use
procurement processes to select the Medicaid MCOs that will provide
Medicaid benefits to the enrollees in the State. The timeline for these
procurements is distinct to each State and may operate off-cycle from
MA contracting at the Federal level. Additionally, the duration of the
procurement may vary based on several factors. If a State decides not
to contract with a particular Medicaid MCO, which may occur off-cycle
from the calendar year, such a procurement decision may require
termination of a Medicaid MCO contract. Termination of the Medicaid MCO
contract would trigger termination of the SMAC, if the terminating
Medicaid MCO is an affiliated entity with a D-SNP that has a SMAC in
effect. For example, if a State with FIDE SNPs reprocured their
Medicaid MCOs and one of the existing Medicaid MCOs lost the
reprocurement, that FIDE SNP would need to terminate when the Medicaid
MCO terminates.
As was noted earlier in this preamble, D-SNPs are statutorily
required to have a SMAC to operate in a State. In the example given
previously, if a Medicaid MCO that is an affiliated entity with a D-SNP
loses a State procurement or otherwise has its Medicaid MCO contract
terminated, the State also terminates the SMAC and the D-SNP cannot
continue to operate. This action requires that the contract between the
D-SNP and CMS be terminated. As more States move towards integrated
care and contract with Medicaid MCOs through the result of
procurements, we have encountered instances where a SMAC is terminated
by a State during the plan year. In those instances, CMS has worked
with the respective State and the MA organization whose SMAC is being
terminated to mutually terminate the contract per Sec. 422.508, a
process by which CMS, the State and the D-SNP are able to agree on a
timeline for termination and the provision of notice to enrollees of
such termination, in an effort to create a smoother transition to an
alternative plan for the plan's enrollees.
[[Page 54977]]
However, an MA organization with a terminating SMAC is not required
to seek a mutual termination of its MA contract with CMS. Absent the
cooperation of the MA organization to mutually terminate in situations
where the MA organization no longer holds a SMAC with the State, we are
concerned that enrollees may experience harm by losing access to their
integrated care, including access to known providers and care plans, as
the D-SNP in which they are enrolled is no longer able to provide
benefits, or arrange for benefits to be provided, for individuals
entitled to Medicaid. In these instances, CMS will need to seek
immediate termination to protect beneficiaries.
At Sec. 422.510(a)(4), we are first proposing to add a new
paragraph (xvii) to establish that CMS may terminate a contract if the
MA organization is no longer eligible to offer a D-SNP because the MA
organization does not hold a contract with the State Medicaid agency
consistent with Sec. 422.107(b). Our goal in adding this new clause is
to codify that the loss of a SMAC constitutes a valid basis for
contract termination under CMS authority per section 1859(f)(3)(D) of
the Act.
Secondly, at Sec. 422.510(b)(2)(i), we are proposing to add
paragraph (D) to state that the procedures specified in paragraph
(b)(1), related to when CMS notifies the MA organization and when the
MA organization must notify its enrollees and the general public, do
not apply if the contract is being terminated based on the proposed
addition of Sec. 422.510(a)(4)(xvii). We are proposing that when a D-
SNP contract is terminated because the State has terminated the
affiliated contract with the Medicaid MCO or the State has terminated
the SMAC, it is cause for CMS to make the MA contract termination
immediate. When a State terminates the Medicaid MCO affiliated with the
D-SNP or terminates the SMAC, D-SNP enrollees who are otherwise
entitled to medical assistance under a State plan under title XIX of
the Act would be in jeopardy of not having access to the Medicaid
services to which they are entitled, given that, as required by Sec.
422.2, D-SNPs coordinate the delivery of Medicare and Medicaid services
for eligible individuals and may provide coverage of Medicaid services.
It is our belief that a delay in D-SNP contract termination could
disrupt access to Medicaid benefits for those who are eligible, which
would pose an imminent and serious risk to the health of the
organization's enrollees, rising to the standard put forth in section
1857(h)(2) of the Act and warranting immediate termination of contract
by CMS. We believe that where the MA organization does not agree to a
mutual termination in coordination with the termination of the
affiliated Medicaid MCO contract and/or SMAC, an immediate termination
would be appropriate. However, we note that our proposed amendments to
Sec. Sec. 422.510(a)(4)(xvii) and (b)(2)(i)(D) do not preclude a MA
organization from seeking termination of a contract by mutual consent,
per Sec. 422.508.
We note that when an MA organization has multiple plans under one
contract, per Sec. Sec. 422.503(e) CMS may sever the D-SNP from the
rest of the contract, in effect allowing CMS to renew only the portion
of the contract that does not include the D-SNP affiliated with the
terminated SMAC.
Proposed Sec. 422.510(b)(2)(i)(D) would codify the process of
immediate termination of contract by CMS when the D-SNP does not have a
SMAC. We believe that the MA organization in this situation does not
need and would not benefit from an opportunity to develop and implement
a corrective action plan as required at Sec. 422.510(c)(1) given that
the only way to correct the issue would be to execute a SMAC with the
State. States have the ability to issue corrective action plans to the
D-SNPs with whom they hold contracts. Many States, in their SMACs,
include language to this effect. Additionally, as in the example given
previously, if a Medicaid MCO that is an affiliated entity with a D-SNP
loses a State procurement, the State also terminates the SMAC. In
either of these instances, allowing D-SNPs the opportunity to develop
and implement a corrective action plan per Sec. 422.510(c)(1) would
not provide the D-SNP with an avenue to correct any underlying issue
that resulted in the State's termination of the SMAC. The SMAC
termination, including any related opportunity to pursue a corrective
action plan offered by the State, will have already occurred by the
time the MA contract is terminated. Moreover, State procurement
decisions operate separately from MA contracting decisions through CMS
and would not be amenable to a cure or a corrective action plan as
described in Sec. 422.510(c)(1). Furthermore, any further delay in
termination of the D-SNP contract poses imminent and serious risk to
the health of the organization's enrollees as previously described in
this preamble, rising to the standard put forth in section 1857(h)(2)
of the Act. As such, we are lastly proposing that termination of a SMAC
be included as an exception to the opportunity for plans to develop and
implement a corrective action plan, at Sec. 422.510(c)(2)(iv).
We request comment on this proposal, including but not limited to
whether this package of provisions will accomplish the goals we have
laid out in this preamble and whether there should be any other
additional modifications to consider.
E. Limitation on D-SNP-Only Contracts Submitting Materials Under the
Multi-Contract Entity Process (Sec. Sec. 422.2261 and 423.2261)
Sections Sec. Sec. 422.2261(a) and 423.2261(a) require MA
organizations and Part D sponsors to submit all marketing materials,
all election forms, and certain designated communication materials for
CMS review. These regulations state that the HPMS Marketing Module is
the primary system of record for the collection, review, and storage of
materials that must be submitted for CMS review. They also specify that
materials must be submitted to the HPMS Marketing Module by the MA
organization or Part D sponsor or, where materials have been developed
by a Third Party Marketing Organization (TPMO) for multiple MA
organizations or plans, by a TPMO with prior review of each MA
organization on whose behalf the materials were created or will be
used. In addition, Sec. Sec. 422.2262(d) and 423.2262(d) describe how
MA organizations and Part D sponsors must use a standardized method of
identification for oversight and tracking for materials received by
beneficiaries including the MA organization's contract or Multi-
Contract Entity (MCE) number (such as an ``H'' number for MA plans or
``Y'' number for an MCE).
Under Sec. 422.107(e), a State Medicaid agency may require MA
organizations offering D-SNPs with exclusively aligned enrollment to do
both of the following: (1) apply for, and seek CMS approval to
establish and maintain, one or more MA contracts that only include one
or more D-SNPs with a service area limited to the State; and (2) use
required materials that integrate Medicare and Medicaid content
including, at a minimum, the Summary of Benefits, Formulary, and
combined Provider and Pharmacy Directory that meets Medicare and
Medicaid managed care requirements consistent with applicable
regulations in parts 422, 423, and 438 of Title 42 of the CFR. We refer
to MA contracts that only include one or more D-SNPs with a service
area limited to the State as D-SNP-only contracts. If a State elects to
require D-SNP-only contracts under Sec. 422.107(e)(1), per Sec.
422.107(e)(3)(i), CMS grants State Medicaid agency officials access to
[[Page 54978]]
HPMS for purposes of oversight and information sharing for these D-SNP-
only contracts. For CY 2026, 13 States have D-SNP-only contracts and
therefore have access to HPMS for oversight of these contracts in their
State. This State oversight includes access to the HPMS Marketing
Module for purposes of reviewing materials submitted by D-SNP-only
contracts. These States only have access to review materials submitted
under the contract number (H number) in HPMS for D-SNP-only contracts.
For material oversight, per Sec. 438.10(c)(5), States are required
to ensure, through their Medicaid managed care contracts, that each
MCO, PIHP, PAHP, and primary care case management (PCCM) entity
provides the information to each enrollee consistent with Sec.
438.10(f)-(i), as applicable. In addition, per Sec. 438.104(b), MCO,
PIHP, PAHP, PCCM, or PCCM entities cannot distribute marketing
materials without first obtaining State approval. The entity's contract
with the State must also specify the methods by which the entity
ensures that marketing, including plans and materials, is accurate and
does not mislead, confuse, or defraud the beneficiaries or the State
Medicaid agency.
Since contracts with exclusive alignment of Medicare and Medicaid
must meet the material requirements of both CMS and the State, prior to
the adoption of Sec. 422.107(e), MA organizations were required to
submit materials to the State and CMS separately. However, States
requiring D-SNP-only contracts have access to HPMS for reviewing these
materials, and they can require the MA organizations offering D-SNP-
only contracts to submit materials in the HPMS marketing module for
State review. This State access decreases plan burden by allowing the
D-SNP to submit the material once in HPMS for concurrent joint review
by CMS and the State, as applicable, rather than having to separately
submit materials to the State for review and then to CMS. This can also
shorten the total review time for the MA organization and give it more
time to meet tight timeframes for releasing materials to enrollees.
If an MA organization were to submit a material under an MCE number
that applies to multiple contracts, the applicable State Medicaid
agency would not be able to either view or review that material in the
HPMS Marketing Module. States only have access to information in HPMS
for the specific D-SNP-only contracts in their State. Because MCE
numbers cover multiple contracts across multiple States, CMS doesn't
allow State staff to access materials submitted under an MCE number,
even if an MA organization includes materials for their State. MA
organizations could potentially submit a substantial number of
materials in HPMS under the MCE number, including their D-SNP-only
contracts, but the State would not be able to view any of them due to
their submission under the MCE number. To address this challenge, CMS
has programmed the HPMS marketing module so that D-SNP-only contracts
cannot submit materials under an MCE number. In addition, States with
D-SNP-only contracts have added language in their SMACs to prohibit
submission of materials in the HPMS Marketing Module under the MA
organization's MCE number. Instead, States are requiring that MA
organizations with D-SNP-only contracts submit materials for review
under their contract ID number.
To ensure that D-SNP-only contracts are meeting the material
requirements of both Medicare and Medicaid, we believe that it is
important to clarify that MA organizations with D-SNP-only contracts
cannot submit materials using the MA organization's MCE number for D-
SNP-only contracts, nor can TPMOs submit materials on behalf of the MA
organization for D-SNP-only contracts using an MCE number. This
requirement applies to all plan benefit packages within D-SNP-only
contracts under Sec. 422.107(e)(1). Since States have already been
requiring this approach through their SMACs and the HPMS Marketing
Module is set up to prevent D-SNP-only contracts from submitting
materials under an MCE number, we do not expect this update to add
burden for any MA organizations; the current process will not change.
The Medicare Communications and Marketing Guidelines (MCMG) provide
additional detail on Sec. Sec. 422.2261(a)(3) and 423.2261(a)(3)
noting that the multi-plan submission process is intended for TPMOs
that submit for multiple organizations. The MCMG states that if the
third party's marketing materials only mention one MA organization,
then the plans should submit the material directly to CMS using the
standard submission process. Since we are prohibiting submissions under
the MCE number for D-SNP-only contracts and TPMOs cannot submit
materials under the contract ID number, there is no way for TPMOs to
submit materials directly for D-SNP-only contracts in the HPMS
Marketing Module. The MA organization must submit all materials to be
used by TPMOs for D-SNP-only contracts.
Under our authority to interpret, implement, and carry out the Part
C and D programs under sections 1851(h), 1851(j), 1852(c), 1860D-
1(b)(1)(B)(vi), 1860D-4(a), and 1860D-4(l) of the Act, we are proposing
to add a requirement at Sec. Sec. 422.2261(a)(3) and 423.2261(a)(3)
that MA organizations offering D-SNPs with exclusively aligned
enrollment subject to Sec. 422.107(e) must submit all materials for
the contract in HPMS under the MA organization's contract number. MA
organizations and TPMOs may not submit materials for the contract under
the organization's MCE number as described in Sec. Sec.
422.2262(d)(2)(i) and 423.2262(d)(2)(i).
We welcome comment on our proposal.
F. Request for Information: C-SNP and I-SNP Growth and Dually Eligible
Individuals
Please note, this is a request for information (RFI) only. In
accordance with implementing regulations of the PRA, specifically 5 CFR
1320.3(h)(4), this general solicitation is exempt from the PRA. Facts
or opinions submitted in response to general solicitations of comments
from the public, published in the Federal Register or other
publications, regardless of the form or format thereof, provided that
no person is required to supply specific information pertaining to the
commenter, other than that necessary for self-identification, as a
condition of the agency's full consideration, are not generally
considered information collections and therefore not subject to the
PRA.
Per the Medicare Prescription Drug, Improvement, and Modernization
Act of 2003 (Pub. L. 108-173), chronic condition special needs plans
(C-SNPs), dual eligible special needs plans (D-SNPs), and institutional
special needs plans (I-SNPs) are MA plans that are specifically
designed to provide targeted care and limit enrollment to special needs
individuals. C-SNPs restrict enrollment to special needs individuals
with specific severe or disabling chronic conditions as defined at
Sec. 422.2. The April 2024 final rule amended the definition of severe
or disabling chronic conditions at Sec. 422.2 by outlining the
specific co-morbid and medically complex chronic conditions that
qualify for C-SNP enrollment (89 FR 30661 through 30666). I-SNPs
restrict enrollment to MA eligible individuals who meet the definition
of institutionalized and institutionalized-equivalent per Sec. 422.2.
The April 2024 final rule added three additional I-SNP subtypes:
facility-based institutional
[[Page 54979]]
special needs plan (FI-SNP), hybrid institutional special needs plan
(HI-SNP), and institutional-equivalent special needs plan (IE-SNP). (89
FR 30649 through 30653) D-SNPs are specialized MA plans for individuals
who are entitled to medical assistance under a State plan under Title
XIX, per Sec. 422.2.
1. Growth in C-SNPs With High Proportion of Dually Eligible Enrollees
The number of C-SNPs offered by MA organizations has increased
substantially in recent years. As outlined in Table FF1, MA
organizations offered 207 C-SNPs in CY 2021 and 385 C-SNPs in CY 2025,
representing growth of 85% over that timeframe. C-SNP enrollment grew
from 387,920 enrollees in CY 2021 to 1,103,194 enrollees in CY 2025, an
increase of 184%. Higher levels of enrollment growth occurred between
CY 2023 and CY 2024 (41.7%) and between CY 2024 and CY 2025 (67.5%).
[GRAPHIC] [TIFF OMITTED] TP28NO25.011
The number of dually eligible individuals enrolled in C-SNPs also
increased over the same period of time. As shown in Table FF1, the
number of dually eligible individuals enrolled in C-SNPs grew from
103,877 enrollees in CY 2021 to 210,983 enrollees in CY 2025, an
increase of more than 100 percent. The highest level of growth during
that timeframe occurred between CY 2024 and CY 2025 with enrollment of
dually eligible individuals increasing from 133,706 enrollees in CY
2024 to 210,983 enrollees in CY 2025, an increase of 57.8 percent in
one year.
Over the same timeframe, the number of C-SNPs with a high
proportion of dually eligible enrollees increased. Per Sec.
422.514(d), we define D-SNP look-alikes as non-SNP MA plans with 60
percent or more dually eligible enrollment. We used this threshold to
identify C-SNPs in CY 2021 through CY 2025 with a similarly high level
of dually eligible enrollees. Table FF2 shows the number of C-SNPs with
dually eligible individuals representing 60 percent or more of total
enrollment grew from 16 C-SNPs in CY 2021 with 59,164 dually eligible
enrollees to 66 C-SNPs in CY 2025 with 104,237 dually eligible
enrollees. This experience represents a 313 percent increase in the
number of C-SNPs with high concentrations of dually eligible enrollees.
The most substantial level of enrollment growth (63.5 percent) during
this timeframe occurred from CY 2024 to CY 2025 with dually eligible
enrollment increasing from 63,738 enrollees in 49 C-SNPs to 104,437
enrollees in 66 C-SNPs.
At least one C-SNP with 60 percent or more dually eligible
enrollees has been offered in the following 26 States for at least one
year during the CY 2021 through CY 2025 time span: Arizona, Arkansas,
California, Colorado, Connecticut, Florida, Georgia, Idaho, Illinois,
Iowa, Indiana, Kansas, Louisiana, Michigan, Minnesota, Missouri,
Nevada, New Hampshire, New Mexico, Ohio, Oregon, South Carolina,
Tennessee, Texas, Vermont, and Virginia. For CY 2025, MA organizations
offered C-SNPs with high concentrations of dually eligible individuals
in 14 States, listed in order of number of such C-SNPs per State:
California (31 C-SNPs); Arizona (7 C-SNPs); Illinois (6 C-SNPs); New
Mexico (5 C-SNPs); Indiana, Minnesota, Nevada, Oregon (2 C-SNPs);
Connecticut, Idaho, Kansas, New Hampshire, Texas, Vermont (1 C-SNP).
The vast majority (85.4 percent) of the dually eligible individuals
enrolled in these CY 2025 C-SNPs are full-benefit dually eligible
individuals. We provide more detail on C-SNPs with a high concentration
of dually eligible individuals in California, Arizona, Illinois, and
New Mexico given these States have the largest number of such C-SNPs
during the CY 2021 through CY 2025 timeframe.
[[Page 54980]]
[GRAPHIC] [TIFF OMITTED] TP28NO25.012
Over the last five years, California is the State with the largest
number of C-SNPs with a high proportion of dually eligible individuals.
Table FF3 details the growth of these C-SNPs in California. Dually
eligible enrollment in these C-SNPs represents more than 90 percent of
total enrollment. Of the 49 C-SNPs and 66 C-SNPs nationally with 60
percent or more of total enrollment in CY 2024 and CY 2025,
respectively, nearly half of these high proportion C-SNPs (24 in CY
2024 and 31 in CY 2025) were offered in California. The vast majority
of dually eligible individuals enrolled in these C-SNPs were full-
benefit dually eligible individuals. Like C-SNP enrollment nationally,
the California C-SNPs experienced a high degree of annual enrollment
growth (98.7 percent increase) from CY 2024 (27,065 enrollees) to CY
2025 (53,786 enrollees).
[GRAPHIC] [TIFF OMITTED] TP28NO25.013
While Arizona and Illinois have substantially fewer C-SNPs with a
high concentration of dually eligible individuals than California, C-
SNPs in Arizona and Illinois also experienced sizable growth in
enrollment from CY 2021 through CY 2025. In Arizona, enrollment in
these C-SNPs with a high concentration of dually eligible individuals
increased from zero enrollees in CY 2021 (zero C-SNPs) to 2,547 in CY
2025 (7 C-SNPs), with the highest level of annual growth (78.1 percent)
occurring between CY 2023 (890 enrollees) and CY 2024 (1,585). These C-
SNPs with a high proportion of dually eligible enrollees continued to
grow (60.7 percent increase) between CY 2024 (1,585 enrollees) and CY
2025 (2,547 enrollees). Approximately 60 percent of dually eligible
individuals enrolled in these C-SNPs are full-benefit dually eligible
individuals.
In Illinois, C-SNPs with a high proportion of dually eligible
individuals increased from 36 enrollees in CY 2021 (one C-SNP) to
41,218 enrollees in CY 2025 (6 C-SNPs), representing a growth of more
than 3,180 percent. While the number of C-SNPs remained steady at 6 C-
SNPs from CY 2024 to CY 2025, enrollment increased from 24,875
enrollees to 41,318 enrollees, a 66 percent increase. Nearly 85 percent
of the dually eligible individuals enrolled in these C-SNPs are full-
benefit dually eligible individuals.
New Mexico also experienced growth in C-SNPs with a high
concentration of dually eligible individuals from CY 2021 (0 enrollees
and 0 C-SNPs) through CY 2025 (5,203 enrollees and 5 C-SNPs). Unlike
California, Arizona, and Illinois, the C-SNPs in New Mexico lost
enrollment from CY 2024 (7,582 enrollees) to CY 2025 (5,203 enrollees),
a reduction of 31.4 percent, after annual increases from CY 2021 to CY
2024. Also, the proportion of full-benefit and partial-benefit dually
eligible individuals enrolled in the C-SNPs has been approximately
equal. We also note that Connecticut, Idaho, Illinois, New Hampshire,
New Mexico, Oregon, and Vermont are States where dually eligible
individuals comprise 60 percent or more of total C-SNP enrollment in
2025.\84\
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\84\ CMS analysis of IDR data for January enrollment for 2025.
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[[Page 54981]]
2. Growth in I-SNPs With High Proportion of Dually Eligible Enrollees
Compared to C-SNPs, the number of I-SNPs offered by MA
organizations has remained relatively consistent in recent years. As
outlined in Table FF4, MA organizations offered 139 I-SNPs in CY 2021
and 144 I-SNPs in CY 2025 with an increase to 171 I-SNPs in CY 2023. I-
SNP enrollment grew from 87,037 enrollees in CY 2021 to 121,188
enrollees in CY 2025, an increase of 39 percent. Dually eligible
individuals represented the vast majority of I-SNP enrollees at
approximately 90 percent of total enrollment each year.
[GRAPHIC] [TIFF OMITTED] TP28NO25.014
For the most recent year reviewed (CY 2025), New York had the
largest number of I-SNPs (12). The following other States had five or
more I-SNPs in CY 2025: Florida (10); Ohio and Texas (8); North
Carolina (7); California, Indiana, Missouri, Oregon (6); and Arizona
and Pennsylvania (5).
Table FF5 provides total I-SNP enrollment in the three I-SNP
subtypes: FI-SNPs, HI-SNPs, and IE-SNPs for CY 2021 through CY 2025. On
average over this time period, 73 percent of I-SNP enrollees were
beneficiaries enrolled in a FI-SNP (institutional-only), 22 percent
were enrolled in a HI-SNP (institutional and institutional-equivalent)
and 5 percent were enrolled in an IE-SNP (institutional-equivalent).
[GRAPHIC] [TIFF OMITTED] TP28NO25.015
3. Challenges With C-SNPs and I-SNPs With High Proportion of Dually
Eligible Enrollees
Dually eligible individuals encounter fragmentation in the health
care system as they navigate the Medicare and Medicaid programs. CMS
has been working to address these fragmented experiences through
policies that integrate care for dually eligible individuals.
Integrated care refers to delivery system and financing approaches that
(1) maximize person-centered coordination of Medicare and Medicaid
services; (2) mitigate cost-shifting incentives between the two
programs; and (3) create a seamless experience for dually eligible
individuals. Our efforts in recent years have increased opportunities
for enrollment in D-SNPs that are aligned with Medicaid managed care
plans operated through a common parent organization (integrated D-
SNPs).
The challenges with C-SNPs and I-SNPs enrolling high proportion of
dually eligible individuals are similar to the challenges of D-SNP
look-alikes. CMS established contracting limitations on D-SNP look-
alikes at Sec. 422.514(d) whereby CMS does not (a) enter into a
contract for a new non-SNP MA plan that projects, in its bid submitted
under Sec. 422.254, that 60 percent or more of its enrollees are
dually eligible or (b) renew a contract with a non-SNP MA plan that has
60 percent or more dually eligible enrollees. We established these
contract limitations to address proliferation and growth of D-SNP look-
alikes, which raised concerns related to effective implementation of
requirements for D-SNPs established by section 1859 of the Act
(including amendments made by the Medicare Improvement for Patients and
Providers Act of 2008 (Pub. L. 110-275) and the Bipartisan Budget Act
of 2018 (Pub. L. 115-123)). As stated in the final rule titled
``Medicare Program; Contract Year 2021 Policy and Technical Changes to
the Medicare Advantage Program, Medicare Prescription Drug Benefit
Program, and Medicare Cost Plan Program,'' which appeared in the
Federal Register on June 2, 2020 (hereafter referred to as the June
2020 final rule; 85 FR 33805 through 33806), we adopted the D-SNP look-
alike contracting limitations to ensure full implementation of
requirements for D-SNPs, such as SMACs, a minimum integration of
[[Page 54982]]
Medicare and Medicaid benefits, care coordination through health risk
assessments (HRAs), and evidence-based models of care (MOCs). These
requirements promote coordination of care. Additionally, the SMAC
requirement allows States the flexibility to require greater
integration of Medicare and Medicaid benefits from the D-SNPs in their
markets. For example, to develop products that integrate Medicare and
Medicaid coverage, in CY 2025, 14 States (Arizona, California, District
of Columbia, Hawaii, Idaho, Massachusetts, Minnesota, New Jersey, New
Mexico, New York, Puerto Rico, Tennessee, Virginia, and Wisconsin)
operate Medicaid managed care programs for dually eligible individuals
in which the State requires that the Medicaid MCOs enrolling dually
eligible individuals offer an affiliated D-SNP product and limit D-SNP
enrollment in those plans to full-benefit dually eligible enrollees.
The number of States with these requirements will increase in CY 2026
to include Indiana, Delaware, and several States (Illinois, Michigan,
Ohio, Rhode Island, and South Carolina) previously participating in the
Financial Alignment Initiative where Medicare-Medicaid Plans are
transitioning to integrated D-SNPs effective January 1, 2026. Through
their annual SMACs, these States are implementing intentional
strategies to better coordinate care for dually eligible individuals.
The analysis outlined earlier in this section shows that a number of
these States (for example, California, Illinois, Arizona) have
experienced increased growth in C-SNPs and increasing concentrations of
dually eligible individuals in those C-SNPs in recent years.
C-SNPs could be serving as a workaround to Federal and State
integration efforts. Among full-benefit dually eligible individuals
newly enrolling in C-SNPs in January 2024 (40,048), 13.0 percent
(5,206) were previously enrolled in plans with high-levels of Medicare-
Medicaid integration (AIP D-SNPs, non-AIP FIDE SNPs, PACE, MMPs), 4.8
percent (1,902) were previously enrolled in D-SNPs with moderate-level
integration (non-AIP HIDE SNPs)), and 7.0 percent (2,808) were
previously enrolled in D-SNPs with low-level integration (non-AIP
coordination-only D-SNPs).\85\ Among full-benefit dually eligible
individuals newly enrolling in C-SNPs in January 2025 (68,554), 14.2
percent (9,732) were previously enrolled in plans with high-level
integration (AIP D-SNPs, non-AIP FIDE SNPs, PACE, MMPs), 4.4 percent
(3,037) were previously enrolled in D-SNPs with moderate-level
integration (non-AIP HIDE SNPs)), and 8.9 percent (6,083) were
previously enrolled in D-SNPs with low-level integration (non-AIP
coordination-only D-SNPs). These data show a one-year increase of 71
percent in the number of full-benefit dually eligible individuals who
were enrolled in a D-SNP, PACE plan, or MMP in January 2024 (40,048)
vs. January 2025 (68,554) and enrolled in a C-SNP the next year. The
highest percentage of these enrollees transitioned out of the plans
with the highest level of Medicare-Medicaid integration. We note that
other publications have analyzed these data.\86\ For purposes of this
analysis, we categorized plans as highly integrated based on presence
of exclusively aligned enrollment, which may differ from estimates in
other publications. The level of Medicare and Medicaid service
integration in D-SNPs is also important.
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\85\ CMS analysis of IDR data for CY 2023-2025.
\86\ For example, Stein R, Ma Y, Phelan J, Figueroa JF. Growth
of C-SNPs May Be Jeopardizing Medicare-Medicaid Integration. Health
Affairs. September 2025. Retrieved from: https://www.healthaffairs.org/content/forefront/growth-c-snps-may-jeopardizing-medicare-medicaid-integration.
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Like D-SNPs, C-SNPs and I-SNPs must have approved MOCs and develop
HRAs and individualized care plans (ICPs). C-SNPs and I-SNPs can offer
benefits specific to chronic disease and institutionalization-level
needs, respectively. In CY 2024, 84 percent of C-SNPs offered Special
Supplemental Benefits for the Chronically Ill (SSBCI), with food and
produce and general living support being the most common SSBCI
offerings.\87\ These benefits may be attractive to dually eligible
individuals who have a higher prevalence of chronic conditions than
non-dually eligible Medicare beneficiaries; 26 percent of dually
eligible individuals have five or more chronic conditions, compared to
15 percent of Medicare beneficiaries without Medicaid coverage.\88\
Dually eligible individuals are also more likely than non-dually
eligible beneficiaries Medicare beneficiaries to live in an institution
(11 percent vs. 3 percent) and report being in poor health (11 percent
vs. 4 percent).\89\ However, C-SNPs and I-SNPs are not subject to State
contracting requirements applicable to D-SNPs nor do they reflect the
key elements of integrated care: maximized person-centered coordination
of Medicare and Medicaid services; mitigation of cost-shifting
incentives between the two programs; and a seamless experience for
dually eligible individuals. Although research has not yet uniformly
shown an advantage for dually eligible individuals enrolling in plans
with Medicare and Medicaid integration, preliminary evidence suggests
that dually eligible individuals enrolled in integrated plans, on
average, experience, reduced emergency department and inpatient
hospital admissions, fewer long-term nursing facility stays, greater
use of patient care, and slightly better experience and clinical
outcomes than those in non-integrated plans.\90\
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\87\ Milliman, Chronic Condition Special Needs Plans: 2024
Market Landscape and Future Consideration, April 2024. Available
from: https://www.milliman.com/en/insight/chronic-condition-special-needs-plans-2024-market-landscape.
\88\ KFF, A Profile of Medicare-Medicaid Enrollees (Dual
Eligibles). January 2023. Available from: https://www.kff.org/medicare/issue-brief/a-profile-of-medicare-medicaid-enrollees-dual-eligibles/.
\89\ MedPAC and MACPAC. Data Book: Beneficiaries Dually Eligible
for Medicare and Medicaid. January 2024. Exhibits 7 and 8. Available
from: https://www.macpac.gov/wp-content/uploads/2024/01/Jan24_MedPAC_MACPAC_DualsDataBook-508.pdf.
\90\ Roberts ET, Duggan C, Stein R, Jonnadula S, Johnston KJ,
Figueroa JF. Quality, spending, utilization, and outcomes among
dual-eligible Medicare-Medicaid beneficiaries in integrated care
programs: a systematic review. JAMA Health Forum. July 2024.
Available from: https://jamanetwork.com/journals/jama-health-forum/fullarticle/2821202; Feng Z, Wang J, Gadaska A, Knowles M, Haber S,
Ingber M, Grouverman, V. Comparing Outcomes for Dual Eligible
Beneficiaries in Integrated Care: Final Report, September 2021.
Available from: https://aspe.hhs.gov/sites/default/files/documents/9739cab65ad0221a66ebe45463d10d37/dual-eligible-beneficiaries-integrated-care.pdf; and https://www.macpac.gov/wp-content/uploads/2019/07/Evaluations-of-Integrated-Care-Models-for-Dually-Eligible-Beneficiaries-Key-Findings-and-Research-Gaps.pdf; and MACPAC
Evaluations of Integrated Care Models for Dually Eligible
Beneficiaries: Key Findings and Research Gaps, August 2020.
Available from: https://www.macpac.gov/wp-content/uploads/2019/07/Evaluations-of-Integrated-Care-Models-for-Dually-Eligible-Beneficiaries-Key-Findings-and-Research-Gaps.pdf.
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C-SNPs and I-SNPs are currently exempt from the D-SNP look-alike
contracting limitations. As stated in the June 2020 final rule (85 FR
33813) and April 2024 final rule (89 FR 30722), we excluded SNPs from
evaluation against the prohibition on D-SNP look-alikes. Our rationale
for the exclusion was to allow for the predominant dually eligible
enrollment that characterizes D-SNPs, I-SNPs, and some C-SNPs by virtue
of the populations that the statute expressly permits each type of SNP
to exclusively enroll. Nonetheless, we stated that we would monitor
enrollment in other types of SNPs to assess whether such plans are
structured primarily to serve dually
[[Page 54983]]
eligible enrollees without meeting D-SNP requirements. In their
comments on the November 2023 proposed rule (89 FR 30719), MACPAC
suggested that we monitor growth in enrollment of dually eligible
beneficiaries in other types of SNPs, including C-SNPs and I-SNPs, and
identify any potential effects on integration efforts.
The number of D-SNP look-alikes transitioning enrollees to C-SNPs
has increased in recent years. That increase could, at least in part,
be driven by the exclusion of C-SNPs from the D-SNP look-alike
prohibition. CY 2023 D-SNP look-alikes transitioned zero enrollees into
C-SNPs effective for January 1, 2024. CY 2024 D-SNP look-alikes
transitioned approximately 3,600 enrollees into 3 receiving C-SNPs
effective for January 1, 2025. We expect the CY 2025 D-SNP look-alikes
to transition approximately 16,500 enrollees into 8 receiving C-SNPs
effective for January 1, 2026.
4. Potential Policy Changes for Comment Solicitation
We solicit comments on potential policy changes to support
integrated care and improved health outcomes given the significant
growth of dually eligible individuals enrolling in C-SNPs and I-SNPs.
First, we solicit comment on establishing a SMAC requirement
similar to the existing requirement for D-SNPs. Under this idea, MA
organizations seeking to offer a C-SNP or I-SNP with a high
concentration of dually eligible individuals would need to have an
executed contract with the State Medicaid agency that allows that plan
to operate in the State during a particular contract year. Such a
contract would allow States to proactively consider and coordinate
their integration strategy for dually eligible individuals with the
existence of such C-SNPs and I-SNPs enrolling a 60 percent or more
dually eligible individuals. A State Medicaid agency contract for C-
SNPs or I-SNP could include additional Federal or State-specific
requirements similar to the D-SNP SMAC requirements at Sec. 422.107.
We solicit comments on whether or not we should adopt a SMAC
requirement for C-SNPs and/or I-SNPs with high concentrations for
dually eligible individuals as well as potential Federal requirements
for those SMACs.
Second, we solicit comments on methods to increase care
coordination for dually eligible individuals enrolled in C-SNPs and I-
SNPs. Section 438.208 includes coordination and continuity of care
requirements for Medicaid MCOs, PIHPs, and PAHPs. Many of the
requirements mirror the care coordination and MOC requirements for SNPs
and closely involve the populations served by C-SNPs and I-SNPs. The
requirement at Sec. 438.208(a)(3)(i) states that for each Medicaid MCO
that serves enrollees who are also enrolled in and receive Medicare
benefits from an MA organization, the State determines to what extent
the MCO must meet the identification, assessment, and treatment
planning requirements for enrollees with special health care needs or
who need long-term services and supports. These are the types of
beneficiaries who, by definition per eligibility criteria at Sec.
422.2, are enrolled in C-SNPs and I-SNPs.
While all SNPs must have approved MOCs, conduct HRAs, and develop
ICPs, currently more care coordination requirements apply to D-SNP
enrollees than C-SNP and I-SNP enrollees. For example, in the final
rule titled ``Medicare and Medicaid Programs; Contract Year 2026 Policy
and Technical Changes to the Medicare Advantage Program, Medicare
Prescription Drug Benefit Program, Medicare Cost Plan Program, and
Programs of All-Inclusive Care for the Elderly'', which appeared in the
Federal Register on April 15, 2025 (90 FR 15792) (hereinafter referred
to as the April 2025 final rule), we amended Sec. 422.101(f)(1)(v) to
require that AIP D-SNPs conduct a single comprehensive HRA that meets
the Medicaid requirements at Sec. 438.208(b)(3) as well as Medicare
requirements. In addition, we published MOC submission requirements for
SNP MOC approval in the Federal Register (90 FR 26591; CMS-10565; OMB
control number 0938-1296),\91\ which require D-SNPs to describe how the
ICP coordinates Medicare and Medicaid services and, if applicable,
provides those services, including long-term services and supports and
behavioral health services, and describes how the D-SNP coordinates
with providers of Medicaid-covered services during care transitions. We
are considering whether to extend any of these existing D-SNP care
coordination requirements to C-SNPs and I-SNPs given the high
proportion of dually eligible individuals enrolled in these plans. We
solicit comments on whether we should (a) adopt any new care
coordination requirements for dually eligible C-SNP and/or I-SNP
enrollees; (b) add any MOC requirements for these SNP types; and (c)
what those care coordination or MOC requirements should include.
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\91\ CMS, Model of Care Submission Requirements, June 23, 2025.
Retrieved from: https://www.cms.gov/regulations-and-guidance/legislation/paperworkreductionactof1995/pra-listing-items/cms-10565.
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Third, we solicit comment on three approaches to applying the D-SNP
look-alike contracting limitations at Sec. 422.514(d) through (g) to
C-SNPs. Applying these contracting limitations would ensure that
enrollees in C-SNPs with a significant proportion of dually eligible
individuals would benefit from the requirements for integrated care
that protect D-SNP enrollees. First, CMS could consider applying the D-
SNP look-alike contracting limitations as is to C-SNPs and remove the
current exemption on C-SNPs from the D-SNP look-alike contracting
limitations at Sec. 422.514(d) through (g). CMS would not (a) enter
into a contract for any non-D-SNP or non-I-SNP MA plan that projects,
in its bid submitted under Sec. 422.254, that 60 percent or more of
its enrollees are dually eligible or (b) renew a contract with any MA
plan that has 60 percent or more dually eligible enrollees. Consistent
with Sec. 422.514(e), existing C-SNPs with 60 percent or more dually
eligible individuals could transition enrollees to a D-SNP. Under a
potential alternative approach, CMS could apply the D-SNP look-alike
contracting limitations at Sec. 422.514(d) through (g) to C-SNPs but
exempt partial-benefit dually eligible individuals from the 60-percent
threshold calculation. Partial-benefit dually eligible individuals do
not have Medicaid benefits to coordinate with Medicare benefits in the
same way as full-benefit dually eligible individuals, and the benefits
that a C-SNP may offer could outweigh the role of Federal and State
requirements outlined in a SMAC. We solicit comments on the potential
approaches to apply the D-SNP look-alike contracting limitations as is
to C-SNPs and excluding partial-benefit dually eligible individuals
from the 60-percent threshold calculation.
We recognize that one of the challenges with these policy options
is that many C-SNPs do not have a D-SNP in the same service areas as
the C-SNP, which could lead to a large proportion of C-SNP enrollees
transitioning to a non-SNP MA plan or Original Medicare and a
standalone Part D plan. Exempting partial-benefit dually eligible
individuals from the 60-percent threshold calculation could reduce the
number of C-SNPs subject to transition. Another approach for
consideration would be to exempt C-SNPs from the 60-percent threshold
in States that do not have any integrated D-SNPs (that is, FIDE SNPs,
HIDE SNPs, or AIPs), targeting it to States with Medicare-
[[Page 54984]]
Medicaid integration strategies. Thus, C-SNPs could continue in States
with D-SNPs meeting the minimum integration requirements. If this
potential policy proposal applied in CY 2025, that would mean we would
not apply the 60-percent threshold to C-SNPs in the following 24
States: Alabama, Arkansas, Colorado, Connecticut, Delaware, Georgia,
Iowa, Louisiana, Maryland, Michigan, Missouri, Mississippi, Montana,
North Carolina, North Dakota, Nevada, Ohio, Oklahoma, Rhode Island,
South Carolina, South Dakota, Utah, West Virginia, and Wyoming. We
expect some of these States (Delaware, Michigan, Ohio, Rhode Island,
and South Carolina) to establish SMACs with integrated D-SNPs for CY
2026 as well as Illinois which is contracting with D-SNPs for the first
time in several years. We welcome comments on the benefits and
challenges of C-SNP enrollees transitioning to non-SNP MA plans and
Original Medicare and a standalone Part D plan as well as other
suggestions for potential transitions.
Fourth, we request that stakeholders submit for our consideration
any other policy suggestions that could help ensure that there are
appropriate protections in place to support high-quality, integrated
care for dually eligible enrollees given the increasing proportion of
them enrolling in C-SNPs and I-SNPs.
Fifth, we welcome comments on the policy ideas outlined in this
section to help inform potential future regulatory action. Also, we are
monitoring the performance of D-SNPs, C-SNPs, and I-SNPs on quality
metrics and differences in Medicare supplemental benefits provided and
expect to have more comparable quality and benefits information
available within the next year to further inform policymaking. We
welcome commenters to share any evidence they have on comparable
quality and benefits information for consideration as well.
Finally, CMS is also interested in how to support improved access
to treatment and care coordination for individuals with mental health
conditions or substance use disorders as we believe SNPs could be
situated to perform a critical role in supporting the improvement of
care provided to individuals with serious mental illness (SMI). In
particular, C-SNPs offer plans focused on chronic conditions such as
chronic alcohol and other drug dependence and chronic and disabling
mental health conditions (42 CFR 422.4(a)(1)(iv)(B)). However, despite
the growth in C-SNPs, CMS has observed that few MA organizations have
sponsored C-SNPs focusing on these categories since the beginning of
the program, with only two Chronic Mental Health C-SNPs that serve
2,646 enrollees in Florida and California currently operating as of
September 2025.\92\ We invite public comment on the difficulties of
creating C-SNPs focused on these conditions, as well as recommended
incentives, outcome-based measures, or strategies that would make it
easier for MA plans to design and offer these plans. In addition, we
welcome comments on how other SNP types, such as D-SNPs and I-SNPs, are
serving this population and what improvements could be made to ensure
individuals with SMI are connected to appropriate services. We also
invite comments on the advantages and disadvantages of dually eligible
individuals with SMI receiving care through enrollment in a C-SNP where
we would expect extra emphasis on addressing mental health needs versus
through enrollment in a D-SNP that would coordinate Medicare and
Medicaid benefits that may also be helpful in addressing mental health
needs. Finally, CMS welcomes commenters to share any other
considerations or regulatory changes they believe may be necessary to
support the availability of high-quality SNPs to serve individuals with
SMI.
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\92\ SNP Comprehensive Report for September 2025. Retrieved
from: https://www.cms.gov/data-research/statistics-trends-and-reports/medicare-advantagepart-d-contract-and-enrollment-data/special-needs-plan-snp-data/snp-comprehensive-report-2025-09.
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VII. Reducing Regulatory Burden and Costs in Accordance With Executive
Order (E.O.) 14192
As noted previously, we are seeking public input on approaches and
opportunities to streamline regulations and reduce administrative
burdens on providers, suppliers, beneficiaries, and other interested
parties participating in the Medicare program. Please refer to the RFI
at https://www.cms.gov/medicare-regulatory-relief-rfi and submit all
comments via this link.
A. Exclusion of Account-Based Medical Plans From Entities Required To
Make Disclosures of Creditable Coverage (Sec. 423.56)
Section 1860D-13(b)(6)(B)(i) of the Act provides that each entity
that offers prescription drug coverage of the type described in
subparagraphs (B) through (H) of section 1860D-13(b)(4) of the Act
shall provide for disclosure, to the Secretary and Part D eligible
individuals, of whether the coverage is creditable coverage, that is,
equals or exceeds the actuarial value of standard prescription drug
coverage (as determined under section 1860D-11(c) of the Act), or
whether such coverage is changed so it no longer meets such
requirement. Section 1860D-13(b)(6)(B)(ii) of the Act requires such
entities to disclose if coverage does not meet such requirement, and
that the disclosure to Part D eligible individuals shall include
information that there are limitations on the periods in a year in
which the individual may enroll in Part D coverage, and that any such
enrollment is subject to a Part D late enrollment penalty (LEP). In
addition, section 1860D-13(b)(4)(H) of the Act provides the Secretary
with the flexibility to identify ``other coverage'' that could be
considered creditable coverage. The types of coverage that are subject
to the creditable coverage requirements and the procedures to determine
and document creditable status of prescription drug coverage were
codified at Sec. 423.56 in the final rule entitled ``Medicare Program;
Medicare Prescription Drug Benefit (Part D final rule)'' that appeared
in the January 28, 2005, Federal Register (70 FR 4532).\93\
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\93\ https://www.federalregister.gov/documents/2005/01/28/05-1321/medicare-program-medicare-prescription-drug-benefit.
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Section 1860D-13(b)(4)(C) of the Act includes Group Health Plans
(GHPs) as entities that are required to provide creditable coverage
disclosures. The statute states that GHPs include health benefits plans
under chapter 89 of title 5 (commonly known as the Federal Employees
Health Benefits Program) and qualified retiree prescription drug plans
as defined at section 1860D-22(a)(2) of the Act. The term, ``Group
Health Plan'' was codified at Sec. 423.882 in the 2005 Part D final
rule (70 FR 4577),\94\ and this definition includes account-based
medical plans such as health reimbursement arrangements (HRAs) as
defined in Internal Revenue Service (IRS) Notice 2002-45, 2002-28
I.R.B. 93, health Flexible Spending Arrangements (FSAs) as defined in
Internal Revenue Code (Code) section 106(c)(2), health savings accounts
(HSAs) as defined in Code section 223, or an Archer MSA as defined in
Code section 220, to the extent they are subject to ERISA as employee
welfare benefit plans providing medical care (or would be subject to
ERISA but for the exclusion in ERISA section 4(b) (29 U.S.C. 1003(b))
for governmental plans or church plans).
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\94\ https://www.federalregister.gov/documents/2005/01/28/05-1321/medicare-program-medicare-prescription-drug-benefit.
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[[Page 54985]]
Section 1860D-13(b)(6)(B)(i) of the Act requires ``entities that
offer prescription drug coverage'' to provide for these creditable
coverage disclosures to the Secretary and Part D eligible individuals,
but account-based plans (for example, HRAs, FSAs, HSAs, etc.) do not
actually offer prescription drug coverage; rather, they are
arrangements created by employers and designed to provide individuals
savings on healthcare costs through pre-tax contributions and
reimbursements, that are often provided to supplement other coverage,
such as another group health plan or individual market coverage.
Therefore, the benefit design of account-based plans makes concepts,
such as disclosure of creditable coverage, inapplicable to those
arrangements.
As an example, HRAs,\95\ which are arrangements that are paid
solely by the employer, reimburse employees only for their, their
spouse's, and their dependents' medical care expenses \96\ (including
premiums), provide reimbursements up to a maximum dollar amount, and
carry forward unused balances in the arrangement from one year to the
next. Individual Coverage HRAs (ICHRAs), which were more recently
recognized by the Labor, Health and Human Services, and Treasury
Departments in the June 20, 2019 final rule titled, ``Health
Reimbursement Arrangements and Other Account-Based Group Health Plans''
(84 FR 28888),\97\ are also a type of reimbursement arrangement;
however, to receive reimbursements for medical care expenses from an
ICHRA, employees and any covered dependents must actually be enrolled
in individual health insurance coverage or Medicare Parts A and B, or
Part C.
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\95\ HRAs were first recognized in 2002 in guidance--Internal
Revenue Service (IRS), ``Health Reimbursement Arrangements,'' Notice
2002-45, at https://www.irs.gov/pub/irs-drop/n-02-45.pdf.
\96\ IRC Sec. 213; IRS, ``Medical and Dental Expenses,''
Publication 502, January 11, 2022, at https://www.irs.gov/pub/irs-pdf/p502.pdf; and IRS, Health Savings Accounts and Other Tax-Favored
Health Plans, IRS Publication 969, February 11, 2021, p. 18, at
https://www.irs.gov/pub/irs-pdf/p969.pdf.
\97\ https://www.govinfo.gov/app/details/FR-2019-06-20/2019-12571.
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HRAs, including ICHRAs, are group health plans that are not, as
section 1860D-13(b)(6)(B)(i) of the Act requires, entities that offer
prescription drug coverage. Comparing a reimbursement arrangement, such
as an HRA, against the intricacies of a prescription drug plan,
including whether the reimbursement provided equates to coverage that
would be considered creditable (that is, offers coverage at least as
good as the Medicare standard drug benefit), is not an `apples to
apples' comparison because account-based plans are fundamentally
different from prescription drug plans. While account-based plans
generally only provide a financial benefit to employees, for example,
tax savings, prescription drug coverage conveys numerous benefits to
beneficiaries.
As discussed previously, section 1860D-13(b)(6)(B)(i) of the Act
requires that ``entities that offer prescription drug coverage'' must
provide creditable coverage disclosures. Under that requirement, we
propose that account-based entities, which do not offer such coverage,
are not required to provide the creditable coverage disclosures.
Requiring account-based plans, such as HRAs, including ICHRAs, to
determine if their coverage is creditable, and requiring them to report
the creditable status of that coverage, unduly increases administrative
burden on these entities by causing them to expend additional resources
and expertise that they may not possess. If these entities disclose
that they do not offer creditable coverage (because they do not
directly offer prescription drug coverage), and the individual's plan
that directly offers the prescription drug benefit coverage discloses
that the benefit is creditable, this could result in an individual
receiving potentially contradictory and confusing information.
Ultimately, this confusion disadvantages the Part D Medicare-eligible
individual in their ability to make an informed choice about their
prescription drug coverage, and ensuring that beneficiaries receive
clear information is crucial. Moreover, as the number of account-based
plans has grown in recent years, we have received feedback from
organizations who offer these products that they believe the
requirement to report creditable coverage does not comport with the
account-based model. This proposal to exclude account-based plans from
making these disclosures is a possible solution to address the feedback
we have received from the industry, as it will provide clarity and
ensure consistency for Medicare-eligible individuals as well as other
industry interested parties. This proposal also aligns with the
President's January 31, 2025, Executive Order (E.O.), titled Unleashing
Prosperity Through Deregulation, as, if finalized, it would eliminate
the need to acquire and maintain resources and expertise to comply with
federal regulations to provide creditable coverage disclosures.
Therefore, we are proposing to modify regulations at Sec.
423.56(b)(3) to codify that account-based plans, such as HRAs and
ICHRAs, are excluded from group health plans that are required to make
creditable coverage disclosures.
B. Deregulate Sec. 422.102(e) Pathway for Certain D-SNPs To Offer
Supplemental Benefits (Sec. 422.102)
We provide several avenues for MA plans to provide enrollees with
supplemental benefits. In the final rule titled ``Medicare Program;
Changes to the Medicare Advantage and the Medicare Prescription Drug
Benefit Programs for Contract Year 2013 and Other Changes,'' which
appeared in the Federal Register on April 12, 2012 (hereafter referred
to as the April 2012 final rule), we codified Sec. 422.102(e). As we
described in the preamble to the April 2012 final rule (77 FR 22075),
Sec. 422.102(e) specifies that, subject to our approval, and as
specified annually by us, certain D-SNPs that meet integration and
performance standards may offer additional Medicare supplemental
benefits beyond those we currently allowed other MA plans to offer at
the time of publication, where we find that the offering of such
benefits could better integrate care for the dual eligible population.
Such benefits may include nonskilled nursing services, personal care
services, and other long-term care services and supports designed to
keep dual eligible beneficiaries out of institutions.
In the Announcement of CY 2019 Medicare Advantage Capitation Rates
and Medicare Advantage and Part D Payment Policies and Final Call
Letter issued on April 2, 2018, we announced its expanded
interpretation of the ``primarily health related'' standard applied to
supplemental benefits in light of section 1852(a)(3) of the Act, which
requires supplemental benefits to be ``health care benefits.'' Under
the expanded interpretation, for an item or service to be considered as
primarily health related, it must diagnose, prevent, or treat an
illness or injury, compensate for physical impairments, act to
ameliorate the functional/psychological impact of injuries or health
conditions, or reduce avoidable emergency and healthcare utilization.
In the call letter, we expressed the belief that the expanded standard
for ``primarily health related'' provided MA plans with more
flexibility in designing and offering supplemental benefits that can
enhance beneficiaries' quality of life
and improve health outcomes.\98\ We note that CMS codified this
standard at Sec. 422.100(c)(2)(ii)(A).
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\98\ CMS, Announcement of Calendar Year 2019 Medicare Advantage
Capitation Rates and Medicare Advantage and Part D Payment Policies
and Final Call Letter, page 208. Retrieved from: https://www.cms.gov/Medicare/Health-Plans/MedicareAdvtgSpecRateStats/Downloads/Announcement2019.pdf.
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[[Page 54986]]
Additionally, the Bipartisan Budget Act of 2018 (Pub. L. 115-123)
amended section 1852(a) of the Act to expand the types of supplemental
benefits that may be offered by MA plans to chronically ill enrollees,
called special supplemental benefits for the chronically ill (SSBCI).
We codified the parameters for SSBCI at Sec. 422.102(f) in the June
2020 final rule. (85 FR 33800) SSBCI includes supplemental benefits
that are not primarily health related and may be offered non-uniformly
to eligible chronically ill enrollees. MA plans can offer a ``non-
primarily health related'' item or service to chronically ill enrollees
if the SSBCI has a reasonable expectation of improving or maintaining
the health or overall function of the chronically ill enrollee.
In recent years, few MA plans have used Sec. 422.102(e) to provide
supplemental benefits, as shown in Table G-B 1. Our analysis of the bid
data from 2013 to 2026, as seen in Table G-B 1, shows that the
supplemental benefits D-SNPs have offered through Sec. 422.102(e) are
meals benefits and assistive devices for home safety. We note that
these benefits can currently be covered under the expanded definition
of primarily health related supplemental benefits and SSBCI.
Specifically, the April 2019 HPMS memo titled ``Implementing
Supplemental Benefits for Chronically Ill Enrollees'' refers to Chapter
4 of the Medicare Managed Care Manual that indicates that meals are a
primarily health related supplemental benefit (PBP category B13c) in
limited situations: when provided to enrollees for a limited period
immediately following surgery, or an inpatient hospitalization, or for
a limited period due to a chronic illness. In those situations, a meals
supplemental benefit is permissible if the meals are: (1) needed due to
an illness; (2) consistent with established medical treatment of the
illness; and (3) offered for a short duration. Meals may be offered
beyond a limited basis as a non-primarily health related supplemental
benefit (PBP category B19b/13i) to chronically ill enrollees. Meals may
be home-delivered and/or offered in a congregate setting.\99\
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\99\ CMS, HPMS Memorandum, ``Implementing Supplemental Benefits
for Chronically Ill Enrollees''. Retrieved from: https://www.cms.gov/research-statistics-data-and-systems/computer-data-and-systems/hpms/hpms-memos-archive-weekly-items/syshpms-memo-2019-week4-apr-22-26.
[GRAPHIC] [TIFF OMITTED] TP28NO25.016
We believe the small number of D-SNPs offering supplemental
benefits through Sec. 422.102(e) is due to the availability of other
pathways to provide the same supplemental benefits that can be covered
under Sec. 422.102(e). Based on this experience, we believe that Sec.
422.102(e) is no longer needed and propose to remove and reserve Sec.
422.102(e) for future rulemaking. The two D-SNPs offering supplemental
benefits through Sec. 422.102(e) in CY 2025 have 27,888 enrollees as
of June 2025. For CY 2026, no plan requested to offer supplemental
benefits through Sec. 422.102(e). We do not anticipate any adverse
consequences to removing Sec. 422.102(e) since D-SNPs could offer the
same benefits in their annual bid through primarily health related
supplemental benefits or SSBCI. By comparison, 905 MA plans offered
supplemental benefits through SSBCI in CY 2025. Of those 905 MA plans,
45 plans offered limited meals benefits (four of which were D-SNPs),
and 229 MA plans offered meals beyond a limited basis (71 of which were
D-SNPs).
We do not anticipate this proposal will add burden to plans given
the small number of D-SNPs utilizing the Sec. 422.102(e) pathway.
Also, given primarily health related supplemental benefits and SSBCI
are the more common pathways for offering supplemental benefits,
deregulating Sec. 422.102(e) could streamline the bid submission
process for D-SNPs and us
[[Page 54987]]
by simplifying the avenues for offering supplemental benefits.
We solicit comments on our proposal. We request that commenters
consider whether there is any value to us retaining Sec. 422.102(e),
such as whether there are any Medicare supplemental benefits that could
only be offered under Sec. 422.102(e) and not through primarily health
related supplemental benefits or SSBCI. We also recognize that
participating D-SNPs will no longer be able to offer benefits through
the MA Value-Based Insurance Design (VBID) model beginning in CY 2026
and solicit comments on whether Sec. 422.102(e) provides any
advantages in D-SNPs offering supplemental benefits previously offered
under VBID.
C. Rescind Mid-Year Supplemental Benefits Notice (Sec. Sec. 422.111(l)
and 422.2267(e)(42))
The ``Medicare Program; Changes to the Medicare Advantage and the
Medicare Prescription Drug Benefit Program for Contract Year 2024--
Remaining Provisions and Contract Year 2025 Policy and Technical
Changes to the Medicare Advantage Program, Medicare Prescription Drug
Benefit Program, Medicare Prescription Drug Benefit Program, Medicare
Cost Plan Program, and Programs of All-Inclusive Care for the Elderly
(PACE)'' final rule appeared in the April 23, 2024 Federal Register (89
FR 30448), hereinafter referred to as the April 2024 final rule, which
included a new requirement, beginning January 1, 2026, that MA
organizations must notify enrollees mid-year of any unused supplemental
benefits available to them (89 FR 30448, 30561). The notice, referred
to as the Mid-Year Notice, would list any supplemental benefits not
utilized by the enrollee during the first 6 months of the plan year.
The Mid-Year Notice was intended to address what appeared to be a
gap in enrollee awareness and utilization of supplemental benefits for
which MA organizations designate rebate dollars. After further review
of interested parties' feedback and more current data on supplemental
benefit utilization (as described later in this proposal), CMS has
determined that the frequency of utilization was higher than previously
believed. In addition, CMS has concerns about the administrative and
financial burden, especially on smaller MA organizations, and believes
this new requirement is duplicative of already existing requirements.
As a result, via the agency's authority to establish standards
consistent with, and to carry out, Part C under section 1856(b)(1) of
the Act, CMS proposes to rescind the Mid-Year Notice of Supplemental
Benefits requirement established in Sec. Sec. 422.111(l) and
422.2267(e)(42), that requires MA organizations to provide annual mid-
year notices to enrollees regarding unused supplemental benefits.
Rescission of this requirement is consistent with E.O. 14192,
``Unleashing Prosperity through Deregulation.'' E.O. 14192 instructed
federal agencies to review all regulations to alleviate unnecessary
regulatory burdens placed on the American people. CMS has reviewed this
regulation in accordance with E.O. 14192 and determined that this
requirement is unnecessary for the reasons outlined in this section.
The Mid-Year Notice would impose a significant burden on MA
organizations that outweighs the intended benefit. As documented in the
April 2024 final rule responses to public comments, MA organizations
expressed numerous concerns about the burden and complexity of
compliance. The requirement necessitates the development,
implementation, and maintenance of tracking systems to monitor
individual enrollee utilization of each supplemental benefit from
January 1st to June 30th of the plan year. It also requires MA
organizations to compile and send the individualized information to
each corresponding enrollee in paper format between June 30th and July
31st of the plan year, providing about a 1-month window to mail
information to potentially millions of enrollees. Additionally, MA
organizations have stated that they predict the substantial task of
printing and mailing several pages of individualized documents within a
compressed time frame would exceed CMS's original estimate for
administrative costs. The impact would be substantially higher for
smaller MA organizations and could contribute to competitive
disadvantages that result in reduced plan choice for MA enrollees.
Further, with respect to MA organizations of all sizes, the
administrative complexity and operational costs associated with meeting
the Mid-Year Notice requirement would consume resources that could be
better utilized for activities with more direct impact on enrollee
health outcomes and satisfaction. Instead, the Mid-Year Notice risks
diversion of organizational capacity away from more beneficial work
such as patient care coordination or quality improvement activities--
both of which are required under statute.
Another factor considered in this proposal is the unnecessary
duplication of information already provided to enrollees through
existing statutory disclosure requirements. Section 1852(c)(1) of the
Act requires MA organizations to provide detailed descriptions of all
plan provisions, including supplemental benefits, in a clear, accurate,
and standardized form through the Evidence of Coverage (EOC) document.
MA organizations must furnish this information to enrollees at the time
of enrollment and annually thereafter. As specified in regulation at
Sec. 422.2267(e)(42), the Mid-Year Notice must include, for each
unused mandatory and optional supplemental benefit, the information
that appears for those benefits, in the EOC. The Mid-Year Notice would
therefore be redundant of information that enrollees already received
about their benefits no more than 6 months earlier.
Finally, the original justification for implementing the Mid-Year
Notice requirement is not supported by the most current evidence
available. In a recent survey \100\ of 1,846 MA enrollees, 70 percent
of respondents reported they had used at least one supplemental benefit
in the past year; 19 percent reported they did not use their
supplemental benefits because they did not need them. These findings
suggest enrollees are generally aware of their supplemental benefits
and are utilizing them, although CMS acknowledges that at this time,
information on MA enrollee use of supplemental benefits is limited.
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\100\ https://www.commonwealthfund.org/publications/surveys/2024/feb/what-do-medicare-beneficiaries-value-about-their-coverage.
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Market competition naturally incentivizes MA organizations to
ensure enrollees are aware of and utilize the supplemental benefits
that differentiate their plans. MA organizations have demonstrated that
they can effectively promote awareness and utilization of supplemental
benefits through existing channels. Moreover, a requirement to send
additional information to enrollees, promoting benefits they will not
necessarily be eligible for, could lead to enrollee confusion. Current
care coordination activities, existing communication requirements, and
proactive, voluntary outreach programs have proven successful in
promoting supplemental benefit utilization. The particular regulatory
requirement for a Mid-Year Notice would likely not result in improved
communication of supplemental benefits information and could create
undue burden for MA organizations. Further, recent evidence suggests
that enrollees are utilizing supplemental benefits when they need them.
Therefore, CMS proposes to rescind the Mid-Year Notice
[[Page 54988]]
requirement at Sec. Sec. 422.111(l) and 422.2267(e)(42).
CMS welcomes comments on the rescission of this regulatory
requirement.
D. Revisions to Ensuring Equitable Access to Medicare Advantage (MA)
Services (Sec. 422.112(a)(8))
Under Sec. 422.112(a)(8), MA organizations are required to ensure
that services are provided in a culturally competent manner to all
enrollees. In the final rule titled ``Contract Year 2024 Policy and
Technical Changes to the Medicare Advantage Program, Medicare
Prescription Drug Benefit Program, Medicare Cost Plan Program, and
Programs of All-Inclusive Care for the Elderly'' (88 FR 22120)
(hereinafter referred to as the April 2023 final rule), CMS retitled
the paragraph heading from ``Cultural considerations'' to ``Ensuring
Equitable Access to Medicare Advantage (MA) Services'' and added more
populations to the existing list of groups in the regulation. These
changes were implemented in accordance with the previous
administration's E.O. 13985: ``Advancing Racial Equity and Support for
Underserved Communities Through the Federal Government,'' (E.O. 13985)
issued on January 20, 2021. CMS explained in the preamble that the list
of populations was clarifying in nature, non-exhaustive, and was
intended to provide additional examples of populations MA organizations
should be mindful of in their plan designs. CMS emphasized that the
protections of the provision were already in effect prior to the
proposed change and that MA organizations must provide all enrollees,
without exception, accommodations to access services (88 FR 22152 and
22153). CMS determined there was no additional regulatory impact to MA
organizations in terms of burden, resources for implementation, or
collection information as MA organizations were already held to and in
compliance with these requirements.
On January 20, 2025, E.O. 14148: ``Initial Rescissions of Harmful
Executive Orders and Actions'' was issued and revoked E.O. 13985. E.O.
14148 states the ``previous administration embedded deeply unpopular,
inflationary, illegal, and radical practices within every agency and
office of the Federal Government. The injection of `diversity, equity,
and inclusion' (DEI) into our institutions has corrupted them by
replacing hard work, merit, and equality with a divisive and dangerous
preferential hierarchy.'' Additionally, on January 31, 2025, President
Trump issued E.O. 14192, ``Unleashing Prosperity through Deregulation''
which instructed Federal agencies to review regulations in their
jurisdiction to alleviate unnecessary regulatory burdens placed on the
American people. CMS has reviewed Sec. 422.112(a)(8) in accordance
with E.O.s 14148 and 14192 and determined that the revisions made in
the April 2023 final rule were unnecessary as they did not change the
underlying requirements for MA organizations and the modification of
the regulatory text created additional and unnecessary complexity in
interpreting the provision. As such, CMS is proposing to amend the
regulation at Sec. 422.112(a)(8) to revert to the prior paragraph
heading and text which reads, ``Cultural considerations. Ensure that
services are provided in a culturally competent manner to all
enrollees, including those with limited English proficiency or reading
skills, and diverse cultural and ethnic backgrounds.'' This proposed
change will streamline the regulatory text and avoid confusion about
the list of different sub-populations in implementation, while
maintaining the protections for access to services for all enrollees.
CMS invites comments on this proposal.
E. Rescinding the Annual Health Equity Analysis of Utilization
Management Policies and Procedures (Sec. 422.137(c)(5), (d)(6) and
(d)(7))
The final rule titled ``The Medicare Program; Contract Year 2024
Policy and Technical Changes to the Medicare Advantage Program,
Medicare Prescription Drug Benefit Program, Medicare Cost Plan Program,
and Programs of All-Inclusive Care for the Elderly'' appeared in the
April 12, 2023 Federal Register (88 FR 22120) (hereinafter referred to
as the April 2023 final rule). The April 2023 final rule required that
MA plans establish a Utilization Management (UM) Committee to annually
review all UM policies and procedures, including for the use of prior
authorization, and ensure that these policies are consistent with the
coverage requirements, including Original Medicare's current national
and local coverage decisions and guidelines.
Then, in November 2023, CMS issued the Medicare Program; Contract
Year 2025 Policy and Technical Changes to the Medicare Advantage
Program, Medicare Prescription Drug Benefit Program, Medicare Cost Plan
Program, and Programs of All-Inclusive Care for the Elderly; Health
Information Technology Standards and Implementation Specifications (88
FR 78476) notice of proposed rulemaking (hereinafter referred to as the
November 2023 proposed rule) wherein CMS proposed additional
requirements related to the UM Committee. Specifically, at Sec.
422.137(c)(5) CMS proposed a requirement that beginning in 2025, the UM
Committee must include at least one member with ``expertise in health
equity.'' In addition, at Sec. 422.137(d)(6), CMS proposed a
requirement that the UM Committee must conduct an annual health equity
analysis of the use of prior authorization by examining the impact of
prior authorization at the plan level, on enrollees with one or more
specified Social Risk Factors (SRFs), defined as (1) receipt of the
low-income subsidy or being dually eligible for Medicare and Medicaid
(LIS/DE) or (2) disability status, by reporting specific metrics
aggregated for all items and services. Finally, CMS proposed a
requirement at Sec. 422.137(d)(7) that by July 1, 2025, and annually
thereafter, this analysis must be posted on the plan's publicly
available website.
In response to the November 2023 proposed rule, CMS received a
significant number of comments regarding concerns about the annual
health equity analysis. Commenters expressed concerns there was not
sufficient evidence that adding a role to the UM Committee would
improve health equity. Some commenters indicated that prior
authorization denial rates are not necessarily attributable to or
correlated with an enrollee's SRF status. Other commenters cautioned
that some of the information gathered as part of this type of analysis
may be confidential or proprietary to the MA plan. Overall, interested
parties raised concerns about the rationale, feasibility, and
administrative burden associated with meaningful implementation of the
regulatory requirements.
In April 2024, CMS issued the Medicare Program; Changes to the
Medicare Advantage and the Medicare Prescription Drug Benefit Program
for Contract Year 2024-Remaining Provisions and Contract Year 2025
Policy and Technical Changes to the Medicare Advantage Program,
Medicare Prescription Drug Benefit Program, Medicare Cost Plan Program,
and Programs of All-Inclusive Care for the Elderly (PACE) final rule
(89 FR 30448) (hereinafter referred to as the April 2024 final rule)
and finalized new requirements related to the UM Committee. In response
to comments, CMS took the position that while changes to the health
equity analysis requirement would be helpful to provide a more in-depth
analysis, the
[[Page 54989]]
health equity analysis requirement as proposed and finalized would
provide useful baseline of data. CMS also signaled the intent to
consider further changes to these requirements in subsequent rulemaking
based on comments received.
The proposed rule titled ``Medicare and Medicaid Programs; Contract
Year 2026 Policy and Technical Changes to the Medicare Advantage
Program, Medicare Prescription Drug Benefit Program, Medicare Cost Plan
Program, and Programs of All-Inclusive Care for the Elderly'' appeared
in the December 10, 2024 Federal Register (89 FR 99340). CMS proposed
at Sec. 422.137(d)(6)(iii)(A) through (H) to revise the required
metrics for the annual health equity analysis of the use of prior
authorization to require the metrics to be reported by each item or
service, rather than aggregated for all items and services. Many
commenters expressed concerns that the expanded analysis requirements
could be misrepresented due to the complexity of the disaggregated data
and variance in plan sizes. Several commenters also stated the proposed
policy change would be costly and burdensome for MA organizations. CMS
did not finalize the proposal to expand the annual health equity
analysis of UM policies and procedures.\101\
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\101\ 90 FR 15792, 15795.
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CMS implemented the additional UM Committee requirements in the
April 2024 final rule based on the previous administration's health
equity related initiatives. Specifically, the regulatory requirements
were implemented in accordance with feedback from interested parties,
based on research, and the prior administration's E.O. 13985:
``Advancing Racial Equity and Support for Underserved Communities
Through the Federal Government,'' issued on January 20, 2021.\102\ This
E.O. has since been revoked by E.O. 14148: ``Initial Rescissions of
Harmful Executive Orders and Actions,'' \103\ which states the
``previous administration has embedded deeply unpopular, inflationary,
illegal, and radical practices within every agency and office of the
Federal Government. The injection of `diversity, equity, and inclusion'
(DEI) into our institutions has corrupted them by replacing hard work,
merit, and equality with a divisive and dangerous preferential
hierarchy.''
---------------------------------------------------------------------------
\102\ https://www.federalregister.gov/documents/2021/01/25/2021-01753/advancing-racial-equity-and-support-for-underserved-communities-through-the-federal-government.
\103\ https://www.federalregister.gov/documents/2025/01/28/2025-01901/initial-rescissions-of-harmful-executive-orders-and-actions.
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The health equity requirements implemented in the April 2024 final
rule increased regulatory burden for MA organizations by requiring the
addition of a member of the UM Committee with expertise in health
equity, additional data collection, and the public posting of an annual
health equity analysis. The increased regulatory burden is inconsistent
with E.O. 14192, ``Unleashing Prosperity Through Deregulation,'' issued
on January 31, 2025,\104\ which seeks to address the significant burden
that complex Federal regulations impose on Americans, which may hinder
economic growth, innovation, and global competitiveness. E.O. 14192
states, ``It is the policy of the executive branch to be prudent and
financially responsible in the expenditure of funds, from both public
and private sources, and to alleviate unnecessary regulatory burdens
placed on the American people.''
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\104\ https://www.federalregister.gov/documents/2025/02/06/2025-02345/unleashing-prosperity-through-deregulation.
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Since the issuance of the April 2024 final rule, the CMS position
on the health equity analysis requirement has changed. CMS now believes
that this analysis is not the best vehicle to obtain baseline data on
the use of prior authorization and that there are more effective ways
to gain this information, including through robust interoperability
efforts. CMS will continue to explore ways to collect data regarding
the use of prior authorization in a manner that best represents all MA
enrollees. CMS is taking steps to reduce the regulatory burdens imposed
by the UM Committee requirements implemented in the April 2024 final
rule consistent with the focus on streamlining regulations and reducing
administrative burdens for those participating in the Medicare program.
In response to interested parties concerns about the limited impact on
health equity, the questionable utility of the required data analysis,
and the additional administrative burden, deregulating the requirements
at Sec. 422.137(c)(5), (d)(6), and (d)(7) aligns with CMS policy goals
and E.O.s 14148 and 14192.
Additionally, on June 16, 2025, CMS released a Health Plan
Management System (HPMS) memorandum exercising enforcement discretion
regarding the requirements under Sec. 422.137(c)(5), (d)(6) and (d)(7)
until further notice. As explained in the HPMS memorandum, CMS received
numerous questions and requests for guidance regarding the
implementation of the requirements and determined that a temporary
pause in enforcement was necessary to reevaluate the requirements and
consider potential changes. CMS now proposes to remove the requirement
at Sec. 422.137(c)(5) that the UM Committee includes at least one
member with expertise in health equity. In addition, CMS proposes to
remove Sec. 422.137(d)(6), which requires that the UM Committee
conduct an annual health equity analysis of the use of prior
authorization. Finally, CMS proposes to remove Sec. 422.137(d)(7),
which requires the health equity analysis to be posted on the plan's
website in a prominent manner that is publicly accessible.
In summary, CMS is proposing to rescind the requirements for MA
organizations' UM Committees at Sec. 422.137(c)(5), (d)(6) and (d)(7),
consistent with the cited E.O.s. and in response to interested parties
concerns about the requirements' rationale, feasibility, and
administrative burden. This proposal aligns with CMS' broader
regulatory approach, including the decision not to finalize proposed
expansions to the health equity analysis requirements in the April 2025
final rule.
CMS welcomes comments on this proposal. CMS also requests comments
on ways to reduce administrative burdens associated with other UM
Committee requirements for consideration in future rulemaking,
including, but not limited to, recommendations on the following:
Whether CMS should revise UM Committee composition
requirements, including that members represent various clinical
specialties; and
Whether CMS should revise the UM Committee
responsibilities, including the UM Committee's role in the
implementation of internal coverage criteria.
CMS is particularly interested in policy solutions that eliminate
redundant reporting, reduce unnecessary requirements, and minimize
duplicative processes to address inefficiencies and reduce financial
burdens. More broadly, CMS welcomes suggestions for deregulating,
simplifying, and streamlining MA organization governance requirements
in ways that benefit enrollees, health care providers, suppliers, and
MA organizations while ensuring continued delivery of high-quality care
to Medicare beneficiaries.
[[Page 54990]]
F. Rescinding the Quality Improvement Program Health Disparities
Requirement (Sec. 422.152(a)(5))
In accordance with section 1852(e) of the Act, all MA organizations
must have an ongoing Quality Improvement (QI) Program for the purpose
of improving the quality of care provided to enrollees. QI program
requirements appear at 42 CFR 422.152. In April 2023, the ``Contract
Year 2024 Policy and Technical Changes to the Medicare Advantage
Program, Medicare Prescription Drug Benefit Program, Medicare Cost Plan
Program, and Programs of All-Inclusive Care for the Elderly final
rule'' appeared in the Federal Register (88 FR 22120), hereinafter
referred to as the April 2023 final rule. In the April 2023 final rule,
CMS added a requirement at Sec. 422.152(a)(5) that directs MA
organizations to incorporate one or more activities that reduce
disparities in health and health care as part of their QI program to
comply with health equity mandates stemming from E.O. 13985,
``Advancing Racial Equity and Support for Underserved Communities
Through the Federal Government.''
On January 20, 2025, E.O. 14148, ``Initial Recission of Harmful
Executive Orders and Actions,'' revoked several executive orders,
including E.O. 13985. Additionally, on January 31, 2025, E.O. 14192,
``Unleashing Prosperity Through Deregulation,'' was issued to address
the significant burden that complex Federal regulations impose on
Americans, and hinder economic growth, innovation, and global
competitiveness. E.O. 14192 states, ``It is the policy of the executive
branch to be prudent and financially responsible in the expenditure of
funds, from both public and private sources, and to alleviate
unnecessary regulatory burdens placed on the American people.''
Consistent with E.O.s 14148 and 14192, CMS propose to eliminate the
regulatory requirement for QI programs under Sec. 422.152(a)(5), which
reads in full, ``Incorporate one or more activities that reduce
disparities in health and health care. These activities must be broadly
accessible irrespective of race, ethnicity, national origin, religion,
sex, or gender. These activities may be based upon health status and
health needs, geography, or factors not listed in the previous sentence
only as appropriate to address the relevant disparities in health and
health care.'' The provision at Sec. 422.152(a)(5) is not aligned with
E.O. 14148 because it mandates race and ethnicity-conscious health
equity activities that were originally implemented in accordance with
E.O. 13985's racial equity requirements, which E.O. 14148 explicitly
revoked as part of its directive to eliminate federal programs and
policies that prioritize considerations based on race, ethnicity, and
other demographic characteristics.
With E.O. 14148's elimination of federal policies to promote
``diversity, equity, and inclusion,'' the requirement to ``incorporate
one or more activities that reduce disparities in health and health
care'' no longer aligns with current administrative priorities.
Moreover, CMS will retain the QI Program requirements under Sec.
422.152(a)(1) through (4) to meet the requirements of section 1852(e)
of the Act. The statute is clear and no further regulatory language to
specify reducing health disparities is necessary to carry out the QI
program. Additionally, this proposal aligns with the directives of E.O.
14192, to deregulate and reduce the administrative burden on MA
organizations while preserving quality.
When this regulation was proposed, CMS received public comments
asserting that some MA organizations were already addressing
disparities in care for underserved populations through a variety of
quality initiatives without the need for regulation. If this
requirement is repealed as proposed, MA organizations would retain the
flexibility to implement quality initiatives that address the needs of
all enrollees, including the option to continue their current QI
program or otherwise make their own determinations regarding whether
and how to target health disparities. This will ensure services are
delivered with equal dignity and respect to each individual and that MA
organizations are not required to direct federal resources towards
services limited to specific mandated subsets of enrollees. This
proposed deregulation reflects CMS's continued commitment to high-
quality health care, while reducing unnecessary administrative burden
associated with the prior regulatory requirements, including those
established under earlier directives that prioritized narrow equity-
focused initiatives driven by exclusively equity-focused executive
orders.
CMS invite comments on this proposal.
G. Deregulate Special Rule for Non-Compliant D-SNPs (Sec. 422.752)
The Bipartisan Budget Act of 2018 (BBA of 2018; Pub. L. 115-123)
amended section 1859 of the Act to establish new minimum standards for
all D-SNPs related to integration with Medicaid services (section
1859(f)(8)(D)(i) of the Act). The BBA of 2018 also amended section 1859
of the Act to authorize the Secretary to impose an enrollment sanction
on an MA organization offering a D-SNP that has failed to meet at least
one of the new integration standards in plan years 2021 through 2025
(section 1859(f)(8)(D)(ii) of the Act). In the April 2019 final rule
(84 FR 15719 through 15720), we codified this enrollment sanction at
Sec. 422.752(d). From plan years 2021 through 2025, we used this
sanction authority in numerous instances and found it helpful for
States and new D-SNPs since it created a mechanism to suspend
enrollment for D-SNPs when contracting with the State Medicaid agency
is unexpectedly delayed. However, since the statutory authority for the
enrollment sanction expires at the end of plan year 2025, we propose to
remove Sec. 422.752(d).
H. Waiver of Part D Customer Call Center Hours for All Regions Served
by LI NET (Sec. 423.2536)
Division CC, title I, subtitle B, section 118 of the Consolidated
Appropriations Act, 2021 (CAA) (Pub. L. 116-260) amended section 1860D-
14 of the Act by redesignating subsection (e) of section 1860D-14 of
the Act as subsection (f) and by establishing a new subsection (e)
Limited Income Newly Eligible Transition (LI NET) Program. Subsection
(e)(1) directs the Secretary to carry out a program to provide
transitional coverage for covered Part D drugs for LI NET eligible
individuals no later than January 1, 2024. We published the Medicare
Program; Contract Year 2024 Policy and Technical Changes to the
Medicare Advantage Program, Medicare Prescription Drug Benefit Program,
Medicare Cost Plan Program, and Programs of All-Inclusive Care for the
Elderly final rule (88 FR 22342) in April 2023 establishing the LI NET
program as a permanent part of Medicare Part D at 42 CFR part 423
subpart Y, beginning at Sec. 423.2500.
Sections 1860D-14(e)(4) and (5) of the Act require that the program
be administered through a contract with a single program administrator
and exempts the LI NET program from certain beneficiary protection
requirements for qualified prescription drug coverage under section
1860D-4 of the Act. Further, the Secretary may waive other such
requirements of title XVIII of the Act as necessary to carry out the
purpose of the program. Under our authority under section 1860D-
14(e)(5)(B) of the Act, we propose to codify a waiver for the LI NET
program with respect to customer call center
[[Page 54991]]
hours of operation for all regions served by LI NET.
Under Sec. 423.128(d), a Part D sponsor is required to have
mechanisms for providing specific information on a timely basis to
current and prospective enrollees upon request. Specifically, Sec.
423.128(d)(1)(i)(A) requires that for coverage beginning on and after
January 1, 2022, such mechanisms include a toll-free customer call
center that is open at least from 8:00 a.m. to 8:00 p.m. in all regions
served by the Part D plan. Due to the nature of the LI NET program,
maintaining a toll-free customer call center that is open Monday
through Friday, except holidays, from 8:00 a.m. to 7:00 p.m. Eastern
Time (ET) is sufficient because the customer call volume for LI NET
after 7:00 p.m. ET has historically been low due to automatic
enrollment of beneficiaries, the transitional nature of LI NET
coverage, and LI NET's open formulary. The majority (for example, 90 to
95 percent) of LI NET beneficiaries are enrolled automatically by us
and, as such, prospective enrollees rarely require customer call center
assistance. Further, the requirement at Sec. 423.128(d)(1)(i)(B)
requires that any call center serving pharmacists or pharmacies be open
so long as any network pharmacy in that region is open. Accordingly,
these calls centers are available to address the majority of inquiries
for the LI NET program and ensures that there is no impact on access.
This proposal also aligns with the President's January 31, 2025, E.O.,
titled Unleashing Prosperity Through Deregulation, as we estimate that
waiving the requirement for customer call center hours in all regions
served by LI NET will save the program approximately $800,000 to
$1,000,000 a year.
We propose to add the customer call center hours of operation for
all regions served by the Part D plan in Sec. 423.128(d)(1)(i)(A) to
the list of Part D requirements waived for the LI NET program at Sec.
423.2536.
We do not believe that the proposed changes to the regulatory text
would adversely impact the LI NET sponsor, individuals' access to
prescription drug benefits, the Medicare Trust Fund, or result in a
paperwork burden.
VIII. Request for Information on Future Directions in Medicare
Advantage (Risk Adjustment, Quality Bonus Payments, and Well-Being and
Nutrition)
A. Introduction
The MA program has grown considerably in the past two decades and
now covers over half of all Medicare beneficiaries.\105\ In light of
this growth, CMS is interested in exploring opportunities for
modernizing and strengthening the program, including with regard to
payment, risk adjustment, and quality policy, with the aim of
supporting competition and maximizing the value of the program for
beneficiaries and taxpayers. Specifically, CMS believes that meaningful
opportunities exist for enhancing the risk adjustment system and the
quality bonus payment (QBP) program, consistent with findings from
multiple studies by the Medicare Payment Advisory Commission (MedPAC)
106 107 and other researchers.108 109 110 CMS is
particularly interested in changes that can enhance competition in the
MA program; level the playing field for smaller, regional, and less
well-resourced MA plans; and address factors that may place these types
of plans at a competitive disadvantage. Enhancements to competition in
MA would be expected to yield substantial benefits for beneficiaries,
taxpayers, health plans, and the Medicare program as a whole. For
example, leveling the playing field in MA can translate into greater
innovation in benefit design and care models, including greater use of
high-value supplemental benefits, reduced use of low-value benefits and
services, and improved health outcomes for beneficiaries.
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\105\ Medicare Payment Advisory Commission. (March 2025).
``Report to the Congress: Medicare Payment Policy, Chapter 11, The
Medicare Advantage Program: Status Report.'' https://www.medpac.gov/wp-content/uploads/2025/03/Mar25_Ch11_MedPAC_Report_To_Congress_SEC.pdf.
\106\ Medicare Payment Advisory Commission. (March 2023).
``Report to the Congress: Medicare Payment Policy, Chapter 11, The
Medicare Advantage Program: Status Report.'' https://www.medpac.gov/wp-content/uploads/2023/03/Ch11_Mar23_MedPAC_Report_To_Congress_SEC.pdf.
\107\ Medicare Payment Advisory Commission. (2024). ``Report to
the Congress: Medicare Payment Policy, Chapter 13, Estimating
Medicare Advantage coding intensity and favorable selection,''
https://www.medpac.gov/wp-content/uploads/2024/03/Mar24_Ch13_MedPAC_Report_To_Congress_SEC.pdf.
\108\ Kronick, R., & Chua, F.M. (2021). Industry-wide and
sponsor-specific estimates of Medicare Advantage coding intensity.
Available at SSRN 3959446.
\109\ Markovitz, A.A., Ayanian, J.Z., Sukul, D., & Ryan, A. M.
(2021). The Medicare Advantage Quality Bonus Program Has Not
Improved Plan Quality: Study examines the impact of the Medicare
Advantage quality bonus program. Health Affairs, 40(12), 1918-1925.
\110\ Layton, T.J., & Ryan, A.M. (2015). Higher incentive
payments in Medicare advantage's pay-for-performance program did not
improve quality but did increase plan offerings. Health services
research, 50(6), 1810-1828.
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CMS could pursue changes in MA through two possible channels. The
first is through rulemaking or other means authorized under law (e.g.,
the annual announcement of methodological changes to MA payment rates
through the Advance Notice and Rate Announcement pursuant to section
1853(b) of the Act), which institute changes that are national in
scale. The second channel is by testing a model under section 1115A of
the Act through which the CMS Innovation Center can test innovative
payment and service delivery models on either a regional or national
scale. Section 1115A(c) of the Act authorizes the Secretary to expand
the scope and duration of the tested model if such expansion is
expected to reduce spending without reducing the quality of care or
improve the quality of patient care without increasing spending; the
Chief Actuary for CMS certifies the expansion would reduce or not
increase program spending, and the Secretary determines that such
expansion would not deny or limit the coverage or provision of benefits
under the applicable title for applicable individuals. If these
requirements are met, the model can be expanded nationally to all
relevant stakeholders in a mandatory fashion through rulemaking.
Examples of expanded CMS Innovation Center models include the Diabetes
Prevention Program,111 112 the Home Health Value-Based
Purchasing Model,\113\ and Prior Authorization of Repetitive, Scheduled
Non-Emergent Ambulance Transport (RSNAT),\114\ which were found to
reduce costs, improve quality, and reduce adverse medical events under
Original Medicare. Throughout its history, the CMS Innovation Center
has implemented only one MA-specific model, the Value-Based Insurance
Design (VBID) model,\115\ which
[[Page 54992]]
terminates effective December 31, 2025.\116\ A CMS Innovation Center
Model can be a channel for testing policy ideas that would benefit from
testing, for example, if a policy has uncertain implications. The
Innovation Center has the resources and flexibility to identify,
develop, rapidly test and encourage voluntary, widespread adoption of
innovative care and payment models. A CMS Innovation Center model is
also an option for testing innovations that require the statutory
authority of the Innovation Center model, for example, statutory
waivers.
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\111\ Centers for Medicare & Medicaid Services. Medicare
Diabetes Prevention Program (MDPP): Expanded Model Fact Sheet.
https://www.cms.gov/files/document/mdpp-expansion-fact-sheet.pdf.
\112\ Centers for Medicare & Medicaid Services. (December 2024).
Medicare Diabetes Prevention Program Expanded Model. https://www.cms.gov/files/document/mln34893002-medicare-diabetes-prevention-program-expanded-model.pdf.
\113\ Centers for Medicare & Medicaid Services. Home Health
Value-Based Purchasing Model. https://www.cms.gov/priorities/innovation/innovation-models/home-health-value-based-purchasing-model.
\114\ Centers for Medicare & Medicaid Services. Prior
Authorization of Repetitive, Scheduled Non-Emergent Ambulance
Transport. https://www.cms.gov/data-research/monitoring-programs/medicare-fee-service-compliance-programs/prior-authorization-and-pre-claim-review-initiatives/prior-authorization-repetitive-scheduled-non-emergent-ambulance-transport-rsnat.
\115\ Centers for Medicare & Medicaid Services. https://www.cms.gov/priorities/innovation/innovation-models/vbid.
\116\ Centers for Medicare & Medicaid Services. (2024). Medicare
Advantage Value-Based Insurance Design (VBID) Model to End after
Calendar Year 2025: Excess Costs Associated with the Model Unable to
be Addressed by Policy Changes. https://www.cms.gov/blog/medicare-advantage-value-based-insurance-design-vbid-model-end-after-calendar-year-2025-excess-costs.
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B. Risk Adjustment
1. Background
Risk adjustment shapes many aspects of the MA program. Risk
adjustment constitutes a key part of the payment process and can
influence the MA program in a number of direct as well as indirect
ways. MA plan payments are calculated at an individual level to account
for a beneficiary's expected health care costs, based on their specific
demographic and health characteristics. Risk adjustment is accomplished
through the calculation of the risk score, a number representing the
ratio between a specific enrollee's predicted Original Medicare costs
and average costs within Original Medicare. Ultimately, because risk
adjustment has such an important role in payment policy, it can
influence the types of enrollees that MA plans target for enrollment,
how they market to enrollees, the types of supplemental benefits that
plans offer, the prescription drugs that they cover, the providers they
contract with, and the types of care that MA enrollees receive.\117\
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\117\ Medicare Payment Advisory Commission. (June 2023).
``Report to the Congress: Medicare Payment Policy, Chapter 4, The
Medicare Advantage Program: Status Report.'' https://www.medpac.gov/wp-content/uploads/2023/06/Jun23_Ch4_MedPAC_Report_To_Congress_SEC.pdf.
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Moreover, risk adjustment impacts competition between MA
organizations and may impose inherent disadvantages on certain types of
organizations over others.\118\ The existing risk adjustment model
relies on medical diagnoses to predict health care costs, in addition
to demographic factors, which could lead plans to code more intensely
than what is observed in Original Medicare. And while risk adjustment
policies are intended to adequately compensate MA plans for their
enrollees' expected costs, higher payments associated with higher risk
scores may encourage MA organizations to prioritize investments in
coding activities over care management or treatment.
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\118\ Kronick, R., Chua, F.M., Krauss, R., Johnson, L., & Waldo,
D. (2025). Insurer-Level Estimates of Revenue From Differential
Coding in Medicare Advantage. Annals of internal medicine, 178(5),
655-662.
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To account for differences in coding patterns between MA and
Original Medicare, section 1853(a)(1)(C)(ii) of the Act requires CMS to
apply a coding adjustment factor each year when risk adjusting
payments. In 2019 and subsequent years, the adjustment must be at least
5.9 percent. Nevertheless, the higher rates of coding in MA relative to
Original Medicare may increase taxpayer expenditures and impose
administrative burdens on plans, without any accompanying improvements
to quality of care.\119\
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\119\ Medicare Payment Advisory Commission. (March 2025).
``Report to the Congress: Medicare Payment Policy, Chapter 11, The
Medicare Advantage Program: Status Report.'' https://www.medpac.gov/wp-content/uploads/2025/03/Mar25_Ch11_MedPAC_Report_To_Congress_SEC.pdf.
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CMS is, therefore, soliciting feedback on options for risk
adjustment, including near-term changes to the existing risk adjustment
methodology and entirely new approaches for risk adjustment, such as
those that account for recent advances in technology. For example, CMS
has previously contemplated including MA encounter data in the
calibration of risk adjustment models, rather than solely relying on
FFS data, to better capture patterns specific to the MA population. CMS
seeks ideas for additional data sources and data elements for risk
adjustment, and for how those data sources should best be incorporated,
particularly to minimize opportunities for gaming by MA organizations,
incentivize positive health outcomes, and minimize administrative
burden for plans and providers. In particular, CMS seeks ideas for risk
adjustment approaches that do not rely on collection of diagnoses data
and, instead, incorporate alternative factors to infer a patient's
health risk as well as the severity of that risk. Finally, CMS is
interested in risk adjustment approaches that advance competition and
foster a level playing field between different types of MA plans and MA
organizations.
2. Solicitation of Comments
We are soliciting comments on opportunities for improving risk
adjustment, inviting comments from a broad range of stakeholders and
interested parties, including MA organizations, beneficiary advocates,
healthcare providers, and industry experts. We are particularly
interested in comments on how to achieve the following goals with risk
adjustment, relative to the current state:
Advancing competition, removing anti-competitive barriers,
and ensuring a level playing field for regional, smaller, and less
well-resourced plans.
Reducing manipulability of the risk adjustment system as
well as the day-to-day administrative burden for both plans and
providers.
Ensuring accurate payments for sicker beneficiaries, while
rewarding effective treatment and favorable patient outcomes.
Mitigating unintended consequences and effectively
navigating tradeoffs. (For example, how to approach a situation where a
potential input to the risk adjustment model improves the predictive
accuracy of the model but would also directly disincentivize valuable
treatments for patients.)
Incentivizing provision of tangible and high-value
benefits and services and maximizing the value that beneficiaries, as
well as taxpayers, get from payments to MA plans.
We are also soliciting more specific comments on potential methods
for improving the MA risk adjustment program through the following
questions:
Which diagnoses are most essential for CMS to include in
its MA risk adjustment model? In certain instances, should CMS limit
the use of diagnoses in risk adjustment based on a minimum threshold of
disease severity or to patient encounters within specific settings?
Should CMS require diagnoses to be substantiated by follow-up
encounters or treatments? Similarly, should CMS exclude diagnoses from
plan-initiated encounters that do not lead to follow-up care, such as
those resulting from in-home health risk assessments, or diagnoses not
linked to specific services furnished to an enrollee?
Over what timeframes should CMS incorporate diagnostic
data for risk adjustment purposes? How can CMS account for certain
illnesses and injuries that are likely to persist but may not be
captured within a given data year by a patient encounter? Similarly,
how should CMS account for past conditions that are no longer active,
but continue appearing as diagnoses?
When incorporating diagnostic data from particular
encounters, should CMS account for the payment status of the
[[Page 54993]]
services associated with that encounter? For example, should the risk
adjustment model include diagnoses from encounters where a payment was
denied, or approved and later found to be improper?
CMS has publicly discussed the prospect of moving towards
a risk adjustment model calibrated based on encounter data. In addition
to these efforts, should CMS consider testing new risk adjustment
methods that replace the current Hierarchical Condition Category (HCC)-
based risk adjustment model, such as an inferred risk adjustment model?
How should CMS think about a model that is not primarily or solely
based off medical diagnoses, but instead uses other types of
information, such as utilization of medical services to infer both the
presence and the severity of different conditions? What are alternative
inputs that CMS should consider, which would be effective at predicting
future health care spending by a patient, incentivizing appropriate
care, while not being readily susceptible to gaming and manipulation?
Likewise, how can a next generation risk adjustment model be structured
to minimize unnecessary administrative burden for plans and providers,
and structured to minimize the sensitivity of risk scores to
administrative effort or administrative skill? How should a model be
structured to best support competition and to ensure a level playing
field for all MA plans?
How might CMS utilize technological innovations, such as
artificial intelligence (AI) and machine learning, in calibrating
current or future risk adjustment methodologies? What are the benefits
and risks of shifting from the existing linear regression methodology
to one that utilizes AI and/or machine learning? Do plans have best
practices when using AI? What types of protections need to be
established to ensure the use of AI is fair? Can the efficiencies of AI
be leveraged so as to reduce fraud, waste, and abuse?
As part of either the existing HCC model or a next
generation risk adjustment model, should CMS draw on additional
elements within existing data sources, as well as entirely new sources
of data? For example, should CMS incorporate prescription drug event
data, beneficiary survey data, electronic medical record data, or lab
data to infer an MA patient's expected health care spending and the
severity of their medical conditions? What kinds of data elements
should CMS draw on within existing data sources, specifically from
medical claims and beneficiary characteristics files (for example,
procedure information)? Should CMS incorporate additional adjustments
for a patient's place of residence to account for variation in costs
within individual counties? How should CMS think about potential data
sources that are not currently readily accessible or usable for the
full population of Medicare beneficiaries, such as electronic medical
record data? How should CMS go about making such novel data sources
accessible and usable for risk adjustment, given that they would need
to be accessible for every Medicare beneficiary?
What other policy approaches should CMS consider to ensure
that risk adjustment maximizes incentives for offering high-quality
coverage rather than investment in coding practices that may not
improve enrollee health?
In advance, we thank all commenters, as this feedback will help
inform future CMS action in this area.
C. Quality Bonus Payments in Medicare Advantage
In this RFI, we solicit information from stakeholders and all
interested parties to inform future policy development and potential
refinement to the QBP structure for MA plans as authorized under
section 1853(o) of the Act and the impact of QBPs on rebates as
authorized under section 1854(b) of the Act.
The solicitation is meant to build upon information obtained from
and issues that surfaced under past RFIs. For example, in the 2024
Consolidation in Health Care Markets RFI \120\ jointly released by the
Federal Trade Commission, the Department of Justice, and the Department
of Health and Human Services, some respondents notably requested
reforms to address potential gaming of risk and quality scores. Also,
this solicitation is intended to address issues previously documented
by MedPAC, academic researchers, and others, and in public comments on
the annual Advance Notice of Methodological Changes for MA Capitation
Rates and Part C and Part D Payment Policies (the Advance Notice).
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\120\ Request for Information on Consolidation in Health Care
Markets. (June 2024). https://www.regulations.gov/docket/FTC-2024-0022/document.
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It takes several years to test, validate, propose, and add a new
measure to the Part C and Part D Star Ratings. Separately, for measures
that are already implemented, a 2-year lag exists between the end of
the measurement period and actual payment to the MA plan. CMS would
like to explore potential options to shorten the timeline for
implementation of new measures, as well as the lag between measurement
and payment for existing measures.
The regulations at 42 CFR 422.164(c)(2) and 42 CFR 423.184(c)(2)
require CMS to announce potential new measures and solicit feedback
through the Advance Notice and Rate Announcement process described in
section 1853(b) of the Act and subsequently propose and finalize new
measures through rulemaking. In addition, 42 CFR 422.164(c)(3) and
423.184(c)(3) require measures be on the display page on the CMS
website for a minimum of 2 years while being finalized as Star Ratings
measures used for payment. We, therefore, solicit comments on potential
methods to condense the timeline to add a new measure to the Star
Ratings, for example, by reducing the display period for new measures.
For existing measures, the lag between the Star Ratings measurement
year and payment year is due to the statutory requirements at sections
1853(o) and 1854(b)(1)(C)(v)-(vi) of the Act, which link the MA bid
process to QBP ratings. Since section 1854(a)(1)(A) of the Act requires
that MA plans submit their bids not later than the first Monday in June
prior to the start of the contract year (which is more than 6 months
prior to the start of the contract year), and an MA plan's quality
bonus amount impacts their bid submission, CMS uses the latest QBP
ratings available as of that date. The QBP ratings thus employed as of
the time of the bid involve a measure period from two calendar years
prior, ultimately translating into up to a three-year overall lag
between measurement and payment. Meanwhile, the time lag between the
measurement and payment years creates a disconnect between the quality
and financial reward, as MA plans receive bonuses based on their
quality performance two years prior, which does not reflect any
remediation since that time. To that effect, CMS is also soliciting
information on whether CMS should test an Innovation Center model that
would delink QBPs from MA bids, with the aim of further incentivizing
health plans to improve quality and providing beneficiaries with more
timely and actionable quality information. Specifically, CMS is
soliciting comments on the following questions:
What could an alternative policy look like, if one is
needed at all?
What are the potential advantages and disadvantages of the
suggested alternative?
[[Page 54994]]
When should bonus payments be finalized and
disbursed?\More broadly, how might CMS better incentivize cost
containment within the MA program, while improving care quality?
D. Well-Being and Nutrition
The MA program offers a unique opportunity to bring high-value
interventions designed to support overall well-being and nutrition to
patients. To the extent that MA organizations are bearing financial
risk related to the long-term health outcomes of the populations they
serve, they will have an inherent incentive to support interventions
that promote health over the long term by avoiding the high costs
associated with chronic conditions.
We are seeking input on well-being policy changes for future years.
Well-being is a comprehensive approach to disease prevention and health
promotion, as it integrates mental and physical health while
emphasizing preventative care to proactively address potential health
issues.\[1]\ This comprehensive approach emphasizes person-centered
care by promoting the well-being of patients and family members.
We are seeking comments on tools and policies that improve overall
health, happiness, and satisfaction in life that could include aspects
of emotional well-being, social connections, purpose, and fulfillment.
We would like to receive input and comments on the applicability of
tools and constructs that assess for the integration of complementary
and integrative health, skill building, and self-care. Please provide
feedback on the relevant aspects of well-being for the MA program, with
a particular emphasis on how incentives can be improved to ensure MA
organizations are bearing long-term risk related to the health and
well-being of their populations.
A second concept that we are seeking feedback on is for policy
changes for nutrition. We are seeking comments on tools and policies
that achieve optimal nutrition and improve preventive care in MA.
Policies for nutrition improvement may include various strategies,
guidelines, and practices designed to promote healthy eating habits and
ensure individuals receive the necessary nutrients for maintaining
health, growth, and overall well-being. Such policies may also include
aspects of health that support or mediate nutritional status, such as
physical activity and sleep. In this context, preventive care plays a
vital role by proactively addressing factors that may lead to poor
nutritional status or related health issues. These efforts not only
support optimal nutrition but also work to prevent conditions that
could otherwise hinder an individual's health and nutritional needs. We
seek comment on the relevant aspects of optimal nutrition and
preventive care for the MA program, with a particular emphasis on how
incentives can be improved to ensure the risk borne by MA organizations
provides them adequate incentive to support beneficiaries seeking to
improve their nutritional habits.
While we will not be responding to specific comments in response to
this RFI, we intend to use this input to inform our future policy
development efforts.
IX. Technical Changes to Terminology in Risk Adjustment and in Payments
to Sponsors of Retiree Prescription Drug Plans
We are proposing to update our regulations related to Medicare
Advantage and the Medicare Prescription Drug Program to align with E.O.
14168--Defending Women From Gender Ideology Extremism and Restoring
Biological Truth to the Federal Government, issued on January 20, 2025.
Per this E.O., we will replace the word ``gender'' with ``sex'' in
Sec. Sec. 422.308(c)(1) and 423.884(c)(2)(v)(D).
As these terms have no discernable operational difference in
meaning with regard to risk adjustment and applications for qualified
retiree prescription drug plans, there is no associated burden.
Therefore, we have not included a discussion of this provision in the
COI section of this rule.
We are not scoring this provision in the Regulatory Impact Analysis
section because this technical change has no impact on program
operations.
X. Collection of Information Requirements
Under the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3501 et
seq.), we are required to provide 60-day notice in the Federal Register
and solicit public comment before a ``collection of information,'' as
defined under 5 CFR 1320.3(c) of the PRA's implementing regulations, is
submitted to the Office of Management and Budget (OMB) for review and
approval. To fairly evaluate whether an information collection
requirement should be approved by OMB, section 3506(c)(2)(A) of the PRA
requires that we solicit comment on the following issues:
The need for the information collection and its usefulness
in carrying out the proper functions of our agency.
The accuracy of our estimate of the information collection
burden.
The quality, utility, and clarity of the information to be
collected.
Recommendations to minimize the information collection
burden on the affected public, including automated collection
techniques.
We are soliciting public comment on each of these issues for the
following sections of this document that contain information collection
requirements. Comments, if received, will be responded to within the
subsequent final rule (CMS-4212-F, RIN 0938-AV63).
A. Wage Data
To derive average (mean) costs, we are using data from the most
current U.S. Bureau of Labor Statistics' (BLS's) National Occupational
Employment and Wage Estimates for all salary estimates (https://www.bls.gov/oes/tables.htm), which, at the time of publication of this
proposed rule, provides May 2024 wages. In this regard, table J1
presents BLS's mean hourly wage, our estimated cost of fringe benefits
and other indirect costs (calculated at 100 percent of salary), and our
adjusted hourly wage.
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[GRAPHIC] [TIFF OMITTED] TP28NO25.017
Adjusting our employee hourly wage estimates by a factor of 100
percent is a rough adjustment that is being used since fringe benefits
and other indirect costs vary significantly from employer to employer
and because methods of estimating these costs vary widely from study to
study. In this regard, we believe that doubling the hourly wage to
estimate costs is a reasonably accurate estimation method.
B. Proposed Information Collection Requirements (ICRs)
The following ICRs are listed in the order of appearance within the
preamble of this proposed rule.
1. ICRs Regarding Manufacturer Discount Program (Sec. 423.100 and
Sec. Sec. 423.2700-423.2768)
As described in section II.C. of this proposed rule, we are
proposing to codify the policies established under the Manufacturer
Discount Program Final Guidance,\121\ with certain refinements, as new
subpart AA of part 423. Information collection requirements for the
Manufacturer Discount Program are approved by OMB under control number
0938-1451 (CMS-10846). Codification of the Manufacturer Discount
Program policies in this proposed rule would not impact the
requirements or burden currently approved by OMB under this control
number.
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\121\ Available at: https://www.cms.gov/files/document/revised-manufacturer-discount-programfinal-guidance122024.pdf.
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2. ICRs Regarding Special Enrollment Period for Provider Terminations
(Sec. 422.62(b)(23))
The following proposed changes will be submitted to OMB for review
under control number 0938-0753 (CMS-R-267). While the control number
has expired, we are setting out this rule's collection of information
requirements/burden to score the impact of such changes. We intend to
use the standard PRA process (which includes the publication of 60- and
30-day non-rule Federal Register notices) to reinstate the control
number with change. The initial 60-day notice will publish sometime
after the publication of this proposed rule.
As described in section IV.A. of this proposed rule, at Sec.
422.62(b)(23) we propose to change the name and eligibility criteria
for the current SEP for Significant Change in Provider Network to
reflect that neither an MA organization determination nor a CMS
determination of significant provider network change is necessary for
an enrollee who is affected by the provider network change to be
eligible for the SEP. We also propose that information regarding
eligibility for the SEP be included in the provider termination notice.
The requirement to issue a provider termination notice is described at
Sec. 422.111, where Sec. 422.2267(e)(12) is referenced as the source
for notice content requirements. Accordingly, we are proposing changes
in the required content of the provider termination notice by revising
Sec. 422.2267(e)(12).
This proposal to amend Sec. 422.2267(e)(12) would not impact MA
organizations in terms of the burden required to identify those
enrollees who must be notified of provider contract terminations per
CMS requirements or to develop and send the required written notices.
Instead, the impact of this provision arises from the one-time effort
for MA organizations to update their existing written provider
termination notice so it is in compliance with the new required notice
content that we are proposing at Sec. 422.2267(e)(12)(ii)(D). We
expect MA organizations to engage in some routine software development
to update their notice template and related systems to incorporate the
new proposed requirements, which we are proposing will be delineated in
a provider termination model document developed by CMS. The proposed
model will be posted for public review and comment in conjunction with
this rule's proposed collection of information request under CMS-R-267.
We estimate it would take one or two software developers a total of
8 hours at $139.00/hr to update their MA organization's existing
provider termination notice template and related systems based on CMS's
model. With approximately 697 MA organizations impacted by this
proposed change, we estimate a total one-time burden of 5,576 hours
(697 MA organizations * 8 hr) at a cost of $775,064 (5,576 hr *
$139.00/hr).
Our proposal to amend the provider termination notice content
requirements at Sec. 422.2267(e)(12) would not affect the volume or
frequency of provider contract terminations and, therefore, on its own,
would not have the effect of increasing or decreasing the number of
enrollees who must be notified of provider contract terminations. This
proposed change would not impact the burden required of MA
organizations to identify enrollees to whom notices must be sent and to
send the required written notices.
3. ICRs Regarding Strengthened Documentation Standards for Part D Plan
Sponsors
Under section 1860D-12(b)(3)(C) of the Act and Sec. 423.505(d) and
(e), Part D plan sponsors are required to maintain certain categories
of documentation for specified periods of time. Specifically, Sec.
423.505(d) requires that the contract between a Part D plan sponsor and
CMS include an agreement by the Part D plan sponsor to maintain books,
records, documents, and other evidence of accounting procedures and
practices for 10 years that are sufficient to meet certain
requirements, including enabling CMS to evaluate the quality,
appropriateness, and timeliness of services performed under the
contract and to audit the services performed or determinations of
amounts payable under the contract. In addition, Sec. 423.505(e)
requires that Part D plan sponsors agree to HHS, the Comptroller
General or their designee to evaluate through audit, inspection, or
other means (1) the quality, appropriateness,
[[Page 54996]]
and timeliness of those services furnished to Medicare enrollees; (2)
compliance with CMS requirements for maintaining the privacy and
security of protected health information and other personally
identifiable information of Medicare enrollees; (3) facilities of the
Part D sponsor; and (4) enrollment/disenrollment records for the
current contract period and 10 prior periods. Furthermore, Sec. Sec.
423.568(a)(3), 423.570(c)(2), and 423.584(c)(1) outline requirements
for Part D plan sponsors to establish and maintain a method of
documenting and to retain documentation for oral requests for coverage
determinations under standard timeframes, expedited timeframes, and
redeterminations respectively.
In this proposed rule, CMS proposes to standardize the
documentation requirements that plan sponsors must maintain, in
regulation at Sec. 423.505, to ensure that Part D plan sponsors
provide CMS with all the information that the plan sponsors use for
determining payment responsibility under the Part D benefit. CMS is
proposing to standardize the documentation requirements because
information currently obtained from and relied upon during coverage
determinations, or point-of-sale (POS) edits, utilized to determine
payment responsibility, are not always maintained in the necessary
detail by the Part D plan sponsors to allow for CMS to evaluate if the
PDE record was covered and paid under the Medicare Part D benefit in
compliance with CMS policy(ies).
CMS proposes to modify Sec. 423.505 to further clarify and set
expectations on the specific type of information needed to support
final payment determinations for coverage determinations, and POS edits
to determine payment responsibility under the Part D benefit. We are
proposing documentation requirements that include certain written,
verbal, and electronic communications, such as the date and time the
request was received; the name and title of the individual who
submitted or verified the request; and the information used to make the
coverage determination.
Based on the current regulations and plan sponsor expectations, CMS
believes that this proposal is exempt from PRA requirements as such
recordkeeping is a usual and customary business practice (5 CFR
1320.3(b)(2)). The ability of the plan sponsor to demonstrate their
compliance with the rules and regulations of the Medicare Part D
program is a basic requirement upon entering a contractual relationship
with CMS. Plan sponsors are expected to maintain documentation and
produce that documentation upon request by CMS to evaluate the
appropriateness of the services provided to the Medicare enrollee in
accordance with the requirements at Sec. 423.505. Based upon our past
audit experience, plan sponsors maintain documentation to varying
degrees and in some instances the documentation maintained is not
sufficient for CMS to have confidence that the PDE record was covered
and paid under the Part D benefit in accordance with CMS policy(ies).
As such, CMS is proposing the documentation standards to allow CMS to
perform the task of evaluating the appropriateness of the Medicare Part
D coverage provided by plan sponsors for coverage determinations and
POS edits that determine coverage. The documentation requirements must
also be provided to CMS, in accordance with existing and proposed
requirements at Sec. 423.505 that allow CMS the right to evaluate and
provide oversight of the program though audit. As such, we believe the
proposed documentation standards that provide clarification of current
expectations are exempt from any PRA.
4. ICRs Regarding Removing Rules on Time and Manner of Beneficiary
Outreach (Sec. Sec. 422.2264(c) and 423.2264(c))
The following proposed changes will be submitted to OMB for review
under control number 0938-1442 (CMS-10837).
CMS is proposing three deregulatory changes to Sec. Sec.
422.2264(c) and 423.2264(c) to remove rules on the time and manner of
beneficiary outreach. These proposals are designed to improve the plan
decision making process by creating a more convenient, beneficiary-
friendly outreach experience and to reduce burden on beneficiaries,
plans, and agents/brokers. The proposed deregulatory changes concern:
(1) marketing events following educational events in the same location,
(2) the timing of a personal marketing appointment after Scope of
Appointment (SOA) form completion, and (3) SOA forms at educational
events.
a. Marketing Events Following Educational Events in Same Location
For the proposed elimination of the requirement for a 12-hour delay
between an educational and marketing event at Sec. Sec.
422.2264(c)(2)(i) and 423.2264(c)(2)(i), the information collection
burden associated with this requirement is currently approved by OMB
under the aforementioned control number. This rule proposes to remove
the one-time burden to change the MA organization's policies and
procedures. With 697 contracts and 15 minutes (0.25 hr) per response at
$88.82/hr for a business operations specialist, we estimate a reduction
of minus 174 hours (697 contracts x 0.25 hr) and minus $15,477 (174 hr
x $88.82/hr).
b. Timing of Personal Marketing Appointment After Scope of Appointment
(SOA) Form Completion
For the proposed elimination of the 48-hour waiting period required
between the SOA completion and a personal marketing appointment at
Sec. Sec. 422.2264(c)(3)(i) and 423.2264(c)(3)(i), the information
collection burden associated with this requirement is currently
approved by OMB under the aforementioned control number. This rule
proposes to remove the one-time burden to change the MA organization's
policies and procedures. With 697 contracts and 15 minutes (0.25 hr)
per response at $88.82/hr for a business operations specialist, we
estimate a reduction of minus 174 hours (697 contracts x 0.25 hr) and
minus $15,477 (174 hr x $88.82/hr).
c. Scope of Appointment (SOA) Forms at Educational Events
For the proposed elimination of the prohibition of the collection
of SOA forms at educational events at Sec. Sec. 422.2264(c)(1)(ii)(D)
and 423.2264(c)(1)(ii)(D), the information collection burden associated
with this requirement is currently approved by OMB under the
aforementioned control number. This rule proposes to remove the one-
time burden to change the MA organization's policies and procedures.
With 697 contracts and 15 minutes (0.25 hr) per response at $88.82/hr
for a business operations specialist, we estimate a reduction of minus
174 hours (697 contracts x 0.25 hr) and minus $15,477 (174 hr x $88.82/
hr).
5. ICRs Regarding Appeals Process for Part D Program Integrity
Prescription Drug Event Record Review Audits (Part 423 Subpart Z)
The effort associated with our proposed requirements under CITE
consists of the time for plan sponsors to prepare and submit the appeal
requests for: (1) reconsiderations, (2) hearing official review, and
(3) review by the Administrator. However, the burden associated with
the preparation and submission of appeals is exempt from the
requirements of the PRA since such appeals would be submitted in
response to an administrative action (5 CFR 1320.4(a)(2) and (c)).
[[Page 54997]]
We also believe that there would be no need for plan sponsors to
establish a new appeals process or revise an existing appeals process.
6. ICRs Regarding Passive Enrollment by CMS (Sec. 422.60)
The proposed requirement and burden for D-SNPs will be submitted to
OMB for review under control number 0938-TBD (CMS-XXXXX). At this time,
the CMS number has yet to be assigned. Additionally, the OMB control
number has yet to be determined, but it will be assigned by OMB upon
their clearance of this proposed rule's collection of information
request. OMB will set out an expiration date upon their approval of the
final rule's collection of information request.
In our April 2018 final rule, we finalized language authorizing CMS
to passively enroll certain dually eligible individuals currently
enrolled in an integrated D-SNP into another integrated D-SNP, after
consulting with the State Medicaid agency that contracts with the D-SNP
or other integrated managed care plan, when CMS determines that the
passive enrollment will promote continuity of care and integrated care
under Sec. 422.60(g)(1)(iii). We also finalized, under Sec.
422.60(g)(2), requirements an MA plan would have to meet to qualify to
receive passive enrollments under paragraph (g)(1)(iii). However, in
multiple situations where we have attempted to implement these
requirements, we have encountered difficulty with receiving integrated
D-SNPs meeting the portion of Sec. 422.60(g)(2)(ii) requiring that
receiving integrated D-SNPs have provider networks and facility
networks that are substantially similar to the relinquishing integrated
D-SNP. In our attempts to utilize passive enrollment, we found that
while prospective receiving integrated D-SNPs had Medicare provider and
facility networks that meet the MA network adequacy criteria at Sec.
422.112, these networks were not substantially similar to the provider
and facility networks in the relinquishing integrated D-SNPs.
We are proposing to amend Sec. 422.60(g)(2)(ii) to require that
the integrated D-SNP receiving passive enrollment provide a continuity
of care to all incoming enrollees for 120 days. We believe that this
extended continuity of care period would address the issue that we
attempted to address at 83 FR 16504 in the April 2018 final rule,
namely that the provider network comparability analysis would minimize
the number of enrollees whose provider relationships are disrupted as a
result of passive enrollment.
In the April 2018 final rule (83 FR 16692), we estimated that
approximately 1 percent of the 373 active D-SNPs offered at that time
would meet the criteria and operate in a market where all of the
conditions of passive enrollment are met and where CMS, in consultation
with a State Medicaid agency, implements passive enrollment. We
therefore estimated that there would be only four instances (373 D-SNPs
x 0.01) in which CMS would conduct passive enrollment each year. Since
we estimated fewer than 10 respondents, the information collection
requirements and burden related to the final provisions under Sec.
422.60(g) were exempt (5 CFR 1320.3(c)) from the requirements of the
PRA. These estimates were accurate. In none of the years since Sec.
422.60(g) has been in effect, have 10 or more D-SNPs met the criteria
to participate in passive enrollment. We have no reason to believe that
this will change.
For this rulemaking, we continue to estimate that approximately 1
percent of the projected 1,100 active D-SNPs expected for CY 2027 would
meet the revised criteria and operate in a market where the conditions
for passive enrollment are met and where CMS, in consultation with a
State Medicaid agency, implements passive enrollment. We therefore
estimate there would be 11 instances (1,100 D-SNPs x 0.01) in which CMS
would conduct passive enrollment each year and the PRA requirements
would apply. The actual number of D-SNPs eligible for passive
enrollment primarily depends on State procurement decisions for
affiliated Medicaid managed care contracts. Those State procurement
calendars are not readily available. We welcome comments on our
assumptions.
We believe that D-SNPs participating in passive enrollment, as
proposed for amendment in this rulemaking, would require 40 hours at
$88.82/hr for a business operations specialist to make necessary policy
and systems updates in preparation for participating in passive
enrollment and 40 hours at $64.94/hr for a computer support specialist.
With 11 D-SNPs nationally participating in passive enrollment in any
given year, we estimate a one-time burden of 880 hours (11 D-SNPs * 80
hr) at a cost of $67,654 [(440 hr * $88.82/hr) + (440 hr * $64.94/hr)]
to update policies and procedures, training materials, systems.
Per Sec. 422.60(g)(4), D-SNPs approved by CMS to participate in
passive enrollment are currently required to distribute two notices to
individuals. The D-SNP must provide the first notice no fewer than 60
calendar days prior to the enrollment effective date and the second
notice no fewer than 30 days prior to the enrollment effective date. We
believe a D-SNP business operation specialist would spend 20 hours at
$88.82/hr developing these notices. We estimate a one-time burden of
220 hours (20 hr * 11 D-SNPs) at a cost of $19,540 (220 hr * $88.82/
hr).
Based on July 2025 total D-SNP enrollment, we estimate 6,168,649 D-
SNP enrollees or a CY 2025 average of 6,500 enrollees per D-SNP
(6,168,649 D-SNP enrollees/949 D-SNPs). We are including this
calculation to provide the average number of enrollees per D-SNP, which
is used in calculations below.
We assume the following costs include paper, toner, envelopes, and
postage (envelope weight is normally considered negligible when citing
these rates and is not included) for hard-copy mailings:
Paper: $3.50 for a ream of 500 sheets. The cost for one
page is $0.007 ($3.50/500 sheets).
Toner: $70 for 10,000 pages. The toner cost per page is
$0.007 ($70/10,000 pages).
Envelope: Bulk envelope costs are $440 for 10,000
envelopes or $0.044 per envelope.
Postage: The cost of first-class metered mail is $0.73 per
letter up to 1 ounce. We estimate that a sheet of paper weighs 0.16
ounces (10.0 lb/1,000 sheets x 16 oz/lb), and do not anticipate
additional postage for mailings in excess of 1 ounce.
We estimate the aggregate cost per mailed notice is $0.802 ([$0.007
for paper * 2 pages] + [$0.007 for toner * 2 pages] + $0.73 for postage
+ $0.044 per envelope). We assume a maximum of 2 double-sided pages
(generally, weighing less than 1 ounce) will be needed for a passive
enrollment notice. Because preparing and generating a hard-copy
enrollment notice is automated once the systems have been developed, we
do not estimate any labor costs. Therefore, we estimate a total annual
mailing cost by sponsors to enrollees of $114,686 (6,500 enrollees * 2
mailings * 11 D-SNPs * $0.802/mailing).
7. ICRs Regarding Continuity in Enrollment for Full-Benefit Dually
Eligible Individuals in a D-SNP and Medicaid Fee-for-Service
(Sec. Sec. 422.107(d)(1) and 422.514(h))
The following proposed changes will be submitted to OMB for review
under control number 0938-0753 (CMS-R-267). While the control number
has expired, we are setting out this rule's collection of information
requirements/burden to score the impact of such changes. We intend to
use the standard PRA process (which includes the
[[Page 54998]]
publication of 60- and 30-day non-rule Federal Register notices) to
reinstate the control number with change. The initial 60-day notice
will publish sometime after the publication of this proposed rule.
We are proposing to amend Sec. Sec. 422.107(d)(1) and 422.514(h)
to allow D-SNPs that serve full-benefit dually eligible individuals in
a HIDE SNP or coordination-only D-SNP to continue enrollment of full-
benefit dually eligible individuals in a D-SNP in the same service area
where those individuals are enrolled in Medicaid FFS. As discussed in
section VI.B. of this proposed rule, this proposed provision makes
specific amendments to a finalized package of provisions from the April
2024 final rule, which limited enrollment in certain D-SNPs to those
individuals who are also enrolled in an affiliated Medicaid managed
care organization (MCO), and limited the number of D-SNP plan benefit
packages an MA organization, its parent organization, or entity that
shares a parent organization with the MA organization, could offer in
the same service area as an affiliated Medicaid MCO. If finalized, our
proposed provisions at Sec. Sec. 422.107(d)(1) and 422.514(h) would
create another exception to allow D-SNPs that serve full-benefit dually
eligible individuals in a HIDE SNP or coordination-only D-SNP to
continue enrollment of full-benefit dually eligible individuals in a D-
SNP in the same service area where those individuals are enrolled in
Medicaid FFS.
In the information collection requirements in the April 2024 final
rule (89 FR 30784), we stated that the provisions we finalized would
create burden for MA organizations that offer multiple D-SNPs in a
service area with a Medicaid MCO, noting that impacted MA organizations
would need to non-renew or (more likely) combine plans and update
systems as well as notify enrollees of plan changes. We also stated in
the April 2024 final rule that we expected that MA organizations would
need two software engineers with each working 4 hours at $127.82/hr to
update software in the first year with no additional burden in future
years and one business operations specialist working 4 hours at $79.50/
hr to update plan policies and procedures in the first year with no
additional burden in future years. In aggregate, we estimated a one-
time burden (for plan year 2027) of 600 hours (50 plans * 12 hr/plan)
at a cost of $67,028 (50 plans x [(8 hr * $127.82/hr) + (4 hr * $79.50/
hr)]).
The modifications that we are proposing in section VI.B. of this
proposed rule to Sec. Sec. 422.107(d)(1) and 422.514(h) would allow D-
SNPs that serve full-benefit dually eligible individuals in a HIDE SNP
or coordination-only D-SNP to continue enrollment of full-benefit
dually eligible individuals in a D-SNP in the same service area where
those individuals are enrolled in Medicaid FFS, and as such, would
change which D-SNPs would be required to non-renew or combine plans,
affecting the burden estimates finalized in the April 2024 final rule.
Given the landscape of States that do not require mandatory Medicaid
managed care for all of their full-benefit dually eligible individuals,
we believe that based on our estimates, 15 MA organizations would be
affected by this proposed exception. To account for the reduction in MA
organizations affected by this proposed change to Sec. Sec.
422.107(d)(1) and 422.514(h) as compared to the finalized burden
estimates in the April 2024 final rule, we are reducing the previous
burden calculation of 50 MA organizations by 15 MA organizations.
Because we believe that these proposed amendments to Sec. Sec.
422.107(d)(1) and 422.514(h) would reduce the number of impacted MA
organizations by 15 as compared to our finalized estimate in the April
2024 final rule, we are providing our estimate in the reduction of
burden that would result if this proposal to amend Sec. Sec.
422.107(d)(1) and 422.514(h) were to be finalized. The wage estimates
in this notice of proposed rulemaking have been updated to reflect May
2024 BLS National Occupational Employment and Wage Estimates, where our
estimates in the April 2024 final rule used BLS National Occupational
Employment and Wage Estimates from May 2022.
We continue to expect that MA organizations would need two software
engineers with each working 4 hours at $139.00/hr to update software in
the first year with no additional burden in future years and one
business operations specialist working 4 hours at $88.82/hr to update
plan policies and procedures in the first year with no additional
burden in future years. In aggregate, we estimate a revised one-time
burden (for plan year 2027) of 420 hours (35 plans * 12 hr/plan) at a
cost of $51,355 (35 plans x [(8 hr * $139.00/hr) + (4 hr * $88.82/
hr)]).
In this regard, we estimate a burden reduced of minus 180 hours
(420 hr-600 hr) and minus $15,673 ($51,355-$67,028).).
8. ICRs Removing Account-Based Medical Plans From Entities Required To
Provide Creditable Coverage Disclosures
The following proposed changes will be submitted to OMB for review
under control number 0938-1013 (CMS-10198).
As described in section VII.A. of this proposed rule, account-based
plans, such as HRAs, including ICHRAs, are group health plans that are
not, as section 1860D-13(b)(6)(B)(i) of the Act requires, entities that
offer prescription drug coverage. Therefore, the benefit design of
account-based plans makes concepts, such as disclosure of creditable
coverage, inapplicable to those arrangements. This rule's proposal to
exclude account-based plans from the group health plans that are
required to disclose creditable coverage status to the Secretary and to
Medicare-eligible individuals as required under Sec. 423.56 will
reduce private expenditures required to comply with federal regulations
to provide creditable coverage disclosures, by avoiding duplicative
efforts, and eliminating the need for these account-based plans to
acquire additional resources and expertise to provide these
disclosures.
The disclosure to the Secretary is required for certain entities
listed at Sec. 423.56(b) that are not excluded at Sec. 423.56(e). The
entities exempted under Sec. 423.56(e) include PDPs, MA-PD plans, and
PACE or cost-based HMOs or CMPs that provide ``qualified Part D
coverage'' within the meaning of Sec. 423.100. Among the plans that
are required to submit this disclosure are group health plans (offered
by employers, union/Taft-Hartley plans, church, State and local
government, and other group-sponsored plans) including the Federal
Employees Health Benefits Program; and qualified retiree prescription
drug plans as defined in section 1860D-22(a)(2) of the Act. As
described in section VII.A. of this proposed rule, the term, ``Group
Health Plan'' (GHP) was codified at Sec. 423.882 in the 2005 Part D
final rule (70 FR 4577), and this definition includes account-based
medical plans. The CMS online disclosure system allows entities to
select the general type of GHP they offer (for example, employer-
sponsored plans); however, the system does not provide for further
subsets of the plan type. For example, account-based plans are not sub-
categorized under the GHP category. Therefore, CMS does not have
specific data on the number of account-based plans that may be making
creditable coverage disclosures.
[[Page 54999]]
As stated in section VII.A. of this proposed rule, ICHRAs, a type
of HRAs, are account-based plans that were more recently recognized by
the Labor, Health and Human Services, and Treasury Departments in the
June 20, 2019 final rule titled, ``Health Reimbursement Arrangements
and Other Account-Based Group Health Plans'' (84 FR 28888). Generally,
the impetus for this proposal to not require account-based plans to
provide creditable coverage disclosures was feedback that CMS was
receiving from stakeholders asking if ICHRAs were required to provide
creditable coverage disclosures. To date, CMS has received minimal to
no inquiries on the requirement for other types of account-based plans
to make creditable coverage disclosures. Therefore, we will attempt to
show a decrease in burden by comparing the number of ICHRA plans
compared to the total universe of health plans, (about 5 percent), and
inputting that percentage to estimate the number of ICHRA plans that
are potentially making creditable coverage disclosures to the
Secretary.\122\
---------------------------------------------------------------------------
\122\ According to the 2024 KFF Employer Health Benefits Survey
(available at https://www.kff.org/health-costs/report/2024-employer-health-benefits-survey/), of firms offering health benefits, 4
percent provide employees funds to purchase non-group coverage (such
as through an ICHRA). Of firms not offering health benefits, 7
percent similarly provide employees funds to purchase non-group
coverage (such as through an ICHRA). Based on these survey
estimates, the weighted number of firms offering health benefits
(1,670,244), and the estimated weighted number of firms not offering
health benefits (1,589,106), it is estimated that there are 178,047
ICHRA plans in total. This is calculated as (1,670,244*0.04) +
(1,589,106*0.07) = 178,047.
---------------------------------------------------------------------------
Using this data, we estimate that about 5 percent of the 140,974
GHPs, or about 7,049 entities (140,974 x 0.05) in our active burden
estimates would not be required to make creditable coverage disclosures
to the Secretary. Taking approximately 5 total minutes (0.083 hr) for
either a Human Resources Manager at $154.30/hr or a Compensation and
Benefits Manager at $150.22/hr (whichever individual/occupational title
is assigned by the plan) to complete the online disclosure form, we
estimate a reduction of minus 585 hours (7,049 * 0.083 hr) and minus
$90,266 (585 * $154.30/hr for a Human Resources Manager) or minus
$87,879 (585 * $150.22/hr for a Compensation and Benefits Manager).
9. ICRs Regarding Rescinding the Annual Health Equity Analysis of
Utilization Management (UM) Policies and Procedures (Sec.
422.137(c)(5), (d)(6), and (d)(7))
The following proposed changes will be submitted to OMB for review
under control number 0938-0964 (CMS-10141).
This rule proposes to remove Sec. 422.137(c)(5), (d)(6), and
(d)(7) which currently contain health equity reporting requirements
related to UM. Rescission of these requirements would decrease the
regulatory burden for MA organizations by removing reporting
requirements for the UM Committee, reducing administrative complexity
and eliminating ongoing compliance and monitoring. CMS proposes to
remove the requirements since they impose compliance costs on MA
organizations without corresponding benefits. The removal supports
E.O.s 14148 and 14192 and addresses stakeholders' concerns about the
requirements' lack of research foundation, feasibility, and
administrative burden.
Section 422.137(c)(5) requires a member of the UM Committee to have
expertise in health equity. CMS estimates it takes 30 minutes at
$81.72/hr for a compliance officer to update the policies and
procedures. By removing this requirement, CMS estimates a one-time
burden reduction of minus 348 hours (697 contracts * 0.5 hr) and minus
$28,438 (348 hr * $81.72/hr).
Section 422.137(d)(6) requires the UM Committee to conduct an
annual health equity analysis of the use of prior authorization. CMS
estimates it takes 8 hours at $139.00/hr for a software developer to
collect and aggregate the health equity analysis data required to
produce the report. By removing this requirement, CMS estimates an
annual burden reduction of minus 5,576 hours (697 contracts * 8 hr/
plan) and minus $775,064 (5,576 hr * $139.00/hr).
Finally, Sec. 422.137(d)(7) requires that annually, the health
equity analysis must be produced and posted to the plan's website. CMS
estimates it takes 10 minutes (0.1667 hr) at $88.82/hr for a business
operations specialist to produce, inspect, and post the report. By
removing this requirement, CMS estimates an annual burden reduction of
minus 116 hours (697 contracts * 0.1667 hr/plan) and minus $10,303 (116
hr * $88.82/hr).
C. Summary of Proposed Information Collection Requirements and
Associated Burden
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D. Submission of PRA-Related Comments
We have submitted a copy of this proposed rule to OMB for its
review of the rule's information collection requirements. The
requirements are not effective until they have been approved by OMB.
To obtain copies of the supporting statement and any related forms
for the proposed collections discussed previously, please visit CMS'
PRA website at https://www.cms.gov/medicare/regulations-guidance/legislation/paperwork-reduction-act-1995/pra-listing or call the
Reports Clearance Office at 410-786-1326.
We invite public comments on these potential information collection
requirements. If you wish to comment, please submit your comments
electronically as specified in the DATES and ADDRESSES sections of this
proposed rule and identify the rule (CMS-4212-P), the ICR's CFR
citation, and OMB control number.
XI. Regulatory Impact Analysis
A. Statement of Need
This proposed rule addresses several critical needs in the Medicare
Advantage (Part C), Medicare Prescription Drug Benefit (Part D), and
Medicare cost plan that require regulatory action to ensure program
integrity, beneficiary protection, and statutory compliance. The
provisions proposed in this rule are intended to codify and implement
the statutory requirements of the Inflation Reduction Act of 2022 (IRA)
(Pub. L. 117-169), and provide greater clarity on the Star Ratings
system for plans operating in the MA and Part D spaces.
One of the primary drivers for this rulemaking is the statutory
mandate to implement changes made by the IRA. The IRA fundamentally
restructured the Part D benefit design and established new payment
obligations for enrollees, Part D plan sponsors, pharmaceutical
manufacturers, and CMS. Without regulatory implementation of these
statutory changes, the Medicare program cannot comply with Federal law
or provide the intended beneficiary protections and cost savings
envisioned by Congress. Specifically, the IRA requires CMS to codify
changes to Part D benefit phases, including the deductible, initial
coverage limit, coverage gap, and the annual out-of-pocket threshold,
as well as to sunset the Coverage Gap Discount Program and to establish
the Medicare Part D Manufacturer Discount Program.
The proposed changes to Star Ratings address the ongoing need to
simplify and refocus quality measurement, improving transparency for MA
organizations and Part D sponsors. The current Star Ratings system has
grown in complexity over time, and stakeholders have requested
streamlining to focus on the most impactful quality measures. The
proposed modifications respond to these requests and should make the
Star Ratings system more comprehensible and predictable.
The absence of regulatory action would result in statutory non-
compliance regarding IRA implementation, ongoing operational
inefficiencies, and missed opportunities for program improvement and
innovation. Therefore, this rulemaking is necessary to ensure the
Medicare program operates effectively, efficiently, and in compliance
with Federal law while serving the best interests of Medicare
beneficiaries.
B. Overall Impact Analysis
We have examined the impacts of this proposed rule as required by
Executive Order 12866 on Regulatory Planning and Review (September 30,
1993); Executive Order 13132, ``Federalism''; Executive Order 14192,
``Unleashing Prosperity Through Deregulation''; the Regulatory
Flexibility Act (RFA) (Pub. L. 96-354); section 1102(b) of the Act; and
section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) (Pub. L.
104-4).
Executive Orders 12866 and 13563 direct agencies to assess all
costs and benefits of available regulatory alternatives and, if
regulation is necessary, to select regulatory approaches that maximize
net benefits (including potential economic, environmental, public
health and safety effects, and distributive impacts). Section 3(f) of
Executive Order 12866 defines a ``significant regulatory action'' as an
any regulatory action that is likely to result in a rule that may: (1)
have an annual effect on the economy of $100 million or more, or
adversely affect in a material way a sector of the economy,
productivity, competition, jobs, the environment, public health or
safety, or State, local, or Tribal governments or communities; (2)
create a serious inconsistency or otherwise interfere with an action
taken or planned by another agency; (3) materially alter the budgetary
impacts of entitlement grants, user fees, or loan programs or the
rights and obligations of recipients thereof; or (4) raise novel legal
or policy issues arising out of legal mandates, or the President's
priorities.
A regulatory impact analysis (RIA) must be prepared for a
regulatory action that is significant under section 3(f)(1) of E.O.
12866. Based on our estimates, OIRA has determined this rulemaking is
significant under section 3(f)(1) of E.O. 12866.
C. Detailed Economic Analysis
Many provisions of this proposed rule have negligible impact either
because they are technical provisions or clarifications. Throughout the
preamble we have noted when we estimated that provisions have no
impact. Additionally, this Regulatory Impact Analysis discusses several
provisions with either zero impact or impact that cannot be quantified.
The remaining provisions' effects are estimated in section X. of this
proposed rule, which estimates costs associated with paperwork burden
resulting from this rule. Where appropriate, when a group of provisions
have both paperwork and non-paperwork impact, this RIA cross-references
impacts from section X. of this proposed rule in order to arrive at the
total impact. Table K1 summarizes the estimated transfers and costs
associated with the various provisions in this proposed rule over a 10-
year period. Further details are provided later in this RIA.
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1. Effects of Part D Redesign: Redesigned Part D Benefit
In this proposed rule, we are proposing to codify changes to the
Part D benefit made by section 11201 of the IRA related to the
deductible, initial coverage limit, the coverage gap, the annual out-
of-pocket (OOP) threshold, and alternative prescription drug coverage
options. Several of the changes made by section 11201 have taken effect
already and other changes will go into effect in 2026.
The Part D defined standard benefit becomes richer because of these
changes, providing Part D enrollees with more protection from
prescription drug costs. As Part D plan offerings must satisfy
equivalence testing with the new, more generous benefit structure, they
must also cover a greater share of Part D drug costs. This leads to
higher bids and increases in federal costs for the program. In
particular, the creation of an out-of-pocket maximum shields enrollees
entirely from cost sharing once they enter the catastrophic phase of
the benefit, leading to cost increases for Part D plans and the
government. The costs and transfers attributable to the Part D redesign
are attributable to the IRA and are not a result of this rule.
2. Effects of Part D Redesign: Specialty Tier
a. Limit on Specialty-Tier Cost Threshold Adjustment (Sec.
423.104(d)(2)(iv)(B))
In this proposed rule, we are proposing to revise Sec.
423.104(d)(2)(iv)(B)(1) and (2) to allow CMS to reduce the specialty-
tier cost threshold under certain circumstances, in addition to the
current authority to increase the threshold. This change would provide
CMS with additional flexibility to reduce the threshold in response to
market conditions, such as potential reductions in Part D drug costs
resulting from the Medicare Drug Price Negotiation Program.
This provision does not impose new requirements on Part D sponsors
or change existing operational processes. The methodology for
determining whether a threshold adjustment is warranted remains the
same (at least 10 percent change from the prior year), and the rounding
methodology remains unchanged. Therefore, we do not anticipate that
this provision will have a measurable economic impact on Part D
sponsors, beneficiaries, or the Medicare program, as it is only
providing CMS with flexibility in making threshold adjustments without
altering the underlying methodology or operational requirements.
b. Specialty-Tier Maximum Allowable Cost Sharing (Sec.
423.104(d)(2)(iv)(D))
We are proposing to codify the methodology for determining the
specialty-tier coinsurance/deductible ranges that were established in
the Final CY 2025 Part D Redesign Program Instructions. This proposal
would update the existing calculation methodology to align with the
redesigned Part D benefit structure implemented under the IRA, which
eliminated the initial coverage limit.
The proposed methodology maintains the existing 25 percent minimum
and 33 percent maximum coinsurance for specialty tiers. While the
underlying calculation has been updated to reflect the redesigned Part
D benefit, the range of allowable coinsurance percentages remains
unchanged. Part D sponsors must continue to ensure their benefit
designs are actuarially equivalent to the defined standard benefit, as
required under existing regulations.
When CMS codified the specialty-tier maximum allowable cost-sharing
methodology in the CY 2022 Final Rule (86 FR 6078), we concluded in the
regulatory impact analysis that the specialty-tier provisions, which
also included provisions to allow Part D sponsors to structure their
benefits with a second, ``preferred'' specialty tier, were unlikely to
have a material impact on Part D costs. Likewise, we do not anticipate
that our current proposal to update this methodology to align with the
redesigned Part D benefit would have a measurable economic impact on
Part D sponsors, beneficiaries, or the Medicare program, as it
maintains the same coinsurance ranges that are currently in effect.
3. Effects of the Medicare Coverage Gap Discount Program (Sec. Sec.
423.100, and 423.2300 Through 423.2345 (Subpart W))
This proposal would codify the sunset of the Coverage Gap Discount
Program, which was enacted under the Affordable Care Act and began on
January 1, 2011. The Coverage Gap Discount Program sunset was
authorized as a part of the Part D benefit redesign under section 11201
of the IRA. Section 11201 of the IRA amended section 1860D-14A of the
Act by adding subsection (h) to require that Coverage Gap Discount
Program provisions at section 1860D-14A apply before January 1, 2025,
and, with respect to applicable drugs dispensed prior to such date,
continue to apply on and after January 1, 2025.
The costs and transfers attributable to the Part D Redesign,
including sunsetting the Coverage Gap Discount Program, are
attributable to the IRA and are not a result of this rule.
4. Effects of the Medicare Part D Manufacturer Discount Program
(Sec. Sec. 423.1, 423.100, 423.505(b), 423.1000, 423.1002, and
423.2700 Through 423.2768 (Subpart AA))
This proposal would codify policies implementing the Manufacturer
Discount Program. Section 11201 of the IRA established the Manufacturer
Discount Program as a part of the IRA's Part D benefit redesign.
Section 11201(f) of the IRA directed CMS to implement the Manufacturer
Discount Program using program instruction or other forms of program
guidance for 2025 and 2026. The Manufacturer Discount Program began on
January 1, 2025, and we are proposing to codify the policies that have
been in place since the program's implementation, with refinements.
The costs and transfers attributable to the Part D Redesign,
including codifying the Manufacturer Discount Program, are attributable
to the IRA and are not a result of this rule.
5. Effects of Third-Party Marketing Organization (TPMO) Oversight:
Revising the Record Retention Requirements for Marketing and Sales Call
Recordings
This provision proposes to reduce the amount of time that MA
Organizations and Part D sponsors are required to retain recordings for
sales and marketing calls from 10 to 6 years that was originally
established in the May 2022 final rule (87 FR 27704) and subsequently
modified in the April 2023 final rule (88 FR 22120) which required an
MA organization or a Part D sponsor's contract, written arrangement
and/or agreement with the aforementioned entities must ensure that
marketing, sales, and enrollment calls with beneficiaries are recorded
in their entirety. In addition, CMS has advised that marketing, sales,
and enrollment call recordings must comply with the record retention
requirements at Sec. Sec. 422.504(d) and 423.505(d). If finalized, the
reduced call retention time from 10 to 6 years will take effect on
October 1, 2026, to coincide with the beginning of 2027 plan year
marketing, as defined under Sec. Sec. 422.2263(a) and 423.2263(a).
To determine the cost of the existing requirement and thus the cost
savings, CMS reviewed different types of storage costs. The first type
is storage in cloud settings where an entity pays per
[[Page 55004]]
gigabyte or terabyte and the cost is determined based on the amount of
data and how accessible the entity wants the data to be (for example,
standard storage, cold line storage, archive storage, etc.). CMS also
reviewed other options available for TPMOs, especially individual
agents or small agencies, to record and store calls. In this review,
CMS found that the industry created and/or marketed different recording
tools available to agents and brokers. These tools have a wide range of
costs, ranging from free recording services to other tools that are
structured around monthly or yearly fees. Moreover, based on
information gleaned from previous regulatory work, CMS has also been
made aware that field marketing organizations (FMOs) may provide agents
and brokers access to call recording technology at a reduced cost or
otherwise factor it into agent/broker contractual arrangements.
Finally, CMS notes that many of these tools are proprietary and total
costs may not be fully transparent until a purchase (or contractual
agreement) is made. All told, the variability makes it more difficult
to establish the savings associated with this provision.
To estimate the cost savings associated with revising the call
recording retention requirement, CMS first estimated the number of
licensed and appointed agents to sell Medicare products, including MA
plans and PDPs, to be 100,000.\123\ CMS acknowledges that there is a
range of how each agent accesses call recordings and storage and how
much each will pay for these features. CMS also acknowledges that the
typical cost to agents combines both the recording and the storage
costs into one fee. With these challenges acknowledged, for this
proposed rule, CMS is using an average cost of $35 per month, or $420
per year for call recording tools based on the median of the costs that
agency was able to identify.124 125 126 127 Further, CMS is
estimating that approximately 60% of the cost is attributed to the
recording costs while the other 40% is attributed to the cost of
storage ($14 is storage [35*0.4]). Since the proposal requires calls to
be retained for 6 years there would be a savings of $5.6 per month
($14*0.4), resulting in a savings of $67.2 per year per agent. Using
the $67.2 per year, combined with the estimated 100,000 agents and
brokers licensed and appointed to sell Medicare products, CMS estimates
that this provision will save an estimated $6.72 million dollars per
year ($67.2 [savings per agent per year] * 100,000 [agents]), or 67.2
million dollars over a 10-year period.
---------------------------------------------------------------------------
\123\ https://www.sparkadvisors.com/resource/where-agents-become-pawns-the-dark-side-of-fmo-contracting-and-what-it-means-for-agents.
\124\ https://www.claap.io/blog/chorus-pricing.
\125\ https://www.nextiva.com/x20/lpGVDT11_i?utm_source=getvoip&utm_medium=affiliate&utm_campaign=lpgvdt&utm_term=nextiva%20plans.
\126\ https://www.zoom.us/pricing/zoom-phone.
\127\ CMS recognizes that some of the tools do not include
unlimited, 10-year storage. Storage may be an additional cost.
---------------------------------------------------------------------------
Based on the previous noted limitations, CMS is specifically
requesting comments on these estimates and welcomes additional data
that may help the agency to further quantify the savings associated
with this provision. We request comments on our assumptions of savings,
taking into account the continued requirement for the recording of a
beneficiary's enrollment into a plan.
6. Effects of Medicare Advantage/Part C and Part D Prescription Drug
Plan Quality Rating System (Sec. Sec. 422.164, 422.166, 423.184, and
423.186)
We are proposing to add and remove certain measures from the Part C
and D Star Ratings program. Historically, measure additions and
removals are routine, and such routine changes have had very little or
no impact on the highest ratings (that is, overall rating for MA-PD
contracts, Part C summary rating for MA-only contracts, and Part D
summary rating for PDPs). However, given the number of measure removals
proposed in this rule, we have estimated the impact of the measure
removals on the Medicare Trust Fund in this rule. We are also proposing
to not move forward with the implementation of the Health Equity Index
(HEI) reward and to continue to include the historical reward factor in
the Star Ratings methodology. Beyond the Medicare Trust Fund, there may
be effects on supplemental benefits, premiums, and plan profits. These
impacts will likely vary significantly from plan to plan (or contract
to contract) based on the business strategies and the competitive
landscape for each plan and contract.
We simulated the cumulative impact of the proposed changes on MA
contracts using the 2025 Star Ratings data. We calculated the net
impacts summarized in Table K-3 due to these proposed Star Ratings
updates by quantifying the difference in the MA organization's final
Star Rating with the proposed changes and without the proposed changes.
We assume Medicare Trust Fund impacts due to the Star Ratings changes
associated with these proposed revisions to the measure set and
methodology. Not moving forward with the implementation of the HEI and
continuing to include the historical reward factor would be effective
for the 2027 Star Ratings and would impact the 2028 plan payments and
2028 Quality Bonus Payments (QBPs). The removal of the Call Center--
Foreign Language Interpreter and TTY Availability (Part C), Call
Center--Foreign Language Interpreter and TTY Availability (Part D), and
Statin Therapy for Patients with Cardiovascular Disease (Part C)
measures would be effective also for the 2028 Star Ratings and would
impact the 2029 plan payments and 2029 QBPs. The removal of the
remaining measures would be effective for the 2029 Star Ratings and
would impact the 2030 plan payments and 2030 QBPs.
All impacts are considered transfers, but we request comments on
the extent to which provision of goods or services would increase or
decrease in association with the payment changes. The impact analysis
for the Star Ratings updates takes into consideration the final quality
ratings for those MA contracts that would have Star Ratings changes
under this proposed rule. There are two ways that Star Ratings changes
will impact the Medicare Trust Fund:
A Star Rating of 4.0 or higher will result in a QBP for
the MA contract, which, in turn, leads to a higher benchmark for the MA
plans offered by the MA organization under that contract. MA
organizations that achieve an overall Star Rating of at least 4.0
qualify for a QBP that is capped at 5 percent (or 10 percent for
certain counties).
The rebate share of the savings will be higher for those
MA organizations that achieve a higher Star Rating. The rebate share of
savings amounts to 50 percent for plans with a rating of 3.0 or fewer
stars, 65 percent for plans with a rating of 3.5 or 4.0 stars, and 70
percent for plans with a rating of 4.5 or 5.0 stars.
In order to estimate the impact of the Star Ratings updates,
baseline assumptions are updated with the assumed Star Ratings changes
described in this proposed rule. We estimated the cumulative impact of
the proposed changes to the Star Ratings calculations since there are
interactions between the changes. The impacts are shown in Table K3.
For the Star Ratings updates, the net impact is estimated to be between
$5.02 billion in 2028 and $0.95 billion in 2036, resulting in a 10-year
net impact estimate of $13.18 billion, which equates to 0.15 percent of
the Medicare payments to private health plans for the years 2027
through 2036.
[[Page 55005]]
[GRAPHIC] [TIFF OMITTED] TP28NO25.020
7. Effects of Continuity in Enrollment for Full-Benefit Dually Eligible
Individuals in a D-SNP and Medicaid Fee-for-Service (Sec. Sec. 422.107
and 422.514)
In the April 2024 final rule, we finalized a package of provisions
at Sec. Sec. 422.503(b)(8), 422.504(a)(20), and 422.514(h) that
require that, beginning in contract year 2027, where an MA organization
offers a D-SNP and the MA organization, its parent organization, or any
entity that shares a parent organization with the MA organization also
contracts with a State as a Medicaid MCO that enrolls full-benefit dual
eligible individuals in the same service areas (even if there is only
partial overlap of the service areas), the MA organization: (a) may
only offer, or have a parent organization or share a parent
organization with another MA organization that offers, one D-SNP for
full-benefit dual eligible individuals, except as otherwise provided in
Sec. 422.514(h)(3); and (b) must limit new enrollment in the D-SNP to
individuals enrolled in, or in the process of enrolling in, the
Medicaid MCO. Per Sec. 422.514(h)(2), beginning in contract year 2030,
such D-SNPs must only enroll (or continue to enroll) individuals
enrolled in (or in the process of enrolling in) the affiliated Medicaid
MCO, except that such D-SNPs may continue to implement deemed continued
eligibility requirements as described in Sec. 422.52(d). We also
codified at Sec. 422.514(h)(3) two exceptions to the requirements at
Sec. 422.514(h)(1) and (2) for exceptions related to instances where
(a) the State Medicaid agency contract (SMAC) with the MA organization
differentiates enrollment into D-SNPs by age group or to align
enrollment in the D-SNP with the eligibility or benefit design used in
the State's Medicaid managed care program and (b) the MA organization,
its parent organization, or an entity that shares a parent organization
with the MA organization offers both HMO D-SNPs and PPO D-SNPs.
In the April 2024 final rule at 89 FR 30802 through 30805, we
stated that our changes would yield an overall annual estimate of net
Part C costs ranging from -$6 million in contract year 2027 to -$207
million in contract year 2034 with total net Part C costs of -$961
million from contract years 2027 through 2034. We estimated an overall
annual estimate of net Part D costs would range from -$7 million in
contract year 2027 to -$286 million in contract year 2034 with total
net Part D costs of -$1,341 million from contract years 2027 through
2034. In the April 2024 final rule (89 FR 30803), we explained that the
regulatory change would shift enrollment from less integrated D-SNPs to
more integrated D-SNPs over time as more D-SNPs align with Medicaid
MCOs. For more context regarding the estimation methodology, see the
April 2024 final rule (89 FR 30802 through 30805).
In this proposed rule, we are proposing to add a third exception at
Sec. 422.514(h)(3) to allow D-SNPs that serve full-benefit dually
eligible individuals in a HIDE SNP or coordination-only D-SNP to
continue enrollment of full-benefit dually eligible individuals in a D-
SNP in the same service area where those individuals are enrolled in
Medicaid FFS. These proposed changes would address the challenges of MA
organizations complying with the requirements at Sec. 422.514(h) in
States where there is no mandatory Medicaid managed care program and
avoid the need for MA organizations in those States to cease enrolling
full-benefit dually eligible individuals who are in Medicaid FFS
starting in 2027 and disenroll those members in 2030 as currently
required under Sec. 422.514(h).
We expect that our proposal to establish a third exception at Sec.
422.514(h)(3) would slightly reduce the savings estimates included in
the April 2024 final rule since the number of D-SNPs and enrollees
impacted by the existing requirement at Sec. 422.514(h) would be
reduced, should our proposal be finalized. We note that we are also
proposing to add a fourth exception at Sec. 422.514(h)(3) to exempt
U.S. Territories that have not adopted Medicare Savings Programs (as
defined at Sec. 435.4) from the requirements at Sec.
422.514(h)(1)(i), but we do not expect that this exception would have
an impact on savings estimates in the April 2024 final rule. The
methodologies and baseline data used in the estimates presented in
Table K4 are consistent with those used in the April 2024 final rule
estimates, except the Tables K4 and K5 estimates exclude certain HIDE
SNPs and coordination-only D-SNPs that
[[Page 55006]]
would be exempt under this proposed rule.
For our proposed change to add a third exception at Sec.
422.514(h)(3), as shown in Table K4, we estimate the Part C costs to
the Medicare Trust Funds range from $0 million in 2027 to $3 million in
2036, summing to $18 million for the years 2027 through 2036. These
estimated costs mean our overall expected Part C savings from
implementation of Sec. 422.514(h) would be $943 million (rather than
$961 million) over 10 years.
[GRAPHIC] [TIFF OMITTED] TP28NO25.021
Table K5 shows the estimated Part D costs of the proposed amendment
to Sec. 422.514(h) range from $0 million in 2027 to $4 million in
2036, summing to $24 million for the years 2027 through 2036. These
estimated costs mean our overall expected Part D savings from
implementation of Sec. 422.514(h) would be $1,317 million (rather than
$1,341 million) over 10 years.
[GRAPHIC] [TIFF OMITTED] TP28NO25.022
8. Effects of Rescinding the Mid-Year Supplemental Benefits Notice
This provision proposes rescinding the requirement established in
the April 2024 final rule (89 FR 30448) that will require MA
organizations to provide annual mid-year notices to enrollees regarding
unused supplemental benefits. The requirement will take effect on
January 1, 2026, and requires MA organizations to mail a notice between
June 30 and July 31 of each plan year to enrollees listing any
supplemental benefits they had not utilized during the first 6 months
of the plan year. Note that on September 8, 2025, CMS announced its
decision to delay enforcement of the requirements under Sec. Sec.
422.111(l) and 422.2267(e)(42) until further notice. MA organizations
are not expected to complete the Mid-Year Supplemental Benefits Notice
requirements for the 2026 plan year.
a. Information Collection Requirements
In anticipation of this rescission, CMS removed the associated
information collection requirements from PRA package CMS R-267 prior to
its submission to OMB for review. Therefore, there are no current
information collection requirements associated with this provision that
require OMB review or approval for rescission.
The rescission of this requirement would prevent the burden that
would have been imposed on MA organizations. Based on updated BLS wage
data, this would prevent approximately $498,522 in one-time costs for
system updates and policy changes, and approximately $1,355,520
annually in printing and mailing costs.
b. Updated One-Time Cost Prevention
The rescission of this requirement would prevent approximately
$499,091 in one-time costs for system updates and policy changes across
774 prepaid contracts. This includes $430,344 (774 prepaid contracts *
4 hours * $139.00/hour) for software system updates performed by
software developers, and $68,746.68 (774 prepaid contracts * 1 hour *
$88.82/hour) for policy and procedure updates performed by business
operations specialists.
c. Annual Cost Prevention
The rescission of this requirement would prevent approximately
$1,355,520 per year in printing and mailing costs across 774 prepaid
contracts serving 32 million enrollees. This includes $451,840
(32,000,000 notices x $0.01412/page) for single-page mailings, with an
estimated average of 3 pages per enrollee resulting in total annual
cost prevention of $1,355,520 (32,000,000 notices x 3 pages x $0.01412/
page).
Over a 10-year period from 2027 to 2036, we estimate this provision
would save approximately $14.1 million (approximately $1.4 million per
year), primarily from the elimination of printing and mailing costs
that would have been incurred annually, plus the one-time system and
policy update costs prevented.
This proposed rescission is consistent with E.O. 14192,
``Unleashing Prosperity through Deregulation,'' which instructs federal
agencies to review regulations to alleviate unnecessary regulatory
burdens. After reviewing stakeholder feedback and current data on
supplemental benefit utilization, CMS determined that the Mid-Year
Notice requirement imposes a significant administrative burden on MA
organizations that outweighs the intended benefit. Additionally, recent
[[Page 55007]]
evidence suggests that enrollees are utilizing supplemental benefits
when they need them, with 70 percent of MA enrollees in a recent survey
reporting they had used at least one supplemental benefit in the past
year.
9. Effects of Waiver of Part D Customer Call Center Hours for All
Regions Served by LI NET
This provision adds a new waiver to the list of Part D requirements
waived for the LI NET program by exempting the customer call center
hours of operation requirements in Sec. 423.128(d)(1)(i)(A).
Currently, Part D sponsors are required to maintain toll-free customer
call centers open from 8:00 a.m. to 8:00 p.m. in all regions served by
the Part D plan. This waiver allows the LI NET program to operate its
customer call center Monday through Friday, except holidays, from 8:00
a.m. to 7:00 p.m. Eastern Time.
We estimate that this waiver will result in cost savings of
approximately $800,000 to $1,000,000 annually for the LI NET program.
These savings result from reduced operational costs associated with
maintaining extended customer call center hours.
The reduced hours are appropriate for the LI NET program due to
several factors: low call volume after 7:00 p.m. ET historically;
automatic enrollment of 90 to 95 percent of LI NET beneficiaries by
CMS, reducing the need for prospective enrollee assistance; the
transitional nature of the LI NET program; LI NET's open formulary
structure; availability of a 24-hour call center serving pharmacists
and pharmacies to address the majority of inquiries.
This provision would not adversely impact the LI NET sponsor,
individuals' access to prescription drug benefits, or the Medicare
Trust Fund. The 24-hour pharmacy call center ensures continued access
to necessary support, while the reduced customer call center hours
align with actual usage patterns.
D. Alternatives Considered
In this section, CMS includes discussions of alternatives
considered. Several provisions of this proposed rule would, if
finalized, codify existing policy where we have evidence, as discussed
in the appropriate preamble sections, that the codification existing
policy would not affect compliance. In such cases, the preamble
typically discusses the effectiveness metrics of these provisions for
public health.
1. Waiver of Part D Customer Call Center Hours for All Regions Served
by LI NET (Sec. 423.2536)
The first alternative we considered would maintain the current
customer call center hours requirement. The LI NET program would comply
with the existing customer call center hours requirement in Sec.
423.128(d)(1)(i)(A), maintaining operations from 8:00 a.m. to 8:00 p.m.
in all regions served by the Part D plan. This alternative would result
in continued operational costs of approximately $800,000 to $1,000,000
annually compared to the proposed waiver. We reject this alternative
because maintaining extended hours is not cost-effective given the
historically low call volume after 7:00 p.m. ET. The automatic
enrollment process for 90 to 95 percent of LI NET beneficiaries
significantly reduces customer service needs, making the extended hours
unnecessary. The continued availability of 24-hour pharmacy support
ensures adequate access to assistance.
The second alternative we considered would eliminate the customer
call center requirements for LI NET. The LI NET program would be
completely exempt from maintaining any customer call center, relying
solely on the 24-hour pharmacy call center. This alternative would
result in maximum cost savings but could potentially impact beneficiary
access to customer service. We reject this alternative because it could
create access barriers for the 5 to 10 percent of LI NET beneficiaries
who are not automatically enrolled and may need customer service
assistance. Maintaining customer call center operations during standard
business hours (8:00 a.m. to 7:00 p.m. ET) provides an appropriate
balance between cost efficiency and beneficiary access to support
services.
The proposed provision represents the optimal balance between
operational efficiency and beneficiary protection, providing necessary
customer service access while eliminating unnecessary costs associated
with low-utilization hours.
E. Regulatory Review Costs
If regulations impose administrative costs on reviewers, such as
the time needed to read and interpret the proposed rule, then we should
estimate the cost associated with regulatory review. We have received
approximately 2,000 comments specific to the provisions of our recent
proposed rules, and we estimate that a similar number will review this
rule upon publication in the Federal Register.
Using the BLS wage information for medical and health service
managers (code 11-9111), we estimate that the cost of reviewing this
proposed rule is $132.44 per hour, including fringe benefits, overhead,
and other indirect costs (http://www.bls.gov/oes/current/oes_nat.htm).
Assuming an average reading speed, we estimate that it will take
approximately 10 hours for each person to review this proposed rule.
For each entity that reviews the rule, the estimated cost is therefore
$1,324.40 (10 hours x $132.44). Therefore, we estimated that the
maximum total cost of reviewing the proposed rule is $2.6 million
($1,324.40 x 2,000 reviewers). However, we expected that many
reviewers, for example pharmaceutical companies and PBMs, will not
review the entire rule but review just the sections that are relevant
to them. We expect that on average (with fluctuations) 10 percent of
the proposed rule will be reviewed by an individual reviewer; we
therefore estimate the total cost of reviewing to be $0.3 million.
We noted that this analysis assumes one reader per contract. Some
alternatives included assuming one reader per parent organization.
Using parent organizations instead of contracts would reduce the number
of reviewers. However, we believe it is likely that review will be
performed by contract. The rationale for this is that a parent
organization might have local reviewers assessing potential region-
specific effects from the rule.
F. Accounting Statement and Table
The following table summarizes costs, savings, and transfers by
provision. As required by OMB Circular A-4 (available at https://trumpwhitehouse.archives.gov/sites/whitehouse.gov/files/omb/circulars/A4/a-4.pdf, in Table K6, we have prepared an accounting statement
showing the transfers and costs associated with the provisions of this
rule over an 11-year period or for contract years 2026 through 2036.
[[Page 55008]]
[GRAPHIC] [TIFF OMITTED] TP28NO25.023
G. Impact on Small Businesses--Regulatory Flexibility Analysis (RFA)
The RFA, as amended, requires agencies to analyze options for
regulatory relief of small businesses if a rule has a significant
impact on a substantial number of small entities. For purposes of the
RFA, small entities include small businesses, nonprofit organizations,
and small governmental jurisdictions.
We believe this proposed rule will have a direct economic impact on
beneficiaries, health insurance plans, and third-party marketing
organizations (TPMOs). Based on the size standards set by the Small
Business Administration (SBA) effective March 17, 2023, (for details,
see the Small Business Administration's website at https://www.sba.gov/document/support-table-size-standards), Direct Health and Medical
Insurance Carriers, classified using the NAICS code 524114, have a $47
million threshold for ``small size.'' Many Medicare Advantage
organizations (about 30 to 40 percent) are not-for-profit, which allows
them to qualify as ``small entities'' so long as they are independently
owned and operated and nondominant in their field. We believe all of
the not-for-profit organizations qualify as small under the
aforementioned criteria. Of the 1,069 businesses using this NAICS code,
we believe 799 (or 74.8 percent) are small businesses. Third party
marketing organizations, which CMS has usually determined to belong to
the category of Insurance Agencies and Brokerages (NAICS code of
524210), have a small size threshold of $15 million. In total, 98.9
percent (119,114 out of 120,434) are considered small.
We are certifying that, if finalized, this rule will not have a
significant economic impact on a substantial number of small entities.
The analysis in this rule provides descriptions of the statutory
provisions, identifies the policies, and presents rationales for our
decisions and, where relevant, alternatives that were considered. The
analysis discussed in this section and throughout the preamble of this
proposed rule constitutes our RFA analysis. The RFA does not define the
terms ``significant economic impact'' or ``substantial number.'' The
SBA advises that this absence of statutory specificity allows what is
``significant'' or ``substantial'' to vary, depending on the problem
that is to be addressed in the rulemaking, the rule's requirements, and
the preliminary assessment of the rule's impact. Nevertheless, HHS
typically considers a ``significant economic impact'' to be 3 to 5
percent or more of the affected entities' costs or revenues, and a
``substantial number'' to mean 5 percent or more of affected small
entities within a given industry. To explain our position, we will
first note certain operational aspects of the Medicare program.
Each year, MA organizations submit a bid for each plan for
furnishing Parts A and B benefits and the entire bid amount is paid to
the plan by the government through the Medicare Trust Funds, if the
plan's bid is below an administratively set benchmark. If the plan's
bid exceeds that benchmark, the beneficiary pays the difference in the
form of a basic premium (note that, historically, only 2 percent of
plans bid above the benchmark, and they contain roughly 1 percent of
all plan enrollees). Part D sponsors also submit a bid for each plan,
and the payments made to stand-alone Part D plans (PDPs) are covered by
the Supplementary Medical Insurance Medicare Trust Fund. PACE
organizations are paid a capitation amount that is funded by both the
Medicare Trust Funds (the Hospital Insurance and Supplementary Medical
Insurance trust funds) as well as the State Medicaid programs they
contract with.
MA plans can also offer enhanced benefits--that is, benefits not
covered under Traditional Medicare. These enhanced benefits are paid
for through enrollee premiums, rebates or a combination. Under the
statutory payment formula, if the plan bid submitted by an MA
organization for furnishing Part A and B benefits is lower than the
administratively set benchmark, the government pays a portion of the
difference to the plan in the form of a rebate. The rebate must be used
to provide supplemental benefits (that is, benefits not covered under
Traditional Medicare) and/or to lower beneficiary cost sharing, Part B
or Part D premiums. Some examples of these supplemental benefits
include vision, dental, and hearing, fitness and worldwide coverage of
emergency and urgently needed services.
Part D sponsors submit bids and plans are paid through a
combination of Medicare funds and beneficiary premiums. In addition,
for enrolled low-income beneficiaries, Part D plans receive special
government payments to cover most of premium and cost sharing amounts
those beneficiaries would otherwise pay.
Thus, the cost of providing services by these insurers is funded by
the government and, in some cases, by enrollee premiums. As a result,
MA plans, Part D plans, Prescription Drug Plans, and PACE organizations
are not expected to incur burden or losses since the private companies'
costs are being supported by the government and enrolled beneficiaries.
This lack of expected burden applies to both large and small health
plans.
The preceding analysis shows that meeting the direct cost of the
rule does not have a significant economic impact on a substantial
number of small entities, as required by the RFA. Besides the direct
costs discussed earlier, there are certain indirect consequences of
these provisions which also create impact. We have already explained
that 98 percent of MA plans (including MA-PD plans) bid below the
benchmark. Thus, their estimated costs for the coming year are fully
paid by the Federal Government, given that as previously noted, under
the statutory payment formula, if a bid submitted by a MA plan for
furnishing Part A and B benefits is lower than the administratively set
benchmark, the government pays a portion of the difference to the plan
in the form of a beneficiary rebate, which must be used
[[Page 55009]]
to provide supplemental benefits and/or lower beneficiary cost sharing,
Part B or Part D premiums. If the plan's bid exceeds the
administratively set benchmark, the beneficiary pays the difference in
the form of a basic premium. However, as also noted previously, the
number of MA plans bidding above the benchmark to whom this burden
applies does not meet the RFA criteria of a significant number of
plans. If the provisions of the rule were to cause bids to increase and
if the benchmark remains unchanged or increases by less than the bid
does, the result could be a reduced rebate. Plans have different ways
to address this in the short-term, such as reducing administrative
costs, modifying benefit structures, and/or adjusting profit margins.
These decisions may be driven by market forces. Part of the challenge
in pinpointing the indirect effects is that there are many other
factors combining with the effects of the rule, making it effectively
impossible to determine whether a particular policy had a long-term
effect on bids, administrative costs, margins, or supplemental
benefits.
As indicated in Table K1, the proposals described in this rule are
expected to result in cost savings amounting to approximately $9.1
million in 2027 and $9.7 million in subsequent years. Most affected
entities are expected to have costs savings as a result of this rule.
For example, we anticipate that the 697 MA organizations will
experience a net cost savings despite some new costs. The Special
Enrollment Period for Provider Terminations provision is expected to
result in new costs of $775,064 in 2027 for 697 MA organizations, equal
to $1,112 per organization. The provisions on Removing Rules on Time
and Manner of Beneficiary Outreach are expected to reduce costs for 697
MA organizations by over $45,000 in 2027, while the provision
Rescinding the Annual Health Equity Analysis of Utilization Management
Policies and Procedures is expected to lower costs for 697 MA
organizations by $813,805 in 2027 and $785,367 annually in subsequent
years. Likewise, the provision Rescinding the Mid-Year Supplemental
Benefits Notice is estimated to result in $1,854,611 in cost savings
for 774 MA organization contracts in 2026 and $1,355,520 annually
thereafter, or $2,396 in year one and $1,751 per year after that. For
those Medicare Advantage organizations to which all of these provisions
apply, expected net cost savings will be $2,396 for 2026, $1,874 for
2027, and $2,878 per year starting in 2028.
Many of the other entities affected by the provisions of this
proposed rule are similarly expected to see cost savings, though others
will see negligible cost increases. The provision Removing Account-
based Medical Plans from Entities Required to Provide Creditable
Coverage Disclosures is expected to save 7,049 group health plans about
$90,000 collectively every year, or approximately $13 per entity. The
provision revising the requirement that TPMOs retain calls for six
years is expected to save organizations $6.72 million annually starting
in 2027. The passive enrollment provision is expected to result in
additional costs of $201,881 annually for an estimated 11 D-SNP
contracts, or $18,353 per contract. Any D-SNPs participating in passive
enrollment would be approved to do so after consulting with the State
Medicaid agency that contracts with the D-SNP and when CMS determines
that the passive enrollment will promote continuity of care and
integrated care. In most cases, these entities would be expected to
benefit from the aforementioned cost savings this rule will produce for
MA organizations, and so any D-SNPs approved to participate in passive
enrollment would likely incur net costs of $16,479 in 2027, while for
2028 and thereafter the net costs would be $15,475 per contract.
We reiterate our belief that this proposed rule will not have a
significant economic impact on a substantial number of small entities.
In the case of TPMOs, though we do not know how many are operating in
the Medicare space, this rule is expected to produce cost savings for
them. The vast majority of MA organizations are likewise expected to
see cost savings as a result of this rule. Even among the D-SNPs that
are expected to incur new net costs, these costs are not expected to
have a significant economic impact. The threshold to qualify as a small
business for Direct Health and Medical Insurance Carriers is $47
million of average annual receipts. Presuming some may be very small
entities, we may estimate that a few have much smaller annual receipts
than the threshold established by the SBA. The 2022 Economic Census
indicates that insurance firms with fewer than 10 employees averaged
nearly $3.6 million in receipts for that year.\128\ Even if receipts
have not increased in the years since, the costs incurred by a D-SNP
would likely fall well below HHS's 3 to 5 percent threshold for
significance. Finally, we also reiterate that Medicare Advantage
organizations, including D-SNPs, are expected to include the costs of
compliance in their bids. For these reasons, we do not believe these
costs result in a significant economic impact on the affected plans. We
request comment on the assessment of this rule's impact on small
businesses.
---------------------------------------------------------------------------
\128\ US Census Bureau, 2022 SUSB Annual Data Tables by
Establishment Industry, https://www.census.gov/data/tables/2022/econ/susb/2022-susb-annual.html, accessed September 22, 2025.
---------------------------------------------------------------------------
H. Unfunded Mandates Reform Act (UMRA)
Section 202 of UMRA also requires that agencies assess anticipated
costs and benefits before issuing any rule whose mandates require
spending in any 1 year of $100 million in 1995 dollars, updated
annually for inflation. In 2025, that threshold is approximately $187
million. This proposed rule is not anticipated to have an unfunded
effect on State, local, or Tribal governments, in the aggregate, or on
the private sector of $187 million or more.
Executive Order 13132 establishes certain requirements that an
agency must meet when it promulgates a rule that imposes substantial
direct requirement costs on State and local governments, preempts State
law, or otherwise has federalism implications. Since this proposed rule
does not impose any substantial costs on State or local governments,
preempt State law or have federalism implications, the requirements of
Executive Order 13132 are not applicable.
I. Federalism
Executive Order 13132 establishes certain requirements that an
agency must meet when it promulgates a rule that imposes substantial
direct requirement costs on State and local governments, preempts State
law, or otherwise has federalism implications. Since this proposed rule
does not impose any substantial costs on State or local governments,
preempt State law or have federalism implications, the requirements of
Executive Order 13132 are not applicable.
J. Executive Order (E.O.) 14192, ``Unleashing Prosperity Through
Deregulation''
E.O. 14192, titled ``Unleashing Prosperity Through Deregulation''
was issued on January 31, 2025, and requires that ``any new incremental
costs associated with new regulations shall, to the extent permitted by
law, be offset by the elimination of existing costs associated with at
least 10 prior regulations.'' This proposed rule, if finalized as
proposed, is expected to be an E.O. 14192 deregulatory action. We
estimate that this rule generates $8
[[Page 55010]]
million in annualized cost savings at a 7 percent discount rate,
discounted relative to year 2024, over a perpetual time horizon.
K. Conclusion
This proposed rule, if finalized, will result in net annualized
cost savings ranging between $8.9 and $8.7 million for calendar years
2026 to 2036, at the 3% and 7% discount rates, respectively. These
savings are primarily attributable to the provision revising aspects of
TPMO oversight. This proposed rule will also result in net annualized
monetized transfers ranging between $1.18 billion and $1.16 billion for
calendar years 2026 to 2036, at the 3% and 7% discount rates
respectively. These transfers primarily result from changing aspects of
the MA and Part D Plan Quality Ratings System.
List of Subjects
42 CFR Part 422
Administrative practice and procedure, Health facilities, Health
maintenance organizations (HMO), Medicare, Penalties, Privacy,
Reporting and recordkeeping requirements.
42 CFR Part 423
Administrative practice and procedure, Health facilities, Health
maintenance organizations (HMO), Medicare, Penalties, Privacy,
Reporting and recordkeeping requirements.
For the reasons set forth in the preamble, the Centers for Medicare
& Medicaid Services proposes to amend 42 CFR Chapter IV as set forth
below:
PART 422--MEDICARE ADVANTAGE PROGRAM
0
1. The authority for part 422 continues to read as follows:
Authority: 42 U.S.C. 1302, 1306, 1395w-21 through 1395w-28, and
1395hh.
0
2. Section 422.60 is amended by--
0
a. Revising paragraphs (g)(2)(i) and (2)(ii); and
0
b. In paragraph (g)(2)(vi) removing the phrase ``capacity to
passively'' and adding in its place the phrase ``capacity, including
care coordinator staffing capacity, to passively''.
The revisions read as follows:
Sec. 422.60 Election process.
* * * * *
(g) * * *
(2) * * *
(i) Operate as an applicable integrated plan as defined at Sec.
422.561.
(ii) Provide continuity of care for all incoming enrollees that
complies with Sec. 422.112(b)(8)(i)(B), with the exception that the
minimum transition period is 120 days.
* * * * *
0
3. Section 422.62 is amended by revising paragraphs (b)(3) introductory
text, (b)(5) introductory text, (b)(20) introductory text, (b)(23)
introductory text, (b)(23)(ii), (b)(23)(iii), and (b)(27) to read as
follows.
Sec. 422.62 Election of coverage under an MA plan.
(b) * * *
(3) This SEP requires CMS approval prior to use. The individual
must use a CMS-operated election mechanism, in a form and manner
specified by CMS, to make an election using this SEP. To be eligible,
the individual must demonstrate to CMS that--
* * * * *
(5) The individual is enrolled in an MA plan offered by an MA
organization that has been sanctioned by CMS and elects to disenroll
from that plan in connection with the matter(s) that gave rise to that
sanction. This SEP requires CMS approval prior to use. The individual
must receive a notice, as described in Sec. 422.62(b)(5)(i), to make
an election using this SEP.
* * * * *
(20) The individual was not adequately informed of a loss of
creditable prescription drug coverage, or that they never had
creditable coverage. CMS determines eligibility for this SEP on a case-
by-case basis, based on its determination that an entity offering
prescription drug coverage failed to provide accurate and timely
disclosure of the loss of creditable prescription drug coverage or
whether the prescription drug coverage offered is creditable. This SEP
requires CMS approval prior to use. The individual must use a CMS-
operated election mechanism, in a form and manner specified by CMS, to
make an election using this SEP.
* * * * *
(b) * * *
(23) Individuals affected by a change in plan provider network are
eligible for a SEP that permits disenrollment from the MA plan that has
changed its network to another MA plan or to original Medicare. This
SEP can be used only once per change in the provider network.
* * * * *
(ii) An enrollee is affected by a network change when the enrollee
is assigned to, currently receiving care from, or has received care
within the past 3 months from a provider or facility being terminated
from the provider network.
(iii) The MA plan that has changed its network must include in the
provider termination notice described at Sec. 422.111(e) information
regarding the affected enrollee's eligibility for the SEP and how to
use the SEP.
* * * * *
(27) The individual meets such other exceptional conditions as CMS
may provide. This SEP requires CMS approval prior to use. The
individual must use a CMS-operated mechanism, in a form and manner
specified by CMS, to make an election using this SEP.
* * * * *
0
4. Section 422.66 is amended by adding paragraph (g) to read as
follows:
Sec. 422.66 Coordination of enrollment and disenrollment through MA
organizations.
* * * * *
(d) * * *
* * * * *
(g) Elections requiring prior CMS approval.
(1) CMS approval. Special Election Periods specified in Sec.
422.66(g)(2) require CMS approval before an individual can use the SEP
to make an election.
(i) CMS approval is provided for MA plan elections either through
the use of a CMS-operated election mechanism or through the
individual's receipt of a notice which explains eligibility for the SEP
and election instructions.
(ii) MA plans may not transmit elections to CMS using the specified
SEPs without prior CMS approval.
(2) Special election periods. All of the following SEPs require CMS
approval prior to use:
(i) SEP for contract violation, Sec. 422.62(b)(3).
(ii) SEP for individuals who disenroll in connection with CMS
sanction, Sec. 422.62(b)(5).
(iii) SEP for individuals who were not adequately informed of a
loss of creditable prescription drug coverage, Sec. 422.62(b)(20).
(iv) SEP for other exceptional circumstances, Sec. 422.62(b)(27).
Sec. 422.101 [Amended]
0
5. Section 422.101 is amended by--
0
a. In paragraph (f)(3)(iv)(B) removing the phrase ``June 1st and
November 30th of each calendar year'' and adding in its place the
phrase ``January 1st and March 31st or October 1st and December 31st of
each contract year''; and
0
b. In paragraph (f)(3)(iv)(G) removing the phrase ``opportunity to
submit a corrected off-cycle revision between June 1st and November
30th of each year.'' and adding in its place the phrase ``opportunity
per contract year to submit a corrected off-cycle revision between
[[Page 55011]]
January 1st and March 31st or October 1st and December 31st of each
contract year.
Sec. 422.102 [Amended]
0
6. Section 422.102 is amended by--
0
a. Removing and reserving paragraph (e); and
0
b. In paragraph (f)(1)(iii)(G), removing the phrase ``Cannabis
products.'' and adding in its place the phrase ``Cannabis products that
are illegal under applicable State or Federal law, including the
Federal Food, Drug, and Cosmetic Act.''
0
7. Section 422.107 is amended by adding paragraph (d)(1)(i) and adding
and reserving paragraph (d)(1)(ii) to read as follows:
Sec. 422.107 Requirements for dual eligible special needs plans.
* * * * *
(d) * * *
(1) * * *
(i) In conjunction with Sec. 422.514(h), to the extent that a
State Medicaid agency contract allows a dual eligible special needs
plan established through this paragraph (d)(1) to enroll full benefit
dually eligible beneficiaries, the contract must stipulate that such
full benefit dually eligible beneficiaries cannot be enrolled in a
Medicaid managed care organization that is owned and controlled by an
entity other than the MA organization, its parent organization, or an
entity that shares a parent organization with the MA organization.
(ii) [Reserved]
* * * * *
Sec. 422.111 [Amended]
0
8. Section 422.111 is amended by removing paragraph (l).
0
9. Section 422.112 is amended by revising paragraph (a)(8) to read as
follows:
Sec. 422.112 Access to services.
* * * * *
(a) * * *
(8) Cultural considerations. Ensure that services are provided in a
culturally competent manner to all enrollees, including those with
limited English proficiency or reading skills, and diverse cultural and
ethnic backgrounds.
* * * * *
Sec. 422.137 [Amended]
0
10. Section 422.137 is amended by removing paragraphs (c)(5), (d)(6),
and (d)(7).
Sec. 422.152 [Amended]
0
11. Section 422.152 is amended by removing paragraph (a)(5).
0
12. Section 422.164 is amended by revising paragraph (e)(2) and adding
paragraph (e)(3) to read as follows:
Sec. 422.164 Adding, updating, and removing measures.
* * * * *
(e) * * *
(2) CMS will announce the removal of a measure based upon its
application of paragraph (e)(1) of this section through the process
described for changes in and adoption of payment and risk adjustment
policies in section 1853(b) of the Act in advance of the measurement
period or will propose and finalize the removal of the measure through
rulemaking in advance of the measurement period.
(3) CMS will propose and finalize the removal of a measure for any
reason not stated in paragraph (e)(1) of this section through
rulemaking in advance of the measurement period.
* * * * *
0
13. Section 422.166 is amended by--
0
a. In paragraph (f)(1) removing the phrase ``Through the 2026 Star
Ratings, this rating-specific'' and adding in its place the phrase
``This rating-specific'';
0
b. Removing paragraph (f)(3); and
0
c. Revising paragraph (h)(2) to read as follows:
Sec. 422.166 Calculation of Star Ratings.
* * * * *
(h) * * *
(2) Plan preview of the Star Ratings. CMS will have two plan
preview periods before each Star Ratings release during which MA
organizations can preview their preliminary Star Ratings data in HPMS
prior to display on the Medicare Plan Finder. During the second plan
preview, CMS will display de-identified contract-level sample data for
one of each type of measure needed to replicate the cut point
methodology, as determined by CMS.
* * * * *
Sec. 422.308 [Amended]
0
14. Section 422.308 is amended in paragraph (c)(1) by removing the word
``gender'' and adding in its place the word ``sex''.
0
15. Section 422.310 is amended by revising paragraph (f) to read as
follows:
Sec. 422.310 Risk adjustment data.
* * * * *
(f) Use and release of data. Regarding the data described in
paragraphs (a) through (d) of this section, CMS may use and release the
minimum data it determines is necessary in accordance with CMS data
sharing procedures and applicable Federal laws, subject to the
aggregation of dollar amounts reported for the associated encounter to
protect commercially sensitive data, unless authorized by other
applicable laws.
* * * * *
0
16. Section 422.510 is amended by adding paragraphs (a)(4)(xvii),
(b)(2)(i)(D), and (c)(2)(iv) to read as follows:
Sec. 422.510 Termination of contract by CMS.
(a) * * *
(4) * * *
(xvii) Is no longer eligible to offer a dual eligible special needs
plan because the MA organization does not hold a contract consistent
with Sec. 422.107(b) with the State Medicaid agency.
(b) * * *
(2) * * *
(i) * * *
(D) The contract is being terminated based on Sec.
422.510(a)(4)(xvii).
(c) * * *
(2) * * *
(iv) The contract is being terminated based on paragraph
(a)(4)(xvii) of this section.
* * * * *
0
17. Section 422.514 is amended by adding paragraphs (h)(3)(iii), (iv),
and (v) to read as follows:
Sec. 422.514 Enrollment requirements.
* * * * *
(h) * * *
(3) * * *
(iii) If the State Medicaid agency's contract with the MA
organization permits full benefit dually eligible beneficiaries to be
enrolled in a plan that is not a HIDE SNP or FIDE SNP per Sec.
422.107(d)(1)(i), or a HIDE SNP with the majority of its enrollees in
Medicaid fee-for-service, the MA organization, its parent organization,
or an entity that shares a parent organization with the MA organization
may offer one or more additional D-SNPs for full benefit dual eligible
individuals in the same service area.
(iv) MA organizations with D-SNPs subject to paragraph (h)(3)(iii)
must comply with responsibilities at Sec. 422.562(a)(5).
(v) If a U.S. Territory has not adopted Medicare Savings Programs,
as defined in 42 CFR 435.4, an MA organization operating in such U.S.
Territory is exempt from the requirements in paragraph (h)(1)(i) of
this section.
Sec. 422.752 [Amended]
0
18. Section 422.752 is amended by removing and reserving paragraph (d).
0
19. Section 422.2261 is amended by adding paragraph (a)(3) to read as
follows:
[[Page 55012]]
Sec. 422.2261 Submission, review, and distribution of materials.
(a) * * *
(3)(i) MA organizations offering dual eligible special needs plans
with exclusively aligned enrollment subject to Sec. 422.107(e) must
submit all materials for the contract in HPMS under the MA
organization's contract number.
(ii) MA organizations and third-party marketing organizations may
not submit materials for the contract under the organization's Multi-
Contract Entity number as described in Sec. 422.2262(d)(2)(i).
* * * * *
Sec. 422.2262 [Amended]
0
20. Section 422.2262 is amended by removing paragraphs (a)(1)(i) and
(a)(1)(ii) and redesignating paragraphs (a)(1)(iii) through (xix) as
paragraphs (a)(1)(i) through (xvii), respectively.
* * * * *
0
21. Section 422.2264 is amended by--
0
a. In paragraph (c)(1)(ii)(D), removing the phrase ``Cards, but not
including Scope'' and adding in its place ``Cards and Scope''; and
0
b. Revising paragraphs (c)(2)(i), (c)(3) introductory text, and
(c)(3)(i).
The revisions read as follows:
Sec. 422.2264 Beneficiary contact.
* * * * *
(c) * * *
(2) * * *
(i) If a marketing event directly follows an educational event, the
beneficiary must be notified that the educational event is ending and a
marketing event will begin shortly and be given a sufficient
opportunity to leave the educational event prior to the start of the
marketing event.
* * * * *
(3) Personal marketing appointments are those appointments that are
tailored to an individual or small group (for example, a married
couple) for purposes of discussing marketing topics. Personal marketing
appointments are not defined by the location.
(i) Prior to the personal marketing appointment, the MA plan (or
agent or broker, as applicable) must agree upon and record the Scope of
Appointment with the beneficiary(ies). The Scope of Appointment must be
in writing for in-person personal marketing appointments.
* * * * *
0
22. Section 422.2267 is amended by--
0
a. Revising paragraphs (e)(5)(ii)(B)(1) and (e)(12)(ii)(D);
0
c. Removing and reserving paragraph (e)(31);
0
d. Revising paragraph (e)(41) introductory text and (e)(41)(ii); and
0
e. Removing paragraph (e)(42).
The revisions read as follows:
Sec. 422.2267 Required materials and content.
* * * * *
(e) * * *
(5) * * *
(ii) * * *
(B) * * *
(1) Deductible; the initial coverage phase; coverage gap for a year
preceding 2025; and catastrophic coverage.
* * * * *
(12) * * *
(ii) * * *
(D) Provide information about the annual coordinated election
period and the MA open enrollment period, as well as explain that an
enrollee who is affected by the provider termination is eligible for a
special election period, as specified in Sec. 422.62(b)(23) (including
the start and end dates of that SEP), and Medigap guaranteed issue (GI)
rights. The notice must advise individuals who have coverage through an
employer or union to contact their benefits administrator before
leaving their current MA plan to find out how making such a change may
affect their employer or union health benefits.
* * * * *
(31) [Reserved]
* * * * *
(41) Third-party marketing organization disclaimer. This is
standardized content. If a TPMO does not sell for all MA organizations
in the service area the disclaimer consists of the statement: ``We do
not offer every plan available in your area. Currently we represent
[insert number of organizations] organizations which offer [insert
number of plans] products in your area. Please contact Medicare.gov or
1-800-MEDICARE to get information on all of your options.'' If the TPMO
sells for all MA organizations in the service area the disclaimer
consists of the statement: ``Currently we represent [insert number of
organizations] organizations which offer [insert number of plans]
products in your area. You can always contact Medicare.gov or 1-800-
MEDICARE for help with plan choices.'' The MA organization must ensure
that the disclaimer is as follows:
* * * * *
(ii) Verbally conveyed during sales calls prior to the discussion
of any benefits.
* * * * *
0
23. Section 422.2274 is amended by--
0
a. In paragraph (b)(3), removing the phrase ``prior to meeting with
potential enrollees'' and adding in its place ``prior to a personal
marketing appointment''; and
0
b. Revising paragraphs (c)(9) and (g)(2)(ii).
The revisions read as follows:
Sec. 422.2274 Agent, broker, and other third-party requirements.
* * * * *
(c) * * *
(9) Establish and maintain a system for confirming all of the
following:
(i) Beneficiaries enrolled by agents or brokers understand the
product, including the rules applicable under the plan.
(ii) Agents and brokers appropriately complete Scope of Appointment
records for all personal marketing appointments (including telephonic
and walk-in).
* * * * *
(g) * * *
(2) * * *
(ii) Record and retain for 6 years all marketing and sales calls,
including the audio portion of calls via web-based technology, in their
entirety.
PART 423--VOLUNTARY MEDICARE PRESCRIPTION DRUG BENEFIT
0
24. The authority for part 423 continues to read as follows:
Authority: 42 U.S.C. 1302, 1306, 1395w-101 through 1395w-152,
and 1395hh.
0
25. Section 423.1 is amended by adding ``1860D-14C. Manufacturer
Discount Program.'' in numerical order in paragraph (a)(1) to read as
follows:
Sec. 423.1 Basis and scope.
(a) * * *
(1) * * *
1860D-14C. Manufacturer Discount Program.
* * * * *
0
26. Section 423.4 is amended by adding the definitions of ``Geographic
area'', ``Outlier prescriber of opioids'', ``Persistent outlier
prescriber of opioids'', and ``Specialty'' in alphabetical order to
read as follows:
Sec. 423.4 Definitions
* * * * *
Geographic area means the state in which a prescriber is
practicing.
* * * * *
Outlier prescriber of opioids means a prescriber who is a
statistical outlier compared to their peers in a specialty and
geographic area.
* * * * *
Persistent outlier prescriber of opioids means an outlier
prescriber identified by CMS in three consecutive outlier prescriber
notifications.
* * * * *
[[Page 55013]]
Specialty means the National Plan Provider Enumeration System
(NPPES) taxonomy of a prescriber.
* * * * *
0
27. Section 423.32 is amended by adding paragraph (k) to read as
follows:
Sec. 423.32 Enrollment process.
* * * * *
(k) Enrollments requiring prior CMS approval--
(1) CMS approval. Special Election Periods specified in Sec.
423.32(k)(2) require CMS approval before an individual can use the SEP
to make an enrollment election. CMS approval is provided for Part D
enrollments either through the use of a CMS-operated election mechanism
or through the individual's receipt of a notice which explains
eligibility for the SEP and election instructions. Part D plans may not
transmit enrollment elections to CMS using the specified SEPs without
prior CMS approval.
(2) Special election periods. All of the following SEPs require CMS
approval prior to use:
(i) SEP for individuals who were not adequately informed of a loss
of creditable prescription drug coverage, Sec. 423.38(c)(2).
(ii) SEP for contract violation, Sec. 423.38(c)(8).
(iii) SEP for individuals who disenroll in connection with CMS
sanction, Sec. 423.38(c)(12).
(iv) SEP for other exceptional circumstances, Sec. 423.38(c)(36).
* * * * *
0
28. Section 423.36 is amended by adding paragraph (g) to read as
follows:
Sec. 423.36 Disenrollment process.
* * * * *
(g) Disenrollments requiring prior CMS approval--
(1) CMS approval. Special Election Periods specified in Sec.
423.36(g)(2) require CMS approval before an individual can use the SEP
to make a disenrollment election. CMS approval is provided for Part D
disenrollments either through the use of a CMS-operated election
mechanism or through the individual's receipt of a notice which
explains eligibility for the SEP and election instructions. Part D
plans may not transmit disenrollment elections to CMS using the
specified SEPs without prior CMS approval.
(2) Special election periods. All of the following SEPs require CMS
approval prior to use:
(i) SEP for individuals who were not adequately informed of a loss
of creditable prescription drug coverage, Sec. 423.38(c)(2).
(ii) SEP for contract violation, Sec. 423.38(c)(8).
(iii) SEP for individuals who disenroll in connection with CMS
sanction, Sec. 423.38(c)(12).
(iv) SEP for other exceptional circumstances, Sec. 423.38(c)(36).
* * * * *
0
29. Section 423.38 is amended by revising paragraphs (c)(2), (c)(8),
(c)(12) introductory text, and (c)(36) to read as follows:
Sec. 423.38 Enrollment periods.
* * * * *
(c) * * *
(2) The individual was not adequately informed, as required by
standards established by CMS under Sec. 423.56, that he or she has
lost his or her creditable prescription drug coverage, that he or she
never had credible prescription drug coverage, or the coverage is
involuntarily reduced so that it is no longer creditable prescription
drug coverage. This SEP requires CMS approval prior to use. The
individual must use a CMS-operated election mechanism, in a form and
manner specified by CMS, to make an election using this SEP.
* * * * *
(8) This SEP requires CMS approval prior to use. The individual
must use a CMS-operated election mechanism, in a form and manner
specified by CMS, to make an election using this SEP. The individual
must demonstrate to CMS, in accordance with guidelines issued by CMS,
that the PDP sponsor offering the PDP substantially violated a material
provision of its contract under this part in relation to the
individual, including, but not limited to any of the following:
* * * * *
(12) The individual is enrolled in a Part D plan offered by a Part
D plan sponsor that has been sanctioned by CMS and elects to disenroll
from that plan in connection with the matter(s) that gave rise to that
sanction. This SEP requires CMS approval prior to use. The individual
must receive a notice, as described in paragraph (c)(12)(i) of this
section, to make an election using this SEP.
* * * * *
(36) The individual meets other exceptional circumstances as CMS
may provide. This SEP requires CMS approval prior to use. The
individual must use a CMS-operated election mechanism, in a form and
manner specified by CMS, to make an election using this SEP.
* * * * *
0
30. Section 423.56 is amended by revising paragraphs (a) and (b)(3) to
read as follows:
Sec. 423.56 Procedures to determine and document creditable status of
prescription drug coverage.
(a) Definition. Creditable prescription drug coverage means any of
the following types of coverage listed in paragraph (b) of this section
only if the actuarial value of the coverage equals or exceeds the
actuarial value of defined standard prescription drug coverage under
Part D in effect at the start of such plan year, not taking into
account the value of any discount provided under section 1860D-14C of
the Act, and demonstrated through--
(1) The use of generally accepted actuarial principles and in
accordance with CMS guidelines; or
(2) For group health plans not receiving a retiree drug subsidy,
meeting the following requirements under the simplified creditable
coverage determination methodology:
(i) Provision of reasonable coverage for brand name and generic
prescription drugs and biological products.
(ii) Provision of reasonable access to retail pharmacies.
(iii) Is designed to pay on average a minimum percent of
participants' prescription drug expenses, with the percent value at 73
percent for 2027 and percent values for subsequent years to be updated
by CMS in subregulatory guidance in a time and manner determined by CMS
to reflect the actuarial value of defined standard prescription drug
coverage under Part D.
* * * * *
(b) * * *
(3) Coverage under a group health plan (other than an account-based
medical plan as defined at 42 CFR 423.882 (paragraph (4) of the
definition of Group health plans)) including the Federal employees
health benefits program, and qualified retiree prescription drug plans
as defined in section 1860D-22(a)(2) of the Act.
* * * * *
0
31. Section 423.100 is amended by--
0
a. Revising and republishing the definition of ``Applicable
beneficiary'';
0
b. Adding the definition of ``Applicable discount'' in alphabetical
order;
0
c. Revising and republishing the definition of ``Applicable drug'';
0
d. Adding the definition of ``Applicable number of calendar days'' in
alphabetical order;
0
e. Revising and republishing the definition of ``Coverage gap'';
0
f. Adding the definition of ``Date of dispensing'' in alphabetical
order;
[[Page 55014]]
0
g. Revising and republishing the definition of ``Incurred costs'';
0
f. Adding definitions for ``Labeler code'', ``Manufacturer'',
``Manufacturer Discount Program'', ``Manufacturer Discount Program
agreement'', ``Medicare Coverage Gap Discount Program'', ``Medicare
Coverage Gap Discount Program agreement'', ``National Drug Code
(NDC)'', ``Non-applicable drug'', ``Price applicability period'',
``Selected drug'', and ``Third Party Administrator (TPA)'' in
alphabetical order.
The additions and revisions read as follows:
Sec. 423.100 Definitions
* * * * *
Applicable beneficiary means an individual who, on the date of
dispensing a covered Part D drug--
(1) Is enrolled in a prescription drug plan or an MA-PD plan;
(2) Is not enrolled in a qualified retiree prescription drug plan;
(3)(i) For the purposes of the Coverage Gap Discount Program--
(A) Is not entitled to an income-related subsidy under section
1860D-14(a) of the Act;
(B) Has reached or exceeded the initial coverage limit under
section 1860D-2(b)(3) of the Act during the year;
(C) Has not incurred costs for covered Part D drugs in the year
equal to the annual out-of-pocket threshold specified in section 1860D-
2(b)(4)(B) of the Act; and
(D) Has a claim that--
(1) Is within the coverage gap;
(2) Straddles the initial coverage period and the coverage gap;
(3) Straddles the coverage gap and the annual out-of-pocket
threshold; or
(4) Spans the coverage gap from the initial coverage period and
exceeds the annual out-of-pocket threshold; and
(ii) For the purposes of the Manufacturer Discount Program, has
incurred costs, as determined in accordance with section 1860D-
2(b)(4)(C) of the Act, for covered Part D drugs in the year that exceed
the annual deductible specified in section 1860D-2(b)(1) of the Act.
Applicable discount, for purposes of the--
(1) Coverage Gap Discount Program, has the meaning set forth at
Sec. 423.2305; and
(2) Manufacturer Discount Program, has the meaning set forth at
Sec. 423.2712.
Applicable drug means a Part D drug that is--
(1)(i) Approved under a new drug application under section 505(c)
of the Federal Food, Drug, and Cosmetic Act (FDCA); or
(ii) In the case of a biological product, licensed under section
351 of the Public Health Service Act (other than, with respect to a
plan year before 2019, a product licensed under subsection (k) of such
section 351).
(2)(i) If the PDP sponsor of the prescription drug plan or the MA
organization offering the MA-PD plan uses a formulary, which is on the
formulary of the prescription drug plan or MA-PD plan that the
applicable beneficiary is enrolled in;
(ii) If the PDP sponsor of the prescription drug plan or the MA
organization offering the MA-PD plan does not use a formulary, for
which benefits are available under the prescription drug plan or MA-PD
plan that the applicable beneficiary is enrolled in;
(iii) Is provided to a particular applicable beneficiary through an
exception or appeal for that particular applicable beneficiary; or
(iv) For the purposes of the Manufacturer Discount Program, is
provided to a particular applicable beneficiary as a transition fill
under Sec. 423.120(b)(3) or as an emergency supply as may be required
for an applicable beneficiary who is a long-term care resident.
(3) Not a compounded drug product (as described in Sec.
423.120(d)) that contains an applicable drug; and
(4) For the purposes of the Manufacturer Discount Program, not a
selected drug during a price applicability period with respect to such
drug.
Applicable number of calendar days means, with respect to claims
for reimbursement submitted electronically, 14 days, and otherwise, 30
days.
* * * * *
Coverage gap means the period in prescription drug coverage that
occurs between the initial coverage limit and the out-of-pocket
threshold during the years 2006 through 2024. For purposes of applying
the initial coverage limit, Part D sponsors must apply their plan
specific initial coverage limit under basic alternative, enhanced
alternative or actuarially equivalent Part D benefit designs.
* * * * *
Date of dispensing means the date of service. For long-term care
and home infusion pharmacies, the date of dispensing can be interpreted
as the date the pharmacy submits the discounted claim for
reimbursement.
* * * * *
Incurred costs means costs incurred by a Part D enrollee--
(1) For--
(2) * * *
(ii) Under State Pharmaceutical Assistance Program (as defined in
Sec. 423.464); by the Indian Health Service, an Indian tribe or tribal
organization, or urban Indian organization (as defined in section 4 of
the Indian Health Care Improvement Act) or under an AIDS Drug
Assistance Program (as defined in part B of title XXVI of the Public
Health Service); or by a manufacturer as payment for an applicable
discount (as defined in Sec. 423.2305) under the Medicare Coverage Gap
Discount Program (as defined in Sec. 423.2305); or
(3) For 2025 and subsequent years, that are reimbursed through
insurance, a group health plan, or certain other third party payment
arrangements, but not including the coverage provided by a prescription
drug plan or an MA-PD plan that is basic prescription drug coverage or
any payments by a manufacturer under the Manufacturer Discount Program
under subpart AA of this part.
* * * * *
Labeler code means the first segment of the National Drug Code
(NDC) that identifies a particular manufacturer.
* * * * *
Manufacturer means any entity which is engaged in the production,
preparation, propagation, compounding, conversion or processing of
prescription drug products, either directly or indirectly, by
extraction from substances of natural origin, or independently by means
of chemical synthesis, or by a combination of extraction and chemical
synthesis. For purposes of the Coverage Gap Discount Program and the
Manufacturer Discount Program, such term does not include a wholesale
distributor of drugs or a retail pharmacy licensed under State law, but
includes entities otherwise engaged in repackaging or changing the
container, wrapper, or labeling of any applicable drug product in
furtherance of the distribution of the applicable drug from the
original place of manufacture to the person who makes the final
delivery or sale to the ultimate consumer or user.
Manufacturer Discount Program means the Medicare Part D
Manufacturer Discount Program established under section 1860D-14C of
the Act.
Manufacturer Discount Program agreement means the agreement
described at section 1860D-14C(b) of the Act.
Medicare Coverage Gap Discount Program (or Coverage Gap Discount
Program) means the Medicare Coverage Gap Discount Program established
under section 1860D-14A of the Act.
[[Page 55015]]
Medicare Coverage Gap Discount Program agreement (or Coverage Gap
Discount Program agreement) means the agreement described in section
1860D-14A(b) of the Act.
National Drug Code (NDC) means the unique identifying prescription
drug product number that is listed with the Food and Drug
Administration (FDA) identifying the product's manufacturer, product
and package size and type.
* * * * *
Non-applicable drug means any Part D drug that is not an applicable
drug and not a selected drug during a price applicability period with
respect to such drug.
* * * * *
Price applicability period has the meaning given such term in
section 1191(b)(2) of the Act and any applicable regulations and
guidance.
* * * * *
Selected drug has the meaning given such term in section 1192(c) of
the Act and any applicable regulations and guidance.
* * * * *
Third Party Administrator (TPA) means the CMS contractor
responsible for administering the requirements established by CMS to
carry out sections 1860D-14A and 1860D-14C of the Act.
* * * * *
0
32. Section 423.104 is amended by--
0
a. Revising paragraphs (d)(1) introductory text, (d)(2) introductory
text, (d)(2)(i) introductory text, (d)(2)(iv)(A)(4), (d)(2)(iv)(B), and
(d)(2)(iv)(D)(3);
0
b. Revising and republishing paragraph (d)(3);
0
c. Revising paragraphs (d)(4) introductory text, (d)(4)(iii)(C), and
(d)(4)(iv)(E).
0
d. Removing paragraph (d)(4)(iv)(F);
0
e. Adding paragraph (d)(4)(v);
0
f. Revising paragraphs (d)(5)(i) introductory text, (d)(5)(i)(A)(2),
and (d)(5)(iii)(F).
0
g. Adding paragraphs (d)(5)(iii)(G) and (H);
0
h. Adding paragraphs (d)(5)(iv)(A), (B), (C) and (D);
0
i. Revising paragraphs (e)(5) introductory text, (e)(5)(i), and
(f)(1)(ii)(B)(3).
0
j. Adding paragraph (j).
The revisions and additions read as follows:
Sec. 423.104 Requirements related to qualified prescription drug
coverage.
* * * * *
(d) * * *
(1) Deductible. Subject to Sec. 423.120(g) and (h), an annual
deductible equal to--
* * * * *
(2) Cost-sharing under prescription drug plans.
(i) Subject to paragraph (d)(4) of this section, coinsurance for
actual costs for covered Part D drugs covered under the Part D plan
above the annual deductible specified in paragraph (d)(1) of this
section, and for each year preceding 2025, up to the initial coverage
limit under paragraph (d)(3) of this section, and for 2025 and each
subsequent year, up to the annual out-of-pocket threshold specified in
paragraph (d)(5)(iii) of this section, that is--
* * * * *
(iv) * * *
(A) * * *
(4) Determination. Except as provided in paragraph (d)(2)(iv)(B) of
this section, the amount determined in paragraph (d)(2)(iv)(A)(3) of
this section is the specialty-tier cost threshold for the plan year.
* * * * *
(B) * * *
(1) CMS modifies the specialty-tier cost threshold for a plan year
only if the amount determined in paragraph (d)(2)(iv)(A)(3) of this
section for a plan year is at least 10 percent above or below the
specialty tier cost threshold for the prior plan year.
(2) If a modification is made in accordance with this paragraph
(d)(2)(iv)(B), CMS rounds the amount determined in paragraph
(d)(2)(iv)(A)(3) of this section to the nearest $10, and the resulting
dollar amount is the specialty-tier cost threshold for the plan year.
* * * * *
(D) * * *
(3) For Part D plans with a deductible that is greater than $0 and
less than the deductible provided under the Defined Standard benefit,
the maximum coinsurance percentage is determined as follows:
(i) For years preceding 2025, subtracting the plan's deductible
from 33 percent of the initial coverage limit (ICL) under section
1860D-2(b)(3) of the Act, dividing this difference by the difference
between the ICL and the plan's deductible, and rounding to the nearest
1 percent.
(ii) For 2025 and each subsequent year, dividing the annual out-of-
pocket (OOP) threshold, described in paragraph (d)(5)(iii) of this
section, by total drug costs (represented by subtracting the plan
deductible from the annual OOP threshold then dividing by the intended
specialty-tier coinsurance percentage and adding the plan deductible)
such that the result is 33 percent. Using the following equation solved
for the deductible, each maximum allowable specialty-tier coinsurance
percentage point can be inserted to determine the maximum allowable
deductible corresponding to that coinsurance.
[GRAPHIC] [TIFF OMITTED] TP28NO25.024
(3) Initial coverage limit. The initial coverage limit is equal to
one of the following:
(i) For 2006. $2,250.
(ii) For years 2007 through 2024. The amount specified in this
paragraph for the previous year, increased by the annual percentage
increase specified in paragraph (d)(5)(iv) of this section, and rounded
to the nearest multiple of $10.
(iii) For year 2025 and each subsequent year, there is no initial
coverage limit.
(4) Cost-sharing in the coverage gap for applicable beneficiaries.
For a year preceding 2025, cost-sharing in the coverage gap for
applicable beneficiaries is as follows:
* * * * *
(iii) * * *
(C) For 2020 through 2024, 25 percent.
(iv) * * *
(E) For 2019 through 2024, 75 percent.
(v) For 2025 and each subsequent year, there is no coverage gap.
(5) * * *
(i) After an enrollee's incurred costs exceed the annual out-of-
pocket threshold described in paragraph (d)(5)(iii) of this section,
for 2024 and each subsequent year, cost-sharing equal to $0, and for
each year preceding 2024, cost-sharing equal to the greater of--
(A) * * *
(2) For subsequent years through 2023, the copayment amounts
specified in this paragraph for the previous year increased by the
annual percentage
[[Page 55016]]
increase described in paragraph (d)(5)(iv) of this section and rounded
to the nearest multiple of 5 cents; or
* * * * *
(iii) * * *
(F) For 2021 through 2024. The amount specified in this paragraph
for the previous year, increased by the annual percentage increase
specified in paragraph (d)(5)(iv) of this section, and rounded to the
nearest $50.
(G) For 2025. $2,000.
(H) For 2026 and each subsequent year. The amount specified in this
paragraph for the previous year, increased by the annual percentage
increase specified in paragraph (d)(5)(iv) of this section, and rounded
to the nearest $50.
* * * * *
(iv) Annual percentage increase in Part D drug expenditures.
(A) General. The annual percentage increase for each year is equal
to the annual percentage increase in average per capita aggregate
expenditures for Part D drugs in the United States for Part D eligible
individuals and is based on data for the 12-month period ending in July
of the previous year.
(B) Calculating the annual percentage increase. The annual
percentage increase is the product of the annual percentage trend (as
defined in subparagraph (C) of this paragraph) and a multiplicative
update (as defined in subparagraph (D) of this paragraph).
(C) Annual percentage trend. The annual percentage trend for a
given year is the ratio of total Part D drug expenditures in the
previous year (numerator) to the total Part D drug expenditures two
years prior to the given year (denominator).
(D) Multiplicative update. The multiplicative update for a given
year is the ratio of the product of the annual percentage trends for
all prior recorded years as revised and updated with the most recently
available data (numerator) to the product of annual percentage trends
in prior recorded years as published in the previous year's rate
announcement (denominator).
* * * * *
(e) * * *
(5) Provides coverage that is designed, based upon an actuarially
representative pattern of utilization, to provide for the payment, for
costs incurred for covered Part D drugs, that are equal to the initial
coverage limit under paragraph (d)(3) of this section for a year
preceding 2025, or the annual out-of-pocket threshold specified in
paragraph (d)(5)(iii) for the year for 2025 and each subsequent year,
of an amount equal to at least the product of the following:
(i) The amount by which the initial coverage limit described in
paragraph (d)(3) of this section for the year, for a year preceding
2025, or the annual out-of-pocket threshold described in paragraph
(d)(5)(iii) for the year for 2025 and each subsequent year, exceeds the
deductible described in paragraph (d)(1) of this section.
* * * * *
(f) * * *
(1) * * *
(ii) * * *
(B) * * *
(3) For a year preceding 2025, an increase in the initial coverage
limit described in paragraph (d)(3) of this section.
* * * * *
(j) Drugs not subject to the defined standard deductible.
(1) If a beneficiary has not satisfied their plan deductible but
has accumulated sufficient incurred costs, as defined at Sec. 423.100,
to satisfy the deductible provided under the Defined Standard benefit,
then they will be both an applicable beneficiary under the Manufacturer
Discount Program, as defined at Sec. 423.100, and be deemed to have
satisfied their plan deductible.
(2) If a plan offers a deductible other than the deductible
provided under the Defined Standard benefit and a beneficiary
accumulates sufficient incurred costs, as defined at Sec. 423.100, to
satisfy the plan deductible but has not accumulated incurred costs
across all drugs at or above the deductible provided under the Defined
Standard benefit, then applicable discounts, as defined at Sec.
423.2712, under the Manufacturer Discount Program are not available for
that beneficiary and the plan must cover the portion of the costs that
would be covered by the applicable discount if the beneficiary were an
applicable beneficiary until the beneficiary's incurred costs exceed
the deductible provided under the Defined Standard benefit and they
become an applicable beneficiary.
(3) If a plan offers a deductible other than the deductible
provided under the Defined Standard benefit and a beneficiary
accumulates sufficient incurred costs, as defined at Sec. 423.100, to
satisfy the plan deductible but has not accumulated incurred costs
across all drugs at or above the deductible provided under the Defined
Standard benefit, then the selected drug subsidy is not available for
that beneficiary and the plan must cover the portion of the costs that
would be covered by the selected drug subsidy, as described at Sec.
423.329(e), if the beneficiary were an applicable beneficiary until the
beneficiary's incurred costs exceed the deductible provided under the
Defined Standard benefit and they become an applicable beneficiary.
0
33. Section 423.128 is amended by revising paragraphs (e)(3)(ii) and
(e)(7) to read as follows:
Sec. 423.128 Dissemination of Part D plan information.
* * * * *
(e) * * *
(3) * * *
(ii) For a year preceding 2025, the initial coverage limit for the
current year.
* * * * *
(7) Be provided no later than the end of the month following any
month when prescription drug benefits are provided under this part,
including, for a year preceding 2025, the covered Part D spending
between the initial coverage limit described in Sec. 423.104(d)(3) and
the out-of-pocket threshold described in Sec. 423.104(d)(5)(iii).
* * * * *
0
34. Section 423.184 is amended by revising paragraph (e)(2) and adding
paragraph (e)(3) to read as follows:
Sec. 423.184 Adding, updating, and removing measures.
* * * * *
(e) * * *
(2) CMS will announce the removal of a measure based upon its
application of paragraph (e)(1) of this section through the process
described for changes in and adoption of payment and risk adjustment
policies in section 1853(b) of the Act in advance of the measurement
period or will propose and finalize the removal of the measure through
rulemaking in advance of the measurement period.
(3) CMS will propose and finalize the removal of a measure for any
reason not stated in paragraph (e)(1) of this section through
rulemaking in advance of the measurement period.
* * * * *
Sec. 423.186 [Amended]
0
35. Section 423.186 is amended by--
0
a. In paragraph (f)(1) removing the phrase ``Through the 2026 Star
Ratings, this rating-specific'' and adding in its place the phrase
``This rating-specific'';
0
b. Removing paragraph (f)(3); and
0
c. Revising paragraph (h)(2) to read as follows:
Sec. 423.186 Calculation of Star Ratings.
* * * * *
(h) * * *
(2) Plan preview of the Star Ratings. CMS will have two plan
preview periods before each Star Ratings release
[[Page 55017]]
during which Part D plan sponsors can preview their preliminary Star
Ratings data in HPMS prior to display on the Medicare Plan Finder.
During the second plan preview, CMS will display de-identified
contract-level sample data for one of each type of measure needed to
replicate the cut point methodology, as determined by CMS.
* * * * *
0
36. Section 423.265 is amended by adding paragraph (d)(2)(vi) to read
as follows:
Sec. 423.265 Submission of bids and related information.
* * * * *
(d) * * *
(2) * * *
(vi) The assumptions regarding the selected drug subsidy under
Sec. 423.329(e) used in calculating the bid.
* * * * *
0
37. Section 423.286 is amended by revising and republishing paragraph
(b) to read as follows:
Sec. 423.286 Rules regarding premiums.
* * * * *
(b) Base beneficiary premium percentage.
(1) The beneficiary premium percentage for any year, except for
years 2024 through 2029, is a fraction, the--
(i) Numerator of which is 25.5 percent; and
(ii) Denominator of which is as follows:
(A) 100 percent minus the percentage established in paragraph
(b)(1)(ii)(B) of this section
(B) The percentage established in this paragraph equals--
(1) The total reinsurance payment that CMS estimates will be paid
under Sec. 423.329(c) for the coverage year divided by--
(2) The amount estimated under paragraph (b)(2)(ii)(A) of this
section for the year plus total payments that CMS estimates will be
paid to Part D plans that are attributable to the standardized bid
amount during the year, taking into account amounts paid by both CMS
and enrollees.
(2) The beneficiary premium percentage for the years 2024 through
2029 is the lesser of the beneficiary premium percentage--
(i) For the immediately preceding year increased by 6 percent; or
(ii) Calculated under the formula computed under paragraph (b)(1)
* * * * *
0
38. Section 423.308 is amended by--
0
a. Revising the definitions for ``Allowable reinsurance costs'' and
``Gross covered prescription drug costs''; and
0
b. Adding the definition of ``Inflation Reduction Act Subsidy Amount
(IRASA)''.
The revisions and addition read as follows:
Sec. 423.308 Definitions and terminology.
* * * * *
Allowable reinsurance costs means the subset of gross covered
prescription drug costs actually paid that are attributable to basic
prescription drug coverage for covered Part D drugs only and that are
actually paid by the Part D sponsor or by (or on behalf of) an enrollee
under the Part D plan and the portion of the negotiated price (as
defined in section 1860D-14C(g)(6) of the Act) of an applicable drug
(as defined at Sec. 423.100 of this part) paid by manufacturers under
the Manufacturer Discount Program (as defined at Sec. 423.100 of this
part). The costs for any Part D plan offering enhanced alternative
coverage must be adjusted not only to exclude any costs attributable to
benefits beyond basic prescription drug coverage, but also to exclude
any costs determined to be attributable to increased utilization over
the standard prescription drug coverage as the result of the insurance
effect of enhanced alternative coverage in accordance with CMS
guidelines on actuarial valuation.
* * * * *
Gross covered prescription drug costs means those costs incurred
under a Part D plan, excluding administrative costs, but including
dispensing fees, during the coverage year. They equal the sum of the
following:
(1) The share of actual costs (as defined at Sec. 423.100) paid by
the Part D plan that is received as reimbursement by the pharmacy, or
other dispensing entity, reimbursement paid to indemnify an enrollee
when the reimbursement is associated with an enrollee obtaining covered
Part D drugs under the Part D plan, or payments made by the Part D
sponsor to other parties listed in Sec. 423.464(f)(1) with which the
Part D sponsor must coordinate benefits, including other Part D plans,
or as the result of any reconciliation process developed by CMS under
Sec. 423.464.
(2) Nominal cost-sharing paid by or on behalf of an enrollee which
is associated with drugs that would otherwise be covered Part D drugs,
as defined at Sec. 423.100, but are instead paid for, with the
exception of said nominal cost-sharing, by a patient assistance program
providing assistance outside the Part D benefit, provided that
documentation of such nominal cost-sharing has been submitted to the
Part D plan consistent with the plan processes and instructions for the
submission of such information.
(3) All amounts paid under the Part D plan by or on behalf of an
enrollee (such as the deductible, coinsurance, cost sharing, or, for
years prior to 2025, amounts between the initial coverage limit and the
out-of-pocket threshold) in order to obtain Part D drugs that are
covered under the Part D plan. If an enrollee who is paying 100 percent
cost sharing (as a result of paying a deductible or, for years prior to
2025, because the enrollee is between the initial coverage limit and
the out-of-pocket threshold) obtains a covered Part D drug at a lower
cost than is available under the Part D plan, such cost-sharing will be
considered an amount paid under the plan by or on behalf of an enrollee
under the previous sentence of this definition, if the enrollee's costs
are incurred costs as defined at Sec. 423.100 and documentation of the
incurred costs has been submitted to the Part D plan consistent with
plan processes and instructions for the submission of such information.
These costs are determined regardless of whether the coverage under the
plan exceeds basic prescription drug coverage.
(4) All amounts paid by manufacturers under the Manufacturer
Discount Program (as defined at Sec. 423.100).
* * * * *
Inflation Reduction Act Subsidy Amount (IRASA) means a temporary
retrospective subsidy paid to Part D plan sponsors for contract year
2023 for the statutory reduction in cost-sharing and deductible for
covered insulin products or for ACIP-recommended adult vaccines, as
defined in Sec. 423.100, and is equal to the difference between the
following:
(1) The beneficiary cost-sharing for a covered insulin product or
an ACIP-recommended adult vaccine under the plan's approved bids
submitted under Sec. 423.265 for contract year 2023; and
(2) The applicable statutory maximum cost-sharing for the covered
insulin product or for the ACIP-recommended adult vaccine for contract
year 2023.
* * * * *
0
39. Section 423.315 is amended by adding paragraph (h) to read as
follows:
Sec. 423.315 General payment provisions.
* * * * *
(h) Selected drug subsidy. CMS provides selected drug subsidy
payments described in Sec. 423.329(e) on a monthly basis during a year
based on either estimated or incurred allowable reinsurance costs as
provided under
[[Page 55018]]
Sec. 423.329(e)(2)(i), and final reconciliation to actual allowable
reinsurance costs as provided in Sec. 423.343(e).
0
40. Section 423.325 is amended by revising paragraph (a)(3) to read as
follows:
Sec. 423.325 PDE submission timeliness requirements.
(a) * * *
(3) Revised PDE records to resolve CMS rejected records at least
once every 90 calendar days from receipt of a rejection until the PDE
record is accepted unless the claim associated with the rejected PDE
record is reversed or deleted, or the PDE record is otherwise found to
have been submitted in error.
* * * * *
0
41. Section 423.329 is amended by revising paragraph (c)(1) and adding
paragraph (e) to read as follows:
Sec. 423.329 Determination of payments.
* * * * *
(c) Reinsurance payment amount--
(1) General rule--
(i) General rule for years preceding 2025. The reinsurance payment
amount for a Part D eligible individual enrolled in a Part D plan for a
coverage year is an amount equal to 80 percent of the allowable
reinsurance costs attributable to that portion of gross covered
prescription drug costs incurred in the coverage year after the
individual has incurred true-out-of-pocket costs that exceed the annual
out-of-pocket threshold specified in Sec. 423.104(d)(5)(iii).
(ii) General rule for 2026 and subsequent years. The reinsurance
payment amount for a Part D eligible individual enrolled in a Part D
plan for a coverage year is an amount equal to 20 percent for
applicable drugs or 40 percent for drugs that are not applicable drugs
of the allowable reinsurance costs attributable to that portion of
gross covered prescription drug costs incurred in the coverage year
after the individual has incurred true-out-of-pocket costs that exceed
the annual out-of-pocket threshold specified in Sec.
423.104(d)(5)(iii).
* * * * *
(e) Selected drug subsidy amount--
(1) General rule. The selected drug subsidy amount is equal to 10
percent of the negotiated price to a covered Part D drug that would
otherwise meet the definition of an applicable drug but for being a
selected drug during a price applicability period.
(2) Payment method. Payments under this section are based on a
method that CMS determines.
(i) Interim payments. CMS establishes a payment method by which
interim payments of amounts under this section are made during a year
based on the selected drug subsidy amount assumptions submitted with
plan bids under Sec. 423.265(d)(2)(vi) of this part and negotiated and
approved under Sec. 423.272 of this part, or by an alternative method
that CMS determines.
(ii) Final payments. CMS reconciles the interim payments to actual
incurred selected drug subsidy amounts as provided in Sec. 423.343(e).
0
42. Section 423.336 is amended by revising paragraph (c) to read as
follows:
Sec. 423.336 Risk-sharing arrangements.
* * * * *
(c) Payment methods. CMS makes payments after a coverage year after
obtaining all of the cost data information in paragraph (c)(1) of this
section necessary to determine the amount of payment. CMS does not make
payments under this section if the Part D sponsor fails to provide the
cost data information in paragraph (c)(1) of this section.
(1) Submission of cost data. Within 6 months of the end of a
coverage year, the Part D sponsor must provide the information that CMS
requires.
(2) Lump sum and adjusted monthly payments. CMS at its discretion
makes either lump-sum payments or adjusts monthly payments in the
following payment year based on the relationship of the plan's adjusted
allowable risk corridor costs to the predetermined risk corridor
thresholds in the coverage year, as determined under this section. In
the event adequate data is not provided for risk corridor costs, CMS
assumes that the Part D plan's adjusted allowable risk corridor costs
are 50 percent of the target amount.
* * * * *
0
43. Section 423.343 is amended by revising paragraph (d) and adding
paragraph (e) to read as follows:
Sec. 423.343 Retroactive adjustments and reconciliations.
* * * * *
(d) Low-income cost-sharing subsidy. CMS makes final payment for
low-income cost-sharing subsidies after a coverage year after obtaining
all of the information necessary to determine the amount of payment.
(1) Submission of cost data. Within 6 months of the end of a
coverage year, the Part D sponsor must provide the information that CMS
requires.
(2) Payments. CMS at its discretion either makes lump-sum payments
or adjusts monthly payments throughout the remainder of the payment
year following the coverage year based on the difference between
interim low-income cost-sharing subsidy payments and total low-income
cost-sharing subsidy costs eligible for subsidy under Sec. 423.782
submitted by the plan for the coverage year. CMS may recover payments
made through a lump sum recovery or by adjusting monthly payments
throughout the remainder of the coverage year if interim low-income
cost-sharing subsidy payments exceed the amount payable under Sec.
423.782 or if the Part D sponsor does not provide the data in paragraph
(d)(1) of this section.
(e) Selected drug subsidy. CMS makes final payment for selected
drug subsidies after a coverage year after obtaining all of the
information necessary to determine the amount of payment.
(1) Submission of cost data. Within 6 months of the end of a
coverage year, the Part D sponsor must provide the information that CMS
requires.
(2) Payments. CMS at its discretion either makes lump-sum payments
or adjusts monthly payments throughout the remainder of the payment
year following the coverage year based on the difference between
interim selected drug subsidy payments and total selected drug subsidy
costs eligible for subsidy under Sec. 423.329(e) submitted by the plan
for the coverage year. CMS may recover payments made through a lump sum
recovery or by adjusting monthly payments throughout the reminder of
the coverage year if the interim selected drug subsidy payments exceed
the amount payable under Sec. 423.329(e) of if the Part D sponsor does
not provide the data in paragraph (e)(1) of this section.
* * * * *
0
44. Section 423.346 is amended by revising paragraph (a) introductory
text to read as follows:
Sec. 423.346 Reopening.
(a) CMS may conduct a global or targeted reopening to reopen and
revise an initial or reconsidered final payment determination,
including the following: a determination of the final amount of direct
subsidy described at Sec. 423.329(a)(1), final reinsurance payments
described at Sec. 423.329(c), final amount of the low income subsidy
described at Sec. 423.329(d), final risk corridor payments as
described at Sec. 423.336, reconciled Coverage Gap Discount Program
payment described at Sec. 423.2320(b), reconciled Inflation Reduction
Act Subsidy Amount (IRASA) payment for contract year 2023 described at
Sec. 423.308, reconciled Manufacturer Discount Program payment
described at Sec. 423.2744(c), and
[[Page 55019]]
reconciled selected drug subsidy payment described at Sec.
423.343(e)--
* * * * *
0
45. Section 423.350 is amended by--
0
a. Adding paragraphs (a)(1)(vi) through (viii); and
0
b. Revising paragraphs (a)(2) and (b)(1).
The additions and revisions read as follows:
Sec. 423.350 Payment appeals.
(a) * * *
(1) * * *
(vi) The reconciled Inflation Reduction Act Subsidy Amount (IRASA)
payment for contract year 2023 described at Sec. 423.308.
(vii) The reconciled Manufacturer Discount Program payment under
Sec. 423.2744(c).
(viii) The reconciled selected drug subsidy payment under Sec.
423.343(e).
(2) Payment information not subject to appeal. Payment information
submitted to CMS under Sec. 423.322 and reconciled or used in the
payment calculations for the reconciled IRASA payment for contract year
2023 described at Sec. 423.308 or under Sec. Sec. 423.336, 423.343,
423.2320(b), or 423.2744(c) is final and may not be appealed, nor may
the appeals process be used to submit new information after the
submission of information necessary for CMS to determine retroactive
adjustments and reconciliations, including the calculation of risk
corridor costs.
(b) * * *
(1) Time for filing a request. The request for reconsideration must
be filed within 15 calendar days from the date CMS issues the payment
reconciliation report for the payment determination that is being
appealed under this section by the Part D plan sponsor.
* * * * *
0
46. Section 423.464 is amended by revising paragraph (f)(2)(i)(C) to
read as follows:
* * * * *
(f) * * *
(2) * * *
(i) * * *
(C) Exclude expenditures for covered Part D drugs made by
government-funded health programs or the coverage provided by a
prescription drug plan or an MA-PD plan that is basic prescription drug
coverage or any payments by a manufacturer under the Manufacturer
Discount Program.
* * * * *
0
47. Section 423.504 is amended by adding paragraph (f) to read as
follows:
Sec. 423.504 General provisions.
* * * * *
(f) Outlier prescribers of opioids.
(1) CMS will identify and send notifications to outlier prescribers
of opioids, which includes information about how the prescriber
compares to other specified prescribers and resources on proper
prescribing methods.
(2) At least annually, CMS will communicate information about
persistent outlier prescribers of opioids to all Part D plan sponsors.
0
48. Section 423.505 is amended by--
0
a. Revising paragraph (b)(24);
0
b. Adding paragraphs (d)(1)(vi) and (d)(2)(xiii); and
0
c. In paragraph (e)(2), removing the phrase ``under the contract, or''
and adding in its place the phrase ``under the contract, which includes
the records containing information identified in paragraph (d) of this
section, or ``.
The additions read as follows:
Sec. 423.505 Contract provisions.
* * * * *
(b) * * *
(24) Provide applicable discounts on applicable drugs when
dispensed to applicable beneficiaries in accordance with the
requirements in subpart W of part 423 for the Coverage Gap Discount
Program and the requirements in subpart AA of part 423 for the
Manufacturer Discount Program.
* * * * *
(d) * * *
(1) * * *
(vi) Enable CMS to review original format documentation or
information from all written, electronic, and verbal communications
between the pharmacist, prescriber, enrollee, or other relevant
stakeholders, in addition to what is included on the pharmacy claim,
that is relied upon by the Part D plan sponsor to make a coverage
determination or otherwise permit a point-of-sale claim adjudication
that determine a drug's coverage under the Part D benefit. In instances
when a coverage determination is extended, the original coverage
determination must be maintained as documentation. The documentation
covered by these standards must be made available to CMS during Part D
program integrity prescription drug event (PDE) record review audits.
Failure to produce this documentation will result in an improper Part D
audit determination and will be subject to PDE record deletion in
accordance with Sec. 423.325(a)(2).
(2) * * *
(xiii) Documentation or information from all written, electronic,
and verbal communications between the pharmacist, prescriber, enrollee,
or other relevant stakeholders, in addition to what is included on the
pharmacy claim, that is relied upon when Part D plan sponsors make
coverage determinations or otherwise permit a point-of-sale claim
adjudication that determines coverage of a drug under the Part D
benefit, consistent with paragraph (d)(1)(vi). This includes:
(A) Date and time the request for a coverage determination or
point-of-sale claim adjudication was received and the identity of the
individual who submitted the request.
(B) Name and title (as applicable) of the individual the Part D
plan contacted to verify the request (for example, pharmacist,
prescriber, enrollee, or enrollee representative).
(C) Information obtained, including the questions asked and
responses received, and the final decision rendered.
(D) Diagnosis code for a coverage determination or point-of-sale
claim adjudication used to support a medically accepted indication.
(E) Any other information that the Part D plan sponsor utilized to
determine the final outcome of the coverage determination or point-of-
sale claim adjudication request.
* * * * *
0
49. Section 423.782 is amended by--
0
a. Revising paragraphs (a)(2) introductory text and (a)(2)(i)(B);
0
b. In paragraph (a)(2)(iii)(A), removing the phrase ``Index, rounded''
and adding in its place the phrase ``Index specified in paragraph (d)
of this section, rounded'';
0
c. In paragraph (b)(1), removing the phrase ``Part D drugs, rounded
to'' and adding in its place the phrase ``Part D drugs, rounded as
specified under Sec. 423.104(d)(5)(iv) to'';
0
d. In paragraph (b)(3), removing the phrase ``in this paragraph (b)(3)
for the previous years increased by the annual percentage increase in
average per capita aggregate expenditures for covered Part D drugs,
rounded'' and adding in its place the phrase ``in Sec.
423.104(d)(5)(i)(A)(2), rounded''; and
0
d. Adding paragraph (d).
The addition reads as follows:
Sec. 423.782 Cost-sharing subsidy.
* * * * *
(a) * * *
(2) Reduction in cost-sharing for all covered Part D drugs covered
under the PDP or MA-PD plan below the out-of-pocket limit (under Sec.
423.104), including for years preceding 2025, Part D drugs covered
under the PDP or MA-PD plan obtained after the initial coverage limit
(under Sec. 423.104(d)(4)), as follows:
[[Page 55020]]
(i) * * *
(B) Those individuals who have income for years prior to 2024 under
135 percent, and for 2024 and subsequent years, under 150 percent of
the Federal poverty line applicable to the individual's family size who
meet the resources test described at Sec. 423.773(b)(2).
* * * * *
(d) Annual percentage increase in consumer price index (CPI).
(1) General. The annual percentage increase in consumer price index
(CPI) for each year is equal to the annual percentage increase in the
CPI in the United States for all items per a U.S. city average and is
based on data for the 12-month period ending in September of the
previous year.
(2) Calculating the annual percentage increase in CPI. The annual
percentage increase is the product of the annual percentage trend (as
defined in subparagraph (d)(3) of this section) and a multiplicative
update (as defined in subparagraph (d)(4) of this section).
(3) Annual percentage trend. The annual percentage trend for a
given year is the ratio of the CPI in the previous year (numerator) to
the CPI 2 years prior to the given year (denominator).
(4) Multiplicative update. The multiplicative update for a given
year is the ratio of the product of the annual percentage trends for
all prior recorded years, as revised and updated with the most recent
available data (numerator) to the product of the annual percentage
trends in prior recorded years as published in the previous year's rate
announcement (denominator).
* * * * *
0
50. Section 423.882 is amended by revising the definition of Gross
Covered Retiree Plan-Related Prescription Drug Costs and Allowable
Retiree Costs to read as follows:
Sec. 423.882 Definitions.
* * * * *
Allowable retiree costs means the subset of gross covered retiree
plan-related prescription drug costs actually paid by the sponsor of
the qualified retiree prescription drug plan or by (or on behalf of) a
qualifying covered retiree under the plan and the portion of the
negotiated price (as defined in section 1860D-14C(g)(6) of the Act) of
an applicable drug (as defined by Sec. 423.100 of this part) paid by
manufacturers under the Manufacturer Discount Program (as defined by
Sec. 423.100 of this part).
* * * * *
Gross covered retiree plan-related prescription drug costs, or
gross retiree costs, means those Part D drug costs incurred under a
qualified retiree prescription drug plan, excluding administrative
costs, but including dispensing fees, during the coverage year. They
equal the sum of the following:
(1) The share of prices paid by the qualified retiree prescription
drug plan that is received as reimbursement by the pharmacy or by an
intermediary contracting organization, and reimbursement paid to
indemnify a qualifying covered retiree when the reimbursement is
associated with a qualifying covered retiree obtaining Part D drugs
under the qualified retiree prescription drug plan.
(2) All amounts paid under the qualified retiree prescription drug
plan by or on behalf of a qualified covered retiree (such as the
deductible, coinsurance, cost sharing, or, for years prior to 2025,
amounts between the initial coverage limit and the out-of-pocket
threshold) in order to obtain Part D drugs that are covered under the
qualified retiree prescription drug plan.
(3) All amounts paid by manufacturers under the Manufacturer
Discount Program (as defined at Sec. 423.100 of this part).
* * * * *
Sec. 423.884 [Amended]
0
51. Section 423.884 is amended by--
0
a. In paragraph (c)(2)(v)(D) by removing the word ``Gender'' and adding
in its place the word ``Sex.''
0
b. In paragraphs (d), (d)(1)(i), (d)(1)(ii), and (d)(5)(iii)(C) by
removing the phrase ``not taking into account the value of any discount
or coverage provided during the coverage gap'' and replacing it with
the phrase ``for years prior to 2025, not taking into account the value
of any discount or coverage provided during the coverage gap and for
2025 and subsequent years, not taking into account the value of any
discount provided under the Manufacturer Discount Program.''
0
52. Section 423.1000 is amended by revising paragraph (a)(3) to read as
follows:
Sec. 423.1000 Basis and scope.
(a) * * *
(3)(i) CMS must impose a civil money penalty on a manufacturer that
fails to provide applicable discounts for applicable drugs of the
manufacturer dispensed to applicable beneficiaries in accordance with
the terms of such manufacturer's--
(A) Coverage Gap Discount Program agreement, in accordance with
section 1860D-14A(e)(2) of the Act; and
(B) Manufacturer Discount Program agreement, in accordance with
section 1860D-14C(e) of the Act.
(ii) The provisions of section 1128A (other than subsections (a)
and (b)) of the Act apply to a civil money penalty under paragraph
(a)(3)(i) of this section.
0
53. Section 423.1002 is amended by
0
a. Revising the definition of ``Affected party''.
The revision reads as follows:
Sec. 423.1002 Definitions
* * * * *
Affected party means any Part D sponsor or, for purposes of the
Coverage Gap Discount Program, any manufacturer (as defined in Sec.
423.100), or, for purposes of the Manufacturer Discount Program, any
manufacturer that is an agreement holder (as defined in Sec.
423.2704), impacted by an initial determination or, if applicable, by a
subsequent determination or decision issued under this part, and
``party'' means the affected party or CMS, as appropriate.
* * * * *
0
54. Section 423.2261 is amended by adding paragraph (a)(3) to read as
follows:
Sec. 423.2261 Submission, review, and distribution of materials.
(a) * * *
(3)(i) Part D sponsors offering dual eligible special needs plans
with exclusively aligned enrollment subject to Sec. 422.107(e) must
submit all materials for the contract in HPMS under the Part D
sponsor's contract number.
(ii) Part D sponsors and third-party marketing organizations may
not submit materials for the contract under the organization's Multi-
Contract Entity number as described in Sec. 423.2262(d)(2)(i).
* * * * *
Sec. 423.2262 [Amended]
0
55. Section 423.2262 is amended by removing paragraphs (a)(1)(i) and
(ii) and redesignating paragraphs (a)(1)(iii) through (xviii) as
(a)(1)(i) through (xvi), respectively.
0
56. Section 423.2264 is amended by--
0
a. In paragraph (c)(1)(ii)(D), removing the phrase ``Cards, but not
including Scope'' and adding in its place ``Cards and Scope''; and
0
b. Revising paragraphs (c)(2)(i), (c)(3) introductory text, and
(c)(3)(i).
The revisions read as follows:
Sec. 423.2264 Beneficiary contact.
* * * * *
(c) * * *
(2) * * *
(i) If a marketing event directly follows an educational event, the
[[Page 55021]]
beneficiary must be notified that the educational event is ending and a
marketing event will begin shortly and be given a sufficient
opportunity to leave the educational event prior to the start of the
marketing event.
* * * * *
(3) Personal marketing appointments are those appointments that are
tailored to an individual or small group (for example, a married
couple) for purposes of discussing marketing topics. Personal marketing
appointments are not defined by the location.
(i) Prior to the personal marketing appointment, the Part D plan
(or agent or broker, as applicable) must agree upon and record the
Scope of Appointment with the beneficiary(ies). The Scope of
Appointment must be in writing for in-person personal marketing
appointments.
* * * * *
0
57. Section 423.2267 is amended by--
0
a. Revising paragraph (e)(5)(ii)(A)(2);
0
b. Removing and reserving paragraph (e)(33); and
0
c. Revising paragraphs (e)(41) introductory text and (e)(41)(ii).
The revisions read as follows:
Sec. 423.2267 Required materials and content.
* * * * *
(e) * * *
(5) * * *
(ii) * * *
(A) * * *
(2) Deductible; the initial coverage phase; coverage gap for a year
preceding 2025; and catastrophic coverage.
* * * * *
(33) [Reserved]
* * * * *
(41) Third-party marketing organization disclaimer. This is
standardized content. If a TPMO does not sell for all Part D sponsors
in the service area the disclaimer consists of the statement: ``We do
not offer every plan available in your area. Currently we represent
[insert number of organizations] organizations which offer [insert
number of plans] products in your area. Please contact Medicare.gov or
1-800-MEDICARE to get information on all of your options.'' If the TPMO
sells for all Part D sponsors in the service area the disclaimer
consists of the statement: ``Currently we represent [insert number of
organizations] organizations which offer [insert number of plans]
products in your area. You can always contact Medicare.gov or 1-800-
MEDICARE for help with plan choices.'' The Part D sponsor must ensure
that the disclaimer is as follows:
* * * * *
(ii) Verbally conveyed during sales calls prior to the discussion
of any benefits.
* * * * *
0
58. Section 423.2274 is amended by--
0
a. In paragraph (b)(3), removing the phrase ``prior to meeting with
potential enrollees'' and adding in its place ``prior to a personal
marketing appointment''; and
0
b. Revising paragraphs (c)(9) and (g)(2)(ii).
The revisions read as follows:
Sec. 423.2274 Agent, broker, and other third-party requirements.
* * * * *
(c) * * *
(9) Establish and maintain a system for confirming all of the
following:
(i) Beneficiaries enrolled by agents or brokers understand the
product, including the rules applicable under the plan.
(ii) Agents and brokers appropriately complete Scope of Appointment
records for all personal marketing appointments (including telephonic
and walk-in).
* * * * *
(g) * * *
(2) * * *
(ii) Record and retain for 6 years all marketing and sales calls,
including the audio portion of calls via web-based technology, in their
entirety.
0
59. Section 423.2300 is amended by revising and republishing the
section to read as follows:
Sec. 423.2300 Scope.
(a) Scope. This subpart sets forth the requirements for the
Medicare coverage gap discount program based on provisions included in
sections 1860D-14A and 1860D-43 of the Act, as follows:
(1) Condition for coverage of applicable drugs under Part D.
(2) The Medicare Coverage Gap Discount Program Agreement.
(3) Coverage gap discount payment processes for Part D sponsors.
(4) Provision of applicable discounts on applicable drugs for
applicable beneficiaries.
(5) Manufacturer audit and dispute resolution processes.
(7) Resolution of beneficiary disputes involving coverage gap
discounts.
(8) Compliance monitoring and civil money penalties.
(8) The termination of the Medicare Coverage Gap Discount Program
Agreement.
(b) Applicability. The requirements of this subpart apply before
January 1, 2025, and, with respect to applicable drugs dispensed prior
to such date, continue to apply on and after January 1, 2025.
0
60. Section 423.2305 is amended by--
0
a. Revising and republishing the introductory text;
0
b. Revising and republishing the definition of ``Applicable discount`
''
0
c. Revising and republishing the definition of ``Negotiated price'';
and
0
d. Removing the definitions of ``Applicable number of calendar days'';
``Date of dispensing''; ``Labeler code''; ``Manufacturer''; ``Medicare
Coverage Gap Discount Program''; ``Medicare Coverage Gap Discount
Program Agreement''; ``National Drug Code''; and ``Third Party
Administrator''.
The revisions read as follows:
Sec. 423.2305 Definitions.
As used in this subpart and for purposes of the Coverage Gap
Discount Program, unless otherwise specified--
Applicable discount means, with respect to a plan year before 2019,
50 percent or, with respect to plan year 2019 through plan year 2024,
70 percent of the portion of the negotiated price (as defined in this
section) of the applicable drug of a manufacturer that falls within the
coverage gap and that remains after such negotiated price is reduced by
any supplemental benefits that are available.
* * * * *
Negotiated price for purposes of the Coverage Gap Discount Program,
means the price for a covered Part D drug that--
* * * * *
Sec. 423.2310 [Amended]
0
61. Section 423.2310 is amended in paragraph (a)(1) by removing the
phrase ``Discount Program'' and adding in its place the phrase
``Coverage Gap Discount Program''.
0
62. Section 423.2315 is amended by--
0
a. In paragraph (a), removing the phrase ``Program Agreement (or
Discount Program Agreement)'' and adding in its place the phrase
``Program Agreement'';
0
b. In paragraphs (b)(5) and (11), removing the phrase ``Discount
Program'' and adding in its place the phrase ``Coverage Gap Discount
Program'';
0
c. In paragraph (c)(1), removing the phrase ``Discount Program
Agreement'' and adding in its place the phrase ``Coverage Gap Discount
Program Agreement'' each time it appears;
0
d. Revising paragraph (c)(2); and
0
e. In paragraph (c)(3), removing the phrase ``Discount Program
Agreement'' and adding in its place the phrase ``Coverage Gap Discount
Program Agreement'';
The revision reads as follows:
[[Page 55022]]
Sec. 423.2315 Medicare Coverage Gap Discount Program Agreement.
* * * * *
(c) * * *
(2) For 2012 and subsequent years prior to 2025, for a Coverage Gap
Discount Program Agreement to be effective for a year, a manufacturer
must enter into such Agreement not later than January 30th of the
preceding year.
* * * * *
Sec. 423.2320 [Amended]
0
63. Section 423.2320 is amended in paragraph (b) by removing the phrase
``Discount Program'' and adding in its place the phrase ``Coverage Gap
Discount Program''.
Sec. 423.2330 [Amended]
0
64. Section 423.2330 is amended in paragraphs (a)(1) and (b)(3) by
removing the phrase ``Discount Program'' and adding in its place the
phrase ``Coverage Gap Discount Program''.
Sec. 423.2335 [Amended]
0
65. Section 423.2335 is amended by removing the phrase ``Discount
Program'' and adding in its place the phrase ``Coverage Gap Discount
Program'';
Sec. 423.2340 [Amended]
0
66. Section 423.2340 is amended in paragraphs (a), (b), (c)
introductory text, and (c)(1) by removing the phrase ``Discount Program
Agreement'' and adding in its place the phrase ``Coverage Gap Discount
Program Agreement'';
0
67. Section 423.2345 is amended by--
0
a. In the section heading, removing the phrase ``Discount Program
Agreement'' and adding in its place the phrase ``Coverage Gap Discount
Program Agreement'';
0
b. In paragraph (a)(1)--
(i) Removing the phrase ``Discount Program Agreement'' and adding
in its place the phrase ``Coverage Gap Discount Program Agreement'';
and
(ii) Removing the phrase ``Discount Program'' and adding in its
place the phrase ``Coverage Gap Discount Program'';
c. In paragraphs (a)(3)(i), (b)(1), (d), and (e) by removing the
phrase ``Discount Program Agreement'' and adding in its place the
phrase ``Coverage Gap Discount Program Agreement''; and
0
d. Adding paragraph (f).
The addition reads as follows:
Sec. 423.2345 Termination of Coverage Gap Discount Program Agreement.
* * * * *
(f) Subject to Sec. 423.2300(b) of this subpart, all Coverage Gap
Discount Program Agreements under this subpart are terminated as of
January 1, 2025.
0
68. Section 423.2420 is amended by adding paragraphs (b)(4)(iii)
through (v) to read as follows:
Sec. 423.2420 Calculation of medical loss ratio.
* * * * *
(b) * * *
(4) * * *
(iii) Prospective Manufacturer Discount Program Payments.
(iv) Selected Drug Subsidy Program Payments.
(v) Inflation Reduction Act Subsidy Amounts.
* * * * *
0
69. Section 423.2536 is amended by adding paragraph (m) to read as
follows:
Sec. 423.2536 Waiver of Part D program requirements.
* * * * *
(m) Provision of specific information. Section 423.128(d)(1)(i)(A).
0
70. The heading for Subpart Z is revised to read as follows:
Subpart Z--Appeals Process for Part D Program Integrity
Prescription Drug Event Record Review Audits
* * * * *
0
71. Section 423.2600 is revised to read as follows:
Sec. 423.2600 Payment appeals.
Medicare Part D plan sponsors may appeal program integrity
prescription drug event record review audit determinations.
(a) Issues eligible for appeal.
(1) CMS's application of Part D policy(ies).
(2) Factual or data errors.
(b) Issues ineligible for appeal.
(1) The Part D plan sponsor's failure to submit documentation in
the timeframes specified by CMS during the audit.
(2) The program integrity prescription drug event record review
audit methodology.
0
72. Section 423.2605 is amended by--
0
a. In paragraph (a), removing the phrase ``demand letter'' and adding
in its place the phrase ``close out letter''; and
0
b. Revising paragraph (e).
The revision reads as follows:
Sec. 423.2605 Request for reconsideration.
* * * * *
(e) Notification of decision. The independent reviewer decides the
reconsideration within 60 calendar days after the timeframe for filing
a rebuttal has expired, and sends a written decision to the Part D plan
sponsor and CMS, explaining the basis for the decision.
* * * * *
0
73. Section 423.2610 is amended by--
0
a. In paragraph (d)(2)(i), removing the phrase ``The Part D RAC'' and
adding in its place the phrase ``The CMS'';
0
b. In paragraph (d)(3) removing the phrase ``nor CMS may submit'' and
adding in its place the phrase ``nor CMS is permitted to submit'';
0
c. In paragraph (e), removing the phrase '' 60 days'' and adding in its
place the phrase ``60 calendar days after the timeframe for filing a
rebuttal has expired''; and
0
d. Revising paragraph (f).
The revision reads as follows:
Sec. 423.2610 Hearing official review.
* * * * *
(f) Effect of hearing official decision. The hearing official's
decision is final and binding, unless the decision is reversed or
modified by the CMS Administrator in accordance with Sec. 423.2615.
* * * * *
0
74. Section 423.2615 is amended by--
0
a. In paragraph (b)(2), removing the phrase ``nor CMS may submit'' and
adding in its place the phrase ``nor CMS is permitted to submit'';
0
b. In paragraph (d), removing the phase ``45 days'' and adding in its
place ``30 calendar days'';
0
c. Revising paragraph (e).
The revision reads as follows:
Sec. 423.2615 Review by the Administrator.
* * * * *
(e) Administrator Review. If the CMS Administrator agrees to review
the hearing official's decision, he or she determines, after reviewing
the hearing record, and any arguments submitted by the Part D plan
sponsor or CMS in accordance with this section, whether the
determination should be upheld, reversed, or modified. The CMS
Administrator furnishes a written decision, which is final and binding,
to the Part D plan sponsor and to CMS within 45 calendar days after the
timeframe for filing a rebuttal has expired.
0
75. Part 423 is amended by adding subpart AA to read as follows:
Sec.
423.2700 Basis and scope.
423.2704 Definitions.
423.2708 Conditions for coverage of drugs under Part D.
423.2712 Applicable discounts.
423.2716 Phase-in of applicable discount for certain manufacturers.
423.2720 Determination of phase-in eligibility.
423.2724 Effect of manufacturer acquisition on phase-in eligibility.
423.2728 Recalculation of phase-in eligibility determination.
423.2732 Use of third party administrator.
[[Page 55023]]
423.2736 Requirement for point-of-sale discounts.
423.2740 Negative invoice payment process for Part D sponsors.
423.2744 Prospective payments to Part D sponsors.
423.2748 Requirement to use the Health Plan Management System.
423.2752 Manufacturer Discount Program agreement.
423.2756 Manufacturer requirements.
423.2760 Audits.
423.2764 Dispute resolution.
423.2768 Civil money penalties.
Subpart AA--Medicare Part D Manufacturer Discount Program
Sec. 423.2700 Basis and scope.
(a) Basis. This subpart implements section 1860D-14C of the Act and
provisions included in section 1860D-43 of the Act.
(b) Scope. This subpart sets forth the requirements of the Medicare
Part D Manufacturer Discount Program, which requires manufacturers to
pay discounts for brand-name drugs and biological products when
dispensed to Part D enrollees in the initial and catastrophic coverage
phases of the Part D benefit, under the terms of an agreement with CMS,
in order for such drugs to be coverable under Part D.
Sec. 423.2704 Definitions.
As used in this subpart and for purposes of the Manufacturer
Discount Program, unless otherwise specified--
Agreement holder means a manufacturer that has executed and has in
effect its own Manufacturer Discount Program agreement in accordance
with Sec. 423.2708(b)(1).
Applicable discount has the meaning set forth at Sec. 423.2712.
Applicable LIS percent has the meaning set forth at Sec.
423.2712(d)(1).
Applicable small manufacturer percent has the meaning set forth at
Sec. 423.2712(d)(2).
Covered Part D drug has the meaning set forth at Sec. 423.100.
Dispute submission deadline means the date that is 60 calendar days
from the date of the invoice containing the information that is the
subject of the agreement holder's dispute.
Negotiated price has the meaning set forth at Sec. 423.100, and
with respect to an applicable drug under the Manufacturer Discount
Program, such negotiated price includes any dispensing fee and, if
applicable, any vaccine administration fee and sales tax.
Network pharmacy has the meaning set forth at Sec. 423.100.
Part D drug has the meaning set forth at Sec. 423.100.
Primary manufacturer has the meaning given such term pursuant to
applicable regulations and guidance for the Medicare Drug Price
Negotiation Program.
Specified drug means, with respect to a specified manufacturer, for
2021, an applicable drug that is produced, prepared, propagated,
compounded, converted, or processed by the specified manufacturer.
Specified small manufacturer drug means, with respect to a
specified small manufacturer, for 2021, an applicable drug that is
produced, prepared, propagated, compounded, converted, or processed by
the specified small manufacturer.
Total expenditures means with respect to--
(1) Part D, the total gross covered prescription drug costs, as
defined in Sec. 423.308; and
(2) Part B, the total Medicare allowed amount (i.e., total allowed
charges), inclusive of beneficiary cost sharing, for Part B drugs and
biologicals, except that expenditures for a drug or biological that are
bundled or packaged into the payment for another service are excluded.
Sec. 423.2708 Conditions for coverage of drugs under Part D.
(a) General rule. Except as specified in paragraph (c) of this
section, in order for coverage to be available under Part D for a Part
D drug of a manufacturer that is an applicable drug or a selected drug
during a price applicability period--
(1) The FDA-assigned labeler code of such applicable drug or
selected drug must be covered by a Manufacturer Discount Program
agreement (described at Sec. 423.2752) that is in effect;
(2) The manufacturer must participate in the Manufacturer Discount
Program in accordance with paragraph (b) of this section; and
(3) The manufacturer must have entered into and have in effect a
Manufacturer Discount Program agreement in accordance with paragraph
(b) of this section.
(b) Participation in the Manufacturer Discount Program. A
manufacturer is considered to participate in the Manufacturer Discount
Program and to have entered into and have in effect a Manufacturer
Discount Program agreement for the purposes of paragraph (a) of this
section if the manufacturer does either of the following:
(1) Executes and has in effect its own Manufacturer Discount
Program agreement.
(2) Participates in the Manufacturer Discount Program by means of
an arrangement whereby its labeler code(s) is covered by another
manufacturer's Manufacturer Discount Program agreement that is in
effect.
(c) Exception. Paragraph (a) of this section does not apply to an
applicable drug that is not covered by a Manufacturer Discount Program
agreement if CMS has made a determination that the availability of the
drug is essential to the health of Part D enrollees. This exception to
the general rule in paragraph (a) of this section does not apply to any
applicable drug or selected drug of a manufacturer for any period
described in section 5000D(c)(1) of the Internal Revenue Code of 1986
with respect to such manufacturer.
(d) Non-applicable drugs. Coverage under Part D is available for
non-applicable drugs (as defined at Sec. 423.100) of a manufacturer
regardless of whether the manufacturer participates in the Manufacturer
Discount Program or has a Manufacturer Discount Program agreement in
effect.
Sec. 423.2712 Applicable discounts.
(a) Defined. For purposes of the Manufacturer Discount Program,
applicable discount means, subject to the requirements of this section,
with respect to an applicable drug of a manufacturer dispensed during a
year to an applicable beneficiary who has--
(1) Not incurred costs, as defined at Sec. 423.100, for covered
Part D drugs (as defined at Sec. 423.100) in the year that are equal
to or exceed the annual out-of-pocket threshold specified at Sec.
423.104(d)(5)(iii) for the year, 10 percent of the negotiated price of
such drug; and
(2) Incurred costs, as defined in Sec. 423.100, for covered Part D
drugs (as defined at Sec. 423.100) in the year that are equal to or
exceed the annual out-of-pocket threshold specified at Sec.
423.104(d)(5)(iii) for the year, 20 percent of the negotiated price of
such drug.
(b) Application of supplemental benefits. For Part D plans offering
supplemental benefits (as defined in Sec. 423.100), the value of any
applicable discount under the Manufacturer Discount Program is
calculated before the application of supplemental benefits.
(c) Application of other coverage. The applicable discount is
calculated before any coverage or financial assistance under another
health or prescription drug benefit plan or program that provides
prescription drug coverage or financial assistance.
(d) Application of discount phase-in for specified manufacturers
and specified small manufacturers.
(1) Applicable LIS percent. For an applicable drug of a specified
manufacturer (as described at Sec. 423.2716(a)) that is marketed as of
[[Page 55024]]
August 16, 2022 (as described in paragraph (d)(3) of this section) and
dispensed for an applicable beneficiary who is a subsidy eligible
individual (as defined in section 1860D-14(a)(3) of the Act), the
applicable discount is as follows:
(i) For the individual who has not incurred costs equal to or
exceeding the annual out-of-pocket threshold for the year--
(A) For 2025, 1 percent;
(B) For 2026, 2 percent;
(C) For 2027, 5 percent;
(D) For 2028, 8 percent; and
(E) For 2029 and each subsequent year, 10 percent.
(ii) For the individual who has incurred costs equal to or
exceeding the annual out-of-pocket threshold for the year--
(A) For 2025, 1 percent;
(B) For 2026, 2 percent;
(C) For 2027, 5 percent;
(D) For 2028, 8 percent;
(E) For 2029, 10 percent;
(F) For 2030, 15 percent; and
(G) For 2031 and each subsequent year, 20 percent.
(2) Applicable small manufacturer percent. For an applicable drug
of a specified small manufacturer (as described at Sec. 423.2716(b))
that is marketed as of August 16, 2022 (as described in paragraph
(d)(3) of this section) and dispensed for an applicable beneficiary,
the applicable discount is as follows:
(i) For the individual who has not incurred costs equal to or
exceeding the annual out-of-pocket threshold for the year--
(A) For 2025, 1 percent;
(B) For 2026, 2 percent;
(C) For 2027, 5 percent;
(D) For 2028, 8 percent; and
(E) For 2029 and each subsequent year, 10 percent.
(ii) For the individual who has incurred costs equal to or
exceeding the annual out-of-pocket threshold for the year--
(A) For 2025, 1 percent;
(B) For 2026, 2 percent;
(C) For 2027, 5 percent;
(D) For 2028, 8 percent;
(E) For 2029, 10 percent;
(F) For 2030, 15 percent; and
(G) For 2031 and each subsequent year, 20 percent.
(3) An applicable drug of a specified manufacturer or a specified
small manufacturer, as applicable, is considered to have been marketed
as of August 16, 2022 if the applicable drug had Part D expenditures on
or before August 16, 2022, and did not have a marketing end date on the
FDA NDC SPL Data Elements File before August 17, 2022.
(e) Straddle claims. In the case of a claim for an applicable drug
for an applicable beneficiary that straddles multiple phases of the
Part D benefit for claims that do not fall entirely--
(1) Above the annual deductible specified at Sec. 423.104(d)(1),
the manufacturer provides the applicable discount on only the portion
of the negotiated price that falls above the deductible; and
(2) Below or entirely above the annual out-of-pocket threshold
specified at Sec. 423.104(d)(5)(iii), the manufacturer provides the
applicable discount on each portion of the negotiated price in
accordance with this section based on the benefit phase into which each
portion of the negotiated price falls.
(f) Claims not subject to discount. The following claims involving
an applicable drug are not subject to discounts under the Manufacturer
Discount Program:
(1) Medicare Secondary Payer claims.
(2) Medicaid Subrogation claims.
(3) Non-standard format coordination of benefits claims.
(4) Manual claims with a service provider identification qualifier
of ``Other''.
(g) Impact of applicable discount on enrollee cost sharing.
(1) Except as specified in paragraph (g)(2) of this section, the
applicable discount does not affect the application of the standard 25
percent coinsurance under Sec. 423.104(d)(2) or the application of the
copayment amount under Sec. 423.104(d)(5).
(2) If, after the applicable discount is applied to the negotiated
price of an applicable drug, the enrollee cost sharing specified under
the plan would exceed such negotiated price minus the applicable
discount, the enrollee cost sharing is the negotiated price minus the
applicable discount.
Sec. 423.2716 Phase-in of applicable discount for certain
manufacturers.
(a) Specified manufacturer. Subject to the limitation with respect
to manufacturer acquisitions described at Sec. 423.2724, a specified
manufacturer is a manufacturer of an applicable drug that, in 2021,
had--
(1) A Coverage Gap Discount Program agreement, as described at
Sec. 423.2315, in effect in accordance with Sec. 423.2720(a)(1);
(2) Total expenditures for all of its specified drugs (as defined
in Sec. 423.2704) covered by a Coverage Gap Discount Program agreement
for 2021 and covered under Part D in 2021 represented less than 1.0
percent of total expenditures for all Part D drugs in 2021; and
(3) Total expenditures for all of its specified drugs that are
single source drugs and biological products for which payment may be
made under Part B in 2021 represented less than 1.0 percent of the
total expenditures under Part B for all drugs or biological products in
2021.
(b) Specified small manufacturer. Subject to the limitation with
respect to manufacturer acquisition described at Sec. 423.2724, a
specified small manufacturer is a manufacturer of an applicable drug
that, in 2021--
(1) Is a specified manufacturer as described in paragraph (a) of
this section; and
(2) The total expenditures under Part D for any one of its
specified small manufacturer drugs covered under a Coverage Gap
Discount Program agreement for 2021 and covered under Part D in 2021
are equal to or greater than 80 percent of the total expenditures for
all its specified small manufacturer drugs covered under Part D in
2021.
(c) Aggregation rule. All entities, including corporations,
partnerships, proprietorships, and other entities treated as a single
employer under subsection (a) or (b) of section 52 of the Internal
Revenue Code of 1986 are treated as one manufacturer for purposes of
this section.
Sec. 423.2720 Determination of phase-in eligibility.
For each manufacturer with one or more FDA-assigned labeler codes
covered by a Manufacturer Discount Program agreement, CMS will
determine whether the manufacturer is a specified manufacturer or a
specified small manufacturer when the manufacturer executes a
Manufacturer Discount Program agreement, or, in the case of a
manufacturer whose FDA-assigned labeler code(s) is covered by another
manufacturer's Manufacturer Discount Program agreement, when such
labeler code(s) is first added to such agreement. In applying the
aggregation rule at Sec. 423.2716(c), CMS will attribute expenditures
for a drug to a manufacturer based on the NDC(s) for the drug, as
reported on PDE records. Specifically, CMS will match the labeler code
extracted from the first 5 digits of each NDC to the manufacturer to
whom the labeler code is assigned by the FDA.
(a) Identification of specified manufacturers.
(1) A manufacturer is considered to have had a Coverage Gap
Discount Program agreement in 2021, as specified at Sec.
423.2716(a)(1), if the manufacturer--
[[Page 55025]]
(i) Had a Coverage Gap Discount Program agreement in effect during
2021; or
(ii) Participated in the Coverage Gap Discount Program in 2021 by
means of an arrangement whereby its labeler code(s) was covered by
another manufacturer's Coverage Gap Discount Program agreement in
effect during 2021.
(2) Part D total expenditures. In calculating the Part D total
expenditures for 2021, CMS will include the total expenditures, as
defined at Sec. 423.2704, reported on all final action, non-delete PDE
records submitted as of June 30, 2022 for all Part D drugs with dates
of dispensing in benefit year 2021.
(i) For purposes of calculating each manufacturer's Part D total
expenditures for applicable drugs and percent share of Part D total
expenditures for 2021, CMS will--
(A) Identify the relevant NDCs attributable to the manufacturer as
reported on the PDE record based on the manufacturer's FDA-assigned
labeler code extracted from the first 5 digits of each NDC;
(B) Calculate the Part D total expenditures for applicable drugs of
the manufacturer by summing the 2021 Part D total expenditures for all
relevant NDCs attributable to the manufacturer; and
(C) Divide the 2021 Part D total expenditures for all applicable
drugs of the manufacturer by the 2021 Part D total expenditures for all
Part D drugs, then multiply by 100 to calculate the manufacturer's
percent share.
(ii) If the manufacturer's Part D total expenditures for its
applicable drugs are less than 1.0 percent of the 2021 Part D total
expenditures, CMS will consider the manufacturer to have satisfied the
Part D total expenditure criterion for specified manufacturer phase-in
eligibility, specified at Sec. 423.2716(a)(2).
(3) Part B total expenditures. In calculating the Part B total
expenditures for all drugs and biological products for 2021, CMS will
include all Part B Carrier, durable medical equipment (DME), and
Outpatient Medicare Part B Fee-for-Service claim line items with a
drug- or biological product-related Healthcare Common Procedure Coding
System (HCPCS) code submitted as of December 31, 2022.
(i) For purposes of calculating each manufacturer's Part B total
expenditures for applicable drugs that are single source drugs and
biological products and each manufacturer's percent share of Part B
total expenditures for 2021, CMS will--
(A) Map all identified HCPCS codes to NDCs;
(B) Identify all mapped HCPCS codes in paragraph (A) of this
paragraph that map to NDCs associated with single source drugs or
biological products;
(C) Identify all mapped HCPCS codes identified in paragraph (B) of
this paragraph that map only to NDCs associated with single source
drugs or biological products of the same manufacturer, consistent with
the aggregation rule at Sec. 423.2716(c), based on the manufacturer's
FDA-assigned labeler code(s) extracted from the first 5 digits of each
NDC;
(D) Attribute 2021 Part B total expenditures for all applicable
drugs that are single source drugs or biological products identified in
paragraph (C) of this section to each manufacturer, consistent with the
aggregation rule at Sec. 423.2716(c), based on the manufacturer's FDA-
assigned labeler code(s) extracted from the first 5 digits of each NDC;
and
(E) Divide the 2021 Part B total expenditures attributed to each
manufacturer in paragraph (D) of this paragraph by the 2021 Part B
total expenditures for all drugs and biological products, then multiply
by 100 to calculate the manufacturer's percent share.
(ii) If the manufacturer's Part B total expenditures for its
applicable drugs that are single source drugs and biologicals are less
than 1.0 percent of the 2021 Part B total expenditures, CMS will
consider the manufacturer to have satisfied the Part B total
expenditure criterion for specified manufacturer phase-in eligibility,
specified at Sec. 423.2716(a)(3).
(b) Identification of specified small manufacturers.
(1) For each specified manufacturer identified in paragraph (a) of
this section, CMS will determine if the 2021 total expenditures under
Part D for any one of the manufacturer's specified drugs covered under
a Coverage Gap Discount Program agreement for 2021, and covered under
Part D in 2021, are equal to or greater than 80 percent of the total
expenditures for all of its specified drugs covered under Part D in
2021, as required under Sec. 423.2716(b)(2), as follows.
(i) Identification of specified small manufacturer drugs.
(A) For purposes of this section, one specified small manufacturer
drug includes--
(1) For drug products, all dosage forms and strengths of a drug
with the same active moiety and the same holder of the new drug
application (NDA), as described in section 505(c) of the Federal Food,
Drug, and Cosmetic Act, inclusive of products that are marketed under
different NDAs.
(2) For biological products, all dosage forms and strengths of the
biological product with the same active ingredient and the same holder
of the biologics license application (BLA), as described in section
351(a) of the Public Health Service Act, inclusive of products that are
marketed under different BLAs.
(B) CMS will identify the holder of the NDA or BLA as reported in
Drugs@FDA or the FDA Purple Book, respectively.
(C) If a drug is a fixed combination drug, as described in 21 CFR
300.50, with two or more active ingredients or active moieties, the
distinct combination of active ingredients or active moieties will be
considered one active ingredient or active moiety for the purpose of
identifying a specified small manufacturer drug.
(D) CMS will attribute 2021 Part D total expenditures for one
specified small manufacturer drug, including authorized generic drugs
and repackaged and relabeled drugs, as applicable, to a specified
manufacturer based on the NDC(s) for the drug, as reported on PDE
records, by matching the labeler code extracted from the first 5 digits
of each NDC to the manufacturer to whom the labeler code is assigned by
the FDA.
(ii) Calculation of Part D total expenditures for each drug for
2021. CMS will calculate the Part D total expenditures for each drug,
aggregated in accordance with paragraph (b)(1)(i) of this section,
attributable to the manufacturer by summing the Part D total
expenditures for all NDCs under each drug as reported on all final
action, non-delete PDE records submitted as of June 30, 2022, with
dates of dispensing in benefit year 2021.
(iii) Calculation of each specified drug's percent share of the
specified manufacturer's Part D total expenditures for applicable drugs
for 2021. CMS will divide the 2021 Part D total expenditures for each
drug, aggregated in accordance with paragraph (b)(1)(i) of this
section, by the 2021 Part D total expenditures for all applicable drugs
of the manufacturer, as determined under paragraph (a)(2) of this
section, then multiply by 100 to determine the percent share.
(iv) If the 2021 Part D total expenditures for one specified drug
of the manufacturer are equal to or greater than 80 percent of the
manufacturer's 2021 Part D total expenditures for all of its specified
drugs, CMS will consider the manufacturer to have satisfied the
criterion at Sec. 423.2716(b)(2) for specified small manufacturer
phase-in eligibility.
[[Page 55026]]
(c) Written notice of determination.
(1) CMS will issue a phase-in eligibility determination notice to
each manufacturer that has executed and has in effect a Manufacturer
Discount Program agreement when such determination is made, delivered
by electronic mail, to the primary point of contact as identified by
the manufacturer.
(2) In the case of a manufacturer that participates in the
Manufacturer Discount Program by means of an arrangement whereby its
labeler code(s) is covered by another manufacturer's Manufacturer
Discount Program agreement, CMS will issue a phase-in eligibility
determination notice to the agreement holder.
Sec. 423.2724 Effect of manufacturer acquisition on phase-in
eligibility.
For purposes of the Manufacturer Discount Program, when a
manufacturer acquires another manufacturer after 2021 (that is, the
acquired manufacturer becomes part of such acquiring manufacturer under
the aggregation rule at Sec. 423.2716(c)), the acquired manufacturer
assumes the phase-in status of the acquiring manufacturer, effective at
the beginning of the plan year immediately following the acquisition
or, for an acquisition before 2025, effective January 1, 2025.
Sec. 423.2728 Recalculation of phase-in eligibility determination.
(a) Right to request a recalculation. A manufacturer that has
received a phase-in eligibility determination notice, as described at
Sec. 423.2720(c), may request a recalculation of such determination in
accordance with the requirements of this section.
(b) Timeframe and method of filing. A manufacturer that seeks a
recalculation of its phase-in eligibility determination must file the
request, in the manner specified by CMS, no later than 30 calendar days
from the date the phase-in eligibility determination notice is
electronically sent to the manufacturer. In order to receive
consideration, the recalculation request must clearly describe the
issue(s) forming the basis of the request and include any relevant
supporting information.
(c) Disposition and notification. After consideration of the issues
raised, CMS will decide whether to perform the recalculation, and will
issue a written decision to the manufacturer that will include CMS's
decision about whether to perform the requested recalculation and, if
such recalculation is performed, the resulting eligibility
determination. The decision is final and binding, subject to the
requirements of the Manufacturer Discount Program under section 1860D-
14C of the Act, this subpart, and the Manufacturer Discount Program
agreement.
(d) Limitation. The recalculation process cannot be used to request
or be granted an exception to the requirements set forth in statute
that determine eligibility for the specified manufacturer or specified
small manufacturer phase-in.
Sec. 423.2732 Use of third party administrator.
(a) CMS will engage a third party administrator (TPA) to assist in
the administration of the Manufacturer Discount Program, which may
include and is not limited to facilitating--
(1) Manufacturer Discount Program invoicing;
(2) The receipt and distribution of funds of a manufacturer; and
(3) The dispute resolution process described in Sec. 423.2764.
(b) Agreement holders must--
(1) Enter into and have in effect, under the terms and conditions
specified by CMS, an agreement with the TPA in order to participate in
the Manufacturer Discount Program. The TPA agreement will only
terminate upon the termination of the Manufacturer Discount Program
agreement; and
(2) Establish and maintain electronic connectivity with the TPA for
the purpose of timely transmission of data and funds.
Sec. 423.2736 Requirement for point-of-sale discounts.
(a) Point-of-sale discounts. Part D sponsors must provide
applicable discounts on applicable drugs at the point of sale on behalf
of the manufacturer. As part of this process, plan sponsors must
determine--
(1) Whether an enrollee is an applicable beneficiary as described
in Sec. 423.100;
(2) Whether a drug is an applicable drug as described in Sec.
423.100; and
(3) The amount of the discount, in accordance with Sec. 423.2712.
(b) Direct member reimbursement (DMR). Part D sponsors must provide
applicable discounts on claims for applicable drugs submitted by
applicable beneficiaries as DMRs, including out-of-network and in-
network paper claims, if such claims are payable under the Part D plan.
While the sponsor must account for the discount in adjudicating the DMR
request and the associated PDE submitted to CMS, the point-of-sale
requirement does not apply.
(c) Pharmacy prompt payment. Part D sponsors must reimburse a
network pharmacy (as defined in Sec. 423.100) the amount of the
applicable discount within the applicable number of calendar days (as
defined in Sec. 423.100) of the date of dispensing (as defined in
Sec. 423.100) of an applicable drug, consistent with Sec. 423.520.
(d) Prescription drug event (PDE) requirements. Part D sponsors
must report the applicable discounts made available to their enrollees
under the Manufacturer Discount Program on the PDE records associated
with such discounts.
(e) Retroactive adjustments. Part D sponsors must make retroactive
adjustments to applicable discounts as necessary to reflect applicable
changes, including changes to the claim, beneficiary eligibility, or
benefit phase determined after the date of dispensing.
Sec. 423.2740 Negative invoice payment process for Part D sponsors.
(a) CMS will invoice negative amounts to Part D sponsors when a
PDE(s) which had been previously invoiced is deleted or adjusted such
that the reported Manufacturer Discount Program discount amount is less
than originally invoiced.
(b) Part D sponsors are required to pay such negative invoice
amounts in the manner specified by CMS within 38 calendar days of
receipt of the invoice.
Sec. 423.2744 Prospective payments to Part D sponsors.
(a) General rule. CMS will provide monthly prospective Manufacturer
Discount Program payments to Part D sponsors for sponsors to advance
manufacturer discounts as specified in Sec. 423.2736(a) and reimburse
network pharmacies as specified in Sec. 423.2736(c).
(b) Exception. CMS will not provide prospective Manufacturer
Discount Program payments to employer group waiver plans.
(c) Reconciliation. CMS will reconcile prospective Manufacturer
Discount Program payments in accordance with subpart G of this part.
(d) Manufacturer bankruptcy. In the event that an agreement holder
declares bankruptcy, as described in title 11 of the United States
Code, and as a result of such bankruptcy does not pay the invoiced
amounts described in Sec. 423.2756(a), CMS will adjust the
Manufacturer Discount Program reconciliation amount for affected Part D
sponsors to account for the invoiced amounts owed for the contract year
being reconciled. The government reserves the right to file a proof-of-
claim and take any other action under bankruptcy law, as appropriate,
to
[[Page 55027]]
attempt to recover such unpaid amounts and any civil money penalties
imposed by CMS under these regulations.
Sec. 423.2748 Requirement to use the Health Plan Management System.
Agreement holders are required to maintain Health Plan Management
System (HPMS) access and use the HPMS to--
(a) Provide and maintain required information, as specified by CMS;
(b) Attest to the completeness and accuracy of data necessary for
CMS to determine whether the manufacturer qualifies as a specified
manufacturer or specified small manufacturer, as described at Sec.
423.2716;
(c) Execute a Manufacturer Discount Program agreement and a TPA
agreement; and
(d) As otherwise specified by CMS to administer the program.
Sec. 423.2752 Manufacturer Discount Program agreement.
Manufacturers that are agreement holders, as defined in Sec.
423.2704, must comply with all requirements of this section.
(a) Requirements of agreement. The manufacturer must:
(1) Reimburse, within the required 38-day timeframe, all applicable
discounts invoiced to the manufacturer, consistent with the
requirements at Sec. 423.2756(b).
(2) Provide CMS with all labeler codes covered by the agreement.
(3) Ensure that the labeler codes provided to CMS under paragraph
(a)(2) of this section include, at a minimum, all labeler codes
assigned by the FDA to the manufacturer, in accordance with Sec.
423.2756(c)(3).
(4) Comply with the requirements established by CMS for purposes of
administering the Manufacturer Discount Program and monitoring
compliance with such program, including providing the manufacturer's
Employer Identification Number (EIN) and other identifying information
to CMS upon request.
(5) Comply with the requirements related to the provision and
maintenance of data at Sec. 423.2756(c).
(6) Enter into and have in effect, under the terms and conditions
specified by CMS, an agreement with the TPA, as described at Sec.
423.2732(b)(1), and comply with such agreement and all TPA
instructions, processes, and requirements.
(7) Provide and attest to information in the manner and form
specified by CMS as necessary for CMS to determine eligibility for and
implement the specified manufacturer and specified small manufacturer
phase-ins described at Sec. 423.2716.
(8) Agree that, no less than 30 days after the date CMS determines
that a primary manufacturer of a selected drug has, in accordance with
paragraph (c)(1)(ii) of this section, provided notice to CMS of its
decision not to enter into or continue its participation in the
Medicare Drug Price Negotiation Program and to discontinue its
applicable agreements under the Medicaid Drug Rebate Program and the
Manufacturer Discount Program, none of the drugs of such primary
manufacturer will be covered by the manufacturer's Manufacturer
Discount Program agreement.
(9) Comply with all other requirements of the Manufacturer Discount
Program.
(b) Agreement term and renewal.
(1) A Manufacturer Discount Program agreement described in this
section is valid for an initial term of not less than 12 months and
automatically renews for a period of 1 year on each subsequent January
1, except as described in paragraph (b)(3) this section, unless
terminated in accordance with paragraph (c) of this section.
(2) For calendar year 2025, an agreement holder must enter into
such agreement no later than March 1, 2024, and the initial 12-month
term of such agreement begins on January 1, 2025 and ends on December
31, 2025.
(3) For calendar year 2026 and subsequent years, a Manufacturer
Discount Program agreement will become effective on the first day of a
calendar quarter as follows:
(i) An agreement holder must enter into the agreement no later than
the last day of the first month of a calendar quarter in order for the
agreement to be effective on the first day of the next calendar
quarter.
(ii) If an agreement holder enters into the agreement after the
last day of the first month of a particular calendar quarter, the
agreement becomes effective on the first day of the second calendar
quarter after the calendar quarter in which the manufacturer entered
into the agreement.
(iii) An initial term that begins on January 1 will end on December
31 of the same calendar year. An initial term that begins on April 1,
July 1, or October 1 will end on December 31 of the following calendar
year.
(c) Termination of Manufacturer Discount Program agreement.
(1) Termination by CMS.
(i) CMS may terminate a Manufacturer Discount Program agreement for
a knowing and willful violation of the requirements of such agreement
or other good cause shown in relation to a manufacturer's participation
in the Manufacturer Discount Program, including good cause as set forth
in paragraph (c)(1)(ii) of this section.
(ii) CMS may terminate a Manufacturer Discount Program agreement
for good cause, in the case of a primary manufacturer under the
Medicare Drug Price Negotiation Program, upon submission of a request
from such manufacturer to terminate its applicable agreements under the
Manufacturer Discount Program in connection with a notice of the
primary manufacturer's decision that it is unwilling to participate in,
or continue its participation in, the Medicare Drug Price Negotiation
Program. If CMS determines such a notice complies with all requirements
set forth in applicable regulations and guidance for the Medicare Drug
Price Negotiation Program, the primary manufacturer's request will
constitute good cause under paragraph (c)(1) of this section to
terminate the primary manufacturer's applicable agreements under the
Manufacturer Discount Program. The primary manufacturer's applicable
agreements include any Manufacturer Discount Program agreement for
which the primary manufacturer is the agreement holder, as well as any
arrangement under Sec. 423.2708(b)(2) in which FDA-assigned labeler
codes of the primary manufacturer are covered under the Manufacturer
Discount Program agreement of another manufacturer. If applicable, CMS
will effectuate termination of coverage of such FDA-assigned labeler
codes of the primary manufacturer that are covered under the
Manufacturer Discount Program agreement of another manufacturer in
accordance with paragraph (c)(1)(v)(A)(1) of this section.
(iii) Any termination by CMS must not be effective earlier than 30
days from the date of the notice to the manufacturer of such
termination. If a hearing is timely requested by the manufacturer in
accordance with paragraph (c)(1)(iv) of this section, such termination
must not be effective prior to resolution of timely appeal requests
received in accordance with the requirements of this section.
(iv) CMS will provide, upon written request, a manufacturer a
hearing concerning a termination by CMS as follows:
(A) This hearing will take place prior to the effective date of the
termination with sufficient time for the termination to be repealed
prior to the effective date if CMS determines repeal would be
appropriate. If a manufacturer or CMS receives an unfavorable decision
from the hearing officer, the manufacturer or CMS may request review by
the CMS
[[Page 55028]]
Administrator within 30 calendar days of receipt of the notification of
such determination. The decision of the CMS Administrator is final and
binding.
(B) A timely request for a hearing before a hearing officer or
review by the CMS Administrator will stay termination until the parties
have exhausted their appeal rights under the Manufacturer Discount
Program, which means either the timeframes to pursue a hearing before a
hearing officer or review by the CMS Administrator have passed or a
final decision by the Administrator has been issued and there is no
remaining opportunity to request further administrative review.
(C) In the case of a termination by CMS under paragraph (c)(1)(ii)
with respect to a primary manufacturer under the Medicare Drug Price
Negotiation Program, the hearing will be held solely on the papers. The
only question to be decided in such hearing is whether the primary
manufacturer has asked to rescind its request to terminate under
paragraph (c)(1)(ii) prior to the effective date of the termination. If
so, CMS will automatically grant such request from the primary
manufacturer to rescind its request to terminate under paragraph
(c)(1)(ii).
(v) In addition to the termination under paragraph (c)(1)(ii) of
this section of any Manufacturer Discount Program agreement for which
the primary manufacturer is the agreement holder, CMS will effectuate
the removal of labeler code(s) that are covered under the Manufacturer
Discount Program agreement of another manufacturer and termination of
coverage of any specific NDC(s) of applicable drugs and selected drugs
of a primary manufacturer that are covered under the Manufacturer
Discount Program agreement of another manufacturer as follows:
(A) If a primary manufacturer provides notice to CMS that it is
unwilling to participate in, or continue its participation in, the
Medicare Drug Price Negotiation Program, consistent with paragraph
(c)(1)(ii) of this section, no earlier than 30 days from the date CMS
sends the notice of termination to the manufacturer in accordance with
paragraph (c)(1)(iii) of this section, CMS will effectuate--
(1) The removal of the FDA-assigned labeler code(s) of the primary
manufacturer from any Manufacturer Discount Program agreement of
another manufacturer whereby such labeler codes of the primary
manufacturer are covered in accordance with Sec. 423.2708(b)(2); and
(2) The termination of coverage under any Manufacturer Discount
Program agreement specific to NDCs of applicable drugs and selected
drugs for which the primary manufacturer is the holder of the new drug
application or biologics license application. Such termination of
coverage will apply to all applicable drug and selected drug NDCs of
the primary manufacturer for which the labeler code is assigned to a
manufacturer other than the primary manufacturer and for which the
primary manufacturer is the new drug application or biologics license
application holder for such drug.
(B) The removal of labeler code(s) in accordance with paragraph
(c)(1)(v)(A)(1) of this section and the termination of coverage
specific to NDCs in accordance with paragraph (c)(1)(v)(A)(2) of this
section do not affect the agreement holder's responsibility to
reimburse Part D sponsors for applicable discounts for applicable drugs
with such labeler code(s) or such NDCs that were incurred under the
agreement before the effective date of removal or termination.
(2) Termination by the manufacturer. An agreement holder may
terminate its Manufacturer Discount Program agreement for any reason.
The effective date of the termination is as follows:
(i) If the agreement holder notifies CMS of its intent to terminate
before January 31 of a calendar year, January 1 of the succeeding
calendar year.
(ii) If the agreement holder notifies CMS of its intent to
terminate on or after January 31 of a calendar year, January 1 of the
second succeeding calendar year.
(3) Post-termination obligations. Termination of a Manufacturer
Discount Program agreement under the requirements of this section does
not affect the agreement holder's responsibility to reimburse Part D
sponsors for applicable discounts for applicable drugs having NDCs with
labeler code(s) covered by such agreement that were incurred under the
agreement prior to the effective date of the termination.
(4) Reinstatement. Reinstatement in the Manufacturer Discount
Program subsequent to termination is available to a manufacturer only
upon payment of any and all outstanding applicable discounts and
penalties incurred under any previous Manufacturer Discount Program
agreement or Coverage Gap Discount Program agreement. The timing of the
reinstatement must be consistent with the requirements at Sec.
423.2752(b).
(d) Automatic assignment upon change of ownership. In the event of
a change in ownership of a manufacturer that is an agreement holder,
the Manufacturer Discount Program agreement is automatically assigned
to the new owner, and all terms and conditions of the agreement remain
in effect as to the new owner unless terminated in accordance with
requirements at Sec. 423.2752(c). The new agreement holder agrees to
be bound by and to perform all the duties and responsibilities under
the Manufacturer Discount Program, and assumes all obligations and
liabilities of, and all claims incurred against, the prior agreement
holder under the Manufacturer Discount Program agreement whether
arising before or after the effective date of the change of ownership.
Sec. 423.2756 Manufacturer requirements.
Manufacturers that are agreement holders, as defined at Sec.
423.2704, must comply with all requirements of this section.
(a) Manufacturer invoicing. CMS will--
(1) Calculate the amounts owed for applicable discounts for
applicable drugs having NDCs with a labeler code covered by the
agreement holder's Manufacturer Discount Program agreement;
(2) Itemize invoices at the NDC level;
(3) Invoice the agreement holder on a quarterly basis, consistent
with the published invoicing calendar; and
(4) Invoice manufacturer discount amounts from accepted PDE data
for 37 months following the end of the benefit year.
(b) Requirement for timely payment.
(1) Agreement holders that are invoiced in accordance with
paragraph (a) are required to pay invoiced amounts within 38 calendar
days of receipt of the invoice, in the manner specified by CMS, except
as specified in paragraphs (b)(2) and (b)(3) of this section.
(2) If an invoice deadline falls on a Saturday, Sunday, or legal
holiday, the payment timeframe is extended to the first day thereafter
which is not a Saturday, Sunday, or legal holiday.
(3) Agreement holders are not permitted to withhold payment for any
invoiced amount, including a disputed amount while a dispute is pending
under Sec. 423.2764, except when the basis for the dispute is that the
invoiced amount does not correspond to NDCs of labeler codes covered by
the agreement holder's Manufacturer Discount Program agreement. If
payment is withheld in such an instance, the agreement holder must
notify the TPA within 38 calendar days of the manufacturer's receipt of
the applicable invoice that payment is being withheld for this reason.
(c) Reporting requirements.
[[Page 55029]]
(1) General. Agreement holders are required to collect, have
available, and maintain appropriate data related to the labeler codes
covered by their Manufacturer Discount Program agreement, and maintain
such data for a period of not less than 10 years from the date of
payment of the invoice.
(2) Manufacturer ownership. Agreement holders must--
(i) Provide and attest to ownership and other data, in the form and
manner specified by CMS, as necessary for CMS to determine eligibility
for and implement the discount phase-ins described at Sec. 423.2716;
(ii) Notify CMS of a change in their ownership no later than 30
calendar days after the agreement holder executes a legal obligation
for such an arrangement and no later than 45 calendar days prior to
such change in ownership taking effect; and
(iii) If the agreement holder covers the FDA-assigned labeler
code(s) of another manufacturer by its Manufacturer Discount Program
agreement in accordance with Sec. 423.2708(b)(2), comply with the
requirements of paragraphs (c)(2)(i) and (c)(2)(ii) of this section
with respect to such other manufacturer.
(3) Labeler codes.
(i) An agreement holder is required to cover by its agreement all
labeler codes assigned by the FDA to the agreement holder that contain
NDCs for the agreement holder's applicable drugs and selected drugs.
(ii) Consistent with Sec. 423.2708(b)(2), an agreement holder may
cover by its Manufacturer Discount Program agreement applicable drugs
or selected drugs with labeler code(s) assigned by the FDA to another
manufacturer, provided the other manufacturer has not executed and does
not have in effect its own Manufacturer Discount Program agreement in
accordance with Sec. 423.2708(b)(1).
(iii) Agreement holders must provide to CMS:
(A) All labeler codes assigned by the FDA to the agreement holder
that contain NDCs for the agreement holder's applicable drugs and
selected drugs, consistent with paragraph (c)(3)(iv) of this section.
(B) All labeler codes assigned by the FDA to another manufacturer
that the agreement holder covers by its Manufacturer Discount Program
agreement and for which the agreement holder agrees to pay discounts.
(iv) Agreement holders must provide labeler code(s) newly assigned
by the FDA to the agreement holder to CMS no later than 3 business days
after receiving written notification of the labeler code(s) from the
FDA, and in advance of providing any NDCs associated with such newly
assigned labeler codes to electronic database vendors.
(v) Agreement holders must maintain the list of labeler codes
covered by their Manufacturer Discount Program agreement, in the manner
specified by CMS. Failure to update labeler codes covered by a
Manufacturer Discount Program agreement in accordance with the
requirements in this section and applicable CMS guidance does not
change an agreement holder's obligation to pay invoiced amounts for
applicable drugs.
(4) FDA and related records.
(i) Agreement holders must:
(A) Ensure that all of their FDA-assigned labeler codes that
contain NDCs for any of their applicable drugs or selected drugs are
properly listed on the FDA NDC Directory;
(B) Electronically list all NDCs of their applicable drugs or
selected drugs with the FDA in advance of commercial distribution of
the product(s);
(C) Maintain up-to-date electronic FDA registrations and listings
of all NDCs, including the timely removal of discontinued NDCs from the
FDA NDC Directory; and
(D) Maintain up-to-date listings with electronic database vendors
to whom they provide their NDCs for pharmacy claims processing.
(ii) If such agreement holder's Manufacturer Discount Program
agreement covers labeler code(s) that are assigned by the FDA to
another manufacturer that participates in the Manufacturer Discount
Program in accordance with Sec. 423.2708(b)(2), the agreement holder
must ensure that the requirements of this section are met with respect
to such labeler codes.
(d) Agreement holders are permitted to transfer labeler code(s)
from one Manufacturer Discount Program agreement to another provided
that the transfer is consistent with the requirements of this subpart
and the Manufacturer Discount Program agreement and is approved by CMS.
Sec. 423.2760 Audits.
(a) Manufacturer audits of TPA data.
(1) An agreement holder may conduct periodic audits, no more often
than annually, of the TPA data and information used to determine
discounts for applicable drugs covered by the agreement holder's
Manufacturer Discount Program agreement, directly or through third
parties.
(2) The agreement holder must provide the TPA with 60 days' notice
of the reasonable basis for the audit and a description of the
information required for the audit.
(3) The audit is limited as follows:
(i) The data provided to the agreement holder conducting the audit
is limited to a statistically significant random sample of data held by
the TPA that were used to determine applicable discounts for applicable
drugs having NDCs with labeler codes covered by the agreement holder's
Manufacturer Discount Program agreement.
(ii) Manufacturers are not permitted to audit CMS records or the
records of Part D sponsors beyond the data provided to the TPA, which
includes claim-level information.
(iii) Audits must occur on site at a location specified by the TPA
and, with the exception of work papers, such data cannot be removed
from the audit site.
(iv) The auditor for the agreement holder may release only an
opinion of the audit results and is prohibited from releasing other
information obtained from the audit, including work papers, to its
client, employer, or any other party.
(b) CMS audits of manufacturers.
(1) An agreement holder is subject to periodic audit by CMS no more
often than annually, directly or through third parties, as specified in
this section.
(2) CMS must provide the agreement holder with 60 calendar days'
notice of the reasonable basis for the audit and a description of the
information required for the audit.
(3) CMS has the right to audit appropriate data, including data
related to labeler codes covered by the agreement holder's Manufacturer
Discount Program agreement and related NDC last lot expiration dates,
utilization, and pricing information relied on by the agreement holder
to dispute quarterly invoices, and any other data CMS determines
necessary to evaluate compliance with the requirements of the
Manufacturer Discount Program.
Sec. 423.2764 Dispute resolution.
(a) Initial disputes. Agreement holders may dispute applicable
discounts invoiced to such agreement holder under Sec. 423.2756(a).
(1) Timeframe and method of filing. Initial disputes must be filed,
in the manner specified by CMS, no later than the dispute submission
deadline, as defined at Sec. 423.2704. The agreement holder must
explain why it believes the invoiced discount amount is in error and
must provide supporting evidence that is material, specific, and
related to the dispute.
(2) Timeframe for making a determination. CMS will issue a written
[[Page 55030]]
determination on an initial dispute no later than 60 calendar days from
the dispute submission deadline.
(b) Independent review. An agreement holder that receives an
unfavorable determination from CMS on its initial dispute or has not
received a determination within 60 calendar days from the dispute
submission deadline, may request review by the independent review
entity (IRE) contracted by CMS.
(1) Timeframe and method of filing. A request for review by the IRE
must be filed, in the manner specified by CMS, no later than the
earlier of the following:
(i) Thirty calendar days from the unfavorable determination on the
initial dispute.
(ii) Ninety calendar days from the dispute submission deadline, if
no determination was made within 60 calendar days of the dispute
submission deadline.
(2) Information considered. In addition to the information provided
by the agreement holder, the IRE considers information received from
CMS, the TPA, the Part D sponsor, or other sources. The IRE may request
additional information from the agreement holder for the purpose of
considering the appeal. Failure to comply with this request for
additional information within the timeframe specified may result in the
IRE issuing a denial.
(3) Timeframe for making a decision. The IRE issues a written
decision to the agreement holder and to CMS no later than 90 calendar
days from receipt of the request.
(4) Notice requirements. The IRE decision must include all of the
following:
(i) A clear statement indicating whether the decision is favorable
or unfavorable to the agreement holder.
(ii) An explanation of the rationale for the IRE's decision.
(iii) Instructions on how to request a review by the CMS
Administrator.
(5) Effect of IRE decision. A decision by the IRE is binding on all
parties unless the agreement holder or CMS files a valid request for
review by the CMS Administrator under the process described in
paragraph (c) of this section.
(c) Review by the CMS Administrator.
(1) CMS or an agreement holder that receives an unfavorable
decision by the IRE may request a review of a determination from the
IRE by the CMS Administrator.
(2) A request for review by the CMS Administrator must be filed, in
the manner specified by CMS, no later than 30 calendar days from the
date of the IRE decision.
(3) The CMS Administrator issues a written decision to both
parties.
(4) A decision by the CMS Administrator is final and binding.
(d) Adjustment to invoiced amounts. CMS adjusts future invoices (or
implements an alternative reimbursement process if determined
necessary) if the dispute is resolved in favor of the agreement holder.
(e) Limitation. The dispute resolution process described in this
section must not be used to dispute a decision by CMS to terminate an
agreement holder's participation in the Manufacturer Discount Program
under Sec. 423.2752(c)(1) or a decision by CMS about a manufacturer's
eligibility for discount phase-ins described at Sec. 423.2720.
Sec. 423.2768 Civil money penalties.
(a) General rule. An agreement holder that fails to provide, in
accordance with the terms of its Manufacturer Discount Program
agreement and the requirements of the Manufacturer Discount Program,
applicable discounts for applicable drugs covered by the agreement
holder's Manufacturer Discount Program agreement and dispensed to
applicable beneficiaries is subject to a civil money penalty for each
such failure.
(b) Notice of non-compliance. When an agreement holder fails to
make a timely payment as required under Sec. 423.2756(b), CMS will
issue to the agreement holder a notice of non-compliance with
information about the violation. The agreement holder has 5 business
days from the date of the notice to respond to CMS.
(c) Determination of the civil money penalty amounts. CMS must
impose a civil money penalty for each failure equal to the sum of:
(1) The amount an agreement holder would have paid with respect to
the applicable discount; and
(2) Twenty-five percent of such amount.
(d) Notice to impose civil money penalties. If CMS makes a
determination to impose a civil money penalty as set forth in paragraph
(c) of this section, CMS will send to the agreement holder a written
notice of such determination that includes all of the following:
(1) A description of the basis for the determination.
(2) The basis for the penalty.
(3) The amount of the penalty.
(4) The date the penalty is due.
(5) The agreement holder's right to a hearing as set forth in
paragraph (e) of this section.
(6) Information about where to file the request for a hearing.
(e) Appeal procedures for civil money penalties. An agreement
holder has a right to a hearing following a decision by CMS to impose a
civil money penalty according to the administrative appeal process and
procedures established in subpart T of this part.
(f) Collection.
(1) CMS may not collect a civil money penalty until the affected
party (as defined in Sec. 423.1002) has received notice and the
opportunity for a hearing under section 1128A(c)(2) of the Act.
(2) An agreement holder that has received from CMS a notice of
determination to impose a civil money penalty must pay such civil money
penalty in full within 60 calendar days of the date of the CMS notice
of determination, except as provided in paragraph (f)(3) of this
section.
(3) If the agreement holder requests a hearing to appeal in
accordance with 42 CFR part 423, subpart T, the civil money penalty is
due, as applicable, once the administrative process as specified in
subpart T has concluded.
(4) CMS will initiate the collection of a civil money penalty owed
by an agreement holder either following the expiration of 60 days from
the date of the CMS notice of determination to impose a civil money
penalty, or if later, the conclusion of the administrative process
specified in 42 CFR part 423, subpart T, as applicable.
(g) Other applicable provisions. The provisions of section 1128A of
the Act (except subsections (a) and (b) of section 1128A of the Act)
apply to civil money penalties under this section to the same extent
that they apply to a civil money penalty or procedures under section
1128A of the Act.
(h) Bankruptcy. In the event an agreement holder declares
bankruptcy, as described in title 11 of the United States Code, and as
a result of such bankruptcy, fails to pay the total sum of the civil
money penalties imposed, the government reserves the right to file a
proof-of-claim and take any other action under bankruptcy law, as
appropriate, to attempt to recover such unpaid amounts and any civil
money penalties imposed by CMS under these regulations.
Robert F. Kennedy, Jr.,
Secretary, Department of Health and Human Services.
[FR Doc. 2025-21456 Filed 11-25-25; 4:15 pm]
BILLING CODE 4120-01-P